As submitted to the Securities and Exchange Commission on May 11, 2017

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No.:               

 

FORESIGHT AUTONOMOUS HOLDINGS LTD.
(Exact name of registrant as specified in its charter)

 

Translation of registrant’s name into English: Not applicable

 

State of Israel   3 Golda Meir
Ness Ziona
741001, Israel
(Jurisdiction of incorporation or organization)   (Address of principal executive offices)

 

Haim Siboni
Chief Executive Officer
Telephone number: +972-077-9709030
Facsimile number: +972-077-9709031
3 Golda Meir
Ness Ziona
7414001 Israel
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class:   Name of each exchange on which registered or to be registered:
American Depositary Shares each representing 10 Ordinary Shares, no par value   NASDAQ Capital Market

 

(1)        Evidenced by American Depositary Receipts.

 

(2)        Not for trading, but only in connection with the listing of the American Depositary Shares.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None 

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of May 10, 2017: 90,889,362 ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes                No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934.

 

Yes                No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

Yes                No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months. 

Yes                No  

 

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☒ Emerging Growth Company ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

 

U.S. GAAP

 

International Financial Reporting Standards as issued by the International Accounting Standards Board

 

Other

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

 

Item 17              Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company.

 

Yes                No

 

 

 

 

TABLE OF CONTENTS

 

PART I       2
  ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS. 2
    A. Directors and Senior Management. 2
    B. Advisers. 2
    C. Auditors. 2
  ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE. 2
  ITEM 3.   KEY INFORMATION. 2
    A. Selected Financial Data. 2
    B. Capitalization and Indebtedness. 3
    C. Reasons for the Offer and Use of Proceeds. 3
    D. Risk Factors. 3
  ITEM 4.   INFORMATION ON THE COMPANY. 20
    A. History and Development of the Company. 20
    B. Business Overview. 21
    C. Organizational Structure. 27
    D. Property, Plants and Equipment. 27
  ITEM 5.   OPERATING AND FINANCIAL REVIEW AND PROSPECTS. 28
    A. Operating Results. 28
    B. Liquidity and Capital Resources. 32
    E. Off-Balance Sheet Arrangements. 34
    F. Tabular Disclosure of Contractual Obligations. 34
  ITEM 6.   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES. 34
    A. Directors and Senior Management. 34
    B. Compensation. 36
    C. Board Practices. 37
    D. Employees. 48
    E. Share Ownership. 48
  ITEM 7.   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS. 50
    A. Major Shareholders. 50
    B. Related Party Transactions. 51
    C. Interests of Experts and Counsel. 52
  ITEM 8.   FINANCIAL INFORMATION. 52
    A. Consolidated Statements and Other Financial Information. 52
    B. Significant Changes. 52
  ITEM 9.   THE OFFER AND LISTING. 52
    A. Offer and Listing Details. 52
    B. Plan of Distribution. 53
    C. Markets. 53

 

i

Table of Contents

 

    D. Selling Shareholders. 53
    E. Dilution. 53
    F. Expenses of the Issue. 54
  ITEM 10.   ADDITIONAL INFORMATION. 54
    A. Share Capital. 54
    B. Memorandum and Articles of Association. 54
    C. Material Contracts. 60
    D. Exchange Controls. 60
    E. Taxation. 60
    F. Dividends and Paying Agents. 68
    G. Statement by Experts. 68
    H. Documents on Display. 69
    I. Subsidiary Information. 69
  ITEM 11.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 69
  ITEM 12.   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. 70
    A. Debt Securities. 70
    B. Warrants and rights. 70
    C. Other Securities. 70
    D. American Depositary Shares. 70
PART II       77
  ITEM 13.   DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES. 77
  ITEM 14.   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS. 77
  ITEM 15.   CONTROLS AND PROCEDURES. 77
  ITEM 16. A. AUDIT COMMITTEE FINANCIAL EXPERT. 77
  ITEM 16. B. CODE OF ETHICS. 77
  ITEM 16. C. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 78
  ITEM 16. D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES. 78
  ITEM 16. E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS. 78
  ITEM 16. F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT. 78
  ITEM 16. G. CORPORATE GOVERNANCE. 78
  ITEM 16. H. MINE SAFETY DISCLOSURE. 78
PART III       78
  ITEM 17. FINANCIAL STATEMENTS . 78
  ITEM 18. FINANCIAL STATEMENTS. 78
  ITEM 19. EXHIBITS. 79

 

ii

Table of Contents

 

 

 

INTRODUCTION

 

We are a development stage technology company engaged in the design, development and commercialization of transportation and safety applications based on our proprietary computer vision, video motion detection and machine learning software. We anticipate that the first key application of our technology will be in Advanced Driver Assistance Systems, or ADAS, in automobiles and trucks. We believe that our sophisticated and robust software has the potential to bridge the gap between the next generation of ADAS and autonomous (self-driving) automobiles. Our technology is based on over a decade’s worth of work by our parent company in conjunction with the Israeli military, and we believe that it has significant advantages over competing solutions. While many currently available ADAS platforms only employ the use of a single camera due to the complexity of stereoscopic imaging, our ADAS software is being built to handle both dual and quadric-camera stereoscopic or stereo assist imaging. Quadric-camera installments will include two dual camera systems – one standard set for daytime imaging and the second camera set based on infrared technology more suitable for limited visibility conditions such as nighttime and adverse weather conditions.

We were incorporated in the State of Israel in September 1977 under the name Golan Melechet Machshevet (1997) Ltd. In April 1987, we became a public company in Israel, and our shares were listed for trade on the Tel Aviv Stock Exchange, or TASE. On May 16, 2010, we changed our name to Asia Development (A.D.B.M.) Ltd., and on January 12, 2016, we changed our name to Foresight Autonomous Holdings Ltd. Our Ordinary Shares are currently traded on the TASE under the symbol “FRST”. We are filing this registration statement on Form 20-F in anticipation of the listing of our American Depositary Shares, or ADSs, on the NASDAQ Capital Market under the symbol “FRSA”. The Bank of New York Mellon, acting as depositary, will register and deliver our ADSs. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Certain information included or incorporated by reference in this registration statement on Form 20-F may be deemed to be “forward-looking statements”. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified. 

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. 

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. 

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things: 

the overall global economic environment;

 

the impact of competition and new technologies;

 

general market, political and economic conditions in the countries in which we operate;

 

projected capital expenditures and liquidity;

 

changes in our strategy;

 

litigation; and

 

those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, as well as in this registration statement on Form 20-F generally.

 

Readers are urged to carefully review and consider the various disclosures made throughout this registration statement on Form 20-F which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. 

You should not put undue reliance on any forward-looking statements. Any forward-looking statements in this registration statement on Form 20-F are made as of the date hereof, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 

In addition, the section of this registration statement on Form 20-F entitled “Item 4. Information on the Company” contains information obtained from independent industry sources and other sources that we have not independently verified. 

Unless otherwise indicated, all references to the “Company,” “we,” “our” and “Foresight” refer to Foresight Autonomous Holdings Ltd. and its subsidiary, Foresight Automotive Ltd., an Israeli corporation. References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References to “Ordinary Shares” are to our Ordinary Shares, no par value. We report our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. 

1

Table of Contents

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

 

A. Directors and Senior Management.

 

The following table lists the current members of our board of directors and our executive officers. The address for our directors and officers is c/o Foresight Autonomous Holdings Ltd., 3 Golda Meir, Ness Ziona 7414001, Israel.

 

Name

 

Position

     
Michael Gally   Chairman of the Board of Directors
     
Haim Siboni   Chief Executive Officer, Director
     
Eli Yoresh   Chief Financial Officer, Director
     
Ariel Dor   Chief Operating Officer
     

Doron Cohadier

 

Vice President of Business Development

     
Dror Elbaz  

Vice President of Research and Development

     
Ehud Aharoni   Director
     
Avishay Cohen   Director
     
Shaul Gilad   Director
     
Zeev Levenberg   Director

 

For further details, see “Item 6. A. Directors and Senior Management.”

 

B. Advisers.

 

Our principal legal advisers are Zysman, Aharoni, Gayer and Sullivan & Worcester LLP, located at 1633 Broadway, 32nd Floor, New York, NY 10019, and Law Offices of Eitan, Mehulal & Sadot, located at 10 Abba Eban Blvd., Herzlia 4612002, Israel.

 

C. Auditors.  

 

The financial statements included in this registration statement on Form 20-F have been audited by Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The address of Brightman Almagor Zohar & Co. is 1 Azrieli Center, Tel Aviv 6116402, Israel.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

A. Selected Financial Data.

 

The selected consolidated financial data for the fiscal years set forth in the table below have been derived from our consolidated financial statements and notes thereto. The selected consolidated statement of operations and other comprehensive income data for fiscal years 2016, 2015 and 2014, and the selected consolidated financial position data at December 31, 2016, 2015 and 2014, have been derived from our audited consolidated financial statements and notes thereto set forth elsewhere in this registration statement on Form 20-F. The selected financial data should be read in conjunction with our consolidated financial statements, and are qualified entirely by reference to such consolidated financial statements.

 

2

Table of Contents

 

U.S. dollars in thousands, except per share data   Year Ended December 31,  
    2016     2015     2014  
Consolidated Statements of Operations Data                  
Research and development expenses     904       131       233  
Marketing and sales     224       --       --  
General and administrative     2,627       26       35  
Equity in net loss of affiliated companies     108       --       --  
Operating loss     3,863       157     269
Finance income, net     1,950       --       --  
Net Loss     1,913       157     268
Basic and diluted loss per share     (0.03 )     (0.00 )     (0.01 )
Weighted average number of shares outstanding used in computing basic and diluted loss per share-in thousands     67,311       35,884       35,884  

 

    December 31,
2016
 
Consolidated Balance Sheet Data:      
Cash and cash equivalents     3,364  
Total assets     5,257  
Total current liabilities     457  
Total non-current liabilities     131  
Accumulated deficit     (3,355
Total shareholders’ equity     4,669  

 

B. Capitalization and Indebtedness.

 

The following table sets forth our capitalization as of December 31, 2016:

 

on an actual basis; and

 

  on a pro forma basis to give effect to the following events as if each event had occurred on December 31, 2016: (i) the issuance of 12,363,413 Ordinary Shares issued in March 2017 pursuant to a private placement at a price per share of NIS 1.9 (approximately $0.52 per share), (out of which 3,863,157 Ordinary Shares will be allocated during May 2017, subject to standard closing conditions), and an aggregate of 12,784,331 series F Warrants to purchase 12,784,33 Ordinary Shares at an exercise price of USD 0.80 per share which are exercisable until the 24 month anniversary of the date of issuance; (ii) the issuance of 6,580,945 Ordinary Shares pursuant to a private placement from March 2017 at a price per share of NIS 2.1 (approximately $0.58 per share) and an aggregate of 6,736,183 series F Warrants to purchase 6,736,183 Ordinary Shares at an exercise price of USD 0.80 per share which are exercisable until the 24 month anniversary of the date of issuance; and (iii) the issuance of 2,083,332 Ordinary Shares pursuant to a private placement from March 2017 at a price per share of NIS 2.4 (approximately $0.66 per share) and an aggregate of 1,051,665 series G Warrants to purchase 1,051,665 Ordinary Shares at an exercise price of USD 0.95 per share which are exercisable until the 18 month anniversary of the date of issuance.

 

You should read this information together with our financial statements and the related notes and with “Item 5. Operating and Financial Review and Prospects” appearing elsewhere in this registration statement on Form 20-F.

 

    As of December 31, 2016  
    Actual     Pro forma  
    Audited     Unaudited  
Cash and Cash equivalents     3,364       14,115  
                 
Shareholders’ equity:                
Share capital and additional paid in capital     8,024       18,775  
Accumulated deficit     (3,355 )     (3,355 )
Total shareholders’ equity     4,669       15,420  
Total capitalization     4,669       15,420  

 

C. Reasons for the Offer and Use of Proceeds.

 

Not applicable.

D. Risk Factors.

 

You should carefully consider the risks described below, together with all of the other information in this registration statement on Form 20-F. If any of these risks actually occurs, our business and financial condition could suffer and the price of our ADSs could decline.

 

3

Table of Contents

 

Risks Related to Our Financial Condition and Capital Requirements

 

We are a development-stage company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant losses until we are able to successfully commercialize our products.

 

Our parent company Magna B.S.P. Ltd., or Magna, was incorporated in Israel in 2001. Starting in 2011, Magna began to develop technology devoted to vehicle safety. Magna operated its vehicle safety segment of operations as a separate division for accounting purposes. On October 11, 2015, we entered into a merger agreement, or the Merger, with Magna and Foresight Automotive Ltd., or the Subsidiary, whereby we acquired 100% of the share capital of the Subsidiary from Magna. Since the date of the Merger, we have been operating as a development-stage company and have a limited operating history on which to assess the prospects for our business, have incurred significant losses, and anticipate that we will continue to incur significant losses for the foreseeable future.

 

Since the date of the Merger, and as of December 31, 2016, we have incurred net losses of approximately $1.9 million.

 

We have devoted substantially all of our financial resources to develop our products. We have financed our operations primarily through the issuance of equity securities. The amount of our future net losses will depend, in part, on completing the development of our products, the rate of our future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. We expect to continue to incur significant losses until we are able to successfully commercialize our products. We anticipate that our expenses will increase substantially if and as we:

 

continue the development of our products;

 

establish a sales, marketing, and distribution infrastructure to commercialize our products;

 

seek to identify, assess, acquire, license, and/or develop other products and subsequent generations of our current products;

 

seek to maintain, protect, and expand our intellectual property portfolio;

 

seek to attract and retain skilled personnel; and

 

create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

 

We have not generated any revenue from the sale of our current products and may never be profitable.

 

We have not yet commercialized any of our products and have not generated any revenue since the date of the Merger. Our ability to generate revenue and achieve profitability depends on our ability to successfully complete the development of, and to commercialize, our products. Our ability to generate future revenue from product sales depends heavily on our success in many areas, including but not limited to:

 

completing development of our products;

 

establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products to support market demand for our products;

 

launching and commercializing products, either directly or with a collaborator or distributor;

 

4

Table of Contents

 

addressing any competing technological and market developments;

 

identifying, assessing, acquiring and/or developing new products;

 

negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;

 

maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and

 

attracting, hiring and retaining qualified personnel.

 

We expect that we will need to raise substantial additional capital before we can expect to become profitable from sales of our products. This additional capital may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

 

We expect that we will require substantial additional capital to commercialize our products. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including but not limited to:

 

the scope, rate of progress, results and cost of product development, and other related activities;

 

the cost of establishing commercial supplies of our products;

 

the cost and timing of establishing sales, marketing, and distribution capabilities; and

 

the terms and timing of any collaborative, licensing, and other arrangements that we may establish.

 

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our products. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our ADSs to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or products or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

 

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of our products or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

 

Raising additional capital would cause dilution to our existing shareholders, and may affect the rights of existing shareholders.

 

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of our ADSs.

 

5

Table of Contents

 

Risks Related to Our Business and Industry

 

Defects in products could give rise to product returns or product liability, warranty or other claims that could result in material expenses, diversion of management time and attention, and damage to our reputation.

 

Even if we are successful in introducing our products to the market, our products may contain undetected defects or errors that, despite testing, are not discovered until after a product has been used. Specifically, our ADAS software is complex and could have, or could be alleged to have, defects in design or manufacturing or other errors or failures. This could result in delayed market acceptance of those products, claims from distributors, end-users or others, increased end-user service and support costs and warranty claims, damage to our reputation and business, or significant costs to correct the defect or error. We may from time to time become subject to warranty or product liability claims that could lead to significant expenses as we need to compensate affected end-users for costs incurred related to product quality issues.

 

Any claim brought against us, regardless of its merit, could result in material expense, diversion of management time and attention, and damage to our reputation, and could cause us to fail to retain or attract customers. Currently, we do not maintain product liability insurance, which will be necessary prior to the commercialization of our products. It is likely that any product liability insurance that we will have in the future will be subject to significant deductibles and there is no guarantee that such insurance will be available or adequate to protect against all such claims, or we may elect to self-insure with respect to certain matters. Costs or payments made in connection with warranty and product liability claims and product recalls or other claims could materially affect our financial condition and results of operations.

 

Furthermore, the automotive industry in general is subject to litigation claims due to the nature of personal injuries that result from traffic accidents. The emerging technologies of ADAS and autonomous driving have not yet been litigated or legislated to a point whereby their legal implications are well documented. As a potential provider of such products, we may become liable for losses that exceed the current industry and regulatory norms. In addition, if any of our products are, or are alleged to be, defective, we may be required to participate in a recall of such products if the defect or the alleged defect relates to motor vehicle safety. Depending on the terms under which we supply our products, an auto manufacturer or other ADAS developers to whom we sell our software may hold us responsible for some or all of the entire repair or replacement costs of these products.

 

Our future success depends in part on our ability to retain our executive officers and to attract, retain and motivate other qualified personnel.

 

We are highly dependent on the services of both Mr. Haim Siboni and Mr. Levi Zroya. The loss of their services without proper replacement may adversely impact the achievement of our objectives. Messrs. Siboni and Zroya may leave our employment at any time subject to contractual notice periods, as applicable. Recruiting and retaining other qualified employees, consultants, and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition in the industry in which we operate. The inability to recruit and retain qualified personnel, or the loss of the services of our executive officers, without proper replacement, may impede the progress of our development and commercialization objectives.

 

6

Table of Contents

 

We rely on highly-skilled technical personnel and if we are unable to attract, retain or motivate key personnel or hire qualified personnel, we may not be able to grow or our business may contract, which would have a material adverse effect on our results of operations and financial condition.

 

Our performance is largely dependent on the talents and efforts of highly-skilled individuals, particularly our software engineers, mechanical engineers and computer vision professionals. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly-skilled personnel and, if we are unable to hire and train a sufficient number of qualified employees for any reason, we may not be able to implement our current initiatives or grow, or our business may contract and we may lose market share. Moreover, certain of our competitors or other technology businesses may seek to hire our employees. There is no assurance that any equity or other incentives that we grant to our employees will be adequate to attract, retain and motivate employees in the future. If we do not succeed in attracting, retaining and motivating highly qualified personnel, our business will suffer.

 

Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

 

We generally enter into non-competition agreements with our employees. These agreements prohibit our employees from competing directly with us or working for our competitors or clients for a limited period after they cease working for us. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefiting from the expertise that our former employees or consultants developed while working for us. For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer that have been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

 

We depend entirely on the success of our current products in development, and we may not be able to successfully introduce these products and commercialize them.

 

We have invested almost all of our efforts and financial resources in the research and development of our products in development. As a result, our business is entirely dependent on our ability to complete the development of, and to successfully commercialize, our product candidates. The process of development and commercialization is long, complex, costly and uncertain of outcome.

 

We may not be able to introduce products acceptable to customers and we may not be able to improve the technology used in our current systems in response to changing technology and end-user needs.

 

The markets in which we operate are subject to rapid and substantial innovation and technological change, mainly driven by technological advances and end-user requirements and preferences, as well as the emergence of new standards and practices. Even if we are able to complete the development of our products in development, our ability to compete in the ADAS markets will depend, in large part, on our future success in enhancing our existing products and developing new ADAS systems that will address the varied needs of prospective end-users, and respond to technological advances and industry standards and practices on a cost-effective and timely basis to otherwise gain market acceptance.

 

Even if we successfully introduce our existing products in development, it is likely that new systems and technologies that we develop will eventually supplant our existing systems or that our competitors will create systems that will replace our systems. As a result, any of our products may be rendered obsolete or uneconomical by our or others’ technological advances.

 

7

Table of Contents

 

We may not be able to successfully manage our planned growth and expansion.

 

We expect to continue to make investments in our products in development. We expect that our annual operating expenses will continue to increase as we invest in business development, marketing, research and development, manufacturing and production infrastructure, and develop customer service and support resources for future customers. Failure to expand operational and financial systems timely or efficiently may result in operating inefficiencies, which could increase costs and expenses to a greater extent than we anticipate and may also prevent us from successfully executing our business plan. We may not be able to offset the costs of operation expansion by leveraging the economies of scale from our growth in negotiations with our suppliers and contract manufacturers. Additionally, if we increase our operating expenses in anticipation of the growth of our business and this growth falls short of our expectations, our financial results will be negatively impacted.

 

If our business grows, we will have to manage additional product design projects, materials procurement processes, and sales efforts and marketing for an increasing number of products, as well as expand the number and scope of our relationships with suppliers, distributors and end customers. If we fail to manage these additional responsibilities and relationships successfully, we may incur significant costs, which may negatively impact our operating results. Additionally, in our efforts to be first to market with new products with innovative functionality and features, we may devote significant research and development resources to products and product features for which a market does not develop quickly, or at all. If we are not able to predict market trends accurately, we may not benefit from such research and development activities, and our results of operations may suffer.

 

As our future development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, failure to deliver and timely deliver our products to customers, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional new products. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.

 

Our operating results and financial condition may fluctuate.

 

Even if we are successful in introducing our products to the market, the operating results and financial condition of our company may fluctuate from quarter to quarter and year to year and are likely to continue to vary due to a number of factors, many of which will not be within our control. If our operating results do not meet the guidance that we provide to the market place or the expectations of securities analysts or investors, the market price of our ADS will likely decline. Fluctuations in our operating results and financial condition may be due to a number of factors, including those listed below and those identified throughout this “Risk Factors” section:

 

the degree of market acceptance of our products and services;

 

the mix of products and services that we sell during any period;

 

long sale cycles;

 

changes in the amount that we spend to develop, acquire or license new products, consumables, technologies or businesses;

 

changes in the amounts that we spend to promote our products and services;

 

changes in the cost of satisfying our warranty obligations and servicing our installed base of systems;

 

delays between our expenditures to develop and market new or enhanced systems and consumables and the generation of sales from those products;

 

development of new competitive products and services by others;

 

difficulty in predicting sales patterns and reorder rates that may result from a multi-tier distribution strategy associated with new product categories;

 

litigation or threats of litigation, including intellectual property claims by third parties;

 

8

Table of Contents

 

changes in accounting rules and tax laws;

 

changes in regulations and standards;

 

the geographic distribution of our sales;

 

our responses to price competition;

 

general economic and industry conditions that affect end-user demand and end-user levels of product design and manufacturing;

 

changes in interest rates that affect returns on our cash balances and short-term investments;

 

changes in dollar-shekel exchange rates that affect the value of our net assets, future revenues and expenditures from and/or relating to our activities carried out in those currencies; and

 

the level of research and development activities by our company.

 

Due to all of the foregoing factors, and the other risks discussed herein, you should not rely on quarter-to-quarter comparisons of our operating results as an indicator of our future performance.

 

The markets in which we participate are competitive. Even if we are successful in completing the development of our products in development, our failure to compete successfully could cause any future revenues and the demand for our products not to materialize or to decline over time.

 

We aim to sell our products to auto manufacturers that provide complete ADASs and other companies that market or develop component ADAS parts. Many of our competitors have extensive track records and relationships within the automotive industry.

 

Many of our current and potential competitors have longer operating histories and more extensive name recognition than we have and may also have greater financial, marketing, manufacturing, distribution and other resources than we have. Current and future competitors may be able to respond more quickly to new or emerging technologies and changes in customer demands and to devote greater resources to the development, promotion and sale of their products than we can. Our current and potential competitors may develop and market new technologies that render our existing or future products obsolete, unmarketable or less competitive (whether from a price perspective or otherwise). We cannot assure you that we will be able to maintain a competitive position or to compete successfully against current and future sources of competition.

 

If our relationships with suppliers for our products and services, especially with single source suppliers of components of our products, were to terminate or our manufacturing arrangements were to be disrupted, our business could be interrupted.

 

We purchase component parts that are used in our products from third-party suppliers, some of whom may compete with us. While there are several potential suppliers of most of these component parts that we use, we currently choose to use only one or a limited number of suppliers for several of these components. Our reliance on a single or limited number of vendors involves a number of risks, including:

 

potential shortages of some key components;

 

product performance shortfalls, if traceable to particular product components, since the supplier of the faulty component cannot readily be replaced;

 

discontinuation of a product on which we rely;

 

9

Table of Contents

 

potential insolvency of these vendors; and

 

reduced control over delivery schedules, manufacturing capabilities, quality and costs.

 

In addition, we require any new supplier to become “qualified” pursuant to our internal procedures. The qualification process involves evaluations of varying durations, which may cause production delays if we were required to qualify a new supplier unexpectedly. We generally assemble our systems and parts based on our internal forecasts and the availability of assemblies, components and finished goods that are supplied to us by third parties, which are subject to various lead times. If certain suppliers were to decide to discontinue production of an assembly, component that we use, the unanticipated change in the availability of supplies, or unanticipated supply limitations, could cause delays in, or loss of, sales, increased production or related costs and consequently reduced margins, and damage to our reputation. If we were unable to find a suitable supplier for a particular component or compound, we could be required to modify our existing products or the end-parts that we offer to accommodate substitute components or compounds.

 

Discontinuation of operations at our manufacturing sites could prevent us from timely filling customer orders and could lead to unforeseen costs for us.

 

We plan to assemble and test the systems that we sell, and produce consumables for our systems, at single facilities in various locations that are specifically dedicated to separate categories of systems and consumables. Because of our reliance on all of these production facilities, a disruption at any of those facilities could materially damage our ability to supply our products to the marketplace in a timely manner. Depending on the cause of the disruption, we could also incur significant costs to remedy the disruption and resume product shipments. Such disruptions may be caused by, among other factors, earthquakes, fire, flood and other natural disasters. Accordingly, any such disruption could result in a material adverse effect on our revenue, results of operations and earnings, and could also potentially damage our reputation.

 

Our planned international operations will expose us to additional market and operational risks, and failure to manage these risks may adversely affect our business and operating results.

 

We expect to derive a substantial percentage of our sales from international markets. Accordingly, we will face significant operational risks from doing business internationally, including:

 

fluctuations in foreign currency exchange rates;

 

potentially longer sales and payment cycles;

 

potentially greater difficulties in collecting accounts receivable;

 

potentially adverse tax consequences;

 

reduced protection of intellectual property rights in certain countries, particularly in Asia and South America;

 

difficulties in staffing and managing foreign operations;

 

laws and business practices favoring local competition;

 

costs and difficulties of customizing products for foreign countries;

 

compliance with a wide variety of complex foreign laws, treaties and regulations;

 

tariffs, trade barriers and other regulatory or contractual limitations on our ability to sell or develop our products in certain foreign markets; and

 

10

Table of Contents

 

being subject to the laws, regulations and the court systems of many jurisdictions.

 

Our failure to manage the market and operational risks associated with our international operations effectively could limit the future growth of our business and adversely affect our operating results.

 

Significant disruptions of our information technology systems or breaches of our data security could adversely affect our business.

 

A significant invasion, interruption, destruction or breakdown of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact our business and operations. We could also experience business interruption, information theft and/or reputational damage from cyber-attacks, which may compromise our systems and lead to data leakage either internally or at our third party providers. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks. Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing compromise and/or disruption of our information technology systems and related data.

 

Risks Related to Our Intellectual Property

 

If we are unable to obtain and maintain effective intellectual property rights for our products, we may not be able to compete effectively in our markets.

 

Historically, we have relied on trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and products. Since December 2015, we have also sought patent protection for certain of our products. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and new products.

 

We have sought to protect our proprietary position by filing patent applications in Israel, and plan to do the same in the United States and in other countries, with respect to our novel technologies and products, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

 

We have a growing portfolio of four provisional patent applications and one non-provisional patent application with the Israeli Patent Office. We cannot offer any assurances about which, if any, patent applications will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any new products that we may develop.

 

Further, there is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our products, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our new products, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

 

If we cannot obtain and maintain effective patent rights for our products, we may not be able to compete effectively, and our business and results of operations would be harmed.

 

11

Table of Contents

 

If we are unable to maintain effective proprietary rights for our products, we may not be able to compete effectively in our markets.

 

In addition to the protection afforded by any patents that may be granted, historically, we have relied on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known, knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

 

We cannot provide any assurances that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secret.

 

Intellectual property rights of third parties could adversely affect our ability to commercialize our products, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially reasonable terms.

 

It is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected if existing patents or patents resulting from patent applications issued to third parties or other third party intellectual property rights are held to cover our products or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our new products. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our new products or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

 

It is also possible that we have failed to identify relevant third party patents or applications. For example, U.S. patent applications filed before November 29, 2000 and certain U.S. patent applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent applications in the United States and in most of the other countries are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our new products or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our new products or the use of our new products. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing our new products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new products that are held to be infringing. We might, if possible, also be forced to redesign our new products so that we no longer infringe the third party’s intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

 

12

Table of Contents

 

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.

 

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all other requirements for patentability are met, in the United States prior to March 15, 2013, the first to make the claimed invention without undue delay in filing, is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16, 2011, the United States has moved to a first to file system. The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and may also affect patent litigation. In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.

 

We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.

 

Competitors may infringe our intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our new products, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the United States Patent and Trademark Office, or USPTO, or made a misleading statement, during prosecution. Under the Leahy-Smith Act, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

 

Derivation proceedings initiated by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our new products to market.

 

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ADS.

 

We may be subject to claims challenging the inventorship of our intellectual property.

 

We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

13

Table of Contents

 

We may not be able to protect our intellectual property rights throughout the world.

 

Filing, prosecuting, and defending patents on products, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

 

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

 

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

Risks Related to the Ownership of Our ADSs or Ordinary Shares

 

Sales of a substantial number of our ADSs or Ordinary Shares in the public market by our existing shareholders could cause our share price to fall.

 

Sales of a substantial number of our ADSs or Ordinary Shares in the public market, or the perception that these sales might occur, could depress the market price of our ADSs or Ordinary Shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our ADSs or Ordinary Shares.

 

Our principal shareholders, officers and directors beneficially own over 39.48% of our outstanding Ordinary Shares. They will therefore be able to exert significant control over matters submitted to our shareholders for approval.  

 

As of May 10, 2017, our principal shareholders, officers and directors beneficially own approximately 39.48% of our Ordinary Shares. This significant concentration of share ownership may adversely affect the trading price for our Ordinary Shares because investors often perceive disadvantages in owning shares in companies with controlling shareholders. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders.

 

Holders of ADSs must act through the depositary to exercise their rights as our shareholders .

 

Holders of the ADSs do not have the same rights of our shareholders and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholders meeting is generally no less than 35 calendar days, but in some instances, 21 calendar days. When a shareholder meeting is convened, holders of the ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their Ordinary Shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders’ meeting unless they first withdraw their ordinary shares from the ADS program and convert them into the underlying Ordinary Shares held in the Israeli market in order to allow them to submit to us a request to call a meeting with respect to any specific matter, in accordance with the applicable provisions of the Israeli Companies Law, or the Companies Law, and our amended and restated articles of association.

 

14

Table of Contents

 

The Jumpstart Our Business Startups Act, or the JOBS Act, will allow us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the Securities and Exchange Commission, or the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ADSs or Ordinary Shares.

 

For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to public companies that are not “emerging growth companies” including:

 

the provisions of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

 

Section 107 of the JOBS Act, which provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. This means that an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are electing to delay such adoption of new or revised accounting standards. As a result of this adoption, our financial statements may not be comparable to companies that comply with the public company effective date;

 

any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements; and

 

our ability to furnish two rather than three years of income statements and statements of cash flows in various required filings.

 

We intend to take advantage of these exemptions until we are no longer an “emerging growth company.” We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

We cannot predict if investors will find our ADSs or Ordinary Shares less attractive because we may rely on these exemptions. If some investors find our ADSs or Ordinary Shares less attractive as a result, there may be a less active trading market for our ADSs or Ordinary Shares, and our market prices may be more volatile and may decline.

 

As a “foreign private issuer” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.

 

Our status as a foreign private issuer also exempts us from compliance with certain SEC laws and regulations and certain regulations of the NASDAQ Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required, under the Securities Exchange Act of 1934, as amended, or the Exchange Act, to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. Also, although a recent amendment to the Companies Law will require us to disclose the annual compensation of our five most highly compensated senior officers on an individual basis (rather than on an aggregate basis, as was permitted under the Companies Law for Israeli public companies listed overseas, such as in the United States, prior to such amendment), this disclosure will not be as extensive as that required of a U.S. domestic issuer. For example, it currently appears as if the disclosure required under Israeli law would be limited to compensation paid in the immediately preceding year without any requirement to disclose option exercises and vested stock options, pension benefits or potential payments upon termination or a change of control. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act.

 

15

Table of Contents

 

These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.

 

We may be a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S. taxpayers that are holders of our ADSs or Ordinary Shares if we are or were to become a PFIC.

 

In general, we will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of our ADSs or Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds our ADSs or Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund”, or QEF, or make a “mark-to-market” election, then “excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of our ADSs or Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the ADSs or Ordinary Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held our ADSs or Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold our ADSs or Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold our ADSs or Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to our ADSs or Ordinary Shares in the event that we are a PFIC. See “Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Companies” for additional information.

 

We may be subject to securities litigation, which is expensive and could divert management attention.

 

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.

 

16

Table of Contents

 

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could decline.

 

The trading market for our ADSs or Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

 

Risks Related to Israeli Law and Our Incorporation and Operations in Israel

 

We are exposed to fluctuations in currency exchange rates.

 

A significant portion of our business is conducted outside the United States. Therefore, we are exposed to currency exchange fluctuations in other currencies such as the NIS, because a portion of our expenses in Israel are paid in NIS, which subjects us to the risks of foreign currency fluctuations. Our primary expenses paid in NIS are employee salaries, fees for consultants and subcontractors and lease payments on our Israeli facilities. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. Thus, we are exposed to the risks that: (a) the NIS may appreciate relative to the dollar; (b) the NIS devalue relative to the dollar; (c) the inflation rate in Israel may exceed the rate of devaluation of the NIS; or (d) the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.

 

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

 

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer’s response date.

 

Israeli tax considerations also may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. See “Taxation—Israeli Tax Considerations and Government Programs” for additional information.

 

17

Table of Contents

 

Our amended and restated articles of association also contain provisions that could delay or prevent changes in control or changes in our management without the consent of our board of directors. These provisions include the following:

 

no cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates; and

 

the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents shareholders from being able to fill vacancies on our board of directors.

 

It may be difficult to enforce a judgment of a United States court against us and our officers and directors in Israel or the United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.

 

We were incorporated in Israel. All of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a United States or foreign court. See “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this registration statement on Form 20-F.

 

Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

 

Our executive offices and principal research and development facilities are located in Israel. In addition, all of our key employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. In 2008, 2012 and again in July 2014, Israel was engaged in an armed conflict with Hamas, a militia group and political party which controls the Gaza Strip and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. In addition, recent political uprisings and conflicts in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. It is not clear how this instability will develop and how it will affect the political and security situation in the Middle East. This instability has raised concerns regarding security in the region and the potential for armed conflict. In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. Additionally, the Islamic State of Iraq and Levant, or ISIL, a violent jihadist group, is involved in hostilities in Iraq and Syria and has been growing in influence. Although ISIL’s activities have not directly affected the political and economic conditions in Israel, ISIL’s stated purpose is to take control of the Middle East, including Israel. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy in general and us in particular. Any potential future conflict could also include missile strikes against parts of Israel, including our offices and facilities. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions, could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business may sometimes decline to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

 

18

Table of Contents

 

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government has in the past covered the reinstatement value of certain damages that were caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations and product development.

 

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial conditions or the expansion of our business. Similarly, Israeli corporations are limited in conducting business with entities from several countries.

 

Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

 

The rights and responsibilities of the holders of our Ordinary Shares (and therefore indirectly, our ADSs) are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and fairness toward the company and other shareholders and to refrain from abusing its power in the company. See “Item 6. C. Board Practices – Duties of Shareholders” for additional information. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. corporations.

 

Our controlling shareholder received Israeli government grants for certain of its research and development activities. In course of the Merger with Magna and the Subsidiary, we assumed, jointly with Magna, certain of its obligations related to such grants. The terms of those grants may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. We may be required to pay penalties in addition to repayment of the grants.

 

Our research and development efforts have been financed in part through royalty-bearing grants in an aggregate amount of approximately $553,000 received from the Israel Innovation Authority, or the IIA, formerly known as Israel’s Office of the Chief Scientist of the Ministry of Economy, as of December 31, 2015. In course of the Merger with Magna and the Subsidiary, we were required by IIA to assume, jointly with Magna, its obligations related to such grants. With respect to the royalty-bearing grants we are committed to pay royalties at a rate of 3% to 5% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest at an annual rate of LIBOR applicable to U.S. dollar deposits. Regardless of any royalty payment, we are further required to comply with the requirements of the Israeli Encouragement of Industrial Research and Development Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer to third parties inside or outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel. 

 

19

Table of Contents

 

The transfer of IIA-supported technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

 

Our operations may be disrupted as a result of the obligation of management or key personnel to perform military service.

 

Our employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in some cases longer periods, of military reserve duty until they reach the age of 40 (or older, for citizens who hold certain positions in the Israeli armed forces reserves) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants. Such disruption could materially adversely affect our business and operations.

 

ITEM 4. INFORMATION ON THE COMPANY

 

A. History and Development of the Company.

 

We were incorporated in the State of Israel in September 1977 under the name Golan Melechet Machshevet (1997) Ltd. In April 1987, we became a public company in Israel, and our shares were listed for trade on the TASE. On May 16, 2010, we changed our name to Asia Development (A.D.B.M.) Ltd., and on January 12, 2016, we changed our name to Foresight Autonomous Holdings Ltd. Our Ordinary Shares are currently traded on the TASE under the symbol “FRST”.

 

Our parent company, Magna, was incorporated in Israel in 2001. Starting in 2011, Magna began to develop technology devoted to vehicle safety. Magna operated its vehicle safety segment of operations as a separate division for accounting purposes. On October 11, 2015, and pursuant to the Merger, we acquired 100% of the share capital of the Subsidiary from Magna. On January 5, 2016, we entered into an asset transfer agreement with Magna whereby Magna transferred to us its vehicle safety segment of operations. The asset transfer agreement became effective retroactively on October 11, 2015. 

 

Prior to the Merger, and from July 2015, until October 2015, we did not have any business activity, excluding administrative management.

 

Our principal executive offices are located at 3 Golda Meir St., Ness Ziona 7414001, Israel. Our telephone number in Israel is +972-08-9709030. Our website address is www.foresightauto.com. The information contained on our website or available through our website is not incorporated by reference into and should not be considered a part of this registration statement on Form 20-F, and the reference to our website in this registration statement on Form 20-F is an inactive textual reference only. Zysman, Aharoni, Gayer and Sullivan & Worcester LLP is our agent in the United States, and its address is 1633 Broadway, New York, NY 10019.

 

We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as implemented under the JOBS Act. As such, we are eligible to, and intend to, take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies including but not limited to not being required to comply with the auditor attestation requirements of the SEC rules under Section 404 of the Sarbanes-Oxley Act. We could remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

20

Table of Contents

 

We are a foreign private issuer as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance with certain laws and regulations of the SEC and certain regulations of the NASDAQ Stock Market, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies registered under the Exchange Act.

 

We had no capital expenditures in 2015 and 2014. Our current capital expenditures are primarily for computers, software, research and development equipment and office improvements, and we expect to finance these expenditures primarily from cash on hand.

 

B. Business Overview.

 

We are a development stage technology company engaged in the design, development and commercialization of transportation and safety applications based on our proprietary computer vision, video motion detection and machine learning software. We anticipate that the first key application of our technology will be in ADAS in automobiles and trucks. We believe that our sophisticated and robust software has the potential to bridge the gap between the next generation of ADAS and autonomous (self-driving) automobiles. Our technology is based on over a decade’s worth of work by our parent company in conjunction with the Israeli military, and we believe that it has significant advantages over competing solutions. While many currently available ADAS platforms only employ the use of a single camera due to the complexity of stereoscopic imaging, our ADAS software is being built to handle both dual and quadric-camera stereoscopic or stereo assist imaging. Quadric-camera installments will include two dual camera systems – one standard set for daytime imaging and the second camera set based on infrared technology more suitable for limited visibility conditions such as nighttime and adverse weather conditions.

 

We are targeting to have a complete proof-of-concept software package ready by the third quarter of 2017, and thereafter we plan to enter into definitive agreements to license our software to tier one industry companies (automotive systems integrators that are the direct suppliers to original equipment/automotive manufacturers), and tier two industry companies (companies that sell their products to tier one companies for integration into their complete ADAS products). Our technology and software is being developed in order to be successfully integrated into, and to enhance, these ADAS products.

 

Our proprietary software algorithms perform detailed interpretations of the visual field in order to identify, detect and track various objects in roadway environments (both urban and highways), including, automobiles, pedestrians, cyclists, animals, road irregularities and debris. Our technology and products are designed to reduce the likelihood and severity of accidents. Our technology has been employed by Magna, our parent company, in the defense and security industry at national borders, airports, harbors, prisons, military bases, nuclear plants, oil lines, mine fields and more. Magna was incorporated in Israel in 2001 and has emerged as a leading innovator in the field of homeland security surveillance. Similar to our solutions, Magna’s products revolve around a sophisticated, two-camera, stereo vision system that employs thermal imaging to detect, track and monitor a wide range of targets in a predefined field of view. Starting in 2011, Magna began to develop technology devoted to vehicle safety, and on January 5, 2016, we entered into the Asset Transfer Agreement with Magna whereby Magna transferred to us certain intellectual property rights and assets in the field of vehicle safety. The asset transfer agreement became effective retroactively on October 11, 2015. In addition, and since the date of our Merger, Magna has provided us with certain services, primarily with respect to the design and development of algorithms and ADAS designated computer vision software.

 

In the past several years, public awareness and demand for driver safety technologies, including ADAS, has grown substantially. A recent study predicts that in 2019, approximately 25% of all new vehicles marketed worldwide will be equipped with ADAS capabilities. We also believe that a trend is emerging where ADAS will become standard on more vehicle models. While there are currently many ADAS available on the market, we believe that many products could be substantially improved with our technology. Our mission is to enhance driver safety by providing a software platform that is highly accurate, reliable and provides the lowest rates of false alerts and the highest rates of threat detection.

 

21

Table of Contents

 

In addition, we believe that our technology will advance the development of autonomous driving applications. Vehicles with autonomous driving capabilities are able to detect the immediate environment and navigate without, or with minimal, human input. We believe that our technology has the potential to advance the revolutionary concept of autonomous driving into a practical and everyday solution for drivers.

 

Beyond ADAS and the automated vehicle industry, we are also exploring more ways in which we can utilize our know-how in video motion detection and tracking to answer unmet needs in other sectors of the transportation industry. There is a significant unmet need to avoid train accidents and derailments, and an increasing demand for collecting crucial data (such as infrastructure data for pre-maintenance and potential hazards such as terrorist attacks) in the railway environment. In addition, there is a major shift occurring toward centralized control in Europe and the United States on train movement that will require vision-based customized technology. Thus, we recently acquired a 26% holding in Rail Vision Ltd., or Rail Vision, a development stage company that is developing products for advanced safety via real-time obstacle detection and fleet management in the rail industry, and hold three series of warrants, exercisable in periods between 18 to 30 months, to acquire a significant number of additional shares to reach holdings of up to 45%, on a fully diluted basis. Rail Vision is developing what we believe to be the first-of-its-kind solution to the rail industry, which we believe has the potential to empower autonomous trains. Furthermore, we believe that our intellectual property and knowhow in algorithms and computer vision has the potential to assist Rail Vision to dramatically shorten its time to market. To this end, our agreement with Rail Vision includes a provision whereby we may supply certain research and development services to Rail Vision.

 

Advanced Driver Assistance Systems (ADAS)

 

Traffic accidents remain a global problem. The World Health Organization estimates that traffic accidents cause approximately 1.25 million deaths each year while 20 to 50 million additional people suffer non-fatal and often debilitating injuries. Because more than 90% of vehicular accidents are caused by human error, making vehicles safer and equipping drivers with advanced safety features will reduce the probability and risks of traffic accidents.

 

ADAS safety features are designed to avoid, and decrease the severity of, accidents through various technologies that either alert drivers to obstacles, road hazards and other potential problems, or avoid or decrease the severity of collisions through automated safeguards that can even take over control or partial control of the vehicle. ADAS are becoming the safety standard for newly manufactured vehicles. For example, the U.S. Department of Transportation’s National Highway Traffic Safety Administration, or the NHTSA, has implemented a new standard that, starting in May 2018, will require all new vehicles weighing less than ten thousand pounds to include a rear vision system.

 

Available Technology and ADAS Sensors

 

The vast majority of ADAS products employ multiple sensors and imaging devices, including radar, lidar and cameras. Radar-based sensors compare microwaves of emitted and reflected signals and are generally unaffected by weather. Unlike cameras, radar is not as sensitive to non-metal objects and cannot detect lane markings and traffic signs. Lidar is a sensor that measures distance by illuminating a target with lasers and analyzing the reflected light. A camera, similar to the human eye, gathers a richer amount of data than either a radar or a lidar sensor. For that reason, most ADASs rely more heavily on cameras than other sensors. We believe that the current technology for ADAS cameras is deficient. We believe that we are developing the only ADAS software solution that can process both dual and quadric-camera stereoscopic imaging – which we believe will greatly advance the effectiveness of current and next generation ADAS.

 

22

Table of Contents

 

Market Opportunity

 

The ADAS market is driven by a growing public awareness of transportation safety issues, increasing international regulation and increasing standards of national and international safety organizations. According to a study performed by RnR Market Research, in 2015, approximately 8% of new vehicles marketed in the United States and Europe were equipped with at one or more ADAS capabilities. The study predicts that in 2019, approximately 25% of all new vehicles marketed worldwide will be equipped with ADAS capabilities. A P&S Market Research report published in March 2016 estimated that the ADAS market is expected to grow by 27% compound annual growth rate during 2016 to 2022. Furthermore, market research firm ABI Research, forecasts that the market for ADAS will grow from $11.1 billion in 2014 to $91.9 billion by 2020, passing the $200 billion mark by 2024.

 

According to the NHTSA, and the Insurance Institute for Highway Safety, or the IIHS, autonomous emergency braking, or AEB, which is just one ADAS feature, helps to significantly prevent crashes or reduce their severity by applying a vehicle’s brakes automatically. In March 2016, the NHTSA and IIHS announced that 20 automakers representing more than 99 percent of the U.S. auto market have made a commitment to implement AEB as a standard feature on virtually all new cars by 2023.

 

There are approximately one billion existing vehicles driven worldwide. Our ADAS software solutions may be integrated into ADAS products that are installed in automobiles in the aftermarket. While national safety standards and regulations, which require certain ADAS features for new cars, become more widespread, public awareness and a desire to stay safe will likely increase the retrofitting and aftermarket sales of ADAS products.

 

In order to capitalize on this rapidly growing, multi-billion-dollar industry, we plan to partner with leading car manufacturers through their innovation and development centers, tier one and tier two automotive system integrators and leading manufacturers of processing platforms for the automotive industry. Our software solutions will offer flexibility customized to varied specifications and requirements.

 

Autonomous Driving

 

In recent years, there has been increasing publicity on “autonomous”, “automated” or “self-driving” vehicles. Self-driving vehicles are those in which operation of the vehicle occurs without direct driver input to control steering, acceleration and braking, and are designed so that the driver is not expected to monitor the roadway constantly while operating in self-driving mode. Self-driving vehicles range from single applications with the driver required to continuously monitor traffic to semi-autonomous or fully autonomous driving where the driver increasingly relinquishes control. There are five different levels of automated driving:

 

Level 1: Assisted – Driver stays in full control of the vehicle, and the automated driving system only assists with adaptive cruise control and lane keeping assist.

 

Level 2: Partial Automation – Uses partially automated longitude and lateral guidance in driving lane. Mostly seen with parking assist feature in which the vehicle can park itself under certain conditions.

 

Level 3: Conditional Automation – Partly automated longitude and lateral guidance in an urban environment. Driver still required to be fully aware of his or her surroundings. Applicable features such as traffic jam control in which the vehicle can automatically stop and go in a traffic jam.

 

Level 4: High Automation – Highly automated longitude and lateral guidance with lane changing. Reliable environment recognition, including in complex environment situations.

 

Level 5: Auto-pilot – Door to door commuting in urban environment, with no driver supervision.

 

Automakers today have already commercialized vehicles with level 1 and level 2 features. We believe that in order to achieve level 3, level 4 and level 5 capabilities, the following are required: (i) robust all-weather day and night three-dimensional, or 3D, sensing of the environment; (ii) software and algorithms that can handle multiple sensor inputs and combine them to make best possible decision as complex road situations are encountered; and (iii) the capability to accurately position a vehicle, specifically in an urban environment where GPS localization is not accurate enough.

 

23

Table of Contents

 

While fully autonomous driving is not expected in the near future, we believe that there will be a gradual evolution and ongoing introductions of semi-autonomous driving capabilities in order to reach more advanced levels. The capabilities start with hands-free highway driving that will gradually extend to other types of roadways, such as country and city driving as well as ranging these capabilities to all weather and light conditions. The key factors in the growth of autonomous driving will be increased safety, fail safe systems, consumer demand and economic and social benefits, which will subsequently be reflected in automobile regulations and rating systems.

 

For level 3, 4 and 5 automated vehicles, we plan to introduce a sensor fusion software kit. The sensor fusion software kit will be able to make use of advanced processing platforms and various sensors inputs to make smart decisions in complex road situations as well as accurately positioning the vehicle. For example, the software will be able to take crucial data from vision sensors and transmit it via dedicated short-range communication (DSRC) to other vehicles in order to avoid pile-up accidents. It will also be able to detect a specific coordinate, accurately measure the distance to it and update the vehicle’s true position.

 

Strategy

 

Our mission is to enhance driver and pedestrian safety by providing a software platform that is built to detect, measure and respond to obstacles, is highly accurate, reliable and provides the lowest rates of false alerts. Initially, our software platform will be integrated into existing automotive-grade processing platforms with respect to vision- based sensors. In the long term, our software will be capable of combining vision sensors with communication platforms (such as DSRC) and other sensors such as lidar to achieve automated driving in complex roads situations.

 

We intend to further advance our advanced technologies and commercialization efforts. To achieve these objectives, we plan to develop software which will be hardware agnostic with the potential to bridge the gap between ADAS and autonomous driving. To achieve that, we plan the following steps:

 

Complete the development of our ADAS software . We plan to continue to adapt our current military grade computer vision algorithms and software to fit a mobile environment. We may cooperate with potential clients for effective testing and recording procedures. Our initial development will be to enhance existing processing platforms of various automakers. We plan to collaborate with various processing platform vendors as well as sensor vendors, specifically in the field of night vision.

 

Strategic partnerships with key industry clients . We expect to conduct live demonstrations with a complete proof-of-concept software package for tier one and tier two companies and auto manufacturers that currently offer ADAS products by the third quarter of 2017. Thereafter, during the fourth quarter of 2017 and throughout 2018, we expect to enter into commercial development agreements with potential customers. Commercial development agreements will lay out the framework pursuant to which we will develop specific and tailor made software packages for the potential customers. Definitive license agreements for these software packages will follow. We expect that any meaningful revenue would only occur after we enter into such definitive license agreements, which may occur as soon as the first quarter of 2019.

 

Complete the development of our sensor fusion software . We plan to leverage our ADAS software which uses 3D vision-based sensors to complete a sensor fusion software package that will be capable of handling various existing sensors, while using the 3D vision as its backbone.

 

Our Unique EyeOn TM ADAS Software Solution

 

To our knowledge, we are developing the only ADAS software solution capable of handling both dual and quadric-camera stereoscopic image technology. Our unique EyesOn TM ADAS solution is based on our proprietary technology.

 

Our software is based on advanced algorithms and three-dimensional technology that we believe will provide a solution to the shortfalls of currently existing ADAS. EyesOn TM uniquely employs the use of a two to four camera layout for a complete 3D image of the driving environment. While many currently available ADAS platforms only employ the use of a single camera due to the complexity of stereoscopic imaging, our ADAS software is being built to handle both dual and quadric-camera stereoscopic imaging. Quadric-camera installments will include two dual camera systems – one standard set for daytime imagining and the second camera set based on infrared technology more suitable for limited visibility conditions such as nighttime and adverse weather conditions.

 

24

Table of Contents

 

Stereo technology has all the advantages of a mono camera application (high precision, colors, rich environment data) with the enhancement of accurate distance measurement (3D capability) similar to short range radar, and thus is able to provide better detection results, higher redundancy capabilities and more efficient use of computing power. The stereo camera consists of two mono-cameras, housed approximately 20 centimeters behind the windshield. Whereas a mono-camera only estimates distances, the stereo camera measures the distance to an object and its height from the road surface. Thus, the stereo camera’s analyzing electronics exploit the same effect that gives humans spatial vision, i.e. the parallax shift between two images, and retains its high resolution capability even under difficult circumstances in which other technologies for object recognition might reach their limits; for example, when several objects are in close proximity to each other, when objects are partially obscured, or when there is poor contrast between the object and its background. The fundamental strength of the stereo camera is its ability to compare the two optical paths because the redundant information obtained when both images contain identical zones with matching characteristics enhance the reliability of the data. In addition, the optical paths support each other in poor visibility.

 

In addition to the spatial position (3D) of any object that the stereo camera detects, it provides particularly crucial supplementary data for active driving safety systems. It can determine the direction in which every pixel of an identified object is moving along the horizontal, vertical, and longitudinal axes. This six-dimensional (6D) identification makes absolutely clear whether an object is moving and in which direction. Combined with object classification, based on common characteristics, this process provides for a high standard of decision-making certainty that it is able to timely initiate emergency braking should the driver fail to react to the object and accurately calculate the precise point of impact of a potential collision in order to make the best possible use of the remaining time to prepare appropriate protective measures.

 

In addition to stereo cameras, our software can also utilize thermal cameras or short wave infrared sensors to provide similar capabilities during the night time, low light conditions, low visibility conditions and in adverse weather conditions.

 

Our EyesOn TM ADAS software solution is being developed to support a complete package of ADAS features, including but not limited to lane departure warning and emergency lane keeping, vehicle detection functions such as forward collision warning, adaptive cruise control, traffic jam assist and autonomous emergency braking and vulnerable road user detection functions.

 

Investment in Railway Safety

 

As a software/intellectual property developer, we plan to leverage our technology to other innovative products and seek synergy with other technology companies. We are also exploring more ways in which we can utilize our know-how in video motion detection and tracking to answer unmet needs in other sectors of the transportation industry. We believe that there is a significant unmet need to avoid train accidents and derailments, and an increasing demand for collecting crucial data (such as infrastructure data for pre-maintenance and potential hazards such as terrorist attacks) in the railway environment. In addition, there is a major shift occurring toward centralized control in Europe and the United States on train movement that we believe will require vision-based customized technology. A recent initiative has been launched in Europe known as “Shift2Rail,” which is the first European rail joint technology initiative to seek focused research and innovation by accelerating the integration of new and advanced technologies into innovative rail product solutions. We believe that Shift2Rail and other similar initiatives and legislations intended to stimulate new and improved rail services across Europe and elsewhere may present a significant market opportunity for Rail Vision.

 

In August 2016, we entered into a share purchase agreement with Rail Vision, whereby we acquired a 32% holding in Rail Vision, with warrants to acquire a significant number of additional shares to reach holdings of up to 48%, on a fully diluted basis, in consideration of an aggregate of $1.42 million. Rail Vision is a development stage company that is developing products for advanced safety, asset and fleet management in the rail industry. Rail Vision is developing what we believe to be the first-of-its-kind solution to the rail industry. Rail Vision’s system is being designed to alert locomotive engine engineers, as well as control centers, of obstacles on railway tracks in a timely fashion, in any weather and any lighting conditions, by using designated cameras for object identification. Since the average stopping distance of a train traveling at a high speed is around 800 – 1,200 meters, long-distance obstacle identification is a key to railway safety. Rail Vision’s high-resolution cameras use advanced image processing algorithms to enable the system to locate obstructions from a distance of over 1,500 meters, thus being able to reduce collisions and fatalities, severe damage to locomotives and the environment. We believe Rail Vision can benefit from our know-how in video motion detection and object classification technology to dramatically shorten time to market. To this end, our agreement with Rail Vision includes a provision whereby we may supply certain research and development services to Rail Vision.

 

In April 2017, Rail Vision entered into definitive agreements with several private investors pursuant to which these individuals will purchase an aggregate of approximately $5 million of Rail Vision’s ordinary shares at a pre money company valuation of $20 million. The investors will also receive 100% warrant coverage with an exercise price per ordinary share reflecting a pre money company valuation of $25 million. The warrants are exercisable until the 18 month anniversary of the date of issuance. As a result, our interest in Rail Vision will be approximately 26% and up to 45% on a fully diluted basis.

 

25

Table of Contents

 

Intellectual Property

 

We seek patent protection as well as other effective intellectual property rights for our products and technologies in the United States and internationally. Our policy is to pursue, maintain and defend intellectual property rights developed internally and to protect the technology, inventions and improvements that are commercially important to the development of our business. We have filed four provisional and one non-provisional patent applications with the Israeli Patent Office. A provisional patent application is a preliminary application that establishes a priority date for the patenting process for the invention concerned and provide certain provisional patent rights. We cannot be certain that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology. Despite our efforts to protect our intellectual property, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages. For more information, please see “Risks Related to our Intellectual Property.”

 

On January 5, 2016, we entered into an asset transfer agreement with Magna whereby Magna transferred to us certain intellectual property rights and assets in the field of vehicle safety. The asset transfer agreement became effective retroactively on October 11, 2015. In addition, and since the date of our Merger, Magna has provided us with certain services, primarily with respect to the design and development of algorithms and ADAS designated computer vision software.

 

Competition

 

The ADAS market is a highly competitive. There are several large corporations that have developed and market complete ADAS, such as MobilEye N.V., Robert Bosch GmbH and Continental AG. Within the ADAS industry, there are also many companies that, like us, focus on offering certain building blocks and components of ADAS and autonomous driving technologies. Within the software/algorithm field, there are several companies, such as NVIDIA and Mitsubishi Electric that currently offer software platforms for integration into complete ADAS. We anticipate that our main competition will be from these software providers. In addition, companies like Google, Uber and MobilEye N.V. are developing autonomous driving technologies.

 

However, unlike many of our competitors, our EyesOn TM software is unique in that it is being developed for dual and quad camera applications, which we believe will solve many of the shortcomings of the currently available ADAS products.

 

Many of our competitors, either alone or through their strategic partners, have substantially greater name recognition and financial, technical, manufacturing, marketing and human resources than we do and significantly greater experience and infrastructure in the research and development of ADAS products, and commercializing those products around the world.

 

Research and Development

 

For the years ended December 31, 2016, 2015 and 2014, we incurred approximately $904,284, $131,016 and $233,000, respectively, of research and development expense.

 

Through our Subsidiary, we have a development services agreement with Magna, pursuant to which Magna provides the Subsidiary with software development services in consideration of monthly payments at agreed upon rates for each of Magna’s employees, not to exceed the aggregate monthly consideration of NIS 200,000 plus VAT. We expect that the services provided by Magna will decrease as we hire additional employees and expand our in-house capabilities.

 

26

Table of Contents

 

Grants from the Israel’s Office of the Chief Scientist/ Israel Innovation Authority

 

Our research and development efforts are financed in part through royalty-bearing grants from the IIA, formerly known as Israel’s Office of the Chief Scientist of the Ministry of Economy. As of December 31, 2016, we have received the aggregate amount of approximately $553,000 from the IIA for the development of our technology. With respect to such grants we are committed to pay certain royalties up to the total grant amount. Regardless of any royalty payment, we are further required to comply with the requirements of the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. We do not believe that these requirements will materially restrict us in any way.

 

Sales and Marketing

 

We intend to build a global commercial infrastructure to effectively support the commercialization of our ADAS software. Meaningful commercialization efforts will commence if and when we believe that the completion of a release-candidate version of a given product is imminent.

 

We expect to conduct live demonstrations with a complete proof-of-concept software package for tier one and tier two companies and auto manufacturers that currently offer ADAS products by the third quarter of 2017. Thereafter, during the fourth quarter of 2017 and throughout 2018, we expect to enter into commercial development agreements with potential customers. Commercial development agreements will lay out the framework pursuant to which we will develop specific and tailor made software packages for the potential customers. Definitive license agreements for these software packages will follow. We expect that any meaningful revenue would only occur after we enter into such definitive license agreements, which may occur as soon as the first quarter of 2019.

 

C. Organizational Structure.

 

Our parent company is Magna B.S.P. Ltd., a private company incorporated in Israel. Magna currently holds approximately 39.48% of our issued and outstanding share capital as of the date of this registration statement on Form 20-F. We currently have one wholly owned subsidiary: Foresight Automotive Ltd., which is a private company incorporated in the State of Israel.

 

D. Property, Plant and Equipment.

 

Our offices and research and development facility are located at the Weitzman Industrial Park in Ness Ziona, Israel, where we currently occupy approximately 3,000 square feet. We lease our facilities, and our lease ends on September 30, 2018. Our monthly rent payment is NIS 14,178 (approximately $3,700).

 

We consider that our current office space is sufficient to meet our current needs, but as our business expands, we may move to bigger offices, or expand our offices in the current location.

 

ITEM 4A. UNRESOLVED STAFF COMMENTS

 

Not applicable.

   

27

Table of Contents

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   

A. Operating Results.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this registration statement on Form 20-F. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” elsewhere in this registration statement on Form 20-F.

 

Overview

 

We are a development stage technology company engaged in the design, development and commercialization of transportation and safety applications based on our proprietary computer vision, video motion detection and machine learning software. We anticipate that the first key application of our technology will be in ADAS in automobiles and trucks. We believe that our sophisticated and robust software has the potential to bridge the gap between the next generation of ADAS and autonomous (self-driving) automobiles. Our technology is based on work done over a decade by our parent company in conjunction with the Israeli military, and we believe that it has significant advantages over competing solutions. While many currently available ADAS platforms only employ the use of a single camera due to the complexity of stereoscopic imaging, our ADAS software is being built to handle both dual and quadric-camera stereoscopic or stereo assist imaging. Quadric-camera installments will include two dual camera systems – one standard set for daytime imaging and the second camera set based on infrared technology more suitable for limited visibility conditions such as nighttime and adverse weather conditions.

 

Operating Expenses

 

Our current operating expenses consist of three components — research and development expenses, marketing and sales expenses and general and administrative expenses.

 

Research and development expenses

 

Our research and development expenses consist primarily of salaries and related personnel expenses, subcontracted work and consulting, professional services and other related research and development expenses.

 

The following table discloses the breakdown of research and development expenses:

 

U.S. dollars in thousands   Year ended December 31  
    2016     2015     2014  
Payroll and related expenses     221       107       195  
Subcontracted work and consulting     588       17       23  
Other     95       7       15  
      904       131       233  

 

We expect that our research and development expenses will materially increase as we plan to rapidly recruit more employees in order to accelerate our research and development efforts.

 

28

Table of Contents

 

Marketing and sales

 

Our marketing and sales expenses consist primarily of salaries and related personnel expenses and other related marketing and sales expenses.

 

The following table discloses the breakdown of marketing and sales expenses:

 

U.S. dollars in thousands   Year ended December 31  
    2016     2015     2014  
Payroll and related expenses     115       --       --  
Exhibitions, conventions and Travel expenses     80       --       --  
Other     29       --       --  
      224       --       --  

 

General and administrative

 

General and administrative expenses consist primarily of salaries, share-based compensation expense, professional service fees for accounting, legal, bookkeeping, intellectual property and facilities, travel expenses and other general and administrative expenses.

 

The following table discloses the breakdown of general and administrative expenses:

 

U.S. dollars in thousands   Year ended December 31  
      2016         2015         2014      
Payroll and related expenses     815       15       15  
Share based payment     59       --       --  
Professional services     829       4       3  
Directors fee and insurance     93       --       --  
Travel expenses     36       2       4  
Rent and office maintenance     90       4       10  
Consultation fees to a related party     470       --       --  
Other     235       1       3  
Total     2,627       26       35  

 

Comparison of Year ended December 31, 2016 to Year ended December 31, 2015.

 

Results of Operations   December 31,  
U.S. dollars in thousands   2016     2015  
Research and development expenses     904       131  
Marketing and sales     224       --  
General and administrative     2,627       26  
Equity in net loss of affiliated companies     108       --  
Operating loss     3,863       157  
Financial income, net     1,950       --  
Net loss     1,913       157  
Loss attributable to holders of Ordinary Shares     1,913       157  

 

Research and development expenses

 

Our research and development expenses for the year ended December 31, 2016 amounted to approximately $904,000, representing an increase of approximately $773,000, or 690%, compared to approximately $131,000 for the year ended December 31, 2015. The increase was primarily attributable to an increase in salaries and related personnel expenses of approximately $114,000, and an increase of approximately $588,000 in subcontracted work, reflecting an increase in the number of employees from Magna, our parent company, giving research and development services to us.

 

Marketing and sales

 

Our marketing and sales expenses for the year ended December 31, 2016 amounted to approximately $224,000, consisting primarily of salaries and related personnel expenses of approximately $115,000, approximately $27,000 in expenses related to exhibitions and conventions and approximately $53,000 in travel expenses. We did not have any marketing and sales expenses in 2015.  

 

29

Table of Contents

 

General and administrative

 

Our general and administrative expenses totaled approximately $2,627,000 for the year ended December 31, 2016, an increase of approximately $2,601,000, compared to approximately $26,000 for the year ended December 31, 2015. The increase resulted primarily from an increase of $800,000 in salaries and related personnel expenses, reflecting an increase in the number of employees, from an increase of approximately $470,000 in consultation fees to a related party and an increase of approximately $825,000 in professional services for accounting, legal, bookkeeping, and consultants.

 

Operating loss

 

As a result of the foregoing, our operating loss for the year ended December 31, 2016 was approximately $3,863,000, as compared to an operating loss of approximately $157,000 for the year ended December 31, 2015, an increase of approximately $3,706,000.

 

Financial expense and income

 

Financial expense and income consist of bank fees and other transactional costs and exchange rate differences.

 

We recognized financial income of approximately $1,950,000 for the year ended December 31, 2016, compared to financial income of $0 for the year ended December 31, 2015. The increase is primarily due to a change in fair value of warrants of approximately $1,847,000, and offset by exchange rate differences during 2016 of approximately $70,000.

 

Net loss

 

As a result of the foregoing, our loss for the year ended December 31, 2016 was approximately $1,913,000, as compared to approximately $157,000 for the year ended December 31, 2015, an increase of approximately $1,756,000.

 

Comparison of the Year ended December 31, 2015 to the Year Ended December 31, 2014.

 

Results of Operations   December 31,  
U.S. dollars in thousands   2015     2014  
Research and development expenses     131       233  
General and administrative     26       35  
Operating loss     157       268  
Net Loss     157       268  
Loss attributable to holders of Ordinary Shares     157       268  

 

Research and development expenses

 

Our research and development expenses for the year ended December 31, 2015 amounted to approximately $131,000, representing a decrease of approximately $102,000, or 44%, compared to approximately $233,000 for the year ended December 31, 2014. The decrease was primarily attributable to a decrease of approximately $89,000 in salaries and related personnel expenses, reflecting a decrease in the number of employees.

 

General and administrative

 

Our general and administrative expenses totaled approximately $26,000 for the year ended December 31, 2015, a decrease of approximately $9,000, or 25.7%, compared to approximately $35,000 for the year ended December 31, 2014. The decrease resulted primarily from a decrease of approximately $6,000 in rent and office related expenses.

 

30

Table of Contents

 

Operating loss

 

As a result of the foregoing, our operating loss and total comprehensive loss for the year ended December 31, 2015 was approximately $157,000, as compared to an operating loss and total comprehensive loss of approximately $268,000 for the year ended December 31, 2014, a decrease of approximately $111,000, or 41.6%.

 

Net loss

 

As a result of the foregoing, our net loss for the year ended December 31, 2015 was approximately $157,000, as compared to approximately $268,000 for the year ended December 31, 2014, a decrease of approximately $111,000.

 

Critical Accounting Policies and Estimate

 

We describe our significant accounting policies more fully in Note 2 to our financial statements for the year ended December 31, 2016. We believe that the accounting policy below is critical in order to fully understand and evaluate our financial condition and results of operations.

 

We prepare our financial statements in accordance with U.S. GAAP. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations, and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, income, and expenses. Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which the change to the estimate is made.

 

Use of estimates in the preparation of financial statements:

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Our management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgment and assumptions can affect reported amounts and disclosures made. Actual results could differ from those estimates.

 

Financial statement in U.S. dollars

 

The functional currency of our business is the U.S. dollar, since the dollar is the currency of the primary economic environment in which we have operated and expects to continue to operate in the foreseeable future.

 

Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, “Foreign Currency Translation.”

 

All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

 

Fair value of financial instruments

 

The carrying values of cash and cash equivalents, other receivable and prepaid expenses, marketable equity securities and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

 

The fair value of derivative warrant liabilities (refer to Note 8 of our financial statements for the year ended December 31, 2016) was estimated using the Black Scholes Merton formula based on inputs including (i) the price of our shares; (ii) the exercise price of the warrant; (iii) risk-free interest; (iv) term available to exercise or redeem the security and (v) the volatility of our share during the relevant term.

 

31

Table of Contents

 

Share-based compensation

 

We apply ASC 718-10, “Share-Based Payment,” or ASC 718-10, which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including employee stock options under our stock plans based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in our statement of operations.

 

We recognize compensation expenses for the value of non-employee awards, which have graded vesting, based on the straight-line method over the requisite service period of each award, net of estimated forfeitures.

 

We estimate the fair value of share options granted using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is calculated using the appropriate industry sector. We have historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and our results of operations. During 2016, our Board of Directors approved the grant of options to purchase 1,794,205 of our Ordinary Shares, subject to the terms and condition of each specific grant.

 

B. Liquidity and Capital Resources.

 

Overview

 

Since our inception through December 31, 2016, we have funded our operations principally with approximately $8,943,000 from funding from Magna and the issuance of Ordinary Shares. As of December 31, 2016, we had approximately $3,364,000 in cash and cash equivalents.

 

The table below presents our cash flows for the periods indicated:

 

U.S. dollars in thousands   December 31,  
    2016     2015     2014  
Operating activities     (2,380 )     (157 )     (268 )
Investing activities     (1,757 )     --       --  
Financing activities     7,501       157       268  
Net increase in cash and cash equivalents     3,364       --       --  

 

Operating Activities

 

Net cash used in operating activities of approximately $2,380,000 during the year ended December 31, 2016 was primarily used for payment of subcontracted work, salaries and related personnel expenses, payments for professional services and travel, patent, directors fees, rent and other miscellaneous expenses.

  

Net cash used in operating activities of approximately $157,000 during the year ended December 31, 2015 was primarily used for payment of salaries and related personnel expenses and for travel, rent and other miscellaneous expenses.

 

Net cash used in operating activities of approximately $268,000 during the year ended December 31, 2014 was primarily used for payment salaries and related personnel expenses and for travel, rent and other miscellaneous expenses.

 

32

Table of Contents

 

Investing Activities

 

Net cash used in investing activities of approximately $1,757,000 during the year ended December 31, 2016 was primarily used for payment for investment in affiliated company of approximately $1,356,000, for purchase of short term deposits of approximately $390,000, and purchase of fixed assets of approximately $73,000.

 

Financing Activities

 

Net cash provided by financing activities in the year ended December 31, 2016 consisted of approximately $7,501,000 primarily provided from net proceeds from issuance of Ordinary Shares of approximately $6,256,000, and from acquisition of a subsidiary in connection with reverse acquisition of approximately $1,245,000.

 

Net cash provided by financing activities in the years ended December 31, 2015 and 2014 consisted of approximately $157,000 and $268,000 of Funding from Magna.

 

Current Outlook

 

We have financed our operations to date primarily through proceeds from sales of our Ordinary Shares and warrants. We have incurred losses and generated negative cash flows from operations since January, 2011. Since January 2011, we have not generated any revenue from the sale of products and we do not expect to generate revenues from sale of our products in the next few years.

 

As of December 31, 2016, our cash and cash equivalents including short-term bank deposits were approximately $3.8 million. During March 2017 we completed three private placements of our Ordinary Shares pursuant to which we raised a total of $10.8 million. We expect that our existing cash, cash equivalents and short-term bank deposits will be sufficient to fund our current operations until December 2018; however, we expect that we will require substantial additional capital to complete the development of, and to commercialize, our products. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:

 

the progress and costs of our research and development activities;

 

the costs of manufacturing our products;

 

the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

 

the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and

 

the magnitude of our general and administrative expenses.

 

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt or equity financings. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our products. This may raise substantial doubts about our ability to continue as a going concern.

 

33

Table of Contents

 

E. Off-Balance Sheet Arrangements.

 

We currently do not have any off-balance sheet arrangements.

 

F. Tabular Disclosure of Contractual Obligations.

 

The following table summarizes our contractual obligations at December 31, 2016:

 

    Total     Less than
1 year
    1-3 years     4-5 years     More than
5 years
 
Facility (1)     77,700       44,400       33,300       --       --  
Development Agreement with Magna (2)     1,264,000       632,000       632,000       --       --  

 

(1) As of December 31, 2016, we had contractual obligations with respect to our lease payments for our offices and research and development facility, in the amount of NIS 14,178 (approximately $3,700) per month.

 

(2) As of December 31, 2016, we had contractual obligations with respect to our development agreement with Magna for research and development services, in the amount of NIS 200,000 (approximately $52,600) per month.

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management.

 

The following table sets forth information regarding our executive officers, key employees and directors as of May 10, 2017:

 

Name   Age   Position
Michael Gally   58   Chairman of the Board of Directors
Haim Siboni   57   Chief Executive Officer, Director
Eli Yoresh   46   Chief Financial Officer, Director
Ariel Dor   35   Chief Operating Officer
Doron Cohadier   42   Vice President of Business Development
Dror Elbaz     38   Vice President of Research and Development
Ehud Aharoni   59   Director
Avishay Cohen   51   Director
Shaul Gilad   51   Director
Zeev Levenberg   52   Director

  

Michael Gally, Chairman of the Board of Directors

 

Mr. Michael Gally has served on our board of directors since January 2016, and as our Chairman since March 2016. From 2011 to 2016, Mr. Gally served as the manager and owner of MG Business Development, a leading consulting practice. From 2011 to 2016, Mr. Gally served as lecturer at the Tel Aviv University Faculty of Management - The Graduate School of Business Administration. Mr. Gally teaches several advanced marketing elective courses in the M.B.A. and E.M.B.A. programs. Mr. Gally takes an active part as an expert in export activities, initiated by the State of Israel. Mr. Gally holds an M.B.A. from Tel Aviv University Faculty of Management - The Graduate School of Business Administration .

 

Haim Siboni, Chief Executive Officer, Director

 

Mr. Haim Siboni has served as our Chief Executive Officer and on our board of directors since December 2015. Mr. Siboni has also served as the chief executive officer and as a director of Magna B.S.P. Ltd., our parent company, since January 2001. Mr. Siboni has many years of professional experience, as well as a broad skillset, in fields such as engineering, marketing and business management of electronics, video, TV, multimedia, computerized systems, line and wireless telecommunication, design and development of systems and devices – including electro-optic radar systems.

 

34

Table of Contents

 

Eli Yoresh, Chief Financial Officer, Director

 

Mr. Eli Yoresh has served as our Chief Financial Officer since March 2010, and on our board of directors since October 2010. Mr. Yoresh is a seasoned executive with over 15 years of executive and financial management experience, mainly, with companies from the financial, technology and industrial sectors. Mr. Yoresh served as the chief executive officer of Tomcar Global Holdings Ltd., a global manufacturer of off-road vehicles, from 2005 to 2008. In addition, since October 2010, Mr. Yoresh has served as a director at Proteologics Ltd. (TASE: PRTL), and since March 2014, Mr. Yoresh has served as a director at Nano Dimension Ltd. (NASDAQ, TASE: NNDM). Mr. Yoresh’s previous directorships include Greenstone Industries Ltd. (TASE: GRTN) from January 2013 to June 2015, as the Chairman of both and Zmicha Investment House Ltd. (TASE: TZMI-M) from February 2013 to July 2015 and Gefen Biomed investments Ltd. (TASE: GEFEN) from April 2013 to July 2015. Mr. Yoresh holds a B.A. in Business Administration from the College of Management in Israel and an M.A. in Law from Bar-Ilan University in Israel. Mr. Yoresh is a Certified Public Accountant in Israel.

 

Ariel Dor, Chief Operating Officer

 

Mr. Ariel Dor has served as our Chief Operating Officer since January 2016. Mr. Dor served as a strategic consultant at Matrix IT Ltd. (TASE: MTRX) from September 2009 to September 2010. He also served as a Team Leader at Elbit Systems Ltd. (NASDAQ: ESLT) from September 2010 to October 2012. Mr. Dor served as a Business Development Manager for Clal Energy from October 2012 to December 2013. Furthermore, he served as the head of mobile and energy IOT division of Galooli Group Ltd. from January 2014 to January 2016. Mr. Dor has extensive experience in the fields of business strategy, marketing and sales operation, and channels management. Mr. Dor holds a B.Sc. in Electrical Engineering and Microelectronics from Tel Aviv University.

 

Doron Cohadier, Vice President of Business Development

 

Mr. Doron Cohadier has served as our Vice President of Business Development since January 2017. Mr. Cohadier has more than 15 years of managerial experience, mainly in the field of business development. From 2011 to 2017, Mr. Cohadier served as a Director Business Development and Marketing of Elbit Systems Ltd. (NASDAQ, TASE: ESLT). Mr. Cohadier holds a B.Sc. in Industrial Engineering from Brunel University, London, and an Executive M.B.A. from the Recanati School of Business Administration of the Tel Aviv University.

 

Dror Elbaz, Vice President of Research and Development

 

Mr. Dror Elbaz has served as our Vice President of Research and Development since December 2016. Mr. Elbaz has more than 10 years of research and development experience with multidisciplinary and highly engineered electro-optical systems, image acquisition, image processing and 3D reconstruction. From 2009 to 2015, Mr. Elbaz served as an R&D Projects Manager and as an Application Product Team Leader at Orbotech Ltd. (NASDAQ: ORBK). From 2015 to 2016, Mr. Elbaz served as a Technical Projects Manager and as Vice President of Engineering at Replay Video Technologies Ltd. Mr. Cohadier holds a B.Sc. in Computer Engineering from Bar Ilan University, Israel, and an M.B.A. in Technological Companies Management from the College of Management, Rishon LeZion, Israel.

 

Ehud Aharoni, Director

 

Mr. Ehud Aharoni has served on our board of directors as an independent director since January 2016. Mr. Aharoni has also served on our Audit and Compensation Committee since January 2016. For over 15 years, Mr. Aharoni has lectured at the Tel-Aviv University, Coller School of Management in a variety of strategic courses, and holds a number of senior administrative positions, including the chief executive officer & academic director of Lahav Executive Education, Coller School of Management, since 2006, and the Executive Director of the Eli Hurvitz Institute of Strategic Management, since 2005. Before joining Lahav Executive Education, Mr. Aharoni served as an independent strategic consultant to leading Israeli firms and organizations. Mr. Aharoni holds a bachelor’s degree in statistics and operations research, an M.B.A. specializing in Finance and a Continuing Studies, and an M.B.A. specializing in International Management, all from the Tel Aviv University.

 

Avishay Cohen, Director

 

Mr. Avishay Cohen has served on our board of directors as an external director since January 2009. Mr. Cohen has also served on our Audit and Compensation Committee since January 2009. From 2012 to 2014, Mr. Cohen served as the chief executive officer of Eilat Harbour, and since 2014 he has served as the Chief Executive Officer of Yafenof Ltd. Mr. Cohen holds a B.A. and an M.A. in Governmental Administration from the Bar Ilan University.

 

Shaul Gilad, Director

 

Mr. Shaul Gilad has served on our board of directors since January 2016. From 2006 to 2010 Mr. Gilad served as the chief financial officer for Champion Motors. From 2010 to 2012 Mr. Gilad served as the chief financial officer and as an executive vice president for Gadot Chemical Ltd. Since 2012, Mr Gilad has served as chief financial officer and as an executive vice president for Aeronautics Ltd. Mr. Gilad holds a B.A. in Economics and Accounting (cum laude) from the Hebrew University, and he is certified public accountant in Israel.

 

35

Table of Contents

 

Zeev Levenberg, Director

 

Zeev Levenberg has served on our board of directors as an external director since July 2011. Mr. Levenberg has also served on our Audit and Compensation Committees since July 2014. Since 2013, Mr. Levenberg has served as the sole owner, director and chief executive officer of My Connecting Group Ltd. From 2008 to 2014, Mr. Levenberg served as a director at Adler Investments Ltd. Additionally, since 2009, Mr. Levenberg has served as a director at Greenenergy Renewable Energy Ltd. From 2009 to 2014, Mr. Levenberg served as a director at Arazim investments Ltd. Furthermore, since 2012, Mr. Levenberg has served as a director at MySize Inc. Mr. Levenberg holds an M.B.A. in Financial Management from Bar-Ilan University Business School, and a B.Sc. in Life Science from the Hebrew University.

 

Family Relationships

 

There are no family relationships between any members of our executive management and our directors.

 

Arrangements for Election of Directors and Members of Management

 

With the exception of our director, Mr. Haim Siboni, Mr. Michael Gally, Mr. Shaul Gilad, and Mr. Ehud Aharoni, who were nominated by Magna pursuant to, and whose appointments were approved by a general meeting of our shareholders as part of, the Merger, there are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive management or our directors were selected. See “Related Party Transactions” for additional information.

 

B. Compensation.

 

Prior to January 2016, we did not pay any directors or senior management. Prior to October 2015, we were operated as a segment of our parent company. The following table presents in the aggregate all compensation we paid to all of our directors and senior management from January 1, 2016 through December 31, 2016. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.

 

All amounts reported in the tables below reflect our cost, in thousands of U.S. dollars. Amounts paid in NIS are translated into U.S. dollars at the rate of NIS 3.843 = U.S. $1.00, based on the average representative rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel during such period of time.

 

   

Salary 
and Related

Benefits

   

Pension,

Retirement

and Other

Similar

Benefits

   

Share Based

Compensation

 
All directors and senior management as a group, consisting of 8 persons   $ 479,000       -     $ 259,000  

 

In accordance with the Companies Law, we are required to disclose the compensation granted to our five most highly compensated officers. With respect to the year ended December 31, 2016, we only had three executive officers for which we were required to provide this individual disclosure. The table below reflects the compensation granted during or with respect to the year ended December 31, 2016.

 

Executive Officer   Salary and Related Benefits     Share Based Compensation     Total  
                   
Haim Siboni   $ 189,000     -     $ 189,000  
                         
Eli Yoresh   $ 103,000     $ 346,000     $ 449,000  
                         
Ariel Dror   $ 125,000        -     $ 125,000  

 

Employment Agreements

 

We have entered into written employment or services agreements with each of our executive officers in January 2016. All of these agreements contain customary provisions regarding noncompetition, confidentiality of information and most of them contain also customary provisions regarding assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors and officers insurance. Members of our senior management may be eligible for bonuses in accordance with our compensation policy and as set forth by our board of directors.

 

36

Table of Contents

 

For a description of the terms of our options and option plans, see “Item 6. E. Share Ownership” below.

 

Directors’ Service Contracts

 

Other than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for benefits upon the termination of his or her engagement with our company.

 

C. Board Practices.

 

Introduction

 

Our board of directors presently consists of seven members, including two external directors required to be appointed under the Companies Law. We believe that Ehud Aharoni, Avishay Cohen, Zeev Levenberg, and Michael Gally are “independent” for purposes of the NASDAQ Stock Market rules. Our amended and restated articles of association provide that the number of board of directors’ members (including external directors) shall be set by the general meeting of the shareholders provided that it will consist of not less than three and not more than ten members. Pursuant to the Companies Law, the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers are appointed by our Chief Executive Officer. Their terms of employment are subject to the approval of the board of directors’ compensation committee and of the board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with them.

 

Each director, except external directors, will hold office until he or she resigns or unless he or she is removed by a majority vote of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our amended and restated articles of association.

 

In addition, under certain circumstances, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors or in addition to the acting directors (subject to the limitation on the number of directors), until the next annual general meeting or special general meeting in which directors may be appointed or terminated. External directors may be elected for up to two additional three-year terms after their initial three-year term under the circumstances described below, with certain exceptions as described in “External Directors” below. External directors may be removed from office only under the limited circumstances set forth in the Companies Law. See “Item 6. C—Board Practices—External Directors” below.

 

Under the Companies Law, any shareholder holding at least one percent of our outstanding voting power may nominate a director. However, any such shareholder may make such a nomination only if a written notice of such shareholder’s intent to make such nomination has been given to our board of directors. Any such notice must include certain information, including the consent of the proposed director nominee to serve as our director if elected, and a declaration that the nominee signed declaring that he or she possess the requisite skills and has the availability to carry out his or her duties. Additionally, the nominee must provide details of such skills, and demonstrate an absence of any limitation under the Companies Law that may prevent his or her election, and affirm that all of the required election-information is provided to us, pursuant to the Companies Law.

 

Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. In determining the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise is two.

 

37

Table of Contents

 

The board of directors may elect one director to serve as the chairman of the board of directors to preside at the meetings of the board of directors, and may also remove that director as chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her relatives is permitted to serve as the chairman of the board of directors, and a company may not vest the chairman or any of his or her relatives with the chief executive officer’s authorities. In addition, a person who reports, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position in the company or a controlled company, but he or she may serve as a director or chairman of a controlled company. However, the Companies Law permits a company’s shareholders to determine, for a period not exceeding three years from each such determination, that the chairman or his or her relative may serve as chief executive officer or be vested with the chief executive officer’s authorities, and that the chief executive officer or his or her relative may serve as chairman or be vested with the chairman’s authorities. Such determination of a company’s shareholders requires either: (1) the approval of at least a majority of the shares of those shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination) (shares held by abstaining shareholders shall not be considered); or (2) that the total number of shares opposing such determination does not exceed 2% of the total voting power in the company. Currently, we have a separate chairman and chief executive officer.

 

The board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the board, and it may, from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise expressly provided by the board of directors, the committees shall not be empowered to further delegate such powers. The composition and duties of our audit committee, financial statement examination committee and compensation committee are described below.

 

The board of directors oversees how management monitors compliance with our risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by us. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to our audit committee.

 

External Directors

 

Under the Companies Law, an Israeli company whose shares have been offered to the public or whose shares are listed for trading on a stock exchange in or outside of Israel is required to appoint at least two external directors to serve on its board of directors. External directors must meet stringent standards of independence. As of the date hereof, our external directors are Messrs. Zeev Levenberg and Avishay Cohen.

 

According to regulations promulgated under the Companies law, at least one of the external directors is required to have “financial and accounting expertise,” unless another member of the audit committee, who is an independent director under the NASDAQ Stock Market rules, has “financial and accounting expertise,” and the other external director or directors are required to have “professional expertise”. An external director may not be appointed to an additional term unless: (1) such director has “accounting and financial expertise;” or (2) he or she has “professional expertise,” and on the date of appointment for another term there is another external director who has “accounting and financial expertise” and the number of “accounting and financial experts” on the board of directors is at least equal to the minimum number determined appropriate by the board of directors. We have determined that Mr. Zeev Levenberg has accounting and financial expertise.

 

38

Table of Contents

 

 

A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses a high degree of proficiency in, and an understanding of, business - accounting matters and financial statements, such that he or she is able to understand the financial statements of the company in depth and initiate a discussion about the manner in which financial data is presented. A director is deemed to have “professional expertise” if he or she holds an academic degree in certain fields or has at least five years of experience in certain senior positions.

 

External directors are elected by a majority vote at a shareholders’ meeting, so long as either:

 

at least a majority of the shares held by shareholders who are not controlling shareholders and do not have personal interest in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder) have voted in favor of the proposal (shares held by abstaining shareholders shall not be considered); or

 

the total number of shares voted against the election of the external director, does not exceed 2% of the aggregate voting rights of the company.

 

The Companies Law provides for an initial three-year term for an external director. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to two additional three-year terms, provided that:

 

(1) his or her service for each such additional term is recommended by one or more shareholders holding at least one percent 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 two percent of the aggregate voting rights in the company and such external director is not an interested shareholder or a competitor or relative of such shareholder, at the time of appointment, and is not affiliated with or related to an interested shareholder or competitor, at the time of appointment or the two years prior to the date of appointment. An "Interested shareholder or a competitor " is a shareholder who recommended the appointment for each such additional term or a substantial shareholder, if at the time of appointment, it, its controlling shareholder or a company controlled by any of them, has business relations with the company or any of them are competitors of the company;

 

(2) 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 disinterested majority required for the initial election of an external director (as described above); or

 

(3) the external director offered his or her service for each such additional term and was approved in accordance with the provisions of section (1) above.

 

The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NASDAQ Stock Market, may be extended indefinitely in increments of additional three-year terms, in each case provided that the audit committee and the board of directors of the company confirm that, in light of the external director’s expertise and special contribution to the work of the board of directors and its committees, the reelection for such additional period(s) is beneficial to the company, and provided that the external director is reelected subject to the same shareholder vote requirements as if elected for the first time (as described above). Prior to the approval of the reelection of the external director at a general shareholders meeting, the company’s shareholders must be informed of the term previously served by him or her and of the reasons why the board of directors and audit committee recommended the extension of his or her term.

 

External directors may be removed only by a special general meeting of shareholders called by the board of directors after the board has determined that circumstances allow such dismissal, at the same special majority of shareholders required for their election or by a court, and in both cases only if the external directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to our company. In the event of a vacancy created by an external director which causes the company to have fewer than two external directors, the board of directors is required under the Companies Law to call a shareholders meeting as soon as possible to appoint such number of new external directors in order that the company thereafter has two external directors.

 

39

Table of Contents

 

External directors may be compensated only in accordance with regulations adopted under the Companies Law.

 

Fiduciary Duties of Office Holders

 

The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company.

 

The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:

 

information on the advisability of a given action brought for his approval or performed by him by virtue of his position; and

 

all other important information pertaining to these actions.

 

The duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:

 

refrain from any conflict of interest between the performance of his duties in the company and his performance of his other duties or personal affairs;

 

refrain from any action that is competitive with the company’s business;

 

refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and

 

disclose to the company any information or documents relating to the company’s affairs which the office holder has received due to his position as an office holder.

 

Approval of Related Party Transactions under Israeli Law

 

General

 

Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:

 

the office holder acts in good faith and the act or its approval does not cause harm to the company; and

 

the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company at a reasonable time before the company’s approval of such matter.

 

Disclosure of Personal Interests of an Office Holder

 

The Companies Law requires that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the transaction is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him or her relating to any existing or proposed transaction by the company. If the transaction is an extraordinary transaction, the office holder must also disclose any personal interest held by:

 

the office holder’s relatives; or

 

any corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director or general manager or has the right to appoint at least one director or the general manager.

 

40

Table of Contents

 

Under the Companies Law, an extraordinary transaction is a transaction:

 

not in the ordinary course of business;

 

not on market terms; or

 

that is likely to have a material effect on the company’s profitability, assets or liabilities.

 

The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our board of directors.

 

Under the Companies Law, once an office holder complies with the above disclosure requirement, the board of directors may approve a transaction between the company and an office holder, or a third party in which an office holder has a personal interest, unless the articles of association provide otherwise and provided that the transaction is in the company’s interest. If the transaction is an extraordinary transaction in which an office holder has a personal interest, first the audit committee and then the board of directors, in that order, must approve the transaction. Under specific circumstances, shareholder approval may also be required. A director who has a personal interest in an extraordinary transaction, which is considered at a meeting of the board of directors or the audit committee, may not be present at this meeting or vote on this matter, unless a majority of the board of directors or the audit committee, as the case may be, has a personal interest. If a majority of the board of directors has a personal interest, then shareholder approval is generally also required.

 

Under the Companies Law, all arrangements as to compensation of office holders require approval of the compensation committee and board of directors, and compensation of office holders who are directors must be also approved, subject to certain exceptions, by the shareholders, in that order.

 

Disclosure of Personal Interests of a Controlling Shareholder

 

Under the Companies Law, the disclosure requirements that apply to an office holder also apply to a controlling shareholder of a public company. Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval of the audit committee or the compensation committee, as the case may be, the board of directors and a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’ meeting. In addition, the shareholder approval must fulfill one of the following requirements:

 

at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or

 

the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.

 

In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval every three years; however, such transactions not involving the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances.

 

41

Table of Contents

 

The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote.

 

The term “controlling shareholder” is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. In the context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated.

 

Duties of Shareholders

 

Under the Companies Law, a shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising its rights and performing its obligations toward the company and other shareholders, including, among other things, voting at general meetings of shareholders (and at shareholder class meetings) on the following matters:

 

amendment of the articles of association;

 

increase in the company’s authorized share capital;

 

merger; and

 

the approval of related party transactions and acts of office holders that require shareholder approval.

 

A shareholder also has a general duty to refrain from oppressing other shareholders.

 

The remedies generally available upon a breach of contract will also apply to a breach of the above mentioned duties, and in the event of oppression of other shareholders, additional remedies are available to the injured shareholder.

 

In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.

 

Committees of the Board of Directors

 

Our board of directors has established three standing committees, the audit committee, the compensation committee and the Financial Statement Examination Committee.

 

Audit Committee

 

Under the Israeli Companies Law, we are required to appoint an audit committee. The audit committee must be comprised of at least three directors, including all of the external directors (one of whom must serve as chair of the committee). The audit committee may not include the chairman of the board; a controlling shareholder of the company or a relative of a controlling shareholder; a director employed by or providing services on a regular basis to the company, to a controlling shareholder or to an entity controlled by a controlling shareholder; or a director who derives most of his or her income from a controlling shareholder.

 

42

Table of Contents

 

In addition, under the Israeli Companies Law, a majority of the members of the audit committee of a publicly-traded company must be unaffiliated directors. In general, an “unaffiliated director” under the Israeli Companies Law is defined as either (i) an external director, or (ii) an individual who has not served as a director of the company for a period exceeding nine consecutive years and who meets the qualifications for being appointed as an external director, except that he or she need not meet the requirement being 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 for accounting and financial expertise or professional qualifications.

 

Our audit committee, acting pursuant to a written charter, is comprised of Messrs. Zeev Levenberg, Avishay Cohen and Ehud Aharoni.

 

Under the Companies Law, our audit committee is responsible for:

 

(i) determining whether there are deficiencies in the business management practices of our company, and making recommendations to the board of directors to improve such practices;

 

(ii) 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 Companies Law) and establishing the approval process for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest (see “Item 6 C.—Board Practices—Approval of Related Party Transactions under Israeli law”);

 

(iii) examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;

 

(iv) examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor;

 

(v) establishing procedures for the handling of employees’ complaints as to the management of our business and the protection to be provided to such employees; and

 

(vi) where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board of directors and proposing amendments thereto.

 

Our audit committee may not conduct any discussions or approve any actions requiring its approval (see “Item 6 C.—Board Practices—Approval of Related Party Transactions under Israeli law”), unless at the time of the approval a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external director.

 

NASDAQ Stock Market Requirements for Audit Committee

 

Under the NASDAQ Stock Market rules, we are required to maintain an audit committee consisting of at least three members, all of whom are independent and are financially literate and one of whom has accounting or related financial management expertise.

 

43

Table of Contents

 

As noted above, the members of our audit committee include Mr. Levenberg and Mr. Cohen who are external directors, and Mr. Aharoni who is an independent director, each of whom is “independent,” as such term is defined in under NASDAQ Stock Market rules. Mr. Levenberg serves as the chairman of our audit committee. All members of our audit committee meet the requirements for financial literacy under the NASDAQ Stock Market rules. Our board of directors has determined that each member of our audit committee is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NASDAQ Stock Market rules.

 

Financial Statement Examination Committee

 

Under the Companies Law, the board of directors of a public company in Israel must appoint a financial statement examination committee, which consists of members with accounting and financial expertise or the ability to read and understand financial statements. Our financial statement examination committee is comprised of Messrs. Zeev Levenberg, Avishay Cohen and Ehud Aharoni. The function of a financial statements examination committee is to discuss and provide recommendations to its board of directors (including the report of any deficiency found) with respect to the following issues: (1) estimations and assessments made in connection with the preparation of financial statements; (2) internal controls related to the financial statements; (3) completeness and propriety of the disclosure in the financial statements; (4) the accounting policies adopted and the accounting treatments implemented in material matters of the company; and (5) value evaluations, including the assumptions and assessments on which evaluations are based and the supporting data in the financial statements. Our independent registered public accounting firm and our internal auditor are invited to attend all meetings of our financial statements examination committee.

 

Compensation Committee

 

Under the Companies Law, the board of directors of any public company must establish a compensation committee. The compensation committee must be comprised of at least three directors, including all of the external directors, who must constitute a majority of the members of the compensation committee. However, subject to certain exceptions, Israeli companies whose securities are traded on stock exchanges such as the NASDAQ Stock Market, and who do not have a shareholder holding 25% or more of the company’s share capital, do not have to meet this majority requirement; provided, however, that the compensation committee meets other Companies Law composition requirements, as well as the requirements of the jurisdiction where the company’s securities are traded. Each compensation committee member that is not an external director must be a director whose compensation does not exceed an amount that may be paid to an external director. The compensation committee is subject to the same Companies Law restrictions as the audit committee as to (a) who may not be a member of the committee and (b) who may not be present during committee deliberations as described above.

 

Our compensation committee is acting pursuant to a written charter, and consists of Messrs. Zeev Levenberg, Avishay Cohen and Ehud Aharoni, each of whom is “independent,” as such term is defined under the NASDAQ Stock Market rules. Our compensation committee complies with the provisions of the Companies Law, the regulations promulgated thereunder, and our articles of association, on all aspects referring to its independence, authorities and practice. Our compensation committee follows home country practice as opposed to complying with the compensation committee membership and charter requirements prescribed under the NASDAQ Stock Market rules.

 

Our compensation committee reviews and recommends to our board of directors: (1) the annual base compensation of our executive officers and directors; (2) annual incentive bonus, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance arrangements, and change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation, compensation policies or arrangements.

 

44

Table of Contents

 

The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. Such policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee. The compensation policy is then brought for approval by our shareholders, which requires a special majority. Under the Companies Law, the board of directors may adopt the compensation policy if it is not approved by the shareholders, provided that after the shareholders oppose the approval of such policy, and that the compensation committee and the board of directors revisit the matter and determine that adopting the compensation policy would be beneficial to the company. Our compensation policy was approved by our shareholders on December 22, 2015, and an amendment thereto was approved by our shareholders on April 17, 2016.

 

The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers and directors, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for executives. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

 

the education, skills, expertise and accomplishments of the relevant director or executive;

 

the director’s or executive’s roles and responsibilities and prior compensation agreements with him or her;

 

the relationship between the terms of service of an office holder and the cost of compensation of the other employees of the company, including those 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 compensation; and

 

as to severance compensation, the period of service of the director or executive, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.

 

The compensation policy must also include the following principles:

 

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 a director or executive 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.

 

The compensation policy must also consider appropriate incentives from a long-term perspective.

 

45

Table of Contents

 

The compensation committee is responsible for (1) recommending the compensation policy to a company’s board of directors for its approval (and subsequent approval by the shareholders) and (2) duties related to the compensation policy and to the compensation of a company’s office holders, including:

 

recommending 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);

 

recommending to the board of directors periodic updates to the compensation policy;

 

assessing implementation of the compensation policy;

 

determining whether the terms of compensation of certain office holders of the company need not be brought to approval of the shareholders; and

 

determining whether to approve the terms of compensation of office holders that require the committee’s approval.

 

Internal Auditor

 

Under the Companies Law, the board of directors of an Israeli public company must also appoint an internal auditor nominated by the audit committee. Our internal auditor is Mr. Ido Cnaan. The role of the internal auditor is to examine, among other things, whether a company’s actions comply with the law and proper business procedure. The audit committee is required to oversee the activities, and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. An internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder, and may not be a member of the company’s independent accounting firm or its representative. The Companies Law defines an interested party as a holder of 5% or more of the outstanding shares or voting rights of a company, any person or entity that has the right to nominate or appoint at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company. Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.

 

Remuneration of Directors

 

Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors and thereafter, unless exempted under the regulations promulgated under the Companies Law, by the general meeting of the shareholders. In case the remuneration of the directors is in accordance with regulations applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting. Where the director is also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply.

 

Insurance

 

Under the Companies Law, a company may obtain insurance for any of its office holders against the following liabilities incurred due to acts he or she performed as an office holder, if and to the extent provided for in the company’s articles of association:

 

breach of his or her duty of care to the company or to another person, to the extent such a breach arises out of the negligent conduct of the office holder;

 

a breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice the company’s interests; and

 

a financial liability imposed upon him or her in favor of another person concerning an act performed by such office holder in his or her capacity as an officer holder.

 

46

Table of Contents

 

We currently have directors’ and officers’ liability insurance, providing total coverage of $10,000,000 for the benefit of all of our directors and officers, in respect of which we paid a twelve-month premium of approximately $11,500, which expires on January 5, 2017.

 

On February 28, 2016, our compensation committee and board of directors approved our entering into a professional liability insurance agreement for officers and directors therein who will serve us from time to time for a period of 12 months retroactively commencing on January 6, 2016, and until January 5, 2017, with the yearly premium and a liability limit set forth above. As required by the Companies Law, this matter was submitted to a vote, and approved by our shareholders on April 17, 2016.

 

Indemnification

 

The Companies Law provides that a company may indemnify an office holder against the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:

 

a financial liability imposed on him or her in favor of another person by any judgment concerning an act performed in his or her capacity as an office holder, including a settlement or arbitrator’s award approved by a court;

 

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

 

reasonable litigation expenses, including attorneys’ fees, expended by the office holder or imposed on him or her by a court,: (1) in proceedings that the company institutes, or that another person institutes on the company’s behalf, against him or her; (2) in a criminal proceedings of which he or she was acquitted; or (3) as a result of a conviction for a crime that does not require proof of criminal intent.

 

Our amended and restated articles of association allow us to indemnify our office holders up to a certain amount. The Companies Law also permits a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her, as described above, then the undertaking should be limited and shall detail the following foreseen events and amount or criterion:

 

to events that in the opinion of the board of directors can be foreseen based on the Company's activities at the time that the undertaking to indemnify is made; and

 

in amount or criterion determined by the board of directors, to be reasonable under the circumstances.

 

We have entered into indemnification agreements with all of our directors and with certain members of our senior management. Each such indemnification agreement provides the office holder with indemnification permitted under applicable law and up to a certain amount, and to the extent that these liabilities are not covered by directors and officers insurance.

 

Exculpation

 

Under the Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance an office holder from his or her liability to the company, in whole or in part, for damages caused to the company as a result of a breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association provide that we may exculpate any office holder from liability to us to the fullest extent permitted by law. Under the indemnification agreements, we exculpate and release our office holders from any and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law.

 

47

Table of Contents

 

Limitations

 

The Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any act or omission committed with the intent to derive an illegal personal benefit; or (4) any fine, monetary sanction, penalty or forfeit levied against the office holder.

 

Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

 

The foregoing descriptions summarize the material aspects and practices of our board of directors. For additional details, we also refer you to the full text of the Companies Law, as well as of our amended and restated articles of association, which are exhibits to this registration statement on Form 20-F, and are incorporated herein by reference.

 

There are no service contracts between us or our Subsidiary, on the one hand, and our directors in their capacity as directors, on the other hand, providing for benefits upon termination of service.

 

D. Employees.

 

As of May 10, 2017, we had four full-time senior management employees, including our Chief Executive Officer, Chief Operating Officer, Vice President of Research and Development, Vice President of Business Development, and an additional part-time senior manager – our chief financial officer. In addition, we have 12 other full-time employee and thirteen part-time service providers. All of our employees are located in Israel. None of our employees are represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance with relevant labor laws by the Israeli Ministry of Economy and which apply such agreement provisions to our employees even though they are not part of a union that has signed a collective bargaining agreement.

 

All of our employment and consulting agreements include employees’ and consultants’ undertakings with respect to non-competition, assignment to us of intellectual property rights developed in the course of employment, and confidentiality. The enforceability of such provisions is limited by Israeli law.

 

E. Share Ownership.

 

The following table sets forth information regarding beneficial ownership of our ordinary shares as of May 10, 2017, by:

 

each of our directors and executive officers; and

 

all of our directors and executive officers as a group.

 

48

Table of Contents

 

    No. of Shares
Beneficially Owned (1)
    Percentage
Owned (2)
 
Directors and executive officers:            
Ehud Aharoni (3)     300,000       0.33 %
Doron Cohadier (4)     700,000       0.77 %
Avishay Cohen     -       -  
Ariel Dor (4)     700,000       0.77 %
Dror Elbaz (4)     700,000       0.77 %
Michael Gally (3)     300,000       0.33 %
Shaul Gilad (3)     300,000       0.33 %
Zeev Levenberg     -       -  
Haim Siboni (5)     2,000,000       2.2 %
Eli Yoresh (6)     1,794,205       1.97 %
All directors and executive officers as a group (10 persons)     6,794,205       7.47 %

 

(1)

Beneficial ownership is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person, even if not the record owner, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities. A person also is considered to be the “beneficial owner” of securities that the person has the right to acquire within 60 days by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through companies in which they have a “controlling interest,” which means the direct or indirect power to direct the management and policies of the entity.

 

(2) The percentages shown are based on 90,889,362 Ordinary Shares issued and outstanding as of May 10, 2017.

 

(3) Includes options to purchase 300,000 Ordinary Shares that are currently exercisable at an exercise price of NIS 1.95 (approximately $0.52) per share.

 

(4) Includes options to purchase 700,000 Ordinary Shares that are currently exercisable at an exercise price of NIS 1.95 (approximately $0.52) per share.

 

(5) Includes options to purchase 2,000,000 Ordinary Shares that are currently exercisable at an exercise price of NIS 2.31 (approximately $0.63) per share.

 

(6) Includes options to purchase 1,794,205 Ordinary Shares that are currently exercisable at an exercise price of NIS 0.3 (approximately $0.08) per share.

 

2016 Share Option Plan

 

We maintain one equity incentive plan – our 2016 Share Option Plan, or the 2016 Plan. As of May 10, 2017, the number of Ordinary Shares reserved for the exercise of options granted under the plan was 10,959,403. In addition, options to purchase 7,519,205 Ordinary Shares were issued and outstanding, out of which options to purchase 897,103 Ordinary Shares were vested as of that date, with an exercise price of NIS 0.30 (approximately $0.08) per share and options to purchase 556,250 Ordinary Shares were vested as of that date, with an exercise price of NIS 1.95 (approximately $0.52) per share and options to purchase 179,167 Ordinary Shares were vested as of that date, with an exercise price of NIS 2.31 (approximately $0.63) per share.

 

Our 2016 Plan was adopted by our board of directors in November 2015, and expires in November 2025. Our employees, directors, officers, and services providers, including those who are our controlling shareholders, as well as those of our affiliated companies, are eligible to participate in this plan.

 

Our 2016 Plan is administered by our board of directors, regarding the granting of options and the terms of option grants, including exercise price, method of payment, vesting schedule, acceleration of vesting and the other matters necessary in the administration of this plan. Eligible Israeli employees, officers and directors, would qualify for provisions of Section 102(b)(2) of the Tax Ordinance. Pursuant to such Section 102(b)(2), qualifying options and shares issued upon exercise of such options are held in trust and registered in the name of a trustee selected by the board of directors. The trustee may not release these options or shares to the holders thereof for two years from the date of the registration of the options in the name of the trustee. Under Section 102, any tax payable by an employee from the grant or exercise of the options is deferred until the transfer of the options or ordinary shares by the trustee to the employee or upon the sale of the options or ordinary shares, and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance with specified conditions. Our Israeli non-employee service providers and controlling shareholders may only be granted options under Section 3(9) of the Tax Ordinance, which does not provide for similar tax benefits. The 2016 Plan also permits granting options to Israeli grantees who do not qualify under Section 102(b)(2).

 

49

Table of Contents

 

As a default, our 2016 Plan provides that upon termination of employment for any reason, other than in the event of death or disability, all unvested options will expire and all vested options will generally be exercisable for 6 months following such termination, or such other period as determined by the plan administrator, subject to the terms of the 2016 Plan and the governing option agreement. Notwithstanding the foregoing, in the event the employment is terminated for cause (including, inter alia, a breach of confidentiality or non-compete obligations to us, and commission of an act involving moral turpitude or an act that causes harm to us) all options granted to such employee, whether vested or unvested, will not be exercisable and will terminate on the date of the termination of his employment.

 

Upon termination of employment due to death or disability, all the options vested at the time of termination will generally be exercisable for 12 months, or such other period as determined by the plan administrator, subject to the terms of the 2016 Plan and the governing option agreement.

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

A. Major Shareholders.

 

The following table sets forth information regarding beneficial ownership of our ordinary shares as of May 10, 2017 by each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our outstanding ordinary shares.

 

Except as indicated in footnotes to this table, we believe that the shareholders named in this table have sole voting and investment power with respect to all shares shown to be beneficially owned by them, based on information provided to us by such shareholders. The shareholders listed below do not have any different voting rights from any of our other shareholders.

 

    No. of Shares
Beneficially Owned (1)
    Percentage
Owned (2)
 
Holders of more than 5% of our voting securities:            
Magna – B.S.P. Ltd.     35,884,116       39.48 %

 

(1)

Beneficial ownership is determined in accordance with the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person, even if not the record owner, has or shares the underlying benefits of ownership. These benefits include the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities. A person also is considered to be the “beneficial owner” of securities that the person has the right to acquire within 60 days by option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through companies in which they have a “controlling interest,” which means the direct or indirect power to direct the management and policies of the entity.

 

(2) The percentages shown are based on 90,889,362 Ordinary Shares issued and outstanding as of May 10, 2017.

 

Changes in Percentage Ownership by Major Shareholders

 

On October 11, 2015, we entered into the Merger with Magna and the Subsidiary, whereby we acquired from Magna 100% of the share capital of the Subsidiary. As a result of the Merger, Magna received an aggregate amount of approximately 61.86% of our issued and outstanding Ordinary Shares, as of January 5, 2016. As of December 31, 2016, Magna owned 49.11% of our issued and outstanding Ordinary Shares and as of May 10, 2017, Magna owns 39.48% of our issued and outstanding Ordinary Shares.

 

For a detailed description of the Merger, see “Related Party Transactions – Merger Agreement.”

 

50

Table of Contents

 

Record Holders

 

Based upon a review of the information provided to us by our transfer agent and custodian bank in the United States, as of May 10, 2017, there were a total of 10 holders of record of our shares, of which all record holders had registered addresses in Israel. These numbers are not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees.

 

We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and here are no arrangements known to us which would result in a change in control of us at a subsequent date.

 

B. Related Party Transactions.

 

See “Item 6.B Compensation” for compensation to our directors and officers.

 

Options

 

Since our inception we have granted options to purchase our Ordinary Shares to our officers and certain of our directors. Such option agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. We describe our option plans under “Management—Equity Incentive Plan.” If the relationship between us and an executive officer or a director is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally remain exercisable for six months after such termination.

 

Merger Agreement

 

On October 11, 2015, we entered into the Merger with Magna and the Subsidiary (under its previous name Four Eyes Autonomous Ltd.), whereby we acquired from Magna 100% of the share capital of the Subsidiary. For accounting purposes, this transaction was treated as a reverse recapitalization. Pursuant to the Merger, as amended on November 16, 2015 and December 28, 2015, we issued 35,884,116 Ordinary Shares to Magna, which constituted approximately 61.86% of our issued and outstanding share capital, on a fully diluted basis. Furthermore, as a condition to the Merger, we undertook to receive repayment of a loan that we gave to Kfir Silberman, a former controlling shareholder, in the sum of NIS 3,166,276 (approximately $833,230), and to have a net cash balance of at least NIS 5,000,000 (approximately $1,315,790), on the closing date of the Merger. 

 

As part of the foregoing merger agreement, Magna was provided with the right to nominate the following four directors: Mr. Haim Siboni, Mr. Michael Gally, Mr. Shaul Gilad, and Mr. Ehud Aharoni. Their appointment to our board of directors was confirmed at a general meeting of our shareholders on December 22, 2015, and became effective on January 5, 2016.

 

Asset Transfer Agreement

 

Following the Merger, on January 5, 2016, the Subsidiary (under its previous name Four Eyes Autonomous Ltd.) entered into an asset transfer agreement with Magna whereby Magna transferred to the Subsidiary Magna’s intellectual property rights and assets in the field of vehicle safety for the purpose of using such rights and assets only in the field of vehicle safety. The asset transfer agreement became effective retroactively on October 11, 2015. The transfer of the assets was made in order to allow the Subsidiary to further develop the technology as a separate entity from Magna. No consideration was paid to Magna. Per the asset transfer agreement, Magna was granted a right of first refusal to purchase back the assets, or any part thereof, in case that the Subsidiary ceases its activity in the field of vehicle safety or ceases the use and sells the assets. Also, pursuant to the asset transfer agreement, Magna may continue to use the transferred asset in any field other than vehicle safety. 

 

51

Table of Contents

 

Services Agreement

 

Following the Merger, on January 5, 2016, Magna entered into a services agreement with the Subsidiary, which provides that, for a period of 12 months following the Merger, Magna shall provide the Subsidiary with certain services, primarily with respect to the design and development of algorithms and ADAS designated computer vision software in consideration of monthly payments at agreed upon rates for each of Magna’s workers, not to exceed the aggregate monthly consideration of NIS 200,000 plus VAT. Furthermore, the Subsidiary may extend the Agreement by two additional 12 month periods.

 

Service Agreement with L.I.A. Pure Capital Ltd.  

 

Following the Merger, on January 5, 2016, we (under our previous name Asia Development (A.D.B.M.) Ltd.) entered into a service agreement with L.I.A. Pure Capital Ltd. or L.I.A., an Israeli company wholly-owned by Kfir Silberman, a former controlling shareholder. The agreement provides that for a period of 12 months following the Merger, L.I.A. will provide us with certain services, on a part-time basis of a 40% work week, primarily consisting of management consulting, supporting the Chief Executive Officer, and financial consulting on matters related to capital markets, for a monthly consideration of NIS 27,500 plus VAT. The agreement will be automatically renewed at the end of its term for up to three additional 12 month periods. In addition, pursuant to the terms of the agreement, L.I.A Capital will be entitled to 5% of all funds raised by us from investors introduced by L.I.A.

 

C. Interests of Experts and Counsel.

 

None.

 

ITEM 8. FINANCIAL INFORMATION.

 

A. Consolidated Statements and Other Financial Information.

 

See “Item 18. Financial Statements.”

 

Legal Proceedings

 

We are not currently subject to any material legal proceedings.

 

Dividends

 

We have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

 

The Israeli Companies Law imposes further restrictions on our ability to declare and pay dividends.

 

Payment of dividends may be subject to Israeli withholding taxes. See “Item 10E. Taxation”, for additional information.

 

B. Significant Changes.

 

No significant change, other than as otherwise described in this registration statement on Form 20-F, has occurred in our operations since the date of our consolidated financial statements included in this registration statement on Form 20-F.

 

ITEM 9. THE OFFER AND LISTING

 

A. Offer and Listing Details.

 

Our Ordinary Shares have been trading on the TASE since 1987. From July 2015 until October 2015, we did not have any business activity, excluding administrative management. On October 11, 2015, we entered into the Merger with Magna and the Subsidiary. The following table sets forth, for the periods indicated since the date of the Merger, the reported high and low sale prices of our Ordinary Shares on the TASE in NIS and U.S. dollars. U.S. dollar per Ordinary Share amounts are calculated using the U.S. dollar representative rate of exchange on the date to which the high or low market price is applicable, as reported by the Bank of Israel.

 

52

Table of Contents

 

   

NIS

Price Per Ordinary Share

   

USD

Price Per Ordinary Share

 
    High     Low     High     Low  
                         
Annual:                        
2016     2.46       1.68       0.65       0.44  
2015     2.15       1.67       0.55       0.43  
2014     1.35       0.41       0.39       0.11  
2013     0.79       0.45       0.22       0.13  
2012     1.35       0.56       0.35       0.14  
2011     2.08       1.16       0.57       0.31  
                                 
Quarterly:                                
Second Quarter 2017 (through May 10, 2017)     4.66       3.17       1.29       0.86  
First Quarter 2017     3.58       1.74       0.99       0.45  
Fourth Quarter 2016     2.46       1.68       0.65       0.44  
Third Quarter 2016     2.15       1.83       0.57       0.48  
Second Quarter 2016     2.17       1.93       0.57       0.50  
First Quarter 2016     2.33       1.78       0.59       0.45  
Fourth Quarter 2015     2.15       1.67       0.55       0.43  
Third Quarter 2015     2.08       0.89       0.54       0.24  
Second Quarter 2015     0.93       0.44       0.25       0.11  
First Quarter 2015     0.49       0.40       0.12       0.10  
Fourth Quarter 2014     0.52       0.41       0.14       0.11  
Third Quarter 2014     1.27       0.42       0.37       0.12  
Second Quarter 2014     1.34       0.46       0.39       0.13  
First Quarter 2014     0.69       0.43       0.20       0.12  
                                 
Most Recent Six Months:                                
April 2017     4.43       3.17       1.22       0.86  
March 2017     3.58       2.13       0.99       0.59  
February 2017     2.30       2.03       0.61       0.55  
January 2017     2.44       1.74       0.64       0.45  
December 2016     2.00       1.68       0.52       0.44  
November 2016     2.19       1.92       0.57       0.50  

 

For a description of the rights of our ADSs, see “Item 12. Description of Securities Other Than Equity Securities – American Depositary Shares.”

 

B. Plan of Distribution.

 

Not applicable.

 

C. Markets.

 

Our Ordinary Shares have been trading on the TASE since 1987.

 

D. Selling Shareholders.

 

Not applicable.

 

E. Dilution.

 

Not applicable.

 

53

Table of Contents

 

F. Expenses of the Issue.

 

Not applicable.

 

ITEM 10. ADDITIONAL INFORMATION

 

A. Share Capital.

 

As of May 10, 2017, our authorized share capital consisted of 200,000,000 Ordinary Shares, no par value per share, of which 90,889,362 shares were issued and outstanding as of such date. All of our outstanding Ordinary Shares have been validly issued, fully paid and non-assessable. Our Ordinary Shares are not redeemable and are not subject to any preemptive right. In December 2015 we increased our authorized share capital to 200,000,000 Ordinary Shares from 22,500,000 Ordinary Shares, and in April 2016 we cancelled the par value of our Ordinary Shares.

 

In the last three years, we have issued an aggregate of 71,153,098 Ordinary Shares in several private placements for aggregate net proceeds of approximately $18.6 million.

 

2,028,568 Ordinary Shares issued in May 2016 include a partial ratchet anti-dilution protection in the event that within a period of 12 months the Company will issue new securities at a price per share lower than NIS 1.75 (approximately $ 0.45), the price per share of the May 2016 issuance, in which case an applicable number of Ordinary Shares will be issued to purchasers of the Ordinary Shares to retroactively adjust their effective purchase price to align with the purchase price at which such new securities are issued. The anti-dilution protection shall not apply to any decrease in price per share under NIS 1.20. 4

 

In addition to Ordinary Shares, in the last three years, we have issued warrants to purchase an aggregate of 46,977,433 Ordinary Shares to advisors, consultants and investors, with exercise prices ranging from NIS 1.95 (approximately $0.52) to NIS 4.0 (approximately $1.03) per share, and granted options to purchase an aggregate of 7,519,205 Ordinary Shares to directors, officers and employees with exercise prices ranging from of NIS 0.3 (approximately $0.08) to NIS 2.31 (approximately $0.63) per share.

 

B. Memorandum and Articles of Association.

 

Our registration number with the Israeli Registrar of Companies is 52-003606-2.

 

Purposes and Objects of the Company

 

Our purpose is set forth in Section 3 of our amended and restated articles of association and includes every lawful purpose.

 

The Powers of the Directors

 

Our board of directors shall direct our policy and shall supervise the performance of our chief executive officer and his actions. Our board of directors may exercise all powers that are not required under the Companies Law or under our amended and restated articles of association to be exercised or taken by our shareholders or management.

 

Rights Attached to Shares

 

Our Ordinary Shares shall confer upon the holders thereof:

 

equal right to attend and to vote at all of our general meetings, whether regular or special, with each Ordinary Share entitling the holder thereof, which attend the meeting and participate at the voting, either in person or by a proxy or by a written ballot, to one vote;

 

equal right to participate in distribution of dividends, if any, whether payable in cash or in bonus shares, in distribution of assets or in any other distribution, on a per share pro rata basis; and

 

equal right to participate, upon our dissolution, in the distribution of our assets legally available for distribution, on a per share pro rata basis.

 

 

4

54

Table of Contents

 

Election of Directors

 

Pursuant to our amended and restated articles of association, our directors are elected at an annual general meeting and/or a special meeting of our shareholders and serve on the board of directors until they resign or until they cease to act as board members pursuant to the provisions of our amended and restated articles of association or any applicable law. In addition, in the event the number of members of our Board of Directors drops below the minimum number of members set forth above, our amended and restated articles of association allow our Board of Directors to appoint directors to fill vacancies on the Board of Directors (subject to the maximum number of directors) to serve until the next annual general meeting. External directors are elected for an initial term of three years, may be elected for additional terms of three years each under certain circumstances and may be removed from office pursuant to the terms of the Companies Law. See “Item 6 C.—Board Practices—External Directors.”

 

Annual and Special Meetings

 

Under the Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year, at such time and place which shall be determined by our Board of Directors, that must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special general meetings. Our Board of Directors may call special meetings whenever it sees fit and upon the written request of: (a) any two of our directors or one quarter of the members of our Board of Directors; and/or (b) one or more shareholders holding, in the aggregate, either (i) 5% or more of our outstanding issued shares and 1% of our outstanding voting power or (ii) 5% or more of our outstanding voting power.

 

Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and forty days prior to the date of the meeting. The Companies Law and our articles of association require that resolutions regarding the following matters must be passed at a general meeting of our shareholders:

 

amendments to our articles of association;

 

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 required for our proper management;

 

appointment or termination of our auditors;

 

appointment of directors, including external directors;

 

approval of certain related party transactions;

 

increases or reductions of our authorized share capital; and

 

a merger (as such term is defined in the Companies Law).

 

Notices

 

The Companies Law and our articles of association require that a notice of any annual or special shareholders meeting be provided to shareholders at least 21 days prior to the meeting, and if the agenda of the meeting includes, among other matters, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting.

 

55

Table of Contents

 

Quorum

 

As permitted under the Companies Law, the quorum required for our general meetings consists of at least two shareholders present in person, by proxy or written ballot, who hold or represent between them at least 33 1/3% of the total outstanding voting rights. If within half an hour of the time set forth for the general meeting a quorum is not present, the general meeting shall stand adjourned the same day of the following week, at the same hour and in the same place, or to such other date, time and place as prescribed in the notice to the shareholders and in such adjourned meeting, if no quorum is present within half an hour of the time arranged, any number of shareholders participating in the meeting, shall constitute a quorum.

 

If a special general meeting was summoned following the request of a shareholder, then a quorum required in an adjourned general meeting, shall consist of at least one or more shareholders holding, in the aggregate, either (a) at least 5% of our issued and outstanding share capital and at least 1% of our voting rights, or (b) at least 5% of our voting rights.

 

Adoption of Resolutions

 

Our amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required under the Companies Law or our amended and restated articles of association. A shareholder may vote in a general meeting in person, by proxy or by a written ballot.

 

Changing Rights Attached to Shares

 

Unless otherwise provided by the terms of the shares and subject to any applicable law, in order to change the rights attached to any class of shares, such change must be adopted by the board of directors and at a general meeting of the affected class or by a written consent of all the shareholders of the affected class.

 

The enlargement of an existing class of shares or the issuance of additional shares thereof, shall not be deemed to modify the rights attached to the previously issued shares of such class or of any other class, unless otherwise provided by the terms of the shares.

 

Limitations on the Right to Own Securities in Our Company

 

There are no limitations on the right to own our securities.

 

Provisions Restricting Change in Control of Our Company

 

There are no specific provisions of our amended and restated articles of association that would have an effect of delaying, deferring or preventing a change in control of us or that would operate only with respect to a merger, acquisition or corporate restructuring involving us (or our Subsidiary). However, as described below, certain provisions of the Companies Law may have such effect.

 

The Companies Law includes provisions that allow a merger transaction and requires that each company that is a party to the merger have the transaction approved by its board of directors and, unless certain requirements described under the Companies Law are met, a vote of the majority of its shareholders, and, in the case of the target company, also a majority vote of each class of its shares. For purposes of the shareholder vote of each party, unless a court rules otherwise, the merger will not be deemed approved if shares representing a majority of the voting power present at the shareholders meeting and which are not held by the other party to the merger (or by any person or group of persons acting in concert who holds 25% or more of the voting power or the right to appoint 25% or more of the directors of the other party) vote against the merger. If, however, the merger involves a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same Special Majority approval that governs all extraordinary transactions with controlling shareholders. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of any of the parties to the merger, and may further give instructions to secure the rights of creditors. In addition, a merger may not be completed unless at least (1) 50 days have passed from the time that the requisite proposals for approval of the merger were filed with the Israeli Registrar of Companies by each merging company and (2) 30 days have passed since the merger was approved by the shareholders of each merging company.

 

56

Table of Contents

 

The Companies Law also provides that an acquisition of shares in an Israeli public company must be made by means of a “special” tender offer if as a result of the acquisition (1) the purchaser would become a holder of 25% or more of the voting rights in the company, unless there is already another holder of at least 25% or more of the voting rights in the company or (2) the purchaser would become a holder of 45% or more of the voting rights in the company, unless there is already a holder of more than 45% of the voting rights in the company. These requirements do not apply if, in general, the acquisition (1) was made in a private placement that received shareholders’ approval, subject to certain conditions, (2) was from a holder of 25% or more of the voting rights in the company which resulted in the acquirer becoming a holder of 25% or more of the voting rights in the company, or (3) was from a holder of more than 45% of the voting rights in the company which resulted in the acquirer becoming a holder of more than 45% of the voting rights in the company. A “special” tender offer must be extended to all shareholders. In general, a “special” tender offer may be consummated only if (1) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (2) the offer is accepted by a majority of the offerees who notified the company of their position in connection with such offer (excluding the offeror, controlling shareholders, holders of 25% or more of the voting rights in the company or anyone on their behalf, or any person having a personal interest in the acceptance of the tender offer). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer.

 

If, as a result of an acquisition of shares, the acquirer will hold more than 90% of an Israeli public company’s outstanding shares, the acquisition must be made by means of a tender offer for all of the outstanding shares. In general, if less than 5% of the outstanding shares are not tendered in the tender offer and more than half of the offerees who have no personal interest in the offer tendered their shares, all the shares that the acquirer offered to purchase will be transferred to it by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares. Shareholders may request appraisal rights in connection with a full tender offer for a period of six months following the consummation of the tender offer, but the acquirer is entitled to stipulate, under certain conditions, that tendering shareholders will forfeit such appraisal rights.

 

Lastly, Israeli tax law treats some acquisitions, such as stock-for-stock exchanges between an Israeli company and a foreign company, less favorably than U.S. tax laws. For example, Israeli tax law may, under certain circumstances, subject a shareholder who exchanges his Ordinary Shares for shares in another corporation to taxation prior to the sale of the shares received in such stock-for-stock swap.

 

Changes in Our Capital

 

The general meeting may, by a simple majority vote of the shareholders attending the general meeting and subject to the provisions of the Companies Law:

 

increase our registered share capital by the creation of new shares from the existing class or a new class, as determined by the general meeting;

 

cancel any registered share capital which have not been taken or agreed to be taken by any person;

 

consolidate and divide all or any of our share capital into shares of larger nominal value than our existing shares;

 

subdivide our existing shares or any of them, our share capital or any of it, into shares of smaller nominal value than is fixed;

 

reduce our share capital and any fund reserved for capital redemption in any manner, and with and subject to any incident authorized, and consent required, by the Companies Law; and

 

57

Table of Contents

 

reduce shares from our issued and outstanding share capital, in such manner that those shares shall be cancelled and the nominal par value paid for those shares will be registered on our books as capital fund, which shall be deemed as a premium paid on those shares which shall remain in our issued and outstanding share capital.

 

Differences between the Companies Law and NASDAQ Requirements

 

The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with various corporate governance practices. In addition, following the listing of our ADSs on the NASDAQ Capital Market, we will be required to comply with the NASDAQ Stock Market rules. Under those rules, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the NASDAQ Stock Market rules for U.S. domestic issuers.

 

In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the NASDAQ Stock Market rules, we have elected to follow the provisions of the Companies Law, rather than the NASDAQ Stock Market rules, with respect to the following requirements:

 

Distribution of periodic reports to shareholders; proxy solicitation . As opposed to the NASDAQ Stock Market rules, which require listed issuers to make such reports available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports available through a public website. In addition to making such reports available on a public website, we currently make our audited financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules.

 

Quorum . While the NASDAQ Stock Market rules require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our amended and restated articles of association provide that a quorum of two or more shareholders holding at least 33 1/3% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our amended and restated articles of association with respect to an adjourned meeting consists of any number of shareholders present in person or by proxy.

 

Nomination of our directors . Generally, our directors are elected by a general meeting of our shareholders to hold office until the director resigns from his office or the nomination is terminated in accordance with the provisions of our articles of association. The nominations for directors, which are presented to our shareholders by our board of directors, are generally made by the board of directors itself, in accordance with the provisions of our amended and restated articles of association and the Companies Law. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent directors, as required under the NASDAQ Stock Market rules.

 

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 NASDAQ Stock Market rules with respect to the CEO and all other executive officers. Instead, compensation of executive officers is determined and approved by our compensation committee and our board of directors, and in certain circumstances by our shareholders, either in consistency with our office holder compensation policy or, in special circumstances in deviation therefrom, taking into account certain considerations stated in the Companies Law.

 

58

Table of Contents

 

Shareholder approval is generally required for officer compensation in the event (i) approval by our board of directors and our compensation committee is not consistent with our office holder compensation policy, or (ii) compensation required to be approved is that of our chief executive officer who is not a director or an executive officer who is also the controlling shareholder of our company (including an affiliate thereof). Such shareholder approval shall require a majority vote of the shares present and voting at a shareholders meeting, provided either (i) such majority includes a majority of the shares held by non-controlling shareholders who do not otherwise have a personal interest in the compensation arrangement that are voted at the meeting, excluding for such purpose any abstentions of disinterested shareholders, or (ii) the total shares held by non-controlling and disinterested shareholders voted against the arrangement does not exceed 2% of the voting rights in our company.

 

Additionally, approval of the compensation of an executive officer who is also a director requires a simple majority vote of the shares present and voting at a shareholders meeting, if consistent with our office holder compensation policy. Where the director is also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply. Our compensation committee and board of directors may, in special circumstances, approve the compensation of an executive officer (other than a director, a chief executive officer or a controlling shareholder) or approve the compensation policy despite shareholders’ objection, based on specified arguments and taking shareholders’ objection into account. Our compensation committee may further exempt an engagement with a nominee for the position of chief executive officer, who meets the non-affiliation requirements set forth for an external director, from requiring shareholder approval, if such engagement is consistent with our office holder compensation policy and our compensation committee determines based on specified arguments that presentation of such engagement to shareholder approval is likely to prevent such engagement. To the extent that any such transaction with a controlling shareholder is for a period exceeding three years, approval is required once every three years.

 

A director or executive officer may not be present when the board of directors of a company discusses or votes upon a transaction in which he or she has a personal interest, except in case of ordinary transactions, unless the chairman of the board of directors determines that he or she should be present to present the transaction that is subject to approval.

 

Independent directors . Israeli law does not require that a majority of the directors serving on our board of directors be “independent,” as defined under NASDAQ Listing Rule 5605(a)(2), and rather requires we have at least two external directors who meet the requirements of the Companies Law, as described above under “Management – Board Practices – External Directors.” However, it is possible for a director to qualify as an "external director" under the Israeli Companies Law without qualifying as an "independent director" under the NASDAQ Stock Market rules, or vice-versa. Notwithstanding Israeli law, we believe that a majority of our directors are currently “independent” under the NASDAQ Stock Market rules. We are required, however, to ensure that all members of our Audit Committee are “independent” under the applicable NASDAQ and SEC criteria for independence (as we cannot exempt ourselves from compliance with that SEC independence requirement, despite our status as a foreign private issuer), and we must also ensure that a majority of the members of our Audit Committee are “unaffiliated directors” as defined in the Companies Law. Furthermore, Israeli law does not require, nor do our independent directors conduct, regularly scheduled meetings at which only they are present, which the NASDAQ Stock Market rules otherwise require.

 

Shareholder approval . We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law, rather than seeking approval for corporation actions in accordance with NASDAQ Listing Rule 5635. In particular, under this NASDAQ Stock Market 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 in the target company or the consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption/amendment of equity compensation arrangements (although under the provisions of the Companies Law there is no requirement for shareholder approval for the adoption/amendment of the equity compensation plan); 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 Companies Law, shareholder approval is required for, among other things: (i) transactions with directors concerning the terms of their service or indemnification, exemption and insurance for their service (or for any other position that they may hold at a company), for which approvals of the compensation committee, board of directors and shareholders are all required, (ii) extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval, and (iii) terms of employment or other engagement of the controlling shareholder of us or such controlling shareholder’s relative, which require special approval. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies.

 

59

Table of Contents

 

Approval of Related Party Transactions . All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transaction as set forth in the Companies Law, which requires the approval of the audit committee, or the compensation committee, as the case may be, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our board of directors as required under the NASDAQ Stock Market rules.

 

C. Material Contracts.

 

We have not entered into any material contract within the two years prior to the date of this registration statement on Form 20-F, other than contracts entered into in the ordinary course of business, or as otherwise described herein in “Item 4.A. History and Development of the Company” above, “Item 4.B. Business Overview” above, or “Item 7A. Major Shareholders” above.

 

D. Exchange Controls.

 

There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our Ordinary Shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.

 

The ownership or voting of our Ordinary Shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel, is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.

 

E. Taxation.

 

Israeli Tax Considerations and Government Programs

 

The following is a description of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also contains a description of material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect on us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the tax authorities will accept the views expressed in the discussion in question. The discussion is not intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations.

 

The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares and ADSs. Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

 

60

Table of Contents

 

General Corporate Tax Structure in Israel

 

Israeli companies are generally subject to corporate tax. As of January 2016, the corporate tax rate is 25%. In 2014-2015, the corporate tax rate was 26.5%. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing corporate tax rate.

 

Law for the Encouragement of Industry (Taxes), 5729-1969

 

The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.”

 

The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company, of which 90% or more of its income in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise” owned by it. An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.

 

The following corporate tax benefits, among others, are available to Industrial Companies:

 

amortization of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement of the company, over an eight-year period, commencing on the year in which such rights were first exercised;

 

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.

 

Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.

 

Tax Benefits and Grants for Research and Development

 

Under the R&D Law research and development programs which meet specified criteria and are approved by the IIA are eligible for grants of up to 50% of the project’s expenditure, as determined by the research committee, in exchange for the payment of royalties from the revenues generated from the sale of products and related services developed, in whole or in part pursuant to, or as a result of, a research and development program funded by the IIA. The royalties are generally at a range of 3.0% to 5.0% of revenues until the entire IIA grant is repaid, together with an annual interest generally equal to the 12 month London Interbank Offered Rate applicable to dollar deposits that is published on the first business day of each calendar year.

 

The terms of the R&D Law also require that the manufacture of products developed with government grants be performed in Israel. The transfer of manufacturing activity outside Israel may be subject to the prior approval of the IIA. Under the regulations of the R&D Law, assuming we receive approval from the Chief Scientist to manufacture our IIA-funded products outside Israel, we may be required to pay increased royalties. The increase in royalties depends upon the manufacturing volume that is performed outside of Israel as follows:

 

Manufacturing Volume Outside of Israel   Royalties to the Chief Scientist as a Percentage of Grant  
       
Up to 50%     120 %
Between 50% and 90%     150 %
90% and more     300 %

 

61

Table of Contents

 

If the manufacturing is performed outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured outside of Israel will increase by 1% over the regular rates. If the manufacturing is performed outside of Israel by a third party, the rate of royalties payable by us on those revenues will be equal to the ratio obtained by dividing the amount of the grants received from the Office of the Chief Scientist and our total investment in the project that was funded by these grants. The transfer of no more than 10% of the manufacturing capacity in the aggregate outside of Israel is exempt under the R&D Law from obtaining the prior approval of the IIA. A company requesting funds from the IIA also has the option of declaring in its IIA grant application an intention to perform part of its manufacturing outside Israel, thus avoiding the need to obtain additional approval. On January 6, 2011, the R&D Law was amended to clarify that the potential increased royalties specified in the table above will apply even in those cases where the IIA approval for transfer of manufacturing outside of Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of total capacity or when the company received an advance approval to manufacture abroad in the framework of its IIA grant application.

 

The know-how developed within the framework of the Chief Scientist plan may not be transferred to third parties outside Israel without the prior approval of a governmental committee charted under the R&D Law. The approval, however, is not required for the export of any products developed using grants received from the Chief Scientist. The IIA approval to transfer know-how created, in whole or in part, in connection with an IIA-funded project to third party outside Israel where the transferring company remains an operating Israeli entity is subject to payment of a redemption fee to the IIA calculated according to a formula provided under the R&D Law that is based, in general, on the ratio between the aggregate IIA grants to the company’s aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration. The transfer of such know-how to a party outside Israel where the transferring company ceases to exist as an Israeli entity is subject to a redemption fee formula that is based, in general, on the ratio between the aggregate IIA grants to the total financial investments in the company, multiplied by the transaction consideration. According to the January 2011 amendment, the redemption fee in case of transfer of know-how to a party outside Israel will be based on the ratio between the aggregate IIA grants received by the company and the company’s aggregate R&D expenses, multiplied by the transaction consideration. According to regulations promulgated following the 2011 amendment, the maximum amount payable to the IIA in case of transfer of know how outside Israel shall not exceed 6 times the value of the grants received plus interest, and in the event that the receiver of the grants ceases to be an Israeli corporation such payment shall not exceed 6 times the value of the grants received plus interest, with a possibility to reduce such payment to up to 3 times the value of the grants received plus interest if the R&D activity remains in Israel for a period of three years after payment to the INATI.

 

Transfer of know-how within Israel is subject to an undertaking of the recipient Israeli entity to comply with the provisions of the R&D Law and related regulations, including the restrictions on the transfer of know-how and the obligation to pay royalties, as further described in the R&D Law and related regulations.

 

These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our know-how outside Israel and may require us to obtain the approval of the IIA for certain actions and transactions and pay additional royalties to the IIA. In particular, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israeli citizen or resident an “interested party,” as defined in the R&D Law, requires a prior written notice to the IIA in addition to any payment that may be required of us for transfer of manufacturing or know-how outside Israel. If we fail to comply with the R&D Law, we may be subject to criminal charges.

 

Tax Benefits for Research and Development

 

Israeli tax law allows, under certain conditions, a tax deduction for expenditures, including capital expenditures, for the year in which they are incurred. Expenditures are deemed related to scientific research and development projects, if:

 

The expenditures are approved by the relevant Israeli government ministry, determined by the field of research;

 

The research and development must be for the promotion of the company; and

 

62

Table of Contents

 

The research and development is carried out by or on behalf of the company seeking such tax deduction.

 

The amount of such deductible expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested in an asset depreciable under the general depreciation rules of the income Tax Ordinance, 1961. Expenditures not so approved are deductible in equal amounts over three years.

 

From time to time we may apply the Office of the Chief Scientist for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance that such application will be accepted.

 

Law for the Encouragement of Capital Investments, 5719-1959

 

The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets).

 

Tax Benefits

 

The Investment Law grants tax benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. A Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived by its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 9%.

 

Dividends paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld.

 

Taxation of our Shareholders

 

Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company will be exempt from Israeli tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of 25% or more in such non-Israeli corporation or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

 

Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the U.S.-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital during any part of the 12-month period preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for 183 days or more during the relevant taxable year.

 

63

Table of Contents

 

In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.

 

Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. However, a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 20% if the dividend is distributed from income attributed to a Preferred Enterprise, unless a reduced tax rate is provided under an applicable tax treaty. For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our Ordinary Shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to an Preferred Enterprise are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 15% for a shareholder that is a U.S. corporation, provided that the condition related to our gross income for the previous year (as set forth in the previous sentence) is met. If the dividend is attributable partly to income derived from a Preferred Enterprise, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.

 

U.S. Tax Considerations

 

U.S. Federal Income Tax Considerations

 

THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.

 

Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S. Holder” arising from the purchase, ownership and sale of the Ordinary Shares and ADSs. For this purpose, a “U.S. Holder” is a holder of Ordinary Shares or ADSs that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.

 

64

Table of Contents

 

This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations that may be relevant to a decision to purchase our Ordinary Shares or ADSs. This summary generally considers only U.S. Holders that will own our Ordinary Shares or ADSs as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’s status as a U.S. Holder. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income tax treatment of an investment in our Ordinary Shares or ADSs by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with the conclusions set forth below.

 

This discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder’s particular circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank, life insurance company, regulated investment company, or other financial institution or “financial services entity”; (2) a broker or dealer in securities or foreign currency; (3) a person who acquired our Ordinary Shares or ADSs in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our Ordinary Shares or ADSs as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, Ordinary Shares or ADSs representing 10% or more of our voting power. Additionally, the U.S. federal income tax treatment of persons who hold Ordinary Shares or ADSs through a partnership or other pass-through entity are not considered.

 

Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or disposing of our Ordinary Shares or ADSs, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.

 

Taxation of Dividends Paid on Ordinary Shares or ADSs

 

We do not intend to pay dividends in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading “Passive Foreign Investment Companies” below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any distribution paid on Ordinary Shares or ADSs (including the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis for the Ordinary Shares to the extent thereof, and then capital gain. Corporate holders generally will not be allowed a deduction for dividends received.

 

In general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders that are individuals, estates or trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” is a corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS has stated that the Israel/U.S. Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.

 

In addition, our dividends will be qualified dividend income if our Ordinary Shares or ADSs are readily tradable on the NASDAQ Capital Market or another established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under “Passive Foreign Investment Companies”. A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has not held our Ordinary Shares or ADSs for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk of loss on our Ordinary Shares or ADSs are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who elect to treat the dividend income as “investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.

 

65

Table of Contents

 

The amount of a distribution with respect to our Ordinary Shares or ADSs will be measured by the amount of the fair market value of any property distributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.

 

Distributions paid by us will generally be foreign source income for U.S. foreign tax credit purposes and will generally be considered passive category income for such purposes. Subject to the limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. federal income tax liability for Israeli income tax withheld from distributions received in respect of the Ordinary Shares or ADSs. The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult with their own tax advisors to determine whether, and to what extent, they are entitled to such credit. U.S. Holders that do not elect to claim a foreign tax credit may instead claim a deduction for Israeli income taxes withheld, provided such U.S. Holders itemize their deductions.

 

Taxation of the Disposition of Ordinary Shares or ADSs

 

Except as provided under the PFIC rules described below under “Passive Foreign Investment Companies”, upon the sale, exchange or other disposition of our Ordinary Shares or ADSs, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s tax basis for the Ordinary Shares or ADSs in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on the sale, exchange or other disposition of Ordinary Shares or ADSs will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at the time of the disposition.

 

Gain realized by a U.S. Holder on a sale, exchange or other disposition of Ordinary Shares or ADSs will generally be treated as U.S. source income for U.S. foreign tax credit purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of Ordinary Shares or ADSs is generally allocated to U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of Ordinary Shares or ADSs is subject to limitations.

 

Passive Foreign Investment Companies

 

Special U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income tax purposes for any taxable year that either:

 

75% or more of our gross income (including our pro rata share of gross income for any company, in which we are considered to own 25% or more of the shares by value), in a taxable year is passive; or

 

At least 50% of our assets, averaged over the year and generally determined based upon fair market value (including our pro rata share of the assets of any company in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income.

 

66

Table of Contents

 

For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and from notional principal contracts. Cash is treated as generating passive income.

 

We have not determined whether we will be a PFIC in 2016 or in future years because, among other things, PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of our Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC.

 

If we currently are or become a PFIC, each U.S. Holder who has not elected to treat us as a qualified electing fund by making a “QEF election”, or who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain distributions by us and upon disposition of our Ordinary Shares or ADSs at a gain: (1) have such distribution or gain allocated ratably over the U.S. Holder’s holding period for the Ordinary Shares or ADSs, as the case may be; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.

 

The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held the Ordinary Shares or ADSs while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinary income and such U.S. Holder’s pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the IRS. We do not intend to notify U.S. Holders if we believe we will be treated as a PFIC for any tax year. In addition, we do not intend to furnish U.S. Holders annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our Subsidiaries are a PFIC. U.S. Holders should consult with their own tax advisors regarding eligibility, manner and advisability of making a QEF election if we are treated as a PFIC.

 

In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a mark-to-market election. A U.S. Holder of our Ordinary Shares or ADSs which are regularly traded on a qualifying exchange, including the NASDAQ Capital Market, can elect to mark the Ordinary Shares or ADSs to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the Ordinary Shares or ADSs and the U.S. Holder’s adjusted tax basis in the Ordinary Shares or ADSs. Losses are allowed only to the extent of net mark-to-market gain previously included income by the U.S. Holder under the election for prior taxable years.

 

U.S. Holders who hold our Ordinary Shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to our Ordinary Shares or ADSs in the event that we are a PFIC.

 

Tax on Net Investment Income

 

For taxable years beginning after December 31, 2013, U.S. Holders who are individuals, estates or trusts will generally be required to pay a new 3.8% Medicare tax on their net investment income (including dividends on and gains from the sale or other disposition of our Ordinary Shares or ADSs), or in the case of estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.

 

67

Table of Contents

 

Tax Consequences for Non-U.S. Holders of Ordinary Shares or ADSs

 

Except as provided below, an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally will not be subject to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our Ordinary Shares or ADSs.

 

A non-U.S. Holder may be subject to U.S. federal income tax on a dividend paid on our Ordinary Shares or ADSs or gain from the disposition of our Ordinary Shares or ADSs if: (1) such item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, if required by an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; (2) in the case of a disposition of our Ordinary Shares or ADSs, the individual non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the disposition and other specified conditions are met.

 

In general, non-U.S. Holders will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares or ADSs if payment is made through a paying agent, or office of a foreign broker outside the United States. However, if payment is made in the United States or by a U.S. related person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides an applicable IRS Form W-8 (or a substantially similar form) certifying its foreign status, or otherwise establishes an exemption.

 

The amount of any backup withholding from a payment to a non-U.S. Holder will be allowed as a credit against such holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

 

Information Reporting and Withholding

 

A U.S. Holder may be subject to backup withholding at a rate of 28% with respect to cash dividends and proceeds from a disposition of Ordinary Shares or ADSs. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.

 

Pursuant to recently enacted legislation, a U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our Ordinary Shares or ADSs, unless such Ordinary Shares or ADSs are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS if the aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance); and may be required to file a Report of Foreign Bank and Financial Accounts, or FBAR, if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. You should consult your own tax advisor as to the possible obligation to file such information report.

 

F. Dividends and Paying Agents.

 

We have never declared or paid cash dividends to our shareholders. Currently we do not intend to pay cash dividends. We intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, applicable Israeli law and other factors our board of directors may deem relevant. Accordingly, we have not appointed any paying agent.

 

G. Statement by Experts.

 

Not applicable.

 

68

Table of Contents

 

H. Documents on Display.

 

When this registration statement on Form 20-F becomes effective, we will be subject to the information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. You may read and copy the registration statement on Form 20-F, including the related exhibits and schedules, and any document we file with the SEC without charge at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, DC 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also available to the public through the SEC’s website at www.sec.gov.

 

As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited quarterly financial information.

 

In addition, since our Ordinary Shares are traded on the TASE, we have filed Hebrew language periodic and immediate reports with, and furnish information to, the TASE and the Israel Securities Authority, or the ISA, as required under Chapter Six of the Israel Securities Law, 1968. Copies of our filings with the ISA can be retrieved electronically through the MAGNA distribution site of the ISA (www.magna.isa.gov.il) and the TASE website (www.maya.tase.co.il).

 

We maintain a corporate website www.foresightauto.com. Information contained on, or that can be accessed through, our website and the other websites referenced above do not constitute a part of this registration statement on Form 20-F. We have included these website addresses in this registration statement on Form 20-F solely as inactive textual references.

 

I. Subsidiary Information.

 

Not applicable.

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

In the ordinary course of our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.

 

Quantitative and Qualitative Disclosure About Market Risk

 

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, a substantial majority of our cash and cash equivalents is held in deposits that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following paragraph.

 

69

Table of Contents

 

Foreign Currency Exchange Risk

 

Our results of operations and cash flow are subject to fluctuations due to changes in NIS/U.S. dollar currency exchange rates. The vast majority of our liquid assets is held in U.S. dollars, and a certain portion of our expenses is denominated in NIS. Changes of 5% and 10% in the U.S. Dollar/NIS exchange rate would increase/decrease our operating expenses for 2014 by 1.7% and 3.5%, respectively However, these historical figures may not be indicative of future exposure, as we expect that the percentage of our NIS denominated expenses will materially decrease in the near future, therefore reducing our exposure to exchange rate fluctuations.

 

We do not hedge our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

A. Debt Securities.

 

Not applicable.

 

B. Warrants and rights.

 

Not applicable.

 

C. Other Securities.

 

Not applicable.

 

D. American Depositary Shares.

 

The Bank of New York Mellon, as depositary, will register and deliver ADSs. Each ADS will represent five shares (or a right to receive five shares) deposited with Bank HaPoalim, as custodian for the depositary in Tel Aviv. Each ADS will also represent any other securities, cash or other property which may be held by the depositary. The depositary’s office at which the ADSs will be administered is located at 101 Barclay Street, New York, New York 10286. The Bank of New York Mellon’s principal executive office is located at 225 Liberty Street, New York, New York 10286.

 

You may hold ADSs either (A) directly (1) by having an American Depositary Receipt, also referred to as an ADR, which is a certificate evidencing a specific number of ADSs, registered in your name, or (2) by having uncertificated ADSs registered in your name, or (B) indirectly by holding a security entitlement in ADSs through your broker or other financial institution that is a direct or indirect participant in The Depositary Trust Company, or DTC. If you hold ADSs directly, you are a registered ADS holder, also referred to as an ADS holder. This description assumes you are an ADS holder. If you hold the ADSs indirectly, you must rely on the procedures of your broker or other financial institution to assert the rights of ADS holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.

 

Registered holders of uncertificated ADSs will receive statements from the depositary confirming their holdings.

 

As an ADS holder, we will not treat you as one of our shareholders and you will not have shareholder rights. Israeli law governs shareholder rights. The depositary will be the holder of the shares underlying your ADSs. As a registered holder of ADSs, you will have ADS holder rights. A deposit agreement among us, the depositary, ADS holders and all other persons indirectly or beneficially holding ADSs sets out ADS holder rights as well as the rights and obligations of the depositary. New York law governs the deposit agreement and the ADSs.

 

70

Table of Contents

 

The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read the entire deposit agreement and the form of ADR.

 

Dividends and Other Distributions

 

How will you receive dividends and other distributions on the shares?

 

The depositary has agreed to pay or distribute to ADS holders the cash dividends or other distributions it or the custodian receives on shares or other deposited securities, upon payment or deduction of its fees and expenses. You will receive these distributions in proportion to the number of shares your ADSs represent.

 

Cash . The depositary will convert any cash dividend or other cash distribution we pay on the shares into U.S. dollars, if it can do so on a reasonable basis and can transfer the U.S. dollars to the United States. If that is not possible or if any government approval is needed and can not be obtained, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. It will hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.

 

Before making a distribution, any withholding taxes, or other governmental charges that must be paid will be deducted. See “Taxation”. It will distribute only whole U.S. dollars and cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you may lose some or all of the value of the distribution.

 

Shares . The depositary may distribute additional ADSs representing any shares we distribute as a dividend or free distribution. The depositary will only distribute whole ADSs. It will sell shares which would require it to deliver a fraction of an ADS (or ADSs representing those shares) and distribute the net proceeds in the same way as it does with cash. If the depositary does not distribute additional ADSs, the outstanding ADSs will also represent the new shares. The depositary may sell a portion of the distributed shares (or ADSs representing those shares) sufficient to pay its fees and expenses in connection with that distribution.

 

Rights to purchase additional shares . If we offer holders of our securities any rights to subscribe for additional shares or any other rights, the depositary may (i) exercise those rights on behalf of ADS holders, (ii) distribute those rights to ADS holders or (iii) sell those rights and distribute the net proceeds to ADS holders, in each case after deduction or upon payment of its fees and expenses. To the extent the depositary does not do any of those things, it will allow the rights to lapse. In that case, you will receive no value for them. The depositary will exercise or distribute rights only if we ask it to and provide satisfactory assurances to the depositary that it is legal to do so. If the depositary will exercise rights, it will purchase the securities to which the rights relate and distribute those securities or, in the case of shares, new ADSs representing the new shares, to subscribing ADS holders, but only if ADS holders have paid the exercise price to the depositary. U.S. securities laws may restrict the ability of the depositary to distribute rights or ADSs or other securities issued on exercise of rights to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

 

Other Distributions . The depositary will send to ADS holders anything else we distribute on deposited securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, the depositary has a choice. It may decide to sell what we distributed and distribute the net proceeds, in the same way as it does with cash. Or, it may decide to hold what we distributed, in which case ADSs will also represent the newly distributed property. However, the depositary is not required to distribute any securities (other than ADSs) to ADS holders unless it receives satisfactory evidence from us that it is legal to make that distribution. The depositary may sell a portion of the distributed securities or property sufficient to pay its fees and expenses in connection with that distribution. U.S. securities laws may restrict the ability of the depositary to distribute securities to all or certain ADS holders, and the securities distributed may be subject to restrictions on transfer.

 

71

Table of Contents

 

The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. We have no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other action to permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we make on our shares or any value for them if it is illegal or impractical for us to make them available to you.

 

Deposit, Withdrawal and Cancellation

 

How are ADSs issued?

 

The depositary will deliver ADSs if you or your broker deposits shares or evidence of rights to receive shares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the person or persons that made the deposit.

 

How can ADS holders withdraw the deposited securities?

 

You may surrender your ADSs for the purpose of withdrawal at the depositary’s office. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver the shares and any other deposited securities underlying the ADSs to the ADS holder or a person the ADS holder designates at the office of the custodian. Or, at your request, risk and expense, the depositary will deliver the deposited securities at its office, if feasible. The depositary may charge you a fee and its expenses for instructing the custodian regarding delivery of deposited securities.

 

How do ADS holders interchange between certificated ADSs and uncertificated ADSs?

 

You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary will cancel that ADR and will send to the ADS holder a statement confirming that the ADS holder is the registered holder of uncertificated ADSs. Upon receipt by the depositary of a proper instruction from a registered holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, the depositary will execute and deliver to the ADS holder an ADR evidencing those ADSs.

 

Voting Rights

 

How do you vote?

 

ADS holders may instruct the depositary how to vote the number of deposited shares their ADSs represent. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they much reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of Israel and the provisions of our articles of association or similar documents, to vote or to have its agents vote the shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so.

 

Except by instructing the depositary as described above, you won’t be able to exercise voting rights unless you surrender your ADSs and withdraw the shares. However, you may not know about the meeting enough in advance to withdraw the shares. In any event, the depositary will not exercise any discretion in voting deposited securities and it will only vote or attempt to vote as instructed.

 

We can not assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your shares are not voted as you requested.

 

72

Table of Contents

 

In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, if we request the depositary to act, we agree to give the depositary notice of any such meeting and details concerning the matters to be voted upon at least 30 days in advance of the meeting date.

 

Fees and Expenses

 

Persons depositing or withdrawing shares or ADS holders must pay:  

 

For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs). Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property.
  Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates.
$.05 (or less) per ADS. Any cash distribution to ADS holders.
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs. Distribution of securities distributed to holders of deposited securities (including rights) that are distributed by the depositary to ADS holders.
$.05 (or less) per ADS per calendar year. Depositary services.
Registration or transfer fees. Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares.
Expenses of the depositary.

Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement).

Converting foreign currency to U.S. dollars.

Taxes and other governmental charges the depositary or the custodian has to pay on any ADSs or shares underlying ADSs, such as stock transfer taxes, stamp duty or withholding taxes. As necessary.
Any charges incurred by the depositary or its agents for servicing the deposited securities. As necessary.

 

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other property distributable) to ADS holders that are obligated to pay those fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

 

From time to time, the depositary may make payments to us to reimburse us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services provided to us by the depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit agreement, the depositary may use brokers, dealers, foreign currency or other service providers that are owned by or affiliated with the depositary and that may earn or share fees, spreads or commissions.

 

73

Table of Contents

 

The depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement and the rate that the depositary or its affiliate receives when buying or selling foreign currency for its own account. The depositary makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to ADS holders, subject to the depositary’s obligations under the deposit agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.

 

Payment of Taxes

 

You will be responsible for any taxes or other governmental charges payable on your ADSs or on the deposited securities represented by any of your ADSs. The depositary may refuse to register any transfer of your ADSs or allow you to withdraw the deposited securities represented by your ADSs until those taxes or other charges are paid. It may apply payments owed to you or sell deposited securities represented by your ADSs to pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to ADS holders any proceeds, or send to ADS holders any property, remaining after it has paid the taxes.

 

Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities

 

The depositary will not tender deposited securities in any voluntary tender or exchange offer unless instructed to do by an ADS holder surrendering ADSs and subject to any conditions or procedures the depositary may establish.

 

If deposited securities are redeemed for cash in a transaction that is mandatory for the depositary as a holder of deposited securities, the depositary will call for surrender of a corresponding number of ADSs and distribute the net redemption money to the holders of called ADSs upon surrender of those ADSs.

 

If there is any change in the deposited securities such as a subdivision, combination or other reclassification, or any merger, consolidation, recapitalization or reorganization affecting the issuer of deposited securities in which the depositary receives new securities in exchange for or in lieu of the old deposited securities, the depositary will hold those replacement securities as deposited securities under the deposit agreement. However, if the depositary decides it would not be lawful and to hold the replacement securities because those securities could not be distributed to ADS holders or for any other reason, the depositary may instead sell the replacement securities and distribute the net proceeds upon surrender of the ADSs.

 

If there is a replacement of the deposited securities and the depositary will continue to hold the replacement securities, the depositary may distribute new ADSs representing the new deposited securities or ask you to surrender your outstanding ADRs in exchange for new ADRs identifying the new deposited securities.

 

If there are no deposited securities underlying ADSs, including if the deposited securities are cancelled, or if the deposited securities underlying ADSs have become apparently worthless, the depositary may call for surrender or of those ADSs or cancel those ADSs upon notice to the ADS holders.

 

Amendment and Termination

 

How may the deposit agreement be amended?

 

We may agree with the depositary to amend the deposit agreement and the ADRs without your consent for any reason. If an amendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs and the deposit agreement as amended.

 

74

Table of Contents

 

How may the deposit agreement be terminated?

 

The depositary will initiate termination of the deposit agreement if we instruct it to do so. The depositary may initiate termination of the deposit agreement if:

 

60 days have passed since the depositary told us it wants to resign but a successor depositary has not been appointed and accepted its appointment;

 

we delist our shares from an exchange on which they were listed and do not list the shares on another exchange;

 

we appear to be insolvent or enter insolvency proceedings;

 

all or substantially all the value of the deposited securities has been distributed either in cash or in the form of securities;

 

there are no deposited securities underlying the ADSs or the underlying deposited securities have become apparently worthless; or

 

there has been a replacement of deposited securities.

 

If the deposit agreement will terminate, the depositary will notify ADS holders at least 90 days before the termination date. At any time after the termination date, the depositary may sell the deposited securities. After that, the depositary will hold the money it received on the sale, as well as any other cash it is holding under the deposit agreement, unsegregated and without liability for interest, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. Normally, the depositary will sell as soon as practicable after the termination date.

 

After the termination date and before the depositary sells, ADS holders can still surrender their ADSs and receive delivery of deposited securities, except that the depositary may refuse to accept a surrender for the purpose of withdrawing deposited securities if it would interfere with the selling process. The depositary may refuse to accept a surrender for the purpose of withdrawing sale proceeds until all the deposited securities have been sold. The depositary will continue to collect distributions on deposited securities, but, after the termination date, the depositary is not required to register any transfer of ADSs or distribute any dividends or other distributions on deposited securities to the ADSs holder (until they surrender their ADSs) or give any notices or perform any other duties under the deposit agreement except as described in this paragraph.

 

Limitations on Obligations and Liability

 

Limits on our Obligations and the Obligations of the Depositary; Limits on Liability to Holders of ADSs

 

The deposit agreement expressly limits our obligations and the obligations of the depositary. It also limits our liability and the liability of the depositary. We and the depositary:

 

are only obligated to take the actions specifically set forth in the deposit agreement without negligence or bad faith;

 

are not liable if we are or it is prevented or delayed by law or by events or circumstances beyond our or its ability to prevent or counteract with reasonable care or effort from performing our or its obligations under the deposit agreement;

 

are not liable if we or it exercises discretion permitted under the deposit agreement;

 

75

Table of Contents

 

are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made available to holders of ADSs under the terms of the deposit agreement, or for any special, consequential or punitive damages for any breach of the terms of the deposit agreement;

 

have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the deposit agreement on your behalf or on behalf of any other person;

 

are not liable for the acts or omissions of any securities depositary, clearing agency or settlement system; and

 

may rely upon any documents we believe or it believes in good faith to be genuine and to have been signed or presented by the proper person.

 

In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.

 

Requirements for Depositary Actions

 

Before the depositary will deliver or register a transfer of ADSs, make a distribution on ADSs, or permit withdrawal of shares, the depositary may require:

 

payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for the transfer of any shares or other deposited securities;

 

satisfactory proof of the identity and genuineness of any signature or other information it deems necessary; and

 

compliance with regulations it may establish, from time to time, consistent with the deposit agreement, including presentation of transfer documents.

 

The depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so.

 

Your Right to Receive the Shares Underlying your ADSs

 

ADS holders have the right to cancel their ADSs and withdraw the underlying shares at any time except:

 

when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) the transfer of shares is blocked to permit voting at a shareholders' meeting; or (3) we are paying a dividend on our shares;

 

when you owe money to pay fees, taxes and similar charges; or

 

when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of shares or other deposited securities.

 

This right of withdrawal may not be limited by any other provision of the deposit agreement.

 

76

Table of Contents

 

Pre-release of ADSs

 

The deposit agreement permits the depositary to deliver ADSs before deposit of the underlying shares. This is called a pre-release of the ADSs. The depositary may also deliver shares upon cancellation of pre-released ADSs (even if the ADSs are canceled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the underlying shares are delivered to the depositary. The depositary may receive ADSs instead of shares to close out a pre-release. The depositary may pre-release ADSs only under the following conditions: (1) before or at the time of the pre-release, the person to whom the pre-release is being made represents to the depositary in writing that it or its customer owns the shares or ADSs to be deposited; (2) the pre-release is fully collateralized with cash or other collateral that the depositary considers appropriate; and (3) the depositary must be able to close out the pre-release on not more than five  business days’ notice. In addition, the depositary will limit the number of ADSs that may be outstanding at any time as a result of pre-release, although the depositary may disregard the limit from time to time, if it thinks it is appropriate to do so.

 

Direct Registration System

 

In the deposit agreement, all parties to the deposit agreement acknowledge that the Direct Registration System, also referred to as DRS, and Profile Modification System, also referred to as Profile, will apply to the ADSs. DRS is a system administered by DTC that facilitates interchange between registered holding of uncertificated ADSs and holding of security entitlements in ADSs through DTC and a DTC participant. Profile is a feature of DRS that allows a DTC participant, claiming to act on behalf of a registered holder of uncertificated ADSs, to direct the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTC participant without receipt by the depositary of prior authorization from the ADS holder to register that transfer.

 

In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties to the deposit agreement understand that the depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an ADS holder in requesting registration of transfer and delivery described in the paragraph above has the actual authority to act on behalf of the ADS holder (notwithstanding any requirements under the Uniform Commercial Code). In the deposit agreement, the parties agree that the depositary’s reliance on and compliance with instructions received by the depositary through the DRS/Profile System and in accordance with the deposit agreement will not constitute negligence or bad faith on the part of the depositary.

 

Shareholder communications; inspection of register of holders of ADSs

 

The depositary will make available for your inspection at its office all communications that it receives from us as a holder of deposited securities that we make generally available to holders of deposited securities. The depositary will send you copies of those communications or otherwise make those communications available to you if we ask it to. You have a right to inspect the register of holders of ADSs, but not for the purpose of contacting those holders about a matter unrelated to our business or the ADSs.

 

PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

Not applicable.

 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

 

Not applicable.

 

ITEM 15. CONTROLS AND PROCEDURES

 

Not applicable.

 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

 

Not applicable.

 

ITEM 16B. CODE OF ETHICS

 

Not applicable.

 

77

Table of Contents

 

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Not applicable.

 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

 

Not applicable.

 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

 

Not applicable.

 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

Not applicable.

 

ITEM 16G. CORPORATE GOVERNANCE

 

Not applicable.

 

ITEM 16H. MINE SAFETY DISCLOSURE

 

Not applicable.

 

PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

We have elected to provide financial statements and related information pursuant to Item 18.

 

ITEM 18. FINANCIAL STATEMENTS

 

The consolidated financial statements and the related notes required by this Item are included in this registration statement on Form 20-F beginning on page F-1.

 

78

Table of Contents

 

ITEM 19. EXHIBITS.

 

Exhibit   Description
     
1.1   Articles of Association of Articles of Foresight Autonomous Holdings Ltd. (unofficial English translation from Hebrew original).
     
2.1   Form of Deposit Agreement among Foresight Autonomous Holdings Ltd., The Bank of New York Mellon as Depositary, and owners and holders from time to time of ADSs issued thereunder, including the Form of American Depositary Shares.
     
4.1   Merger Agreement dated October 11, 2015, by and among the Company, Magna B.S.P. Ltd. and Foresight Automotive Ltd. (unofficial English translation from Hebrew original).
     
4.2   Asset Transfer Agreement dated January 5, 2016, by and between the Company and Magna B.S.P. Ltd. (unofficial English translation from Hebrew original).
     
4.3   Service Agreement dated January 5, 2016, by and between the Company and Magna B.S.P. Ltd. (unofficial English translation from Hebrew original).
     
4.4   Form of Indemnification Agreement (unofficial English translation from Hebrew original).  
     
4.5   Form of Exculpation Agreement (unofficial English translation from Hebrew original).
     
4.6   Foresight Autonomous Holdings Ltd. (2016) Share Equity Incentive (unofficial English translation from Hebrew original).
     
4.7   Employment agreement dated January 5, 2016, by and between the Company and Haim Siboni (unofficial English translation from Hebrew original).
     
4.8   Services Agreement dated January 26, 2016, by and between the Company and Ariel Dror (unofficial English translation from Hebrew original).
     
4.9   Services Agreement dated January 5, 2016, by and between the Company and Eli Yoresh (unofficial English translation from Hebrew original).
     
4.10   Share Purchase Agreement dated August 4, 2016, by and among Rail Vision Ltd, the Company and the other investors listed therein.
     
4.11   Services Agreement dated January 5, 2016, by and between the Company and L.I.A. Pure Capital Ltd. (unofficial English translation from Hebrew original).
     
8.1   List of Subsidiaries.
     
15.1   Consent of Brightman Almagor Zohar & Co., a member firm of Deloitte Touche Tohmatsu.

 

79

Table of Contents

 

 

 

 

 

 

 

 

 

Foresight Autonomous Holdings Ltd.

 

Financial Statements

As of December 31, 2016

 

 

 

 

 

 

 

 

 

 

Table of Contents  

 

Foresight Autonomous Holdings Ltd.

 

Financial Statements

As of December 31, 2016

 

TABLE OF CONTENTS

 

  Page
   
Report of Independent Registered Public Accounting Firm F-2
   
Financial Statements:  
   
Consolidated Balance sheets F-3
   
Consolidated Statements of Operations F-4
   
Statement of Changes in Shareholders' Equity F-5
   
Consolidated Statements of Cash Flows F-6 - F-7
   
Notes to the consolidated financial statements F-8 - F-21

 

  F- 1  
Table of Contents  

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

FORESIGHT AUTONOMOUS HOLDINGS LTD.

 

We have audited the accompanying consolidated balance sheets of FORESIGHT AUTONOMOUS HOLDINGS LTD. and its subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company's Board of Directors and management. Our responsibility is to express an opinion on the financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Brightman Almagor Zohar & Co.

Certified Public Accountants

A Member of Deloitte Touche Tohmatsu Limited

 

Tel Aviv, Israel

April 19, 2017

 

 

  F- 2  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Consolidated Balance Sheets

 

          As of December 31,  
          2015     2016  
    Note     USD in thousands  
                   
ASSETS                  
                   
Current assets                  
Cash and cash equivalents     2D           3,364  
Short Term Deposits                   390  
Other receivables     3             104  
Total current assets                   3,858  
                         
Marketable equity securities     2F             18  
Investment in affiliate company     4             1,248  
Other investments     4             66  
Fixed assets, net                   67  
                    1,399  
                         
TOTAL ASSETS                   5,257  
                         
LIABILITIES AND SHAREHOLDERS' EQUITY                        
                         
Current liabilities                        
Other accounts payable     6             457  
Total current liabilities                   457  
                         
Derivative warrant liabilities     8             131  
                         
TOTAL LIABILITIES                   588  
                         
Shareholders' equity                        
Ordinary shares, NIS 0 par value; Authorized 200,000,000 shares; Issued and outstanding: 19,736,264, 73,062,687 shares as of December 31, 2015, December 31, 2016 respectively     1A, 9B              
Additional paid in capital     9       1,442       8,024  
Accumulated deficit             (1,442 )     (3,355 )
Total shareholders' equity                   4,669  
                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   5,257  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 3  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Consolidated Statements of Operations

 

         

Year ended December 31,

 
          2014     2015     2016  
    Note     USD in thousands  
                         
                         
Research and development expenses     2J, 10       233       131       904  
                                 
Marketing and sales                         224  
                                 
General and administrative     11       35       26       2,627  
                                 
Equity in net loss of an affiliated company     4                   108  
Operating loss             268       157       3,863  
                                 
Financial income, net     13                   1,950  
                                 
Net loss             268       157       1,913  
                                 

Basic and diluted loss per share (in USD)

    2I     (0.01 )     (0.00 )     (0.03 )
                                 
Weighted average number of shares outstanding used in computing basic and diluted loss per share - in thousands             35,884       35,884       67,311  

 
Other comprehensive loss, net of tax

 

         

Year ended December 31,

 
              2014       2015     2016  
      Note       USD in thousands  
                               
                               
Net loss             268       157     1,913  
                               
                         
                               
Comprehensive loss             268       157     1,913  

 
The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 4  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Statements of changes in shareholders' equity

 

    Share Capital     Additional           Total  
    Number of shares (*)     USD     paid in
capital
    Accumulated Deficit     shareholders' equity  
    USD in thousands  
                               
BALANCE AS OF JANUARY 1, 2014     19,736,264             1,017       (1,017 )      
                                         
CHANGES DURING 2014:                                        
Deemed contribution from Magna                 268             268  
Loss for the year                       (268 )     (268 )
                                         
BALANCE AS OF DECEMBER 31, 2014     19,736,264             1,285       (1,285 )      
                                         
CHANGES DURING 2015:                                        
Deemed contribution from Magna                 157             157  
Loss for the year                       (157 )     (157 )
                                         
BALANCE AS OF DECEMBER 31, 2015     19,736,264               1,442       (1,442 )      
                                         
CHANGES DURING 2016:                                        
Issuance of 35,884,116 ordinary shares to effect reverse recapitalization transaction     35,884,116             1,733             1,733  
Exercise of options     2,392,275                          
Issuance of ordinary shares     15,050,032             4,444             4,444  
Share-based payment                 405             405  
Loss for the year                       (1,913 )     (1,913 )
                                         
BALANCE AS OF DECEMBER 31, 2016     73,062,687             8,024       (3,355 )     4,669  

 


* Represents the number of shares of the legal acquirer for all periods presented.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 5  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Consolidated Statements of Cash Flows

 

   

Year ended December 31,

 
    2014     2015     2016  
    USD in thousands  
                   
Net cash used in operating activities                  
Loss for the year     (268 )     (157 )     (1,913 )
                         
Adjustments to reconcile loss to net cash used in operating activities:                 (467 )
                         
Net cash used in operating activities     (268 )     (157 )     (2,380 )
                         
Cash Flows from Investing Activities                        
Sales of marketable securities                 128  
Purchase of short term deposits                 (390 )
Investment in affiliate company                 (1,422 )
Purchase of fixed assets                 (73 )
                         
Net cash used in investing activities                 (1,757 )
                         
Cash flows from Financing Activities:                        
Issuance of ordinary shares and warrants, net of issuance expenses                 6,256  
Acquisition of a subsidiary in connection with reverse recapitalization (See below)                 1,245  
Funding from Magna     268       157        
Net cash provided by financing activities     268       157       7,501  
                         
Increase in cash and cash equivalents                 3,364  
Cash and cash equivalents at the beginning of the period                  
                         
Cash and cash equivalents at the end of the period                 3,364  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 6  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Consolidated Statements of Cash Flows

 

   

Year ended December 31,

 
    2014     2015     2016  
    USD in thousands  
Adjustments to reconcile loss to net cash used in operating activities:                  
Share-based payment granted to service providers                 405  
Depreciation                 11  
Revaluation of warrants                 (1,847 )
Equity in loss of an affiliated company                 108  
Revaluation of securities classified as trading                 (104 )
Realized loss of securities classified as available-for-sale, net                 31  
Issuance expenses presented in financing activities                 166  
                         
Changes in assets and liabilities:                        
Increase in other receivables                 (2 )
Decrease in other current assets                 429  
Decrease in other accounts payable                 336  
Adjustments to reconcile loss to net cash used in operating activities                 (467 )

 

   

Year ended December 31,

 
    2014     2015     2016  
    USD in thousands  
Supplemental information for Cash Flow:      
       
Assets (liabilities) acquired:      
Current assets and liabilities excluding cash and cash equivalents                 (5 )
Marketable equity securities                 (49 )
Fixed assets                 (5 )
Other current assets                 (429 )
Reverse recapitalization effect on equity                 1,733  
Cash acquired in connection reverse recapitalization                 1,245  

 

The accompanying notes are an integral part of the consolidated financial statements.

 

  F- 7  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 1    - GENERAL

 

A. Foresight Autonomous Holdings Ltd. (the "Company") was originally incorporated in Israel in September 1977 under the name "Golan Malechet Macshevet Ltd" as a private company, and in April 1987 became a public company. In 2010 the Company changed its name to "Asia Development (A.D.B.M.) Ltd". The Company's shares are traded on the Tel Aviv Stock Exchange. Effective January 5, 2016, the Company acquired (the "Acquisition Transaction") 100% of the outstanding shares of Foresight Automotive Ltd. ("Foresight Ltd."), a company incorporated in Israel, pursuant to a capital stock exchange agreement dated as of October 11, 2015, among the Company, Magna B.S.P. Ltd. ("Magna"), and the shareholders of Foresight Ltd. In exchange for the outstanding shares of Foresight Ltd., the Company issued to Magna a total of 35,884,116 of the Company’s Ordinary Shares representing approximately 64.50% of the Ordinary Shares then issued and outstanding after giving effect to the Acquisition Transaction. As a result of the Acquisition Transaction, Foresight Ltd. became a wholly owned subsidiary of the Company as of January 5, 2016 and, subsequent to the Acquisition Transaction, the Company changed its name to "Foresight Autonomous Holdings Ltd.".
     
    The transaction between the Company and Foresight Ltd. was accounted for as a reverse recapitalization. As the shareholders of Foresight Ltd. received the largest ownership interest in the Company, Foresight Ltd. was determined to be the "accounting acquirer" in the reverse recapitalization. As a result, the historical financial statements of the Company were replaced with the historical financial statements of Foresight Ltd.
     

The Company and its subsidiary, Foresight Ltd., are collectively referred to as the "Company".

 

B.

Establishment of Foresight Ltd.

 

Foresight Ltd. was established in July 2015 by Magna in order to transfer all of Magna's 3D computer vision research and development technology and business in the area of Advanced Driver Assistance Systems (“ADAS”) to a separate entity. As part of the reorganization, Magna transferred to Foresight Ltd. intellectual assets comprising mostly of know-how, software and algorithms developed by Magna.

 

The transfer of the ADAS business to Foresight Ltd. was accounted for as a business combination between entities under common control with financial statements presented for prior periods retrospectively to reflect the transfer from the first day Magna started its research in January 2011.

 

Foresight’s statement of operations consists of all the related costs and expenses of the ADAS business which were incurred by Magna but were related to the ADAS business. These allocations of research and development expenses and general and administrative expenses were based on direct payroll costs incurred by Magna in relation to the ADAS business, on the proportional allocation of direct overhead costs incurred by Magna by considering the proportion of direct payroll costs incurred by Magna in relation to the ADAS business to total payroll costs incurred by Magna and on the proportional allocation of indirect overhead costs by considering the proportion of total indirect overhead expenses incurred by Magna to total payroll costs incurred by Magna.

 

Foresight Ltd. is a company whose planned principal operations are the design, engineering and commercialization of ADAS systems. Foresight Ltd. is currently conducting research and development activities, rapidly developing ADAS prototype systems so that it can move to the commercialization activities.

 

Foresight Ltd.'s activities are subject to significant risks and uncertainties, including falling to secure additional funding to operationalize the ADAS technology before another company develops similar technology. In addition, the Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements and limited operating history.

 

Management believes that the current working capital position, along with capital raising during 2017, will be sufficient to meet the Company’s working capital needs until the end of December 2018 (refer to note 15 subsequent events).

 

  F- 8  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 2    - SIGNIFICANT ACCOUNTING POLICIES

 

  A. Basis of Presentation:

 

The financial statements have been prepared in conformity with accounting principles generally accepted in United Sates of America ("US GAAP").

 

  B. Use of estimates in the preparation of financial statements:

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgment and assumptions can affect reported amounts and disclosures made. Actual results could differ from those estimates.

 

  C. Financial statement in U.S. dollars:

 

The functional currency of the Company is the U.S dollar ("dollar" or “USD”) since the dollar is the currency of the primary economic environment in which the Company has operated and expects to continue to operate in the foreseeable future.

 

Transactions and balances denominated in dollars are presented at their original amounts. Transactions and balances denominated in foreign currencies have been re-measured to dollars in accordance with the provisions of ASC 830-10, "Foreign Currency Translation".

 

All transaction gains and losses from re-measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

 

  D. Cash and cash equivalents:

 

Cash equivalents are short-term highly liquid investments that are readily convertible to cash with maturities of three months or less as of the date acquired.

 

  E. Fair value of financial instruments:

 

The carrying values of cash and cash equivalents, other receivable, marketable equity securities and other accounts payable approximate their fair value due to the short-term maturity of these instruments.

 

The fair value of derivative warrant liabilities (refer to Note 8) was estimated using the Black Scholes Merton formula based on inputs including (i) the price of the Company's shares; (ii) the exercise price of the warrant; (iii) risk-free interest; (iv) term available to exercise or redeem the security and (v) the volatility of the Company's share during the relevant term.

 

  F. Marketable equity securities:

 

Marketable equity securities classified as available-for-sale are recorded at fair value. The fair value is based on the quoted prices of such securities (level 1). Unrealized gains of available for sale securities are reflected in other comprehensive income. Unrealized losses considered to be temporary are reflected in other comprehensive income; unrealized losses that are considered to be other-than-temporary are charged to income as an impairment charge. Realized gains and losses are included in financial expenses, net.

 

Marketable equity securities classified as trading are recorded at fair value. The fair value is based on the current market value. Unrealized gains and losses before the securities are sold are reported in the income statement.

 

  F- 9  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 2    - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

  G. Investment in Affiliate Company:

 

Investment in common stock of an entity in which the Company can exercise significant influence but does not own a majority equity interest or otherwise control is accounted for using the equity method and is included as an investment in affiliate company in the consolidated balance sheet. The Company records its share in undistributed earnings and losses since acquisition in the consolidated statements of operations.

 

The Company reviews its investment for other-than-temporary impairment whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable

 

  H. Share-based compensation:

 

The Company applies ASC 718-10, "Share-Based Payment,” which requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors including employee stock options under the Company's stock plans based on estimated fair values.

 

ASC 718-10 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's statement of operations.

 

The Company recognizes compensation expenses for the value of non-employee awards, which have graded vesting, based on the straight-line method over the requisite service period of each award, net of estimated forfeitures.

 

The Company estimates the fair value of stock options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the options are exercised or expire). Expected volatility is estimated based on volatility of similar companies in the technology sector. The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected option term is calculated for options granted to employees and directors using the "simplified" method. Grants to non-employees are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted and the results of operations of the Company

 

  I. Basic and diluted net loss per share:

 

Basic loss per share is computed by dividing the net loss by the weighted average number of shares of Ordinary Shares outstanding during the year. Diluted loss per share is computed by dividing the net loss by the weighted average number of Ordinary Shares outstanding plus the number of additional Ordinary Shares that would have been outstanding if all potentially dilutive Ordinary Shares had been issued, using the treasury stock method, in accordance with ASC 260-10 "Earnings per Share". Potentially dilutive Ordinary Shares were excluded from the diluted loss per share calculation because they were anti-dilutive.

 

The weighted average number of Ordinary Shares outstanding has been retroactively restated for the equivalent number of shares received by the accounting acquirer as a result of the reverse recapitalization as if these shares had been outstanding as of the beginning of the earliest period presented.

 

  F- 10  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 2    - SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

  J. Research and development expenses, net:

 

Research and development expenses, are charged to the statement of operations as incurred. Grants for funding of approved research and development projects are recognized at the time the Company is entitled to such grants, on the basis of the costs incurred and applied as a deduction from the research and development expenses.

 

K. Recent Accounting Standards

 

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of the promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for us beginning in the first quarter of 2018; early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. As the Company has not incurred revenues to date, it is unable to determine the expected impact the new standard will have on its consolidated financial statements.

 

In January 2016, the FASB issued an amended standard requiring changes to recognition and measurement of certain financial assets and liabilities. The standard primarily affects equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. This standard is effective beginning in the first quarter of 2018. Certain provisions allow for early adoption. The Company does not expect that the adoption of this standard will have a significant impact on the financial position or results of operations.

 

In February 2016, the FASB issued a new lease accounting standard requiring the recognition of lease assets and liabilities on the balance sheet. This standard is effective beginning in the first quarter of 2019; early adoption is permitted. The Company has not yet determined the impact of the new standard on its consolidated financial statements.

 

In March 2016, the FASB issued an accounting standard update aimed at simplifying the accounting for share-based payment transactions. Included in the update are modifications to the accounting for income taxes upon vesting or settlements of awards, employer tax withholding on shared-based compensation, forfeitures, and financial statement presentation of excess tax benefits. This standard is effective beginning in the first quarter of 2017; early adoption is permitted. The Company does not expect that the adoption of this standard will have a significant impact on the financial position or results of operations.

 

In June 2016, the FASB issued a new standard requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. This standard is effective beginning in the first quarter of 2020; early adoption is permitted starting from the first quarter of 2019. The Company do not expect that the adoption of this standard will have a significant impact on the financial position or results of operations.

 

  F- 11  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 3    - OTHER RECEIVABLES

 

     

December 31,

 
      2015     2016  
      USD in thousands  
  Governmental institutes           72  
  Prepaid expenses           32  
              104  

 

NOTE 4    - INVESTMENT IN AFFILIATE COMPANY

 

On August 4, 2016, the Company entered into a Share Purchase Agreement (“SPA”) to acquire up to 36% of Rail Vision Ltd. (“Rail Vision”) shares at an average price per share of USD 60 and 3 types of Warrants to purchase ordinary shares of Rail Vision: Warrant 1, Warrant 2 and Warrant 3 exercisable within 18 months, 30 months and 24 months at an exercise price of USD 189, USD 270 and USD 216, respectively.

 

Rail Vision, was incorporated in Israel on April 18, 2016 and is a development stage company that is developing products for advanced safety, asset and fleet management in the rail industry.

 

Under the terms of the SPA, the Company will acquire Rail Vision securities in two installments for a maximum aggregate investment amounts to USD 1,600 (and with other investors up to an aggregate investment amount of USD 2,000 in Rail Vision).

 

According to the agreement between the Company and other investors, the Company's part in the first installment is USD 600 and the Company has the right, but not the obligation, to invest up to an additional USD 1,000 in the second installment, or a part of it. The first installment will result in a 13.5% interest in Rail Vison and if the Company exercises the second installment, in full, the Company interest in Rail Vision will result in 36%.

 

On August 25, 2016 the Company and other investors consummated the first installment of the SPA. As a result of the first installment, the Company purchased 7,093 ordinary shares of Rail Vision at a price per share equal to USD 84.59 and 16,157 warrants. Total investment amounted to USD 600 and allocated to warrants investment and Investment in the common stock based on the relative fair value, as of the date of first installment, of each of the elements. Warrants investment was recorded in other investments in the amount of USD 29. Investment in the common stock of Rail Vision was recorded in the amount of USD 571 was recorded in investment in affiliate company.

 

On November 7, 2016 the Company and other investors consummated the second installment of the SPA. As a result of the second installment, the Company purchased 16,599 additional ordinary shares of Rail Vision at a price per share equal to USD 46.52 and 33,931 additional warrants. Total investment of the second installment amounted to USD 822 and allocated to warrants investment and Investment in the common stock based on the   relative fair value, as of the date of second installment, of each of the elements . Warrants investment was recorded in other investments in the amount of USD 37. Investment in the common stock of Rail Vision was recorded in the amount of USD 785 was recorded in investment in affiliate company.

 

As a result of completing the investment at a total amount of USD 1,422, the Company's holdings in Rail Vision are 32% on an as issued basis and 48% on a fully diluted basis. Total amounts of USD 66 and USD 1,356 was recorded in other investments and investment in affiliate company, respectively.

 

  F- 12  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 4    - INVESTMENT IN AFFILIATE COMPANY (Cont.)

 

The following tables present summarized financial information derived from Rail Vision’s consolidated financial statements, which are prepared on the basis of US GAAP:

 

  Balance sheet data:   As of
December 31,
 
      2016  
      USD in thousands  
         
  Current assets     1,329  
  Long-term assets     70  
  Current liabilities     (168 )
  Equity     1,231  

 

  Operating data:  

7.5 months ended

December 31,

 
      2016  
      USD in thousands  
           
  Revenue      
  Operating loss     (872 )
  Net loss     (888 )

 

Loss of USD 108 was recognized in “Equity in net loss of affiliated companies” for the year ended December 31, 2016.

 

Activity in Investment in affiliate company is as follows:

 

     

Investment in affiliate company

 
  As of January 1, 2016      
  Purchases of ordinary shares of Rail Vision (both of the installments)     1,356  
  Equity in net loss of affiliated companies     (108 )
  As of December 31, 2016     1,248  

 

NOTE 5    - EMPLOYEE RIGHTS UPON RETIREMENT

 

Israeli labor law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances.

 

Pursuant to section 14 of the Severance Compensation Act, 1963, the Company's employees covered under this section are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies. Payments in accordance with section 14 relieve the Company from any future severance payments in respect of those employees.

 

  F- 13  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 6    - OTHER ACCOUNTS PAYABLE

 

     

December 31,

 
      2015     2016  
      USD in thousands  
               
  Employees and related expenses           59  
  Accrued expenses           273  
  Other payables           125  
              457  

 

NOTE 7    - COMMITMENTS AND CONTINGENCIES LIABILITIES
   
A. Agreement with Magna

 

In January 2016, the Company entered into a research and development services agreement with Magna for software development in the area of ADAS. Within the framework of the specific program and subject to the conditions prescribed in the agreement, Magna will provide research and development services for 12 months with an option to extend the agreement for two periods. According to the agreement, the monthly payment to Magna for the research and development services will not exceed NIS 200 thousand (approximately USD 50)

 

  B.

Office of the Chief Scientist

 

The Company obtained grants from the Chief Scientist of the State of Israel for participation in research and development for the years 2011 through 2013, and, in return, the Company is obligated to pay royalties amounting to 3%-5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of the dollar and bears interest of Libor per annum.

 

Through the year ended December 31, 2016, total grants obtained amounted to USD 553.

 

The refund of the grants is contingent upon the successful outcome of the Company’s research and development programs and the attainment of sales. The Company has no obligation to refund these grants, if sales are not generated. The financial risk is assumed completely by the Government of Israel. The grants are received from the government on a project-by-project basis. If the project fails the Company has no obligation to repay any grant received for the specific unsuccessful or aborted project.

 

  C.

Lease facilities

 

In June 2016, the Company entered into an office lease agreement, which will end on September 30, 2018. According to the lease agreement, the monthly office lease payment is approximately USD 3.70.  

 

  F- 14  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 8    - DERIVATIVE WARRANTS LIABILITIES (refer to note 9B1)

 

A. Fair Value Measurements:

 

Level 3 Measurements:

As quoted prices in active markets for identical or similar financial instruments are not available, the Company uses directly and indirectly observable inputs in the valuation of its derivative warrant liabilities, based on the Black Scholes Merton formula. The following inputs were used in the fair value measurement of these derivative warrant liabilities:

 

  Weighted average of inputs   As of December 31,  
      2015     2016  
  Share price         $ 0.45  
  Exercise price         $ 0.88  
  Expected volatility           42 %
  Risk-free interest           0.22 %
  Dividend yield           0 %
  Expected life of up to (years)           0.89  

 

Activity in such liabilities measured on a recurring basis is as follows:

 

      Derivative warrant liabilities  
  As of January 1, 2016      
  Issuance of warrants (see note 9B1a)     1,978  
  Revaluation of warrants     (1,847 )
  As of December 31, 2016     131  

 

In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the derivative warrant liabilities of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the Black-Scholes model that vary overtime, namely, the volatility and the risk free rate. A 5.0% decrease in volatility would decrease the value of the warrants to USD 84; a 5.0% increase in volatility would increase the value of the warrants to USD 195. A 5.0% decrease or increase in the risk free rate would not have materially changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.

 

NOTE 9    - SHAREHOLDERS' EQUITY

 

A. The rights of Ordinary Shares are as follows:

 

The Ordinary Shares confer upon the holders the right to receive notice to participate and vote in general meetings of shareholders of the Company, the right to receive dividends, if declared, and the right to participate in a distribution of the surplus of assets upon liquidation of the Company.

 

B. Issuance of shares, warrants and options

 

1. Private placements and public offering

 

(a) On March 1, 2016, the Company raised USD 4,482 (gross) through a private placement of its Ordinary Shares. The Company issued a total of 9,994,267 Ordinary Shares, (NIS 1.75 per share, approximately $0.45 per share) and a total of 21,531,390 warrants ("Warrants A" and "Warrants B") to purchase 1 Ordinary Shares for every share purchased in the private placement: 9,994,267

 

  F- 15  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 9    - SHAREHOLDERS' EQUITY (Cont.)

 

B. Issuance of shares, warrants and options (Cont.)

 

2. Private placements and public offering (Cont.)

 

Warrants A at an exercise price of NIS 3 per share, which are exercisable until the 18 month anniversary of the date of issuance and 11,537,123 Warrants B at an exercise price of NIS 4 per share which are exercisable until the 36 month anniversary of the date of issuance. After deducting closing costs and fees, the Company received proceeds of approximately USD 4,100, net of issuance expenses.

 

In accordance with ASC 815, as the exercise price of Warrants A and Warrants B is denominated in a currency other than the Company's functional currency, the warrants were recorded in liabilities at their fair value as of the date of issuance, in the amount of USD 1,581. Issuance expenses attributable to the warrants were recorded in the profit and loss statement. The remainder of the proceeds, allocated to the Ordinary Shares issued, in the amount of USD 2,661, net of issuance expenses attributable to the ordinary shares, was recorded in equity.

 

(b) On May 17, 2016, the Company raised USD 943 (gross) through a private placement of its Ordinary Shares. The Company issued a total of 2,028,568 Ordinary Shares, (NIS 1.75 per share, approximately $0.46 per share) and an aggregate of 4,057,136 Warrants A and Warrants B to purchase 1 Ordinary Share for every share purchased in the private placement: 2,028,568 Warrants A at an exercise price of NIS 3 per share which are exercisable until the 18 month anniversary of the date of issuance and 2,028,568 Warrants B at an exercise price of NIS 4 per share which are exercisable until the 36 month anniversary of the date of issuance. After deducting closing costs and fees, the Company received proceeds of approximately USD 858, net of issuance expenses.

 

In accordance with ASC 815, as the exercise price of Warrants A and Warrants B is denominated in a currency other than the Company's functional currency, the warrants were recorded in liabilities at their fair value as of the date of issuance, in the amount of USD 258. Issuance expenses attributable to the warrants were recorded in the profit and loss statement. The remainder of the proceeds, allocated to the Ordinary Shares issued, in the amount of USD 623, net of issuance expenses attributable to the ordinary shares, was recorded in equity.

 

  (*) Both of the Ordinary Share issuances mentioned in section (a) and (b) include a partial ratchet anti-dilution protection in the event that within a period of 12 months as of the closing date the Company will issue new securities at a price per share lower than NIS 1.75 ($ 0.45 price per share of the March 1, 2016 issuance), in which case an applicable number of Ordinary Shares will be issued to purchasers of the Ordinary Shares mentioned in (a) and (b) to retroactively adjust their effective purchase price to align with the purchase price at which such new securities are issued. The anti-dilution protection shall not apply to any decrease in price per share which is under NIS 1.2.

 

(c) On October 26, 2016, the Company raised USD 1,410 (gross) through a private placement of its Ordinary Shares. The Company issued a total of 3,027,197 Ordinary Shares, (NIS 1.75 per share, approximately $0.46 per share) and total of 3,178,557 warrants ("Warrants E") to purchase 1 Ordinary Share for every share purchased in the private placement at an exercise price of NIS 3 per share which are exercisable until the 36 month anniversary of the date of issuance. After deducting closing costs and fees, the Company received net proceeds of approximately USD 1,287.

 

In accordance with ASC 815, as the exercise price of Warrant E is denominated in a currency other than the Company's functional currency, the advances related to the warrants, in the amount of USD 139, were recorded in liabilities at their fair value and the receipts on account of shares and corresponding receivables on account of shares, at the net amount of USD 1,160, were recorded in equity.

 

  F- 16  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 9    - SHAREHOLDERS' EQUITY (Cont.)

 

B. Issuance of shares, warrants and options (Cont.)

 

2. Shares and warrants to service providers:

 

The Company accounts for Ordinary Shares and warrants issued to non-employees using the guidance of ASC 505-50, "Equity-Based Payments to Non-Employees", whereby the fair value of such ordinary shares and warrant grants is determined at the earlier of the date at which the non-employee's performance is completed or a performance commitment is reached.

 

(a) Warrants to service providers:

 

The fair value for the warrants to service providers was estimated on the measurement date determined using a Black-Scholes option pricing model, with the following weighted-average assumptions weighted average volatility of 70%, risk free interest rates of 0.3%, dividend yields of 0% and a weighted average life of the options of 1.5 - 3.

 

The following table summarizes information about the warrants and share options as of September 30, 2016:

 

  Issuance date   Number of warrants and options issued     Exercised     Forfeited     Outstanding     Exercise
Price $
    Warrants exercisable     Exercisable through
  Jan 2016(1)     2,392,275       2,392,275                   0          
  March 2016(2)     1,000,000                   1,000,000       0.798           Apr 2019 -
Jan 2021
  March 2016(3)     462,042                   462,042       0.798           Sep 2017
  March 2016(4)     101,428                   101,428       0.798           Nov 2017
  Sep 2016(5)     151,360                   151,360       0.798           Oct 2019

 

(1) On January 5, 2016, the Company granted to an intermediator in its reverse recapitalization transaction 2,392,275 options to purchase 2,392,275 of its Ordinary Shares, which were immediately exercised. As such share based award was granted in connection with an equity transaction, the relating compensation costs were recorded in equity with no impact on the statement of operations.

 

(2) On March 1, 2016, the Company granted to a management consulting service provider 1,000 options to purchase 1,000 Ordinary Shares at an exercise price of NIS 3 (approximately $0.77 at the grant date). These options vest in 8 quarterly tranches over a period of 2 years (consistent with the contractual term of the service) and expire 3 years from the vesting date in relation to each tranche. The Company recorded in its statement of operations an expense of USD 46 in respect of such grant, included in general and administrative expenses.

 

(3) On March 1, 2016, the Company granted to an intermediator in its March 1, 2016 private placement 462 thousand Warrants A to purchase 462 thousand Ordinary Shares at an exercise price of NIS 3 (approximately $0.77 at the grant date). These options expire 18 months after their grant date and are fully vested as of their grant date. The Company recorded in its statement of operations an expense of USD 11 , included in general and administrative expenses, in respect of the portion of such grant allocated to the instruments issued in the March 1 private placement that were recorded in liabilities. In respect of the portion of such grant allocated to the instruments issued in the March 1 private placement that were recorded in equity, the relating compensation costs were recorded in equity with no impact on the statement of operations.

 

(4) On March 31, 2016, the Company granted to an intermediator in its May 2016 private placement 101 thousand Warrants A to purchase 101 thousand Ordinary Shares at an exercise price of NIS 3 (approximately $0.8 at the grant date). These options expire 18 months after their grant date and are fully vested as of their grant date. The Company recorded in its statement of operations an expense of USD 2, included in general and administrative expenses, in respect of the portion of such grant allocated to the instruments issued in the May 2016 private placement that were recorded in liabilities. In respect of the portion of such grant allocated to the instruments issued in May 2016 private placement that were recorded in equity, the relating compensation costs were recorded in equity with no impact on the statement of operations.

 

  F- 17  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 9    - SHAREHOLDERS' EQUITY (Cont.)

 

B. Issuance of shares, warrants and options (Cont.)

 

2. Shares and warrants to investors and service providers (Cont.)

 

(5) On September 30, 2016, the Company granted to an intermediator in its October 2016 private placement 151 thousand Warrants E to purchase 151 thousand Ordinary Shares at an exercise price of NIS 3 (approximately $0.8 at the grant date). These options expire 36 months after their grant date and are fully vested as of their grant date. The Company recorded in its statement of operations an expense of USD 1, included in general and administrative expenses, in respect of the portion of such grant allocated to the instruments issued in the October 2016 private placement that were recorded in liabilities. In respect of the portion of such grant allocated to the instruments issued in the March 1 private placement that were recorded in equity, the relating compensation costs were recorded in equity with no impact on the statement of operations.

 

3. Shares and options to employees

 

On April 17, 2016, the Company granted to its chief financial officer options to purchase an aggregate of 1,794,205 Ordinary Shares at an exercise price of $0.08 per share. The options vest over 10 quarters until fully vested on June 30, 2018. The Company recorded in its statement of operations an expense of USD 259 in respect of such grant, included in general and administrative expenses.

 

4. Share Based Compensation Expense:

 

The total share-based compensation expense, related to shares, options and warrants granted to employees and service providers was comprised, at each period, as follows:

 

     

Year ended December 31,

 
      2014     2015     2016  
       

USD in thousands

 
                           
  General and administrative                 346  
  Total share-based compensation expense                 346  

 

NOTE 10  - RESEARCH AND DEVELOPMENT

 

      Year ended December 31,  
      2014     2015     2016  
      USD in thousands  
                     
  Payroll and related expenses     195       107       221  
  Subcontracted work and consulting     23       17       588  
  Other     15       7       95  
        233       131       904  

 

  F- 18  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 11  - GENERAL AND ADMINISTRATIVE

 

     

Year ended

December 31,

 
      2014     2015     2016  
      USD in thousands  
                     
  Payroll and related expenses     15       15       815  
  Share-based payment                 59  
  Professional services     3       4       829  
  Directors fees and insurance                 93  
  Travel expenses     4       2       36  
  Rent and office maintenance     10       4       90  
  Consultation fees to a related party                 470  
  Other     3       1       235  
        35       26       2,627  

 

NOTE 12  - TAXES ON INCOME

 

A. The Company is subject to income taxes under Israeli tax laws:

 

1. Corporate tax rates in Israel

 

The Israeli corporate tax rate was 26.5% in the years 2015 and 2014 and 25% for year 2016.

 

2. As of December 31, 2015, the Company generated net operation losses of approximately USD 1,440, which may be carried forward and offset against taxable income in the future for an indefinite period.

 

3. The Company is still in its development stage and has not yet generated revenues, therefore, it is more likely than not that sufficient taxable income will not be available for the tax losses to be utilized in the future. Therefore, a valuation allowance was recorded to reduce the deferred tax assets to its recoverable amounts.

 

     

December 31,

 
      2014     2015     2016  
      USD in thousands  
  Deferred tax assets:                  
  Deferred taxes due to carryforward losses     341       382       1,372  
        341       382       1,372  
                           
  Valuation allowance     (341 )     (382 )     (1,372 )
  Net deferred tax asset                  

 

4. The Company has no uncertain tax positions and foreign sources of income.

  F- 19  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 13  - FINANCIAL INCOME NET

 

     

Year ended
December 31,

 
      2014     2015     2016  
      USD in thousands  
                     
  Revaluation of securities classified as trading, net                 39  
  Change in fair value of warrants                 1,847  
  Exchange rate differences                 70  
  Other                 (6 )
                    1,950  

 

NOTE 14 - TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES

 

A. Transactions:

 

     

Year ended
December 31,

 
      2014     2015     2016  
      USD in thousands  
                     
  Payroll and related expenses                 503  
  Commission paid to former controlling shareholder                 429  
  Directors fees and insurance                 52  
  Subcontracted work and consulting                 588  
                    1,572  

 

B. Balances:

 

      As of
December 31,
 
      2015     2016  
      USD in thousands  
               
  Other accounts payable           90  
              90  

 

NOTE 15  - SUBSEQUENT EVENTS

 

A. On January 26, 2017, the Company granted to three of its directors options to purchase an aggregate of 300,000 Ordinary Shares, each, at an exercise price of NIS 1.95 (approximately $0.52 per share at the grant date). The options vest over the next 11 quarters until fully vested on September 30, 2019.

 

B. On February 1, 2017, the Company granted to two service providers 380,000 options to purchase 380,000 Ordinary Shares at an exercise price of NIS 1.95 (approximately $0.52 per share at the grant date). The options vest over the next 11 quarters until fully vested on September 30, 2019.

 

  F- 20  
Table of Contents  

 

Foresight Autonomous Holdings Ltd.

Notes to the consolidated financial statements

(dollars in thousands, except per share data)

 

 

NOTE 15  - SUBSEQUENT EVENTS (Cont.)

 

C. On December 28, 2016, the Company signed a compromise agreement with the Israeli VAT authorities, under which the company agreed to pay back VAT amounts relating to the years 2012-2016. As a result, on December 31, 2016, the Company recorded in its statement of operations an expense of approximately USD 170 included in general and administrative expenses.

 

D. During March and April 2017 the Company raised USD 11,665 (gross) through three private placements of its Ordinary Shares. The Company issued as follows:

 

  (a) a total of 12,363,413 Ordinary Shares (out of which 3,863,157 Ordinary Shares will be allocated during May 2017), (NIS 1.90 per share, approximately $0.52 per share) and an aggregate of 12,784,331 Warrants F to purchase 1 Ordinary Share for every share purchased in the private placement at an exercise price of USD 0.80 per share which are exercisable until the 24 month anniversary of the date of issuance.
  (b) a total of 6,580,945 Ordinary Shares, (NIS 2.10 per share, approximately $0.58 per share) and an aggregate of 6,736,183 Warrants F to purchase 1 Ordinary Share for every share purchased in the private placement at an exercise price of USD 0.80 per share which are exercisable until the 24 month anniversary of the date of issuance.
  (c) a total of 2,083,332 Ordinary Shares, (NIS 2.40 per share, approximately $0.66 per share) and an aggregate of 1,051,665 Warrants G to purchase 1 Ordinary Share for every share purchased in the private placement at an exercise price of USD 0.95 per share which are exercisable until the 18 month anniversary of the date of issuance.

 

After deducting closing costs and fees, the Company received proceeds of approximately USD 10,751, net of issuance expenses.

 

  F- 21  
Table of Contents  

 

SIGNATURES

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on Form 20-F filed on its behalf.

 

  FORESIGHT AUTONOMOUS HOLDINGS LTD.
     
Date: May 11, 2017 By: /s/ Haim Siboni
    Haim Siboni
    Chief Executive Officer

   

 

80

 

 

 

Exhibit 1.1

 

THE COMPANIES LAW, 5759-1999

 

COMPANY LIMITED BY SHARES

 

ARTICLES OF ASSOCIATION

 

OF

 

FORESIGHT AUTONOMOUS HOLDINGS LTD.

 

1. Preamble

 

1.1 In these Articles, unless the written text requires another interpretation, words and expressions defined in the Companies Law 5759-1999 (hereinafter: “the Companies Law ”), and in any amendment thereto shall have the same meanings ascribed to them therein. Where it has been stipulated in these Articles that any matter shall be subject to and in accordance with the provisions of the Companies Law, the meaning is to the provisions of the Companies Law as in force at that date and as amended from time to time. Words in the singular shall include the plural and vice versa; words in the masculine gender shall include the feminine gender and vice versa; and reference to a person shall also include corporate bodies and vice versa.

 

1.2 The headings used in these Articles are for convenience only and shall not affect the construction of these Articles.

 

1.3 Where it has been stipulated in these Articles that any of the provisions hereof shall be applicable subject to the provisions of the Ordinance and/or subject to the provisions of the Companies Law and/or subject to the provisions of any law, the meaning is to the provisions of the Companies Ordinance and/or to the provisions of the Companies Law and/or to the provisions of any law, which may not be contracted out, unless the context requires otherwise.

 

1.4 The provisions which may be contracted out in the Companies Law shall apply to the Company, to the extent that it has not been stipulated otherwise in these Articles and insofar as there is no contradiction between the provisions in the Companies Law and the provisions of these Articles.

 

   

 

 

2. Amendments to Articles of Association

 

The Company may amend the provisions of these Articles by resolution adopted by an ordinary majority of the participating shareholders of the Company.

 

3. Aims

 

The aims for which the Company is established are: to engage in any legal business.

 

4. Donation

 

The Company may donate reasonable amounts to a worthy purpose, even if such donation is not within the framework of business considerations of maximizing profits.

 

5. Registered Share Capital

 

5.1. The registered share capital is 200,000,000 ordinary shares of no par value. The rights attached to the Company’s shares shall be the rights set forth in these Articles and maybe changed in the manner set forth in these Articles.

 

5.2. The ordinary shares shall confer their holders all the rights conferred upon a shareholder, including the right to receive notices of, and to attend and vote at General Meetings of the Company, the right to receive dividends and any other bonus of the Company, and a share in the distribution of any surplus assets of the Company upon its liquidation, all as set forth in these Articles.

 

6. Shareholders’ Liability

 

The liability of the Company Shareholders is a liability limited by shares.

 

7. Share Certificate

 

7.1. Share certificates will be issued and bear the signatures of those authorized by the Company's Board of Directors and under the Company seal. Share certificate will only be issued in the name of the shareholder. No bearer shares will be issued.

 

7.2. Each shareholder shall be entitled to receive one share certificate for all the shares registered in his or its name, specifying the number of shares for which such certificate was issued and to be registered in the Shareholders’ Register as holder thereof, unless the terms of allocation of such shares provide otherwise. If the consideration for a share certificate has not been paid in full, it shall remain as a deposit with the Company until full payment thereof.

 

  2  

 

 

7.3. A share certificate registered in the names of two or more persons shall be delivered to the person first named in the Shareholders’ Register from amongst such joint holders.

 

7.4. If a share certificate is defaced, lost or destroyed, the Company may issue another certificate to replace such defaced, lost or destroyed certificate, upon payment of such fee and upon such terms as to the furnishing of evidence of such loss or defacement and such indemnity for damages, as the Board of Directors may deem appropriate.

 

8. Shares

 

8.1. Subject to the provisions of any law, the Company may issue shares with equal rights or with prior or later rights with respect to the existing shareholders, to issue redeemable preferential shares and redeem the same and determine in the manner set forth in the law from time to time shares with restricted, special or other rights, or with restrictions in respect of dividends distribution, voting rights, capital settlement, or in respect of other matters. The Company shall not issue bearer shares.

 

8.2. The Company may at any time, unless the terms of such share class provide otherwise, convert, broaden, add, abrogate or otherwise alter the rights and provisions related or unrelated to any class of its shares, if the Company obtains a consent for such from the holders of all the issued shares of such class, or as determined at an extraordinary general meeting of the shareholders of such class, and all in the manner and form provided in the Companies Law from time to time and subject to the provisions of any law.

 

8.3. The provisions in these Articles pertaining to General Meetings shall apply, mutatis mutandis , as the case may be, to each such extraordinary general meeting.

 

8.4. The unissued shares in the share capital shall be under the control of the Board of Directors, and the Board of Directors may allocate the unissued shares or grant an option to purchase same, against cash or for such other consideration which is not cash, with such conditions, to such persons, and on such dates as the Board of Directors shall deem appropriate, and also differentiate between the shareholders regarding all such conditions. If under the terms of issue of any shares, payment of the consideration for the share, in whole or in part, is made in installments, then each such installment shall be paid to the Company on the due date for payment thereof by the person who is the registered shareholder of the shares at that time or by the person to whom such shares were allocated for the first time, as shall be elected by the Board of Directors of the Company.

 

  3  

 

 

8.5. The Company shall not be required to first offer shares from additional future issues, if any, to the existing shareholders of the Company.

 

8.6. Except as otherwise provided in these Articles and/or in the provisions of any law, the Company shall be entitled, at the discretion of its Board of Directors, to treat the registered holder of each share as the absolute owner thereof, and accordingly shall not be obligated to recognize any equitable or other claim regarding such share, or regarding a benefit or interest in such share on the part of any other person, except as ordered by a court of competent jurisdiction or as provided in the law.

 

8.7. The Company may at any time pay commission to any person for his unconditional or conditional singing or consent to sign any share or debenture of the Company, or for his consent to underwrite, whether unconditionally or conditionally, any share or debenture of the Company, in such rate as determined by the Board of Directors, which is not in excess of the rate stipulated from time to time under any law.

 

9. Calls for Payment: Forfeiture of Shares, Shares Charge

 

9.1. The Board of Directors may, from time to time, at its discretion, make such calls for payment upon the shareholders and modify such calls, for the payment of any amounts yet unpaid in respect of the shares held by each of the shareholders, and which is not, by the terms of issue thereof, payable at fixed time/s, and each shareholder must pay the Company the amount of the call made upon him, at the time, in the amount and place designated by the Board of Directors.

 

9.2. Notice of any call for payment shall be given not less than seven calendar days prior to the time of payment fixed in such notice, and shall specify the place of payment. Prior to the time for any such payment fixed in such notice of a call given to a shareholder, the Board of Directors may revoke such call or extend the time fixed for payment of such call.

 

9.3. Joint holders of a share shall be jointly and severally liable to pay all calls for payment in respect of such share.

 

  4  

 

 

9.4. If by the terms of issue of any share or otherwise, any amount is made payable at a fixed time or by installments at fixed times, either at par on account of the share amount, or at a premium, each such amount or installment shall be payable as if it were a call duly made and of which due notice has been given, and all the provisions in these Articles with respect to calls for payment shall apply to such amount or such installment.

 

9.5. If an amount of a call for payment or installment has not been paid on the due date for payment thereof, the person who at that time is the holder of the share for which the call for payment has been made, must pay interest on the aforesaid amount, at the rate determined by the Board of Directors from time to time, if any, from the day set for its payment until the day it is actually paid, this, without derogating from the right of the Company to demand the payment owing to the Company from any other entity that has undertaken to pay such payment, even if such entity is not the shareholder at that time.

 

9.6. The Board of Directors may accept from any shareholder wishing to advance payment of any amount of money the payment of which has not yet been called or which is not yet due and may pay such shareholder interest for that advance, or part thereof, until the day on which payment of that amount would have been due had such amount not been paid it in advance, at a rate agreed between the Board of Directors and such shareholder, and in accordance with the provisions of any law.

 

9.7. If the shareholder fails to pay an amount payable by virtue of a call or a payment installment before the day fixed for payment of the same, the Board of Directors may, at any time after the day fixed for such payment, so long as such amount or any installment thereof remains unpaid, give notice to such shareholder and demand settlement of such amount or installment, within at least 7 calendar days from the date of notice, together with the interest which may have accrued and all the expenses that were incurred by the Company as a result of such non-payment. The notice will state that in case of non payment, the Company may forfeit the shares in respect of which the call for payment was made or the date of payment of an installment has arrived.

 

9.8. If the requirements included in said notice are not complied with, then at any time thereafter, prior to the payment of the call for payment or the installment, interest and expenses owing in respect of these shares, the Board of Directors may, by a resolution to that effect, forfeit the shares in respect of which such notice has been served. Such forfeiture will include all the dividends, bonus shares and other rights declared in respect of the forfeited shares that were not actually paid prior to the forfeiture.

 

  5  

 

 

9.9. Any share thus forfeited will be deemed property of the Company and the Board of Directors may sell, re-allocate, or otherwise dispose of such share or even waive such forfeiture, so long as such has not been disposed, and under terms determined at the discretion of the Board of Directors.

 

9.10. Any shareholder whose shares have been forfeited shall cease to be a shareholder in respect of the forfeited shares, but shall nonetheless be liable to pay to the Company all calls, installments, interest and expenses owing on account or in respect of such shares at the time of forfeiture, together with interest thereon from the time of forfeiture until actual payment date, at the rate determined by the Board of Directors and the Board of Directors may claim and collect from the shareholder all or part of such amounts.

 

9.11. If the Company issues any shares, then the right of lien shall apply to the share certificate for any share with respect to which a full consideration has not been paid. Where any call for payment has not been complied with, the Board of Directors may cause the sale of such share, as it may deem appropriate.

 

9.12. The Company shall have the right of a first charge and lien on all the shares registered in the name of each shareholder, excluding shares for which full consideration was paid, on all the dividends declared from time to time on such shares and on the proceeds of the sale thereof, for discharging all the debts and liabilities of such shareholder to the Company. In order to exercise the charge, the Board of Directors may sell the charged shares in the manner that the Board of Directors, at its discretion, deems appropriate: The registration by the Company of the transfer of those shares shall be considered as a waiver on the part of the Company on the charge of these shares.

 

9.13. The net proceeds from each such sale, after payment of the sale expenses, shall serve for discharge of all the debts and fulfillment of all the obligations of the relevant shareholder and any excess, if any, will be paid to such shareholder or to the administrators of his estate or to person to whom such shareholder transferred such right.

 

  6  

 

 

9.14. Upon the sale of shares after forfeiture or for the enforcement of a charge, by exercising the above vested powers, the Board of Directors may appoint any person to sign the deed of transfer of the sold shares and to register the purchaser in the Shareholders’ Register as the holder of the sold shares and after registration of the purchaser’s name in the Shareholders’ Register in respect of such shares, the validity of the sale shall not be subject to an appeal.

 

9.15. No shareholder shall be entitled to receive any dividend or exercise any rights of a shareholder, including voting rights, until such shareholder shall have paid all calls made from time to time and applicable to his shares then due and payable (whether registered alone or jointly with any other person).

 

9.16. A declaration signed by a director that a share has been forfeited, surrendered or sold by the Company by virtue of a charge, shall be conclusive evidence of the facts therein stated against all persons claiming to be entitled to any rights for the share. The purchaser of the share relying on the said declaration shall not be bound to ascertain that such sale proceedings, re-allocation or transfer were duly performed, or the extent of the consideration, and after his name has been registered in the Shareholders’ Register shall have full title for such share.

 

10. Transfer of Shares and their Transmission

 

10.1. The Board of Directors may, at its discretion, either approve or refuse to approve any transfer of shares in the Company for which the full consideration has not been paid to the Company, or with respect to which a right of lien exists.

 

10.2. Where the Board of Directors has refused to approve a transfer of shares, it shall provide notice thereof to the transferor, by no later than 7 days from the date of receiving a deed of transfer. If the Board of Directors of the Company has not notified the transferor within 7 days as aforesaid, the Board of Directors shall no longer be able to refuse to approve the shares transfer.

 

10.3. No transfer of shares shall be registered unless a proper deed of transfer has been delivered to the Company and signed by the transferor and the transferee. The Company may refuse to recognize the deed of transfer, unless it is accompanied by the share certificate, if such has been issued, for the transferred shares. The transferor shall be deemed as having remained the shareholder until the name of the transferee has been registered in the Shareholders’ Register in respect to the transferred share. The Board of Directors may demand any other proof for the transferor’s title to the shares or his entitlement to transfer the shares.

 

  7  

 

 

10.4. The deed of transfer for the share shall be drafted in the following form or in form as similar as possible to it, or in a customary or acceptable form to be approved by the Board of Directors:

 

I, ______ of ___________, for consideration in the amount of NIS _________ paid to me by ________ of __________ (hereinafter: “the Transferee”), hereby transfer to the Transferee _______ shares of NIS ___ each, numbered ____ to ______ (inclusive) of the Company called _____, to be held by the Transferee, the administrators of his estate, his guardians and proxies, in accordance with the terms whereby I, the Transferee, his administrators of the estate, guardians and proxies held such shares immediately prior to signing this deed, and I, the Transferee, hereby agree to receive the aforesaid shares, in accordance with the aforesaid terms.

 

In witness whereof, we have set our hands on this __ day of the month of ___ year _______.

 

       
  Transferor   Transferee
       
       
  Witness to signature of the Transferor   Witness to signature of the Transferee

 

10.5. The Board of Directors may suspend the registration of shares transfer for a period of up to the 14 last days preceding any General Meeting, provided that a notice to that effect has been provided to the shareholders, all subject to the provisions of any law.

 

10.6. The deeds of transfer registered shall remain in the Company’s possession, but all the deeds of transfer that the Board of Directors has refused to register shall be returned on demand, to whomever delivered them, together with the share certificate (if delivered).

 

  8  

 

 

10.7. The guardian and administrators of the estate of an individual shareholder who has died, or, when there are no administrators of an estate or guardians, the persons having the right as heirs of the deceased shareholder, will be solely recognized by the Company as having a right to the share that was registered in the name of the deceased.

 

10.8. If a share is registered in the names of two holders or more, the Company shall only recognize the surviving partner or the surviving partners as the persons having the right to the share or to a benefit in the share.

 

10.9. The Company may recognize the receiver or liquidator of any corporate shareholder in winding-up or dissolution, or the trustee in bankruptcy or any receiver of a bankrupt shareholder as being entitled to the shares registered in the name of such shareholder, and to register him/them, at the exclusive discretion of the Board of Directors, as shareholder of such shares.

 

10.10. Any person becoming entitled to shares due to the death of a shareholder, may, upon providing evidence of the probate of a will or appointment of a guardian or succession order, attesting the right of such person to the shares of the deceased shareholder, be registered as a shareholder by virtue of such shares, or may, subject to the approval of the Board of Directors under the provisions of these Articles, transfer these shares. The aforesaid shall not release the estate of the deceased from any undertakings with respect to the share.

 

11. Modification of Capital

 

11.1. “Resolution” in this Section, shall be adopted with the requisite majority as valid upon adoption of such Resolution. In the event that no express provision of the law exists, the requisite majority shall be the simple majority of the shares voting at the General Meeting of the Company.

 

11.2. The Company may, from time to time, by a Resolution, increase its share capital by the creation of new shares, whether all the existing shares have been issued by that date or not, and any such increase shall be in such amount and shall be divided into shares of such nominal value or without nominal value, and determine the share classes, conditions and rights as the Resolution approving the creation of such shares shall provide.

 

  9  

 

 

11.3. In accordance with its Resolution, the Company may, subject to the provisions of any law:

 

a. Consolidate and re-divide its share capital.

 

b. Divide, by means of a re-division of its existing shares, in whole or in part, its share capital, in whole or in part, into a greater number of shares of no par value. The Company may determine in the Resolution on the dividing of shares that some of the new shares created following such division shall confer the holders thereof preferred rights or a deferred rights, to the extent that the Company may confer preferred rights or a deferred rights to new shares or to unissued shares.

 

c. To reduce its share capital in the same manner and on the same terms and upon receiving such required approval as the law as amended from time to time shall provide.

 

12. Borrowing Powers

 

The Board of Directors may from time to time, at its exclusive discretion, borrow or secure the payment of any sum or sums of money for the purposes of the Company, in such manner, at such times and upon such terms and conditions as it deems fit, and in particular by the issuance of guarantees, debentures, or any mortgages, charges or other securities on the whole or any part of the property or business of the Company, both present and future, including its uncalled or called but unpaid capital for the time being.

 

13. General Meetings

 

13.1. The Company shall hold an annual meeting at least once each year and no later than the end of fifteen months after the last annual meeting. Any General Meeting of the Company other than the annual meeting shall be referred to as a “special meeting”.

 

13.2. The powers of the General Meeting shall be as provided in these Articles and in accordance with the Companies Law.

 

13.3. The Board of Directors of the Company shall convene a special meeting according on its own decision and at the request of each of the following:

 

13.3.1. Two directors or one quarter of the all directors then in office, whichever is lower.

 

  10  

 

 

13.3.2. One shareholder, or more than one, holding no less than five percent of the voting rights in the Company.

 

13.4. The agenda of the General Meeting shall be determined by the Board of Directors and include subjects for which the convening of a special meeting is required under Article 13.3 above.

 

13.5. Notice of a General Meeting will be published at least 21 days prior to its convening. The notice shall state the place, date and time of the General Meeting as well as the items on its agenda, setting forth in reasonable detail the subjects for discussion. There is no requirement under these Articles, to serve a personal notice in advance to each shareholder registered in the Shareholders’ Register.

 

13.6. No discussion is to be opened in a General Meeting and no resolution is to be adopted unless a quorum is present. In a General Meeting (both ordinary and extraordinary) a quorum shall be constituted when at least two shareholders, whether in person or by proxy who hold together at least one third of total voting rights in the Company shall be present, unless otherwise required under any law.

 

13.7. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon request under the Companies Law, shall be dissolved, but in any other case it shall be adjourned to the same day in the next week, at the same time and place, or to such other day and/or time and/or place as the Board of Directors shall determine in a notice to the shareholders. If at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, then the meeting shall be held with any number of participants for discussion and adoption of resolutions in the subjects for which such meeting was called.

 

13.8. In a General Meeting only resolutions regarding matters which were included in the agenda shall be adopted.

 

13.9. The chairman of the General Meeting shall be the person elected by the General Meeting, if no such chairman is elected, or should he fail to be present after fifteen minutes from the time set for the meeting, the chairman shall be - the chairman of the Board of Directors.

 

  11  

 

 

13.10. The chairman may, with the agreement of the General Meeting in which a quorum is present, adjourn the meeting from time to time and from place to place, and has a duty to adjourn it if so ordered by the meeting. Notwithstanding the above, at the adjourned meeting, no matters may be discussed other than those matters in which the discussion was not concluded in the meeting in which the adjournment was resolved. The shareholders of the Company shall be duly notified of the adjournment and on the matters on the agenda of the adjourned meeting.

 

13.11. The provisions of these Articles relating to General Meetings shall, mutatis mutandis , apply to any general meeting of the holders of a particular class of shares of the Company.

 

13.12. Subject to the provisions of any law, a defect in convening or conducting the General Meeting, including a defect deriving from the non-fulfillment of any provision or condition laid down in the Law or these Articles, including with regard to the manner of convening or conducting the General Meeting, shall not disqualify any resolution passed at the General Meeting and shall not affect the discussions which took place thereat.

 

14. Voting of Shareholders

 

14.1. Subject to the provisions of any law, resolutions of the Company at its General Meetings shall be deemed to have been approved if adopted by a simple majority at least of the votes of the shares voting at the General Meeting.

 

14.2. The chairman of a General Meeting shall not have a casting or additional vote.

 

14.3. Every question submitted to the General Meeting shall be decided by a show of hands and/or by written ballot, subject to the provisions of the Companies Law and by such manner, at the time and in the place as directed by the chairman of the meeting.

 

14.4. A declaration by the chairman that a resolution at the General Meeting has been rejected or carried, either unanimously, or carried by a particular majority, shall constitute prima facie evidence of the matters recorded therein.

 

14.5. In a voting at a General Meeting every shareholder, present in person, or by proxy, or by means of a written proxy, shall have one vote for each share held by him and entitling a voting right.

 

14.6. A corporation being a shareholder of the Company may duly authorize in writing any person it shall deem appropriate to be its representative at any meeting of the Company. The person so authorized shall be entitled to exercise on behalf of such corporation all the powers that the corporation could have exercised if it were an individual shareholder.

 

  12  

 

 

14.7. In the case of joint holders of a share, the vote of the head of partners, given in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose, the question who the head of partners is shall be determined based on the order in which the names are recorded in the Shareholders’ Register.

 

14.8. Subject to the provisions of any law, shareholders may vote either in person or by proxy, or, in the case of a corporation - by a representative in accordance with Article 14.6 above, or by a duly authorized proxy as provided hereinafter, provided that the instrument appointing the proxy or representative is delivered to the Company or to the chairman of the meeting at least 48 hours prior to the time of voting.

 

14.9. Any instrument appointing a proxy shall be signed by the appointer or by its attorneys duly empowered in writing for this purpose, or, if the appointer is a corporation, the appointment will be made by a written instrument duly signed by its authorized attorney. The Company may request any reasonable information required for the examining the contents of the instrument of appointment of the proxy or representative.

 

14.10. Any instrument of appointment of a proxy, whether for a meeting that is indicated especially or otherwise, shall be, to the extent that the circumstances allow, in the following form:

 

“I, ________, of ________, a shareholder in ______ Ltd., hereby appoint Mr./Mrs. ________, of _________, or in his/her absence, Mr./Mrs. _______, of _________, to vote for me and on my behalf in the General Meeting of the Company which will be held on ______, and in any adjourned meeting of this meeting.

 

In witness whereof, we have set our hands in ________ on this __ day of the month of __________ year __________,

 

14.11. A vote in accordance with the provisions of the instrument appointing a proxy shall be valid in spite of the death of the appointer, or cancellation of the power of attorney, or transfer of the share in respect of which such vote was made, unless notice in writing of the death, the cancellation or the transfer, has been received at the office of the Company or by the chairman of the meeting prior to the vote.

 

  13  

 

 

14.12. The Board of Directors and a shareholder may request that the shareholders act as a proxy - subject to the provisions of the Companies Law and any law applicable from time to time.

 

14.13. An instrument of appointment of the proxy shall be valid also with respect to any adjourned meeting of the meeting to which the instrument of appointment refers.

 

15. Board of Directors

 

15.1. The number of members in the Board of Directors of the Company will be determined from time to time by the Company by resolution at the General Meeting, until determined otherwise by the General Meeting, the number of members in the Board of Directors will be not less than three and will not exceed ten.

 

15.2. A corporation may serve as member in the Board of Directors of the Company. A corporation serving as a director in the Company may appoint an individual who is qualified to be appointed as a director in the Company, to serve on its behalf, and may replace such director, all subject to the duties owed by the corporation to the Company. The name of the individual serving on behalf of the corporation shall be entered in the directors' register, as someone serving in the name of such corporation and the duties applicable to the corporation shall apply, jointly and severally, on the director.

 

15.3. The members of the Board of Directors shall be appointed by resolution of the General Meeting, that may from time to time:

 

a. Remove any Board of Directors’ member from office and appoint another member in his/its place, provided that a reasonable opportunity is given to the director to express his opinion before the General Meeting:

 

b. Appoint an additional member to the Board of Directors or another member to the Board of Directors instead of the member whose office has been vacated for any reason whatsoever.

 

  14  

 

 

15.4. Each appointment and removal of members of the Board of Directors shall become effective on the date of the resolution, or at a later date as resolved by the General Meeting.

 

15.5. Apart from the external directors and the disinterested directors, a member of the Board of Directors may, by notice to the Company, appoint an alternate for himself (“ Alternate Director ”), remove such Alternate Director from office and appoint another Alternate Director in his place and appoint a director instead of the Alternate Director appointed by him whose office has been vacated for any reason whatsoever. Each such appointment shall become effective from the date specified in the appointment notice but not earlier than the date such notice is delivered to the Company.

 

15.6. Any person or corporation may be an Alternate Director if such person or corporation is qualified to serve as a director of the Company, if such person is not a director in the Board of Directors of the Company or serves as an Alternate Director in the Board of Directors of the Company. An Alternate Director shall have, subject to the provisions of the deed of appointment whereby he was appointed – all of the powers vested in the member of the Board of Directors for whom he is serving as Alternate.

 

15.7. The office of an Alternate Director shall be terminated upon his removal from office under the provisions of Article 15.6 above, if the office of the member of the Board of Directors who appointed him as his alternate is vacated for any reason, or upon the occurrence of one of the events set forth in the following sub Articles (15.9 a-h) in relation with such Alternate Director.

 

15.8. Any Board of Directors’ member who has ceased to serve in office will be eligible for re-appointment.

 

15.9. A member of the Board of Directors, including the first director, shall continue to hold his office until one of the following events occurs:

 

a. If removed under Article 15.3.

 

b. Upon his death, or if he is a company - upon its winding-up or striking off from the register of companies.

 

c. If found to be legally incapacitated

 

  15  

 

 

d. If declared bankrupt, or reached a compromise with his creditors in bankruptcy proceedings.

 

e. If resigned by written notice to the Company.

 

f. Upon expiry of the tenure determined for his office.

 

g. If he was convicted of a crime constituting an act of moral turpitude or a felony as provided in section 226 (a)(1) or (3) of the Companies Law during the term of office (subject to any law, such conviction shall not prevent a re-election of such member to the Board of Directors by the General Meeting).

 

h. In accordance with the decision of the court under section 233 of the Law.

 

15.10. So long as the Alternate Director holds his office/position, he shall be entitled to receive notices about meetings of the Board of Directors and to participate and vote at such meetings as if he were a member of the Board of Directors. Shall have all the rights, obligations and duties of a member of the Board of Directors in which he serves as an Alternate Director. An Alternate Director shall not be entitled to vote at any meeting in which the director appointing him as Alternate Director is present.

 

15.11. If one of the members is not appointed to the Board of Directors, or if an office of a member of the Board of Directors is vacated, the remaining members of the Board of Directors may continue to act on any issue, as long as their number does not fall below the minimum legal number of directors provided for the time being for Board of Directors meetings. In the event the number of directors has fallen below the legal quorum, the remaining directors may appoint immediately or at any future date, additional director or directors who shall hold office until the next annual meeting, provided that the total number of Board of Directors’ members does not exceed ten.

 

15.12. A member of the Board of Directors shall not be required to hold any qualification shares.

 

15.13. Members of the Board of Directors, Alternate Directors and attorneys of members of the Board of Directors shall receive remuneration from the Company’s funds, in accordance with the provisions of the law and subject to the receipt of all approvals as required under the law. The Company may reimburse the directors, their alternates or attorneys for reasonable expenses, for travel, subsistence meal or accommodation expenses and other expenses in connection with their participation in the Board of Directors’ meetings and the discharge of their duties.

 

  16  

 

 

15.14. If a director becomes aware of any matter pertaining to the Company that may involve an alleged violation of law or harm the ordinary course of business, he shall promptly act to convene a meeting of the Board of Directors.

 

16. Proceedings of the Board of Directors

 

16.1. The Board of Directors may meet and adjourn its meetings and otherwise regulate such meetings and proceedings, all as resolved by the Board of Directors. Unless otherwise decided by the General Meeting of the Company by ordinary resolution, a quorum at the meetings of the Board of Directors shall be constituted by the presence of a majority of members of the Board of Directors, then in office. A member of the Board of Directors who has a Personal Interest, as such term is defined in the Companies Law, shall be taken into account for the purpose of establishing the quorum requirements notwithstanding such Personal Interest.

 

16.2. The Board of Directors shall convene for meetings as per Company needs, and at least once every three months. A member of the Board of Directors, or the Company Secretary, may at any time convene a meeting of the Board of Directors.

 

16.3. Without derogating from the above, the chairman of the Board of Directors shall be required to convene the Board of Directors, under such circumstances that require the convening of the Board of Directors under the Law.

 

16.4. Prior notice of a Board of Directors’ meeting shall be given to all members of the Board of Directors, at least forty eight (48) hours before the time set for the meeting, unless the chairman of the Board of Directors is of the opinion that such meeting is ought to be convened with a shorter notice, at his discretion, and provided that the delivery date is reasonable under the circumstances of the matter (such notice may be delivered by letter, telegram, telex, facsimile, Email, telephone, orally or by any other means of communication).

 

16.5. Notwithstanding the foregoing, the Board of Directors may, with the consent of all of the directors, convene a meeting without notice.

 

  17  

 

 

16.6. The chairman of the Board of Directors shall determine the agenda of Board of Directors’ meetings, that will include:

 

a. Matters determined by the chairman of the Board of Directors;

 

  b. Such matters as determined in Article 16.3 above;

 

16.7. The notice on the convening of a meeting of the Board of Directors will state the time and place of the meeting and reasonably detailed information on the items on the agenda.

 

16.8. Notice with respect to a meeting of the Board of Directors may be delivered to the address of the director as informed in advance to the Company, unless the director requested to receive the notice at such other place.

 

16.9. The Board of Directors may hold meetings by the use of any means of communication, provided, that all the directors participating in the meeting can hear each other simultaneously. If resolutions have been adopted in such meetings, the chairman shall keep a written record of such resolutions and sign the minutes.

 

16.10. Any notice on a meeting of the Board of Directors may be delivered orally, by telephone, in writing, by Email, fax or other means of communication, provided that the notice is delivered at least 24 hours prior to the date set for the meeting, unless all of the members of the Board of Directors agree to a shorter notice.

 

16.11. The Board of Directors shall elect one of its members to serve as chairman. The chairman of the Board of Directors shall preside at every meeting of the Board of Directors. If there is no chairman or if at any meeting the chairman is not present within 15 minutes after the time fixed for holding the meeting or is unwilling to take the chair, the Board of Directors’ members present at the meeting shall choose someone of their number to be the chairman of such meeting.

 

16.12. Questions arising at any meetings of the Board of Directors shall be decided by a majority of votes. The chairman of the Board of Directors’ meeting, either the chairman of the Board of Directors, or any other member of the Board of Directors, shall not have an additional or casting vote.

 

16.13. The Board of Directors may for a specific matter, save for such matters set forth in the Companies Law which may be delegated for recommendation purposes only, delegate its powers or part thereof to committees comprised of two or more directors, as it shall deem appropriate, and may, from time to time, annul, broaden or restrict this delegation of power. Each such committee shall include external directors and/or disinterested directors in accordance with any law.

 

  18  

 

 

16.14. The meetings and actions of each committee so formed shall be conducted in accordance with the provisions of these Articles dealing with the meetings and actions of the Board of Directors, mutatis mutandis , and in accordance with the instructions issued by the Board of Directors from time to time. Subject to the provisions of the Companies Law, a resolution that was adopted or an act performed at a Board of Directors’ committee shall be treated as a resolution adopted or an act performed by the Board of Directors.

 

16.15. A resolution adopted at a meeting of the Board of Directors convened without complying with the pre-required conditions for convening same may be revoked under the terms set forth in the Companies Law, as amended from time to time.

 

16.16. Without derogating from the generality of the above stated in Article 16.8, the Board of Directors may revoke a resolution adopted by a committee appointed by it, however, nothing in the aforesaid revocation shall serve to impair the validity of a resolution of a committee on which the Company acted, in respect of any other person, who was not aware of such revocation.

 

16.17. A resolution in writing, signed by all of members of the Board of Directors or to which all the members of the Board of Directors have agreed, by letter, Email, facsimile, telephone call or any other means of communication, or which was granted, also in a later date, a written approval of the parties to the call, shall have the same effect for any purpose whatsoever as if adopted by a meeting of the Board of Directors duly convened and held.

 

16.18. The Board of Directors may exercise all the authorities and powers and do all the acts and deeds which the Board of Directors is authorized to do or which it is required to do under the Companies Law and/or these Articles. The Board of Directors shall be subject to the provisions of the Companies Law, these Articles and any Article, to the extent such does not contradict such provisions and Articles, determined by the Company in the General Meeting, provided that no such Article shall revoke the legal effect of a deed which has been done earlier by the Board of Directors, or in accordance with its instructions, which was valid had such Article not been enacted.

 

  19  

 

 

16.19. The Board of Directors may ratify any act which was within the powers of the Board of Directors at the time of approval of such act. The General Meeting may ratify any act of the Board of Directors and/or of any committee of the directors undertaken without authority or overstepping their powers or which are otherwise flawed. Following the ratification, any act ratified as aforesaid shall be deemed to have been duly done from the beginning.

 

16.20. No directorship in the Company shall disqualify such director from engaging in any business and/or from holding any position, either with the Company, or any of its subsidiaries, or any corporation in which the Company has interests or any corporation related in any manner to the Company. Nothing in the above shall derogate from the duties of such member of the Board of Directors to report to the Company about his personal interest in the business of the Company as required under the law.

 

17. The General Manager

 

17.1. Subject to the provisions of the Companies Law, the Board of Directors shall appoint one or more persons as General Manager or Managers of the Company, either for a fixed period of time or without limitation of time, and the Board of Directors may, subject to the provisions of any contract with such General Manager, remove or dismiss the General Manager from office and appoint another or others instead, and determine the remuneration and terms of his employment.

 

17.2. The Board of Directors may instruct the General Manager on how to act in a specific matter, and if the General Manager does not follow such instruction, the Board of Directors may act in order to exercise the authority required to perform such act by itself in his stead.

 

17.3. The General Manager shall have full managerial and operational powers which have not been vested by the Companies Law or by these Articles in another organ of the Company and shall be responsible for the day-to-day management of the affairs of the Company within the framework of the policies determined by the Board of Directors, and subject to the supervision of the Board of Directors and shall report thereto under the provisions of any law.

 

17.4. The General Manager may, with the Board of Directors’ approval, delegate some of his powers to another who is subordinate to him.

 

  20  

 

 

17.5. Subject to the provisions of any law which cannot be stipulated against, the remuneration of the General Manager shall be determined from time to time by the Board of Directors, and may be in the form of a fixed salary or commission on dividends, or in any other manner determined by the Board of Directors.

 

18. Transactions with Interested Parties

 

18.1. Whenever a duty of disclosure applies to any Officeholder or Interested Party, as such terms are defined in the Companies Law, to disclose information the Company under any law, such Officeholder or Controlling Shareholder shall disclose to the Company any matters which are required in order to comply with such duty.

 

18.2. Whenever a special approval is required for a transaction of the Company, such approval shall be obtained by all the corporate organs, as required under the law and in accordance with the provisions thereof.

 

18.3. For transactions which are not Extraordinary Transactions, as such term is defined in the Companies Law, which involve Officeholders of the Company and/or Officeholders who have a personal interest in the transaction, no approvals shall be required from any of the Company’s organs, for execution of such transaction. Notwithstanding the foregoing, for transactions which are not Extraordinary Transactions, which involve Officeholders of the Company and/or Officeholders who have a personal interest in the transaction, having an aggregate scope exceeding $10,000, or where such transaction involves the employment of a certain individual, the prior and/or retroactive approval of the Company’s Audit Committee and/or any other entity empowered for this purpose by the Audit Committee shall be required.

 

19. Shareholders’ Register

 

19.1. The Company shall maintain a Shareholders’ Register open to the inspection of any person and record therein the following details:

 

a. The names, identity numbers and addresses of the shareholders, the amount of shares of class held by each shareholder (indicating the serial number of each share, if any), the nominal value of the share (if any) and the unpaid amount, if yet unpaid, on account of the consideration stipulated for such share.

 

b. The date of allocation of the shares or the dates of their transfer to the shareholder, as the case may be.

 

  21  

 

 

c. Any other details which the Company is required to record under any law in the Shareholders’ Register.

 

19.2. The Company may, considering the provisions of any law, maintain an additional register in any other country. If such additional register is maintained by the Company, the principal register shall indicate the number of shares registered in the additional register and their numbers, if numbered.

 

20. Minutes

 

20.1. The Board of Directors shall cause that Minutes are recorded and duly entered in the books provided for that purpose, concerning:

 

a. The names of members of the Board of Directors present in each meeting of the Board of Directors and each meeting of a committee thereof.

 

b. The names of the shareholders who participate in any General Meeting.

 

c. The instructions given by the Board of Directors to the committees of the Board of Directors.

 

d. Resolutions and summary of deliberations at the General Meetings, Board of Directors’ meetings and Board of Directors’ committees.

 

e. All such other details or details which are required to be entered in the Minutes under the provisions of any law and/or these Articles.

 

20.2. Each such Minutes of a meeting of the Board of Directors, or a meeting of a committee thereof, or a shareholders' meeting of the Company, if purporting to be signed by the chairman of the meeting or by the chairman of any of the next succeeding meetings, shall constitute prima facie evidence of the matters recorded therein.

 

21. Signatory Rights

 

21.1. The Board of Directors may empower any person or persons (even if they are not members of the Board of Directors) to act and/or sign on behalf of the Company, with or without the Company stamp, and the actions and signatures of that person or those persons on behalf of the Company shall bind the Company, if and to the extent that they have acted and signed within the scope of the authority so given to them by the Board of Directors.

 

  22  

 

 

22. Secretary, Employees, Contractors and Attorneys

 

22.1. The Board of Directors, and if duly authorized to do so also the General Manager, may from time to time appoint a Secretary for the Company, as well as employees, agents, contractors, consultants and attorneys for such positions as the Board of Directors deems fit, and determine their powers and terms of employment, at its exclusive discretion, for a fixed period or temporarily, all at its exclusive discretion, and may terminate the service of any such person, at any time, at its exclusive discretion. Subject to the provisions of these Articles, the Board of Directors or the General Manager shall decide as to the powers and duties, as well as the salaries and emoluments of such persons, and may require appropriate securities in such cases and in such amounts as they deems fit.

 

23. Distribution

 

The Company may make a distribution, including a distribution of dividends and repurchase of shares, as such term is defined and as detailed in the Companies Law.

 

24. Dividend and Reserve Fund

 

24.1. The Company’s resolution regarding a distribution shall be adopted at the Board of Directors of the Company that will also determine the effective date with regard to the entitlement to receive a dividend.

 

24.2. The Board of Directors may, before reaching a decision as to the scope of distribution, set aside out of the profits of the Company such sums, as it thinks proper, as reserve fund, for such purposes as the Board of Directors, at its exclusive discretion, determines as expedient for the business of the Company, and may invest any such amounts in such investments as it shall deem fit and from time to time deal with and vary such investments and dispose of all or any part thereof for the benefit of the Company, and may distribute such reserve fund to specials funds, as it shall deem fit, and apply any such reserve or any part thereof in the business of the Company, without being bound to keep the same separate from other assets of the Company.

 

24.3. Subject to any preferential rights available, if any, to the shareholders of such or other class and the provisions of these Articles concerning a reserve fund, the dividends shall be distributed and paid to the shareholders registered in the Shareholders’ Register on the “X” date determined as the effective date for distribution of dividends, in proportion to their holdings in the Company. No dividend shall be paid on shares for which the consideration has not been fully paid up to the Company.

 

  23  

 

 

24.4. If no other instructions were given, any dividend may be paid by check or payment orders to be mailed to the address of a shareholder or of the person entitled thereto, as registered in the Shareholders' Register, or, in the case of joint registered owners, to such shareholder named first in the Shareholders’ Register regarding the joint ownership. Every such check shall be made out to the order of the person to whom it is sent. The receipt of the person whose name was registered on the “X” date in Shareholders’ Register as the holder of any share or, in the case of joint holders, of one of the joint holders, shall serve as a release with respect to all payments made in connection with that share. The directors may invest any dividend not claimed for one year after declaration thereof, or otherwise use it for the Company’s benefit until it is claimed. The Company shall not pay interest and/or linkage for a dividend or interest not paid.

 

24.5. The Board of Directors which decides on the distribution of a dividend may decide that the dividend shall be paid, in whole or in part, by way of a distribution of specific assets and/or bonus shares, and in particular by way of distribution of fully paid up shares, debentures or securities of another company, or by one or more such ways.

 

24.6. Subject to the provisions of any law, the Board of Directors may decide that any moneys or other assets, forming part of the undivided profits of the Company, standing to the credit of the reserve fund, or to the credit of a reserve fund for the redemption of capital, or for a revaluation fund for real estate properties or other assets of the Company, or any other fund or moneys or assets in the control of the Company and available for distribution of dividends under the law, or representing premiums received on the issuance of shares and standing to the credit of the share premium account - to be capitalized and distributed among such of the shareholders as would be entitled to receive the same in accordance with the determination of the Board of Directors, if distributed by way of dividend, and in the same proportion: and that any such fund so becoming capitalized or part thereof shall be applied for payment, as determined in the decision - for shares, bonus shares or debentures of the Company which were not yet issued, that will be distributed, respectively as aforesaid, or for full or partial discharge of any uncalled liabilities for payment for the issued shares or debentures: and that any distribution or discharge is accepted by such shareholders in full satisfaction of their share in the said capitalized fund.

 

  24  

 

 

24.7. In order to give effect to any resolution in connection with Article 24.6 above, the Board of Directors may resolve any difficulty that shall arise with respect to such distribution, in such way as it shall deem proper, and in particular determine the value of a certain property for purposes of distribution and may decide that payment in cash shall be made to shareholders on the basis of value decided for that purpose, or that fractions the value of which is less than the nominal value, if such nominal value was determined, shall not be taken into account, for the purpose of adjusting the rights of all the parties and the Board of Directors may deposit any such cash or assets with trustees against securities, for those persons entitled to a dividend or capitalized fund, as the Board of Directors shall see fit: Wherever required under any law, a contract shall be duly entered and the Board of Directors may appoint a person to execute such contract in the name of the persons entitled to any dividend or capitalized fund and such an appointment shall be valid and effective.

 

24.8. The Board of Directors may deduct from any dividend or moneys or other assets payable with respect to shares held by such shareholder, either as the sole owner thereof or jointly with another shareholder, all the amounts due from such shareholder, alone or together with others, to the Company, on account of calls for payment or any other reason.

 

25. Books of Account

 

The Board of Directors shall cause that correct books of accounts are kept in accordance with the provisions of any law. The books of account shall be kept at the registered office of the Company, or at such other place or places, as the Board of Directors think fit, and shall always be open to the inspection of the Board of Directors’ members. No shareholder of the Company who is not a member of the Board of Directors shall have a right to inspect all or any of the Company’s books or documents, unless granted such right under any law, or if so permitted by the Board of Directors, or by the Company by means of an ordinary resolution at the General Meeting.

 

  25  

 

 

26. Accountant Auditor

 

26.1. The Company shall appoint at each annual meeting an Accountant Auditor to audit the Company’s accounts and the correctness of the annual financial statement and to provide any other services at the request of the Company.

 

26.2. The Accountant Auditor shall be appointed at the annual meeting of the Company, and the meeting may appoint such Accountant Auditor to serve in office for a period not exceeding the conclusion of three annual auditing activities. This provision shall also apply with respect to appointment of the first Accountant Auditor by the Board of Directors. The tenure of the Accountant Auditor shall terminate in accordance with the provisions of the Companies Law.

 

26.3. The fees of the Accountant Auditor for performing the auditing activities and for other services provided to the Company will be determined by the Board of Directors. The Board of Directors shall report to the annual meeting regarding the fees of the Accountant Auditor.

 

27. Audit Committee

 

The Board of Directors of the Company shall appoint the members of the Audit Committee from amongst its members. The composition of the Audit Committee and its duties and powers shall be as provided in the Companies Law, as amended form time time.

 

28. Officeholders' Indemnity, Insurance and Exemption

 

28.1. Officeholders’ exemption - The Company may exempt an officeholder, in advance, or retroactively, of his liability, in whole or in part, due to damage which it incurs as a result of the breach of the duty of care towards the Company, to the maximum extent allowed under any law as amended from time to time.

 

28.2. Officeholders’ Indemnification

 

28.2.1. The Company may indemnify an officeholder of the Company to the maximum extent allowed under any law, as amended from time to time. Without limiting the generality of the foregoing, the following provisions shall apply.

 

  26  

 

 

28.2.2. Subject to the provisions of any law, the Company may indemnify any of its Officeholders due to any liability or expense imposed on the Officeholder as a result of an act which was performed by virtue of his being an Officeholder of the Company, for any of the following:

 

a. Financial liability imposed and/or to be imposed on him in favor of another person by a court judgment, including a settlement judgment or an arbitrator's award approved by a court.

 

b. Reasonable litigation expenses, including attorneys' fees, incurred and/or to be incurred by the Officeholder as a result of an investigation or proceedings instituted against such Officeholder by a competent authority, which investigation or proceedings have ended without the filing of an indictment and without the imposition of financial liability in lieu of criminal proceedings, or have ended without the filing of an indictment but with the imposition of a financial liability in lieu of criminal proceedings for an offense that does not require proof of criminal intent (mens rea).

 

c. Reasonable litigation expenses, including attorneys' fees, expended and/or to be incurred by an Officeholder and/or charged to him by a court, in a proceeding filed 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 a criminal charge of which he was convicted of a crime which does not require proof of criminal intent (mens rea).

 

d. Financial liability imposed and/or to be imposed on him in favor of an Injured Party, as defined in Section 52(54)(a)(1)(a) of the Securities Law.

 

  e. Expenses expended and/or to be incurred by an Officeholder in connection with such proceedings (as defined in such section) concerning him, including reasonable litigation expenses, including attorneys’ fees. “ Proceedings ” in this section are proceedings under Chapters 8'3, 8'4 or 9'1 of the Securities Law.

 

f. Any other liability or expense for which it is and/or shall be permissible to indemnify an Officeholder under the law.

 

  27  

 

 

28.2.3. Indemnification in advance - the Company may also undertake in advance to indemnify an Officeholder of the Company for a liability described in sub Article 28.2.2.A above, provided that such advance indemnification undertaking shall be limited to events which, in the opinion of the Board of Directors, are foreseeable in light of the Company's actual operations at the time of the granting of the indemnification undertaking and to an amount or by criteria determined by the Board of Directors to be reasonable in the given circumstances of the case and further provided, that in the indemnification undertaking the Company will detail events that in the opinion of the Board of Directors are foreseeable in light of the Company's actual operations at the time of granting the undertaking and the amount or criteria determined by the Board of Directors to be reasonable in the given circumstances. The Company may also undertake in advance to indemnify an Officeholder therein for such liabilities or expenses as set forth in sub Articles 28.2.2.B., 28.2.2.C., 28.2.2.D., and 28.2.2.E. above.

 

28.2.4. Retroactive indemnification - the Company may indemnify any of its Officeholders retroactively, due to any indemnifiable liability or expense, as set forth in sub Article 28.2.2 above, imposed on the Officeholder as a result of an act which was performed by virtue of his being an Officeholder of the Company.

 

28.2.5. It is clarified that with reference to sub Article 28.2 and all its sections, the definition of the term “Officeholder” is in accordance with the provisions of the Companies Law and the Securities Law as well as any other Law applicable to Officeholders during the discharge of their duties in the Company and/or a subsidiary and/or during their service on behalf of the Company and/or the subsidiary in a related company and/or another corporation in which the Company and/or the subsidiary directly or indirectly holds securities.

 

28.3. Officeholders' Insurance

 

The Company may insure the Officeholders of the Company to the maximum extent allowed under any law. Without derogating from the generality of the aforesaid, the Company may enter into an insurance contract for covering the liability of an Officeholder thereof due to a liability to be imposed on him due to an act performed by him in his capacity as an Officeholder thereof, and/or for expenses expended and/or to be incurred by the Officeholder in any of the following cases:

 

a. Breach of the duty of care towards the Company or towards another person;

 

  28  

 

 

b. Breach of a fiduciary duty towards the Company, provided that the Officeholder acted in good faith and had a reasonable basis to believe that the act would not prejudice the Company’s interests;

 

c. Financial liability imposed on him in favor of another person, including a financial liability towards an Injured Party, as set forth in Section 52(54)(a)(1)(a) of the Securities Law.

 

d. Expenses expended and/or to be incurred by an Officeholder in connection with such proceedings set forth in sub Article 28.2.2.E above.

 

e. Any other event for which it is and/or shall be permissible to insure the liability of an Officeholder under the law.

 

28.4. The Company’s ability to exempt, insure, compensate and indemnify the directors and Officeholders of the Company, as described hereinabove, shall be given the broadest possible interpretation, in accordance with any laws and regulations.

 

29. Financial Statements

 

The Company shall draw up financial statements for every year, which shall include a balance sheet for December 31 and a profit and loss statement for a period of one year ending on that day.

 

30. Internal Auditor

 

30.1. The Company’s Board of Directors shall appoint an Internal Auditor to the Company, on recommendation of the Audit Committee.

 

30.2. The chairman of the Board of Directors or the General Manager shall be in charge, in terms of the organizational structure, of the Internal Auditor, as determined by the Board of Directors. Unless determined otherwise by the Board of Directors, the chairman of the Board of Directors shall be in charge, in terms of the organizational structure, of the Internal Auditor.

 

30.3. The Internal Auditor shall submit for the approval of the Audit Committee and the Board of Directors, unless determined otherwise by the Board of Directors, a proposal for an annual or periodical work program and the Audit Committee and Board of Directors shall approve it with such amendments as they deem fit.

 

  29  

 

 

31. Liquidation

 

31.1. In any event of liquidation of the Company, whether voluntary or otherwise, then - unless otherwise explicitly provided in these Articles or in the terms of issue of any shares -

 

31.2. The assets of the Company available for distribution among the shareholders shall be distributed among the shareholders, in proportion to their holdings in the Company, without regard to any premium paid for such shares.

 

31.3. Subject to the provisions of any law, with the approval of the General Meeting, with a special majority, the liquidator may distribute the assets of the Company available for distribution, or any part thereof, in kind among the shareholders as well as deposit any asset of the surplus assets with a trustee to the credit of the shareholders as the liquidator, with the approval of the General Meeting, may deem fit. For the purpose of distributing the surplus assets in kind, the liquidator may determine the fair value of the distributable assets and decide how the distribution amongst the shareholders shall be executed, having regard for the rights attached to the various classes of shares of the Company which they own.

 

32. Notices

 

32.1. A notice under these Articles and/or any law will be delivered by the Company personally or sent by post by letter, Email, facsimile or by any other means of communication addressed to the shareholder at his address as registered in the Company’s Shareholders’ Register or by notice published in two daily newspapers appearing in Israel.

 

32.2. A shareholder whose registered address is located outside of Israel may, from time to time, provide the Company in writing an address in Israel and such address shall be deemed to be his registered address within the meaning of the preceding Article. A shareholder shall not be entitled to receive notices in his registered address located outside of Israel.

 

32.3. All notices concerning shares, to which persons are jointly entitled, shall be delivered to the joint holder whose name is registered first in the Shareholders’ Register and any notice so given shall be sufficient notice to all such shareholders.

 

  30  

 

 

32.4. Any notice sent by letter through the post to an address in Israel shall be deemed to have been served within two days after the letter has been delivered for dispatch at the post office and in order to prove such delivery, it would be sufficient to prove that the proper address was written on the letter and that it was duly delivered to the post office. A written certificate signed by the secretary or director or any other employee of the Company that the proper address appeared on the letter and was delivered to the post office shall serve as conclusive evidence for such service. Any notice sent by facsimile or Email shall be deemed accepted on the day in which it was sent, if it bears, or a separate attached page bears, a transmission report generated by the facsimile machine.

 

32.5. Notwithstanding the foregoing, notice of a General Meeting, may be delivered in the manner provided in the Companies Law, or in any other Regulation, and does not require a personal service upon each shareholder concerning the convening of the General Meeting.

 

32.6. Any notice sent by post or facsimile to a shareholder or published in a newspaper as aforesaid, shall be deemed to have been duly delivered to the addressee - notwithstanding the death of the shareholder - and it makes no difference whether the Company was aware of such death or not - with respect to all the registered shares, whether such shares were held by that shareholder separately or jointly with others, until another person is registered as owner or joint owner of the shares in his/their stead and such service shall be deemed, for all intents and purposes under these Articles, as sufficient delivery of the notice to his personal representative and to all such persons jointly interested with him in such shares.

 

 

31

 

Exhibit 2.1

 

 

 

 

 

FORESIGHT AUTONOMOUS LIMITED

 

AND

 

THE BANK OF NEW YORK MELLON

 

As Depositary

 

AND

 

OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES

 

Deposit Agreement

 

__________, 2017

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE 1. DEFINITIONS 1
     
SECTION 1.1. American Depositary Shares. 1
SECTION 1.2. Commission. 2
SECTION 1.3. Company. 2
SECTION 1.4. Custodian. 2
SECTION 1.5. Delisting Event. 2
SECTION 1.6. Deliver; Surrender. 2
SECTION 1.7. Deposit Agreement. 3
SECTION 1.8. Depositary; Depositary’s Office. 3
SECTION 1.9. Deposited Securities. 3
SECTION 1.10. Disseminate. 3
SECTION 1.11. Dollars. 4
SECTION 1.12. DTC. 4
SECTION 1.13. Foreign Registrar. 4
SECTION 1.14. Holder. 4
SECTION 1.15. Insolvency Event. 4
SECTION 1.16. Owner. 4
SECTION 1.17. Receipts. 5
SECTION 1.18. Registrar. 5
SECTION 1.19. Replacement. 5
SECTION 1.20. Restricted Securities. 5
SECTION 1.21. Securities Act of 1933. 5
SECTION 1.22. Shares. 5
SECTION 1.23. SWIFT. 6
SECTION 1.24. Termination Option Event. 6
     
ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OF AMERICAN DEPOSITARY SHARES 6
     
SECTION 2.1. Form of Receipts; Registration and Transferability of American Depositary Shares. 6
SECTION 2.2. Deposit of Shares. 7
SECTION 2.3. Delivery of American Depositary Shares. 8
SECTION 2.4. Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts; Interchange of Certificated and Uncertificated American Depositary Shares. 8
SECTION 2.5. Surrender of American Depositary Shares and Withdrawal of Deposited Securities. 9
SECTION 2.6. Limitations on Delivery, Transfer and Surrender of American Depositary Shares. 10

 

  - i -  

 

 

SECTION 2.7. Lost Receipts, etc. 11
SECTION 2.8. Cancellation and Destruction of Surrendered Receipts. 11
SECTION 2.9. Pre-Release of American Depositary Shares. 11
SECTION 2.10. DTC Direct Registration System and Profile Modification System. 12
     
ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES 12
     
SECTION 3.1. Filing Proofs, Certificates and Other Information. 12
SECTION 3.2. Liability of Owner for Taxes. 13
SECTION 3.3. Warranties on Deposit of Shares. 14
SECTION 3.4. Disclosure of Interests. 14
     
ARTICLE 4. THE DEPOSITED SECURITIES 15
     
SECTION 4.1. Cash Distributions. 15
SECTION 4.2. Distributions Other Than Cash, Shares or Rights. 16
SECTION 4.3. Distributions in Shares. 17
SECTION 4.4. Rights. 17
SECTION 4.5. Conversion of Foreign Currency. 19
SECTION 4.6. Fixing of Record Date. 20
SECTION 4.7. Voting of Deposited Shares. 20
SECTION 4.8. Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities. 21
SECTION 4.9. Reports. 23
SECTION 4.10. Lists of Owners. 23
SECTION 4.11. Withholding. 23
     
ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY 24
     
SECTION 5.1. Maintenance of Office and Transfer Books by the Depositary. 24
SECTION 5.2. Prevention or Delay of Performance by the Company or the Depositary. 24
SECTION 5.3. Obligations of the Depositary and the Company. 25
SECTION 5.4. Resignation and Removal of the Depositary. 27
SECTION 5.5. The Custodians. 28
SECTION 5.6. Notices and Reports. 28
SECTION 5.7. Distribution of Additional Shares, Rights, etc. 29
SECTION 5.8. Indemnification. 29
SECTION 5.9. Charges of Depositary. 30
SECTION 5.10. Retention of Depositary Documents. 31
SECTION 5.11. Exclusivity. 31

  - ii -  

 

 

ARTICLE 6. AMENDMENT AND TERMINATION 32
     
SECTION 6.1. Amendment. 32
SECTION 6.2. Termination. 32
     
ARTICLE 7. MISCELLANEOUS 33
     
SECTION 7.1. Counterparts; Signatures. 33
SECTION 7.2. No Third Party Beneficiaries. 34
SECTION 7.3. Severability. 34
SECTION 7.4. Owners and Holders as Parties; Binding Effect. 34
SECTION 7.5. Notices. 34
SECTION 7.6. Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver. 35
SECTION 7.7. Waiver of Immunities. 36
SECTION 7.8. Governing Law. 36

 

  - iii -  

 

 

DEPOSIT AGREEMENT

 

DEPOSIT AGREEMENT dated as of __________, 2017 among FORESIGHT AUTONOMOUS LIMITED, a company incorporated under the laws of the State of Israel (herein called the Company), THE BANK OF NEW YORK MELLON, a New York banking corporation (herein called the Depositary), and all Owners and Holders (each as hereinafter defined) from time to time of American Depositary Shares issued hereunder.

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to provide, as set forth in this Deposit Agreement, for the deposit of Shares (as hereinafter defined) of the Company from time to time with the Depositary or with the Custodian (as hereinafter defined) under this Deposit Agreement, for the creation of American Depositary Shares representing the Shares so deposited and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares; and

 

WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as set forth in this Deposit Agreement;

 

NOW, THEREFORE, in consideration of the premises, it is agreed by and between the parties hereto as follows:

 

ARTICLE 1. DEFINITIONS

 

The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:

 

SECTION 1.1. American Depositary Shares.

 

The term “ American Depositary Shares ” shall mean the securities created under this Deposit Agreement representing rights with respect to the Deposited Securities. American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to this Deposit Agreement shall be the prospectus required under the Securities Act of 1933 for sales of both certificated and uncertificated American Depositary Shares. Except for those provisions of this Deposit Agreement that refer specifically to Receipts, all the provisions of this Deposit Agreement shall apply to both certificated and uncertificated American Depositary Shares.

 

Each American Depositary Share shall represent the number of Shares specified in Exhibit A to this Deposit Agreement, except that , if there is a distribution upon Deposited Securities covered by Section 4.3, a change in Deposited Securities covered by Section 4.8 with respect to which additional American Depositary Shares are not delivered or a sale of Deposited Securities under Section 3.2 or 4.8, each American Depositary Share shall thereafter represent the amount of Shares or other Deposited Securities that are then on deposit per American Depositary Share after giving effect to that distribution, change or sale.

 

  - 1 -  

 

 

SECTION 1.2. Commission.

 

The term “ Commission ” shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.

 

SECTION 1.3. Company.

 

The term “ Company ” shall mean Foresight Autonomous Limited, a company incorporated under the laws of the State of Israel, and its successors.

 

SECTION 1.4. Custodian.

 

The term “ Custodian ” shall mean Bank Hapoalim, as custodian for the Depositary in Israel for the purposes of this Deposit Agreement, and any other firm or corporation the Depositary appoints under Section 5.5 as a substitute or additional custodian under this Deposit Agreement, and shall also mean all of them collectively.

 

SECTION 1.5. Delisting Event.

 

A “ Delisting Event ” occurs if the American Depositary Shares are delisted from a securities exchange on which the American Depositary Shares were listed and the Company has not listed or applied to list the American Depositary Shares on any other securities exchange.

 

SECTION 1.6. Deliver; Surrender.

 

(a) The term “ deliver ”, or its noun form, when used with respect to Shares or other Deposited Securities, shall mean (i) book-entry transfer of those Shares or other Deposited Securities to an account maintained by an institution authorized under applicable law to effect transfers of such securities designated by the person entitled to that delivery or (ii) physical transfer of certificates evidencing those Shares or other Deposited Securities registered in the name of, or duly endorsed or accompanied by proper instruments of transfer to, the person entitled to that delivery.

 

(b) The term “ deliver ”, or its noun form, when used with respect to American Depositary Shares, shall mean (i) registration of those American Depositary Shares in the name of DTC or its nominee and book-entry transfer of those American Depositary Shares to an account at DTC designated by the person entitled to that delivery, (ii) registration of those American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to that delivery and mailing to that person of a statement confirming that registration or (iii) if requested by the person entitled to that delivery, execution and delivery at the Depositary’s Office to the person entitled to that delivery of one or more Receipts evidencing those American Depositary Shares registered in the name requested by that person.

 

  - 2 -  

 

 

(c) The term “ surrender ”, when used with respect to American Depositary Shares, shall mean (i) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (ii) delivery to the Depositary at its Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (iii) surrender to the Depositary at its Office of one or more Receipts evidencing American Depositary Shares.

 

SECTION 1.7. Deposit Agreement.

 

The term “ Deposit Agreement ” shall mean this Deposit Agreement, as it may be amended from time to time in accordance with the provisions of this Deposit Agreement.

 

SECTION 1.8. Depositary; Depositary’s Office.

 

The term “ Depositary ” shall mean The Bank of New York Mellon, a New York banking corporation, and any successor as depositary under this Deposit Agreement. The term “ Office ”, when used with respect to the Depositary, shall mean the office at which its depositary receipts business is administered, which, at the date of this Deposit Agreement, is located at 101 Barclay Street, New York, New York 10286.

 

SECTION 1.9. Deposited Securities.

 

The term “ Deposited Securities ” as of any time shall mean Shares at such time deposited or deemed to be deposited under this Deposit Agreement, including without limitation, Shares that have not been successfully delivered upon surrender of American Depositary Shares, and any and all other securities, property and cash received by the Depositary or the Custodian in respect of Deposited Securities and at that time held under this Deposit Agreement.

 

SECTION 1.10. Disseminate.

 

The term “ Disseminate ,” when referring to a notice or other information to be sent by the Depositary to Owners, shall mean (i) sending that information to Owners in paper form by mail or another means or (ii) with the consent of Owners, another procedure that has the effect of making the information available to Owners, which may include (A) sending the information by electronic mail or electronic messaging or (B) sending in paper form or by electronic mail or messaging a statement that the information is available and may be accessed by the Owner on an Internet website and that it will be sent in paper form upon request by the Owner, when that information is so available and is sent in paper form as promptly as practicable upon request.

 

  - 3 -  

 

 

SECTION 1.11. Dollars.

 

The term “ Dollars ” shall mean United States dollars.

 

SECTION 1.12. DTC.

 

The term “ DTC ” shall mean The Depository Trust Company or its successor.

 

SECTION 1.13. Foreign Registrar.

 

The term “ Foreign Registrar ” shall mean the entity that carries out the duties of registrar for the Shares and any other agent of the Company for the transfer and registration of Shares, including, without limitation, any securities depository for the Shares.

 

SECTION 1.14. Holder.

 

The term “ Holder ” shall mean any person holding a Receipt or a security entitlement or other interest in American Depositary Shares, whether for its own account or for the account of another person, but that is not the Owner of that Receipt or those American Depositary Shares.

 

SECTION 1.15. Insolvency Event.

 

An “ Insolvency Event ” occurs if the Company institutes proceedings to be adjudicated as bankrupt or insolvent, consents to the institution of bankruptcy or insolvency proceedings against it, files a petition or answer or consent seeking reorganization or relief under any applicable law in respect of bankruptcy or insolvency, consents to the filing of any petition of that kind or to the appointment of a receiver, liquidator, assignee, trustee, custodian or sequestrator (or other similar official) of it or any substantial part of its property or makes an assignment for the benefit of creditors, or if information becomes publicly available indicating that unsecured claims against the Company are not expected to be paid.

 

SECTION 1.16. Owner.

 

The term “ Owner ” shall mean the person in whose name American Depositary Shares are registered on the books of the Depositary maintained for that purpose.

 

  - 4 -  

 

 

SECTION 1.17. Receipts.

 

The term “ Receipts ” shall mean the American Depositary Receipts issued under this Deposit Agreement evidencing certificated American Depositary Shares, as the same may be amended from time to time in accordance with the provisions of this Deposit Agreement.

 

SECTION 1.18. Registrar.

 

The term “ Registrar ” shall mean any corporation or other entity that is appointed by the Depositary to register American Depositary Shares and transfers of American Depositary Shares as provided in this Deposit Agreement.

 

SECTION 1.19. Replacement.

 

The term “ Replacement ” shall have the meaning assigned to it in Section 4.8.

 

SECTION 1.20. Restricted Securities.

 

The term “ Restricted Securities ” shall mean Shares that (i) are “restricted securities,” as defined in Rule 144 under the Securities Act of 1933, except for Shares that could be resold in reliance on Rule 144 without any conditions, (ii) are beneficially owned by an officer, director (or person performing similar functions) or other affiliate of the Company, (iii) otherwise would require registration under the Securities Act of 1933 in connection with the public offer and sale thereof in the United States or (iv) are subject to other restrictions on sale or deposit under the laws of State of Israel, a shareholder agreement or the articles of association or similar document of the Company.

 

SECTION 1.21. Securities Act of 1933.

 

The term “ Securities Act of 1933 ” shall mean the United States Securities Act of 1933, as from time to time amended.

 

SECTION 1.22. Shares.

 

The term “ Shares ” shall mean ordinary shares of the Company that are validly issued and outstanding, fully paid and nonassessable and that were not issued in violation of any pre-emptive or similar rights of the holders of outstanding securities of the Company; provided , however , that, if there shall occur any change in nominal or par value, a split-up or consolidation or any other reclassification or, upon the occurrence of an event described in Section 4.8, an exchange or conversion in respect of the Shares of the Company, the term “Shares” shall thereafter also mean the successor securities resulting from such change in nominal value, split-up or consolidation or such other reclassification or such exchange or conversion.

 

  - 5 -  

 

 

SECTION 1.23. SWIFT.

 

The term “ SWIFT ” shall mean the financial messaging network operated by the Society for Worldwide Interbank Financial Telecommunication, or its successor.

 

SECTION 1.24. Termination Option Event.

 

The term “ Termination Option Event ” shall mean an event of a kind defined as such in Section 4.1, 4.2 or 4.8.

 

ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, DELIVERY, TRANSFER AND SURRENDER OF AMERICAN DEPOSITARY SHARES

 

SECTION 2.1. Form of Receipts; Registration and Transferability of American Depositary Shares.

 

Definitive Receipts shall be substantially in the form set forth in Exhibit A to this Deposit Agreement, with appropriate insertions, modifications and omissions, as permitted under this Deposit Agreement. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless that Receipt has been (i) executed by the Depositary by the manual signature of a duly authorized officer of the Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or the Registrar or a co-registrar. The Depositary shall maintain books on which (x) each Receipt so executed and delivered as provided in this Deposit Agreement and each transfer of that Receipt and (y) all American Depositary Shares delivered as provided in this Deposit Agreement and all registrations of transfer of American Depositary Shares, shall be registered. A Receipt bearing the facsimile signature of a person that was at any time a proper officer of the Depositary shall, subject to the other provisions of this paragraph, bind the Depositary, even if that person was not a proper officer of the Depositary on the date of issuance of that Receipt.

 

The Receipts and statements confirming registration of American Depositary Shares may have incorporated in or attached to them such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement as may be required by the Depositary or required to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts and American Depositary Shares are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise.

 

  - 6 -  

 

 

American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by proper instruments of transfer, shall be transferable as certificated registered securities under the laws of the State of New York. American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of the State of New York. Notwithstanding any notice to the contrary, the Depositary and the Company may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes, and neither the Depositary nor the Company shall have any obligation or be subject to any liability under this Deposit Agreement to any Holder of American Depositary Shares (but only to the Owner of those American Depositary Shares).

 

SECTION 2.2. Deposit of Shares.

 

Subject to the terms and conditions of this Deposit Agreement, Shares or evidence of rights to receive Shares may be deposited under this Deposit Agreement by delivery thereof to any Custodian, accompanied by any appropriate instruments or instructions for transfer, or endorsement, in form satisfactory to the Custodian.

 

As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or upon the written order of, the person or persons stated in that order American Depositary Shares representing those deposited Shares, (iii) evidence satisfactory to the Depositary that those Shares have been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, a Custodian or a nominee of the Depositary or a Custodian, (iv) evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in each applicable jurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose name those Shares are or have been recorded may thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.

 

At the request and risk and expense of a person proposing to deposit Shares, and for the account of that person, the Depositary may receive certificates for Shares to be deposited, together with the other instruments specified in this Section, for the purpose of forwarding those Share certificates to the Custodian for deposit under this Deposit Agreement.

 

The Depositary shall instruct each Custodian that, upon each delivery to a Custodian of a certificate or certificates for Shares to be deposited under this Deposit Agreement, together with the other documents specified in this Section, that Custodian shall, as soon as transfer and recordation can be accomplished, present that certificate or those certificates to the Company or the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or that Custodian or its nominee.

 

  - 7 -  

 

 

Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.

 

SECTION 2.3. Delivery of American Depositary Shares.

 

The Depositary shall instruct each Custodian that, upon receipt by that Custodian of any deposit pursuant to Section 2.2, together with the other documents or evidence required under that Section, that Custodian shall notify the Depositary of that deposit and the person or persons to whom or upon whose written order American Depositary Shares are deliverable in respect thereof. Upon receiving a notice of a deposit from a Custodian, or upon the receipt of Shares or evidence of the right to receive Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall deliver, to or upon the order of the person or persons entitled thereto, the number of American Depositary Shares issuable in respect of that deposit, but only upon payment to the Depositary of the fees and expenses of the Depositary for the delivery of those American Depositary Shares as provided in Section 5.9, and of all taxes and governmental charges and fees payable in connection with that deposit and the transfer of the deposited Shares. However , the Depositary shall deliver only whole numbers of American Depositary Shares.

 

SECTION 2.4. Registration of Transfer of American Depositary Shares; Combination and Split-up of Receipts; Interchange of Certificated and Uncertificated American Depositary Shares.

 

The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register a transfer of American Depositary Shares on its transfer books upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by the Owner or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated American Depositary Shares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.10), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States of America. Upon registration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitled thereto.

 

The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

 

  - 8 -  

 

 

The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated American Depositary Shares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.10) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and register and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

 

The Depositary may appoint one or more co-transfer agents for the purpose of effecting registration of transfers of American Depositary Shares and combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to American Depositary Shares and will be entitled to protection and indemnity to the same extent as the Depositary.

 

SECTION 2.5. Surrender of American Depositary Shares and Withdrawal of Deposited Securities.

 

Upon surrender at the Depositary’s Office of American Depositary Shares for the purpose of withdrawal of the Deposited Securities represented thereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 and payment of all taxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then be lawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American Depositary Shares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will be delivered or paid on the scheduled payment date to the Owner as of that record date). That delivery shall be made, as provided in this Section, without unreasonable delay.

 

As a condition of accepting a surrender of American Depositary Shares for the purpose of withdrawal of Deposited Securities, the Depositary may require (i) that each surrendered Receipt be properly endorsed in blank or accompanied by proper instruments of transfer in blank and (ii) that the surrendering Owner execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in that order.

 

  - 9 -  

 

 

Thereupon, the Depositary shall direct the Custodian to deliver, subject to Sections 2.6, 3.1 and 3.2, the other terms and conditions of this Deposit Agreement and local market rules and practices, to the surrendering Owner or to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the surrendered American Depositary Shares, and the Depositary may charge the surrendering Owner a fee and its expenses for giving that direction.

 

At the request, risk and expense of an Owner surrendering American Depositary Shares for withdrawal of Deposited Securities, and for the account of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, if applicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to the Depositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner.

 

SECTION 2.6. Limitations on Delivery, Transfer and Surrender of American Depositary Shares.

 

As a condition precedent to the delivery, registration of transfer or surrender of any American Depositary Shares or split-up or combination of any Receipt or withdrawal of any Deposited Securities, the Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Deposit Agreement, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.6.

 

The delivery of American Depositary Shares against deposit of Shares generally or against deposit of particular Shares may be suspended, or the registration of transfer of American Depositary Shares in particular instances may be refused, or the registration of transfer of outstanding American Depositary Shares generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of this Deposit Agreement, or for any other reason; in each case, the Depositary shall notify the Company as promptly as practicable of any such suspension or delay that is outside the ordinary course of business. Notwithstanding anything to the contrary in this Deposit Agreement, the surrender of outstanding American Depositary Shares and withdrawal of Deposited Securities may not be suspended, subject only to (i) temporary delays caused by closing of the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, or the deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of the Deposited Securities.

 

  - 10 -  

 

 

The Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares that, at the time of deposit, are Restricted Securities.

 

SECTION 2.7. Lost Receipts, etc.

 

If a Receipt is mutilated, destroyed, lost or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form or, if requested by the Owner, execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt, upon surrender and cancellation of that mutilated Receipt, or in lieu of and in substitution for that destroyed, lost or stolen Receipt. However , before the Depositary will deliver American Depositary Shares in uncertificated form or execute and deliver a new Receipt, in substitution for a destroyed, lost or stolen Receipt, the Owner must (a) file with the Depositary (i) a request for that replacement before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfy any other reasonable requirements imposed by the Depositary.

 

SECTION 2.8. Cancellation and Destruction of Surrendered Receipts.

 

The Depositary shall cancel all Receipts surrendered to it and is authorized to destroy Receipts so cancelled.

 

SECTION 2.9. Pre-Release of American Depositary Shares.

 

Notwithstanding Section 2.3, unless requested in writing by the Company to cease doing so, the Depositary may deliver American Depositary Shares prior to the receipt of Shares pursuant to Section 2.2 (a “Pre-Release”). The Depositary may, pursuant to Section 2.5, deliver Shares upon the surrender of American Depositary Shares that have been Pre-Released, whether or not that surrender is prior to the termination of that Pre-Release or the Depositary knows that those American Depositary Shares have been Pre-Released. The Depositary may receive American Depositary Shares in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must be (a) preceded or accompanied by a written representation from the person to whom American Depositary Shares or Shares are to be delivered, that such person, or its customer, owns the Shares or American Depositary Shares to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days’ notice, and (d) subject to all indemnities and credit regulations that the Depositary deems appropriate. The number of American Depositary Shares outstanding at any time as a result of Pre-Release will not normally exceed thirty percent (30%) of all American Depositary Shares outstanding; provided , however , that the Depositary reserves the right to change or disregard that limit from time to time as it deems appropriate.

 

  - 11 -  

 

 

The Depositary may retain for its own account any compensation received by it in connection with Pre-Release.

 

SECTION 2.10. DTC Direct Registration System and Profile Modification System.

 

(a) Notwithstanding the provisions of Section 2.4, the parties acknowledge that DTC’s Direct Registration System (“ DRS ”) and Profile Modification System (“ Profile ”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC that facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in those securities through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register that transfer.

 

(b) In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in paragraph (a) above has the actual authority to act on behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.3 and 5.8 apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/Profile system and otherwise in accordance with this Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

 

ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS AND HOLDERS OF AMERICAN DEPOSITARY SHARES

 

SECTION 3.1. Filing Proofs, Certificates and Other Information.

 

Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, taxpayer status, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary or the Company may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of American Depositary Shares, the distribution of any dividend or other distribution or of the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates are executed or those representations and warranties are made.

 

  - 12 -  

 

 

Each Holder and Owner agrees to comply with requests from the Company pursuant to applicable law and regulations, the rules and requirements of the Tel Aviv stock exchange, and of any other stock exchange on which the Shares or American Depositary Shares are, or may be, registered, traded or listed and any book-entry settlement system or the articles of association or similar document of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Owner owns American Depositary Shares (and Shares, as the case may be) and regarding the identity of any other person(s) interested in such American Depositary Shares and the nature of such interest and various other matters, whether or not they are Holders or Owners at the time of such request. The Depositary agrees to use its reasonable efforts to forward, upon the request of the Company and at the Company’s expense (unless otherwise agreed in writing between the Company and the Depositary), any such request from the Company to the Owners and to forward to the Company any such responses to such requests received by the Depositary, to the extent that disclosure is permitted under applicable law.

 

SECTION 3.2. Liability of Owner for Taxes.

 

If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with any American Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to which Section 4.8 applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares to the Depositary. The Depositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented by those American Depositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sell for the account of the Owner any part or all of the Deposited Securities represented by those American Depositary Shares and apply those dividends or other distributions or the net proceeds of any sale of that kind in payment of that tax or other governmental charge but , even after a sale of that kind, the Owner of those American Depositary Shares shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under this Section that are not used to pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1. If the number of Shares represented by each American Depositary Share decreases as a result of a sale of Deposited Securities under this Section, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

  - 13 -  

 

 

SECTION 3.3. Warranties on Deposit of Shares.

 

Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and each certificate therefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of the holders of outstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also be deemed to represent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under this Section shall survive the deposit of Shares and delivery of American Depositary Shares.

 

SECTION 3.4. Disclosure of Interests.

 

When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company, the Company may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which it holds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American Depositary Shares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance. Each Owner and Holder agrees to provide all information known to it in response to a request made pursuant to this Section.  Each Holder consents to the disclosure by the Owner or any other Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to this Section relating to that Holder that is known to that Owner or other Holder.  The Depositary agrees to use reasonable efforts, at the Company's expense (unless otherwise agreed in writing between the Company and the Depositary), to comply with written instructions requesting that the Depositary forward any request authorized under this Section to the Owners and to forward to the Company any responses it receives in response to that request.

 

Each Holder and Owner agrees to comply with any applicable law, including in both the United States and Israel, with regard to the notification to the Company of the holding or proposed holding of certain interests in Shares and the obtaining of certain consents, to the same extent as if such Holder or Owner were a registered holder or beneficial owner of Shares. The Depositary is not required to take any action with respect to such compliance on behalf of any Holder or Owner, including the provision of the notification described below.

 

Each Holder and Owner agrees to comply with the provisions of applicable law, including in both the United States and Israel, which may require that persons who hold a direct or indirect interest in 5% or more of the voting securities of the Company (including persons who hold such an interest through the holding of American Depositary Shares) give written notice of their interest and any subsequent changes in their interest to the Company.

 

  - 14 -  

 

 

As of the date of this Deposit Agreement, each Owner and Holder agrees, if it instructs the Depositary to exercise voting rights with respect to Deposited Shares, that it will comply with any applicable Israeli law requiring it to, inter alia, disclose any personal interest it might have in the matter on the agenda of the general meeting. The Company undertakes no obligations to update this Section to reflect changes in law that occur after the date of this Deposit Agreement.

 

ARTICLE 4. THE DEPOSITED SECURITIES

 

SECTION 4.1. Cash Distributions.

 

Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary shall, subject to the provisions of Section 4.5, convert that dividend or other distribution into Dollars and distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Section 5.9) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing those Deposited Securities held by them respectively; provided , however , that if the Custodian or the Depositary shall be required to withhold and does withhold from that cash dividend or other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of the American Depositary Shares representing those Deposited Securities shall be reduced accordingly. However , the Depositary will not pay any Owner a fraction of one cent, but will round each Owner’s entitlement to the nearest whole cent.

 

The Company or its agent will remit to the appropriate governmental agency in each applicable jurisdiction all amounts withheld and owing to such agency. The Depositary will forward to the Company or its agent such information from its records as the Company may reasonably request to enable the Company or its agent to file necessary reports with governmental agencies. Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, employees, agents and affiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced withholding at source or other tax benefit received by it.

 

If a cash distribution would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that cash distribution. A distribution of that kind shall be a Termination Option Event .

 

  - 15 -  

 

 

SECTION 4.2. Distributions Other Than Cash, Shares or Rights.

 

Subject to the provisions of Sections 4.11 and 5.9, whenever the Depositary receives any distribution other than a distribution described in Section 4.1, 4.3 or 4.4 on Deposited Securities (but not in exchange for or in conversion or in lieu of Deposited Securities), the Depositary shall cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary and any taxes or other governmental charges, in proportion to the number of American Depositary Shares representing such Deposited Securities held by them respectively, in any manner that the Depositary deems equitable and practicable for accomplishing that distribution (which may be a distribution of depositary shares representing the securities received); provided , however , that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company or the Depositary withhold an amount on account of taxes or other governmental charges or that securities received must be registered under the Securities Act of 1933 in order to be distributed to Owners or Holders) the Depositary deems such distribution not to be lawful and feasible, the Depositary, after consultation with the Company to the extent practicable, may adopt such other method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Section 5.9) to the Owners entitled thereto, all in the manner and subject to the conditions set forth in Section 4.1. The Depositary may withhold any distribution of securities under this Section 4.2 if it has not received satisfactory assurances from the Company that the distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of securities or other property it would otherwise distribute under this Section 4.2 that is sufficient to pay its fees and expenses in respect of that distribution.

 

If a distribution under this Section 4.2 would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that distribution. A distribution of that kind shall be a Termination Option Event .

 

  - 16 -  

 

 

SECTION 4.3. Distributions in Shares.

 

Whenever the Depositary receives any distribution on Deposited Securities consisting of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company so requests in writing, deliver to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing those Deposited Securities held by them respectively, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or free distribution, subject to the terms and conditions of this Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares, including withholding of any tax or governmental charge as provided in Section 4.11 and payment of the fees and expenses of the Depositary as provided in Section 5.9 (and the Depositary may sell, by public or private sale, an amount of the Shares received (or American Depositary Shares representing those Shares) sufficient to pay its fees and expenses in respect of that distribution). In lieu of delivering fractional American Depositary Shares, the Depositary may sell the amount of Shares represented by the aggregate of those fractions (or American Depositary Shares representing those Shares) and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1. If and to the extent that additional American Depositary Shares are not delivered and Shares or American Depositary Shares are not sold, each American Depositary Share shall thenceforth also represent the additional Shares distributed on the Deposited Securities represented thereby.

 

If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or other securities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with the Company, make that right of election available for exercise by Owners in any manner the Depositary considers to be lawful and practical. As a condition of making a distribution election right available to Owners, the Depositary may require satisfactory assurances from the Company that doing so does not require registration of any securities under the Securities Act of 1933.

 

SECTION 4.4. Rights.

 

(a) If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Company and the Depositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may, to the extent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositary to purchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) if requested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute the net proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, the Depositary shall permit the rights to lapse unexercised.

 

  - 17 -  

 

 

(b) If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and upon payment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, the Depositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by, the Depositary. The Depositary shall (i) deposit the purchased Shares under this Deposit Agreement and deliver American Depositary Shares representing those Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary will not act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositary has received an opinion of United States counsel that is satisfactory to it to the effect that those securities may be sold and delivered to the applicable Owners without registration under the Securities Act of 1933.

 

(c) If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the American Depositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as the Company and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner.

 

(d) If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to the number of American Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any American Depositary Shares or otherwise.

 

(e) Payment or deduction of the fees of the Depositary as provided in Section 5.9 and payment or deduction of the expenses of the Depositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cash proceeds under this Section 4.4.

 

(f) The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to or exercise rights on behalf of Owners in general or any Owner in particular, or to sell rights.

 

  - 18 -  

 

 

SECTION 4.5. Conversion of Foreign Currency.

 

Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted by sale or in any other manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed to the Owners entitled thereto. A cash distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchange restrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9.

 

If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of any government or agency thereof, the Depositary may, but will not be required to, file an application for that approval or license.

 

If the Depositary, after consultation with the Company to the extent practicable, determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for such conversion is not filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.

 

If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon for the account of, the Owners entitled thereto.

 

The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.  The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under this Deposit Agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account.  The Depositary makes no representation that the exchange rate used or obtained in any currency conversion under this Deposit Agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’s obligations under Section 5.3. The methodology used to determine exchange rates used in currency conversions is available upon request.

 

  - 19 -  

 

 

SECTION 4.6. Fixing of Record Date.

 

Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or other securities are issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance with Section 4.4) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives notice that a meeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7, or whenever the Depositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shall fix a record date, which shall be the same as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for the determination of the Owners (i) who shall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled to give instructions for the exercise of voting rights at that meeting or (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for which the record date was set, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 and to the other terms and conditions of this Deposit Agreement, the Owners on a record date fixed by the Depositary shall be entitled to receive the amount distributable by the Depositary with respect to that dividend or other distribution or those rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively, to give voting instructions or to act in respect of the other matter for which that record date was fixed, or be responsible for that fee or charge, as the case may be.

 

SECTION 4.7. Voting of Deposited Shares.

 

(a) Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be in the sole discretion of the Depositary, that shall contain (i) the information contained in the notice of meeting received by the Depositary from the Company, (ii) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Israeli law and of the articles of association or similar documents of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their respective American Depositary Shares (iii) a statement as to the manner in which those instructions may be given and (iv) the last date on which the Depositary will accept instructions (the “ Instruction Cutoff Date ”).

 

  - 20 -  

 

 

(b) Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specified by the Depositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary.

 

(c) There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date.

 

(d) In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, if the Company will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting, details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not less than 35 days prior to the meeting date.

 

(e) Notwithstanding anything in this Section 4.7 to the contrary, the Depositary and the Company may from time to time modify the procedures, or adopt additional procedures, relating to voting of Deposited Securities as they determine may be necessary or appropriate to comply with applicable law or the articles of association or similar documents of the Company.

 

SECTION 4.8. Tender and Exchange Offers; Redemption, Replacement or Cancellation of Deposited Securities.

 

(a) The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similar offer made to holders of Deposited Securities (a “ Voluntary Offer ”), except when instructed in writing to do so by an Owner surrendering American Depositary Shares and subject to any conditions or procedures the Depositary may require.

 

  - 21 -  

 

 

(b) If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash in a transaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “ Redemption ”), the Depositary, at the expense of the Company (unless otherwise agreed in writing between the Company and the Depositary), shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date, (ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American Depositary Shares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by the Depositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Shares shall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 and (iii) distribute the money received upon that Redemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance with Section 2.5 (and, for the avoidance of doubt, Owners shall not be entitled to receive that money under Section 4.1). If the Redemption affects less than all the Deposited Securities, the Depositary shall call for surrender a corresponding portion of the outstanding American Depositary Shares and only those American Depositary Shares will automatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Shares converted under the preceding sentence among the Owners pro-rata to their respective holdings of American Depositary Shares immediately prior to the Redemption, except that the allocations may be adjusted so that no fraction of a converted American Depositary Share is allocated to any Owner. A Redemption of all or substantially all of the Deposited Securities shall be a Termination Option Event .

 

(c) If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any other reclassification of the Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affecting the issuer of the Deposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as a result, securities or other property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “ Replacement ”), the Depositary shall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities under this Deposit Agreement, the new securities or other property delivered to it in that Replacement. However , if in the opinion of the Depositary, after consultation with the Company to the extent practicable, it is not lawful or not practical for it to hold those new Deposited Securities under this Deposit Agreement because those new Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any other reason, the Depositary may elect to sell those new Deposited Securities, at public or private sale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemed under paragraph (b) above. A Replacement shall be a Termination Option Event .

 

  - 22 -  

 

 

(d) In the case of a Replacement where the new Deposited Securities will continue to be held under this Deposit Agreement, the Depositary may call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and the number of those new Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American Depositary Share decreases as a result of a Replacement, the Depositary, after consultation with the Company to the extent practicable, may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

(e) If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled, or the Deposited Securities with respect to American Depositary Shares have become apparently worthless, the Depositary may call for surrender of those American Depositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and a Termination Option Event occurs.

 

SECTION 4.9. Reports.

 

The Depositary shall make available for inspection by Owners at its Office any reports and communications, including any proxy solicitation material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including any proxy soliciting material to which this Section applies, to the Depositary in English, to the extent those materials are required to be translated into English pursuant to any regulations of the Commission.

 

SECTION 4.10. Lists of Owners.

 

Upon written request by the Company, the Depositary shall, at the expense of the Company (unless otherwise agreed in writing between the Company and the Depositary), furnish to it a list, as of a recent date, of the names, addresses and American Depositary Share holdings of all Owners.

 

SECTION 4.11. Withholding.

 

If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, all or a portion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary and practicable to pay those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.

 

  - 23 -  

 

 

ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY

 

SECTION 5.1. Maintenance of Office and Transfer Books by the Depositary.

 

Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain facilities for the execution and delivery, registration, registration of transfers and surrender of American Depositary Shares in accordance with the provisions of this Deposit Agreement.

 

The Depositary shall keep books for the registration of American Depositary Shares, which shall be open for inspection by the Owners at the Depositary’s Office during regular business hours, provided that such inspection is not for the purpose of communicating with Owners in the interest of a business or object other than the business of the Company or a matter related to this Deposit Agreement or the American Depositary Shares.

 

The Depositary may close the transfer books, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties under this Deposit Agreement. The Depositary shall, as soon as practicable, notify the Company of any closure that is outside the ordinary course of business.

 

If any American Depositary Shares are listed on one or more stock exchanges, the Depositary shall act as Registrar or appoint a Registrar or one or more co-registrars for registry of those American Depositary Shares in accordance with any requirements of that exchange or those exchanges.

 

The Company shall have the right, at all reasonable times, upon written request, to inspect transfer and registration records of the Depositary, the Registrar and any co-transfer agents or co-registrars and to require such parties to supply, at the Company’s expense (unless otherwise agreed in writing between the Company and the Depositary) copies of such portions of their records as the Company may reasonably request.

 

SECTION 5.2. Prevention or Delay of Performance by the Company or the Depositary.

 

Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Holder:

 

(i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, any State of the United States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositary only) by reason of any provision, present or future, of the articles of association or similar document of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof; or (C) by reason of any event or circumstance, whether natural or caused by a person or persons, that is beyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, but not limited to earthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes or criminal acts; interruptions or malfunctions of utility services, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures or malfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from, forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, any act or thing that, by the terms of this Deposit Agreement or the Deposited Securities, it is provided shall be done or performed;

 

  - 24 -  

 

 

(ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement (including any determination by the Depositary to take, or not take, any action that this Deposit Agreement provides the Depositary may take);

 

(iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Deposited Securities but is not, under the terms of this Deposit Agreement, made available to Owners or Holders; or

 

(iv) for any special, consequential, indirect or punitive damages for any breach of the terms of this Deposit Agreement.

 

Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 applies, or an offering to which Section 4.4 applies, or for any other reason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of that distribution or offering on behalf of Owners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offering available to Owners, and shall allow any rights, if applicable, to lapse.

 

SECTION 5.3. Obligations of the Depositary and the Company.

 

The Company, its directors, officers, employees, agents and affiliates assume no obligation nor shall it nor any of them be subject to any liability under this Deposit Agreement to any Owner or Holder or any other person (other than the Depositary), except that the Company agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

 

  - 25 -  

 

 

The Depositary, its directors, officers, employees, agents and affiliates assume no obligation nor shall it nor any of them be subject to any liability under this Deposit Agreement to any Owner or Holder (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the Depositary agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

 

Neither the Depositary nor the Company nor any of their respective directors, officers, employees, agents and affiliates shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the American Depositary Shares on behalf of any Owner or Holder or any other person.

 

Each of the Depositary and the Company may rely, and shall be protected in relying upon, any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.

 

Neither the Depositary nor the Company nor any of their respective directors, officers, employees, agents and affiliates shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information.

 

The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

 

The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise.

 

In the absence of bad faith on its part, the Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote.

 

The Depositary shall have no duty to make any determination or provide any information as to the tax status of the Company, nor shall the Company or the Depositary have any liability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares, including without limitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a “Passive Foreign Investment Company” (“PFIC”) (in each case as defined in the U.S. Internal Revenue Code and the regulations issued thereunder) or otherwise. The Company may have been in the past and may be in the future a PFIC for U.S. Federal income tax purposes. Owners must consult their own tax advisers as to the potential application of the PFIC rules.

 

  - 26 -  

 

 

No disclaimer of liability under the Securities Act of 1933 is intended by any provision of this Deposit Agreement.

 

SECTION 5.4. Resignation and Removal of the Depositary.

 

The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, to become effective upon the appointment of a successor depositary and its acceptance of that appointment as provided in this Section. The effect of resignation if a successor depositary is not appointed is provided for in Section 6.2.

 

The Depositary may at any time be removed by the Company by 120 days’ prior written notice of that removal, to become effective upon the later of (i) the 120th day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of its appointment as provided in this Section.

 

If the Depositary resigns or is removed, the Company shall use its best efforts to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to the Company an instrument in writing accepting its appointment under this Deposit Agreement. If the Depositary receives notice from the Company that a successor depositary has been appointed following its resignation or removal, the Depositary, upon payment of all sums due it from the Company, shall deliver to its successor a register listing all the Owners and their respective holdings of outstanding American Depositary Shares and shall deliver the Deposited Securities to or to the order of its successor. When the Depositary has taken the actions specified in the preceding sentence (i) the successor shall become the Depositary and shall have all the rights and shall assume all the duties of the Depositary under this Deposit Agreement and (ii) the predecessor depositary shall cease to be the Depositary and shall be discharged and released from all obligations under this Deposit Agreement, except for its duties under Section 5.8 with respect to the time before that discharge. A successor Depositary shall notify the Owners of its appointment as soon as practical after assuming the duties of Depositary.

 

Any corporation or other entity into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

 

  - 27 -  

 

 

SECTION 5.5. The Custodians.

 

The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it. The Depositary in its discretion may at any time appoint a substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodians under this Deposit Agreement. If the Depositary receives notice that a Custodian is resigning and, upon the effectiveness of that resignation there would be no Custodian acting under this Deposit Agreement, the Depositary shall, as promptly as practicable after receiving that notice, appoint a substitute custodian or custodians, each of which shall thereafter be a Custodian under this Deposit Agreement. The Depositary shall require any Custodian that resigns or is removed to deliver all Deposited Securities held by it to another Custodian.

 

SECTION 5.6. Notices and Reports.

 

On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares, or of any adjourned meeting of those holders, or of the taking of any action in respect of any cash or other distributions or the granting of any rights, the Company agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in English but otherwise in the form given or to be given to holders of Shares.

 

The Company will arrange for the translation into English, if not already in English, to the extent required pursuant to any regulations of the Commission, and the prompt transmittal by the Company to the Depositary and the Custodian of all notices and any other reports and communications which are made generally available by the Company to holders of its Shares. If requested in writing by the Company, the Depositary will Disseminate, at the Company’s expense (unless otherwise agreed in writing between the Company and the Depositary), those notices, reports and communications to all Owners or otherwise make them available to Owners in a manner that the Company specifies as substantially equivalent to the manner in which those communications are made available to holders of Shares and compliant with the requirements of any securities exchange on which the American Depositary Shares are listed. The Company will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect that Dissemination.

 

The Company represents that as of the date of this Deposit Agreement, the statements in Article 11 of the Receipt with respect to the Company’s obligation to file periodic reports under the United States Securities Exchange Act of 1934, as amended, are true and correct. The Company agrees to promptly notify the Depositary upon becoming aware of any change in the truth of any of those statements.

 

  - 28 -  

 

 

SECTION 5.7. Distribution of Additional Shares, Rights, etc.

 

If the Company or any affiliate of the Company determines to make any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities convertible into Shares, or (4) rights to subscribe for such securities (each a “ Distribution ”), the Company shall notify the Depositary in writing in English as promptly as practicable and in any event before the Distribution starts and, if requested in writing by the Depositary, the Company shall promptly furnish to the Depositary either (i) evidence satisfactory to the Depositary that the Distribution is registered under the Securities Act of 1933 or (ii) a written opinion from U.S. counsel for the Company that is reasonably satisfactory to the Depositary, stating that the Distribution does not require, or, if made in the United States, would not require, registration under the Securities Act of 1933.

 

The Company agrees with the Depositary that neither the Company nor any company controlled by, controlling or under common control with the Company will at any time deposit any Shares that, at the time of deposit, are Restricted Securities.

 

SECTION 5.8. Indemnification.

 

The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and each Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to any fees and expenses incurred in seeking, enforcing or collecting such indemnity and the fees and expenses of counsel) that may arise out of or in connection with (a) any registration with the Commission of American Depositary Shares or Deposited Securities or the offer or sale thereof in the United States or (b) acts performed or omitted, pursuant to the provisions of or in connection with this Deposit Agreement and the American Depositary Shares, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, or (ii) by the Company or any of its directors, employees, agents and affiliates.

 

The indemnities contained in the preceding paragraph shall not extend to any liability or expense which arises solely and exclusively out of a Pre-Release (as defined in Section 2.9) of American Depositary Shares in accordance with Section 2.9 and which would not otherwise have arisen had such American Depositary Shares not been the subject of a Pre-Release pursuant to Section 2.9; provided, however, that the indemnities provided in the preceding paragraph shall apply to any such liability or expense (i) to the extent that such liability or expense would have arisen had the American Depositary Shares not been the subject of a Pre-Release, or (ii) which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum), or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of American Depositary Shares, except to the extent any such liability or expense arises out of (i) information relating to the Depositary or any Custodian (other than the Company), as applicable, furnished in writing and not materially changed or altered by the Company expressly for use in any of the foregoing documents, or, (ii) if such information is provided, the failure to state a material fact necessary to make the information provided not misleading.

 

  - 29 -  

 

 

The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and hold them harmless from any liability or expense that may arise out of acts performed or omitted by the Depositary or any Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.

 

The obligations set forth in this Section 5.8 shall survive the termination of succession or substitution of any party hereto.

 

Any person seeking indemnification hereunder (an “indemnified person”) shall notify the person from whom it is seeking indemnification (the “indemnifying person”) of the commencement of any indemnifiable action or claim promptly after such indemnified person becomes aware of such commencement (provided that the failure to make such notification shall not affect such indemnified person’s rights to seek indemnification except to the extent the indemnifying person is materially prejudiced by such failure) and shall consult in good faith with the indemnifying person as to the conduct of the defense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable in the circumstances. No indemnified person shall compromise or settle any action or claim that may give rise to an indemnity hereunder without the consent of the indemnifying person, which consent shall not be unreasonably withheld.

 

SECTION 5.9. Charges of Depositary.

 

The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.3), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable (including SWIFT) and facsimile transmission fees and expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 and the surrender of American Depositary Shares pursuant to Section 2.5 or 6.2, (6) a fee of $.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, including, but not limited to Sections 4.1 through 4.4 and Section 4.8, (7) a fee for the distribution of securities pursuant to Section 4.2 or of rights pursuant to Section 4.4 (where the Depositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities under this Deposit Agreement (for purposes of this item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under item 6 above, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary's or Custodian’s agents or the agents of the Depositary's or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (which charges shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.6 and shall be payable at the sole discretion of the Depositary by billing those Owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions).

 

  - 30 -  

 

 

The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to Owners that are obligated to pay those fees.

 

In performing its duties under this Deposit Agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions.

 

The Depositary, subject to Section 2.9, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

 

SECTION 5.10. Retention of Depositary Documents.

 

The Depositary is authorized to destroy those documents, records, bills and other data compiled during the term of this Deposit Agreement at the times permitted by the laws or regulations governing the Depositary.

 

SECTION 5.11. Exclusivity.

 

Without prejudice to the Company’s rights under Section 5.4, the Company agrees not to appoint any other depositary for issuance of depositary shares, depositary receipts or any similar securities or instruments (for the avoidance of doubt, other than instruments or securities issued directly by the Company) so long as The Bank of New York Mellon is acting as Depositary under this Deposit Agreement.

 

  - 31 -  

 

 

ARTICLE 6. AMENDMENT AND TERMINATION

 

SECTION 6.1. Amendment.

 

The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary without the consent of Owners or Holders in any respect that they may deem necessary or desirable. Any amendment that would impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary Shares until the expiration of 30 days after notice of that amendment has been Disseminated to the Owners of outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, by continuing to hold American Depositary Shares or any interest therein, to consent and agree to that amendment and to be bound by this Deposit Agreement as amended thereby. Upon the effectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by each American Depositary Share, the Depositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender of American Depositary Shares to effect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive delivery of the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

 

SECTION 6.2. Termination.

 

(a) The Company may initiate termination of this Deposit Agreement by notice to the Depositary. The Depositary may initiate termination of this Deposit Agreement if (i) at any time 60 days shall have expired after the Depositary delivered to the Company a written resignation notice and a successor depositary has not been appointed and accepted its appointment as provided in Section 5.4, (ii) an Insolvency Event or Delisting Event occurs with respect to the Company or (iii) a Termination Option Event has occurred or will occur. If termination of this Deposit Agreement is initiated, the Depositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the “ Termination Date ”), which shall be at least 90 days after the date of that notice, and this Deposit Agreement shall terminate on that Termination Date.

 

(b) After the Termination Date, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9.

 

  - 32 -  

 

 

(c) At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under this Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditors of the Depositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges) and (ii) for its obligations under Section 5.8 and (iii) to act as provided in paragraph (d) below.

 

(d) After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to Deposited Securities (that have not been sold), may sell rights and other property as provided in this Deposit Agreement and shall deliver Deposited Securities (or sale proceeds) upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions of this Deposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares or deliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities (that have not been sold) if in its judgment the requested withdrawal would interfere with its efforts to sell the Deposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities have been sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends and other distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under this Deposit Agreement except as provided in this Section.

 

ARTICLE 7. MISCELLANEOUS

 

SECTION 7.1. Counterparts; Signatures.

 

This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of those counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodians and shall be open to inspection by any Owner or Holder during regular business hours.

 

  - 33 -  

 

 

Any manual signature on this Deposit Agreement that is faxed, scanned or photocopied, and any electronic signature valid under the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001, et. seq ., shall for all purposes have the same validity, legal effect and admissibility in evidence as an original manual signature, and the parties hereby waive any objection to the contrary.

 

SECTION 7.2. No Third Party Beneficiaries.

 

This Deposit Agreement is for the exclusive benefit of the Company, the Depositary, the Owners and the Holders and their respective successors and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.

 

SECTION 7.3. Severability.

 

In case any one or more of the provisions contained in this Deposit Agreement or in a Receipt should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Deposit Agreement or that Receipt shall in no way be affected, prejudiced or disturbed thereby.

 

SECTION 7.4. Owners and Holders as Parties; Binding Effect.

 

The Owners and Holders from time to time shall be parties to this Deposit Agreement and shall be bound by all of the terms and conditions of this Deposit Agreement and of the Receipts by acceptance of American Depositary Shares or any interest therein.

 

SECTION 7.5. Notices.

 

Any and all notices to be given to the Company shall be in writing and shall be deemed to have been duly given if personally delivered or sent by domestic first class or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similar bit-mapped image of a signed writing, provided that receipt of the facsimile transmission or email has been confirmed by the recipient, addressed to Foresight Autonomous Limited, _________________________________________, Attention: _____________, or any other place to which the Company may have transferred its principal office with notice to the Depositary.

 

  - 34 -  

 

 

Any and all notices to be given to the Depositary shall be in writing and shall be deemed to have been duly given if in English and personally delivered or sent by first class domestic or international air mail or air courier or sent by facsimile transmission or email attaching a pdf or similar bit-mapped image of a signed writing, addressed to The Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, Attention: Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Office with notice to the Company.

 

Delivery of a notice to the Company or Depositary by mail or air courier shall be deemed effected when deposited, postage prepaid, in a post-office letter box or received by an air courier service. Delivery of a notice to the Company or Depositary sent by facsimile transmission or email shall be deemed effected when the recipient acknowledges receipt of that notice.

 

A notice to be given to an Owner shall be deemed to have been duly given when Disseminated to that Owner. Dissemination in paper form will be effective when personally delivered or sent by first class domestic or international air mail or air courier, addressed to that Owner at the address of that Owner as it appears on the transfer books for American Depositary Shares of the Depositary, or, if that Owner has filed with the Depositary a written request that notices intended for that Owner be mailed to some other address, at the address designated in that request. Dissemination in electronic form will be effective when sent in the manner consented to by the Owner to the electronic address most recently provided by the Owner for that purpose.

 

SECTION 7.6. Appointment of Agent for Service of Process; Submission to Jurisdiction; Jury Trial Waiver.

 

The Company hereby (i) designates and appoints the person named in Exhibit A to this Deposit Agreement, located in the State of New York, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or relating to the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement (a “Proceeding”), (ii) consents and submits to the jurisdiction of any state or federal court in the State of New York in which any Proceeding may be instituted and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any Proceeding. The Company agrees to deliver to the Depositary, upon the execution and delivery of this Deposit Agreement, a written acceptance by the agent named in Exhibit A to this Deposit Agreement of its appointment as process agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue that designation and appointment in full force and effect, or to appoint and maintain the appointment of another process agent located in the United States as required above, and to deliver to the Depositary a written acceptance by that agent of that appointment, for so long as any American Depositary Shares or Receipts remain outstanding or this Deposit Agreement remains in force. In the event the Company fails to maintain the designation and appointment of a process agent in the United States in full force and effect, the Company hereby waives personal service of process upon it and consents that a service of process in connection with a Proceeding may be made by certified or registered mail, return receipt requested, directed to the Company at its address last specified for notices under this Deposit Agreement, and service so made shall be deemed completed five (5) days after the same shall have been so mailed.

 

  - 35 -  

 

 

EACH PARTY TO THIS DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THIS DEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING, WITHOUT LIMITATION, ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).

 

SECTION 7.7. Waiver of Immunities.

 

To the extent that the Company or any of its properties, assets or revenues may have or may hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, or from execution of judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Deposit Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any immunity of that kind and consents to relief and enforcement as provided above.

 

SECTION 7.8. Governing Law.

 

This Deposit Agreement and the Receipts shall be interpreted in accordance with and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the laws of the State of New York.

 

  - 36 -  

 

 

IN WITNESS WHEREOF, FORESIGHT AUTONOMOUS LIMITED and THE BANK OF NEW YORK MELLON have duly executed this Deposit Agreement as of the day and year first set forth above and all Owners and Holders shall become parties hereto upon acceptance by them of American Depositary Shares or any interest therein.

 

  FORESIGHT AUTONOMOUS LIMITED
   
  By:  
    Name:  
    Title:    
     
  THE BANK OF NEW YORK MELLON,
  as Depositary
   
  By:  
    Name:  
    Title:   

 

  - 37 -  

 

 

EXHIBIT A

 

AMERICAN DEPOSITARY SHARES

(Each American Depositary Share represents

one-tenth of one deposited Share)

 

THE BANK OF NEW YORK MELLON

AMERICAN DEPOSITARY RECEIPT

FOR ORDINARY SHARES OF

FORESIGHT AUTONOMOUS LIMITED

(INCORPORATED UNDER THE LAWS OF THE STATE OF ISRAEL)

 

The Bank of New York Mellon, as depositary (hereinafter called the “Depositary”), hereby certifies that_________________________________________, or registered assigns IS THE OWNER OF _____________________________

 

AMERICAN DEPOSITARY SHARES

 

representing deposited ordinary shares (herein called “Shares”) of Foresight Autonomous Limited, incorporated under the laws of State of Israel (herein called the “ Company ”). At the date hereof, each American Depositary Share represents one-tenth of one Share deposited or subject to deposit under the Deposit Agreement (as such term is hereinafter defined) with a custodian for the Depositary (herein called the “ Custodian ”) that, as of the date of the Deposit Agreement, was Bank Hapoalim located in Israel. The Depositary's Office is located at a different address than its principal executive office. Its Office is located at 101 Barclay Street, New York, N.Y. 10286, and its principal executive office is located at 225 Liberty Street, New York, N.Y. 10286.

 

THE DEPOSITARY'S OFFICE ADDRESS IS

101 BARCLAY STREET, NEW YORK, N.Y. 10286

 

  A- 1  

 

 

1. THE DEPOSIT AGREEMENT.

 

This American Depositary Receipt is one of an issue (herein called “ Receipts ”), all issued and to be issued upon the terms and conditions set forth in the deposit agreement dated as of __________, 2017 (herein called the “ Deposit Agreement ”) among the Company, the Depositary, and all Owners and Holders from time to time of American Depositary Shares issued thereunder, each of whom by accepting American Depositary Shares agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Holders and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of those Shares and held thereunder (those Shares, securities, property, and cash are herein called “ Deposited Securities ”). Copies of the Deposit Agreement are on file at the Depositary's Office in New York City and at the office of the Custodian.

 

The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall have the meanings set forth in the Deposit Agreement.

 

2. SURRENDER OF AMERICAN DEPOSITARY SHARES AND WITHDRAWAL OF SHARES.

 

Upon surrender at the Depositary’s Office of American Depositary Shares for the purpose of withdrawal of the Deposited Securities represented thereby and payment of the fee of the Depositary for the surrender of American Depositary Shares as provided in Section 5.9 of the Deposit Agreement and payment of all taxes and governmental charges payable in connection with that surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of the Deposit Agreement, the Owner of those American Depositary Shares shall be entitled to delivery (to the extent delivery can then be lawfully and practicably made), to or as instructed by that Owner, of the amount of Deposited Securities at the time represented by those American Depositary Shares, but not any money or other property as to which a record date for distribution to Owners has passed (since money or other property of that kind will be delivered or paid on the scheduled payment date to the Owner as of that record date). The Depositary shall direct the Custodian with respect to delivery of Deposited Securities and may charge the surrendering Owner a fee and its expenses for doing so. That delivery will be made, at the office of the Custodian, except that , at the request, risk and expense of the surrendering Owner, and for the account of that Owner, the Depositary shall direct the Custodian to forward any cash or other property comprising, and forward a certificate or certificates, if applicable, and other proper documents of title, if any, for, the Deposited Securities represented by the surrendered American Depositary Shares to the Depositary for delivery at the Depositary’s Office or to another address specified in the order received from the surrendering Owner.

 

  A- 2  

 

 

3. REGISTRATION OF TRANSFER OF AMERICAN DEPOSITARY SHARES; COMBINATION AND SPLIT-UP OF RECEIPTS; INTERCHANGE OF CERTIFICATED AND UNCERTIFICATED AMERICAN DEPOSITARY SHARES.

 

The Depositary, subject to the terms and conditions of the Deposit Agreement, shall register a transfer of American Depositary Shares on its transfer books upon (i) in the case of certificated American Depositary Shares, surrender of the Receipt evidencing those American Depositary Shares, by the Owner or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer or (ii) in the case of uncertificated American Depositary Shares, receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.10 of that Agreement), and, in either case, duly stamped as may be required by the laws of the State of New York and of the United States of America. Upon registration of a transfer, the Depositary shall deliver the transferred American Depositary Shares to or upon the order of the person entitled thereto.

 

The Depositary, subject to the terms and conditions of the Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

 

The Depositary, upon surrender of certificated American Depositary Shares for the purpose of exchanging for uncertificated American Depositary Shares, shall cancel the Receipt evidencing those certificated American Depositary Shares and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in Section 2.10 of the Deposit Agreement) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging for certificated American Depositary Shares, shall cancel those uncertificated American Depositary Shares and register and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

 

As a condition precedent to the delivery, registration of transfer, or surrender of any American Depositary Shares or split-up or combination of any Receipt or withdrawal of any Deposited Securities, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or the presenter of the Receipt or instruction for registration of transfer or surrender of American Depositary Shares not evidenced by a Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in the Deposit Agreement, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with any regulations the Depositary may establish consistent with the provisions of the Deposit Agreement.

 

  A- 3  

 

 

The delivery of American Depositary Shares against deposit of Shares generally or against deposit of particular Shares may be suspended, or the registration of transfer of American Depositary Shares in particular instances may be refused, or the registration of transfer of outstanding American Depositary Shares generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement, or for any other reason; in each case, the Depositary shall notify the Company as promptly as practicable of any such suspension or delay that is outside the ordinary course of business. Notwithstanding anything to the contrary in the Deposit Agreement or this Receipt, the surrender of outstanding American Depositary Shares and withdrawal of Deposited Securities may not be suspended subject only to (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the Foreign Registrar, if applicable, or the deposit of Shares in connection with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, and (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the American Depositary Shares or to the withdrawal of the Deposited Securities. The Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares that, at the time of deposit, are Restricted Securities.

 

4. LIABILITY OF OWNER FOR TAXES.

 

If any tax or other governmental charge shall become payable by the Custodian or the Depositary with respect to or in connection with any American Depositary Shares or any Deposited Securities represented by any American Depositary Shares or in connection with a transaction to which Section 4.8 of the Deposit Agreement applies, that tax or other governmental charge shall be payable by the Owner of those American Depositary Shares to the Depositary. The Depositary may refuse to register any transfer of those American Depositary Shares or any withdrawal of Deposited Securities represented by those American Depositary Shares until that payment is made, and may withhold any dividends or other distributions or the proceeds thereof, or may sell for the account of the Owner any part or all of the Deposited Securities represented by those American Depositary Shares, and may apply those dividends or other distributions or the net proceeds of any sale of that kind in payment of that tax or other governmental charge but, even after a sale of that kind, the Owner shall remain liable for any deficiency. The Depositary shall distribute any net proceeds of a sale made under Section 3.2 of the Deposit Agreement that are not used to pay taxes or governmental charges to the Owners entitled to them in accordance with Section 4.1 of the Deposit Agreement. If the number of Shares represented by each American Depositary Share decreases as a result of a sale of Deposited Securities under Section 3.2 of the Deposit Agreement, the Depositary may call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

  A- 4  

 

 

5. WARRANTIES ON DEPOSIT OF SHARES.

 

Every person depositing Shares under the Deposit Agreement shall be deemed thereby to represent and warrant that those Shares and each certificate therefor, if applicable, are validly issued, fully paid and nonassessable and were not issued in violation of any preemptive or similar rights of the holders of outstanding securities of the Company and that the person making that deposit is duly authorized so to do. Every depositing person shall also be deemed to represent that the Shares, at the time of deposit, are not Restricted Securities. All representations and warranties deemed made under Section 3.3 of the Deposit Agreement shall survive the deposit of Shares and delivery of American Depositary Shares.

 

6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.

 

Any person presenting Shares for deposit or any Owner or Holder may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, taxpayer status, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary or the Company may deem necessary or proper. The Depositary may withhold the delivery or registration of transfer of American Depositary Shares, the distribution of any dividend or other distribution or of the proceeds thereof or the delivery of any Deposited Securities until that proof or other information is filed or those certificates are executed or those representations and warranties are made.

 

Each Holder and Owner agrees to comply with requests from the Company pursuant to applicable law and regulations, the rules and requirements of the Tel Aviv stock exchange, and of any other stock exchange on which the Shares or American Depositary Shares are, or may be, registered, traded or listed and any book-entry settlement system or the articles of association or similar document of the Company, which are made to provide information, inter alia, as to the capacity in which such Holder or Owner owns American Depositary Shares (and Shares, as the case may be) and regarding the identity of any other person(s) interested in such American Depositary Shares and the nature of such interest and various other matters, whether or not they are Holders or Owners at the time of such request. The Depositary agrees to use its reasonable efforts to forward, upon the request of the Company and at the Company’s expense (unless otherwise agreed in writing between the Company and the Depositary), any such request from the Company to the Owners and to forward to the Company any such responses to such requests received by the Depositary, to the extent that disclosure is permitted under applicable law.

 

  A- 5  

 

 

As conditions of accepting Shares for deposit, the Depositary may require (i) any certification required by the Depositary or the Custodian in accordance with the provisions of the Deposit Agreement, (ii) a written order directing the Depositary to deliver to, or upon the written order of, the person or persons stated in that order, the number of American Depositary Shares representing those Deposited Shares, (iii) evidence satisfactory to the Depositary that those Shares have been re-registered in the books of the Company or the Foreign Registrar in the name of the Depositary, a Custodian or a nominee of the Depositary or a Custodian, (iv) evidence satisfactory to the Depositary that any necessary approval has been granted by any governmental body in each applicable jurisdiction and (v) an agreement or assignment, or other instrument satisfactory to the Depositary, that provides for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property, that any person in whose name those Shares are or have been recorded may thereafter receive upon or in respect of those Shares, or, in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary.

 

7. CHARGES OF DEPOSITARY.

 

The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.3 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable (including SWIFT) and facsimile transmission fees and expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.5 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.3, 4.3 or 4.4 of the Deposit Agreement and the surrender of American Depositary Shares pursuant to Section 2.5 or 6.2 of the Deposit Agreement, (6) a fee of $.05 or less per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to Sections 4.1 through 4.4 and 4.8 of the Deposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.2 of the Deposit Agreement or of rights pursuant to Section 4.4 of that Agreement (where the Depositary will not exercise or sell those rights on behalf of Owners), such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities under the Deposit Agreement (for purposes of this item 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under item 6, a fee of $.05 or less per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in item 9 below, and (9) any other charges payable by the Depositary or the Custodian, any of the Depositary's or Custodian’s agents or the agents of the Depositary's or Custodian’s agents, in connection with the servicing of Shares or other Deposited Securities (which charges shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.6 of the Deposit Agreement and shall be payable at the sole discretion of the Depositary by billing those Owners for those charges or by deducting those charges from one or more cash dividends or other cash distributions).

 

  A- 6  

 

 

The Depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to Owners that are obligated to pay those fees.

 

The Depositary, subject to Article 8 hereof, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

 

From time to time, the Depositary may make payments to the Company to reimburse the Company for costs and expenses generally arising out of establishment and maintenance of the American Depositary Shares program, waive fees and expenses for services provided by the Depositary or share revenue from the fees collected from Owners or Holders. In performing its duties under the Deposit Agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated with the Depositary and that may earn or share fees, spreads or commissions.

 

8. PRE-RELEASE OF AMERICAN DEPOSITARY SHARES.

 

Notwithstanding Section 2.3 of the Deposit Agreement, unless requested in writing by the Company to cease doing so, the Depositary may deliver American Depositary Shares prior to the receipt of Shares pursuant to Section 2.2 of the Deposit Agreement (a “Pre-Release”). The Depositary may, pursuant to Section 2.5 of the Deposit Agreement, deliver Shares upon the surrender of American Depositary Shares that have been Pre-Released, whether or not that surrender is prior to the termination of that Pre-Release or the Depositary knows that those American Depositary Shares have been Pre-Released. The Depositary may receive American Depositary Shares in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release must be (a) preceded or accompanied by a written representation from the person to whom American Depositary Shares or Shares are to be delivered, that such person, or its customer, owns the Shares or American Depositary Shares to be remitted, as the case may be, (b) at all times fully collateralized with cash or such other collateral as the Depositary deems appropriate, (c) terminable by the Depositary on not more than five (5) business days’ notice, and (d) subject to all indemnities and credit regulations that the Depositary deems appropriate. The number of American Depositary Shares outstanding at any time as a result of Pre-Release will not normally exceed thirty percent (30%) of all American Depositary Shares outstanding; provided , however , that the Depositary reserves the right to change or disregard that limit from time to time as it deems appropriate.

 

  A- 7  

 

 

The Depositary may retain for its own account any compensation received by it in connection with Pre-Release.

 

9. TITLE TO AMERICAN DEPOSITARY SHARES.

 

It is a condition of the American Depositary Shares, and every successive Owner and Holder of American Depositary Shares, by accepting or holding the same, consents and agrees that American Depositary Shares evidenced by a Receipt, when the Receipt is properly endorsed or accompanied by proper instruments of transfer, shall be transferable as certificated registered securities under the laws of the State of New York, and that American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of the State of New York. The Depositary, notwithstanding any notice to the contrary, may treat the Owner of American Depositary Shares as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes, and neither the Depositary nor the Company shall have any obligation or be subject to any liability under the Deposit Agreement to any Holder of American Depositary Shares, but only to the Owner.

 

10. VALIDITY OF RECEIPT.

 

This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been (i) executed by the Depositary by the manual signature of a duly authorized officer of the Depositary or (ii) executed by the facsimile signature of a duly authorized officer of the Depositary and countersigned by the manual signature of a duly authorized signatory of the Depositary or the Registrar or a co-registrar.

 

11. REPORTS; INSPECTION OF TRANSFER BOOKS.

 

The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934 and, accordingly, files certain reports with the Securities and Exchange Commission. Those reports will be available for inspection and copying through the Commission's EDGAR system or at public reference facilities maintained by the Commission in Washington, D.C.

 

  A- 8  

 

 

The Depositary will make available for inspection by Owners at its Office any reports, notices and other communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of those Deposited Securities by the Company. The Company shall furnish reports and communications, including any proxy soliciting material to which Section 4.9 of the Deposit Agreement applies, to the Depositary in English, to the extent such materials are required to be translated into English pursuant to any regulations of the Commission.

 

The Depositary will keep books for the registration of American Depositary Shares and transfers of American Depositary Shares, which shall be open for inspection by the Owners at the Depositary’s Office during regular business hours, provided that such inspection shall not be for the purpose of communicating with Owners in the interest of a business or object other than the business of the Company or a matter related to the Deposit Agreement or the American Depositary Shares.

 

12. DIVIDENDS AND DISTRIBUTIONS.

 

Whenever the Depositary receives any cash dividend or other cash distribution on Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a foreign currency can in the judgment of the Depositary be converted on a reasonable basis into Dollars transferable to the United States, and subject to the Deposit Agreement, convert that dividend or other cash distribution into Dollars and distribute the amount thus received (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement) to the Owners entitled thereto; provided , however , that if the Custodian or the Depositary is required to withhold and does withhold from that cash dividend or other cash distribution an amount on account of taxes or other governmental charges, the amount distributed to the Owners of the American Depositary Shares representing those Deposited Securities shall be reduced accordingly. If a cash distribution would represent a return of all or substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that cash distribution. A distribution of that kind shall be a Termination Option Event .

 

  A- 9  

 

 

Subject to the provisions of Section 4.11 and 5.9 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Section 4.1, 4.3 or 4.4 of the Deposit Agreement on Deposited Securities (but not in exchange for or in conversion or in lieu of Deposited Securities), the Depositary will cause the securities or property received by it to be distributed to the Owners entitled thereto, after deduction or upon payment of any fees and expenses of the Depositary and any taxes or other governmental charges, in any manner that the Depositary deems equitable and practicable for accomplishing that distribution (which may be a distribution of depositary shares representing the securities received); provided , however , that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason the Depositary, after consultation with the Company to the extent practicable, deems such distribution not to be lawful and feasible, the Depositary may adopt such other method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and distribution of the net proceeds of any such sale (net of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement) to the Owners entitled thereto all in the manner and subject to the conditions set forth in Section 4.1 of the Deposit Agreement. The Depositary may withhold any distribution of securities under Section 4.2 of the Deposit Agreement if it has not received satisfactory assurances from the Company that the distribution does not require registration under the Securities Act of 1933. The Depositary may sell, by public or private sale, an amount of securities or other property it would otherwise distribute under this Article that is sufficient to pay its fees and expenses in respect of that distribution. If a distribution under Section 4.2 of the Deposit Agreement would represent a return of all of substantially all the value of the Deposited Securities underlying American Depositary Shares, the Depositary may require surrender of those American Depositary Shares and may require payment of or deduct the fee for surrender of American Depositary Shares (whether or not it is also requiring surrender of American Depositary Shares) as a condition of making that distribution. A distribution of that kind shall be a Termination Option Event .

 

Whenever the Depositary receives any distribution consisting of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company so requests in writing, deliver to the Owners entitled thereto, an aggregate number of American Depositary Shares representing the amount of Shares received as that dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and issuance of American Depositary Shares, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees and expenses of the Depositary as provided in Article 7 hereof and Section 5.9 of the Deposit Agreement (and the Depositary may sell, by public or private sale, an amount of Shares received (or American Depositary Shares representing those Shares) sufficient to pay its fees and expenses in respect of that distribution). In lieu of delivering fractional American Depositary Shares, the Depositary may sell the amount of Shares represented by the aggregate of those fractions (or American Depositary Shares representing those Shares) and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.1of the Deposit Agreement. If and to the extent that additional American Depositary Shares are not delivered and Shares or American Depositary Shares are not sold, each American Depositary Share shall thenceforth also represent the additional Shares distributed on the Deposited Securities represented thereby.

 

  A- 10  

 

 

If the Company declares a distribution in which holders of Deposited Securities have a right to elect whether to receive cash, Shares or other securities or a combination of those things, or a right to elect to have a distribution sold on their behalf, the Depositary may, after consultation with the Company, make that right of election available for exercise by Owners any manner the Depositary considers to be lawful and practical. As a condition of making a distribution election right available to Owners, the Depositary may require satisfactory assurances from the Company that doing so does not require registration of any securities under the Securities Act of 1933.

 

If the Depositary determines that any distribution received or to be made by the Depositary (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge that the Depositary is obligated to withhold, the Depositary may sell, by public or private sale, all or a portion of the distributed property (including Shares and rights to subscribe therefor) in the amounts and manner the Depositary deems necessary and practicable to pay any those taxes or charges, and the Depositary shall distribute the net proceeds of that sale, after deduction of those taxes or charges, to the Owners entitled thereto in proportion to the number of American Depositary Shares held by them respectively.

 

Each Owner and Holder agrees to indemnify the Company, the Depositary, the Custodian and their respective directors, employees, agents and affiliates for, and hold each of them harmless against, any claim by any governmental authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced withholding at source or other tax benefit received by it.

 

13. RIGHTS.

 

(a) If rights are granted to the Depositary in respect of deposited Shares to purchase additional Shares or other securities, the Company and the Depositary shall endeavor to consult as to the actions, if any, the Depositary should take in connection with that grant of rights. The Depositary may, to the extent deemed by it to be lawful and practical (i) if requested in writing by the Company, grant to all or certain Owners rights to instruct the Depositary to purchase the securities to which the rights relate and deliver those securities or American Depositary Shares representing those securities to Owners, (ii) if requested in writing by the Company, deliver the rights to or to the order of certain Owners, or (iii) sell the rights to the extent practicable and distribute the net proceeds of that sale to Owners entitled to those proceeds. To the extent rights are not exercised, delivered or disposed of under (i), (ii) or (iii) above, the Depositary shall permit the rights to lapse unexercised.

 

(b) If the Depositary will act under (a)(i) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon instruction from an applicable Owner in the form the Depositary specified and upon payment by that Owner to the Depositary of an amount equal to the purchase price of the securities to be received upon the exercise of the rights, the Depositary shall, on behalf of that Owner, exercise the rights and purchase the securities. The purchased securities shall be delivered to, or as instructed by, the Depositary. The Depositary shall (i) deposit the purchased Shares under the Deposit Agreement and deliver American Depositary Shares representing those Shares to that Owner or (ii) deliver or cause the purchased Shares or other securities to be delivered to or to the order of that Owner. The Depositary will not act under (a)(i) above unless the offer and sale of the securities to which the rights relate are registered under the Securities Act of 1933 or the Depositary has received an opinion of United States counsel that is satisfactory to it to the effect that those securities may be sold and delivered to the applicable Owners without registration under the Securities Act of 1933.

 

  A- 11  

 

 

(c) If the Depositary will act under (a)(ii) above, the Company and the Depositary will enter into a separate agreement setting forth the conditions and procedures applicable to the particular offering. Upon (i) the request of an applicable Owner to deliver the rights allocable to the American Depositary Shares of that Owner to an account specified by that Owner to which the rights can be delivered and (ii) receipt of such documents as the Company and the Depositary agreed to require to comply with applicable law, the Depositary will deliver those rights as requested by that Owner.

 

(d) If the Depositary will act under (a)(iii) above, the Depositary will use reasonable efforts to sell the rights in proportion to the number of American Depositary Shares held by the applicable Owners and pay the net proceeds to the Owners otherwise entitled to the rights that were sold, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any American Depositary Shares or otherwise.

 

(e) Payment or deduction of the fees of the Depositary as provided in Section 5.9 of the Deposit Agreement and payment or deduction of the expenses of the Depositary and any applicable taxes or other governmental charges shall be conditions of any delivery of securities or payment of cash proceeds under Section 4.4 of that Agreement.

 

(f) The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make rights available to or exercise rights on behalf of Owners in general or any Owner in particular , or to sell rights.

 

14. CONVERSION OF FOREIGN CURRENCY.

 

Whenever the Depositary or the Custodian receives foreign currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the foreign currency so received can in the judgment of the Depositary be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary shall convert or cause to be converted by sale or in any other manner that it may determine that foreign currency into Dollars, and those Dollars shall be distributed to the Owners entitled thereto. A cash distribution may be made upon an averaged or other practicable basis without regard to any distinctions among Owners based on exchange restrictions, the date of delivery of any American Depositary Shares or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary as provided in Section 5.9 of the Deposit Agreement.

 

  A- 12  

 

 

If a conversion of foreign currency or the repatriation or distribution of Dollars can be effected only with the approval or license of any government or agency thereof, the Depositary may, but will not be required to, file an application for that approval or license.

 

If the Depositary, after consultation with the Company to the extent practicable, determines that in its judgment any foreign currency received by the Depositary or the Custodian is not convertible on a reasonable basis into Dollars transferable to the United States, or if any approval or license of any government or agency thereof that is required for such conversion is not filed or sought by the Depositary or is not obtained within a reasonable period as determined by the Depositary, the Depositary may distribute the foreign currency received by the Depositary to, or in its discretion may hold such foreign currency uninvested and without liability for interest thereon for the respective accounts of, the Owners entitled to receive the same.

 

If any conversion of foreign currency, in whole or in part, cannot be effected for distribution to some of the Owners entitled thereto, the Depositary may in its discretion make that conversion and distribution in Dollars to the extent practicable and permissible to the Owners entitled thereto and may distribute the balance of the foreign currency received by the Depositary to, or hold that balance uninvested and without liability for interest thereon for the account of, the Owners entitled thereto.

 

The Depositary may convert currency itself or through any of its affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account.  The revenue is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the Deposit Agreement and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account.  The Depositary makes no representation that the exchange rate used or obtained in any currency conversion under the Deposit Agreement will be the most favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable to Owners, subject to the Depositary’s obligations under Section 5.3 of that Agreement. The methodology used to determine exchange rates used in currency conversions is available upon request.

 

  A- 13  

 

 

15. RECORD DATES.

 

Whenever a cash dividend, cash distribution or any other distribution is made on Deposited Securities or rights to purchase Shares or other securities are issued with respect to Deposited Securities (which rights will be delivered to or exercised or sold on behalf of Owners in accordance with Section 4.4 of the Deposit Agreement) or the Depositary receives notice that a distribution or issuance of that kind will be made, or whenever the Depositary receives notice that a meeting of holders of Shares will be held in respect of which the Company has requested the Depositary to send a notice under Section 4.7 of the Deposit Agreement, or whenever the Depositary will assess a fee or charge against the Owners, or whenever the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary otherwise finds it necessary or convenient, the Depositary shall fix a record date, which shall be the same as, or as near as practicable to, any corresponding record date set by the Company with respect to Shares, (a) for the determination of the Owners (i) who shall be entitled to receive the benefit of that dividend or other distribution or those rights, (ii) who shall be entitled to give instructions for the exercise of voting rights at that meeting, (iii) who shall be responsible for that fee or charge or (iv) for any other purpose for which the record date was set, or (b) on or after which each American Depositary Share will represent the changed number of Shares. Subject to the provisions of Sections 4.1 through 4.5 of the Deposit Agreement and to the other terms and conditions of the Deposit Agreement, the Owners on a record date fixed by the Depositary shall be entitled to receive the amount distributable by the Depositary with respect to that dividend or other distribution or those rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by them respectively, to give voting instructions or to act in respect of the other matter for which that record date was fixed, or be responsible for that fee or charge, as the case may be.

 

16. VOTING OF DEPOSITED SHARES.

 

(a) Upon receipt of notice of any meeting of holders of Shares at which holders of Shares will be entitled to vote, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, Disseminate to the Owners a notice, the form of which shall be in the sole discretion of the Depositary, that shall contain (i) the information contained in the notice of meeting received by the Depositary from the Company, (ii) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Israeli law and of the articles of association or similar documents of the Company, to instruct the Depositary as to the exercise of the voting rights pertaining to the amount of Shares represented by their respective American Depositary Shares (iii) a statement as to the manner in which those instructions may be given and (iv) the last date on which the Depositary will accept instructions (the “ Instruction Cutoff Date ”).

 

(b) Upon the written request of an Owner of American Depositary Shares, as of the date of the request or, if a record date was specified by the Depositary, as of that record date, received on or before any Instruction Cutoff Date established by the Depositary, the Depositary may, and if the Depositary sent a notice under the preceding paragraph shall, endeavor, in so far as practicable, to vote or cause to be voted the amount of deposited Shares represented by those American Depositary Shares in accordance with the instructions set forth in that request. The Depositary shall not vote or attempt to exercise the right to vote that attaches to the deposited Shares other than in accordance with instructions given by Owners and received by the Depositary.

 

  A- 14  

 

 

(c) There can be no assurance that Owners generally or any Owner in particular will receive the notice described in paragraph (a) above in time to enable Owners to give instructions to the Depositary prior to the Instruction Cutoff Date.

 

(d) In order to give Owners a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Shares, if the Company will request the Depositary to Disseminate a notice under paragraph (a) above, the Company shall give the Depositary notice of the meeting, details concerning the matters to be voted upon and copies of materials to be made available to holders of Shares in connection with the meeting not less than [45] days prior to the meeting date.

 

(e) Notwithstanding anything in Section 4.7 of the Deposit Agreement to the contrary, the Depositary and the Company may from time to time modify the procedures, or adopt additional procedures, relating to voting of Deposited Securities as they determine may be necessary or appropriate to comply with applicable law or the articles of association or similar documents of the Company.

 

17. TENDER AND EXCHANGE OFFERS; REDEMPTION, REPLACEMENT OR CANCELLATION OF DEPOSITED SECURITIES.

 

(a) The Depositary shall not tender any Deposited Securities in response to any voluntary cash tender offer, exchange offer or similar offer made to holders of Deposited Securities (a “ Voluntary Offer ”), except when instructed in writing to do so by an Owner surrendering American Depositary Shares and subject to any conditions or procedures the Depositary may require.

 

(b) If the Depositary receives a written notice that Deposited Securities have been redeemed for cash or otherwise purchased for cash in a transaction that is mandatory and binding on the Depositary as a holder of those Deposited Securities (a “ Redemption ”), the Depositary, at the expense of the Company (unless otherwise agreed in writing between the Company and the Depositary), shall (i) if required, surrender Deposited Securities that have been redeemed to the issuer of those securities or its agent on the redemption date, (ii) Disseminate a notice to Owners (A) notifying them of that Redemption, (B) calling for surrender of a corresponding number of American Depositary Shares and (C) notifying them that the called American Depositary Shares have been converted into a right only to receive the money received by the Depositary upon that Redemption and those net proceeds shall be the Deposited Securities to which Owners of those converted American Depositary Shares shall be entitled upon surrenders of those American Depositary Shares in accordance with Section 2.5 or 6.2 of the Deposit Agreement and (iii) distribute the money received upon that Redemption to the Owners entitled to it upon surrender by them of called American Depositary Shares in accordance with Section 2.5 of that Agreement (and, for the avoidance of doubt, Owners shall not be entitled to receive that money under Section 4.1 of that Agreement). If the Redemption affects less than all the Deposited Securities, the Depositary shall call for surrender a corresponding portion of the outstanding American Depositary Shares and only those American Depositary Shares will automatically be converted into a right to receive the net proceeds of the Redemption. The Depositary shall allocate the American Depositary Shares converted under the preceding sentence among the Owners pro-rata to their respective holdings of American Depositary Shares immediately prior to the Redemption, except that the allocations may be adjusted so that no fraction of a converted American Depositary Share is allocated to any Owner. A Redemption of all or substantially all of the Deposited Securities shall be a Termination Option Event .

 

  A- 15  

 

 

(c) If the Depositary is notified of or there occurs any change in nominal value or any subdivision, combination or any other reclassification of the Deposited Securities or any recapitalization, reorganization, sale of assets substantially as an entirety, merger or consolidation affecting the issuer of the Deposited Securities or to which it is a party that is mandatory and binding on the Depositary as a holder of Deposited Securities and, as a result, securities or other property have been or will be delivered in exchange, conversion, replacement or in lieu of, Deposited Securities (a “ Replacement ”), the Depositary shall, if required, surrender the old Deposited Securities affected by that Replacement of Shares and hold, as new Deposited Securities under the Deposit Agreement, the new securities or other property delivered to it in that Replacement. However, if in the opinion of the Depositary, after consultation with the Company to the extent practicable, it is not lawful or not practical for it to hold those new Deposited Securities under this Deposit Agreement because those new Deposited Securities may not be distributed to Owners without registration under the Securities Act of 1933 or for any other reason, the Depositary may elect to sell those new Deposited Securities, at public or private sale, at such places and on such terms as it deems proper and proceed as if those new Deposited Securities had been Redeemed under paragraph (b) above. A Replacement shall be a Termination Option Event.

 

(d) In the case of a Replacement where the new Deposited Securities will continue to be held under the Deposit Agreement, the Depositary may call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing the new Deposited Securities and the number of those new Deposited Securities represented by each American Depositary Share. If the number of Shares represented by each American Depositary Share decreases as a result of a Replacement, the Depositary may, after consultation with the Company to the extent practicable, call for surrender of the American Depositary Shares to be exchanged on a mandatory basis for a lesser number of American Depositary Shares and may sell American Depositary Shares to the extent necessary to avoid distributing fractions of American Depositary Shares in that exchange and distribute the net proceeds of that sale to the Owners entitled to them.

 

(e) If there are no Deposited Securities with respect to American Depositary Shares, including if the Deposited Securities are cancelled, or the Deposited Securities with respect to American Depositary Shares become apparently worthless, the Depositary may call for surrender of those American Depositary Shares or may cancel those American Depositary Shares, upon notice to Owners, and a Termination Option Event occurs.

 

  A- 16  

 

 

18. LIABILITY OF THE COMPANY AND DEPOSITARY.

 

Neither the Depositary nor the Company nor any of their respective directors, employees, agents or affiliates shall incur any liability to any Owner or Holder:

 

(i) if by reason of (A) any provision of any present or future law or regulation or other act of the government of the United States, any State of the United States or any other state or jurisdiction, or of any governmental or regulatory authority or stock exchange; (B) (in the case of the Depositary only) by reason of any provision, present or future, of the articles of association or similar document of the Company, or by reason of any provision of any securities issued or distributed by the Company, or any offering or distribution thereof; or (C) by reason of any event or circumstance, whether natural or caused by a person or persons, that is beyond the ability of the Depositary or the Company, as the case may be, to prevent or counteract by reasonable care or effort (including, but not limited to earthquakes, floods, severe storms, fires, explosions, war, terrorism, civil unrest, labor disputes or criminal acts; interruptions or malfunctions of utility services, Internet or other communications lines or systems; unauthorized access to or attacks on computer systems or websites; or other failures or malfunctions of computer hardware or software or other systems or equipment), the Depositary or the Company is, directly or indirectly, prevented from, forbidden to or delayed in, or could be subject to any civil or criminal penalty on account of doing or performing and therefore does not do or perform, any act or thing that, by the terms of the Deposit Agreement or the Deposited Securities, it is provided shall be done or performed;

 

(ii) by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement (including any determination by the Depositary to take, or not take, any action that the Deposit Agreement provides the Depositary may take);

 

(iii) for the inability of any Owner or Holder to benefit from any distribution, offering, right or other benefit that is made available to holders of Deposited Securities but is not, under the terms of the Deposit Agreement, made available to Owners or Holders; or

 

(iv) for any special, consequential or punitive damages for any breach of the terms of the Deposit Agreement.

 

  A- 17  

 

 

Where, by the terms of a distribution to which Section 4.1, 4.2 or 4.3 of the Deposit Agreement applies, or an offering to which Section 4.4 of that Agreement applies, or for any other reason, that distribution or offering may not be made available to Owners, and the Depositary may not dispose of that distribution or offering on behalf of Owners and make the net proceeds available to Owners, then the Depositary shall not make that distribution or offering available to Owners, and shall allow any rights, if applicable, to lapse.

 

The Company, its directors, officers, employees, agents and affiliates assume no obligation nor shall it nor any of them be subject to any liability under the Deposit Agreement to any Owner or Holder or any other person (other than the Depositary), except that the Company agrees to perform its obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary, its directors, officers, employees, agents and affiliates assume no obligation nor shall it nor any of them be subject to any liability under the Deposit Agreement to any Owner or Holder (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that the Depositary agrees to perform its obligations specifically set forth in the Deposit Agreement without negligence or bad faith. Neither the Depositary nor the Company nor any of their respective directors, officers, employees, agents and affiliates shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the American Depositary Shares on behalf of any Owner or Holder or any other person. Each of the Depositary and the Company may rely, and shall be protected in relying upon, any written notice, request, direction or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. Neither the Depositary nor the Company nor any of their respective directors, officers, employees, agents and affiliates shall be liable for any action or non-action by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Depositary shall not be liable for the acts or omissions of any securities depository, clearing agency or settlement system in connection with or arising out of book-entry settlement of American Depositary Shares or Deposited Securities or otherwise. In the absence of bad faith on its part, the Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote. The Depositary shall have no duty to make any determination or provide any information as to the tax status of the Company, nor shall the Company or the Depositary have any liability for any tax consequences that may be incurred by Owners or Holders as a result of owning or holding American Depositary Shares, including without limitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a “Passive Foreign Investment Company” (“PFIC”) (in each case as defined in the U.S. Internal Revenue Code and the regulations issued thereunder) or otherwise. The Company may have been in the past and may be in the future a PFIC for U.S. Federal income tax purposes. Owners must consult their own tax advisers as to the potential application of the PFIC rules. No disclaimer of liability under the Securities Act of 1933 is intended by any provision of the Deposit Agreement.

 

  A- 18  

 

 

19. RESIGNATION AND REMOVAL OF THE DEPOSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN.

 

The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its election so to do delivered to the Company, to become effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by 120 days’ prior written notice of that removal, to become effective upon the later of (i) the 120th day after delivery of the notice to the Depositary and (ii) the appointment of a successor depositary and its acceptance of its appointment as provided in the Deposit Agreement. The Depositary in its discretion may at any time appoint a substitute or additional custodian or custodians.

 

20. AMENDMENT.

 

The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary without the consent of Owners or Holders in any respect which they may deem necessary or desirable. Any amendment that would impose or increase any fees or charges (other than taxes and other governmental charges, registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that would otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding American Depositary Shares until the expiration of 30 days after notice of that amendment has been Disseminated to the Owners of outstanding American Depositary Shares. Every Owner and Holder, at the time any amendment so becomes effective, shall be deemed, by continuing to hold American Depositary Shares or any interest therein, to consent and agree to that amendment and to be bound by the Deposit Agreement as amended thereby. Upon the effectiveness of an amendment to the form of Receipt, including a change in the number of Shares represented by each American Depositary Share, the Depositary may call for surrender of Receipts to be replaced with new Receipts in the amended form or call for surrender of American Depositary Shares to effect that change of ratio. In no event shall any amendment impair the right of the Owner to surrender American Depositary Shares and receive delivery of the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

 

  A- 19  

 

 

21. TERMINATION OF DEPOSIT AGREEMENT.

 

(a) The Company may initiate termination of the Deposit Agreement by notice to the Depositary. The Depositary may initiate termination of the Deposit Agreement if (i) at any time 60 days shall have expired after the Depositary delivered to the Company a written resignation notice and a successor depositary has not been appointed and accepted its appointment as provided in Section 5.4 of that Agreement, (ii) an Insolvency Event or Delisting Event occurs with respect to the Company or (iii) a Termination Option Event has occurred or will occur. If termination of the Deposit Agreement is initiated, the Depositary shall Disseminate a notice of termination to the Owners of all American Depositary Shares then outstanding setting a date for termination (the “ Termination Date ”), which shall be at least 90 days after the date of that notice, and the Deposit Agreement shall terminate on that Termination Date.

 

(b) After the Termination Date, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary under Sections 5.8 and 5.9 of that Agreement.

 

(c) At any time after the Termination Date, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of American Depositary Shares that remain outstanding, and those Owners will be general creditors of the Depositary with respect to those net proceeds and that other cash. After making that sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except (i) to account for the net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of such American Depositary Shares in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges) and (ii) for its obligations under Section 5.8 of that Agreement and (iii) to act as provided in paragraph (d) below.

 

(d) After the Termination Date, the Depositary shall continue to receive dividends and other distributions pertaining to Deposited Securities (that have not been sold), may sell rights and other property as provided in the Deposit Agreement and shall deliver Deposited Securities (or sale proceeds) upon surrender of American Depositary Shares (after payment or upon deduction, in each case, of the fee of the Depositary for the surrender of American Depositary Shares, any expenses for the account of the Owner of those American Depositary Shares in accordance with the terms and conditions of the Deposit Agreement and any applicable taxes or governmental charges). After the Termination Date, the Depositary shall not accept deposits of Shares or deliver American Depositary Shares. After the Termination Date, (i) the Depositary may refuse to accept surrenders of American Depositary Shares for the purpose of withdrawal of Deposited Securities (that have not been sold) if in its judgment the requested withdrawal would interfere with its efforts to sell the Deposited Securities, (ii) the Depositary will not be required to deliver cash proceeds of the sale of Deposited Securities until all Deposited Securities have been sold and (iii) the Depositary may discontinue the registration of transfers of American Depositary Shares and suspend the distribution of dividends and other distributions on Deposited Securities to the Owners and need not give any further notices or perform any further acts under the Deposit Agreement except as provided in Section 6.2 of that Agreement.

 

  A- 20  

 

 

22. DTC DIRECT REGISTRATION SYSTEM AND PROFILE MODIFICATION SYSTEM.

 

(a) Notwithstanding the provisions of Section 2.4 of the Deposit Agreement, the parties acknowledge that DTC’s Direct Registration System (“ DRS ”) and Profile Modification System (“ Profile ”) apply to the American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC that facilitates interchange between registered holding of uncertificated securities and holding of security entitlements in those securities through DTC and a DTC participant. Profile is a required feature of DRS that allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register that transfer.

 

(b) In connection with DRS/Profile, the parties acknowledge that the Depositary will not determine whether the DTC participant that is claiming to be acting on behalf of an Owner in requesting registration of transfer and delivery described in paragraph (a) above has the actual authority to act on behalf of that Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.3 and 5.8 of the Deposit Agreement apply to the matters arising from the use of the DRS/Profile. The parties agree that the Depositary’s reliance on and compliance with instructions received by the Depositary through the DRS/Profile system and otherwise in accordance with the Deposit Agreement, shall not constitute negligence or bad faith on the part of the Depositary.

 

23. APPOINTMENT OF AGENT FOR SERVICE OF PROCESS; SUBMISSION TO JURISDICTION; JURY TRIAL WAIVER; WAIVER OF IMMUNITIES.

 

The Company has (i) appointed ______________________________________, located in the State of New York, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or relating to the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Agreement, (ii) consented and submitted to the jurisdiction of any state or federal court in the State of New York in which any such suit or proceeding may be instituted, and (iii) agreed that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding.

 

  A- 21  

 

 

EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACH OWNER AND HOLDER) THEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE COMPANY AND/OR THE DEPOSITARY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHER DEPOSITED SECURITIES, THE AMERICAN DEPOSITARY SHARES OR THE RECEIPTS, THE DEPOSIT AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF, INCLUDING WITHOUT LIMITATION ANY QUESTION REGARDING EXISTENCE, VALIDITY OR TERMINATION (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).

 

To the extent that the Company or any of its properties, assets or revenues may have or hereafter become entitled to, or have attributed to it, any right of immunity, on the grounds of sovereignty or otherwise, from any legal action, suit or proceeding, from the giving of any relief in any respect thereof, from setoff or counterclaim, from the jurisdiction of any court, from service of process, from attachment upon or prior to judgment, from attachment in aid of execution or judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of any judgment, in any jurisdiction in which proceedings may at any time be commenced, with respect to its obligations, liabilities or any other matter under or arising out of or in connection with the Shares or Deposited Securities, the American Depositary Shares, the Receipts or the Deposit Agreement, the Company, to the fullest extent permitted by law, hereby irrevocably and unconditionally waives, and agrees not to plead or claim, any such immunity and consents to such relief and enforcement.

 

24. DISCLOSURE OF INTERESTS.

 

When required in order to comply with applicable laws and regulations or the articles of association or similar document of the Company, the Company may from time to time request each Owner and Holder to provide to the Depositary information relating to: (a) the capacity in which it holds American Depositary Shares, (b) the identity of any Holders or other persons or entities then or previously interested in those American Depositary Shares and the nature of those interests and (c) any other matter where disclosure of such matter is required for that compliance.   Each Owner and Holder agrees to provide all information known to it in response to a request made pursuant to this Section.  Each Holder consents to the disclosure by the Owner or other Holder through which it holds American Depositary Shares, directly or indirectly, of all information responsive to a request made pursuant to this Section relating to that Holder that is known to that Owner or other Holder.  The Depositary agrees to use reasonable efforts, at the Company's expense, to comply with written instructions requesting that the Depositary forward any request authorized under this Section to the Owners and to forward to the Company any responses it receives in response to that request. Each Holder and Owner agrees to comply with any applicable law, including in both the United States and Israel, with regard to the notification to the Company of the holding or proposed holding of certain interests in Shares and the obtaining of certain consents, to the same extent as if such Holder or Owner were a registered holder or beneficial owner of Shares. The Depositary is not required to take any action with respect to such compliance on behalf of any Holder or Owner, including the provision of the notification described below. Each Holder and Owner agrees to comply with the provisions of applicable law, including in both the United States and Israel, which may require that persons who hold a direct or indirect interest in 5% or more of the voting securities of the Company (including persons who hold such an interest through the holding of American Depositary Shares) give written notice of their interest and any subsequent changes in their interest to the Company. As of the date of the Deposit Agreement, each Owner and Holder agrees, if it instructs the Depositary to exercise voting rights with respect to Deposited Shares, that it will comply with any applicable Israeli law requiring it to, inter alia, disclose any personal interest it might have in the matter on the agenda of the general meeting. The Company undertakes no obligations to update Section 3.4 of the Deposit Agreement to reflect changes in law that occur after the date of the Deposit Agreement.

 

 

A-22

 

 

Exhibit 4.1

 

 

AGREEMENT

 

Made and Entered into in Tel Aviv on the 11 th of October, 2015

 

  Between: ASIA PITUACH (A.D.B.M.) Ltd.
    Company No. 520036062
    of 7 Jabotinsky Street, Ramat Gan 52520
    (hereinafter: the “ Company ”)
      On the One Part ;
  And: Four Eyes Autonomous Ltd.
    Company No. 515287480
    of Henri Malka Street, Dimona
    (hereinafter: “ 4Eyes ”)
      On the Second Part ;
  And: MAGNA - B.S.P. Ltd.
    Company No. 513066639
    of Henri Malka Street, Dimona
    (hereinafter: “ MAGNA ”)
      On the Third Part;

 

(The Company, 4Eyes and MAGNA shall hereinafter be referred to jointly as the “ Parties ”)

 

Whereas: The Company is a public company, whose shares are traded on the Tel Aviv Stock Exchange Ltd. (hereinafter: the “ Stock Exchange ”); and
   
Whereas : 4Eyes is a private company registered in Israel, engaging in the field of radar research and development based on MAGNA’s tangible and intangible assets in connection with the Car Safety Field through devices installed in the car, including 3D technologies, designated for the market of advanced systems for prevention of road accidents that will be transferred from MAGNA to 4Eyes immediately prior to, and subject to, the Closing of the Transaction and with effect as of the Merger Date, all tax exempt in accordance with the provisions of Section 104A of the Ordinance; and

  

  1  

 

 

Whereas : The Company is interested, on the one hand, based on the representations and undertakings of 4Eyes, as set forth herein, and 4Eyes and MAGNA are interested, on the other hand, based on the representations and undertakings of the Company, as set forth herein, that subject to the fulfillment of the conditions set forth in this Agreement, the Company shall purchase 4Eyes’ entire (100%) issued and paid-up share capital, on a fully diluted basis, in exchange for allocation of Ordinary Shares of the Company, as set forth in section 7 of this Agreement and allocation of Option Warrants (rights to shares) to the holders of Option Warrants, as shall exist in 4Eyes immediately prior to the Closing of this Agreement, all in accordance with the conditions set forth herein (hereinafter: the “ Transaction ” or the “ Merger ”); and
   
Whereas : The Merger is intended for business and financial purposes and by virtue of which and through the Company, 4Eyes shall become a fully owned subsidiary of the public company, the shares of which are listed for trading on the stock exchange; and
   
Whereas : On July 19, 2015 the parties to this Agreement entered into a non-binding principles agreement in the framework of which the parties put into writing the agreements in principle reached among them in connection with the Transaction that shall constitute the basis for a detailed definite agreement among the parties (hereinafter: the “ Principles Agreement ”); and
   

Whereas :

 

The parties wish to determine and define in this Agreement below the web of legal relationships among them based on the principles reached in the Principles Agreement and to embody in writing the terms of the Transaction among them;

 

  2  

 

 

Therefore, it has been agreed, declared and stipulated by and among the parties as follows:

 

1. Preamble, Annexes and Section Headings

 

1.1 The preamble and annexes to this Agreement and the parties’ declarations form an integral part hereof.
     
1.2 The division of this Agreement into sections and subsections and the section headings herein are made for convenience purposes only, and have no, and shall not be taken into account in interpreting this Agreement.

 

2. Definitions

 

The terms set forth in section 2 below shall have the meanings appearing opposite them:

 

  2.1 Approval of Corporate Organs   Approval of the Audit Committee and/or Remuneration Committee, as the case may be, the Company’s Board of Directors and the General Meeting for all the provisions of this Agreement, including approval of the allocation of the securities hereunder in accordance with Sections 274 and 275 of Companies Law;
         
  2.2 General Meeting   The general meeting of the Company’s shareholders, to be convened in accordance with the Private Offering Regulations and the Controlling Shareholder Regulations, for the purpose of approving the Company’s engagement in and performance of this Agreement, including additional engagements and resolutions arising from this Agreement, that require lawful approval of the General Meeting;

 

 

  3  

 

 

  2.3 4Eyes’ Shareholders ” or the Offerees   MAGNA - B.S.P. Ltd;
         
  2.4 Deleted .    
         
  2.5 Transaction Report   The transaction report to be duly published by the Company, for the purpose of approving the Transaction which is the subject matter of this Agreement by the General Meeting (a Condition Precedent for this Agreement) in accordance with the Securities Law made in accordance with the Securities (Transaction between a Company and the Controlling Shareholder therein) Regulations, 5761-2001, which shall also constitute an Exceptional Private Offering, in accordance with the Securities (Private Offering of Securities in a Listed Company) Regulations, 5760-2000, and any other necessary regulations;
         
  2.6 Full Dilution   The Company’s issued and paid-up share capital on the assumption of a full exercise of all the options for purchase of the Company’s shares, Option Warrants, convertible debts and convertible securities and/or undertakings to grant options, shares and Option Warrants, into shares of the Company and on the assumption of consummation of all the transactions and acts which are the subject matter of this Agreement (including exchange of the Option Warrants to be allocated in 4Eyes and/or shares of 4Eyes for Option Warrants of the Company and including conversion of the Option Warrants to be allocated in the Company into shares), but without taking into account 1,794,205 Option Warrants that the Company intends to allocate to Mr. Eli Yoresh as part of the shares option Plan to be adopted by the Company following the Closing of the Merger under this Agreement; 2.6The Company’s Cap Table, as of the date of execution of this Agreement and as of the Transaction Closing, and on the assumption that all allocations are made in accordance with this Agreement, is attached hereto as Annex 2.6 ;

 

  4  

 

 

  2.7 Canceled .    
         
  2.8 Financial Statements   The Annual Report (as such term is defined in section 2.9 below) and the Company’s last reviewed interim Financial Statements as of June 30, 2015.
         
  2.9 Annual Report ”“   The Company’s Annual Report for 2014, and all parts thereof, published by Magna on March 24, 2015 (Ref. No.: 2015-01-059803).
         
  2.10 Canceled .    
         
  2.11 4Eyes Pro-forma Reports   The pro-forma reports of 4Eyes that will be attached as Annex 2.11 by the Closing Date hereof. Such pro-forma reports reflect 4Eyes’ assets and results of operations for the relevant period, had such reports been prepared by 4Eyes on the relevant dates.2.11 The reports will be prepared in accordance with generally accepted accounting standards and the provisions of the Securities Law and the regulations promulgated thereunder;
         
  2.12 Incumbent Directors   The directors serving on the Company’s Board of Directors on the signing date of this Agreement, namely Avishay Cohen (External Director), Zeev Lowenberg (External Director), Eliyahu Yoresh, Ron Weisberg and Shoshana Zeig;
         
  2.13 Offerees’ Directors   The list of candidates to be provided by the Offerees, along with the consent of all Offerees, as a single entity, provided, however, that their identities, together with an appropriate affidavit on behalf of each one of them, are provided to the Company prior to the convening of the General Meeting;
         
  2.14 Nominee Company   Israel Discount Bank Nominees Ltd.;
         
  2.15 Lock-up ” or “ Lock-up Provisions   Prevention and/or restriction of acts or transactions in the Allocated Shares (and/or the Option Warrants to be allocated as set forth in sections 7.2 and 8 below, in connection with the Transaction, to the extent relevant), by virtue of the provisions of Section 15C of Securities Law and the Securities (Details with regard to Sections 15A and 15C of the Law) Regulations, 5760-2000, as set forth in section 15 hereof and by virtue of the provisions of any applicable law;

 

  5  

 

 

  2.16 Trustee   Tzvika Bernstein of 102 Capital Management Ltd. or any other trustee agreed upon by the parties.
         
  2.17 Effective Date ” or Transaction Closing Date ” or “ Closing Date”   Three (3) business days following the occurrence of the last of the Conditions Precedent set forth in section 19 below;
         
  2.18 Allocated Shares   35,884,116 shares of the Company (prior to capital consolidation, if such consolidation of capital is made in the Company) to be allocated to MAGNA, that shall form, following their allocation, a holding at the rate of approximately 61.86% of the Company’s share capital, on a fully diluted basis, as such term is defined in section 2.6 above. It is clarified that after the Closing of Merger, the Company intends to allocate 1,794,205 Option Warrants of the Company to Mr. Eli Yoresh, so that following the allocation of such Option Warrants to Mr. Eli Yoresh, the shares allocated to MAGNA shall constitute 60% of the Company’s share capital on a fully diluted basis.
         
  2.19 Purchased Shares   100% of 4Eyes’ equity, on a fully diluted basis, immediately prior to the Transaction Closing Date, excluding Option Warrants in 4Eyes which are allocated in accordance with section 8;
         
  2.20 Agreements with Officeholders or Service Providers   The Services agreements to be signed with Mr. Eli Yoresh, CFO of the Company and Mr. Kfir Silberman, Controlling Shareholder of the Company, by virtue of his holding of 8,505,534 shares of the Company, constituting a holding of about 43.09% of the Company’s issued and paid up share capital as of the signing date of this Agreement (personally and through a company under his control - L.I.A. Pure capital Ltd.).
         
  2.21 Valuation of 4Eyes   The valuation of 4Eyes to be commissioned by the Company from the appraiser BDO Ziv Haft, accountants. For the avoidance of doubt, if the engagement hereunder is concluded, the Company shall bear the costs involved in the preparation of the Valuation of 4Eyes (such amount will be set-off from the Company’s commitment that on the Closing Date, the total amount of cash on hand remaining in the Company is not less that NIS 5,000,000) and in the event that the engagement is not concluded, Mr. Kfir Silberman shall bear such costs and return same to the Company.

 

  6  

 

 

  2.22 Private Allocation   The allocation of the Allocated Shares and the allocated Option Warrants as provided herein, as Private Allocation in accordance with the provisions of the Securities Law.
         
  2.23 Ruling   The tax Ruling in agreement to be received from the Tax Authority that shall grant MAGNA an exemption from tax for the transfer of its assets to 4Eyes, exempt from tax, as provided in Section 104A of the Ordinance and for the transfer by 4Eyes to the Company under the tax exemption provided in Section 103T of the Ordinance;
         
  2.24 Companies Law   The Companies Law, 5759-1999;
         
  2.25 Securities Law   The Securities Law, 5728-1968;
         
  2.26 Business Day   Sundays to Thursdays, each week, other than Jewish holidays and festivals, holiday eves and/or public holidays, provided the majority of the largest four Israeli banks are open for the transaction of business;
         
  2.27 Maintenance Rules   The Maintenance Rules provided in Part IV of the Stock Exchange Rules;
         
  2.28 Option Warrants   2,392,275 non-negotiable option warrants or rights for shares of the Company, each exercisable into one Ordinary Share of the Company, as set forth in section 8 below;
         
  2.29 Deleted .    
         
  2.30 Ordinary Shares of the Company   Ordinary shares of NIS 1 par value each in the Company’s issued and paid-up share capital;
         
  2.31 Ordinary Shares of 4Eyes   Ordinary shares of NIS 0.01 par value each in 4Eyes’ issued and paid-up share capital;
         
  2.32 Placement Memorandum ” or “ Memorandum   Description of 4Eyes’ business, as required under the Private Offering Regulations and in accordance with the First Schedule to the Securities (Details of a Prospectus and Prospectus Draft, its Form and Structure) Regulations, 5729-1969, including its Financial Statements and the schedules to the Placement Memorandum, if any;
         
  2.33 Free and Clear  

With reference to the Allocated Shares : Free, clear and released of any lock-up and/or debt and/or mortgage and/or charge and/or pledge and/or attachment and/or any other indebtedness or right in favor of a Third Party, including the Company’s shareholders, other than the Lock-up Provisions (as such term is defined in section 2.15 above);

 

With reference to the Purchased Shares : Free and clear of any pledge, charge, attachment, debt and/or any right in favor of a Third Party, including MAGNA;

 

  7  

 

 

  2.34 Income Tax Ordinance ” or the “ Ordinance   The Income Tax Ordinance [New Version], 5721-1961 and all the Rules, Regulations, Orders, procedures and determinations promulgated thereunder and any amendments thereto, including specifically the Rules (as defined above), all as may be amended from time to time;
         
  2.35 Misleading Detail   As such term is defined in the Securities Law;
         
  2.36 Third Party ” or “ 3rd Party   Individual/ individuals who is/are not any of the parties to this Agreement;
         
  2.37 Canceled.    
         
  2.38 Conditions Precedent   All the Conditions Precedent set forth in section 19 of this Agreement;
         
  2.39 Interim Period   The period commencing on the signing date of this Agreement and ending on the Effective Date;
         
  2.40 Reporting Regulations   The Securities (Periodic and Immediate Reports) Regulations, 5730-1970;
         
  2.41 “Private Offering Regulations”   The Securities (Private Offering of Securities in a Listed Company) Regulations, 5760-2000;
         
  2.42 “Interested Party Regulations”   The Securities (Transaction between a Company and its Controlling Shareholder) Regulations, 5761-2001;

 

  8  

 

 

3. Purposes of the Agreement

 

The purposes of this Agreement are, inter alia , to determine the conditions for the allocation of the Allocated Shares to MAGNA by the Company and the purchase of the Purchased Shares by the Company, transfer of current control in the Company to MAGNA and appointment of Directors and Officeholders on their behalf.

 

4. Declarations of the Parties

 

The parties declare, each solely with reference to itself, that it has examined its legal and tax situation in connection with this Agreement and the Transaction and that subject to the fulfillment of the Conditions Precedent, they declare that no limitation and/or prohibition and/or prevention exist under the provisions of any agreement, whether verbally or in writing, and no prevention exists under any agreement and/or any law on their part to their entering into this Agreement and performance of their undertakings hereunder and that such parties’ entering into this Agreement and the execution hereof (subject to the fulfillment of all the Conditions Precedent set forth in section 19 below) by them do not and shall not constitute a breach of any undertakings of any of them, as applicable.

 

5. Representations, Declarations and Undertakings of the Company

 

Further to the Company’s declarations set forth in section 4 above, the Company hereby declares and undertakes as follows:

 

5.1 The entering into and performance of this Agreement by the Company do not and shall not constitute a breach of any undertakings of the Company.

 

  9  

 

 

5.2 The Company is a public company, as such term is defined in the Companies Law, and its shares are traded on the Stock Exchange. The Company was duly incorporated and registered under the laws of the State of Israel in 1977 and its number with the Companies Registrar is 520036062. The Company is registered with the Companies Registrar as an active company. The Company has fully and punctually paid all fees and payments due to the Companies Registrar and never received a warning on the intention to declare it a “Law Breaching Company” under the provisions of the Companies Law and is not in any state of breach vis-à-vis the Companies Registrar.
     
5.3 The Company’s updated Articles of Association as of the signing date of this Agreement appears in the Company’s immediate report dated December 28, 2011 [Reference No.: 2011-01-378288].
     
5.4 As of the signing date of this Agreement, the Company’s registered share capital consists of 22,500,000 Ordinary Shares of NIS 1 par value each; and its issued and paid-up share capital consists of 19,736,626 Ordinary Shares of NIS 1 par value each of the Company. At the Company’s General Meeting of shareholders the registered capital of the Company will be increased to 100,000,000 shares of NIS 1 par value each.
     
5.5 As of the signing date of this Agreement, the Interested Parties in the Company by virtue of their holdings in the Company’s shares, as reported by the Company based on the Interested Parties’ notices, are as follows:

 

Name of Interested Party Position in the Company Amount of Shares Holding of Voting Rights in the Company (not on a fully diluted basis)
Kfir Silberman 1 CEO 8,505,534 Approximately 43.09%

 

 

1 Kfir Silberman holds the Company’s shares through L.I.A. Pure capital Ltd. Co.

 

 

 

  10  

 

 

5.6 As of the date of signing this Agreement, Kfir Silberman is the Controlling Shareholder in the Company. Mr. Kfir Silberman shall undertake, following the approval of the Transaction at the General Meeting of MAGNA and prior to the convening of the General Meeting of the Company, to vote in favor of approval of the engagement hereunder at the Company’s General Meeting of shareholders.
     
5.7 As of the signing date of this Agreement: (a) the Ordinary Shares of the Company, included in its issued and paid-up share capital, are listed and traded on the main list of the Stock Exchange and shall remain listed on the main list by the Effective Date; (b) to the Company’s best knowledge, no limitation and/or prohibition and/or prevention exits under the provisions of any law, the Stock Exchange Rules and directives, as at the date of signing this Agreement, with respect to allocation of the Allocated Shares to MAGNA, except for the restrictions imposed pursuant to the Stock Exchange Rules concerning “minimum share price” and “public holdings percentage”; (c) the Company is not aware of any intention to delist the Ordinary Shares from trade and/or prevent the continued trading in the Company’s securities on the Stock Exchange. Notwithstanding the above, on January 19, 2015, the Stock Exchange announced ( see the Company’s notice dated January 19, 2015, Reference No.: 2015-01-014833), that under the Stock Exchange data, immediately following the expiry of the term ending on December 31, 2015, the Company does not comply with the Maintenance Rules due the cause of public holdings value (which at said date were less than NIS 5 million) and the Company was given an extension until June 30, 2015 to cure such state. According to the Stock Exchange notice, a further examination of the Company’s compliance with the Maintenance Rules should be conducted by the Stock Exchange immediately following the end of the quarter ending on June 30, 2015. On the examination date by the Stock Exchange of the public holdings value at the end of Q2, 2015, the Company did comply with the Stock Exchange Rules concerning the Maintenance Rules and therefor its shares were not transferred to trading on the maintenance list.

 

  11  

 

 

5.8 As of the signing date of this Agreement, the Company neither allocated nor committed to allocate to any person and/or entity any Ordinary Shares and/or Option Warrants and/or securities of any kind whatsoever and/or rights to shares and/or other rights and has not received payment on account of the Shares and/or Option Warrants and/or such other securities and/or rights and shall not do so by the Effective Date, unless expressly provided in this Agreement (allocation of Option Warrants as set forth in section 8 below).
     
5.9 At the time of the signing of this Agreement, the Company did not announce any dividends which were not distributed and did not resolve on any distribution of bonus shares which were not distributed.
     
5.10 The Company undertakes, subject to the provisions of any law, that starting from the date of signing this Agreement and until the Closing or the expiry of this Agreement, whichever occur first, the Company’s operations shall be conducted in the ordinary course of business, and shall refrain from any distribution of dividends to its shareholders and issuance of any Company securities, unless expressly stated herein.
     
5.11 As of the signing date of this Agreement, the Directors serving on the Company’s Board of Directors are Messrs. Ron Weisberg (Chairman), Eli Yoresh, Shoshana Zeig , Zeev Lowenberg (External Director) and Avishay Cohen (External Director). Mr. Ido Kna’an serves as internal auditor and Mr. Kfir Silberman as CEO. The senior officeholders in the Company are named in the Company report dated January 7, 2015 “Immediate Report on Senior Officeholders Staff” [Reference No.: 2015-01-006310] (hereinafter, jointly with the Incumbent Directors: the “ Officeholders ”). The Incumbent Directors and the Company’s Officeholders were duly appointed and their employment conditions were duly approved. The Company has no debts and/or liabilities owing to the Incumbent Directors and/or Officeholders beyond the allowances made in the Financial Statement and beyond that stated in Annex 5.11(a) .

 

The employment conditions of all the Officeholders and/or Directors in the Company are consistent with the Company’s duly adopted remuneration policy, in accordance with the Companies Law and the regulations promulgated thereunder, attached hereto as Annex 5.11(b) . Annex 5.11(c) hereto details the employment conditions of all the Company’s Officeholders and Directors.

 

  12  

 

 

5.12 As of the signing date of this Agreement, the Company is holding the subsidiaries listed in Annex 5.12 (the “ Subsidiaries ”). The Company has no obligations, including any commitments to make investments and/or guarantees and/or any other liabilities in and/or towards the Subsidiaries and/or any other company and/or partnership and/or venture. It is agreed that the Company shall act to immediately dissolve the Subsidiaries and file the necessary documents for dissolution of the Subsidiaries within 21 days after the signing date of this Agreement, so as to make sure that the dissolution process commences prior to the Merger Date, and that consequently after payment of the expenses involved in the dissolution of the Subsidiaries (including payment of any sanctions due by a Law Breaching Company and/or any other fines to the Companies Registrar and/or any other entities) in the amount set forth in Annex 5.12 hereto, a cash amount in the sum of NIS 5,000,000 shall remain in the Company on the Closing Date, less the Company’s liabilities set forth herein.

 

The Subsidiaries are free of any liabilities and/or guarantees towards Third Parties and are not in violation of any law and/or provision and/or agreement and/or undertaking, other than their debts to the Companies Registrar and their status as Law Breaching Companies. Other than the dissolution costs set forth in Annex 5.12 , the Company shall not be required to make any other payments and/or incur any other expenses in connection with the Subsidiaries.

 

The Company is holding shares and/or securities of the companies listed in Annex 5.12(a) . The Company has no obligations, including any commitments to make investments and/or guarantees and/or any additional liabilities in and/or towards such companies. Other than that stated in Annex 5.12(a) , the Company does not hold any shares and/or securities whatsoever.

 

5.13 All the material agreements which still bind the Company and/or which include provisions that are in effect as of this day, are set forth in Annex 5.13 hereto and are in effect as of the signing date of this Agreement, and the Company is not fundamentally breaching any agreements and/or undertakings it had assumed and has no genuine concern that any of such agreements may be breached by the Company in a manner likely to cause a revocation of the agreement by the other party thereto.

 

5.14 As of the signing date of this Agreement, except the Ordinary Shares of the Company, the Company has no shares, options, debentures, preemptive rights or other rights to purchase shares that were issued by the Company (or an undertaking to issue such securities) and the Company did not give nor undertook to provide to any Third Party any such right and/or option to purchase shares of the Company or gave or undertook to give any rights thereto.

 

  13  

 

 

5.15 The Company’s public reports as such appear on the Magna system and the Maya site of the Stock Exchange, including the Financial Statements published or to be published in the future by the Company prior to the Closing Date, were and will be prepared, as applicable, in accordance with the relevant provisions of the law on the publication date. The Company published all the reports (including immediate reports) it is required to publish under the law on the due dates and fully and punctually as required under any law, and such reports do not include any misleading and/or inaccurate details.
     
5.16 The Financial Statements which the Company published or shall publish prior to the Closing Date, fully and appropriately reflect and shall reflect, as the case may be, under the provisions of any law and the general accounting principles, the Company’s financial condition, its activities and results, the changes in its share capital and cash flows. Furthermore, the Financial Statements accurately reflect all the Company’s equity, assets and liabilities as of the dates of such Financial Statements, and save for that stated in such Statements, as at the Financial Statements’ dates, such constitute all the assets and/or liabilities of the Company. The Financial Statements were and will be prepared in accordance with International Financial Reporting Standards (IFRS) and the provisions of the Securities Law and the Regulations promulgated thereunder.
     
5.17 All the immediate and other reports published by the Company did not include any misleading details and truly and accurately reflect the Company’s business affairs and its assets and liabilities. Such reports are true, complete and accurate and include all the information concerning the Company required under the law.

 

  14  

 

 

5.18 As of the signing date of this Agreement, the Company has no charges or undertakings to create charges on any of the Company’s assets and/or share capital.
     
5.19 As of the signing date of this Agreement, the Company did not make any guarantees for the debts and liabilities of any Third Parties whatsoever and/or undertook to guarantee the debts and liabilities of any Third Parties whatsoever.
     
5.20 As of the signing date of this Agreement, the Company and/or the Subsidiaries have no debts and/or liabilities, other than those listed in Annex 5.20 hereto.
     
5.21 On the Transaction Closing Date, the Company shall neither have any liabilities vis-à-vis Third Parties nor guarantees for the liabilities of Third Parties. The Company’s cash balance, less liabilities of the Company to Third Parties (including, without limitation, following a deduction of the liabilities set forth in Annexes 5.11(a) , 5.12 and 5.20 ) and/or guarantees provided and/or which the Company has undertaken to provide, shall not be lower than NIS 5,000,000 (the Transaction expenses will be deducted from this amount of NIS 5,000,000). In addition, and without derogating from the aforesaid, the Board of Directors of the Company may start acting to list the Company’s shares for trade in the U.S.A. The total expenses involved in such listing will be paid from the Company’s cash, subject to the fulfillment of the following two conditions in full: (a) After payment of the above expenses and any other expenses agreed upon in this Agreement, excluding the expenses set forth in Annex 14.1 , the net cash amount which remain in the Company shall not be less than at least NIS 5,000,000; (b) The total expenses shall not exceed the amount of NIS 1,000,000.

 

  15  

 

 

5.22 Except as set forth in Annex 5.22 hereto, as of the signing date of this Agreement, the Company has no financial or other obligations to the Interested Parties of the Company or any debts whatsoever, including debts associated with the termination of services of Company Officeholders. The Company has neither provided any guarantee in favor of any of its Interested Parties and/or their affiliates, nor undertaken to indemnify its Interested Parties and/or their affiliates or created, in favor of such Interested Parties and/or affiliates, charges or other securities (other than in connection with Officeholders’ and Directors’ indemnification). For the purpose of this section, affiliates shall include, without limitation, any of the Controlling Shareholders of the Company’s Interested Parties.
     
5.23 As of August 16, 2015, the Controlling Shareholder loan, detailed in Notes 5 and 7 of the Company’s Annual Financial Statements amounts to NIS 3,166,276 and shall be repaid by the Closing Date, with immediate effect prior to the Merger and subject to the completion of the Merger which is the subject matter of this Agreement. The Company is not, and shall not be liable to tax (as such term is defined below) in connection with the Controlling Shareholder loan, from the date of creation of the loan to and including the repayment thereof. The Company was not demanded or shall be demanded in the future to pay any tax whatsoever for the Controlling Shareholder loan and/or repayment thereof. The Company referred in its Financial Statements to the Controlling Shareholder loan in accordance with the relevant tax laws.

 

  16  

 

 

5.24 Except as stated in Annex 5.24 hereto, there are no civil claims or criminal indictments or legal proceedings of any kind, including arbitration proceedings, pending against the Company and/or its Officeholders, by virtue of their positions in the Company. Moreover, there are no criminal indictments or criminal proceedings of any kind, pending against the Company’s Officeholders. To the Company’s best knowledge, it is not aware of any intention to take legal proceedings against the Company and/or its Officeholders in connection with the discharge of their duties, and/or of the existence of any judgment, arbitration award or decision or judicial ruling against the Company and/or its Officeholders, in connection with the discharge of their duties, which were not fully complied with and/or in any criminal proceedings against the Company’s Officeholders.
     
5.25 For the purpose of sections 5.23 - 5.28, the term “tax” shall mean: all taxes, including, without limitation, income tax, corporate tax, capital gains tax, value added tax, levies, purchase tax, customs, municipal taxes, including arnona (rates and taxes) , national insurance charges, fees and any other mandatory payments due to any authority under the law, and including tax withholdings at source under the provisions of any law, in Israel and outside of Israel.
     
5.26 As of the signing date of this Agreement, the Company is registered in the registers of the Income Tax and Value Added Tax authorities and lawfully reports thereto. Attached hereto as Annex 5.26 is the status of the Company’s reporting to such authorities and to any other tax authority. As of the signing date of this Agreement, all payments which the Company was required to pay to the above authorities arising due to causes preceding the signing date hereof, were duly paid by the Company and/or adequate reserves for the payment thereof were made in the Financial Statements.

 

  17  

 

 

5.27 The Company has obtained final tax assessments from the relevant Tax Authorities for all the fiscal years up to 2012. The Company’s deductions file account and income tax file are attached hereto as Annex 5.27 . The Company and/or Subsidiaries did not receive any demand or claim from the Tax Authorities and no negotiations are conducted with the Tax Authorities regarding the open tax assessments.
     
5.28 The Company and Subsidiaries have timely filed all reports, declarations, notices or any other documents required to be filed by them to the Tax and/or other Authorities. All the figures appearing in the Financial Statements as tax debts and/or tax reserves reflect the Company’s tax liability to the Tax Authorities as of the dates in which such were made and the adequate reserves in accordance with generally accepted accounting principles and the Company has no tax liability with respect to the relevant dates which was not reflected in the Financial Statements. All taxes due for payment by Company were fully and punctually paid or are reflected as tax reserves in the Financial Statements. The Company paid advances to the Tax Authorities under any law. The Company is not a party to any proceedings concerning any assessment, protest, appeal or leave to appeal in tax matters. No (open) investigation was or is carried out against the Company and/or its Officeholders by any Tax Authority and the Company is not aware of any intention of any tax or other authority to commence such investigation against the Company in connection with any tax liability of the Company. There is no demand, and to the Company’s knowledge no demand is expected, regarding the payment of any tax, other than current payments regularly and continuously paid by the Company. The tax returns and/or all other reports filed by the Company in connection with its tax liability are true, complete and accurate. None of the Company and/or its Subsidiaries shall be required to pay any taxes for the period ending on the Closing Date, save for payments expressly reserved in the Financial Statements and payments for the period following the Financial Statements’ date.

 

 

  18  

 

 

5.29 As of October 6, 2015, the Company’s cash balance is not less than NIS 4,310,021 (in words: Four million, three hundred and ten thousand and twenty one Israeli Shekels); Details of the Company’s credit and debit balances in the bank accounts maintained by the Company and details of the balances and holdings in the Company’s securities accounts, as of the signing date of this Agreement, are attached hereto as Annex 5.29 . The details of all the Company’s bank accounts, signatory rights and balances therein as of the signing date, are attached hereto as Annex 5.29 .
     
5.30 It is hereby agreed that on the Transaction Closing Date the total amount of cash on hand remaining in the Company shall not be less than NIS 5,000,000 (namely, total (cash) assets, less the Company’s liabilities (including, without limitation, less the liabilities set forth in Annexes 5.11(a), 5.12 and 5.20 ) . The following Transaction costs shall be deducted from the above amount: Payments to attorneys for preparation of the Placement Memorandum, convening of the General Meeting, preparation of the Merger Agreement and for the other legal acts required for the purpose of execution this Agreement, payment to accountants for preparation of the Company’s Financial Statements, payment for the appraiser for making the Valuation and payment to the tax consultant for obtaining the preliminary Ruling from the Tax Authorities, all as set forth in Annex 14.1 . In addition, and without derogating from the aforesaid - the Board of Directors of the Company may start acting to list the Company’s shares for trade in the U.S.A. The expenses involved in such listing will be paid from the Company’s cash, subject to the fulfillment of the following two conditions in full: (a) After payment of the above expenses and any other expenses agreed upon in this Agreement, excluding the expenses set forth in Annex 14.1 , the net cash amount which remain in the Company shall not be less than NIS 5,000,000; (b) The total expenses set forth above shall not exceed the amount of NIS 1,000,000. The Company is aware that in accordance with the Ruling, it is possible that certain limitations shall be imposed on the Company with respect to its holdings in the shares of 4Eyes to be transferred to it, and it undertakes to act in accordance with the Ruling and to refrain from breaching such limitations (if and to the extent such limitations are imposed).

 

 

  19  

 

 

5.31 Deleted.
     
5.32 Deleted.
     
5.33 Except as set forth in Annex 5.33 , as of the signing date of this Agreement, the Company has no employees, no employer - employee relationships between the Company and any of its Officeholders and the Company is not under any duty to report to the National Insurance Institute. Furthermore, the Company shall reach an agreement with all its employees, that subject to the Closing of the Transaction which is the subject matter hereof, the employment of such employees will be terminated and as of such date onwards, the Company shall have no duties and/or obligations vis-à-vis such employees. All the amounts due to the Company’s employees, as set forth in Annex 5.33 under the law or any contract for their employment term and/or its termination, including with respect to salary, bonuses, Income Tax deductions, National Insurance, vacation, vacation redemption rights, convalescence, severance pay, managers’ insurance and provident and pension funds’ payments and other social benefits owing to the employees, were fully paid, or fully reserved in the Financial Statements until the relevant date. There is no legal, contractual and/or other prevention to terminate the employment of any of the Company’s employees by up to thirty (30) days prior notice.
     
5.34 On the Closing Date, all management and/or employment agreements and/or any other undertakings of the Company (if any) towards the Company’s Interested Parties and/or Officeholders and/or employees shall expire or be terminated, after making the final accounting with each of the Service Providers and/or Officeholders and after the latter duly provide their consent to the Company for the aforesaid.
     
5.35 As part of the due diligence conducted by 4Eyes and MAGNA to the Company and/or Subsidiaries and under the demands of 4Eyes and MAGNA, from time to time, the Company shall provide them all the information they may require in order to conduct the due diligence and examination of the Company’s business. For the avoidance of doubt, it is clarified that with reference to the Company’s assets and/or liabilities, full disclosure was provided, as required under the law in the Company’s annual/ periodic/ quarterly Financial Statements, which are published to the public. In addition, the Company shall do its utmost in order that 4Eyes and MAGNA receive answers to all the questions presented, based on the materials provided to them as part of the due diligence. The Company undertakes to immediately inform 4Eyes and MAGNA of any material changes in the representations, starting from signing date up until the Effective Date.

 

  20  

 

 

5.36 Except as set forth in Annex 5.36 hereto, no intermediary, agent, broker, investment banker, investment consultant, financial adviser or any other person or entity, whether or not such entity is employed by the Company, is and/or shall become entitled to brokerage fees and/or commission and/or any other payment from the Company in connection with the Transaction which is the subject matter of this Agreement and/or consummation thereof. The tax liability for payment of the commission set forth in Annex 5.36 shall exclusively apply to the commission recipient. To the extent the commission recipient does not provide an exemption from withholding of tax at source no later than 7 days prior to the Closing Date, to MAGNA’s satisfaction, tax shall be withheld at source from the commission amount at the rates prescribed by law.
     
5.37 Canceled.
     
5.38 The Company is aware that the Offerees and 4Eyes are entering into this Agreement with the Company, inter alia , based on the Company’s representations set forth in this section 5 above and in reliance on the Company’s undertakings set forth in this Agreement. Such representations are correct in any material respect also on the Effective Date (except for representations that by their nature are given and true as at the signing date of this Agreement only).

 

6. Declarations and Undertakings of 4Eyes and MAGNA

 

Further to their declarations as set forth in section 4, 4Eyes and MAGNA each declares, to the best of its knowledge and each solely with reference to itself and 4Eyes, as the case may be, as follows:

 

6.1 The entering into and performance of this Agreement by the Offerees and 4Eyes do not and shall not constitute, subject to the fulfillment of the Conditions Precedent, a breach of any of their undertakings.

 

  21  

 

 

6.2 All the shares of 4Eyes (whose entire issued and paid-up share capital is intended to be transferred to the Company in this Transaction) shall be Free and Clear on the Closing Date.
     
6.3 4Eyes is a private company limited by shares, incorporated in Israel and registered on July 16, 2015 with the purpose of absorbing the car activity assets for merging into the listed company, and its number with the Companies Registrar is 515287480. The Company is registered with the Companies Registrar as an active company and did not receive any notice regarding an intended delisting from the Companies Registrar. Copies of 4Eyes’ certificate of incorporation and incorporation documents updated and true as of the date of signing this Agreement, together with a certification of 4Eyes attorneys as to their being updated and true on the signing date hereof are attached to this Agreement as Annex 6.3 .
     
6.4 As of the signing date hereof, 4Eyes’ registered share capital is NIS 10,000, consisting of 1,000,000 Ordinary Shares of 4Eyes of NIS 0.01 par value each; and the issued and paid-up share capital of 4Eyes consists of 100,000 Ordinary Shares of NIS 0.01 par value each which were allocated to MAGNA for the purpose of absorbing the Car Safety Field activities through devices installed in the Car, under Section 104A of the Ordinance.
     
6.5 MAGNA and the holders of 4Eyes’ Option Warrants, to whom shares and Option Warrants in 4Eyes were allocated and their holdings in the issued and paid-up share capital of 4Eyes as of the signing date hereof are as set forth in Annex 6.5 ;

 

Except as set forth in Annex 6.5 to this Agreement, MAGNA hereby declares that as of the signing date of this Agreement, it does not hold, directly or indirectly, any securities of the Company, and that as of the signing date of this Agreement, there are no agreements of any kind whatsoever, between anyone on behalf MAGNA, and the holders of shares in the Company and/or the holders of securities in the Company, with respect to the purchase or sale of securities of the Company or the voting rights therein or in connection with MAGNA’s future rights to the Company’s shares;

 

  22  

 

 

6.6 As of the signing date of this Agreement, other than the Ordinary Shares, 4Eyes did not issue any shares, options, debentures, preemptive rights or other rights to purchases shares (or made any undertaking to issue such securities); 4Eyes did not undertake to allocate to any person and/or entity any Ordinary Shares and/or Option Warrants to purchase shares and/or securities of any kind whatsoever and/or rights to shares and/or other rights of 4Eyes and did not receive payment on account of the Shares and/or Option Warrants and/or such other securities and/or rights, and shall not do so by the Effective Date, unless expressly provided in this Agreement.
     
6.7 The Directors of 4Eyes are: Chaim Siboni, Tzur Dat and a representative of Aeronautics Ltd.
     
6.8 4Eyes’ intellectual property and the rights to its intellectual property are detailed in the Placement Memorandum.
     
6.9 4Eyes did not announce any dividends which were not distributed and the Board of Directors of 4Eyes did not resolve on any distribution of bonus shares and/or dividends which were not distributed.
     
6.10 4Eyes’ Pro-forma Reports were prepared in accordance with generally accepted accounting principles and give a fair and accurate report of 4Eyes’ financial condition, assets and liabilities as at the dates set forth therein and the results of its operations for the periods therein referred, as if the assets and operations of 4Eyes existed and took place in 4Eyes during the relevant periods. The Company’s Financial Statements will be appended by the date of convening the General Meeting, as Annex 6.10 to this Agreement.

 

 

  23  

 

 

6.11 Upon conclusion of preparation of 4Eyes’ Financial Statements, MAGNA shall provide its representation with regard to the equity of 4Eyes as of June 30, 2015.
     
6.12 Since the signing date of 4Eyes’ Pro-forma Reports, no material adverse change occurred in anything relating to 4Eyes, and MAGNA and 4Eyes are not aware of any such event which may lead to any such adverse change.
     
6.13 4Eyes’ reports were prepared in accordance with International Financial Reporting Standards (IFRS) and the provisions of the Securities Law and the Regulations promulgated thereunder.
     
6.14 To the report prepared for the convening of a meeting of the Company’s shareholders for the approval of the Transaction and all other necessary acts provided in this Agreement, if and to the extent the approval of the meeting is required for such acts, the Placement Memorandum of 4Eyes shall be attached, prepared in accordance with the provisions of the Securities Law and the Regulations promulgated thereunder, as well as 4Eyes’ Financial Statements as of July 16, 2015 (and to the extent so required under the provisions of the Securities Law and the Regulations promulgated thereunder, 4Eyes’ reports will be updated and made to the dates prescribed under the provisions of the Securities Law and the Regulations promulgated thereunder).
     
6.15 As part of the due diligence conducted in 4Eyes by the Company and in accordance with the Company’s demands, as such may be prior to the date of publication of the invitation for convening the General Meeting, 4Eyes and/or the Offerees, as the case may be, have and/or shall transfer, as the case may be, to the Company all the relevant information, data and knowledge which the Company needs in order to conduct the due diligence and investigation of 4Eyes’ business and no relevant information was withheld and it has no knowledge of any missing information which might materially influence the judgement of a reasonable person making decision as to the entering into this Agreement. Furthermore, they have and are making their best efforts that the Company will receive answers to all the questions which the Company has or will present, either alone or through others, such as attorneys, accountants, appraisers, etc., based on the materials provided or to be provided to the Company as part of the due diligence. 4Eyes is aware that the Company is entering into this Agreement in reliance on the representations set forth in section 6 above. For the avoidance of doubt it is clarified, that nothing in the aforesaid may exculpate and/or derogate from their liability for the representations provided by them in this Agreement. 4Eyes undertakes to immediately inform the Company of any material changes in the representations, starting from signing date up until the Effective Date.

 

 

  24  

 

 

6.16 As of the signing date of this Agreement, no charges are registered on the assets of 4Eyes in the registers of the Companies Registrar and/or Register of Pledges and/or Lands Registrar and no charges or undertakings to create further charges are imposed on any assets of 4Eyes.
     
6.17 As of the signing date of this Agreement, no guarantees or undertakings to provide guarantees to any Third Parties were given prior to the Closing of the Transaction.
     
6.18 As of the signing date of this Agreement, 4Eyes has not taken any loans and has no undertakings towards Third Parties, other than the undertakings arising from this Agreement, including attorneys’ and accountants’ fees and additional costs in the amount of up to NIS 150,000 plus VAT that will be paid by the Company and from its cash balance in addition to the expenses set forth in Annex 14.1 , even if the Transaction is not closed for any reason whatsoever. In the event that the Transaction is closed, the amount set forth in Annex 17.2.15 (as well as the amounts set forth under Annex 14.1 ) will be deducted from the cash amount of NIS 5 million remaining with the Company on the Closing Date.
     
6.19 Save as detailed in the Placement Memorandum, on the Closing Date there shall be no current or future financial liabilities of any of the Offerees towards 4Eyes and/or of 4Eyes towards any of the Offerees.
     
6.20 4Eyes and the Offerees shall provide the following, within 30 days after the signing of this Agreement: 1) The final duly prepared Placement Memorandum, as defined in section 2 above, and 2) 4Eyes’ Pro-forma Reports (to the extent such are required), including as of June 30, 2015, prepared in accordance with International Financial Reporting Standards (IFRS) and in accordance with the provisions of the Securities Law and the Regulations promulgated thereunder, signed by the competent organs (hereinafter: “ 4Eyes Pro-forma Reports ”) as at the dates required for preparation of the Placement Memorandum in accordance with the Private Offering Regulations (and any amended reports thereto as may be required).
     
6.21 The Placement Memorandum (excluding the Valuation to be attached thereto) to be filed for approval of the Company’s organs and published by means of an immediate report (including the Reports of 4Eyes and the Placement Memorandum Annexes (if any) will be appended as Annex 6.21 to this Agreement and shall form an integral part of the declarations and representation of both 4Eyes and the Offerees under this Agreement. The parties’ execution of this Agreement constitutes their consent for publication of the Placement Memorandum as described above.

 

  25  

 

 

6.22 No material details shall be omitted from, and no Misleading Details shall be included in the Placement Memorandum and it shall be prepared in accordance with the provisions of the Securities Law and the Regulations promulgated thereunder.

 

MAGNA will declare, upon the signing of the Placement Memorandum, that such Memorandum contains all the relevant information necessary about 4Eyes’ operation under the provisions of the Securities Law and the Regulations promulgated thereunder and that it includes no Misleading Details as such term is defined in the Securities Law and the Regulations promulgated thereunder.

 

6.23 Following the submitting of the Placement Memorandum for approval by the Company’s organs, 4Eyes shall do nothing which is not in the ordinary course of business or likely to have material adverse effect on the state of its business, equity, profitability, assets and/or liabilities. 4Eyes shall keep the Company informed of any such changes.
     
6.24 The Offerees are aware, that by virtue of the provisions of Section 15C of the Securities Law and as provided in section 15 below, transactions in the Allocated Shares allocated thereto by the Company, as part of the Transaction which is the subject matter of this Agreement, may be subject to limitations and/or restrictions and they undertake to comply with any limitations imposed upon them by said Section and to refrain from making any transactions with such shares which may be considered as a public offering of these shares, contrary to the provisions of the law.

 

 

  26  

 

 

6.25 The Offerees are aware that in addition to and separately from the Lock-up Provisions under the provisions of the Securities Law, the Allocated Shares may be locked in accordance with the provisions of the Ruling and they agree that such Lock-up shall apply to the entire period determined in the Ruling, subject to their approval and consent to the final version of the Ruling.

 

In addition, MAGNA shall undertake not to sell any of the shares that will be allocated to it under this Agreement for a period of 24 months following the Transaction Closing Date (hereinafter: the “ Contractual Lock-up Period ”). For securing MAGNA’s contractual obligation to refrain from selling its shares, such shares will be deposited during the Contractual Lock-up Period with a Trustee, so that only at the expiry of 24 months following the Transaction Closing Date, such shares shall be transferred from the Trustee to MAGNA and MAGNA would be able to sell its shares in the Company subject to the provisions of any law.

 

It is, however, clarified that subject to any law and the Ruling, MAGNA may sell up to 5% of its holdings in the shares of the Company (hereinafter: the “ Released Shares ”) and such Released Shares will be transferred to MAGNA at its request.

 

6.26 Subject to the fulfillment of all the Conditions Precedent as set forth in this Agreement, MAGNA and 4Eyes (in respect of the undertakings each of them assumes hereunder): (a) has full corporate authority to enter into this Agreement; and (b) is not subject to any limitation and/or prohibition and/or prevention on its entering into this Agreement and performing its undertakings hereunder; and (c) no Third Party approvals or consents are required in connection with the signing of this Agreement or performance of its provisions; and (d) the entering into or performance of this Agreement shall not constitute a breach of any existing and/or contingent undertakings of 4Eyes and/or MAGNA towards any Third Parties whatsoever, including among themselves, under any existing shareholders’ agreements, if any, or the Articles of Association of 4Eyes.
     
6.27 4Eyes and MAGNA are aware that the Company is entering into this Agreement with them, inter alia , based on the representations set forth in this section 6 above and in reliance on their respective undertakings set forth in this Agreement. Such representations would be correct in any material respect also as of the Effective Date (except for representations that by their nature are given and are true as of the signing date of this Agreement only).

 

  27  

 

 

7. The Transaction

 

On the Closing Date, subject to the fulfillment of the Conditions Precedent set forth in section 19 below, the following acts shall be performed:

 

  7.1 Purchase of 4Eyes Shares

 

In exchange for the allocation as set forth in section 7.2 below, the Company shall purchase the Purchased Shares, being Free and Clear.

 

  7.2 Allocation of the Allocated Shares

 

On the Transaction Closing Date, and in exchange for the transfer of the Purchased Shares to the Company, the Company will allocate the Allocated Shares to MAGNA (and also allocate the Option Warrant as set forth in section 8 below), as follows:

 

Allocation of the Allocated Shares : The Company will allocate the Allocated Shares to MAGNA, being Free and Clear. Allocation of the Allocated Shares shall be made in accordance with the Cap-Table, as set forth in Annex 7.3 attached to this Agreement.

 

7.2.1 Deposit of Allocated Shares with the Trustee to secure the provisions of the tax Ruling : On the Closing Date, the Company will allocate the Allocated Shares and immediately upon such allocation they will be transferred to a Trustee to be chosen by MAGNA, with whom an escrow agreement will be entered in the form to be appended prior to the Transaction Closing Date (such Trustee will be responsible for opening the Escrow Account), this, for the purpose of compliance with the Lock-up Provisions by virtue of the Ruling and/or the Ordinance and in order to ensure compliance with any other acts required under the Ruling. Together with and subject to the allocation of the Allocated Shares to MAGNA, MAGNA will sign an appropriate indenture concerning compliance with the provisions of the Ruling and the deposit of the Allocated Shares with the Trustee. It is also clarified, that subject to that stated in the Ruling, the voting rights by virtue of the shares so allocated to MAGNA shall be maintained by MAGNA and it shall vote such shares by means of instructions to be given to the Trustee holding the shares in trust, in accordance with the provisions of the escrow agreement or any special and separate instruction directly given to the Trustee (by each of the shares/options holders) at his/its discretion, subject to the provisions of any applicable law.

 

  28  

 

 

Moreover, on the Closing Date, the shareholders of the Company listed in Annex 7.2.1 as such will be attached to this Agreement no later than 3 business days prior to the Closing Date, will deposit with the Trustee any shares remaining in their hands immediately prior to the General Meeting and these shareholders will sign an appropriate indenture regarding compliance with the provisions of the Ruling. In this context, it is noted that the Company and the Controlling Shareholder shall see to it, that to the extent that prior to the Transaction Closing Date any shareholders of the Company are considered as shareholders subject to the Lock-up restrictions by virtue of the Ordinance (as such term is defined below), then such securities held by the said shareholders shall be also deposited with the Trustee and they too will sign the appropriate indenture as aforesaid.

 

In that regard, shareholders who are subject to the Lock-up restrictions by virtue of the Ordinance mean:

 

Controlling Shareholders, as such term is defined in the Ordinance (excluding a provident fund and mutual fund), namely a person who holds or is entitled to acquire, directly or indirectly, alone or together with his/her relative, one of these: (1) at least 5% of the Company’s issued share capital; (2) at least 5% of the voting power in the Company; (3) the right to receive at least 5% of the Company’s profits or of its assets upon winding up; (4) the right to appoint a director. As to the manner of calculation of such rights, for example, holding of 5% of the Company’s issued and paid-up share capital prior to the Transaction Closing Date, means, shareholders that will hold, following the Transaction Closing Date, for example, shares equivalent to 5% of the Company’s issued and paid-up share capital, prior to the Transaction Closing Date.

 

Notwithstanding the foregoing, provided that under the Ruling, MAGNA is entitled to immediately sell 10% of the share capital allocated to it in the Company on the Closing Date, MAGNA agrees to transfer to the shareholders of the Company (including shareholders who purchase shares in the framework of capital raising and/or such shareholders considered subject to the Lock-up restrictions by virtue of the Ordinance) whose shares are locked as aforesaid, the right, pro-rata among them, to sell locked shares, in the amount of 5% of the share capital allocated to MAGNA in the Company (hereinafter: the “ Transferred Rights ”). It is clarified that 50% of the Transferred Rights (as defined above) to sell shares will be transferred to the holders of Option Warrants and 50% of the Transferred Rights (as defined above) will be transferred to the shareholders of the Company.

 

 

  29  

 

 

7.3 The shares allocated to MAGNA (other than the Released Shares) will be allocated in the name of the Nominee Company to the credit of a bank account to be opened by the Trustee, to the benefit of the Offeree MAGNA (hereinafter: the “ Escrow Account ”) and held in trust by the Trustee, in the Escrow Account, to the benefit of the Offeree according to an agreement to be entered between them by the Closing Date, for securing the Contractual Lock-up hereunder, as such term is defined in section 7.5 below.
     
7.4 It is agreed that the cost value, for tax purposes, to be provided by the Company to the Nominee Company, will be the value provided to the Company by MAGNA, at least three days prior to Closing Date and in accordance with the conditions of the Ruling obtained by MAGNA. Notwithstanding the above, to the extent that MAGNA delivers a certificate from the Tax Authorities concerning the cost value for tax purposes, as provided by the Company to the Nominee Company, then the Company shall issue a notice on the cost value in accordance with such certificate.

 

  7.5 The Allocated Shares will be allocated to the Offerees in accordance with the Ruling, being Free and Clear (except that such shares are subject to the Lock-up Provisions as defined above and to the Contractual Lock-up conditions as set forth in section 6.25 above (hereinafter and herein below: the “ Contractual Luck-up ”)) and except with respect to their undertaking (namely, any of them bound by such restriction under the law and/or the Ruling) not to breach the provisions of the Ruling and in consideration thereof the Offerees shall transfer to the Company 100% of 4Eyes’ issued and paid-up share capital, being Free and Clear.

 

 

  30  

 

 

8. Allocation of Option Warrants to Service Providers of 4Eyes

 

8.1 Immediately prior to the Closing, 4Eyes shall allocate Option Warrants to Victor Tshuva & Co. for the services provided to 4Eyes as set forth in Annex 8.1 , with immediate effect prior to the Merger Date (Pursuant to Section 3(i) of the Income Tax Ordinance). The Option Warrants in 4Eyes and/or the shares resulting from the exercise thereof shall be non-negotiable and non-transferable and/or non-saleable and may be exclusively used for exercising the Company’s Options. As part of the Merger and on the Transaction Closing Date, the Company will allocate to Victor Tshuva & Co. Option Warrants conferring non-negotiable and non-transferable and/or non-saleable rights into Company shares, the receipt of which by Victor Tshuva & Co. and the exercise thereof shall only be done by way of stock exchange of 4Eyes shares for Company shares. Upon exercising 4Eyes’ Option Warrants into 4Eyes’ shares, the shares of 4Eyes shall be automatically exchanged into Company shares, as part of the exercise of the rights into Company shares that shall be allocated to Victor Tshuva & Co. (pursuant to Section 3(i) of the Income Tax Ordinance), which were substituted for the Option Warrants allocated to them in 4Eyes (hereinafter: the “ Option Warrants’ Holders ”). The terms and conditions underlying the Option Warrants and any adjustments therein and including the amount of such Option Warrants are set forth in Annex 8.1 attached to this Agreement.

 

It is agreed that the process by which the Option Warrants are exercised will be as follows: the Option Warrants’ Holders in 4Eyes shall exercise their Option Warrants, at their discretion, into shares of 4Eyes and in consideration for the shares of 4Eyes, the 4Eyes Option Warrants’ Holders will automatically receive shares of the Company as part of the exercise of the options in the Company. The Company shares resulting from the exercise of the rights into shares as aforesaid shall be listed for trade on the Stock Exchange and shall be transferable subject to any law and the Ruling.

 

9. Replacement of Directors

 

On the Effective Date, and subject to the approval of the General Meeting of Company’s Shareholders, up to 4 additional members will be appointed to the Company’s Board of Directors, the identity of whom will be determined by MAGNA by written notice to be delivered immediately prior to the date of publication of the report prepared for the convening of the General Meeting of the Company’s shareholders. The necessary written consents and declarations of the new Directors will be attached to said notice as required under the provisions of any law. Mr. Chaim Siboni will be appointed as CEO of the Company.

 

Simultaneously, and in the framework of convening such General Meeting, the Company will announce the termination of service of the following Directors: Mrs. Shoshana Zeig and Ron Weisberg; and subject to the approval of the Meeting for: (a) termination of service of the above Directors, and (b) appointment of the new Directors, the Company will be provided with a letter of irrevocable waiver of any claims, suits or demands against the parties hereto, in the form attached to this Agreement as Annex 9 . It is clarified that subject to their appointment by the Meeting, the compensation of the Directors so appointed will be in the minimum amount prescribed under the Companies (Rules Regarding Compensation and Expenses for External Directors) Regulations, 5760-2000;

 

 

  31  

 

 

10. Appointment of CEO and his Employment Conditions; Transferred Employees

 

10.1 On the Effective Date, the Company’s current CEO, Mr. Kfir Silberman, will provide a notice of his resignation from the position of CEO and such notice shall take immediate effect, and deliver a letter of irrevocable waiver of any claims, suits or demands against the parties hereto, in the form attached to this Agreement as Annex 10.1 .
     
10.2 Simultaneously with the notice of the current CEO of his resignation from his position, Mr. Chaim Siboni will be appointed as CEO of the Company. The employment and service conditions of Mr. Chaim Siboni as CEO of the Company will be in accordance with the employment agreement entered with him and as agreed upon by the parties prior to the date of convening the General Meeting of the Company’s shareholders and will be attached hereto as Annex 10.2 , all subject to approval of his employment and service conditions by the competent corporate organs, including the approval of the General Meeting of Company shareholders, as provided in section 17 below.
     
  10.3 The Company shall enter into a consultation agreement with Mr. Kfir Silberman in the form agreed upon by the parties prior to the date of convening the General Meeting of the Company and attached as Annex 10.3 hereto.
     
  10.4 The Company shall enter into an agreement pursuant to which Mr. Eli Yoresh will continue to provide services to the Company in the position of CFO or equivalent, in the form agreed upon by the parties prior to the date of convening the General Meeting of the Company and attached as Annex 10.4 to this Agreement.

 

 

  32  

 

 

11. Exculpation and Indemnification Letters

 

On the Effective Date, and subject to the approval of the Company’s General Meeting of shareholders, the Directors and Officeholders to be appointed on the Effective Date will be given exculpation and indemnification letters in the forms attached hereto as Annex 11 (or in a form otherwise agreed upon among the Company, the Controlling Shareholder and MAGNA), including on the issues deriving from the Placement Memorandum, Valuation of 4Eyes and the private allocation and in addition, on the Effective Date such new exculpation and indemnification letters will be given to all Directors and Officeholders of the Company, including any of them who are considered to be Controlling Shareholders. As part of the invitation published by the Company on the convening of the General Meeting for approval of the Transaction which is the subject matter of this Agreement, and subject to the Meeting’s approval, it will be approved that the existing and future Directors and Officeholders of the Company from time to time, including Directors and Officeholders of the Company who are considered to be Controlling Shareholders, will be entitled to such exculpation and indemnification letters in the above form, all subject to the provisions of any law.

 

12. Directors’ and Officeholders’ Liability Insurance

 

On the Effective Date and subject to the approval of the General Meeting of shareholders:

 

12.1 The existing Directors’ and Officeholders’ liability insurance policy will be extended to include the Company’s new Directors and Officeholders as well as additional Directors and Officeholders to the extent any such additional Directors and Officeholders are added to the Company and 4Eyes from time to time. In case the existing insurance status is not altered, the said policy terms and conditions will be as detailed in Annex 12.1 .
     
12.2 The Company will maintain a Run-Off Directors’ and Officeholders’ liability insurance policy for events occurring prior to the Effective Date, this from the Effective Date and onwards for a period of seven (7) years and under such conditions and scope of not less than the conditions of the Company’s existing policy as of the signing date of this Agreement. Such insurance policy shall cover the Directors and Officeholders who served in the Company prior to the Effective Date.

 

13. Increase of the Company’s Registered Share Capital and Amendment of the Articles of Association

 

13.1 On the Effective Date and subject to the approval of the General Meeting of shareholders of the Company and as one of the Conditions Precedent for Closing the Transaction, the Company’s registered share capital will be increased to 100,000,000 Ordinary Shares of NIS 1 par value each.
     
13.2 In addition, in the framework of convening the General Meeting, the matters on the agenda of which are set forth in section 17.2 below, one of the matters will be the replacement of the Company’s Articles of Association in accordance with the version attached to this Agreement as Annex 17.2.6 , unless MAGNA resolves to waive such replacement of the Articles of Association.

 

  33  

 

 

14. Repayment of Owners’ Debt Balances to the Company

 

14.1 After the signing of this Agreement, the Company shall act to take any necessary actions for securing repayment to the Company of any debts owing by the owners, so that following the Transaction Closing, the net equity of the Company, in cash, less the Company’s liabilities (including, without limitation, deduction of the liabilities set forth in Annexes 5.11(a), 5.12 and 5.20 ), will amount to no less than NIS five (5) million in cash. The following Transaction expenses will be deducted from the above amount: Payment of attorneys’ fees for preparation of the Placement Memorandum, convening of the General Meeting, preparation of the Merger Agreement and other legal acts required for the purpose of execution of this Agreement, payment to accountants for preparation of the Company’s Financial Statements, payment for the appraiser for making the Valuation and payment to the tax consultant for obtaining the preliminary Ruling from the Tax Authorities, all as set forth in Annex 14.1 .
     
14.2 Repayment of the shareholders’ loan balance shall be completed immediately prior to the Transaction Closing and constitute a condition for such Closing.

 

15. Prevention or Restriction of Transactions in the Allocated Shares

 

The general lock-up provisions provided under any law including the Lock-Up Provisions provided in Section 15C of the Securities Law, 5728- 1968 shall apply to the securities offered under this Agreement.

 

 

  34  

 

 

16. Interim Period

 

16.1 The following provisions shall apply in the period commencing on the signing date of this Agreement and up until the Closing Date or expiry of this Agreement, whichever occurs first (hereinafter: the “ Interim Period ”), unless the other parties’ prior written consent to act otherwise is obtained and except for the execution of any acts expressly permitted hereunder:
     
16.1.1 4Eyes will be managed in the ordinary course of its business and no acts or undertakings will be taken which may adversely affect the Company’s financial condition;
     
16.1.2 The Company shall not effect any transactions that may result in changes in the declarations and representation set forth above, to the extent such transactions are under its control, and no acts or undertakings shall be taken which may adversely affect the Company’s financial condition;
     
16.1.3 Neither the Company nor 4Eyes shall modify its capitalization and/or Articles of Association, other than as set forth herein;
     
16.1.4 Neither the Company nor 4Eyes shall effect transactions in which any of the Officeholders and/or Interested Parties therein are personally interested, including modifications of employment conditions and save as provided in this Agreement;
     
16.1.5 Neither the Company nor 4Eyes shall allocate new shares or distribute options or rights to shares and shall not change the exercise prices and/or exercise amounts of the existing convertible securities in the Company, save as set forth in this Agreement;
     
16.1.6 Neither the Company nor 4Eyes shall make and/or undertake to make any investment, including investments in the Company/ 4Eyes, as the case may be, and/or in any partnership and/or venture and/or share capital and/or other rights and shall not purchase assets and/or bind itself in any undertakings whatsoever;
     
16.1.7 Neither the Company nor 4Eyes shall alter the rights attached to their respective shares;
     
16.1.8 Neither the Company nor 4Eyes shall conduct a “distribution” (as such term is defined in the Companies Law);

 

  35  

 

 

16.2 During the Interim Period, each party will inform the other party in writing of:

 

16.2.1 Any notice of a party alleging that such party’s consent is required for the Closing of the Transaction and was not included in the representations set forth in this Agreement;
     
16.2.2 Any claim, demand or contention against any of the parties, which came to its knowledge or instituted against such party during the Interim Period and was not included in the representations set forth in this Agreement;
     
16.2.3 Any material change in the correctness of the representations provided by them, in this Agreement, the ancillary agreements or annexes thereto and any material change, material event or change or occurrence which may adversely affect their activities or business;
     
16.2.4 Any material adverse change in any of the representations provided by any of the parties hereunder and/or the business and/or financial condition of the Company and/or 4Eyes, which may influence the Company and/or 4Eyes and/or their equity and/or assets and/or liabilities;

 

16.3 The parties shall cooperate and provide any information required by the Company for the purpose of reporting to the Securities Authority and/or the Stock Exchange and the Company’s shareholders in connection with this Agreement. Moreover, during the Interim Period, the parties shall act jointly and assist one another as far as possible, all in order to advance the fulfillment of all the Conditions Precedent.

 

 

  36  

 

 

17. Acts to be Performed prior to the Effective Date

 

From the date of signing this Agreement until the Effective Date:

 

17.1 The Company will prepare and publish invitation documents for the convening of the General Meeting of the Company and the required reports concerning the Transaction and the various engagements detailed in this Agreement, including publication of a Transaction Report, in accordance with the Securities Law, the Securities (Transaction between a Company and the Controlling Shareholder therein) Regulations, 5761-2001, which shall also constitute an Exceptional Private Offering, in accordance with the Securities (Private Offering of Securities in a Listed Company) Regulations, 5760-2000, and any other necessary Regulations (the “ Transaction Report ”). The Transaction Report will also include the Company’s Pro-forma Report, in accordance with the provisions of Regulation 9A of the Reporting Regulations to the extent such are required under the said Regulations. 4Eyes shall assist the Company to prepare a due operations memorandum of 4Eyes under the provisions of the Securities (Details of a Prospectus and Draft Prospectus - its Form and Structure), 5729-1968 (the “ Memorandum ” or “ Placement Memorandum ”). 4Eyes will also fully cooperate as appropriate under the circumstances in connection with the preparation of all the necessary documents required for performance of the Agreement and execution of the Transaction.
     
17.2 Subject to receipt of all documents required for convening the General Meeting, as provided in the Securities Law and/or the relevant Regulations promulgated thereunder, including, without limitation, the Private Offering Regulations, the Reporting Regulations and Interested Party Regulations (namely, a final Memorandum ready for reporting, audited and reviewed Financial Statements prepared under the requirements of the Law and a final Valuation) prior to and by no later than November 10, 2015 , the Company will convene the General Meeting, prior to and by no later than December 15, 2015 . In the General Meeting all the Transactions set forth in this Agreement will be duly presented for the approval of the Company’s shareholders, in accordance with the Transaction Report (“ Approval of the General Meeting ”), including:

 

17.2.1 Approval of the Transfer of Assets Agreement between MAGNA and 4Eyes.
     
  17.2.2 Approval of the purchase of 4Eyes’ shares.
     
17.2.3 Approval of the Services Agreement between MAGNA and 4Eyes that will be attached hereto as Annex 17.2.3 .
     
17.2.4 Approval for execution of allocation of the Allocated Shares to the Offerees and of the Option Warrants to the Service Providers of 4Eyes.

 

  37  

 

 

17.2.5 Increase of the Company’s Registered Share Capital and amendment of the Articles of Association accordingly, as shall be required for the Transaction Closing and in accordance with the provisions of section 13.2 above.
     
17.2.6 Replacement of the Company’s Articles of Association with such Articles of Association to be appended, to MAGNA’s satisfaction, by the convening date of the Company’s General Meeting as Annex 17.2.6 hereto.
     
17.2.7 Approval of appointment of the Offerees’ Directors and 4Eyes on the Closing Date to the Company’s Board of Directors, instead of the Directors Mrs. Shoshana Zeig and Mr. Ron Weisberg.
     
17.2.8 Approval of the appointment of Mr. Chaim Siboni as CEO of the Company (the current CEO will leave his position) and approval of the terms and conditions of the CEO’s service and employment in accordance with the agreement entered with him and as required under the law.
     
17.2.9 Approval to provide exculpation and indemnification letters to the Directors and Officeholders on behalf of the Offerees in the form attached hereto as Annex 17.2.9, by the date of convening the General Meeting of the Company, including on the issues deriving from the Placement Memorandum, the Valuation of 4Eyes and the allocation to the Offerees.
     
17.2.10 Inclusion of the Offerees’ Directors in the Company’s Directors’ and Officeholders’ liability insurance policy, attached to this Agreement as Annex 17.2.10 ; or approval of the Company’s entering into a Directors’ and Officeholders’ liability insurance policy, that will include the Directors and Officeholders appointed on behalf of the shareholders of 4Eyes and certification from the relevant insurer for procuring such insurance policy, provided the Closing takes place.
     
17.2.11 Approval of the Company’s entering into a Run-Off Directors’ and Officeholders’ liability insurance policy and certification from the relevant insurer for procuring such insurance policy, provided the Closing takes place.

 

 

  38  

 

 

17.2.12 Approval of the Company’s entering into the Services Agreement with Mr. Kfir Silberman.
     
17.2.13 Approval of the Company’s entering into the Services Agreement with Mr. Eli Yoresh in the position of CFO or equivalent.
     
17.2.14 Change of the Company’s Name to פור אייז אוטונומוס אחזקות בע”מ (in Hebrew), and in English: Four-Eyes Autonomous Holdings Ltd., or any similar name to be chosen by the Offerees, provided such name is approved by the Companies Registrar and the Company’s Articles of Association is accordingly amended.
     
17.2.15 Approval for payment of all the Transaction expenses of 4Eyes, including attorneys’ and accountants fees and any Transaction expenses as set forth in Annex 17.2.15 , that will be provided to the Company prior to the convening of the General Meeting of the Company and the Company’s expenses as set forth in Annex 14.1 .

 

All the aforesaid, as a transaction between the Company and the Controlling Shareholder therein having a personal interest in such transaction and as an Exceptional Private Offering.

 

It is clarified that as part of the approval by the General Meeting, the Company’s management shall provide its approval and consent to take all necessary acts, in order to consummate and execute the resolutions presented for its approval as aforesaid, based on the principles set forth in the Transaction Report, including authorizing the Company’s management, with approval of the audit committee, to extend the Deadline by which the Conditions Precedent need to be fulfilled or waive any of the Conditions Precedent, provided that at the audit committee’s discretion, such changes or consents are not likely to adversely affect the Transaction conditions pertaining to the Company and that waiver of any of such conditions is not required under the law.

 

17.3 The Company will approach the Stock Exchange for receiving its confirmation for listing the Allocated Shares and the shares resulting from the exercise of the Option Warrants for trade as set forth in sections 7.2 and 8, respectively.
     
17.4 The Company will act to publish any additional reporting with reference to the Transaction as required under the law.
     
17.5 The Company will file the Ruling application, as such term is defined above, within 15 days of the signing date of this Agreement.

 

17.5.1 The Company will inform 4Eyes in writing on the completion of the due diligence of 4Eyes in the legal, property, accounting, tax, financial, valuation, etc. aspects by the Company, to its satisfaction, prior to the date of convening the General Meeting and no later than November 10, 2015 . To the extent MAGNA does not receive such notice by November 10, 2015 , MAGNA shall become entitled to revoke this Agreement.

 

 

  39  

 

 

18. Closing of the Transaction

 

Subject to the fulfillment of the Conditions Precedent as set forth in section 19 below, the Closing of the Transaction shall take place on the Effective Date at 12:00 in the Law Offices of Victor Tshuva & Co. Advocates, 3 Ha’yezira St. (Shaap Building, 7 th floor), Ramat Gan, or at any other time or place to be agreed upon by the parties in writing. The actions set forth in this section below shall be deemed and considered to have occurred at one and the same time, and shall have no effect unless all are wholly and fully done simultaneously and concurrently and no single action shall be deemed to have been completed and no single document shall be deemed to have been delivered, until all such actions have been completed and all required documents delivered. It is agreed that modifications may apply to the Closing procedure, which the parties shall discuss and agree in good faith and reasonably, all for ensuring, to the extent possible, the simultaneous nature of the following actions:

 

The Parties

 

18.1 The parties will provide approval that all representations set forth in sections 5 and 6 above (each party with reference to its own representations) are also true on the date of approval of the Transaction by the Company’s General Meeting or that no material changes have occurred in any of the representations prior to the date of approval of the Transaction at the General Meeting of the Company, of which no written notice was delivered to the other party to this Agreement, other than changes made in accordance with the provisions of this Agreement, including presentation of the documents evidencing the aforesaid representations.
     
  18.2 Deleted.

 

The Offerees

 

18.3 Shall provide authorizations from the competent organs of 4Eyes for the transfer of 4Eyes shares to the Company, to the extent such authorizations are required under 4Eyes’ incorporation documents and under any law, including share transfer deeds of 4Eyes’ shares from MAGNA to the Company signed by MAGNA, minutes of 4Eyes shareholders’ and board of directors’ <meetings> authorizing the transfer of 4Eyes’ shares to the Company and approval of the Transaction which is the subject matter of this Agreement.

 

 

  40  

 

 

18.4 4Eyes shall transfer to the Company the shares of 4Eyes, being Free and Clear.
     
18.5 4Eyes shall deliver to the Company a share certificate in the name of the Company for the Purchased Shares and also an approval that such transfer of the Purchased Shares was done in accordance with the requirements set forth in the Articles of Association of 4Eyes. 4Eyes shall enter the Purchased Shares in 4Eyes’ shareholders register and shall also sign the reporting forms intended for the Companies Registrar in connection with the transfer of the Purchased Shares and deliver copies of such notices sent to the Companies Registrar with respect to the transfer of 4Eyes’ shares to the Company.
     
18.6 4Eyes shall deliver an affidavit to the Company, in the form attached hereto as Annex 18.6 , according to which all the representations and declarations provided in section 6 are true in any material aspect on the Effective Date.
     
18.7 An opinion will be delivered by the attorneys’ firm of 4Eyes confirming that all transactions which are the subject matter of this Agreement were duly authorized by the competent organs of 4Eyes.
     
18.8 4Eyes shall deliver a copy of MAGNA’s signed indenture as set forth in section 7.2.1 above, in connection with compliance with the provisions of the Ruling and deposit of the Allocated Shares with the Trustee.

 

The Company

 

18.9 The Company shall deliver to 4Eyes copy/copies of the resolutions of Company’s Board of Directors and committees’ approving all the transactions hereunder and an approval of the Company’s Board of Directors, according to which all authorizations required for such transactions were obtained in accordance with the provisions of Chapter V of Part Six of the Companies Law, as set forth in Section 282 of the Companies Law.

 

 

  41  

 

 

  18.10 The Company shall deliver to 4Eyes and MAGNA a copy of the minutes of the General Meeting approving the Transaction and all the other transactions and acts referred to in this Agreement, including the resolutions set forth in section 17.2 above.
     
  18.11 An opinion shall be delivered by the Company’s attorneys’ firm confirming that all transactions which are the subject matter of this Agreement were duly authorized by the competent organs of the Company.
     
  18.12 A duly signed share certificate in the name of the Nominee Company for the Allocated Shares in the form attached hereto as Annex 18.2 , and all the ancillary documents required by the Nominee Company for listing the Allocated Shares for trade. The distribution of the Allocated Shares shall be made subject to the provisions of the Ruling and performance of all other acts required under the Ruling, including with respect to the deposit in trust, if applicable, and such deposits and registrations shall be made accordingly as described above.
     
  18.13 Copy of the Option Warrants for the options allocated as set forth in section 8 above in the form attached on the Closing Date, duly signed and a copy of the allocation letters.
     
  18.14 Copy of form T-87 (ת-87) reflecting the allocation of the Allocated Shares and the Option Warrants, as set forth in sections 7.2 and 8 above, respectively.
     
  18.15 Copy of the Company’s Articles of Association in its new version, as requested by 4Eyes and MAGNA and approved by the General Meeting of the Shareholders of the Company.
     
  18.16 Copy of form T-97 (ת-97) reflecting the changes in the composition of the Company’s Board of Directors and the other Officeholders in the Company.
     
  18.17 Copy of the application for name change as filed with the Companies Registrar.
     
  18.18 Copy of the exculpation and indemnification letters granted on the Effective Date to Directors and Officeholders of the Company.
     
  18.19 Copy of a certificate of the relevant insurer for the entering into the policy or adding the relevant Officeholders as set forth in section 12.1 above.
     
  18.20 Copy of a certificate of the relevant insurer for the Company’s entering into a Run-Off Directors’ and Officeholders’ liability insurance policy, in accordance with the provisions of section 12.2 above.

 

 

 

  42  

 

 

  18.21 A declaration of the Company, in the form attached hereto as Annex 18.21 , according to which, all representations and undertakings provided in section 5 above are true and correct in any material aspect on the Effective Date.
     
  18.22 Resignation letters of the Directors Mrs. Shoshana Zeig and Mr. Ron Weisberg, with effect on the Closing Date, in the form attached hereto as Annex 18.22 .
     
  18.23 Confirmation of the Stock Exchange for listing the Allocated Shares and the shares resulting from the exercise of the Option Warrants for trade as set forth in section 17.23 above.
     
  18.24 Waivers signed by the employees of the Company whose employment is terminated on the Closing, approving payment of all amounts due to them and that they have no, and shall have no, claims concerning their employment and termination thereof.
     
  18.25 Allocate the Allocated Shares and Option Warrants to the Offerees, being Free and Clear (except the Lock-up Provisions) and issue a share certificate in the name of the Nominee Company for the Allocated Shares with instructions to deposit them in the Escrow Account in the name of the Trustee, as set forth in section 7.3 above.
     
  18.26 Deliver a bank confirmation to the Offerees stating its cash balances, according to which the credit balances in its accounts on the Closing Date are in the amount of NIS [X].
     
  18.27 Deliver to the Offerees a written certificate from the Interested Parties in the Company, in the form attached hereto as Annex 18.27 , according to which on the Closing Date the Interested Parties in the Company have no credit/debit balances in the Company’s books.
     
  18.28 Deliver to the Offerees a certificate signed by all the Incumbent Directors and by all the Interested Parties, Officeholders and employees of the Company with whom the Company has entered into employment agreements and/or management agreements and/or other obligations, according to which such Incumbent Directors, Interested Parties and/or Officeholders and/or employees confirm that all the amounts owing to them were paid and that they confirm having no claims and/or suits against the Company and that they waive all their rights vis-a-vis the Company so that they shall have no claims and/or demands against the Company, in the form attached hereto as Annex 18.28 , except the employees and Officeholders detailed in Annex 18.28 and subject to the provisions of this Agreement.

 

 

  43  

 

 

19. Conditions Precedent

 

19.1 The entering into effect and performance of this Agreement are subject to the full and accumulative fulfillment of each of the Conditions Precedent set forth in this section by December 15, 2015 (unless all parties waive in writing the fulfillment of such condition, in whole or in part) (herein above and hereinafter: the “ Conditions Precedent ” and “ Deadline ”, respectively):

 

19.1.1 The General Meeting duly adopts a resolution to appoint the Offerees’ Directors to the Company’s Board of Directors on the Closing Date, including the appointment of a CEO (the employment of the current CEO will be terminated).
     
19.1.2 MAGNA’S Board of Directors and shareholders’ meeting duly adopt a resolution - until the expiry of 15 days after the signing of the Agreement - to approve MAGNA’s entering into this Agreement and execution of all the provisions hereof, including the transfer of assets to 4Eyes (including the approval of Aeronautics, Excellence and Prizma, to the extent so required under MAGNA’s Articles of Association), as well as 4Eyes’ Board of Directors duly adopted approval - until the expiry of 15 days after the signing of this Agreement - to 4Eyes’ entering into this Agreement and execution of all the provisions hereof.
     
19.1.3 Obtaining a due authorization from the competent organs of the Company by no later than December 15, 2015, for each one of the matters on the agenda of the General Meeting, including the following:

 

(a) Obtaining the approval of the Company’s competent organs for its entering into this Agreement and performance of all its provisions, including for the allocation to the Offerees of the Allocated Shares and the Option Warrants to the Service Providers.

 

  44  

 

 

(b) Approval to purchase the shares of 4Eyes.
     
(c) Increase of the Company’s registered share capital for the purpose of such allocations as set forth in this Agreement and amendment of the Company’s Articles of Association accordingly.
     
(d) Replacement of the Company’s Articles of Association by the Articles of Association in the version attached hereto as Annex 17.2.6 .
     
(e) Approval for appointment of directors on behalf of the Offerees and 4Eyes on the Closing Date to the Company’s Board of Directors, instead of the Directors Mrs. Shoshana Zeig and Mr. Ron Weisberg as set forth in section 9.
     
(f) Approval of the appointment of Mr. Chaim Siboni as CEO of the Company and approval of the terms and conditions of Mr. Chaim Siboni’s service and employment in accordance with the agreement entered with him from the Transaction Closing Date onwards.
     
(g) Approval for granting the exculpation and indemnification letters as set forth in section 11.
     
(h) Approval to provide exculpation and indemnification letters to Directors and Officeholders on behalf of the Offerees as set forth in section 11 above, in the form attached hereto as Annex 11 , including on the issues deriving from the Placement Memorandum and the Valuation of 4Eyes.

 

 

  45  

 

 

(i) Inclusion of the Offerees’ Directors in the Company’s Directors’ and Officeholders’ liability insurance policy, attached to this Agreement as Annex 12.1 ; or (in accordance with a resolution so adopted) approval for the Company’s entering into the Directors’ and Officeholders’ liability insurance policy, that will include the Directors and Officeholders appointed on behalf of the shareholders of 4Eyes and certification from the relevant insurer for procuring such insurance policy, provided the Closing takes place.
     
(j) Approval from the Chief Scientist in the Ministry of Economy for the agreement between MAGNA and 4Eyes that will confirm that payments by MAGNA and/or 4Eyes to the Chief Scientist shall only be made for and with respect to future revenues and that no payment date of MAGNA to the Chief Scientist shall be accelerated, and 4Eyes’ signing on an instrument of rights’ transfer to the extent required.
     
(k) Approval for the Company’s entering into a consulting agreement with Mr. Kfir Silberman.
     
(l) Approval of the Services Agreement between 4Eyes and MAGNA for a period of one year from the Closing Date and a monthly payment in the amount of NIS 200,000 plus VAT in consideration for such services and annual payment in the rate of 2% plus VAT of 4Eyes’ annual revenues.

  46  

 

 

19.1.4 Receipt of an approval from the Stock Exchange for listing the Allocated Shares to be allocated hereunder and the shares resulting from the conversion of the Option Warrants.
     
19.1.5 Delivery of a report on the payment of all the Company’s liabilities which were paid during the Interim Period, as well as the liabilities yet unpaid by the Company and conclusion of repayment of owners’ debt balances owing to the Company, so that following the Closing, the net equity of the Company is at least NIS 5,000,000 (cash at hand less liabilities, including, without limitation, deduction of the liabilities set forth in Annexes 5.11(a), 5.12 and 5.20 ). The Transaction expenses will be deducted from the said amount as set forth in Annex 14.1 attached hereto. In addition, the Board of Directors of the Company may start acting to list the Company’s shares for trade in the U.S.A. The expenses involved in such listing will be paid from the Company’s cash, subject to the fulfillment of the following two conditions in full: (a) After payment of the above expenses and any other expenses agreed upon in this Agreement, excluding the expenses set forth in Annex 14.1 , the net cash amount which remain in the Company shall not be less than NIS 5,000,000; (b) The total expenses shall not exceed the amount of NIS 1,000,000.
     
19.1.6 Approval of the General Director of the Antitrust Authority for the Transaction which is the subject matter of this Agreement, if any such approval is required.
     
19.1.7 Receipt of the tax Ruling in agreement from the Tax Authority pursuant to the provisions of Section 104A and/or 103T of the Income Tax Ordinance, to the MAGNA’s satisfaction. In case the Ruling is not obtained within five (5) months following the signing of the Principles Agreement, which provides that 4Eyes and/or MAGNA are not liable to tax in the framework of the Transaction, 4Eyes and MAGNA shall be released from any obligations to perform the Transaction and/or towards the Company.

  

19.1.8 Receipt of the Valuation of 4Eyes.
     
19.1.9 The Company complies with the requirements of the Stock Exchange concerning allocation of the Allocated Shares and the Option Warrants under this Agreement.
     
19.1.10 Completion of the due diligence of the Company in the legal, property, accounting, tax, financial, valuation, etc. aspects by 4Eyes and the shareholders of 4Eyes, to their satisfaction.

 

  47  

 

 

19.1.11 Completion of the due diligence of 4Eyes in the legal, property, accounting, tax, financial, valuation, etc. aspects by the Company, to its satisfaction, prior to the date of convening the General Meeting, that will be convened to discuss, inter alia , the approval of the Transaction and any matters ancillary thereto.
     
19.1.12 Entering of the Company and 4Eyes in agreements with Service Providers as set forth in section 2.20 attached as Annex 19.1.12 hereto, as described in the Placement Memorandum.
     
19.1.13 From the signing date this Agreement and until the date of approval of the Transaction by the General Meeting, there has been no adverse change in any of the parties’ representations as set forth in section 5 and 6 of this Agreement.

  

19.1.14 Confirmation by each of the parties that during the Interim Period, neither the Company nor 4Eyes, as the case may be, has made any acts which are not permitted to be done during the Interim Period and has complied with all its undertakings as required during such period.
     
19.1.15 Obtaining all necessary regulatory approvals as required under any law as well as any Third Party consents for the change of control in the Company and 4Eyes, as the case may be, including certificates from the financing banks, and as well as consent and/or approval of any Third Party, the consent and/or approval of whom is required under any law and/or agreement for the Closing of the Transaction, including any approval, notice, consent, exemption, license, waiver or assignment from any governmental or administrative authority, or any other entity and/or person, in any of the cases set forth above, as required under the law, for the Closing of the Transaction and for the continued validity of all permits and licenses of 4Eyes following the Closing Date.
     
19.1.16 On the Closing Date, there shall not be any court order outstanding that prohibits the Closing of the Transaction and/or any outstanding legal or quasi-legal proceedings or claims or objections of any authority against the Transaction.

 

19.2 The parties shall cooperate and provide any information required by the Company for the purpose of reporting to the Securities Authority and/or the Stock Exchange and the Company’s shareholders in connection with this Agreement. Moreover, during the Interim Period, the parties shall act jointly and assist one another as far as possible, all in order to advance the fulfillment of all the Conditions Precedent.

 

  48  

 

 

19.3 Without derogating from any other relief, under the law, available to any party not in breach of this Agreement, to the extent any of the parties fails to comply, for any reason, with the provisions of this Agreement, unless such party is entitled to revoke this Agreement hereunder and/or under any law, the revoking party shall pay the other party an agreed compensation in the amount of NIS 250,000, for covering the other party’s expenses for this Agreement.
     
19.4 In the event that by November 10, 2015 the Transaction and this Agreement are not presented for approval of the Company’s General Meeting, MAGNA shall become entitled to deliver notice of revocation of this Agreement by November 17, 2015 by written notice delivered to the Company.
     
19.5 Unless all the Conditions Precedent provided in this section are fulfilled by December 22, 2015 (the “ Expiration Date ”), subject to the parties’ right to jointly agree to extend the Expiration Date (the “ Deferred Date ”), this Agreement shall expire on the Expiration Date or the Deferred Date (as applicable) and neither party shall have any contention and/or demand against the other for the non-coming into force of this Agreement. Notwithstanding the foregoing, a failure to fulfill any of the Conditions Precedent arising out of any bad faith act or omission of any party hereto shall be deemed to be a breach of such party’s undertakings under this Agreement that shall entitle the other party to all the relief available to a non-breaching party under the law.

  

19.6 The Offerees and 4Eyes may, however, waive the observance of all or any of the Conditions Precedent (other than such Conditions Precedent which may not be waived under the law - as set forth in sections 19.1.1-19.1.4, 19.1.6, 19.1.7, 19.1.8-19.1.11, 19.1.12 and 19.1.15), and in such case, the non fulfillment of said Conditions Precedent shall not constitute a condition precedent to the fulfillment of this Agreement.
     
19.7 Shortly after the Transaction Closing Date, the parties shall act to cause the Company’s Board of Directors to adopt a resolution concerning the change of signatory rights on behalf of the Company (due to the appointment of new Directors and Officeholders for the Company), and new signatories allowed to electronically sign on behalf of the Company will be appointed.

 

 

  49  

 

 

20. Company’s Indemnity and Liability for the Representations and Undertakings

 

20.1 The Company hereby undertakes to indemnify MAGNA for any losses, damages, liability, responsibility or expenses, which may be incurred by MAGNA or 4Eyes, including in connection with reasonable litigation expenses (the “ Indemnifiable Damages ”) resulting from: (a) The fact that any of the representations set forth in section 5 above was materially misleading or incorrect or inaccurate or incomplete (“ Breach of Representation ”); and/or (b) Breach by the Company and/or the Controlling Shareholder thereof of any of their undertakings by virtue of this Agreement; and/or (c) Suits instituted against the Company and/or the Officeholders for causes of action created prior to the Closing Date (even if such causes of action were disclosed in the framework of the representations made herein), including claims of Company’s employees whose employment will be terminated by the Company upon Closing of the Transaction.

  

20.2 The indemnity undertaking, except with respect to indemnity arising from any suit and/or demand of the employees detailed in Annex 5.33 and/or any claim and/or suit and/or demand concerning the Subsidiaries (as such term is defined above), is subject to the exclusion that no indemnity whatsoever shall be given with respect to an indemnity liability of up to a total aggregate amount of NIS 100,000 (hereinafter in this section: the “ Base Amount ”). If the aggregate Indemnifiable Damages exceed the Base Amount, the liability to indemnify shall be for the full amount of damages (from the first New Shekel), without deducting the Base Amount. Such limitation shall not apply in case of malicious deception and/or fraud.
     
20.3 In the event that any Third Party institutes a suit or demand or claim against MAGNA (“ Claim ”) which would result in the Company’s liability to indemnify under the provisions of section 20.1 above, the following provisions shall apply:

 

20.3.1 MAGNA shall deliver notice to the Company on such Claim, shortly as far as possible following receipt thereof, together with all the documents received and/or relevant.
     
20.3.2 The Company may inform MAGNA within 7 days, should the Company wish to direct the defense against the Claim, including the appointment of an attorney on its behalf, subject to, and in accordance with, the provisions of this section.
     
20.3.3 MAGNA shall cooperate with the Company, to the extent reasonably required, in order to allow and assist the Company defend itself or direct the defense, as the case may be, against such Claim.
     
20.3.4 The Company shall not settle or compromise such Claim or agree to refer any such Claim to arbitration, mediation or any other agreed dispute resolution proceedings without the prior written consent of 4Eyes, which will not withhold its approval except for reasonable grounds.

 

 

  50  

 

 

21. 4Eyes’ Indemnity and Liability for Representations and Undertakings

 

21.1 MAGNA hereby undertakes to indemnify the Company for any losses, damages, liability, responsibility or expenses, which may be incurred by the Company, including in connection with reasonable litigation expenses (the “ Indemnifiable Damages ”) resulting from: (a) The fact that any of the representations set forth in section 6 above was materially misleading or incorrect or inaccurate or incomplete (“ Breach of Representation ”); and/or (b) 4Eyes’ breach of its undertakings by virtue of this Agreement.
     
21.2 The indemnity undertaking is subject to the exclusion that no indemnity whatsoever shall be given with respect to any indemnity liability of up to a total aggregate amount of NIS 100,000 (hereinafter in this section: the “ Base Amount ”). If the aggregate Indemnifiable Damages exceed the Base Amount, the liability to indemnify shall be for the full amount of damages (from the first New Shekel), without deducting the Base Amount. Such limitation shall not apply in case of malicious deception and/or fraud.
     
21.3 In the event that any Third Party institutes a suit or demand or claim against the Company (“ Claim ”) which would result in MAGNA’s liability to indemnify under the provisions of section 21.1 above, the following provisions shall apply:

 

21.3.1 The Company shall deliver notice to MAGNA on such Claim, shortly as far as possible following receipt thereof, together with all the documents received and/or relevant (the “ Indemnification Demand ”).

  

21.3.2 MAGNA may inform the Company within 7 days after delivery of the Indemnification Demand, should MAGNA wish to direct the defense against the Claim, including the appointment of an attorney on the Company’s behalf, at the expense of MAGNA, subject to, and in accordance, with the provisions of this section.
     
21.3.3 The Company shall cooperate with the MAGNA, to the extent reasonably required, in order to allow and assist MAGNA defend itself or direct the defense, as the case may be, against such Claim.
     
21.3.4 The Company shall not settle or compromise such Claim or agree to refer any such Claim to arbitration, mediation or any other agreed dispute resolution proceedings without the prior written consent of MAGNA, which will not withhold its approval except for reasonable grounds.

 

 

  51  

 

 

21.4 MAGNA’s liability to indemnify as set forth in this section above shall remain in effect until the expiry of 21 months following the Transaction Closing Date. It is clarified that in any event, that stated in this section regarding the time limit applicable to the indemnity, shall not apply to any cause for indemnity for which a Claim has been filed prior to the expiry of the indemnity, provided that prior to the expiry of the indemnification period the Company sent MAGNA notice of such Claim. It is further clarified that such indemnity shall be made exclusively by means of Company shares and the maximum indemnity to which the Company is entitled would be shares of the Company in such an amount that leave MAGNA holding 50.1% of the Company’s share capital on a fully diluted basis. The shares’ price will be calculated in accordance with their average price at the closing of trade during the 30 days preceding the payment day. In any event, no indemnification would be given for damages actually paid by insurance, if any.

  

21.5 Notwithstanding that stated in section 21.4 above, the limitations as to the time of expiry of indemnification and the minimum and maximum amount shall not apply and shall be of no validity in case such result from fraud on the part of MAGNA and/or 4Eyes.
     
21.6 The indemnity detailed in this section 21 shall be the Company’s sole relief for breach of the representations made by 4Eyes and/or MAGNA under this Agreement, other than due to fraud on the part of 4Eyes and/or MAGNA.

 

22. Taxes and Other Expenses

 

Each party shall bear any tax liability applicable to such party as consequence of performance of this Agreement.

 

The Company shall bear all expenses, costs and commissions imposed under the provisions of any law and/or incurred by the Company and/or 4Eyes and/or MAGNA, during the engagement under this Agreement and/or execution thereof, including attorneys’, accountants’ and other consultants’ fees (regardless of whether concluded or revoked under the provisions of this Agreement above).

 

  52  

 

 

23. Confidentiality

 

23.1 It is agreed and declared that each party undertakes to keep strictly confidential any commercial, financial, business and other information and data in connection with the other parties’ business, assets and plans which were and/or will be disclosed to each party during the term of this Agreement as well as the negotiations preceding the signing of this Agreement and during the due diligence made by the parties and preparation of the Placement Memorandum (the “ Information ”).

  

23.2 The provisions of section 23.1 above shall apply and survive any termination or revocation of this Agreement for any reason for an unlimited period, but shall not apply or cease to apply, as applicable, with reference to all or part of the Information:

 

23.2.1 If and to the extent such Information is available in the public domain on the date of signing this Agreement;
     
23.2.2 Information which becomes, after the execution of this Agreement, reasonably available in the public domain, other than due to a breach of the undertakings of the receiving party as set forth above.

 

23.3 Information that any of the parties is obligated to disclose by law; and it is hereby agreed that any Information included in the Company’s reports made under the Securities Law and the Regulations promulgated thereunder constitutes Information which must be disclosed by law.

 

 

  53  

 

 

24. Miscellaneous

 

24.1 The parties undertake to take all acts and sign all documents, approvals, forms and declarations, to the extent so required, necessary or advisable for the performance of the provisions of this Agreement.
     
24.2 This Agreement does not constitute a contract in favor of a Third Party and the parties do not intend to confer any rights whatsoever upon any Third Parties.

  

24.3 This Agreement contains, embodies, merges, expresses and exhausts all the terms and conditions agreed upon by the parties. No written or oral promises, warranties or agreements, undertakings or representations concerning the subject matter of this Agreement given or made by the parties prior to the entering into this Agreement which are not explicitly expressed herein, shall add to the obligations and rights provided herein, derogate therefrom or change them and such promises, warranties, agreements, undertakings or representations, shall no longer bind the parties from the date of signing this Agreement. For the avoidance of doubt, it is hereby agreed that the Principles Agreement is made null and void upon the signing of this Agreement, save for the Non-Shop provisions which shall remain in effect as provided therein.
     
24.4 Any amendment, change or waiver in connection with this Agreement shall be binding and valid only if made by means of a written document and limited to the matter for which it was initially made. A waiver in any single case shall not constitute a precedent in any other case. No avoidance of action or delay (laches) in the performance of such action shall be considered as waiver and shall not prejudice the rights and obligations of any of the parties in connection with such action. The claim of laches or waiver shall not be available to the party in breach.
     
24.5 The parties’ rights and obligations under the provisions of this Agreement may not be assigned or transferred.
     
24.6 The terms and conditions of this Agreement fully exhaust anything stipulated and agreed upon by the parties with reference to the allocation of the Allocated Shares to the Offerees and supersede all previous verbal or written communications, agreements, representations and undertakings made prior to the signing of this Agreement.

 

 

  54  

 

 

24.7 Whenever the date determined for execution of any of the stages under this Agreement occurs on a non-business day, such date shall be deferred until the first business day which follows.
     
24.8 Drafts and other documents which the parties exchanged prior to the signing of this Agreement shall be deemed as if never made and shall not serve in any manner as evidence or reference for interpretation and/or claim and/or otherwise.
     
24.9 No modification, amendment and/or addendum to this Agreement shall be valid or deemed binding, unless made in writing and signed by the parties together.
     
24.10 The parties shall take all further steps, including signing further documents as shall be required for the implementation and execution of this Agreement in letter and in spirit.
     
24.11 MAGNA hereby acknowledges that the provisions of this Agreement prevail over any agreement, covenant or understanding, including the Articles of Association of 4Eyes with reference to the transfer of its shares in 4Eyes, if applicable, and/or any limitations on the transfer of such shares and it agrees to such shares transfers as provided in this Agreement (4Eyes hereby undertakes to include, if necessary, an appropriate amendment in its Articles of Association to reflect the provisions of this section).
     
24.12 The laws of the State of Israel shall govern this Agreement and only the competent courts in the Tel-Aviv - Yafo district shall have exclusive jurisdiction and subject matter jurisdiction to try any matter arising and/or connected to this Agreement.
     
24.13 All notices required to be given under the provisions of this Agreement shall be made in writing and sent to the parties’ respective addresses as set forth in the preamble of this Agreement or to any other address in Israel of any of the parties, for which such party make notice to the other party hereto in writing.

 

24.14 All notices will be sent by courier, registered mail, facsimile or any other electronic means. A notice sent by registered mail shall be deemed to have been received five (5) days after being sent. A notice sent by courier shall be deemed to have been received one business day after its dispatch and a notice sent by fax or other electronic means shall be deemed to have been received when the sender confirms full receipt thereof, provided the sender writes down the name of the person confirming receipt and the time on which such notice was received.

 

  55  

 

 

In Witness Whereof the Parties have set their Hand:

 

The Company   4Eyes
     
By its Authorized Signatory:   By its Authorized Signatory:
     
/s/ Eli Yoresh   /s/ Haim Siboni
Eli Yoresh   Haim Siboni
     
/s/ Kfir Silberman    

Kfir Silberman

 

   
     
MAGNA    
     
By its Authorized Signatory:    
     
/s/ Haim Siboni    
Haim Siboni    

 

 

56

Exhibit 4.2

 

 

Agreement for Tax Exempt Transfer of Assets

 

Made and Entered into in Tel Aviv on the 5 th of January, 2016, (hereinafter: the “ Agreement ”)

 

Between: MAGNA - B.S.P. Ltd.
  Company number: 513066639
  Henri Malka Street, Dimona
  (hereinafter: “ MAGNA ”)

 

On the One Part

 

And: Four Eyes Autonomous Ltd .
  Company number: 515287480
  Henri Malka Street, Dimona
  (hereinafter: “ 4Eyes” )

 

On the Second Part

 

Whereas : MAGNA operates in the field of development and marketing of new products and innovative technologies based on passive 3D electro-optics radar, in three main fields of activities: One - Border security, protected facilities and industry (hereinafter: the “ Security Field ”); two - aviation security and prevention of air traffic accidents (hereinafter: the “ Aviation Field ”); and three - car safety through products installed in the car for prevention of road accidents (hereinafter: the “ Car Safety Field ”); and

 

Whereas : 4Eyes (a wholly owned subsidiary of MAGNA) was established for the purpose of concentrating the Car Safety Field under a separate legal entity; and

 

Whereas : For this purpose, MAGNA is interested in reorganizing its organizational structure, and in transferring to 4Eyes only the Car Safety Field assets (hereinafter: the “ Transferred Activities ”), this without consideration and in accordance with the provisions of Part E2 of the Income Tax Ordinance: Structural Change and Merger (hereinafter: the “ Reorganization ”, all subject to the approval of the Tax Authority and as part of a preliminary step to merge with a public company (hereinafter: the “ Merger ”); and

 

Whereas : 4Eyes is interested in absorbing the Transferred Activities in accordance with the Reorganization principles; and

 

Whereas : The Reorganization is, inter alia , subject to obtaining an approval from the Tax Authority; and

 

  1  

 

 

Whereas : MAGNA, through its competent corporate organs, adopted the requisite resolutions for the purpose of transferring the Transferred Activities to 4Eyes; and

 

Whereas : 4Eyes, through its competent corporate organs, adopted the requisite resolutions for the purpose of receiving the Transferred Activities from MAGNA; and

 

Whereas : The Reorganization is intended for business and financial purposes as detailed herein above and below; and

 

Whereas: The parties desire to enter into this Agreement;

 

Now, therefore, it is hereby Agreed, Stipulated and Declared by and between the Parties as follows:

 

1. Preamble and Annexes

 

1.1 The preamble to this Agreement and the parties’ declarations contained herein form an integral part hereof.

 

1.2 The annexes attached to this Agreement constitute an integral part hereof and are binding as the other terms and conditions hereof.

 

2. Definitions

 

In this Agreement the following terms shall have the respective meanings ascribed to them below:

 

2.1 Companies Law ” - the Companies Law, 5759-1999.

 

2.2 Effective Date ” - the date on which the Merger is approved by all the competent corporate organs of the merging companies or any other date determined and agreed to by the parties and subject to the Tax Authority’s approval.

 

2.3 Transferred Assets ” - all the Intellectual Property assets transferred from MAGNA to 4Eyes under this Agreement in accordance with the provisions of Annex 2.5 attached hereto.

 

2.4 Income Tax Ordinance ” - the Israeli Income Tax Ordinance [New Version] 5721-1961.

 

2.5 Intellectual Property ” - all of MAGNA’s intellectual property rights in the Car Safety Field and/or used by it in this field, whether such rights are registered on not, including, without derogating from the generality of the foregoing, rights and/or use licenses, designs, patents, trademarks, service marks, trade names, know-how and any other intellectual property rights, including as set forth in Annex 2.5 attached hereto.

 

  2  

 

 

3. Purposes of the Reorganization

 

3.1 The Reorganization is intended for business and financial purposes, including, among others, the following:

 

3.1.1 Efficiency improvements of MAGNA’s business activities by concentrating the activities in two separate companies each having a distinct nature and quality (the Security and Aviation Fields and the Car Safety Field) - MAGNA and 4Eyes, respectively.

 

3.1.2 Expanding MAGNA’s business and activities, including by the introduction of investors to the Car Safety Field through a separate company. Focusing the distinct activities of Security and Aviation in one company and Car Safety in a separate company is intended to allow maximum flexibility in this aspect - for each one of the companies individually.

 

3.1.3 MAGNA is interested in raising public capital in Israel, for the Car Safety Field, through the Merger (4Eyes and a listed company), for the continued advancement and development of the Car Safety Field. Gathering the Car Safety Field in the framework of 4Eyes, distinctly from MAGNA, is intended to unlock and “float" the value inherent in 4Eyes and facilitate such capital raising.

 

3.1.4 Development of the business and activities of each of MAGNA and 4Eyes, that following such Reorganization shall engage in its respective distinct fields and projects, of different risk levels - intending to facilitate the companies’ capital raising process of current and long term credit from banks and other lenders.

 

3.1.5 Expansion of the scope of activities in the Car Safety Field - MAGNA desires to expand its activities in the Car Safety Field, separately from the Security and Aviation Fields that are different in their nature and quality.

 

3.1.6 Addressing market risks - minimizing the exposure of the Security Field activities to the difficulties characterizing the activities in the Car Safety Field and vice versa .

 

3.1.7 The Reorganization may facilitate the ongoing management of the Group in anything relating to regulation and the drafting of legal documents and contracts.

 

4. MAGNA’s Declarations:

 

MAGNA hereby declares and undertakes towards 4Eyes as follows:

 

4.1 It is the exclusive owner of all the Transferred Assets; No charges and/or attachments are imposed on MAGNA’s rights to the Transferred Assets and MAGNA is not aware of any third party claims whatsoever in connection with the Transferred Assets.

 

  3  

 

 

4.2 It had received grants from the Chief Scientist in the Ministry of Economy for development of the Transferred Assets under Programs Nos. 45098 and 47453.

 

5. Reorganization

 

5.1 Subject to the parties’ fulfillment of their obligations as set forth herein, and provided the Conditions Precedent set forth below are met, to the extent both parties do not waive any of such condition/s by written consent, MAGNA hereby sells, transfers and assigns to 4Eys and 4Eyes hereby accepts this transfer and acquires from MAGNA, with effect as of the Effective Date and in their state AS IS on the Effective Date, all the Transferred Assets for exclusive use in the Car Safety Field only. It is hereby clarified that from the Effective Date onwards, 4Eyes shall bear all debts applicable to the Transferred Assets, including with respect to royalties owing to the Chief Scientist for the products following the Effective Date.

 

5.2 Until all the Conditions Precedent are met, as set forth in section 6 below, other than any Condition Precedent that the fulfillment of which was waived by both parties by written consent, this Agreement shall not become effective and MAGNA shall continue to operate in its current format and retain the Transferred Activities.

 

6. Conditions Precedent

 

6.1 This Agreement shall become effective from October 11, 2015 immediately prior to the signing of the Merger Agreement, subject to the fulfillment of the following Conditions Precedent:

 

6.1.1 Obtaining all present and future approvals and consents as shall be required under any law, including under the Companies Law and the Regulations promulgated thereunder and the Securities Law, 5728-1968 and Regulations promulgated thereunder.

 

6.1.2 Completion of the Merger of 4Eyes with a listed company.

 

6.1.3 Receipt of an affirmative tax ruling by the Director of the Tax Authority or someone appointed by him pursuant to the provisions of Part E2 of the Income Tax Ordinance, to the full satisfaction of the parties to the agreement, according to which the Reorganization shall be approved and the Merger shall be tax exempt in accordance with the provisions of Part E2 of the Income Tax Ordinance.

 

6.1.4 It is hereby clarified that the parties may, by written agreement, waive any of the Conditions Precedent, provided that the fulfillment of any such conditions is not required under any law.

 

6.1.5 Obtaining the approval of the Chief Scientist in the Ministry of Economy for the transfer of the Transferred Assets to 4Eyes.

 

  4  

 

 

6.2 Each party shall act and be responsible for obtaining the relevant approvals listed above which refer to such party as well as for obtaining any other approvals and taking any further actions necessary under any law for the execution of the Reorganization, in cooperation with all the other parties.

 

6.3 In the event that by the date agreed upon by all the parties in writing, the Conditions Precedent are not met, or in the event that the Conditions Precedent which were not waived by the parties (if such may be waived) were not met, and/or in the event that any other requirement which any of the parties was required to fulfill under any law was not fulfilled, this Agreement shall be made null and void ab initio , without such cancellation being considered as a breach by any of the parties, or giving rise to any claim of any of the parties against the other party.

 

7. Fulfillment of the Tax Exemption Conditions and Indemnification

 

7.1 The parties undertake to observe and to fully and punctually perform all the conditions underlying the tax exemption in accordance with the provisions of Part E2 of the Income Tax Ordinance and any other conditions to be determined by the Tax Authority in the affirmative tax ruling, including exemptions duly granted by the Tax Authority (hereinafter: the “ Tax Exemption Conditions ”).

 

7.2 Any party who by way of commission or omission would cause the breach of the Tax Exemption Conditions shall indemnify the other party for all damages and loss of benefits incurred by the injured party as a result of the breach of the Tax Exemption Conditions by breaching party.

 

8. General Obligations

 

8.1 Prior to the Effective Date, MAGNA alone shall be entitled to, and obligated in connection with all income, expenses and liabilities for the Transferred Assets and the Transferred Activities. Following, the Effective Date, 4Eyes alone shall be entitled to, and obligated in connection with all income, expenses and liabilities for the Transferred Assets and the Transferred Activities in the Car Safety Field in accordance with the provisions of this Agreement, including for the payment of any debts to any authority and/or third parties whatsoever and for the performance of any acts and activities in connection with the Transferred Assets and the Transferred Activities. For the avoidance of doubt, it is hereby clarified that MAGNA alone shall be liable and bear any payments and/or cover any debts or liabilities in connection with assets and/or liabilities which were not expressly transferred to 4Eyes under the provisions of this Agreement.

 

  5  

 

 

8.2 Without derogating from the generality of that stated in section 8.1 above, each party shall compensate the other party for any payment and/or debt and/or liability incurred by the other party which are the responsibility of the first party and carried out after the Effective Date in connection with the Transferred Assets and the Transferred Activities in accordance with the provisions of this Agreement.

 

8.3 Each party hereby declares and undertakes towards the other party that each of them shall compensate and indemnify the other party for any payment, loss or damage incurred by the other party (including legal fees and attorneys' fees) in connection with the breach of that party’s undertakings under the provisions of section 8.1 above.

 

8.4 MAGNA shall have the right of first refusal to purchase all or any part of the Intellectual Property, in case 4Eyes decides to discontinue its operations in the Car Safety Field or stops using and sells such Intellectual Property.

 

9. Taxes and Expenses

 

The Reorganization shall be made subject to the tax exemption under the provisions of Part E2 of the Income Tax Ordinance. Each Party shall bear the expenses and costs impose on such party under the provisions of any law and/or which shall be expended by that party during the entering into and/or execution of this Agreement.

 

10. Miscellaneous

 

10.1 All documents delivered in connection with the obtaining of the necessary approvals required for the completion of the Reorganization and the documents delivered upon the completion thereof shall constitute an integral part of this Agreement.

 

10.2 Nothing in this Agreement shall be interpreted as preventing MAGNA and/or as restricting it from acting in any other fields, other than the Car Safety Field, through use of the Intellectual Property and technology which MAGNA has developed.

 

10.3 This Agreement may be terminated prior to the completion of the Reorganization by mutual written consent of the parties.

 

10.4 This Agreement confers no rights whatsoever upon any third parties.

 

10.5 No delay in exercising and/or enforcing the rights of either party shall be considered as waiver of such rights and shall not prevent such party from exercising such rights whenever it may see fit.

 

10.6 This agreement revokes any prior agreement and/or memorandum done by the parties, if any. The parties’ rights and obligations in anything relating to the subject matter hereof shall be exclusively determined by the terms and conditions of this Agreement.
     
10.7 Any notice sent by any of the parties to the other party by registered mail in accordance with their addresses set forth in the preamble hereof shall be considered as reaching its destination within 72 hours after the deposit of the registered letter at a post office for dispatch by registered mail, and if delivered by hand – at the time of its delivery.

 

  6  

 

 

In Witness Whereof the Parties have set their Hands:

 

  MAGNA - B.S.P. Ltd.     Four Eyes Autonomous Ltd.
         
By: /s/ Haim Siboni   By: /s/ Haim Siboni
Name: Haim Siboni   Name: Haim Siboni
Title: CEO   Title: CEO

 

  7  

 

 

Annex 2.5

 

Intellectual Property

 

4eyes

 

Software Elements related to the Car
Safety Field through Devices
installed in the Car of the following
software programs:
Software Elements related to the Car Safety
Field through Devices installed in the Car of the
following Algorithms:
   

Software module for damping vibrations and shocks.

Algorithm for motion detection through imaging.

Software module for image input and processing and noise cleaning including motion tracking in motion.

Automatic focusing algorithm of CCD cameras.

Software for detection and classification of objects surrounding the vehicle: Cars, bicycles, motorcycles, pedestrians, animals, objects, etc.

Image stabilization algorithm (for vibrations and shocks).

Software for calculation of distances and speeds between the car in motion and other surrounding objects (cars, bicycles, motorcycles, people, objects, etc.).

Algorithm for motion detection through imaging.

Algorithm for distances calculation in motion.

Software module for 3D mapping of objects in space. Algorithm for speeds calculation in motion.

Software module for motion tracking in motion. Algorithm for noise reduction.
     

 

 

 

8

 

Exhibit 4.3

 

 

Software Development Services Agreement

Made and Entered into in Tel Aviv on the 5 th of January, 2016, (hereinafter: the “ Agreement ”)

 

Between: MAGNA - B.S.P. Ltd.    
  Company number: 513066639  
  Henri Malka Street, Dimona  
  (hereinafter: the “ Company ”)  
     
    On the One Part
   
And Between: Four Eyes Autonomous Ltd.    
  Company number: 515287480  
  Henri Malka Street, Dimona  
  (hereinafter: the “ Customer ”)  
     
    On the Second Part

 

Whereas The Company, the Customer and ASIA PITUACH (A.D.B.M.) Ltd. (hereinafter: “ Asia ”) had entered on October 11, 2015, into a Merger transaction (hereinafter: the “ Merger Agreement ”); and
     
Whereas The Customer engages, inter alia , in software development in the field of car safety, but has not yet recruited the full scope of manpower it requires for such development, and therefore, at this stage, the Customer outsources the development services; and
     
Whereas The Customer is interested in receiving software development services from the Company in the field of car safety through products installed in the car for read accidents prevention (hereinafter: the “ Car Safety Field ”), as such services shall be required by the Customer from time to time (hereinafter: the “ Services ”); and
     
Whereas The Company is interested in supplying the Services to the Customer in accordance with and subject to the provisions of this Agreement;

 

  1  

 

 

Now, therefore, it is hereby Agreed, Stipulated and Declared by and between the Parties as follows:

 

1. Preamble and Interpretation

 

1.1. The preamble to this Agreement and its annexes form an integral part hereof and are binding as the other terms and conditions hereof.
     
1.2. The section headings in this Agreement are intended for convenience purposes only and they shall not serve for interpretation of this Agreement and the provisions hereof.

 

2. Declarations and Undertakings of the Company

 

The Company declares, warrants and undertakes as follows:

 

2.1. That it shall comply with its undertakings as set forth in this Agreement, to the best of its ability, at a high professional level, to the Customer’s satisfaction and in accordance with the Customer’s instructions;
     
2.2. That it has obtained and shall maintain, throughout the Agreement term, all the licenses and permits required under any law for conducting its business and for the execution of the Services and undertakes to conduct its business and execute the Services in accordance with the provisions of any law;
     
2.3. It has the know-how, experience, professional skills, manpower, resources and technical devices and the financial capability to comply with its undertakings under this Agreement;
     
2.4. That no limitation and/or prevention exists under any agreement and/or law or any conflict of interests that may prohibit the entering into this Agreement and/or the full fulfillment thereof;
     
2.5. That by providing the Services, the Company is not breaching the intellectual property rights of any third party whatsoever.

 

3. The Services

 

3.1. Throughout the Agreement term, the Company shall provide the Services to the Customer in the manner determined in accordance with the Customer’s demands and its professional needs by such workers and in such tariffs as set forth in “ Annex A ” to this Agreement.

 

  2  

 

 

3.2. If the Company in required to make use of any software which is not fully owned by the Company for the providing of the Services under this Agreement, including combination of closed functions and/or open source code (hereinafter: “ Third Party Work Products ”), the Company shall notify the Customer of such use in advance. For the avoidance of doubt, it is clarified that the provisions of this section 3.2 are subject to the Company’s undertakings and declarations and the Company’s liability under this Agreement, including under sections 2.5 above and 10 below.
     
3.3. The Development Personnel set forth in Annex A hereto and/or other development professionals to be employed by the Company and made available to the Customer for the providing of the Services, shall be skilled and with the required qualifications as demanded by the Customer and they will be assigned by the Customer to work at the Customer’s offices or the Company’s offices or at any other location to be agreed upon by the parties.

 

4. Services Approval Procedure

 

4.1. The Company undertakes to deliver all the Services’ work products to the Customer and to supply the Services in accordance with the instructions, specifications, milestones and timetables to be specified and agreed upon by the parties from time to time. The Customer may perform any tests and/or inspections on the Services’ work products as the Customer may deem necessary, at its exclusive discretion, to examine compliance of the Services’ work products with all the demands and specifications determined in connection thereto.
     
4.2. In the event that a fault is found in the Services’ work products, the Customer shall inform the Company of such fault and the Company undertakes to ensure that the Services’ work products comply with all the relevant demands and specifications, within a reasonable time as shall be agreed upon by the parties and at no additional charge.

 

5. The Agreement Term and Revocation

 

5.1. This Agreement shall come into force immediately upon the Closing of the Merger Transaction (as such term is defined in the Merger Agreement) and shall remain in effect for a period of twelve (12) months thereafter (hereinafter: the “ First Term ”). The Customer may extend the Agreement term, in accordance with its conditions, for two additional twelve (12) months periods each, by providing a written notice to the Company sixty (60) days prior to the expiry of the First Term or the option term thereafter, as the case may be (the First Term and the option terms, collectively referred to as: the “ Term ”).

 

  3  

 

 

5.2. Revocation due to a Breach . Each party may immediately revoke this Agreement: (a) If the other party fundamentally breaches the Agreement and does not cure such breach within 14 days after being required to do so in writing by the other party; or (b) a motion is filed for the appointment of a (temporary or permanent) receiver or (temporary or permanent) liquidator or (temporary or permanent) trustee for the assets or substantially all the assets of the other party and such motion is not removed/dismissed within 45 days; or a dissolution order, or receivership order is granted against the other party, or a temporary liquidator is appointed for the other party and such are not canceled within 45 days; or an attachment is imposed on all or part of the assets of the other party, in a manner interfering with the fulfillment of the such party’s obligations under this Agreement and such attachment is not removed within 45 days.
     
5.3. Upon the termination and/or revocation of this Agreement for any reason, the Company shall deliver to the Customer all the documents, information and any other materials reaching the Company or anyone on its behalf or prepared by the Company or someone in its name in connection with the providing of the Services hereunder.
     
5.4. It is hereby clarified, that upon the termination and/or revocation of the Agreement for any reason whatsoever, any provisions of this Agreement, which by their nature should survive such termination and/or revocation, will survive, including, without limitation, the following sections: 5.4, 5.5, 7, 8, 9 and 10.

 

6. Consideration

 

During the Agreement term, the Customer will pay the Company for the Services in accordance with the employees’ costs and the scope of position of each one of them (plus general and administrative expenses) as set forth in Annex A, as shall be actually made available by the Company to the Customer for the providing of the Services, plus VAT (hereinafter: the “ Consideration ”). In any event, the monthly Consideration for the Services shall not exceed NIS 200,000 plus VAT. The Consideration will be paid to the Company on a monthly basis, by the 15 th day of each calendar month, with respect to the previous calendar month. The Company will provide a report to the Customer detailing the actual Services’ hours provided, by the 5 th day of each calendar month.

 

  4  

 

 

7. Intellectual Property

 

7.1. It is hereby expressly agreed that the Services will be provided on a “work for hire” basis and that all the rights, including the rights to file for patent and/or design applications, the rights for patents and/or designs, trade secrets, trademarks, copyrights and industrial or intellectual property rights concerning inventions (patentable or other), advancements, developments, improvements, ideas and applications, which the Company or anyone on its behalf may invent, develop, conceive or otherwise reach, alone or in cooperation with others, in connection with and/or arising from the Services, or created in the course of the Services provision Term and in connection with the Customer’s business activities, as such are currently conducted and as shall be conducted from time to time, including all rights in any products related thereto and in any future developments, including any ancillary documentation in the Car Safety Field (hereinafter: the “ Invention ”) shall be the exclusive property of the Customer and shall belong to the Customer for all intents and purposes as absolute owner thereof, including without limitation, to act for the realization and commercialization thereof worldwide and the Company hereby assigns to the Customer and waives in advance any such rights. It is hereby clarified that any development, which does not constitute an Invention, namely, which is not within the scope of the Car Safety Field, shall belong to the Company.
     
7.2. The Company undertakes to cooperate with the Customer in anything relating to performance of the provisions of this section; to provide any information and documentation and to sign any documents, all as shall be requested by the Customer, and to do so also following the termination of the Agreement term, all without any Consideration.
     
7.3. Without derogating from the provisions of this section 7, the Company shall forward to the Customer any source code and/or other development code of any software associated with the providing of the Services (including any modification or amendment thereof) to be developed in the framework of the Services in the Car Safety Field and such shall be the exclusive property of the Customer.

 

  5  

 

 

7.4. Without derogating from any other provisions in this section 7, the Company hereby declares and undertakes that the Company and/or anyone on the Company’s behalf have no and shall have no claims and/or demands whatsoever against the Customer in anything, directly or indirectly, relating to or arising from the inventions and/or Services to be provided to the Customer by the Company and/or anyone on its behalf hereunder, the ownership or the intellectual property rights therein.

 

8. Confidentiality

 

8.1. The Company hereby undertakes to keep in strict confidence and not to use, other than for the purposes hereof and not to disclose in any manner whatsoever to any third parties, any confidential information which was provided by the Customer and/or reached the Company, either verbally or in writing or by any other means, as a result of this Agreement and/or the execution and/or the drafting hereof.

 

For the purposes of this section, “ Confidential Information ” shall mean any information, written or not, in connection with the Company, other than information which is in the public domain on the signing date of this Agreement, and/or enters the public domain thereafter, otherwise than by reason of a breach of the terms of this Agreement by the Company, and save for information which the Company may prove was in its possession prior to the signing of this Agreement and/or information which was provided to the Company by a third party otherwise than by reason of the breach of confidentiality duties owing to the Customer and/or required to be disclosed by law, to the extent such is required.

 

8.2. The Company shall maintain the confidentiality of the Confidential Information in such means and manner as the Company maintains its own confidential information, provided the Company does not employ lesser caution than the reasonable level of caution required in the circumstances of the case.
     
8.3. The Company may disclose such Confidential Information to its employees engaged on its behalf in the discharge of its undertakings under this Agreement, for the performance of this Agreement, provided the Company remains liable, in accordance with this Agreement, that its employees maintain the confidentiality of the Confidential Information. The Company shall be liable for any damage incurred by the Customer as a result of a breach of such confidentiality duties by any of the employees of the Company.

 

  6  

 

 

8.4. The undertakings set forth above to maintain confidentiality shall remain in effect for a period of 7 years following the termination or revocation of this Agreement for any reason whatsoever.

 

9. Non Competition

 

The Company hereby undertakes that during the Agreement term and for a period of 12 months thereafter, it shall, directly or indirectly, refrain from engaging or from providing Services, either by itself or through a corporation under its control and/or any person on its behalf, to any person or business that compete with the Customer’s business in the Car Safety Field, without obtaining the Customer’s prior written consent.

 

10. Absence of Employer-Employee Relationships

 

It is expressly agreed and declared that no employer - employee relationships exist or shall exist between the Customer and the Company and/or anyone on the Company's behalf, and that any rights available to the Customer to inspect, audit, instruct and/or train the Company with respect to the providing of the Services under this Agreement shall only serve to ensure the performance of this Agreement and shall not create any employer - employee relationships between the Customer and the Company and/or anyone of its behalf. The parties declare and agree that the relationships between them are of a contractor and customer.

 

11. Liability

 

11.1. The Company’s liability under this Agreement shall be limited only and exclusively to the Services and for making any reasonable efforts to repair faults and/or malfunctions in the Services' work products. Beyond the aforesaid, the Company makes no further undertakings or representations with respect to the Services' work products and/or their fitness for particular purposes, and the Customer hereby exempts the Company from any claim and/or demand and/or suit for the aforesaid and shall not be entitled to any compensation, indemnification or relief in this matter.

 

  7  

 

 

11.2. Under no circumstances shall the Company be liable for any damages incurred by the Customer and/or any other third party, as a result of lost data, computer downtime, lost profits, prevented profits and/or for any indirect or consequential damage, except where the cause of action or reason for the damage are the Company’s acts or omissions made in gross negligence and/or intentional wrongdoing. If, notwithstanding the provisions of this section above, the Company is found liable for any damage, the Company’s maximum liability, for any damage in connection with this Agreement, shall in no circumstances exceed the Consideration amount actually paid under this Agreement.

 

12. General

 

12.1. At the Customer’s written request, the Company shall allow access to the Customer and/or anyone on its behalf, including officeholders and/or consultants of the Customer’s parent company, to the Company’s books and shall forward to the Customer any information in connection with the Services under this Agreement, including information about the Company’s costs, working hours of the Company’s employees actually devoted in the providing of the Services and division of the positions scope of the Company’s employees between the providing of the Services hereunder and their other occupations.
     
12.2. The Company may not transfer or assign and/or dispose and/or endorse in any manner all or part of its rights and undertakings under this Agreement to any third parties, unless it has obtained the Customer’s prior written consent, at the Customer’s exclusive and absolute discretion. The Customer may assign and/or endorse all or part of its rights under this Agreement to any third party whatsoever at any time and without the need to obtain the Company’s consent, provided the Company’s rights under this Agreement are not prejudiced. The Company may not provide development services to any third party in the Car Safety Field during this Agreement’s term and for a period of 48 months following the termination or revocation hereof.
     
12.3. This Agreement constitutes the entire agreement between the parties and no negotiations, declarations, representations, undertakings or agreements made, if made, whether orally or in writing, expressly or implied, prior to the execution of this Agreement, shall have any force or effect. There will be no effect to any changes in this Agreement unless made in a written instrument bearing the signatures of both parties.

 

  8  

 

 

12.4. No conduct on the part of any of the parties shall be deemed a waiver of any of such party’s rights under this Agreement or under any law, including in connection with the breach or non performance of any of the Agreement’s provisions, unless such waiver, consent, delay, modification, cancellation or addition were explicitly made and in writing.
     
12.5. The addresses of the parties for the purposes of this Agreement are as given in the preamble hereof and any notice of one party to the other given in accordance with the address set forth in the preamble hereto, shall be deemed as having been received by the addressee within 72 hours after the time of delivery thereof for dispatch by registered mail in the post office in Israel, and if personally delivered - at the time of actual delivery.
     
12.6. The exclusive place of jurisdiction for any disputes appertaining to and/or arising from this Agreement shall only be with the competent court in Tel Aviv - Yafo.

 

Four Eyes Autonomous Ltd.   MAGNA - B.S.P. Ltd.
     
By: /s/ Haim Siboni   By: /s/ Haim Siboni
Name: Haim Siboni   Name: Haim Siboni
Title: CEO   Title: CEO

 

  9  

 

 

Annex “A”

  

Calculation of Services Cost/debit for 4Eyes per Month

 

  Fees Cost
per Month - ₪
    Services for 4Eyes 50%  
Profession /Position   NIS     NIS  
Research and Development Manager - Electro-Optics expert     28,000       14,000  
Engineer - Image Processing expert     35,000       17,500  
Engineer - Software     12,000       6,000  
Engineer - Systems Engineering     15,600       7,800  
Mechanical Engineer - hardware/software     20,500       10,250  
Engineer - Software     10,600       5,300  
Practical Engineer - Research and Development and Testing     12,000       6,000  
Practical Engineer - Research and Development and Testing     10,300       5,150  
Programmers             36,000  
Systems Engineer             35,000  
Engineer - Operations Manager & Research and Development     33,400       16,700  
Office Administrator     13,200       6,600  
              32% addition for general and administrative expenses for Services that are actually provided.  

 

 

 

 

A- 1

 

 

Exhibit 4.4

 

Director’s and Officers’ Letter of Indemnity

 

(this " Agreement ")

 

Made and entered into this ____ Day of ____, 2016

 

Whereas __________ , Identity Card No. __________ , of __________ (hereinafter: the " Officeholder ") has been serving in Foresight Autonomous Holdings Ltd., Public Co. No. 520036062 (hereinafter: the " Company "), as a director, since __________ and as __________ , since __________ and may serve in the future in additional and/or alternatives positions with the Company and/or on its behalf, in accordance with the Company’s resolutions as adopted from time to time; and

 

Whereas The Company is interested in providing the Officeholder an undertaking in advance for indemnification, that shall be limited to such types of events which in the opinion of the Company's board of Directors deem to be foreseeable at the time the indemnification undertaking is made, all subject to the provisions of the Companies Law, 5759-1999 (hereinafter: the " Companies Law "); and

 

Whereas The Company’s articles of association (hereinafter: the " Articles of Association ") permit engagements of the type which is the subject matter of this Agreement; and

 

Whereas The Company’s compensation committee and afterwards the Company’s board of directors approved the providing of the undertaking in advance for indemnification of the Officeholder and the terms and conditions set forth in this Letter of Indemnity; and

 

Whereas The Company’s shareholders' meeting as well approved the providing of the undertaking in advance for indemnification of the Officeholder and the terms and conditions set forth in this Letter of Indemnity; and

 

Whereas The Company is interested in providing the Officeholder an undertaking in advance for indemnification for any liability or expense incurred by reason of an act done by virtue of his being an Officeholder of the Company, provided that upon doing such act, the Officeholder was serving as an Officeholder in the Company and that such act was done in accordance with the law and in accordance with and subject to the provisions of the Company’s Articles, the Companies Law and any other law, including the Securities Law, 5728-1968 (hereinafter: the " Securities Law ") and as set forth herein below.

 

 

 

NOW, THEREFORE, the Company undertakes to indemnify the Officeholder, subject to the provisions of this Letter of Indemnity and subject to the provisions of any law, which constitute an integral part hereof, as follows:

 

1. Indemnification

 

1.1 The Company hereby undertakes to indemnify the Officeholder for any liability or expense imposed on the Officeholder as a result of an act which was performed during his service as Officeholder in the Company and by virtue of his being an Officeholder of the Company, as follows:

 

1.1.1 A financial liability imposed on the Officeholder in favor of another person by a court judgment, including a settlement judgment or an arbitrator's award approved by a court.

 

1.1.2 Reasonable litigation expenses, including attorneys' fees, incurred by the Officeholder due to investigation or proceedings, which terminated without the filing of an indictment against the Officeholder and without the imposition of financial liability in lieu of criminal proceedings, or terminated without the filing of an indictment against him, but in the imposition of a financial liability in lieu of a criminal proceedings for an offense that does not require proof of criminal intent ("Termination of proceedings without filing of an indictment in a matter with respect to which a criminal investigation had been commenced" and "financial liability in lieu of criminal proceedings" as such phrases are defined in Section 260(a)(1a) of the Companies Law, as amended from time to time).

 

1.1.3 Reasonable litigation expenses, including attorneys' fees, incurred by the Officeholder or charged to him by a court, in proceedings filed against him by another company or on its behalf or by another person (including in case of a suit filed against the Officeholder by way of a derivative action), or in a criminal charge from which he was acquitted, or in a criminal charge of which he was convicted for an offense that does not require proof of criminal intent.

 

1.1.4 Financial liability in favor of an Injured Party, as defined in Section 52(54)(a)(1)(a) of the Securities Law.

 

1.1.5 Expenses incurred and/or to be expended by the Officeholder in connection with Administrative Enforcement Proceedings (as such term is defined below) concerning the Officeholder, including reasonable litigation expenses, including attorneys’ fees. " Administrative Enforcement Proceedings " in this section are proceedings under Chapters H'3, H'4 or I'1 of the Securities Law.

 

1.1.6 Any financial indemnity allowed under the law.

 

  - 2 -  
 

 

1.2 Notwithstanding the provisions of section 1.1 and its subsections above, the Company’s undertaking to indemnify the Officeholder shall be void and the Company shall not indemnify the Officeholder in any of the following events:

 

1.2.1 The Officeholder breaches a fiduciary duty, except where the Officeholder acted in good faith and had reasonable grounds to assume that the act would not prejudice the Company’s best interests.

 

1.2.2 The Officeholder intentionally or recklessly breaches the duty of care.

 

1.2.3 The Officeholder acted with an intention to illegally reap a personal gain.

 

1.2.4 A fine or a civil fine or monetary sanction is levied on the Officeholder.

 

1.3 In addition, and subject to the provisions of this Letter of Indemnity, the Company undertakes that to the extent the Officeholder would be required to provide guarantees and/or securities in any interim proceedings instituted against the Officeholder - the Company shall provide such guarantees and/or securities instead of the Officeholder.

 

1.4 Subject to the provisions of any law, the total amount of indemnity payable by the Company to all the Officeholders to whom indemnification is provided for any such event shall not exceed 25% (twenty five percent) of the Company’s equity, pursuant to the Company’s latest audited consolidated financial statements, as of the actual date of payment of such indemnification, such amount shall, however, not be lower than NIS 4 Million (hereinafter: the " Maximum Indemnity Amount "). It is expressly emphasized, that the Indemnity Amount under this Letter of Indemnity shall extend beyond the paid amount (if and to the extent such is paid) as part of any insurance and/or indemnification of any party other than the Company. If and to the extent that the total indemnity amounts the Company is demanded to pay exceed the Maximum Indemnity Amount or the balance of the Maximum Indemnity Amount (as may exist at the time), then the Maximum Indemnity Amount or the balance thereof, as the case may be, shall be distributed among the Company’s Officeholders entitled to such Indemnity, in such manner that the actual indemnity amount received by each Officeholder shall be calculated pro rata, on the basis of the ratio of the indemnity amount due to each such Officeholders and the Indemnity Amount due to all such Officeholders in the aggregate.

 

  - 3 -  
 

 

1.5 The Company shall make available to the Officeholder all the amounts required under this section 1, on the date the liability of the Officeholder to pay them first arises (hereinafter: the " Liability Date "); in the event that legal proceedings commence, or in case of threat or concern for their commencement against the Officeholder, the Company will make available to the Officeholder, in advance, on account of the indemnity amount, any amounts assessed by the Company, to cover reasonable litigation expenses, including attorneys' fees, for which the Officeholder is entitled to indemnity; this section shall not apply to any litigation expenses and attorneys' fees in the framework of criminal proceedings, save for an indictment for an offense that does not require proof of criminal intent, with respect of which the indemnity shall be given to the Officeholder, if any, after and subject to being discharged from the indictment.

 

2. Causes for Indemnification

 

The Company’s indemnity undertaking under this Letter of Indemnity is limited to any act or omission in connection with each of the following acts and/or matters:

 

2.1.1 Acts carried out in the Company’s ordinary or other course of business, in connection with its field of business, including all the Company’s engagements in such fields.

 

2.1.2 The issuance of the Company’s securities pursuant to a prospectus and/or any other document and any amendments to such prospectus and/or document (the prospectus and document, hereinafter collectively: the " Prospectus ").

 

2.1.3 Any issues that require a disclosure in the Prospectus, including any draft thereof, that occurred prior to the date of the Prospectus, during the period in which the Prospectus is published and until the expiry of the subscription period, for which no due disclosure was made and all issues that require a disclosure in later reporting of the Company (hereinafter: " Misleading " or " Lacking Reporting ").

 

2.1.4 Lacking Reporting of a Misleading item in the financial statements, periodic reports, immediate reports and other reports that the Company is required to file as a public company under the Securities Law or any other law.

 

  - 4 -  
 

 

2.1.5 Financial liability imposed upon such Officeholder due to a claim of third parties against the Officeholder for lacking and/or misleading reporting and/or disclosure, in writing or verbally, to existing and/or potential investors in the Company, including in case of a merger of the Company with another company.

 

2.1.6 Actions that result from the public status of the Company, or due to the offering of its shares to the public, or the trading thereof at any Israeli and/or foreign stock exchange.

 

2.1.7 Exercise of the personal guarantee provided by the Officeholder to the Company to secure the Company’s warranties and/or representations

 

2.1.8 Failure to conduct a full and/or proper due diligence process of the Company’s investments, which result in a full and/or partial loss of the investment and/or harm to the Company’s business and/or breach of any obligations towards third parties.

 

2.1.9 Cover the excess in case of activation of the Officeholders’ liability insurance, if any such insurance is procured.

 

2.1.10 Actions in connection with the Company’s investments in various corporations, prior to or following such investments, for the purpose of entering into, performance, development, follow-up and monitoring such investment transaction.

 

2.1.11 The acts of purchase, sale, or holding marketable securities or other investments for or on behalf of the Company, including real estate investments in Israel and/or abroad.

 

2.1.12 Activities associated with hiring, dismissing, and overall labor relations in the Company and the Company’s trade relations, including employees, independent contractors, customers and other service providers.

 

2.1.13 Financial liability imposed on the Officeholder in respect of acts performed by the Officeholder vis à vis the government, a stock exchange and the Securities Authority institutions.

 

  - 5 -  
 

 

2.1.14 Any change or reorganization of the Company or any resolutions in connection therewith, including, without derogating from the generality of the above, splitting, merger, recapitalization, establishing subsidiaries, liquidation, merger or sale thereof, purchase of companies, legal entities or assets, allocation, transfer and distribution (as such terms are defined in the Companies Law).

 

2.1.15 Notification or declaration, including an expression of position or opinion made in good faith by the Officeholder, in the course of and as part of the performance of his duties, including during meetings of the board of directors of the Company or of any related organs, press interviews, various reportings, etc.

 

2.1.16 Events in connection with and/or arising from the lack of adequate insurance arrangements.

 

2.1.17 Events with respect to acts and/or resolutions in connection with the preparation or approval of financial statements, business plans or forecasts concerning the Company.

 

2.1.18 Events in connection with any demands or claims or proceedings arising from violations of intellectual property rights of any third parties or breach of the obligation of confidentiality towards such parties, which occur in the course of the Company’s activities.

 

2.1.19 Events in connection with any lenders or creditors, or loaned money or other liabilities of the Company.

 

2.1.20 Events in connection with Company's proceedings before any court and/or arbitrator and/or mediator and/or any other judiciary tribunal.

 

2.1.21 Events relating to class action suits or derivative actions in connection with the Company.

 

2.1.22 Events in connection with the distribution or non-distribution of dividends.

 

2.1.23 Events in connection with documents, actions, resolutions, representations or warranties with respect to any of the foregoing issues, towards the Company and/or any third parties.

 

2.1.24 Any Transaction, within the meaning of Section 1 of the Companies Law, including an Interested Party Transaction, as such term is defined in the Companies Law.

 

  - 6 -  
 

 

2.1.25 Any event and/or action for which indemnification is permitted under the Efficiency of Enforcement Procedures in the Securities Authority (legislation amendments) Law, 5771-2011.

 

2.1.26 Each one of the acts set forth in sections 2.1.1 - 2.1.25 above, if performed by the Officeholder in companies in which the Officeholder serves as an Officeholder and/or observer and/or representative and/or agent on behalf of the Company, including without limitation, in connection with his voting in the name of the Company at general meetings of such companies.

 

3. Indemnification Conditions

 

The Company’s indemnity undertaking shall be conditioned upon meeting the following conditions:

 

3.1 The Officeholder must notify the Company, in writing, of any legal and/or administrative proceedings initiated and/or threatened against the Officeholder, including, without limitation, claim of any type, investigation by a competent authority, legal suit and/or civil claim, including a claim for monetary compensation and/or motion for injunctive relief and/or Administrative Enforcement Proceedings as such term is defined in section 1.1.5 above and of any written or verbal demand and/or notice and/or threat received by him which mean an imposition of liability on the Officeholder resulting in the application of indemnification under this agreement (hereinafter: the " Proceedings "), close as possible after the Officeholder becomes aware of the above for the first time, and promptly deliver to the Company any documents provided to him/her in connection with such Proceedings.

 

3.2 The Company may, and if requested by the Officeholder, the Company shall be obligated to, assume the handling of such Proceedings as defined above on behalf of the Officeholder and hand over the defense to an attorney, the identity of whom shall be jointly determined by the Company and the Officeholder.

 

3.3 To the extent that the Officeholder wishes to exercise his rights under section 3.2 above, the Officeholder shall sign an authorization to empower the Company, as well as the attorney appointed by the Company for such purpose, to conduct the defense on his behalf in such Proceedings and represent him in anything involved in such defense, all at the Company’s first written request.

 

  - 7 -  
 

 

3.4 The Officeholder shall cooperate with the Company as well as with said attorney in any reasonable manner as demanded by the Company or attorney in their actions pertaining to the Proceedings, this regardless of whether the Officeholder elects to exercise his rights under section 3.2 above, or not.

 

3.5 If the Officeholder elects to exercise his rights under section 3.2 above, then the Company shall bear any expenses incurred in connection with such handling of the Proceedings in his name (hereinafter: the " Expenses ").

 

For the avoidance of doubt, that stated in this section above shall not apply in case of the conviction of the Officeholder of a criminal offense that requires proof of criminal intent. In such case, the Officeholder shall remit to the Company such Expenses no later than sixty (60) days after the judgment becomes peremptory or following receipt by the Officeholder of the Company’s demand, whichever is later.

 

Any acts of the Officeholder or anyone on his behalf contrary to the provisions of this section, shall constitute grounds for revocation of this indemnification agreement by the Company.

 

3.6 For the purpose of settlement, including, without derogating from the generality of the aforesaid, the referral of the Proceedings for mediation before a mediator, or for resolution by arbitration, the prior written consent of both the Officeholder and the Company shall be required, regardless of whether the Officeholder has elected to exercise his rights pursuant to the provisions of section 3.2 above, or not.

 

3.7 In the event that Officeholders are indemnified under any Officeholders’ insurance policy procured by the Company, if any, for the indemnifiable matter, the indemnity under this Letter of Indemnity shall be in the amount of the difference between the financial liability imposed on the Officeholders, including legal expenses and the amount received from the insurer with respect to the same matter.

 

4. Effect of the Undertaking

 

4.1 The indemnity undertaking refers to the acts of the Officeholder performed by virtue of his being an Officeholder of the Company and shall be in effect, both with respect to Proceedings instituted against him during his service with the Company and Proceedings instituted against him following the termination of his office, provided such Proceedings are with respect to acts performed by the Officeholder during the term of his office as Officeholder and by virtue of being an Officeholder of the Company, whether directly or indirectly, during the course of, or by reason of being an Officeholder in the Company.

 

  - 8 -  
 

 

4.2 The Company shall not indemnify the Officeholder for any liability or expense or for any settlement agreement, which were made with the Officeholder’s consent, but without the prior written consent of the Company.

 

4.3 The Company’s undertaking shall not apply to any act done without the Company’s knowledge or approval, notwithstanding the fact that under the Company’s incorporation documents and/or its resolutions such were ought to be within the Company’s knowledge and/or approval, even if such act was legal but the results of which were not for the benefit of the Company.

 

4.4 Nothing in the indemnity undertaking of the Company shall cancel, derogate from or waive any other indemnification available to the Officeholder from any other source under the provisions of any law and/or statute.

 

4.5 Nothing in the Company’s indemnity undertaking shall limit the Company from providing any further or special indemnification to the Officeholder, pursuant to the Company’s governing documents and the provisions of any law, provided such shall not adversely affect the indemnification undertaking which is the subject matter of this agreement.

 

5. Miscellaneous

 

5.1 This Letter of Indemnity exhausts the terms and the conditions applicable to the Company’s undertaking to indemnify the Officeholder in advance. This Letter of Indemnity supersedes any covenants, declarations, agreements, representations or understandings made by the Company, if any, either written or oral, prior to the execution of this Letter of Indemnity.

 

5.2 Notices under this Letter of Indemnity will be delivered in writing and shall be deemed received by the addressee when personally delivered, or within 3 days, if sent by registered mail in accordance with the addresses recorded in the Company’s files.

 

In witness whereof, we have hereto set our hands:

 

     
The Officeholder   Foresight Autonomous Holdings Ltd.

 

  - 9 -  
 

 

Schedule to Exhibit 4.4

 

The following directors and executive officers are parties to Indemnification Agreements with the Company which are substantially identical in all material respects to the representative Indemnification Agreement filed herewith and are dated as of the respective dates listed below. The other Indemnification Agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.

 

Name of Signatory   Date
     
Michael Gally   April 18, 2016
Chairman of the Board of Directors    
     
Haim Siboni   April 18, 2016
Chief Executive Officer    
     
Eli Yoresh   April 18, 2016
Chief Financial Officer    
     
Ariel Dor   April 18, 2016
Chief Operations Officer    
     
Ehud Aharoni   April 18, 2016
Director    
     
Avishay Cohen   April 18, 2016
Director    
     
Shaul Gilad   April 18, 2016
Director    
     
Zeev Levenberg   April 18, 2016
Director    

 

 

 

- 10 -

 

Exhibit 4.5

 

ASIA PITUACH (A.D.B.M.) LTD.
(the “Company” )

To

__________

 

Dear Sir,

 

Re: Letter of Exculpation

 

Whereas: The necessary resolutions were duly adopted by the Company to exculpate you in advance from liability for any damage caused due to a breach of the duty of care owed to the Company with respect to acts performed by you during the course of your service as an Officeholder in the Company, as set forth below; and

 

Whereas: The Company is interested in exculpating you from liability, in accordance with and subject to the terms and conditions of this Letter;

 

Now, therefore, subject to the provisions of any law and the provisions of this Letter of Exculpation, the Company hereby undertakes towards you as follows:

 

1.        General

 

1.1 The preamble and supplement hereto constitute an integral part hereof.

 

1.2 The section headings are intended solely for convenience of reading and shall not be used for interpretation of this Letter.

 

2.        Definitions

 

In this Letter of Exculpation, the following terms shall be assigned with the meanings appearing alongside them, unless explicitly stated otherwise:

 

2.1 “Companies Law” - the Companies Law, 5759-1999, as shall be in effect from time to time, including any amendments or modifications thereto.

 

2.2 “Officeholder” - as such term is defined in the Companies Law, including an Officeholder who is a Controlling Shareholder and/or an Officeholder who is an employee of the Company.

 

2.3 “Act” - as such term is defined in the Companies Law, including a resolution and/or omission during your service as an Officeholder in the Company and/or its subsidiaries, including your acts prior to the date of this Letter.

 

3.        Exculpation

 

3.1 The Company hereby exculpates you, in advance, from any liability towards the Company due to any damage sustained and/or to be sustained to it, if any, due to your breach of the duty of care to the Company.

 

3.2 The Company does not exculpate you from liability towards it for any of the following:

 

3.2.1 Breach of fiduciary duty;

 

3.2.2 Breach of the duty of care committed intentionally or recklessly, other than a breach of the duty of care committed solely by negligence;

 

3.2.3 Acts made with an intention to illegally reap a personal gain;

 

3.2.4 A fine, civil fine or monetary sanction, to the extent such is levied on you.

 

 

 

4. The Company’s undertakings under this Letter of Exculpation shall inure to your benefit and/or to the benefit of your estate without time limit, also following the termination of your service as an Officeholder in the Company, provided the Acts with respect to which such undertakings are given were and/or shall be performed during the course of your service as an Officeholder of the Company.

 

5. This Letter of Exculpation may not be transferred, assigned and/or charged and nothing in this Letter of Exculpation and/or any of the terms hereof may create any undertaking towards any third party and/or confer any rights whatsoever upon such third party, and neither this Letter of Exculpation nor any of the terms hereof shall be deemed to be an undertaking and/or contract in favor of any third party.

 

6. In the event of a conflict between any provisions in this Letter of Exculpation and the provisions of any law which cannot be stipulated against, or which may not be amended or supplemented, such provision of the law shall prevail, but without derogating from and/or affecting the validity and effect of the other provisions of this Letter of Exculpation.

 

7. This Letter of Exculpation shall come into effect upon your signing a copy of this Letter where indicated and delivery of the signed copy to the Company.

8. This Letter of Exculpation may not be amended, unless signed by both the Company and you.

9. To avoid doubt, it is hereby provided that this Letter of Exculpation does not constitute a contract in favor of a third party and may not be assigned.

 

10. Under no circumstances shall any waiver, laches, avoidance of action or the granting of an extension on the part of the Company or you be considered as waiver by the Company or you of any rights under this Letter and under any law and shall not prevent such party from taking all legal and other actions necessary to exercise such rights.

 

11. This Letter of Exculpation shall be governed by Israeli Law and the competent court in Tel Aviv shall have exclusive jurisdiction to hear any disputes arising from the implementation of this Letter.

 

  - 2 -  
 

 

In Witness Whereof , the Company has hereunto set its hand, through its duly authorized signatories.

 

(Signature + Stamp: ASIA PITUACH (A.D.B.M.) LTD. 520036062)

The Company

 

I hereby acknowledge receipt of this Letter and my agreement to all its terms and conditions.

 

( Signature )

 

Name: ______________________

 

Date: ____________

 

 

 

  - 3 -  
 

 

Schedule to Exhibit 4.5

 

The following directors and executive officers are parties to Exculpation Agreements with the Company which are substantially identical in all material respects to the representative Exculpation Agreement filed herewith and are dated as of the respective dates listed below. The other Exculpation Agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.

 

Name of Signatory   Date
     
Michael Gally   January 5, 2016
Chairman of the Board of Directors    
     
Haim Siboni   January 5, 2016
Chief Executive Officer    
     
Eli Yoresh   January 5, 2016
Chief Financial Officer    
     
Ariel Dor    January 5, 2016
Chief Operations Officer    
     
Ehud Aharoni   January 5, 2016
Director    
     
Avishay Cohen   January 5, 2016
Director    
     
Shaul Gilad   January 5, 2016
Director    
     
Zeev Levenberg   January 5, 2016
Director    

 

 

- 4 -

 

Exhibit 4.6

 

ASIA Development (A.D.B.M.) LTD.

(the "Company")

  (2016) EQUITY INCENTIVE PLAN

 

1. Name and Purpose of the Plan

 

1.1 This plan, which has been adopted by the Board of Directors of Asia Development (A.D.B.M.) Ltd. (hereinafter: "the Company ") and as amended from time to time, shall be referred to as "the Asia Development (A.D.B.M.) Ltd. (2016) Equity Incentive Plan" (hereinafter: "the Plan ").

 

1.2 The purposes of the Plan are to reward and provide incentives to the employees, officeholders and/or Directors 1 , consultants and service providers of the Company and its Affiliates (if any, and as defined below), both present and/or as may join in future, including the Controlling Shareholders of the Company, for their contribution and efforts in developing the Company's business and to strengthen the sense of common interest between them and the Company.

 

1.3 Awards granted under the Plan to service providers in various jurisdictions, may be subject to specific terms and conditions for such Awards, as may be set forth in one or more separate appendice(s) to this Plan, as approved by the Board of Directors of the Company.

 

2. Definitions

 

The following terms referred to in this Plan shall have the definitions set forth below:

 

" Option " - An option to purchase Shares awarded under the terms of the Plan, with each Option exercisable into one ordinary Share of the Company (subject to adjustments) and subject to the terms and conditions of this Plan.

 

" 3(i) Option " - an Option the exercise of which is taxable pursuant to Section 3(i) of the Income Tax Ordinance, awarded to any person who is a Non-Eligible Participant.

 

 

 

 

 

 

 
1 In this Plan “ Directors ” - excluding External Directors and Independent Directors as such terms are defined in the Companies Law 5759 - 1999.  

 

 

 

" Tax Track Election " - the Company’s election in either of the two Tax Tracks applicable to Share awards to employees through a Trustee (the Capital Gains Track or the Ordinary Income Track), to be reported to the Tax Authorities and pursuant to which the Options shall be awarded under the Plan.

 

" Controlling Shareholder " - as defined in Section 32(9) of the Ordinance.

 

" Board of Directors " - the Company’s Board of Directors.

 

" The Stock Exchange " - the Tel Aviv Stock Exchange Ltd.

 

" The Nominee Company " - the Israel Discount Bank Nominees Ltd. or any other nominee company elected by the Company.

 

" The Rules " - the Income Tax Rules (Tax Relief in Issuance of Shares to Employees), 5763-2003.

 

" The Director " ( ha'menahel ) - a director appointed pursuant to section 229 of the Ordinance, including the Deputy Director.

 

" Non-Trustee Award " - an award to an Eligible Participant pursuant to Section 102(c) of the Income Tax Ordinance and not held in trust by the Trustee.

 

" Capital Gains Track Award " - an award to an Eligible Participant through a Trustee to which the Capital Gains Track treatment applies.

 

" Ordinary Income Track Award " - an award through a Trustee to which the Ordinary Income Track treatment applies.

 

" Trustee Award " - an award pursuant to Section 102(b) of the Income Tax Ordinance where the Option or the Share subject to the Award are held in trust by a Trustee for the benefit of the Participant, including pursuant to the Ordinary Income Track and the Capital Gains Track.

 

" Award Agreement " - an agreement or other document defining the terms applicable to a particular Award under the Plan, including such sections of the employment agreement between the Company and the Participant that include an undertaking to grant Options.

 

" Award " - a grant of Options or Shares under the Plan. Each Award shall be confirmed by an Award Agreement setting forth the terms of such Award.

 

" The Company " - Asia Pituach (A.D.B.M.) Ltd. and any successor thereof.

 

  - 2 -  
 

 

" Affiliate " - the subsidiary - Four Eyes Autonomous Ltd. Company No. 515287480 and any "Employing Company" within the meaning of Section 102(a) of the Income Tax Ordinance.

 

" The Companies Law " - the Companies Law, 5759 - 1999 and any amendments thereto.

 

" Shares " - Ordinary Shares of the Company, of NIS 1 par value each (subject to adjustments and/or technical changes in the Company’s share capital).

 

" Exercise Shares " - the Shares resulting from the exercise of Options under the Plan.

 

" Capital Gains Track " - the tax alternative set forth in Sections 102(b)(2) and 102(b)(3) of the Income Tax Ordinance.

 

" Ordinary Income Track " - the tax alternative set forth in Section 102(b)(1) of the Income Tax Ordinance, pursuant to which income resulting from the sale of Shares or transfer of Shares from the Trustee to an employee is taxed as ordinary income.

 

" Participant " - a recipient of an Award under this Plan who executes an Award Agreement.

 

" Eligible Participant " - an employee of the Company or of an Affiliate or any individual who is serving as a Director or officeholder of the Company, who is not a Controlling Shareholder.

 

" Trustee " - any individual or corporation appointed by the Company’s Board of Directors to serve as a Trustee and approved by the Tax Authorities, in accordance with the provisions of Section 102(a) of the Ordinance.

 

" Section 102 " - the provisions of Section 102 of the Income Tax Ordinance, as amended from time to time, including all the Regulations, Rules and Orders enacted or promulgated under Section 102 of the Ordinance.

 

" Income Tax Ordinance " or "the Ordinance " - the Israeli Income Tax Ordinance [New Version] 5721 - 1961 and all the Rules, Regulations, Orders or procedures promulgated thereunder and any amendments thereto, including specifically the Rules (as defined above), all as may be amended from time to time.

 

" Control " - as such term is defined in the Securities Law, 5728-1968.

 

  - 3 -  
 

 

" The Plan " - means this Plan.

 

" Lock-Up Period " - the period set forth in Section 102 of the Ordinance, or any other period required by the Tax Authorities in anything relating to Trustee Awards, during which Options awarded by the Company must be held in trust by the Trustee for the benefit of the Eligible Participant. As of the date of adoption of this Plan, the Lock-Up Period for Ordinary Income Track Awards is 12 months from the award date of the Options and the Lock-Up Period for Capital Gains Track Awards is 24 months from the award date of the Options.

 

3. Administration of the Plan

 

3.1 The Board of Directors of the Company is responsible for the administration of the Plan and for all the required actions, including the determining of the following (a) identity of Participants in the Plan; (b) number of Options to be covered by each Award; (c) Award dates; (d) vesting terms, exercise price, exercise period (including schedules and other terms and conditions for exercising the entitlement to Options, including the setting of defined periods (such as Black Out Periods) in which notices of exercise may not be delivered), the manner of exercise and other terms applicable to a specific Award; (e) form of the Award Agreement or other documents concerning Awards; (f) restrictions and other conditions applicable to the Options or the Shares covered by the Options; (g) any other decisions required or connected to the Plan, whether or not set forth herein, and provided that the terms of the Options granted prior to such date are not adversely affected, without the consent of the Participant; and any other matters required or necessary for the arrangement of the Awards and/or for the administration, clarification, interpretation and implementation of the Plan. Subject to the provisions of the law, the interpretation of any provision of the Plan by the Board of Directors shall be final and conclusive.

 

3.2 No member of the Board of Directors shall be liable for any act or determination made in good faith with respect to the Plan or any Award granted under the Plan.

 

  - 4 -  
 

 

3.3 The Board of Directors of the Company may delegate the powers listed above, subject to the provisions of the Company’s Articles of Association and the provisions of any law applicable to the Company, provided that in any such case, the Board of Directors shall be entitled to exercise its powers under the Plan even if such powers were delegated in effect.

 

3.4 The award of Options to officeholders of the Company shall be made in accordance with and subject to the officeholders’ remuneration policy determined and approved by the Company from time to time (" Remuneration Policy "), except where the competent organs of the Company determine that such awards may be made other than in accordance with the Remuneration Policy. Decisions that also require the approval of the Audit Committee and/or the Remuneration Committee under the law, shall be passed at the Audit Committee prior to the approval of such decisions by the Board of Directors, and in the necessary cases also require the approval of the general meeting of the Company's shareholders.

 

3.5 Nothing stated in this Plan shall derogate from the powers of the Remuneration Committee of the Company under the law and/or from the provisions set forth in the Company’s remuneration plan.

 

4.  Eligibility for Participation in the Plan

 

4.1 No Awards may be granted pursuant to the Plan to members of the Board of Directors or officeholders, unless such Awards were approved in accordance with the provisions of the Companies Law.

 

4.2 Subject to the provisions of section 4.1 above and the provisions of any law, Awards may be granted to Eligible Participants and service providers of the Company and/or of its Affiliates, whether or not such persons serve as directors or officeholders of the Company or its Affiliates.

 

4.3 Subject to the provisions of any law, the Board of Directors of the Company shall determine the identity of those eligible to be Participants under the Plan. The eligibility for an Award, its terms and conditions and the amount of Shares or Options covered by such Award, shall be determined by the organs authorized under the law.

 

  - 5 -  
 

 

4.4 Eligible Participants may only receive Trustee Awards or Non-Trustee Awards. Participants other than Eligible Participants may receive 3(i) Options only.

 

4.5 The grant of an Option to a Participant hereunder shall neither entitle the optionee to participate nor disqualify the optionee from participating in any other grant of Options under the Plan or under any other Options or Shares grant plans of the Company or its Affiliates.

 

5.  Shares Reserved for the Plan

 

The Board of Directors may from time to time determine the number of Options and Shares reserved for Awards hereunder and such number may be increased or decreased from time to time. Until cancellation of the Plan, the Company shall reserve in its authorized but unissued share capital such sufficient number of Company Shares for the purpose of granting Awards in accordance with the total number of Shares subject to the Options awarded under the Plan, subject to adjustments as a result of changes in the share capital of the Company, as set forth in section 11 below. Any Shares that remain authorized but unissued and are not subject to Options at the date of termination of the Plan shall cease to be reserved for purposes of the Plan, but until termination of the Plan, the Company shall at all times reserve a sufficient number of Shares to meet the requirements of the Plan. Should any Option granted under the Plan expire or be canceled prior to its exercise date or the Participant relinquishes the exercise of such Option, the Shares which were not purchased under the Option shall be available to the Plan and may be used, including for awarding same once again to other Participants.

 

6. Award Agreement

 

6.1 The Board of Directors of the Company may approve to Participants Awards under the Plan, at its discretion and subject to the provisions of the law. The terms of the Award will be set forth in the Award Agreement, in the form approved by the Board of Directors.

 

6.2 The date of grant of each Award shall be the date specified by the Board of Directors at the time such Award is made, provided that such date is not earlier than the date of approval of the Award by the Board of Directors, and in the absence of such specification, on the date of approval of the Award by the Board of Directors and in any event, subject to the provisions of the law and to any relevant regulatory restriction as of the date of the Options Award.

 

  - 6 -  
 

 

6.3 The Award Agreement shall state, inter alia , the number of Options or Shares being granted, the types of Options or Shares, any special terms applying to such Award (if any), all as determined by the Board of Directors. Furthermore, the Award Agreement shall indicate whether the Award is a Trustee Award, a Non-Trustee Award or a 3(i) Options Award; and if the Award is a Trustee Award - shall also indicate the applicable Tax Track, namely - Capital Gains Track or Ordinary Income Track.

 

6.4 In addition, the Award Agreement shall include the following agreements and undertakings of the Participant: (a) agreement of the Participant to all the terms and conditions of the Plan, including, without derogating from the generality of the above, the Participant’s consent to bear any lax liabilities and other mandatory payments arising from the offering and award of the Option warrants, the exercise thereof, the transfer of the option warrants and/or Exercise Shares and/or the Shares awarded, including the consent of the Participant to authorize the Company to withhold at source (including if so required - from the amount of the Option warrants and/or Exercise Shares and/or the awarded Shares, as the case may be) any applicable tax and an undertaking to indemnify the Company if it is sued for such non-payment. If it is determined in the future by any competent authority and/or judgment that the Company must deduct tax for the Award in advance of the Options exercise date, then the Participant undertakes to transfer to the Company, immediately upon its first demand, the amount of such demanded tax liability; (b) an undertaking to comply with the statutory provisions in anything relating to the prohibition on use of the Company’s inside information; (c) an undertaking to comply with the provisions of Section 102 the of Ordinance, the Rules and the Plan; (d) the Participant’s undertaking to uphold the Options exercise and sale of Exercise Shares’ procedure, as agreed between the Company and the Trustee, the principles of which are set forth in section 8 and 9 below; (e) an undertaking to release the Trustee from any liability in respect of any act or decision duly taken and bona fide executed in connection with this Plan, or the Option warrants issued to the Trustee on behalf of the Participant or the Exercise Shares vested to him by virtue thereof; (f) a letter of instructions to the Trustee as to the manner of exercise of the voting rights attached to the Shares resulting from the exercise of the Options during the Lock-Up Period.

 

  - 7 -  
 

 

7. Election of the Section 102 Tax Track

 

7.1 Subject to that stated below, Awards executed in accordance with Section 102, either as Options grants, as grants of equity incentive or as Shares Awards, shall be made subject to either (a) Section 102(b)(2) of the Income Tax Ordinance - in anything relating to Capital Gains Track Awards, or (b) Section 102(b)(1) of the Income Tax Ordinance in anything relating to Ordinary Income Track Awards. The Company’s election in either of the two Tax Tracks applicable to employee share awards through a Trustee, shall be filed with the Tax Authorities. Pursuant to the provisions of Section 102, once the Company has reported such Track election, it may change the type of the elected Tax Track only after the lapse of at least 12 months from the end of the calendar year in which the first Award was made, in accordance with the original Tax Track election. For the avoidance of doubt, such election by the Company shall not prevent the Company from making Non-Trustee Awards to Eligible Participants at any time.

 

7.2 Eligible Participant may only receive Trustee Awards or Non-Trustee Awards. Participants other than Eligible Participants may be granted 3(i) Options only. The Award Agreement or other documents evidencing the granting of the Options and/or Shares pursuant to the Plan, shall indicate whether the Award is a Trustee Award, a Non-Trustee Award or a 3(i) Options Award. If the Award is a Trustee Award, it shall also indicate whether it is a Capital Gains Track Award or an Ordinary Income Track Award.

 

7.3 No Trustee Awards may be made pursuant to this Plan until 30 days after the date of the filings required by the Tax Authorities and all subject to the provisions of the Income Tax Ordinance.

 

  - 8 -  
 

 

8. Terms of 102 Trustee Awards

 

8.1 The date appearing on the Award notice delivered to the Participant will be deemed the Award date for any Trustee Award (hereinafter: "the Award Date "), provided that the following two conditions are met: (a) the Company provides notice to the Trustee indicating such date as the Award Date; and (b) the Participant signs the Award Agreement and all the documents required by the Company or the Trustee.

 

8.2 An Award shall be deemed to be a Trustee Award if the Company, immediately following the execution of such Award, and in no event later than the date stipulated by the Tax Authorities, as updated from time to time: (a) notifies the Trustee of the Award and transfers to the Trustee a copy of the Award decision; and (b) deposit the Award and the Award Agreement, including the documents incident thereto with the Trustee, as required by the Tax Authorities, and the Eligible Participant signs a certification in a accordance with the provisions of Section 102, in the form required by the Trustee.

 

8.3 Upon making the Trustee Award, the Trustee shall be allocated all the Options and/or Shares issued as a result of exercise of the Options, and shall be registered in the name of the Trustee and held in trust by the Trustee for the benefit of the Participant during and after the Lock-up Period, and the Shares resulting from such exercise shall be held by the Trustee throughout the Lock-Up Period and thereafter in such manner that the Shares are recorded in the books of the Company in the name of the Nominee Company, and held with a Member of the Stock Exchange in a deposit maintained in the name of the Trustee, with only the Trustee having signatory rights in such deposit. Upon the conclusion of the Lock-up Period, the Trustee shall be entitled to transfer the Options or the Shares (as the case may be) to the Eligible Participant (through the Nominee Company), and/or sell them (including by way of same day exercise and sale), to which the conditions set forth in section 9.10 below shall apply), fully or partially, as directed by the Participant, but only provided that: (a) the Trustee receives the Tax Authorities approval that all the tax required under the Income Tax Ordinance has been paid, or if the Trustee and/or the Company and/or an Affiliate have actually deducted the required tax under the Income Tax Ordinance; and (b) all the required actions have been completed and all the required approvals under the law in connection with such transfer and/or sale have been obtained.

 

  - 9 -  
 

 

8.4 Each Trustee Award (whether under the Capital Gains Track or the Ordinary Income Track) shall be subject to the relevant provisions of Section 102, the Income Tax Ordinance and the assessing officer's certification, which shall be deemed an integral part of the Award terms and in case of a contradiction, shall prevail over any terms or conditions contained in the Plan or the Award Agreement. All the provisions of the Income Tax Ordinance, the Regulations and Rules thereunder as well as any approval or instruction of the Tax Authorities in accordance with the provisions of Section 102 (even where such are not explicitly provided in the Plan or the Award Agreement) - shall bind the Eligible Participants. The Trustee and any Eligible Participant who received an Award through a Trustee shall comply with the provisions of the Income Tax Ordinance and are subject to all the terms and conditions of the trust agreement between the Company and the Trustee. Furthermore, the Eligible Participant hereby agrees to sign any document required by the Company or the Trustee for the purpose of complying with the provisions of any applicable law, including Section 102.

 

8.5 During the Lock-Up Period, the Eligible Participant shall not be entitled to require the Trustee to release, transfer or sell the Options, Shares or other shares obtained following any realization of rights derived from Shares or Options (including bonus shares), to such Eligible Participant or to any third party, unless permitted to do so under Section 102 as set forth in the following paragraph, and subject to any law.

 

Notwithstanding the foregoing, the Trustee may, pursuant to a written request and subject to the limitations of applicable law, release and transfer such Shares to a Participant or any third party, provided that both of the following conditions have been fulfilled prior to such release or transfer: (a) all taxes required to be paid upon the release and transfer of the Shares have paid or withheld by the Participant, Trustee or the Company; and (b) the Trustee has received written confirmation from the Company that all requirements for such release and transfer have been fulfilled according to the provisions of the Company’s Articles of Association, the Plan, the provisions of any relevant agreement and any law. For the avoidance of doubt, any such sale, transfer or release of securities during the Lock-Up Period, may result in tax consequences for breach of the Lock-Up Period as provided in Section 102. In any event, and without derogating from the provisions of section 13 below, such tax consequences arising from the transfer to such third party shall apply to and shall be borne solely by such Eligible Participant.

 

  - 10 -  
 

 

8.6 Without derogating from the aforesaid in section 8.4 above, during the Lock-Up Period, or prior to the payment or securing the payment of the applicable tax, as provide in Section 7 of the Rules, whichever is later, the Option warrants (including the Exercise Shares derived therefrom by the Trustee) may not be transferred, assigned, pledged, attached, or otherwise voluntarily charged and no powers of attorney or other transfer deeds shall be given with respect to them, whether with immediate effect or in effect at some future date, other than by a will or under the law; If such Option warrants and/or Exercise Shares derived therefrom and/or the awarded Shares (if any) are transferred under a will or the law as aforesaid, the provisions of Section 102 of the Ordinance and the Rules shall apply to the Participant’s heirs or transferees, as the case may be.

 

8.7 To the extent that under the provision of this Plan Shares are held by a Trustee on behalf of a Participant, if the Company declares a distribution of bonus shares and/or grant of additional rights for the Shares, the provisions of this Plan shall apply to such bonus shares and/or grant of additional rights. In addition, the Lock-Up Period for such rights shall be deemed to begin on the commencement date of the Lock-Up Period for the Award with respect to which the underlying bonus shares or additional rights were distributed. In the event of a distribution of cash dividend, for Shares held by the Trustee on behalf of an Eligible Participant, the Trustee shall transfer the dividend proceeds to the Eligible Participant after deduction of taxes and mandatory payments under the law.

 

  - 11 -  
 

 

8.8 If an Option awarded under a Trustee Award is exercised during a Lock-Up Period, the Shares deriving from such exercise shall be issued in the name of the Trustee (and recorded in the name of the Nominee Company) and held by the Trustee for the benefit of the Eligible Participant. If such Option is exercised after the end of the Lock-Up Period, the Eligible Participant may choose whether such Shares resulting from the exercise shall be: (a) issued in the name of the Trustee; or (b) transferred directly the Eligible Participant, provided that such Participant had complied with the terms of the Plan and subject to payment of the due tax under the relevant Tax Track; or (c) sold by the Trustee for the Participant pursuant to the arrangements provided in this Plan.

 

8.9 Subject to the decision of the Board of Directors and obtaining the Tax Authorities’ certificates, the Trustee shall be vested with all the powers under Section 102 of the Ordinance as well as any other authority agreed upon between the Company and the Trustee in the trust agreement entered into between the Company and the Trustee.

 

8.10 The Trustee may take any actions he deems appropriate for the purpose of tax withholding, as required under the law, as consequence of exercise of the Options or sale of the Exercise Shares or transfer of the Exercise Shares to the Participant.

 

8.11 The Company shall provide the Trustee with any information demanded by the Trustee and relevant to the Plan and the Awards made thereunder.

 

9. Exercise of Options

 

9.1 Options are exercisable in accordance with the terms of their grant, subject to the terms of the Plan and as set forth in the Award Agreement, with each Option exercisable into one Share of the Company of NIS 0.1 par value (subject to adjustments).

 

  - 12 -  
 

 

9.2 The exercise price for each Share shall the price determined by the Board of Directors at its discretion, at the time the Options are granted, and provided that the Share price is not lower than the minimum price for exercising Option warrants determined in the Stock Exchange Rules and instructions, as at the date of the adoption of the decision by the Board of Directors regarding the Award, or upon the exercise, all subject to the provisions of the Remuneration Policy concerning the Options’ exercise price.

 

9.3 A Participant wishing to exercise an Option, or any part thereof, shall sent to the Company (with a copy to the Trustee (except in the case of a Non-Trustee Award)) a notice of exercise setting forth the number of Options the Participant wishes to exercise. The notice of exercise shall be accompanied by payment in full of the exercise price, multiplied by the amount of Options the Participant is interested in exercising, either in cash or in the manner determined by the Company from time to time.

 

9.4 The notice of exercise may not be amended or revoked, unless with the consent of the Company.

 

9.5 Any Option not exercised by the end of the exercise period, shall immediately expire and shall not confer the holder of the Option any rights whatsoever.

 

9.6 If the last day for exercising the Option occurs on a non-trading day, the exercise date shall be deferred to the next trading day.

 

9.7 A Participant wishing to exercise Options into such Exercise Shares, shall sign immediately upon the Company’s first demand and as a preliminary condition to such Options' exercise, any document the Participant is required to sign under the Plan, the Articles of Association of the Company and/or under any law, in order to enable the exercise. If the applicant has not fully complied with the conditions for exercise of the Options, and where such action cannot be remedied, then the notice of exercise shall be deemed null and void, and the notice of exercise, as well as the enclosed funds shall be returned to the applicant, within two business days after the Company’s determination that the notice of exercise is null and void.

 

  - 13 -  
 

 

9.8 Without derogating from the generality of the aforesaid in this section 9, Options shall not be exercised on the effective date for distribution of bonus shares, offering by way of rights, distribution of a dividend, consolidation, subdivision or capital reduction (each of the above cases - " a Company Event "). In addition, if the "ex day" of a Company Event occurs prior to the effective date of the Company Event, no conversion shall be made on such "ex day". The limitations set forth in this section 9.8 shall be in effect as long as the securities of the Company are traded on the Stock Exchange.

 

9.9 Notwithstanding the provisions of sections 9.1 and 9.3 above, and at the option of the Eligible Participant as set forth in section 9.9.1 below, to the extent not provided otherwise by the Board of Directors, in the specific Award Agreement with respect to any of the Participants, then the exercise of the Options into Shares shall be made, subject to the obtaining of a pre-ruling from the Tax Authorities, on the basis of net exercise (cashless exercise), so that the Participant shall not be required to actually pay the exercise price, save for the amount of the nominal value (as defined below) and the amount of Shares actually issued to the Participant shall be calculated by taking the difference between:

 

(a) the closing rate of the Company's Shares at the Stock Exchange on the trading day preceding the exercise date, multiplied by the number of Shares covered by the Options with respect to which the notice of exercise was given; and (b) the exercise price, multiplied by the number of Options with respect to which the notice of exercise was given.

 

Such difference (if positive) shall constitute the deriving benefit amount for the Participant on the exercise date (" Benefit Amount ").

 

The number of Shares to which the Participant shall be entitled based on the net exercise will be computed through the following formula:

 

  X =   Y(A-B)  
  A  

 

  - 14 -  
 

 

Where:

 

X - the number of Shares to which the Participant is entitled as a result of the exercise of the Options.

 

Y - Number of exercisable Options, which Participant wishes to exercise.

 

A - The closing rate of the Company’s Share of NIS 0.01 par value each (subject to changes in the nominal value in the event of stock split or reverse stock split) on the day preceding the exercise date.

 

B - Exercise price of each option (subject to adjustments).

 

This on the assumption that the nominal value of the Company's Share on the exercise date remains NIS 0.1 (if not, the denominator of the fraction will be accordingly adjusted).

 

9.9.1 It is clarified that the Eligible Participant may choose to use the Cashless Exercise mechanism as aforesaid, as notified by him in writing to the Company, specifying that the Eligible Participant may choose between the Cashless Exercise mechanism and the ordinary exercise mechanism of the Options upon exercise thereof.

 

9.9.2 Immediately after the first trading date following receipt of the notice of exercise, the Company shall notify the Participant about the partial number of Exercise Shares (as defined below) that the Participant shall be entitled to receive and the total nominal amount the Participant is required to pay for such Awards. On the first trading date following such notice, and subject to the payment of the nominal value amount by the Participant, the Company shall issue to the Participant (or to the Trustee in his favor, as applicable) such amount of Shares the market value of which, in accordance with the closing rate of the Company’s Shares at the Stock Exchange on the day preceding the notice of exercise, is equal to the Benefit Amount, with such amount of Shares added by an additional amount of Shares for the nominal value paid by the Participant for any Share issued to him, or issued in his favor, for the exercise of the Options under this section (in this section - the amount of Shares resulting from the aforesaid shall be referred to as: "the Partial Number of Exercise Shares " and the amount of the nominal value with respect to the Partial Number of Exercise Shares shall be referred to as—"the Nominal Value Amount "). In any event, the Company shall not issue share fractions and any fractional share deriving from the above calculation or resulting from the provisions of this section, shall be rounded (upwards or downwards, as the case may be) to the nearest whole share.

 

  - 15 -  
 

 

9.10 The Exercise Shares shall not be issued prior to the delivery to the Company of the exercise price and/or the nominal value of the Shares, as the case may be, and delivery of all the documents, certifications and payments required from the Participant as condition for the exercise of the Option warrants. The Company shall issue the Exercise Shares for the Option warrants converted by the Participant, to the Nominee Company, for the Trustee, that shall hold same for the Participant, and the Trustee shall act with respect to the Exercise Shares in accordance with the provisions of the trust deed to be executed with him and the provisions of Section 102 of the Ordinance.

 

9.11 Notwithstanding the aforesaid in section 9.10 above, an Eligible Participant who wishes to exercise all or part of the Options and sell the Shares deriving from the exercise, shall do so by applying in writing to the Trustee (in case of a Trustee Award), in the form determined the Company and/or by the Trustee, that will include, among others, the number of Options that the offeree is interested in exercising. The Trustee shall withhold from such sale proceeds: (a) the exercise price, or alternatively, the nominal value amount in case of net exercise under section 9.8 above and transfer such amount to the Company; and (b) the tax amount required under the Income Tax Ordinance and other mandatory payments (including payments applicable to the Company, if any). The balance remaining following execution of the aforesaid deductions shall be transferred to the Eligible Participant, provided that all the required actions are completed and all the necessary approvals under the law in connection with the transfer and/or sale as aforesaid are obtained. For the avoidance of doubt, it is hereby clarified that the Eligible Participant may not apply to the Trustee and request to exercise all or part of the Options, and to sell the Shares deriving from the exercise, as aforesaid, to the extent that the consideration expected to be received from the sale is lower than the amounts set forth in subsections (a) and (b) above, and in such case, the provisions of this section 9.11 shall not apply.

 

  - 16 -  
 

 

9.12 The Company shall act to issue the Shares immediately following the exercise of the Options and shall also act to list them for trade in the Stock Exchange, according and subject to the provisions of the Stock Exchange rules and directives. In accordance with the Stock Exchange directives, the Company shall register the Exercise Shares deriving from exercise of the Option warrants under this Plan in the name of the Nominee Company.

 

9.13 Until the Exercise Shares are duly issued, the Participant shall not be entitled to any voting rights or to receive dividends or any other rights as a shareholder with respect to such Shares.

 

9.14 Subject to that stated in section 9.15 below in the matter of a proxy for voting in the Exercise Shares, following the exercise of the Options into the Exercise Shares and until registration of the rights to the Exercise Shares in the name of the Participant in the Company’s register of shareholders, the Participant shall have none of the rights attached to the Exercise Shares.

 

9.15 So long as the Exercise Shares are held by the Trustee, the Trustee shall be deemed for all intents and purposes vis-à-vis the Company and any other third parties as holder of the Exercise Shares, including, without derogating from the generality of the aforesaid, for receiving notices from the Company. Notwithstanding the above, the Trustee shall not have, personally, any voting rights attached to the Exercise Shares, but the Trustee may, subject to obtaining the appropriate written request from a Participant, grant such Participant a proxy to vote at the general meeting of the Company for the Exercise Shares to which such Participant is entitled and held by the Trustee.

 

  - 17 -  
 

 

9.16 Subject to the provisions of any law and/or agreement, the Company shall have a pre-emptive right to purchase from a Participant to whom Options were awarded under this Plan any Share resulting from the exercise of such Options, in case of sale of the Exercise Shares by the Participant other than in the framework of trading at the Stock Exchange. Such pre-emptive right shall apply for a period of 7 business days starting from the day on which the Participant delivers a notice to the Company and/or the Trustee, as the case may be, concerning the intention of the Participant to transfer and/or sell the Exercise Shares held by him to a third party, the identity of the third party and the terms of sale (in this section 9.16: "the Participant’s Notice "). If the Company elects to exercise such pre-emptive right, it shall exercise such pre-emptive right under the same conditions stipulated in the Participant’s Notice. In the event that the Company does not reply the Participant within 7 business days after the delivery of the Participant’s Notice, the Participant shall be entitled to sell the Exercise Shares to the third party under the conditions set forth in the Participant’s Notice and subject to compliance with all his undertakings under this Plan and/or the Award Agreement.

 

10. Termination of Employment/Engagement as Service Provider (Options Expiry/Cancellation)

 

10.1 Effect of Termination; Exercise after Termination. Unless otherwise provided in the Award Agreement, in case of termination of the employment relationship between the Participant and the Company, the service of an officeholder ceases, or the Participant ceases to provide services to the Company, such Participant may exercise all the Options vested prior to the date of termination of employment relationship which were not exercised by him, for the period set forth in this section (but in no event later than the end of the exercise period of the vested Options, as set forth in the Award Agreement or the Plan). Any Options that remain unvested on the date of termination of employment relationship, or on the expiration date of the engagement between the Participant and the Company, as the case may be, shall terminate and may not be exercised. In the event of termination of employer - employee relationship for any reason prior to the vesting date of any portion, such entitlement shall not vest. If, after the termination date of the employment relationship, cessation of service of an officeholder, or the termination of engagement, the Participant chooses not to exercise the vested Options within the time specified below, all the Options shall expire and confer no rights whatsoever.

 

  - 18 -  
 

 

In the absence of any other provision in the relevant Award Agreement:

 

(a) In any case of termination of the employment relationship between the Participant and the Company or an Affiliate or in case the Participant ceases to provide services for any reason whatsoever (save for the events set forth in subsections (b) and (c) below, to which the provisions of these subsections shall apply), Options vested prior to the termination date of the employment relationship, may be exercised within six months following the termination date of the employment relationship, or prior to the expiration of the Option period, whichever is earlier. Options which remain unvested until the termination date of the employment relationship shall expire and be canceled;

 

(b) In the event of termination of the employment relationship between the Participant and the Company "for cause" - the Options may not be exercised, whether vested or not, and the Options shall expire on the termination date of the employment relationship. In this Plan, termination of employment relationship " for cause " means, each of the following: (i) commission of an offense (by act or omission) causing damage to the Company or involving moral turpitude; (ii) breach of the duty of loyalty and the duty of care towards the Company by a Participant who serves as an officeholder; (iii) breach of any confidentiality or non-competition duty towards the Company, or any other material obligation towards the Company; and (iv) termination of employment due to the conviction of the Participant for commission of any act of felony, fraud, moral felonies and such other similar felonies equivalent in terms of severity and/or conviction of any other criminal offense involving moral turpitude.

 

  - 19 -  
 

 

(c) In any case of termination of the employment relationship between the Participant and the Company due to disability or death, any Options that have vested until the termination date of the employment relationship may be exercised: within twelve (12) months following the termination date of the employment relationship, or the expiry of the Option period, whichever is earlier.

 

It is hereby clarified, for the avoidance of doubt, that after the termination date of the employment relationship, including during the 6 months period as stated in subsection (a) above, or during the 12 months period as stated in subsection (c) above, the entitlement to the vesting of the Options shall no longer continue.

 

10.2 Termination Date of Employment Relationship . Unless otherwise provided in the relevant Award Agreement " termination date of the employment relationship " (for any reason) for the purposes of the Plan is the date on which the Participant is no longer on the payroll of the Company, including the prior notice period.

 

10.3 Unpaid Leave of Absence. Unless the Board of Directors directs otherwise and subject to any applicable law, the vesting of Awards granted under this Plan shall be suspended at any time during the course of any type of unpaid leave of absence.

 

10.4 Application to a Non-Employee Service Provider. The provisions of this section 10 shall apply, mutatis mutandis, on Non-Employee Participants, who are service providers (consultants, contractors, Non-Employee officeholders, etc.) whose engagement with the Company ceases, and in such case, whenever a termination date of employment relationship is referred to in this section 10, it shall be interpreted as referring to the date on which the notice of cessation of engagement is delivered or the date of actual cessation of engagement with a service provider, whichever is earlier.

 

  - 20 -  
 

 

10.5 Change of Status. None of the following events shall be deemed to be a termination of employment relationship or cessation of an engagement between the Participant and the Company or an Affiliate: (a) any absence approved by the Company; (b) transfer from employment by the Company to the employment of any Affiliate (and vice versa ); (c) a transfer from employment by an Affiliate to employment by another Affiliate; and (d) change of status (an employee’s change of status into that of a director, an employee’s change of status into that of a service provider, etc.), provided that such change of status does not affect the special conditions of the Award referring to such service provider or employee.

 

10.6 Neither the provisions of this Plan nor any of the provisions of the Award Agreement with the Participant shall be construed as agreement for, or as imposing any obligation on the Company and/or an Affiliate to continue the employment of the Participant or to continue the engagement with the Participant as a service provider, and neither the provisions of this Plan nor any of the provisions of such Agreement shall be construed as conferring upon any Participant any rights to continue the employment with the Company and/or any of its Affiliates or to continue providing services to the Company and/or any of its Affiliates, or as interfering in any way with the rights of the Company and/or its Affiliates at any time to terminate any of the Participants’ employment or engagement.

 

10.7 Expiration Due to Delisting. In the event that the Shares of the Company are delisted for any reason, the Participant shall be entitled to exercise with the 90 days period following the delisting date all the Options vested until the end of such 90 day period. After such date, all the Options, whether vested or not by such date shall expire. During such 90 days period, the closing rate for the Company’s Share, for the purpose of computing the Cashless Exercise mechanism described in section 9.8 above, shall be calculated as the last known close of trading rate of the Company's share at the Stock Exchange prior to such delisting.

 

  - 21 -  
 

 

11. Adjustments

 

Upon the occurrence of any of the following described events during the period commencing on the date of the Options’ Award to the Participant under this Plan and the date of exercise thereof, the Participant’s rights shall be adjusted as hereinafter provided:

 

11.1 Technical Changes in the Company’s Share Capital. If the amount of Shares in the Company changes as a result of a stock split, reverse stock split, etc., the number of Shares deriving from any exercise of an Option shall be proportionately adjusted (without change of the exercise price). The manner in which adjustments are made in such cases shall be determined by the Board of Directors and its determinations shall be final and conclusive. Unless explicitly provided otherwise, issue of Shares of any class shall not result in an adjustment of the exercise price or the number of Shares deriving from the exercise.

 

11.2 Dividends. In the event that the Company makes a distribution of a dividend in cash, or in kind, to all its shareholders (including a distribution approved by the court in accordance with Section 303 of the Companies Law, or any other applicable provisions) and the effective date for the entitlement to receive such dividend (hereinafter: "the Effective Date ") occurs after the Award date but prior to the exercise date, then the exercise price for any unexercised Option into a Share of the Company prior to the Effective Date, shall be reduced by the amount of the distributed dividend per share (gross) (or the value of the dividend in case of a dividend in kind), but in any event, the exercise price shall not be lower than the nominal value of Company's Share. Beyond such adjustments of the exercise price set forth in this section, a distribution of a dividend by the Company (in cash and/or in kind) shall not affect in any manner the number of Exercise Shares and shall not require the Company to make any adjustments in connection with the Options and/or Exercise Shares. Such adjustment shall be subject to Stock Exchange rules and directives, as amended from time to time.

 

  - 22 -  
 

 

11.3 Bonus Shares. In the event of distribution of bonus shares, the number of Options awarded but unexercised shall be adjusted, so that the number of Shares to which the Option holder is entitled as a result of the exercise of the Options, shall either increase or decrease in proportion to the number of Shares of that class that the Participant would have been entitled to as bonus shares had he exercised the Options held by him. It is clarified that so long as the Company's securities are traded on the Tel Aviv Stock Exchange such manner of adjustment may not be altered.

 

11.4 Issuance by way of Rights. In the event that, prior to the exercise of the Options, the Company offers securities by way of rights to its ordinary shareholders, then, with regard to the Options which are then unexercised prior to the Effective Date for issuance of the rights, there shall be no adjustment in the exercise price of the Options, but the number of Shares resulting from the exercise of each Option, which are then unexercised on the Effective Date for determining the entitlement to participate in the award of rights will be adjusted so that the number of Shares resulting from the exercise of such Options shall be adjusted to the bonus component of such rights, as reflected in the ratio between the per share rate on the Stock Exchange on the last trading day prior to the "ex day", and the underlying price of the Shares prior to the award of rights (the above calculation will be as set forth in the Stock Exchange directives, as amended from time to time). Such adjustment shall be subject to the Stock Exchange rules and directives, as amended from time to time.

 

11.5 Mergers and acquisitions. In the event of a merger or consolidation of the Company with or into another corporation, resulting in such other corporation being the surviving entity, or that the Company is the surviving corporation and as a result of such merger at least 50% of the existing voting rights in the Company are modified; or in the event of a purchase by a third party of all or substantially all the assets of the Company (hereinafter: "the Transaction "), all the Options shall be adopted or expire and be automatically exchanged by substituting awards of the surviving corporation.

 

  - 23 -  
 

 

In such case, the amount of the aforesaid substituting Options shall be determined by the mechanism provided in the merger Transaction for exchange of the Company's shares by shares of the surviving corporation. Alternatively, the Board of Directors of the Company may determine, at its exclusive discretion, an alternative consideration for the Options, close as possible to the exchange mechanism applicable to the Company shareholders and in such a manner not adversely affecting the economic value of the Options held by the Participant immediately prior to the merger event. The remainder of the provisions in this Plan, including with reference to the vesting and exercise of the Options, shall apply to the substituting options, or their proceeds, mutatis mutandis.

 

In the event that the surviving corporation does not agree to adopt or exchange the Options, the Board of Directors of the Company may determine, at its sole discretion, the treatment of the unexercised and/or unvested Awards, or Awards which are still subject to restrictions on the Transaction date, which may include one or more than one of the following alternatives: (a) acceleration of the vesting dates of all or part of the Awards to a date occurring at least two days prior to Transaction closing, provided however, that any exercise and/or vesting of Awards which may not be exercised in the absence of an actual Transaction shall be conditioned on the actual consummation of the Transaction, unless determined otherwise by the Board of Directors; (b) that all, some, or specific categories of Awards shall be annulled and expire on the actual closing of the Transaction, and that in exchange the Award holders shall receive the value of the annulled Awards (if any) in cash, shares, securities or other assets, or any combination thereof, under such terms as determined by the Board of Directors at its exclusive discretion (which may be based on the per share price so received or expected to be received by the other shareholders of the Company in such case); and/or (c) that all, some, or specific categories of unvested Awards and/or which are still subject to restrictions shall be annulled and expire on the actual closing of the Transaction, with no consideration to the holders thereof.

 

In the event that a Transaction takes place and the Board of Directors determined in good faith that certain Shares have no monetary value and therefore confer the holders thereof no consideration in the framework of such Transaction, the Board of Directors may determine that relevant Options shall expire on the Transaction date.

 

  - 24 -  
 

 

11.6 The Authority of the Board of Directors to make Adjustments. The authority of the Board of Directors to interpret, make determinations and decisions on adjustments shall be interpreted as widely as possible, to allow the Board of Directors maximal power and flexibility to interpret and implement the provisions of this Plan in the event of Transactions of the Company or its shareholders, this, also without the Participant’s express written consent, so that the granting of Options under this Plan shall in no manner cause an impediment against the execution of a Transaction, so as to allow the Company’s Board of Directors implement the granting and exercise of the Options in case of modifications in the Stock Exchange rules and/or under any law. The Board of Directors shall act in good faith in order to protect the rights of the Participant and prevent an unfair adverse effect as result of such decisions.

 

11.7 Canceled

 

11.8 Fractional Shares. For the avoidance of doubt, in the event of modification as described in this section 11 above, the Participant shall not be entitled to exercise an Option into a fraction of a Share and the number of Shares to which the Participant would become entitled to upon the exercise of the Option under the Plan shall be rounded (upwards or downwards, as the case mat be) to the nearest whole number.

 

12. Vesting Dates

 

12.1 Subject to the provisions pertaining to the Lock-Up Period and the other terms and conditions of the Plan, except as otherwise determined by the Board of Directors with regard to a specific Participant, as provided in the relevant Award Agreement, each Option may be exercised, in accordance with the vesting dates, as set forth in section 12.2 below.

 

  - 25 -  
 

 

12.2 The entitlement to the Options shall vest in accordance with the following vesting periods, unless the Award Agreement provides for a different vesting, and in such case, the provisions of the Award Agreement shall prevail :

 

12.2.1 The first portion of Options, constituting one third (1/3) of the amount of Option warrants awarded to a Participant, may be exercised starting from the expiry of 12 months from the date of the actual award;

 

12.2.2 The second portion of Options, constituting one third (1/3) of the amount of the Option warrants awarded to a Participant, shall vest on a quarterly basis, starting from the expiry of 12 months from the date of actual award, in four equal portions, so that by the end of each quarter an amount of 1/12 of the Option warrants awarded to the Participant vests and any such amount may be exercised starting from its vesting date;

 

12.2.3 The third portion of Options, constituting one third (1/3) of the amount of the Option warrants awarded to a Participant, shall vest on a quarterly basis, starting from the expiry of 24 months from the date of actual award, in four equal portions, so that by the end of each quarter an amount of 1/12 of the Option warrants awarded to the Participant vests and any such amount may be exercised starting from its vesting date.

 

12.3 Acceleration of the Vesting Period

 

12.3.1 In case of termination of the employee-employer relationship between the Participant and the Company, as a result or incidentally with: (i) a change of Control in the Company, or (ii) a merger transaction of the Company resulting in a change of Control in the Company, or (iii) execution of a re-organization as defined by the Board of Directors of the Company as an event accelerating the vesting period, then, the vesting period of the nearest portion of the Options entitling such offeree shall be accelerated and he may exercise the option in accordance with the provisions of section 10 above. Thus, for example, a Participant terminating his employment with the Company for the reasons set forth above during the second year following the Award, then the second portion of the qualifying Options shall be accelerated and the third portion of such Participant shall expire.

 

  - 26 -  
 

 

12.3.2 The Remuneration Committee and the Board of Directors may at any time, at its exclusive discretion, determine such further provisions concerning the acceleration of the vesting dates with respect to grants or part thereof, or concerning the removal of restrictions on exercise, all subject to any law.

 

12.4 The Options may not be exercisable after the Expiration Date, as such term is defined in section 13.1 below.

 

13. Exercise Period

 

13.1 Except as determined otherwise by the Board of Directors, the Participant may exercise any vested portion of the Options into the Shares of the Company, starting from the vesting date of each such portion and until the expiry of four (4) years following the vesting date of such portion as aforesaid (hereinafter, concerning vested Options: " Exercise Period " and " Expiry Date ", respectively), except where such Options or part thereof expired prior to the end of the Exercise Period all in accordance with provisions of section 10 above. All Options granted to the Participant and unexercised by the Participant into the Shares of the Company prior to the end of the Exercise Period, shall expire and may not be exercised in accordance with this Plan and all the Participant’s rights with respect to such Options shall be canceled.

 

13.2 The Options may be fully or partially exercised by the Participant at any time, from time to time, to the extent that the vesting date of the Option has occurred and the vesting conditions provided in the agreement pursuant to which the Options were awarded are met and prior to the expiry of the Exercise Period, as set forth above. Unless provided otherwise in the agreement pursuant to which the Options were granted, the condition for the vesting of each portion of the Options is that the vesting date precedes the termination date of the employment relationship (or the engagement), as defined in section 10.2 above.

 

  - 27 -  
 

 

14. Non-Transferability

 

14.1 So long as the Options and/or Exercise Shares are held by the Trustee on behalf of the Eligible Participant, the rights of the Eligible Participant with respect thereto are personal and cannot be transferred, assigned, charged, pledged and/or grant any rights thereto to any third party, other than by will or under any law. Any such act, either directly or indirectly, whether with immediate or future effect shall be void.

 

14.2 Shares not paid in full, may not be assigned, transferred, charged or pledged, other than by will or under any law. For avoidance of doubt, the foregoing shall not be deemed to restrict the transferability of the Participant's rights in respect of Options or Shares purchasable pursuant to the exercise thereof upon the death of such Participant to such Participant's estate or other successors by operation of law or will, whose rights therein shall be governed by Section 10.1 above, or as may be determined by the Board of Directors.

 

15. Term of the Plan

 

15.1 This Plan shall be in effect for a term of ten (10) years from the date of its adoption by the Board of Directors of the Company, unless the Board of Directors decides to cancel the Plan earlier. For the avoidance of doubt, it is clarified that Options under this Plan may not be granted in the period following 10 years from the date of its adoption by the Company’s Board of Directors, however, the provisions of this Plan shall continue to apply to the Options granted under this Plan (despite the expiry of such 10 years period after the date of its adoption), until the expiry date of the Options in accordance with the Award Agreement.

 

  - 28 -  
 

 

15.2 Notwithstanding any other provision of the Plan, the Board of Directors may, at any time, amend, suspend or cancel, in retrospect, or otherwise, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any provisions of the law); provided, however, that, except for correction of typographical errors, corrections arising from the requirements of any law or as otherwise specifically provided herein, the rights of the Participant with respect to vested Awards granted to him prior to such amendment, suspension or cancellation, may not be impaired, without the consent of such Participant. The Board of Directors may amend the terms of any Award granted to the Participant, prospectively or retroactively, provided that, but for correction of typographical errors, corrections arising from the requirements of the law, applicable accounting rules, or as specifically provided herein, the rights of any Participant with respect to Awards granted to him prior to such amendment shall not be impaired without the Participant's consent.

 

15.3 Notwithstanding that stated in the Plan, the Board of Directors may do the following acts: (a) increase the number of Shares issuable under the Plan; (b) extend the validity of the Plan; (c) substantially broaden the group of eligible Participants in the Plan; (d) expand the type of Options and/or benefits granted under the plan.

 

16. Tax Consequences

 

16.1 The Participant shall solely bear all the tax consequences arising from the award of Options and/or Shares under this Plan, from exercise of any Option, from the sale or transfer of Shares, or from any other event or act (of the Company, and/or an Affiliate, and/or the Trustee and/or the Participant), connected to the Awards of Options or the Shares awarded under this Plan. The Company and/or its Affiliates and/or the Trustee shall withhold taxes according to the requirements under the Income Tax Ordinance and under any applicable law, rules and regulations. The Participant agrees to indemnify the Company and/or its Affiliates and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, all expenses and payments relating to the obligation to withhold, or to have withheld, any such tax from any payment made to the Participant or any act in connection with the Award, exercise, sale or transfer of Shares and/or Options.

 

  - 29 -  
 

 

16.2 The Company or any of its Affiliates and the Trustee may make such provisions and take such steps as they may deem necessary or appropriate for the withholding of the taxes required by any law to be withheld with respect to Awards granted under the Plan and the exercise, sale, transfer of any Award and/or Option and/or Share, including, without derogating from the generality of the foregoing to: (a) deducting the amount so required to be withheld from any other amount then or thereafter to be paid to the Participant, including by deducting any such required amount from a Participant's salary or other amounts payable to the Participant, to the maximum extent permitted under law; and/or (b) requiring the Participant to pay to the Company or any of its Affiliates the amount so required to be withheld as a condition of the Award, delivery, and/or release of any Shares; and/or (c) by causing the exercise of the Options and/or sale of any Shares held by or on behalf of the Participant to cover such liability. In addition, the Participant will be required to pay any amount due in excess of the tax withheld and transferred to the Tax Authorities, pursuant to any law.

 

16.3 With regard to Non-Trustee Awards, in the event an Eligible Participant shall cease to be employed by or serve as officeholder of the Company or any Affiliate, the Eligible Participant shall be obligated to provide the Company and/or its Affiliate with a security or guarantee, satisfactory to the Company, to cover any tax obligation resulting from the sale of the Shares, all in accordance with the provisions of Section 102 of the Income Tax Ordinance and the Rules.

 

16.4 The foregoing discussion does not purport to be an authoritative interpretation of the provisions of the law referred to above, or an exhaustive description of all the provisions of the law pertaining to taxes which may apply in connection with the Options offered to the Participants and does not replace the need for legal and professional consultation in this matter. Each Participant is advised to consult with a tax advisor with respect to the tax consequences of receiving and/or exercising any Award under this Plan.

 

  - 30 -  
 

 

17.  Compliance with Law

 

Shares shall not be issued pursuant to the exercise of Options or with respect to any other Award, unless the exercise of such Option or grant of such Award and the issuance of such Shares shall comply with any applicable laws, including the Securities laws and the Stock Exchange directives.

 

18. General Provisions

 

18.1 The adoption of the Plan by the Board of Directors shall not be construed as creating any limitations on the power of the Board of Directors to adopt such other incentive arrangements, as it may deem desirable, including, the granting of additional options and/or shares and/or securities other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

18.2 The terms of each Option may differ from other Options granted under this Plan at the same time. The Board may also grant more than one Option to a given Participant during the term of the Plan, either in addition to, or in substitution for, one or more Options previously granted to that Participant.

 

18.3 No income or profit credited (or purported to be credited) to the Participant for the Options or Shares under this Plan, shall be deemed part of the salary of the Participant for all intents and purposes (except for tax withholding purposes and other mandatory withholdings) and shall not be taken into account upon calculation of the basis for the Participant’s entitlement vis-à-vis the Company to any social benefits whatsoever (including severance payment, social contributions, pension, etc.) or any other rights or benefits arising from employer - employee relationship.

 

19. Applicable Law and Jurisdiction

 

The laws of the State of Israel shall apply to this Plan and to all the documents issued or be issued under the Plan or in connection thereto.

 

 

 

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

 

 

 -31-

 

 

Exhibit 4.7

 

SPECIAL PERSONAL EMPLOYMENT AGREEMENT

 

and Notification of Employment Conditions Pursuant to the Notice to the Employee and
Job Candidate Law (Employment Conditions and Candidate Screening and Selection Procedures), 5762-2002

 

Made and Entered into on the 5 th Day of January, 2016.

 

Between:

ASIA PITUACH (A.D.B.M.) LTD., Public Company No.: 520036062

of 7 Jabotinsky Street, Ramat Gan, Israel

(hereinafter: the " Company " or the " Employer ")

On the One Part;

And

Mr. Haim Siboni, Identity Card No.: 069964997

of 23 Ben Gurion Avenue, Lod, Israel

(hereinafter: the " Employee ")

On the Second Part ;

 

Whereas The Company is a public company, mainly engaged in the field of car safety through devices installed within the car for the purpose of preventing car accidents (hereinafter: the " Company’s Activities "); and

 

Whereas The Company is interested in employing the Employee in the position of its chief executive officer (hereinafter: " CEO "); and

 

Whereas The Employee desires to be employed by the Company is such position; and

 

Whereas The parties wish to establish the terms and conditions of their engagement in this personal employment agreement which shall exclusively regulate the Employee’s terms of employment by the Company.

 

Therefore, it has been agreed, stipulated and declared by and between the parties as follows:

 

1. General

 

1.1 The preamble to this Special Person Employment Agreement (hereinafter: the "Agreement") and its annexes form an integral part hereof.

 

1.2 The section headings appearing in this Agreement are for ease of reading only and shall not be used for interpretation hereof.

 

 

 

2. The Exclusivity of the Agreement

 

2.1 The Employee is employed under a personal agreement and therefore, only the provisions of this Agreement shall apply to the employment relations between the Employee and the Company, to the exclusion of any other agreements whatsoever. Without derogating from the generality of the aforesaid, it is hereby agreed and declared, that during the term of this Agreement, the provisions of any collective bargaining agreements and/or arrangements and/or any other agreements shall not apply to the parties’ relations.

 

3 . Employee’s Role and Scope of Position

 

3.1 The Employee will be employed in the position of CEO at a scope which is not lower than 80% of a (an ordinary) position, namely, at least 148 monthly working hours, on an annual average basis.

 

3.2 The Employee will be subordinated and shall report directly to the Company’s board of directors, or any other organ determined by the board of directors.

 

3.3 The Employee shall perform his work in Ramat Gan, at the Company’s registered offices, or in any other location in Israel or abroad in which he will be required, in accordance with the Company’s needs.

 

3.4 The Employee undertakes to discharge his duties loyally and devotedly to the best of his qualifications and skills to promote the objectives of the Company while keeping the Company’s secrets in confidence, during and following the employment term.

 

3.5 As part of his position scope, the Employee shall be responsible for all acts and tasks entailed by the position of CEO, as defined from time to time by the Company, including, without limitation, the following acts: (1) management of the Company’s manpower and assets; (2) marketing the Company’s activities; (3) undertaking acts intended to raise capital for financing the Company’s activities and developing its products. The Company’s board of directors may change the Employee's job title and duties or the type and scope of the tasks assigned to the Employee from time to time, at its discretion.

 

  2  
 

 

4. Employee’s Employment Term and Termination of the Agreement

 

4.1 This Agreement will become effective and the Employee will be employed by the Company, from the closing date of the Transaction, as such term is defined in the merger agreement dated October 11, 2015 entered by and between the Company, Magna - BSP Ltd. and 4Eyes Autonomous Ltd. (hereinafter: the " Employment Commencement Date "). The Agreement is entered for a term of three (3) years, starting from the Employment Commencement Date (hereinafter: the " Initial Employment Term "), unless revoked, and the Employee’s employment terminated earlier by either parties hereto, in accordance with the provisions of sections 4.3, 4.5 or 4.6 below.

 

4.2 At the end of the Initial Employment Term, this Agreement will be automatically extended for additional three (3) years term each time, subject to receipt of all the necessary approvals under any law.

 

4.3 The Company may terminate this Agreement, at any time and for any reason, pursuant to the Company’s board of directors’ resolution, by at least six (6) months prior written notice to the Employee (hereinafter: the " Prior Notice " and the " Prior Notice Period ", respectively).

 

4.4 During the Prior Notice Period, the employee will continue to work and discharge his duties and perform all his obligations hereunder, including the orderly transfer of his duties to whomever the Company instructs. During the Prior Notice Period, the Employee will be entitled to the full compensation and fringe benefits to which he was entitled immediately prior to the Prior Notice date; The Company, however, may waive all or any part of the Employee’s work during the Prior Notice Period, provided the Company pays the Employee any compensation the Employee is entitled to with respect to such portion of the Prior Notice Period for which the Company had waived the Employee’s work.

 

4.5 Without derogating from the aforesaid, the Employee may terminate this Agreement, at any time and for any reason, by at least three (3) months prior written notice to the Company. In such case, the provisions of section 4.4 above shall apply, mutatis mutandis.

 

4.6 Without derogating from the rights of the Company under this Agreement and/or any law, the Company may terminate this Agreement, without prior written notice or payment in lieu of prior notice, and the Employee’s work with the Company hereunder shall immediately terminate upon receipt of the board of directors’ notice by the Employee, upon the occurrence of any one of the following cases (hereinafter: the " Special Circumstances "):

 

4.6.1 The Employee was convicted of a criminal offense (excluding traffic offenses) and/or offenses involving moral turpitude;

 

4.6.2 Fundamental breach of this Agreement by the Employee which was not cured within 30 days following receipt of a written notice in this matter by the Employee;

 

4.6.3 In case the Employee causes malicious damage to the Company’s affairs or good name;

 

4.6.4 Any other case included in the circumstances in which the Company is entitled to duly dismiss the Employee without an entitlement to full or partial severance pay.

 

  3  
 

 

4.7 The Employee undertakes that in any case in which he stops working with the Company, he will orderly transfer, in accordance with the Company’s instructions, his job duties to whomever the Company instructs, so as to enable such successor to continue performing the Employee’s duties in an orderly fashion without causing any harm to the Company.

 

4.8 The Employee undertakes to forthwith return to the Company upon termination of his work, or at any earlier date at the Company’s discretion, any property and/or assets of the Company in the Employee’s possession, including all documents, information, magnetic media and any other materials reaching him and/or prepared by him in connection with his work, and/or any assets and/or documents reaching him during or as part of his work. It is clarified that the Employee shall have no right of lien over any assets and/or documents and/or property belonging to the Company in the Employee’s possession and he hereby waives any such right of lien.

 

5. Employee’s Declarations and Undertakings

 

The Employee hereby undertakes and declares as follows:

 

5.1 He has the skills and ability required to perform his duties as set forth in this Agreement and shall perform his duties with honesty, dedication, skills and fidelity and devote to his work his knowledge, time, efforts and talents.

 

5.2 The Employee declares that there is no legal and/or contractual and/or other hindrance, to prevent or restrict in any manner his entering into this Agreement.

 

5.3 The Employee undertakes to immediately notify the Company of any matter or subject in which he has personal interest and/or which may create a conflict of interests with his position.

 

5.4 As part of his position responsibilities, the Employee shall take any steps required for protecting the Company’s interests, its property, rights, good name and goodwill, including by refraining from making any acts and/or omissions which may harm and/or cause damages to the Company and to the extent required in the scope of his position - shall represent the Company in a proper manner.

 

  4  
 

 

6. Compensation

 

6.1 For his work and for fulfilling all of his duties under this Agreement, the Company will pay the Employee monthly compensation in the amount of NIS 38,000 (Employer’s cost), starting from the Employment Commencement Date. Such monthly compensation will automatically increase to the amount of NIS 52,000 (Employer’s costs) (regardless of whether the Employee choses to be provided with a car in accordance with section 13 below, or not), from the month in which the capital raising by the Company and/or its subsidiary 4Eyes Autonomous Ltd. is completed (whether by means of a capital investment or loan) in an aggregate amount not lower than US$ 1,000,000 (One Million U.S. dollars) (hereinafter: the " Financing Date "). Such monthly compensation will automatically increase once again to the amount of NIS 65,000 (Employer’s costs) (regardless of whether the Employee choses to be provided with a car in accordance with section 13 below, or not), from the month in which the capital raising by the Company and/or its subsidiary 4Eyes Autonomous Ltd. is completed (whether by means of a capital investment or loan) in an aggregate amount not lower than US$ 3,500,000 (Three Million and Five hundred thousand U.S. dollars). The monthly compensation will be made in accordance with the Company’s payment procedures. In view of the Employee’s position and duties and the expectation that such position requires working overtime, the above amount also represents global payment for working overtime (hereinafter: the " Compensation ").

 

6.2 It is expressly declared and clarified that the Employee’s position also requires working during the weekends, national (and Jewish) holidays and sometimes beyond the ordinary hours of full time position. The nature of this position requires a special degree of personal trust, and/or such working conditions that do not enable the Company any supervision over the Employee’s hours of work and rest, and that therefore, the Hours of Work and Rest Law, 5711-1951 (hereinafter: the " Hours of Work and Rest Law ”) shall not apply to the Employee. Therefore, the parties agree that the provisions of the said Law shall not apply to the Employee’s employment by the Company and that the Employee shall not be entitled to receive any additional consideration for his work, except as expressly provided in this Agreement.

 

6.3 The Employee shall bear all taxes and compulsory payments applicable in connection with all the amounts, benefits, rights and privileges granted to the Employee hereunder. The Company may withhold at the source, from any payment payable to the Employee any taxes and/or compulsory payments required under any law.

 

7. Annual Bonus

 

So long as the Employee is employed in the position of CEO he will be entitled to an annual bonus as determined by the board of directors of the Company and subject to any approvals required under any law.

 

8. Options

 

The Company shall allocate option warrants to the Employee from time to time to purchase shares of the Company pursuant to its employee stock option plan, in such amount and under such terms as determined by the board of directors of the Company and subject to any approvals required under any law.

 

  5  
 

 

9. Social Security Benefits

 

9.1 Annual Vacation : The Employee will be entitled during the term of this Agreement to 22 working days of vacation for each full year of employment. The utilization and redemption of vacation days shall in accordance with the provisions of the Annual Leave Law, 5718-1958 and in coordination with the Company and according to the Company's needs. The Employee shall make any efforts to utilize each year his entire annual leave quota, but if such utilization of the entire annual leave quota is not possible, the Employee may accumulate the annual leave days for a period of two years. Any vacation days not utilized during the above said period shall be redeemed at a value of a working day to be determined in accordance with the Employee’s Compensation and the Company will pay him such amounts.

 

9.2 Convalescence : The Employee shall be entitled to 10 days convalescence pay ( dmei havraah ) for each year in accordance with the tariff applicable from time to time under the prevailing extension orders. For part of a year, the Employee will receive partial convalescence pay.

 

9.3 Sick Leave : The Employee shall be entitled to such number of sick leave days as applicable under the law. The Employee shall be entitled to payment of his full salary starting from the first day of absence due to an illness.

 

9.4 Reserve Duty : The Employee shall be entitled to full Compensation from the Company during his reserve duty service. Any amount, however, paid to the Employee for such service, by the IDF or any other source, will be refunded to the Company by the Employee or be fully deducted from his salary. The Employee undertakes to furnish the Company with an appropriate confirmation about his active army reserve duty, for submission to the National Insurance Institute, so to enable the Company receive the applicable payments from the National Insurance Institute. To the extent that the refund from the National Insurance Institute exceeds the value of working day actually paid to the Employee in his salary for each reserve duty day, the Company will pay the Employee such difference.

 

10. Pension Insurance

 

10.1 The Company shall procure pension insurance for the Employee at his election in a pension fund and/or managers’ insurance policy (hereinafter: the " Pension Arrangement ").

 

10.2 The Company shall contribute to the Pension Arrangement elected by the Employee at the following rates:

 

10.2.1 To a pension fund - The Company shall contribute at its expense an amount equivalent to 8.33% of the monthly salary for severance pay plus 6% for Employer’s benefits. In addition, the Company shall deduct an amount equivalent to 5.5% of the Employee’s monthly salary, at the Employee’s expense, for pension ( tagmulim ) and deliver such amount to the Pension Arrangement.

 

10.2.2 To managers’ insurance - The Company shall contribute at its expense an amount equivalent to 8.33% of the monthly salary for severance pay plus 5% for Employer’s benefits. In addition, the Company shall deduct an amount equivalent to 5% of the Employee’s monthly salary, at the Employee’s expense, for benefits ( tagmulim ) and deliver such amount to the Pension Arrangement. In addition, the Company shall pay payments for securing a monthly income in case of disability, at the rate of up to 2.5% of the monthly salary or such other rate that would confer a disability pension to the Employee at the rate of 75% of the salary, whichever is lower.

 

10.3 Subject to full contribution by the Company as set forth above, the Company’s contributions for the pension component of the Pension Arrangement for the period in which such contributions were made shall come, for all intents and purposes, instead of severance pay pursuant to Section 14 of the Severance Pay Law, 5723-1963 (hereinafter: the " Severance Pay Law ") and pursuant to the General Confirmation of the Minister of Labor and Social Affairs Regarding Payments of Employers to Pension Funds and Insurance Funds instead of Severance Pay, attached to this Agreement as Annex A .

 

  6  
 

 

10.4 For the avoidance of doubt, it is hereby clarified that the Company waives its rights for any restitution for any amount paid by the Company to the policy and that it will release the full amount deposited in the policy/pension to the ownership of the Employee upon expiry of the labor relations. With reference to the Severance Pay as set forth above, the waiver is given save for the event that the Employee’s entitlement is denied pursuant to the provisions of Sections 16 or 17 of the Severance Pay Law, if any, or in the event that the Employee withdraws monies from the policy other than due to an “Entitling Event”. For this purpose, an “Entitling Event” means death, disability or retirement at the age of 60 or over.

 

11 . Advanced Study Fund

 

11.1 The Employee shall be entitled to contributions to a recognized advanced study fund ( keren hishtalmut ), of his choosing. The Company shall contribute at its expense an amount at the rate of 6.5% of the Employee’s monthly salary and transfer them to the fund, and the Employee shall contribute additional 2.5% to the advanced study fund from his salary and the Company shall transfer such as well to the advanced study fund.

 

11.2 The Employee shall bear all tax liabilities for any deposits to the advanced study fund that exceed the tax ceiling recognized for deposits to advanced study funds as such ceiling is defined from time in the Income Tax Regulations.

 

11.3 Upon termination of the Employee's employment by the Company, for any reason, the Company will release all payments accumulated in the advance study fund to the ownership of the Employee.

 

12 . Reimbursement of Expenses

 

The Employee shall be entitled to reimbursement of expenses, against appropriate receipts, including for travel and accommodation, all in accordance with the Company’s policies and procedures.

 

13 . Car

 

13.1 To the extent so elected by the Employee, starting from the Financing Date, the Company will make available a car for the Employee’s use (from the car category, the value of which exceeds a list price of NIS 180,000) and bear all the car expenses, including insurance, maintenance, fuel, parking while in duty and excluding fines, tickets for traffic offenses, deductibles demanded by the insurance company in case of an accident which is the Employee’s fault and private parking costs. The Employee will be responsible for the proper maintenance of the car and use it carefully and reasonably.

 

13.2 The taxes imposed on the Employee with respect to the car benefit (value of car use) shall apply to the Employee.

 

13.3 Upon termination/expiry of the Employee's employment with the Company, for any reason, the Employee will return the car to the Company.

 

14. Confidentiality and Non-Competition

 

The Employee hereby undertakes towards the Company to comply with the provisions concerning confidentiality, non-competition, non-solicitation and assignment of intellectual property rights, as set forth in Annex B attached hereto. Without derogating from the generality of the aforesaid, the Employee is aware that the terms and conditions of this Agreement are personal and particularly designed for him and that maintaining them in confidence is very important to the Company, and undertakes to keep confidential the terms of his employment by the Company and not to disclose them to other/s, unless required to do so by any applicable laws. The Employee declares and agrees that the breach of any of the provisions of Annex B shall constitute a fundamental breach of this contract.

 

  7  
 

 

15. General

 

15.1 The Employee may, at any time and at his discretion, assign and transfer all his rights and obligations under this Agreement to a company controlled by him (hereinafter: the " Company Controlled by the Employee "), provided (a) the Company Controlled by the Employee supplies the services under this Agreement exclusively by the Employee; and (b) save for the adding of VAT, no changes shall occur with respect to the costs to the Company as provided herein.

 

15.2 No changes in the provisions of this Agreement shall be effective unless made in writing and signed by the parties.

 

15.3 All taxes and levies which the Company is required to deduct at source under any law, may be deducted from all payments, rights and benefits to which the Employee is entitled, at the expense of the Employee, unless otherwise expressly specified herein.

 

15.4 The Employee hereby undertakes to keep the contents of this Agreement fully confidential, including with respect to other employees of the Company, as those may be from time to time.

 

15.5 This Agreement expresses and reflects the entire agreement between the parties and embodies, replaces and revokes any representations, undertakings, covenants, agreements, negotiations, customs and practices whatsoever, memorandum of understanding, offers, summaries of discussions, letters of intent and any other agreements or documents of understanding or arrangements, prevailing or exchanged between the parties, all whether orally or in writing, prior to the signing of this Agreement, which shall all be of no effect, to the extent not expressly embodied in this Agreement.

 

15.6 If any provision and/or section of this Agreement, or any part thereof, is held by a court of competent jurisdiction to be inconsistent with the law or unenforceable, such judicial authority shall be asked to interpret such provision and/or section so as to allow the performance thereof in accordance with the parties’ intent, as such intent arises from the terms of this Agreement, and to the extent necessary, such provision and/or section or part thereof shall be limited or eliminated to the extent necessary so that the remaining provisions of this Agreement shall otherwise remain in effect.

 

15.7 A failure by one of the parties hereto to exercise any right does not constitute a comprehensive waiver of such right and such party may exercise such right again.

 

15.8 A breach of one or more of sections 4, 5, 6, 9, 12 and their subsections, shall be deemed a fundamental breach.

 

15.9 Any notice by one party to the other and any matter which under or in accordance with this Agreement requires a notice shall be made in writing.

 

15.10 The addresses of the parties hereto are as set forth in preamble to this Agreement. It is agreed that any notices sent by one party to the other party by registered mail shall be deemed to have been received by the other party 72 hours after being delivered to the post office and if delivered by hand, shall be deemed to have been immediately received.

 

15.11 This Agreement shall be governed by Israeli law and the competent courts in Tel Aviv-Yafo shall be the exclusive place of jurisdiction in connection with this Agreement.

 

  8  
 

 

In Witness Whereof we have Set Our Hand

 

/s/ Haim Siboni     ASIA PITUACH (A.D.B.M.) LTD.
Haim Siboni   By: /s/ Eli Yoresh
    Name: Eli Yoresh
    Title: CFO

 

 

 

 

  9  
 

 

Annex A

 

General Confirmation Regarding Payments of Employers to Pension Funds

and Insurance Funds instead of Severance Pay

(Under the Severance Pay Law, 5723-1963)

 

Pursuant to my authority under Section 14 of the Severance Pay Law, 5723-1963 1 (hereinafter: the " Law "), I authorize that payments paid by an employer as of the publication of this Confirmation, in respect of his employees, towards a comprehensive pension in a pension fund that is not an insurance fund as defined in the Income Tax Regulations (Rules for the Authorization and Administration of Provident Funds) 5724-1964 2 (hereinafter: the " Pension Fund "), or to a Manager’s Insurance Policy which includes the possibility of a pension in said insurance fund (hereinafter: the “ Insurance Fund "), or a combination of payments to a pension plan and a plan which is not a pension plan, including payments paid by the employer combining payments to a pension fund and an insurance fund, whether or not the insurance fund includes a pension program (hereinafter: the " Employer’s Payments "), shall come in lieu of severance pay payable to said employee in respect of the salary from which such payments are made and in respect of the period in which said payments are made (hereinafter: the " Exempted Salary "), provided the following has been fulfilled: 

 

(1) Employer Payments

 

(A) For Pension Fund are not less than 14 1 / 3 % of the Exempted Salary or 12% of the Exempted Salary, if the Employer pays for his employee in addition, supplementary payments on behalf of the severance pay completion for a providence fund or Insurance Fund at the rate of 2 1 / 3 % of the Exempted Salary. If the Employer does not pay in addition to the 12% also 2 1 / 3 % as aforesaid, his payments will come in lieu of 72% of the severance pay of the employee only;

 

(B) To the Insurance Fund are not less than one of the following:

 

(1) 13 1 / 3 % of the Exempted Salary, if the Employer pays the employee additional payments to insure his monthly income in case of work disability, in a plan approved by the Supervisor of the Capital Market, Insurance and Savings in the Finance Ministry, at the lower of, a rate required to insure 75% of the Exempted Salary or 2½% of the Exempted Salary (hereinafter: the “ Disability Insurance Payment ").

 

(2) 11% of the Exempted Salary, if the Employer pays in addition also a disability insurance payment, and in such a case the Employer’s payments will come in lieu of 72% of the severance pay of the employee, only; if the Employer pays in addition to this also supplementary payments on behalf of the severance pay completion to a severance fund or to an insurance fund in the employee’s name at a percentage of 2 1 / 3 % of the Exempted Salary, the Employer’s payments will come in lieu of 100% of the employee’s severance pay.

 

(2) A written agreement must be made between the Employer and employee no later than three months after the commencement of the Employer Payments that include -

 

(A) The employee agreement to the arrangement according to this Confirmation in a version detailing the Employer’s payments and the Pension Fund and the Insurance Fund, as the case may be; in such an agreement the version of this Confirmation will be also included;

 

(B) An advance waiver of the Employer for any right that he/it could have, to have his payments refunded, unless the employee’s right to severance pay is denied by judgment according to sections 16 or 17 of the Law, or in case the employee withdrew monies from the Pension Fund or Insurance Fund not for an Entitling Event; For this purpose, an “Entitling Event” means - death, disability or retirement at the age of 60 or over.

 

(3) This Confirmation does not derogate from the employee’s entitlement to severance pay according to the Law, collective agreement, extension order or personal employment agreement, for any salary above the Exempted Salary.

 

15 th of Sivan, 5758 (June 9, 1998)

 

(HM 3-327)

 

  Mr. Eliyahu Yishai
  The Minister of Labor and Social Affairs

 

 

 

1 Journal of Laws 5723 (1963), Page 136

2 Collection of Regulations 5724 (1964), Page 1302

 

  A- 1  
 

 

Annex B

 

To the Employment Agreement between ASIA PITUACH (A.D.B.M.) LTD. , ( the " Company ") and Haim Siboni ( the " Employee ") dated January 5, 2016

 

To

ASIA PITUACH (A.D.B.M.) LTD.

7 Jabotinsky Street, Ramat Gan

Israel

 

In addition to that stated in section 14 of the Agreement, and as I am employed in the position of CEO, I the undersigned, Haim Siboni , hereby undertake to the Company as follows:

 

1. Confidentiality, Non-Competition and Non-Solicitation

 

1.1. I hereby declare and confirm that I am aware of the fact that any information which was directly and/or indirectly provided and/or shall be provided and/or that came, and/or shall come to my knowledge during and/or as a result of my work with the Company, in connection with the Company, its business and activities, including without derogating from the generality of the foregoing, any business, financial, professional, technical, technological, commercial and economic information (hereinafter, jointly: the " Confidential Information "), is secret and valuable for the Company and its disclosure shall cause the Company significant harm and damage. All Confidential Information shall be and remain the exclusive property of the Company. Despite the aforesaid, the Confidential Information shall not include (a) Information which was known to the Employee prior to the Commencement of Employment with the Company; or (b) Is or becomes generally available in the public domain, including in the industry in which the Company and/or its subsidiaries are active, including by means of publication of academic papers or patent applications other than by reason of the Employee’s act or omission, constituting a breach of this Agreement; or (c) Reflects the general knowhow and experience acquired by the Employee during the term of his employment by the Company, or (d) Information which the Employee had developed independently, without using the Confidential Information received during his work with the Company.

 

1.2. I further acknowledge that I am aware that during the course of my work I will learn and/or acquire confidential information of third parties as well, which as aforesaid is part of the Confidential Information with respect to which the Company is owing a confidentiality obligation to such third parties, the disclosure of which may cause the Company to breach its confidentiality obligations.

 

1.3. I hereby undertake to keep in strict confidence all or any such Confidential Information, not to disclose it to other/s and not allow its exposure to other/s and not directly or indirectly make any use thereof, both during the course of my employment with the Company and for a period of 36 months thereafter, unless for the purpose of fulfilling my duties for the Company under my Employment Agreement. The provisions of this Agreement shall not apply to any Confidential Information required by law to be disclosed, or any Confidential Information ordered to be disclosed pursuant to an explicit direction of a competent authority.

 

1.4. Without derogating from and further to my undertakings hereunder, I hereby undertake that immediately upon the termination/expiry of my work with the Company or at its demand, whichever is earlier, I will return to the Company any documents, objects etc. which contain or refer to any Confidential Information and I shall delete all files in my possession which contain any such Confidential Information.

 

1.5. I hereby undertake to take all necessary precautions to prevent the loss of any such Confidential Information and/or the reaching of such Confidential Information and/or documents to the hands of third parties. I will immediately inform the Company of any event where any such Confidential Information is lost and/or reaches third parties.

 

1.6. Further to my confidentiality undertakings and in view of the sensitive nature of the information to which I am exposed and my senior position and in order to protect such legitimate interests of the Company, I hereby undertake that both during the course of my employment with the Company and for a period of 12 months following the termination of the employee-employer relationship between me and the Company (hereinafter: the " Non-Competition Period ") I shall not, directly and/or indirectly, work and/or provide services, either by myself or through any corporation on my behalf, as a salaried employee, self-employed person, consultant, partner, shareholder, director or otherwise, as part of or for any customer of the Company, or for any competitor company/entity, in any business competing with the Company’s business and refrain from any activities competing with the Company’s business.

 

  B- 1  
 

 

1.7. Moreover, I further undertakes not to approach during my employment and during the Non-Competition Period any of the Company’s customers, suppliers and service providers, including such entities with whom the Company has conducted negotiations at the time of termination of my employment with the Company, with an intent to make them my customers, suppliers or service providers, respectively, and shall not propose any business transactions or services to them dealing with the same line of business in which the Company is active, other than in the name of the Company and as part of my duties towards the Company, and/or shall not receive from them (whether of my initiative or their initiative) either directly or indirectly, any position, invitation, offer, work, provision of service or business in which the Company is or has been engaged or, to my best knowledge, contemplated to engage.

 

1.8. During the course of my employment with the Company and throughout the Non-Competition Period, I undertake to refrain from any solicitation of employees of the Company to leave their employment with the Company, to refrain from any solicitation of employees of the Company to work or serve another entity or employ them by any other entity.

 

2. Intellectual Property

 

2.1. Without derogating from the Company’s rights under any law or this Agreement, I hereby agree that all discoveries, ideas, developments, products, inventions (whether patentable, or registered as trademark, or not, or whether protectable as trademarks or not) copyrights, methods, plans, data, processes, technologies, drawings, specifications, documentation, records, etc. (hereinafter: the " Developments and Inventions ") which I discovered and/or shall discover, developed and/or shall develop, invented and/or shall invent, created and/or shall create, conceived and/or shall conceive, as a result of my employment or in connection thereto, either alone or with others, are the full and exclusive property of the Company and I have no and shall have no ownership or rights of any kind whatsoever in or with respect thereto. I further agree that to the extent any formal or additional action is required on my part in connection with the Developments and Inventions, etc. for the purpose of exercising any of my above undertakings and obligations, including for the purpose of formally transferring title in any such Developments and Inventions to the Company, such as the assignment of rights thereto - I shall forthwith do any such actions as the Company may demand.

 

2.2. For the avoidance of doubt, I hereby transfer and assign to the Company all my rights, including without limitation, the ownership and title and/or moral rights which I have or shall have in the future (if any) whether alone or together with others in or to the Developments and Inventions.

 

2.3. For the avoidance of doubt, it is hereby clarified that the provisions of sections 2.1-2.3 above shall also apply with respect to a Service Invention, as such term is defined in the Patent Law, 5727-1967 (hereinafter: the " Patent Law ") and that I shall have no rights whatsoever, including any property rights in any Service Inventions and that the provisions of Section 132(b) of said Law shall not apply, unless the Company agrees otherwise in writing.

 

2.4. I shall not be entitled to any royalties, compensation or other payments and benefits of any kind whatsoever, for or in connection with the Developments and Inventions and/or in connection with the Service Invention and/or any commercial or other exploitation of the aforesaid, and it is hereby clarified, without derogating from the above, that I shall not be entitled to any consideration for the Service Invention in connection with Section 134 of the Patent Law.

 

  B- 2  
 

 


I hereby declare that I understand the nature of my undertakings and I am aware of their contents.

 

In Witness Whereof I have set my Hand:

 

    ASIA PITUACH (A.D.B.M.) LTD.
/s/ Haim Siboni      
Haim Siboni   By: /s/ Eli Yoresh
    Name; Eli Yoresh
    Title:   CFO

 

B-3

 

Exhibit 4.8

   

 

SERVICES AGREEMENT

(the “ Agreement ”)

 

Made and Entered into on the 26 th Day of January, 2016.

 

Between: Foresight Autonomous Holdings Ltd.
  Company No. 520036062
  Whose registered address is at 10 Abba Even Avenue,
  PO Box 2081, Herzliya
  (hereinafter: the “ Company ”)

 

On the One Part ;

 

And: Mr. Ariel Dor
  Identity Card No. 043017334
  of 7 Tar’ad Street, Ramat Gan
  (hereinafter: the “ Service Provider ”)

 

On the Second Part ;

 

Whereas The Service Provider is interested in providing business and strategic consulting services to the Company as the Company’s Chief Operations and Business Development Officer and in other roles, as instructed from time to time by the Company’s Chief Executive Officer (hereinafter: the “ CEO ”) and/or the board of directors or anyone on their behalf from time to time (hereinafter: the “ Position ”); and
   
Whereas The Service Provider is qualified, holds expertise and is authorized under the provisions of any law to serve in such Position; and
   
Whereas The Company is interested in receiving the services of the Service Provider pertaining the Position; and
   
Whereas The Service Provider declares that he has the required experience, ability and knowledge to provide the aforesaid services and is capable of providing such services to the Company as set forth in this Agreement; and
   
Whereas The parties are interested in regulating the terms and conditions concerning the providing of the services by the Service Provider to the Company and to put them into writing, all as set forth in this Agreement below;

 

Therefore, it was Declared, Stipulated and Agreed between the Parties as follows :

 

1. Preamble, Interpretation and Definitions

 

1.1. The preamble hereto constitutes an integral part hereof.

 

1.2. The section headings are for convenience only and should not be relied upon for the construction or interpretation of this Agreement.

 

1.3. The provisions of any other and/or previous agreements among the Company and/or its held companies and the Service Provider are hereby made null and void, unless expressly provided otherwise herein.

 

  - 1 -  

 

 

2. The Nature and Scope of the Position

 

2.1. The Company will receive from the Service Provider and the Service Provider will provide to the Company, the following services: The Service Provider will serve as Chief Operations and Business Development Officer in a scope of position of 90% and will provide further services to the Company in various fields within the Company’s line of business (hereinafter: the “ Services ”). The Company hereby declares that it is aware of the fact that the Service Provider is a combat pilot in active military reserve service and that the remaining 10% of the scope of his position will be devoted to military service days, that will be coordinated to the extent possible with the Company’s needs.

 

2.2. In performing his Services, the Service Provider will report to, and be subordinated to, the Company’s CEO and to his decisions.

 

3. Identity and Declarations of the Service Provider

 

3.1. The Services will be provided to the Company by the Service Provider through Mr. Ariel Dor and this constitutes a fundamental condition of this Agreement.

 

3.2. The Service Provider will provide the Services to the Company in a scope of 90% and to the extent required by the Company.

 

3.3. The Service Provider hereby declares, that throughout the term of this Agreement, he will not engaged in any other job or occupation, whether as a salaried employee or self employed, including as a consultant, service provider, agent, broker, manager, director, shareholder or in any other manner whatsoever, or serve in any position with any entity, or by himself, whether for compensation or otherwise, directly or indirectly, without the Company’s prior written approval and subject to the terms of such approval. The Company shall neither be obligated to give such approval nor provide reasons for its refusal.

 

3.4. The Service Provider hereby declares that he is aware of everything required for the providing of the Services and undertakes to provide his services to the Company with dedication and professionalism, subject to the Company’s policies, as applicable from time to time and in accordance with the instructions to be given to him from time to time by the Company, and efficiently, loyally and skillfully devote his full energy, knowledge, experience, qualifications and talents, his time and efforts, as agreed upon in this Agreement.

 

3.5. The Service Provider hereby declares that no limitation and/or prevention exists under any agreement and/or law and/or any other prohibition for fulfilling his undertakings hereunder and that in the event that any such limitation arises in the future, he shall promptly inform same to the Company. The Service Provider further undertakes, that in the execution of his undertakings and the providing of the Services hereunder, he shall comply with the provisions of any law.

 

  - 2 -  

 

 

4. The Agreement Term and Revocation

 

4.1. This Agreement is entered for an indefinite period, commencing on January 1, 2016 which shall continue unless terminated by either party in accordance with the provisions of sections 4.2-4.4 below (hereinafter: the “ Engagement Term ”), this without derogating from the necessity to obtain the requisite approvals for the engagement from any relevant corporate organs, to the extent such approvals are required under the provisions of any law.

 

4.2. Each party hereto may terminate this Agreement, for any reason whatsoever, provided the party wishing such termination of the Agreement delivers a 90 days prior written notice to the other party, and such termination shall not be deemed as breach of the Agreement (hereinafter: the “ Prior Notice ” and the “ Prior Notice Period ”, respectively).

 

4.3. In the event that one of the parties notifies the other party of such termination of the Agreement as set forth in section 4.2 above, the Service Provider will continue to provide the Services hereunder, to the best of his ability and fully cooperate with the Company, until the expiry of the Prior Notice Period, against payment of the full Consideration for such Prior Notice Period. Notwithstanding the aforesaid, the Company may, at its sole discretion, instruct the Service Provider to immediately stop providing the Services, despite the Prior Notice Period, or terminate the Services at any time during the Prior Notice Period, provided the Company pays the Service Provider, in advance, on the due date for payment, the full consideration owing for the remainder of the Prior Notice Period.

 

4.4. Notwithstanding that stated in section 4.1 above, the parties agree that the Company may immediately terminate the engagement with the Service Provider, without Prior Notice and without the Company being liable to pay for such Prior Notice Period, in each of the following events:

 

4.4.1. The Service Provider has fundamentally breached his obligations under this Agreement.

 

4.4.2. The Service Provider was convicted of a criminal offense involving moral turpitude.

 

4.4.3. Initiation of bankruptcy proceedings against the Service Provider.

 

4.4.4. The Service Provider passed away and/or became incapacitated and/or lost his work ability for a period exceeding 45 days.

 

4.5. Upon termination, for any reason, of the engagement between the Company and the Service Provider, the Service Provider undertakes to transfer his position in an orderly fashion to such person as the Company shall instruct.

 

  - 3 -  

 

 

4.6. Should the Service Provider’s service be terminated or come to an end, for any reason, including, without limitation, under the provisions of this section above, the Service Provider undertakes, to immediately and without delay return to the Company, at the location indicated by the Company, any written and/or printed and/or recorded and/or typed material and/or any other information that reached him or anyone on his behalf or was prepared by him or by anyone on his behalf in connection with the providing of the Services under this Agreement.

 

4.7. The Service Provider further undertakes to return to the Company any equipment and/or assets belonging to the Company and in his possession, all in good condition as such were received by the Service Provider, save for depreciation and normal wear and tear due to reasonable use thereof.

 

4.8. It is hereby clarified, that upon revocation of the Agreement, for any reason, any provisions which by their nature are intended to survive the expiry or termination of this Agreement, shall so survive, including, without limitation, the following sections: 4 (The Agreement Term and Revocation), 9 (Absence of Employer-Employee Relationship), 10 (Confidentiality; Non-Competition and Conflict of Interests), 11 (Miscellaneous).

 

5. Company Supervision

 

By virtue of his position, the Service Provider shall be subordinated to the CEO of the Company.

 

6. Consideration and Benefits

 

6.1. In consideration for and subject to full compliance of the Service Provider with the provisions hereof, the Company will pay the Service Provider a fixed monthly payment in the amount of NIS 35,000 (thirty five thousand Israeli Shekels), plus lawful VAT, against a duly issued tax invoice (hereinafter: the “ Monthly Payment ”).

 

6.2. In addition, the Company will reimburse the Service Provider for his car expenses and cellular phone in the amount of NIS 5,000 per month plus lawful VAT, against a duly issued tax invoice. In addition to the expenses set forth above, the Company will cover the Service Provider’s expenses incurred in Israel and abroad in connection with the providing of the Services, in accordance with the Company’s Expenses coverage procedure and the receipts presented by the Service Provider in his monthly tax invoice in accordance with the Company’s procedures.

 

6.3. To the extent that for any reason during a certain period no Services are provided by the Service Provider, a pro rata share of the Service Provider’s Monthly Payment will be set off, excluding an accumulated period of up to 16 days each year, that for the purpose of implementation of this provision will not be taken into account. The Service Provider will report once a month of any leave of absence taking place during the month, excluding weekends.

 

  - 4 -  

 

 

6.4. The Monthly Payment will be paid by the 10 th day of the month for the previous month and subject to the receipt of a duly issued tax invoice of the Service Provider by the 1 st day of the month following the month in which the Services were supplied.

 

6.5. Pursuant to the resolution of the Company’s management and under its exclusive discretion, the Service Provider shall be entitled to an annual bonus as customary in the Company.

 

6.6. Subject to section 7 below, the amounts payable to the Service Provider as set forth in this section 6 constitute the full, agreed and final consideration for the Services to be provided by Service Provider hereunder, including any payment, tax, levy and/or fee of any kind whatsoever as well as all related and/or ancillary payments for the Services hereunder. In determining the consideration any direct and indirect costs, which would have applied to the Company had the Service Provider been employed as an employee, have been taken into account and added.

 

6.7. The Service Provider shall be responsible for the payment of any taxes and for any other mandatory payments applicable with respect to the payments, rights and benefits to which the Service Provider is entitled under this Agreement. Without derogating from the generality of the aforesaid, to the extent it is liable to do so under any law, the Company may withhold at the source, from any consideration payable to the Service Provider hereunder, all taxes required to be paid under any law, unless the Service Provider delivers to the Company an exemption from the withholding of tax at source.

 

7. Options

 

The Company shall allocate option warrants to the Service Provider from time to time to purchase shares of the Company, pursuant to its employee stock option plan, in such amount and under such terms as determined by the board of directors of the Company and subject to any approvals required under any law.

 

8. Officeholders Insurance

 

The Company will include the Service Provider in the directors’ and officers’ liability insurance policy procured by the Company.

 

9. Absence of Employee - Employer Relationship

 

9.1. The Service Provider hereby declares that he owns an independent business through which he provides the Services to the Company; the Service Provider further declares that he has independent dealer files with the Value Added Tax authorities, the National Insurance Institute and the Income Tax authorities and that he shall take care of any such payments by himself and at his expense.

 

9.2. The Service Provider declares and undertakes that this type of engagement, as set forth herein, was expressly elected by him and that he is fully aware of any consequences and implications arising from this type of engagement.

 

  - 5 -  

 

 

9.3. The Service Provider hereby declares that in the framework of providing the Services by him under this Agreement, there have not been, and there will be no, employee - employer relationship between him and the Company with all the implications of that statement. This, in light of the Service Provider’s explicit election not to become an employee of the Company and his election to provide the Services in the status of an independent contractor, after fully understanding the entire significance of such status, as set forth in section 9.2 above.

 

9.4. The Service Provider hereby undertakes to indemnify the Company for any actions whatsoever commenced against the Company due to the question of whether employee - employer relationship have existed between him and the Company, regardless of whether such action commences by the Service Provider and/or any of his employees and/or successors and/or their legal heirs or by any other third party.

 

9.5. Without derogating from the aforesaid in section 9.1, the Service Provider hereby declares that it is clear to him and he agrees that the consideration set forth in section 6 above is based on his declarations in sections 9.1-9.4 above, on the representation he made to the Company and the basic assumption underlying the agreement between him and the Company that there have not been, and there will be no, employee - employer relationship between him and the Company.

 

9.6. Therefore, the Service Provider hereby agrees that in the event that he claims and/or demands any rights from the Company due to the existence of employee - employer relationship between him and the Company and/or if any legal instance and/or any other entity determines, that indeed such employee - employer relationship exist, then the proper value of services of the Service Provider as employee will be calculated as 60% of the consideration stipulated in section 6 above. Such consideration shall be deemed to have been initially agreed and the Service Provider will return to the Company the difference of 40% of the consideration plus lawful linkage differentials and interest, from the date of payment of any such consideration until actual payment thereof.

 

That stated in this section shall apply, regardless of whether a claim regarding the existence of any employee - employer relationship is raised and/or if any such action is commenced against the Company and/or any other affiliate thereof, by the Service Provider or by any of his employees and/or successors and/or their estate and/or their heirs and/or by any other third party related thereto. In this context, the Service Provider and/or his estate shall be deemed obligated to make restitution as aforesaid, prior to the making of any payment whatsoever to the Service Provider and/or his estate and/or successors.

 

9.7. That stated in this section, including its subsections shall be regarded as a fundamental condition of this Agreement.

 

  - 6 -  

 

 

10. Confidentiality; Non-Competition and Conflict of Interests

 

10.1. The Service Provider hereby undertakes to keep in strict confidence any data and/or document and/or knowhow and/or information pertaining to the Services provided to the Company and/or the Company’s business activities (hereinafter: the “ Confidential Information ”), for the duration of this Agreement and following the termination hereof. The Service Provider is aware of the fact that any such information, which is not generally available in the public domain, is the property of the Company. The foregoing shall not apply to any information that is already generally available in the public domain, provided that it has not reached the public domain as a result of an act or omission of the Service Provider and/or anyone on his behalf. The Service Provider hereby undertakes not to make any use whatsoever of the Confidential Information, other than for the purpose of providing his Services under this Agreement and as part of such Services, all for the benefit of the Company.

 

10.2. The Service Provider undertakes to avoid being in a situation of conflict of interests between his various business activities and the providing of his Services under this Agreement to the Company. In any event of concern for potential conflicts of interest, the Service Provider undertakes to provide notice thereof to the Company in advance and obtain the Company’s written consent for such act.

 

10.3. The Service Provider hereby undertakes that throughout the term of this Agreement and for a period of 12 months following the termination of this Agreement, for any reason (hereinafter: the “ Non-Competition Period ”), the Service Provider shall not, directly and/or indirectly, work and/or provide services, either by himself or through any corporation on his behalf, as a salaried employee, self-employed person, consultant, partner, shareholder, director or otherwise, as part of, or for any customer of the Company, or for any person or company having business relationships with the Company, or for any competitor of the Company.

 

10.4. The Service Provider further undertakes not to approach during the Non-Competition Period any of the Company’s customers or suppliers, including such entities with whom the Company has conducted negotiations at time of termination of this Agreement, with an intent to make them his own customers or suppliers, respectively, and shall not propose any business transactions to them dealing with the same line of business in which the Company is active, other than in the name of the Company and as part of the Services provided thereto and/or shall not receive from them and/or from any person, company or entity affiliated thereto, either directly or indirectly, any position, invitation, offer, work, provision of service or business in which the Company is or has been engaged or, to the Service Provider’s best knowledge, contemplated to engage.

 

10.5. The Service Provider’s undertakings under this section constitute fundamental conditions of this Agreement

 

11. Miscellaneous

 

11.1. Parties’ addresses for the purpose of this Agreement are as follows:

 

11.1.1. Service Provider - 7 Tar’ad Street, Ramat Gan.

 

11.1.2. The Company - 7 Jabotinsky Street, Ramat Gan.

 

  - 7 -  

 

 

11.2. Any notice sent by one party to the other party will be deemed to have been received by the addressee within 72 hours after being posted at the post office in a registered letter and if delivered by hand, shall be deemed to have been immediately received.

 

11.3. This Agreement represents all agreements and understandings between the parties in relation to the providing of the Services and revokes any prior agreement and/or understanding.

 

11.4. Any change and/or revocation of any of the provisions hereof may only be made by a writing signed by both parties.

 

11.5. The Service Provider may not endorse and/or assign to any other person all or any of his rights and/or obligations under this Agreement, unless the Company has given its prior written approval for such.

 

11.6. The Service Provider has no and shall have no right of lien over any documents belonging to the Company, including documents which were prepared by and/or through him or any of the Company’s equipment which was made available for his use in the course of providing the Services, and he will return any such documents or equipment to the Company upon its first demand, unless such involve a Substantial Default in payment of the Monthly Payment by the Company as set forth in section 6.4 above, and for this purpose, “Substantial Default” means a delay of 60 days following the due day for payment of the Monthly payment in section 6.4, in which case the right of lien shall be available to the Service Provider. The foregoing shall not derogate from any rights and/or relief available to the Service Provider under any law.

 

11.7. No delay in exercising, or default to exercise, any of the parties’ rights under this Agreement shall be deemed as waiver or preclusion of such party.

 

11.8. This Agreement is governed by the laws of the State of Israel. The parties hereby submit to the exclusive jurisdiction and venue of the competent courts and tribunals in Tel-Aviv-Yafo for any legal proceedings or disputes arising in connection with this Agreement.

 

  - 8 -  

 

 

In Witness Whereof the Parties Have Set their Hand
on the Date set forth in the Preamble hereof :

 

/s/ Ariel Dor     Foresight Autonomous Holdings Ltd.
Ariel Dor   By: /s/ Eli Yoresh
    Name: Eli Yoresh
    Title: CFO

 

 

- 9 -

 

 

Exhibit 4.9

 

 

SERVICES AGREEMENT

(the “ Agreement ”)

 

Made and Entered into on 5 th Day of January, 2016.

 

Between: ASIA PITUACH (A.D.B.M.) LTD.
Company No. 520036062 
  of 7 Jabotinsky Street, Ramat Gan
(hereinafter: the “ Company ”) 
  On the One Part;
   
And: Mr. Eli Yoresh
Identity Card No. 14660039 
  of 37 Ussishkin Street, Ramat Hasharon
(hereinafter: the “ Service Provider ”) 
  On the Second Part;
 

On the Second Part ;

 

Whereas The Company is a public company, whose shares are traded on the Tel Aviv Stock Exchange Ltd.; and
   
Whereas The Company is contemplating to close a merger transaction by way of an exchange of stock with 4Eyes Autonomous Ltd. (hereinafter: the “Merger Transaction ” and “ 4Eyes ”, respectively); and
   
Whereas The Service Provider serves as chief financial officer (hereinafter: the “ CFO ”) of the Company and the Company wishes that the Service Provider will continue to hold the position of CFO of the Company following the closing of the Merger Transaction as well, as set forth in this Agreement below; and
   
Whereas The Service Provider is qualified, holds expertise and is authorized under the provisions of any law to serve in such Position; and
   
Whereas The Company is interested in receiving the services of the Service Provider in anything relating to such position as CFO; and
   
Whereas The Service Provider declares that he has the required experience, ability and knowledge to provide the aforesaid services and is capable of providing such services to the Company as set forth in this Agreement; and
   
Whereas The parties are interested in regulating the terms and conditions concerning the providing of the services by the Service Provider to the Company and to put them into writing, all as set forth in this Agreement below;

 

Therefore, it was Declared, Stipulated and Agreed between the Parties as follows :

 

  1. Preamble, Interpretation and Definitions

 

  1.1. The preamble hereto constitutes an integral part hereof.
     
  1.2. The section headings are for convenience only and should not be relied upon for the construction or interpretation of this Agreement.

 

  - 1  -  

 

 

  1.3. The provisions of any other and/or previous agreements among the Company and/or its held companies and the Service Provider are hereby made null and void, unless expressly provided otherwise herein.

 

  2. Acceptance, Waiver and Settlement of Claims

 

  2.1. The Service Provider hereby confirms that the providing of his services to the Company under this Agreement is not connected in any manner to the previous period of his service with the Company prior to the Merger Transaction and does not create any continuous or accrued seniority with respect to such previous period (hereinafter: the “ Previous Period ”).

 

  2.2. The Service Provider hereby declares and acknowledges that he had received from the Company, on the due dates, all the rights and money to which he was entitled with respect to the Previous Period and the Company is no longer liable to pay him for such Previous Period or the termination thereof.

 

  2.3. The Service Provider hereby declares and acknowledges that neither him nor any of his successors and/or those acting on his behalf shall have any demands and/or claims whatsoever against the Company and/or against any of its subsidiaries and/or parent company and/or a combined company and/or any affiliate thereof, and/or anyone on their behalf and/or any of their past, present or future employees and/or managers and/or shareholders (hereinafter: “ Anyone on Behalf of the Company ”), with respect to the Previous Period and/or the termination thereof, for any reason whatsoever and however caused and he hereby fully, finally and absolutely waives any such demands and/or claims.

 

  3. The Nature and Scope of the Position

 

  3.1. The Company will receive from the Service Provider and the Service Provider will provide the Company the following services: The Service Provider will serve as the CFO of the Company and render his services in accordance with the Company’s needs in a scope of 60% of a position, this from the date of signing hereof and as provided in this Agreement above and below, including without limitation, the Service Provider will undertake any tasks in connection with the position of a CFO of a public company and will also serve a director at the Company’s board of directors (hereinafter: the “ Services ”).

 

  3.2. In performing his Services, the Service Provider will report to, and be subordinated to, the Company’s chief executive officer (hereinafter: the “ CEO ”) and to his decisions.

 

  4. Identity and Declarations of the Service Provider

 

  4.1. The Services will be provided to the Company by the Service Provider through Mr. Eli Yoresh and this constitutes a fundamental condition of this Agreement.

 

  4.2. The Service Provider will provide the Services to the Company in accordance with the needs of the Company at a scope which is not lower than 60% of the ordinary working hours of a salaried employee.

 

  - 2  -  

 

 

  4.3. The Service Provider hereby declares, that he is aware of everything required for the providing of the Services and undertakes to provide his Services to the Company with dedication and professionalism, subject to the Company’s policies, as applicable from time to time and in accordance with the instructions to be given to him from time to time by the Company and to efficiently, loyally and skillfully devote his best talents, time and efforts, as agreed upon in this Agreement.

 

  4.4. The Service Provider hereby declares that no limitation and/or prevention exists under any agreement and/or law and/or any other prohibition for fulfilling his undertakings hereunder and that in the event that any such limitation arises in the future, he shall promptly inform same to the Company. The Service Provider further undertakes, that in the execution of his undertakings and the providing of the Services hereunder, he shall comply with the provisions of any law.

 

  5. The Agreement Term and Revocation

 

  5.1. This Agreement is entered for an indefinite period, commencing on the closing of the Merger Transaction which shall continue unless terminated by either party in accordance with the provisions of sections 5.2-5.4 below (hereinafter: the “ Engagement Term ”), this without derogating from the necessity to obtain the requisite approvals for the engagement from any relevant corporate organs, to the extent such approvals are required under the provisions of any law.

 

  5.2. Each party hereto may terminate this Agreement, for any reason whatsoever, provided the Service Provider gives the Company a prior written notice of 3 months, and to the extent that the Company wishes to terminate the engagement, then the Company shall deliver a prior notice to the Service Provider 6 months in advance of its wish to terminate the engagement with him and such termination shall not be deemed as breach of the Agreement (hereinafter: “the “ Prior Notice ” and the “ Prior Notice Period ”, respectively).

 

  5.3. In any event that one of the parties notifies the other party of the termination of the Agreement as set forth in section 5.2. above, the Service Provider will continue to provide the Services hereunder, to the best of his ability and fully cooperate with the Company, until the expiry of the Prior Notice Period, against payment of the full consideration for such Prior Notice Period. Notwithstanding the aforesaid, the Company may, at its sole discretion, instruct the Service Provider to immediately stop providing the Services, despite the Prior Notice Period, or terminate the Services at any time during the Prior Notice Period, provided the Company pays the Service Provider, in advance, on the due date for payment, the full consideration owing for the remainder of the Prior Notice Period.

 

  - 3  -  

 

 

  5.4. Notwithstanding that stated in section 5.1 above, the parties agree that the Company may immediately terminate the engagement with the Service Provider, without Prior Notice and without the Company being liable to pay for such Prior Notice Period, in each of the following events:

 

  5.4.1. The Service Provider has fundamentally breached his obligations under this Agreement.

 

  5.4.2. The Service Provider was convicted of a criminal offense involving moral turpitude.

 

  5.4.3. Initiation of bankruptcy proceedings against the Service Provider.

 

  5.4.4. The Service Provider passed away and/or became incapacitated and/or lost his work ability for a period exceeding 45 days.

 

  5.5. Upon termination, for any reason, of the engagement between the Company and the Service Provider, the Service Provider undertakes to transfer his position in an orderly fashion to such person as the Company shall instruct.

 

  5.6. Should the Service Provider’s service be terminated or come to an end, for any reason, including, without limitation, under the provisions of this section above, the Service Provider undertakes, to immediately and without delay return to the Company, at the location indicated by the Company, any written and/or printed and/or recorded and/or typed material and/or any other information that reached him or anyone on his behalf or was prepared by him or by anyone on his behalf in connection with the providing of the Services under this Agreement.

 

  5.7. The Service Provider further undertakes to return to the Company any equipment and/or assets belonging to the Company and in his possession, all in good condition as such were received by the Service Provider, save for depreciation and normal wear and tear due to reasonable use thereof.

 

  5.8. It is hereby clarified, that upon revocation of the Agreement, for any reason, any provisions which by their nature are intended to survive the expiry or termination of this Agreement, shall so survive, including, without limitation, the following sections: 5 (The Agreement Term and Revocation), 10 (Absence of Employee-Employer Relationship), 11 (Confidentiality; Non-Competition and Conflict of Interests), 12 (Miscellaneous).

 

  6. Company Supervision

 

By virtue of his position, the Service Provider shall be subordinated to the CEO of the Company.

 

  7. Consideration and Benefits

 

  7.1. In consideration for and subject to full compliance of the Service Provider with the provisions hereof, the Company will pay the Service Provider a fixed monthly payment in the amount of NIS 30,000 (thirty thousand Israeli Shekels), plus lawful VAT, against a duly issued tax invoice (hereinafter: the “ Monthly Payment ”).

 

  - 4  -  

 

 

  7.2. In addition, the Company will reimburse the Service Provider for his car expenses and cellular phone in the amount of NIS 3,000 per month plus lawful VAT, against a duly issued tax invoice. In addition to the expenses set forth above, the Company will cover the Service Provider’s expenses incurred in Israel and abroad in connection with the providing of the Services, in accordance with the Company’s Expenses coverage procedure.

 

  7.3. To the extent that for any reason during a certain period (including reserve military service days) no Services are provided by the Service Provider, a pro rata share of the Service Provider’s Monthly Payment will be set off, excluding an accumulated period of up to 22 days each year, which for the purpose of implementation of this provision will not be taken into account. The Service Provider will report once a month of any leave of absence taking place during the month, excluding weekends.

 

  7.4. The Monthly Payment will be paid by the 15 th day of the month for the previous month and subject to the receipt of a duly issued tax invoice of the Service Provider.

 

  7.5. Subject to section 8 below, the amounts payable to the Service Provider as set forth in this section 7 constitute the full, agreed and final consideration for the Services to be provided by Service Provider hereunder, including any payment, tax, levy and/or fee of any kind whatsoever as well as all related and/or ancillary payments for the Services hereunder.

 

  7.6. The Service Provider shall be responsible for the payment of any taxes and for any other mandatory payments applicable with respect to the payments, rights and benefits to which the Service Provider is entitled under this Agreement. Without derogating from the generality of the aforesaid, to the extent it is liable to do so under any law, the Company may withhold at the source, from any consideration payable to the Service Provider hereunder, all taxes required to be paid under the law, unless the Service Provider delivers to the Company an exemption from the withholding of tax at source.

 

  8. Options

 

The Service Provider is entitled to 1,794,205 option warrants convertible into 1,794,205 shares of the Company, pursuant to its employee stock option plan to be adopted by the Company under the provisions of Section 102 of the Income Tax Ordinance. It is clarified that the options will be allocated to the Service Provider after the Company adopts an employee stock option plan under section 102 of the Income Tax Ordinance. The exercise period for any option warrant will be 3 years following the allocation date, the additional exercise money will be in accordance with the minimum amount required under the Stock Exchange Rules and the warrants will be subject to adjustments as provided in the options plan.

 

  - 5  -  

 

 

  9. Officeholders Insurance

 

The Company will include the Service Provider in the directors’ and officers’ liability insurance policy, procured by the Company.

 

  10. Absence of Employee - Employer Relationship

 

  10.1. The Service Provider hereby declares that he owns an independent business through which he provides the Services to the Company; the Service Provider further declares that he is registered as an independent dealer for VAT purposes and registered as an independent dealer with the National Insurance Institute and the Income Tax authorities.

 

  10.2. The Service Provider declares and undertakes that this type of engagement, as set forth herein, was expressly elected by him and that he is fully aware of any consequences and implications arising from this type of engagement.

 

  10.3. The Service Provider hereby declares that in the framework of providing the Services by him under this Agreement, there have not been, and there will be no, employee - employer relationship between him and the Company with all the implications of that statement. This, in light of the Service Provider’s explicit election not to become an employee of the Company and his election to provide the Services in the status of an independent contractor, after fully understanding the entire significance of such status, as set forth in section 10.2 above.

 

  10.4. The Service Provider hereby undertakes to indemnify the Company for any actions whatsoever commenced against the Company, due to the question of whether employee - employer relationship have existed between him and the Company, regardless of whether such action commences by the Service Provider and/or any of his employees and/or successors and/or their legal heirs or by any other third party.

 

  10.5. Without derogating from the aforesaid in section 10.1, the Service Provider hereby declares that it is clear to him and he agrees that the consideration set forth in section 7 above is based on his declarations in sections 10.1-10.4 above, on the representation he made to the Company and the basic assumption underlying the agreement between him and the Company that there have not been, and there will be no, employee - employer relationship between him and the Company.

 

  10.6. Therefore, the Service Provider hereby agrees that in the event that he claims and/or demands any rights from the Company due to the existence of employee - employer relationship between him and the Company and/or if any legal instance and/or any other entity determines, that indeed such employee - employer relationship exist, then the proper value of services of the Service Provider as employee will be calculated as 60% of the consideration stipulated in section 7 above and such consideration shall be deemed to have been initially agreed and the Service Provider will return to the Company the difference of 40% of the consideration plus lawful linkage differentials and interest, from the date of payment of any such consideration until actual payment thereof.

 

  - 6  -  

 

 

That stated in this section shall apply, regardless of whether a claim regarding the existence of any employee - employer relationship is raised and/or if any such action is commenced against the Company and/or any other affiliate thereof, by the Service Provider or by any of his employees and/or successors and/or their estate and/or their heirs and/or by any other third party related thereto. In this context, the Service Provider and/or his estate shall be deemed obligated to make restitution as aforesaid, prior to the making of any payment whatsoever to the Service Provider and/or his estate and/or successors.

 

  10.7. That stated in this section, including its subsections shall be regarded as a fundamental condition of this Agreement.

 

  11. Confidentiality; Non-Competition and Conflict of Interests

 

  11.1. The Service Provider hereby undertakes to keep in strict confidence any data and/or document and/or knowhow and/or information pertaining to the Services provided to the Company and/or the Company’s business activities (hereinafter: the “ Confidential Information ”). The Service Provider is aware of the fact that any such information, which is not generally available in the public domain, is the property of the Company. The foregoing shall not apply to any information that is already generally available in the public domain, provided that it has not reached the public domain as a result of an act or omission of the Service Provider and/or anyone on his behalf. The Service Provider hereby undertakes not to make any use whatsoever of the Confidential Information, other than for the purpose of providing his Services under this Agreement and as part of such Services, all for the benefit of the Company.

 

  11.2. The Service Provider undertakes to avoid being in a situation of conflict of interests between his various business activities and the providing of his Services under this Agreement to the Company. In any event of concern for potential conflicts of interest, the Service Provider undertakes to provide notice thereof to the Company in advance and obtain the Company’s written consent for such act.

 

  11.3. The Service Provider hereby undertakes that throughout the term of this Agreement and for a period of 4 months following the termination of this Agreement, for any reason (hereinafter: the “ Non-Competition Period ”), the Service Provider shall not, directly and/or indirectly, work and/or provide services, either by himself or through any corporation on his behalf, as a salaried employee, self-employed person, consultant, partner, shareholder, director or otherwise, as part of or for any customer of the Company, or for any person or company having business relationships with the Company, or for any competitor of the Company.

 

  11.4. The Service Provider further undertakes not to approach during the Non-Competition Period any of the Company’s customers or suppliers, including such entities with whom the Company has conducted negotiations at time of termination of this Agreement, with an intent to make them his own customers or suppliers, respectively, and shall not propose any business transactions to them dealing with the same line of business in which the Company is active, other than in the name of the Company and as part of the Services provided thereto and/or shall not receive from them and/or from any person, company or entity affiliated thereto, either directly or indirectly, any position, invitation, offer, work, provision of service or business in which the Company is or has been engaged or, to the Service Provider’s best knowledge, contemplated to engage.

 

  11.5. The Service Provider’s undertakings under this section constitute fundamental conditions of this Agreement.

 

  - 7  -  

 

 

  12. Miscellaneous

 

  12.1. Parties’ addresses for the purpose of this Agreement are as follows:

 

  12.1.1. The Service Provider - 37 Ussishkin Str., Ramat Hasharon

 

  12.1.2. The Company - 7 Jabotinsky Street, Ramat Gan.

 

  12.2. Any notice sent by one party to the other party will be deemed to have been received by the addressee within 72 hours after being posted at the post office in a registered letter and if delivered by hand, shall be deemed to have been immediately received.

 

  12.3. This Agreement represents all agreements and understandings between the parties in relation to the providing of the Services and revokes any prior agreement and/or understanding.

 

  12.4. Any change and/or revocation of any of the provisions hereof may only be made by a writing signed by both parties.

 

  12.5. The Service Provider may not endorse and/or assign to any other person all or any of his rights and/or obligations under this Agreement, unless the Company has given its prior written approval for such.

 

  12.6. The Service Provider has no and shall have no right of lien over any documents belonging to the Company, including documents which were prepared by and/or through him or any of the Company’s equipment which was made available for his use in the course of providing the Services, and he will return any such documents or equipment to the Company upon its first demand, unless such involve a Substantial Default in payment of the Monthly Payment by the Company as set forth in section 7.4 above, and for this purpose, “Substantial Default” means a delay of 60 days following the due day for payment of the Monthly payment in section 7.4, in which case the right of lien shall be available to the Service Provider. The foregoing shall not derogate from any rights and/or relief available to the Service Provider under any law.

 

  12.7. No delay in exercising, or default to exercise, any of the parties’ rights under this Agreement shall be deemed as waiver or preclusion of such party.

 

  12.8. This Agreement is governed by the laws of the State of Israel. The parties hereby submit to the exclusive jurisdiction and venue of the competent courts and tribunals in Tel-Aviv-Yafo for any legal proceedings or disputes arising in connection with this Agreement.

 

  - 8  -  

 

 

In Witness Whereof the Parties Have Set their Hand
on the Date set forth in the Preamble hereof :

 

  ASIA PITUACH (A.D.B.M.) LTD.
/s/ Eli Yoresh    
Eli Yoresh   By: /s/ Haim Siboni
    Name: Haim Siboni
    Title: CEO

  

 

- 9 -

 

 

Exhibit 4.10

 

 

SHARE PURCHASE AGREEMENT

 

This Share Purchase Agreement (this “ Agreement ”) is made and entered into as of the 4 th day of August, 2016 (the “ Effective Date ”) by and between Railvision Ltd ., a company incorporated under the laws of the State of Israel, registration number 5154441541 (the “ Company ”), the Founders (as defined below) and Capitalink Ltd., (“ Capitalink “), Foresight Autonomous Holdings Ltd. (“ Foresight ”), and Amir Uziel Consulting Ltd. (“ Uziel ”) (each, an “ Investor ”; and collectively, the “ Investors ”). The Company, the Founders and the Investors are collectively referred to herein as the “Parties”, and each separately as a “Party”.

 

RECITALS

 

WHEREAS , the Company was founded by Messrs. Elen Joseph Katz, Shachar Hania, Yuval Esby and Noam Tich (the “ Founders ”) and is developing and the owner of proprietary alert and safety systems, with focus on railways;

  

WHEREAS , the Board of Directors of the Company (the “ Board ”) has determined that it is in the best interests of the Company to raise capital by means of the issuance of Ordinary Shares of the Company, nominal value NIS 0.01 per share (the “ Ordinary Shares ”), in two installments, at an average price per share of US$60.029 for a maximum aggregate investment amount of US$2,000,000 (the “ Maximum Investment Amount ”); and

 

WHEREAS, in May 2016, Mr. Guy Gershoni (“ Gershoni ”) extended to the Company a convertible loan in the amount of US $50,000 (the “ Gershoni Loan ”) to be automatically converted into Ordinary Shares of the Company immediately prior to the Initial Closing (as defined below); and

 

WHEREAS , in May 2016 the Parties entered in that certain Memorandum of Understandings which outlined the principal terms of the transaction contemplated hereunder (the “ MOU ”); and

 

WHEREAS, in May 2016, the Company, Capitalink and Uziel entered into that certain loan agreement pursuant to which Capitalink and Uziel extended or shall extend to the Company a convertible loan in the amount of up to US$270,000 (the “ Investors Loan ”), as an advance payment against their respective contemplated investment in the Company, to be automatically converted into Ordinary Shares of the Company at the Initial Closing (as defined below); and

  

NOW, THEREFORE , in consideration of the mutual promises and covenants set forth herein, the parties hereby agree as follows:

 

1.        The Transaction

 

1.1.     Issuance and Purchase of Ordinary Shares . Subject to the terms and conditions herein, at the Initial Closing (as defined below), the Company shall issue to the Investors and/or any party on their behalf, as determined by the Investors absolute discretion (the “ Additional Investors ”) and each Investor and Additional Investor, as the case may be, shall purchase from the Company, severally and not jointly, in accordance with the breakdown set forth in Schedule A attached hereto, an aggregate number of 11,821 Ordinary Shares of the Company (the “ Investors’ Shares ”), at a price per each Investors’ Share equal to US$84.59 (the “ PPS ”), in consideration for an aggregate investment amount of US$1,000,000, which shall include the respective amount previously advanced to the Company pursuant to the Investors Loan (the “ Initial Investment Amount ”), reflecting a Company's post-investment valuation of US$4,444,444. The Investors' Shares shall represent, immediately following the Initial Closing, 22.5% of the issued and outstanding share capital of the Company.

 

   

 

 

1.2.     Conversion of Gershoni Loan . Immediately prior to the Initial Closing, and contingent thereupon, the Company will convert the Gershoni Loan into 721 Ordinary Shares at a conversion price equal to the PPS.

 

1.3.     Investors’ Decision regarding the Second Investment Amount . From and after the date of the Initial Closing and during a one hundred and twenty day period thereafter (the “ Decision Period ”), the Investors shall elect and notify the Company in which of the two following ways, shall the Investors (and/or Additional Investors) invest the additional US$1,000,000 (the “ Second Investment Amount ”) in the Company, on a best effort basis:

 

1.3.1. Investment of the Second Investment Amount by purchase of 21,496 additional Ordinary Shares, to be issued by the Company to the Investors and/or Additional Investors, (“ Investors’ Optional Shares ” and together with the Investors’ Shares - the “ Purchased Shares ”) each at price per share of US$46.52 (the " Second Closing PPS "), subject to provisions of Section 6.1 herein. The Purchased Shares shall represent, immediately following the Second Closing, 45% of the issued and outstanding share capital of the Company. Following the Second Closing, the Investors will make their best efforts, to register the Company's ordinary shares for trade on a recognized US stock exchange (the " Registration for Trade "). For the removal of any doubts, the Registration for Trade and the terms and conditions thereof, shall be subject to the approval of the Board (the " Direct Investment "). In the event the Investors elect to effect a Direct Investment, the Investors shall use their best efforts to consummate the Direct Investment within two months of the Investors’ Decision Notice; or 

 

1.3.2. A merger of the Company with or into an existing publicly traded shell company, whose securities are traded on a recognized US stock exchange and with cash assets equal to the Second Investment Amount (the “ Merger ”, the “ Shell Company ” and the " Indirect Investment " accordingly) within 90 days of the Investors’ Decision Notice.

 

1.3.3. The Investors’ shall provide the Company with a written notice by the lapse of the Decision Period informing the Company on their decision (the “ Investors’ Decision Notice ”) whether to invest by way of a Direct Investment or by way of an Indirect Investment.

 

1.3.4. It is hereby clarified that: (i) in the event the Investors invest via Direct Investment, the Investors shall not hold, jointly, immediately following the consummation of the Direct Investment, more than 44.99% of the issued and outstanding share capital of the Company, on a non-diluted basis; and (ii) in the event the Investors invest via Indirect Investment, the Investors shall not hold, jointly, immediately following the consummation of the Merger Agreement, more than 44.99% of the issued and outstanding share capital of the Shell Company, on a non-diluted basis.

 

1.3.5. The Company hereby agrees and acknowledges that in the event neither Direct Investment nor the Indirect Investment is consummated provided that the Investors used their best efforts to effect same, the Investors, or any of them, shall have no liability or responsibility to the Company or any of its shareholders, officers or employees, and the Company shall have no, and it hereby expressly waives and releases, any claim against the Investors or any of their respective shareholders, officers or employees for any damages or losses of any nature in connection therewith.

 

  - 2 -  

 

 

1.4.     Merger into a Shell Company . In the event the Investors decided to invest by way of Indirect Investment as set forth in Section 1.3.2, the Investors hereby undertake to make best efforts to cause the Shell Company to enter into an appropriate agreement with the Company and/or the Company’s shareholders (the “ Merger Agreement ”) within ninety (90) days of delivery of the Investors Decision Notice (the “ Merger Date ”). Pursuant to the Merger Agreement, all of the Company’s share capital, as well as any and all rights of the Company, including, without limitation, any tangible and in-tangible assets, intellectual property rights, rights to the technology, and any know-how that were developed by the Company up to the Merger Date will be purchased by the Shell Company in exchange for issuance to the shareholders of the Company immediately prior to the Initial Closing Date (as defined below) of such number of shares of the Shell Company which will represent immediately following the Merger Date 55.01% of the issued and outstanding share capital of the Shell Company, on a non-diluted basis (i.e. excluding the ESOP Pool, as provided in Section 1.7 herein and the Warrants granted in accordance with Section 1.8 herein). For the avoidance of any doubt, the Merger may be effected by any other appropriate mechanism, as agreed between the parties to the Merger Agreement, including, but not limited to, by means of exchange of shares between the shareholders of the Company and the Shell Company. It is hereby clarified that on the Merger Date, the Shell Company shall be free and clear of (i) any assets, other than a minimum amount of cash equaling to the Second Investment Amount and (ii) liabilities, debts, liens, any other encumbrances, including any third parties rights in this transaction.

 

1.5.     Investors’ Second Loan . In the event the Investors decided to invest by way of Indirect Investment as set forth in Section 1.3.2, the Investors hereby take to extend to the Company a convertible loan in the amount of the Company’s monthly burn rate, as shall be determined by the CEO of the Company, at his sole discretion, (the “ Investors Second Loan ”) for the period between the delivery of the Investors Decision Notice and until the Merger Date. The Investors Second Loan shall be deemed an advance payment against the Second Investment Amount, to be automatically converted into Ordinary Shares of the Company upon the consummation of the Merger Agreement.

 

1.6.     Release from lock up. Following the Registration for Trade or the consummation of the Merger Agreement, the Company will make its best efforts to release the Purchased Shares, and any shares derived from the exercise of the Warrants (as defined below) granted to the Investors hereunder (the “ Exercised Shares ”), from the applicable lock-up restrictions. The Founder’s shares in the Company, including any shares resulting from exercise of the options to purchase the Company’s shares under the Plan (as defined below), shall be released from lock-up in accordance with the applicable law, including the Rule 144 under the US Securities Act of 1933, if applicable and/or in accordance with obligations towards underwriters, if any.

 

1.7.     ESOP Pool . The Company undertakes to reserve, at the Initial Closing and contingent thereupon, 7,881 Ordinary Shares, constituting 15% of the issued and outstanding share capital of the Company immediately following the Initial Closing (the “ ESOP Pool ”), for issuance upon the exercise of the Company's employee share options plan to be approved by the Board (the “ Plan ”) pursuant to which the Company may grant options to purchase Ordinary Shares to employees, officers, directors or service providers of the Company. Unless resolved otherwise by the Board, the options granted pursuant to the Plan shall have a vesting period of five (5) years during which each year a twenty percent (20%) of the options would vest. The exercise price of each such option shall be determined by the Board, provided however , that the minimal exercise price thereof shall reflect the Company’s valuation of US$20,000,000 based on the Company’s issued and outstanding share capital as of the Initial Closing (the “ Minimal Exercise Price ”). Notwithstanding the foregoing, under special circumstances and at the request of the CEO of the Company, the Board shall have the right to decrease the Minimal Exercise Price. In any event, on the Initial Closing and thereafter, the Company shall not allocate to those Company’s employees and officers who shall be employed by the Company on the Initial Closing Date, options in an amount, exceeding, in the aggregate 5,524 options to purchase 5,524 Ordinary Shares.

 

  - 3 -  

 

 

1.8.     Warrants .

 

1.8.1. At the Initial Closing the Company shall issue to each of the Investors and Additional Investors, as the case may be: (a) a warrant in the form attached hereto as Exhibit ‎1.8.1 (a) (the “ Initial Warrant 1 ”) to purchase up to the amount of the Ordinary Shares equal to such Investor's or Additional Investor’s portion of the Investors' Shares, at an exercise price per each such share of US$266.45, reflecting a Company pre-money valuation of US$14,000,000, exercisable within 18 months as of the Initial Closing Date; if the Second Closing is consummated, the Initial Warrant 1 shall be cancelled against and subject to issuance to each of the Investors and Additional Investors of a warrant in the form attached hereto as Exhibit ‎1.8.1 (a)(i) (the “ Updated Warrant 1 ”) updated as follows: (i) the amount of the Ordinary Shares shall be increased to such Investor's or Additional Investor’s portion of the Purchased Shares; (ii) the exercise price shall be decreased to US$189.09, and (iii) the exercise period will be extended to 18 months as of the Second Closing Date; (b) a warrant in the form attached hereto as Exhibit ‎1.8.1 (b) (the “ Initial Warrant 2 ”) to purchase up to the amount of the Ordinary Shares equal to such Investor's or Additional Investor’s portion of the Investors' Shares, at an exercise price per each such share of US$380.64, reflecting a Company pre-money valuation of US$20,000,000, exercisable within 30 months as of the Initial Closing Date; if the Second Closing is consummated, the Initial Warrant 2 shall be cancelled against and subject to issuance to each of the Investors and Additional Investors of a warrant in the form attached hereto as Exhibit ‎1.8.1 (b)(i) (the “ Updated Warrant 2 ”) updated as follows: (i) the amount of the Ordinary Shares shall be increased to such Investor's or Additional Investor’s portion of the Purchased Shares; (ii) the exercise price shall be decreased to US$270.13, and (iii) the exercise period will be extended to 30 months as of the Second Closing Date.

 

1.8.2. At the Initial Closing the Company shall issue to the Investors and the Additional Investors warrants in the form attached hereto as Exhibit ‎1.8.2 (the “ Initial Warrant 3 ”) to purchase the Ordinary Shares in the amounts set forth alongside such Investor's or Additional Investor’s name in Schedule A attached hereto, and in the aggregate, up to 3,284 Ordinary Shares (“ Aggregate Amount ”), at an exercise price per each share of US$304.52, exercisable within 24 months as of the Initial Closing Date; if the Second Closing is consummated, the Initial Warrant 3 shall be cancelled against and subject to issuance to each Investor and Additional Investor of warrants in the form attached hereto as Exhibit 1.8.2(i) (the “ Updated Warrant 3 ”) updated as follows: (i) to purchase up to the amount of the Ordinary Shares pro rata to such Investor’s or Additional Investor’s share in the Maximum Investment Amount and in the increased Aggregate Amount of 4,627 Ordinary Shares; (ii) the exercise price shall be decreased to US$216.1, and (iii) the exercise period will be extended to 24 months as of the Second Closing Date.

 

1.8.3. The Initial Warrant 1, Initial Warrant 2 and Initial Warrant 3 collectively – the “ Initial Warrants ”; The Updated Warrant 1, Updated Warrant 2 and Updated Warrant 3 collectively – the “ Updated Warrants ”; the Initial Warrants and the Updated Warrants collectively – the “ Warrants ”.

 

  - 4 -  

 

 

2.        The Closings

 

2.1.     The Initial Closing . The issuance and allotment of the Investors’ Shares to the Investors and the payment of the Initial Investment Amount by the Investors in consideration therefor (the “ Initial Closing ”), shall take place remotely via the exchange of documents and signatures or at the offices of Pearl Cohen Zedek Latzer Baratz, 1 Azrieli Center, Round Tower, 18th Floor, Tel-Aviv 67021 Israel, at such date and time as the Company and the Investors shall mutually agree (the “ Initial Closing Date ”), which, in any event, shall not be later than September 15, 2016 (the “ End Date ”).

 

2.2.     Transactions at the Initial Closing . At the Initial Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and 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:

 

  2.2.1.  The Company shall deliver to the Investor the following documents:

 

(a)       A true and correct copy of the unanimous written consent of the Company’s Board, in the form attached hereto as Schedule ‎2.2.1 ‎(a) , approving, inter alia : (i) the entering into, execution, delivery and performance of this Agreement and approving all the transactions contemplated herein; (ii) the issuance and allotment of the Investors’ Shares to the Investors and the Additional Investors against payment of the Initial Investment Amount; (iii) the issuance of the Investors’ Optional Shares (if and when applicable) to the Investors and/or Additional Investors against and subject to payment of the Second Investment Amount; (iv) the reservation of the ESOP Pool; and (v) the issuance of the Warrants, the issuance of the Ordinary Shares upon the exercise thereof and reserving share capital for the Warrants.

 

(b)      A true and correct copy of the minutes of the general meeting of the shareholders of the Company, in the form attached hereto as Schedule ‎2.2.1 ‎(b)(i) , approving, inter alia : (i) the entering into, execution, delivery and performance of this Agreement and approving all the transactions contemplated herein; (ii) the issuance and allotment of the Investors’ Shares to the Investors and the Additional Investors against payment of the Initial Investment Amount; (iii) the issuance of the Investors’ Optional Shares (if and when applicable) to the Investors and/or Additional Investors against and subject to payment of the Second Investment Amount; (iv) the reservation of the ESOP Pool; (vi) the adoption of the Amended and Restated Articles of Association (the “ Amended Articles ”), in the form attached hereto as Schedule ‎2.2.1 ‎(b)(ii) ; (vi) the increase of the authorized share capital of the Company; and (vi) the issuance of the Warrants, the issuance of the Ordinary Shares upon the exercise thereof and reserving share capital for the Warrants.

  

(c)       Validly executed share certificates in the Investors’ and Additional Investors’ names, evidencing the Investors’ Shares issued to and purchased by the Investors and Additional Investors, in a form attached hereto as Schedule ‎2.2.1 ‎(c) (including on account of the automatically converted Investors Loan) ;

 

(d)       Validly executed Initial Warrants;

 

(e)       The Company’s shareholders register, in a form attached hereto as Schedule ‎2.2.1 ‎(d) , evidencing the issuance of such Investors’ Shares to the Investors and conversion of Gershoni Loan;

 

  - 5 -  

 

 

(f)        An opinion of counsel to the Company dated as of the Initial Closing Date, in the form attached hereto as Schedule 2.2.1(f) ;

 

(g)       Certificates duly executed by the chief executive officer of the Company and each of the Founders, dated as of the Initial Closing Date, in the forms attached hereto as Schedule 2.2.1(g)(i) and (ii) (the “ Compliance Certificates ”);

 

(h)       Executed copies of indemnity agreement with the persons appointed as a director of the Company in the form attached as Schedule 2.2.1(h) (the “ Indemnification Agreements ”);

 

(i)        A copy of a duly completed and executed notices to the Israeli Companies Registrar with regard to the: (i) adoption of the Amended Articles, including the increase of the authorized share capital of the Company; (ii) issuance of the Investors’ Shares, and (iii) changes to the Company’s Board, all in form and substance acceptable to Investors for immediate filing with the Registrar;

 

(j)        Waivers duly executed by each of the Company's shareholders waiving any and all preemptive rights, rights of first refusal, anti-dilution rights and any other participation or veto rights (whether under the current Articles of Association of the Company or any other agreement or under applicable law), if any, that they may have in connection with the issuance of the Purchased Shares, the grant of the Warrants and the exercise thereof, and the transactions contemplated hereunder, in the form attached hereto as Schedule 2.2.1(j) ;

 

(k)       Gershoni's waiver of any payment by the Company on account of Gershoni Loan;

 

(l)       A copy of tax ruling issued by the Israeli Tax Authority under Section 104B of Israeli Income Tax Ordinance with regard to the transfer by Founders of the Intellectual Property (as defined below) to the Company, as well as the approval issued by the Israeli Tax Authority under Section 104A of Israeli Income Tax Ordinance and the regulations promulgated thereunder pursuant to which (i) the Company is deemed a ‘research and development’ company and (ii) the holdings of the controlling shareholders of the Company immediately prior to the Initial Closing may be diluted to 25% of the Company’s share capital;

 

(m)      Any third party consent required (if any) in connection with the transactions contemplated hereby, the issuance of the Purchased Shares and the grant of the Warrants.

 

  2.2.2. The Company and each of the Founders shall enter into an employment or services agreement in the forms attached hereto as Schedule ‎2.2.2(i)-(iv) .

 

  2.2.3. Each Investor and Additional Investor shall cause the transfer to the Company of his entire respective portion of the Initial Investment Amount paid in consideration for the Investors’ Shares being issued to said Investor or Additional Investor, as more fully set forth in Schedule A, by wire transfer, banker’s check or such other form of payment as is mutually agreed by the Company and the Investors. The wire transfer (if so agreed) will be made in US Dollars or New Israeli Shekels (in accordance with the representative rate of exchange published by the Bank of Israel on the Business Day immediately preceding the Initial Closing Date) to the Company’s bank account, the details of which will be provided to the Investors by the Company at least three (3) days prior to the Initial Closing Date. For the purpose hereof, “ Business Day ” shall mean a day, other than Friday, Saturday, Sunday or other day on which commercial banks in Tel-Aviv, Israel or the US are authorized or required by law to be closed.

 

  - 6 -  

 

 

2.3.     Second Closing .

 

  2.3.1. Within ninety (90) days of delivery of the Investors’ Decision Notice to the Company notifying the Company that the Investors decided to invest via Direct Investment, at a time and date agreed between the Company and the Investors and the Additional Investors (the “ Second Closing Date ”), a second closing shall take place remotely via the exchange of documents and signatures or at the offices of Pearl Cohen Zedek Latzer Baratz, 1 Azrieli Center, Round Tower, 18th Floor, Tel-Aviv 67021 Israel, whereby the Investors and the Additional Investors shall transfer to the Company the Second Investment Amount and the Company will issue to the Investors and the Additional Investors, if any, the Investors’ Optional Shares (the “ Second Closing ” and together with the Initial Closing, the “ Closing ”).

 

2.4.     Transactions at the Second Closing . At the Second Closing, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and 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:

 

  2.4.1. The Company shall deliver to the Investors the following documents:

 

(a)       Validly executed share certificates in the Investors’ and/or Additional Investors’ names, evidencing the Investors’ Optional Shares issued to and purchased by the Investors and/or Additional Investors, in a form attached hereto as Schedule ‎2.2.1 ‎(a) ;

 

(b)       The Company’s shareholders register, evidencing the issuance of such Investors’ Optional Shares to the Investors and/or Additional Investors;

 

(c)       Validly executed Updated Warrants;

 

  2.4.2. Each Additional Investor not listed in Schedule A hereto shall provide the Company with a duly executed copy of a joinder to this Agreement in the form attached hereto as Schedule  ‎2.4.2 .

 

  2.4.3. Each Investor and/or Additional Investor, if any, shall cause the transfer to the Company of his entire respective portion of the Second Investment Amount paid in consideration for the Investors’ Optional Shares being issued to said Investor or Additional Investor, as applicable, according to a breakdown to be provided to the Company by the Investors, by wire transfer, banker’s check or such other form of payment as is mutually agreed by the Company and the Investors. The wire transfer (if so agreed) will be made in US Dollars or New Israeli Shekels (in accordance with the representative rate of exchange published by the Bank of Israel on the Business Day immediately preceding the Second Closing Date) to the Company’s bank account, the details of which will be provided to the Investors by the Company at least three (3) days prior to the Second Closing Date.

 

  - 7 -  

 

   

3.        Representations and Warranties of the Company and the Founders . As a material inducement and condition to the Investors entering into this Agreement and consummation of the transactions contemplated hereby, the Company and the Founders (only with regard to Sections 3.4 and 3.5 below) jointly and severally represent, warrant and undertake to the Investors, except as set forth on a Schedule of Exceptions attached hereto as Schedule 3 (the “ Schedule of Exceptions ”), which exceptions shall be deemed to be representations and warranties as if made hereunder, that as of the date hereof and as of the Initial Closing:

 

3.1.     Authorization; Approvals . The Company has the full power and authority to execute, deliver and perform this Agreement and the other agreements contemplated hereby or which are ancillary hereto (the “ Transaction Documents ”), and to consummate the transactions contemplated hereby and thereby. This Agreement and all the Transaction Documents, when executed and delivered by or on behalf of the Company, will constitute the valid and legally binding obligations of the Company, legally enforceable against the Company in accordance with its terms, except (i) as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or in law). All corporate action on the part of the Company, its shareholders, officers and directors necessary for the authorization, execution, delivery, and performance of all of the Company’s obligations under the Transaction Documents and for the authorization, issuance and sale of the Purchased Shares and Warrants and of the Ordinary Share issuable upon the exercise of the Warrants, has or will be taken prior to the Initial Closing. No consent, approval, order, license, permit, action by, or authorization of or designation, declaration, or filing with any governmental authority or any other person or entity on the part of the Company is required and has not been obtained by the Company prior to the Initial Closing in connection with the valid execution, delivery and performance of this Agreement and the other Transaction Documents or the offer, sale, or issuance of the Purchased Shares and the Warrants.

 

3.2.     Organization . The Company is duly organized and validly existing company under the laws of the State of Israel. The Company has all requisite power to own and operate its properties and assets, and to carry on its business as presently conducted and as presently proposed to be conducted. The articles of association of the Company (the “ Articles of Association ”) as in effect prior to the Initial Closing are attached hereto as Schedule ‎3.2 and the Amended Articles shall be in effect immediately upon the Initial Closing.

 

3.3.        Compliance with other Instruments . The execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in any violation of, or conflict with or constitute a default under, (i) the Company’s Articles of Association, (ii) any material contract, agreement, instrument or mortgage of the Company or to which it is a party or by which it or any of its property is bound or affected; (iii) any judgment, order, injunction, decree, or ruling of any court or governmental authority, domestic or foreign; or (iv) any applicable law. The Company has all franchises, permits, licenses, and any similar authority necessary or required under any applicable law, regulation, rule or ordinance in the State of Israel or in other territories in which the Company currently conducts business, for the conduct of its business as presently being conducted, and the Company is not in default of any material provision of the same. To the Company’s knowledge, there are no restrictions of any kind that prevent or restrict the payment of dividends or other distributions by the Company other than those imposed by the laws of general applicability of their respective jurisdictions of organization. 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.

 

3.4.     Share Capital .

 

  3.4.1. The authorized share capital of the Company immediately prior to the Initial Closing is NIS 1,000, divided into 100,000 shares, par value of NIS 0.01 per share, of which 4,000 are issued and outstanding, which upon and subject to the Initial Closing shall increase to NIS 10,000, divided into 1,000,000 shares, par value of NIS 0.01 per share, of which 40,000 will be issued and outstanding. Except for the transactions contemplated by this Agreement and except as set forth in the Cap Table (as defined below) and/or in the Amended Articles, there are no other share capital, preemptive rights, convertible securities, outstanding warrants, options or other rights, promises or other contracts, agreements, undertakings, commitments to subscribe for, purchase or acquire from the Company any share capital of the Company.

 

  - 8 -  

 

 

  3.4.2. All of the issued and outstanding share capital of the Company has been duly authorized, validly issued, fully paid-up and non-assessable. The Purchased Shares and the Warrants, as well as Ordinary Shares originating from the exercise of the Warrants, when issued and allotted and paid for in accordance with this Agreement or the terms of Warrants, will be duly authorized, validly issued, fully paid-up, non-assessable and free of any participation rights, preemptive rights or any similar rights by virtue of which the shareholders or other third parties may be entitled to purchase or receive securities of the Company, and will have the rights, preferences, privileges, and restrictions set forth in the Amended Articles and will be issued free and clear of any liens, claims, encumbrances or third party rights of any kind and duly registered in the name of the Investors or Additional Investors, in the Company’s shareholders register. Except as set forth in the Transaction Documents and the Amended Articles, there are no voting agreements, proxies or other agreements with respect to the share capital of the Company or any agreement relating to the issuance, sale, redemption, transfer or other disposition of the share capital of the Company to which the Company is a party, or of which the Company has knowledge of. The Company is not under any obligation to register any of its currently outstanding securities or any of its securities, which may hereafter be issued, for trading on any securities exchange.

 

3.5.     Ownership of Shares . The capitalization table attached hereto as Schedule ‎3.5 (the “ Cap Table ”) sets forth the number and class of shares held by each shareholder of the Company, and the total number of securities of the Company prior to, and immediately following, the Initial Closing and the Second Closing (assuming the investment in full of the entire applicable investment amount for each such Closing) on a fully-diluted basis. Except as set forth in Schedule ‎3.5 , no other person or entity owns or has rights to or has been promised any shares of the Company, any securities of the Company or any rights to purchase or be issued or granted shares or securities of the Company.

 

3.6.     Directors, Officers . The directors and officers of the Company as of the date hereof and immediately prior to the Initial Closing, are as listed on Schedule ‎3.6 . Except as set forth in the Transaction Documents and the Amended Articles, the Company has no agreement, obligation or commitment with respect to (i) the election of any individual or individuals to the Board; or (ii) payment of any compensation to any of the Company’s directors (in such persons’ capacity as directors). There are no agreements, commitments and understandings, whether written or oral, with respect to any compensation to be provided to any of the Company’s directors or officers (other than as set forth in their (or companies under their control) respective written employment or consulting agreements with the Company which have been provided to the Investors prior to the Initial Closing). To the Company’s best knowledge no officer of the Company is planning to work less than full-time at the Company in the future.

 

3.7.     Subsidiaries . The Company does not own or control, directly or indirectly, any interest or participation rights in any corporation, partnership, limited liability company, joint venture, trust, association or other business entity.

 

3.8.    Liabilities

 

  3.8.1. Except as set forth in Schedule ‎3.8.1 , the Company has no known liabilities, debts or monetary obligations of any nature exceeding NIS 10,000, whether accrued, absolute or contingent, it is not a guarantor of any debt or obligation of another, nor has it given any indemnification, loan, security or otherwise agreed to become directly or contingently liable for any obligation of any person, and no person has given any guarantee of, or security for, any obligation of the Company.

 

  - 9 -  

 

 

  3.8.2. As of the incorporation of the Company, there has not been:

 

(a)       any material adverse event occurred that has or is likely to change the status of the Company;

 

(b)       any damage, destruction or loss, whether or not covered by insurance, to any of the material assets, properties, financial condition, operating results, prospects or business of the Company (as such business is presently conducted and as it is presently proposed to be conducted);

 

(c)        any waiver or compromise by the Company of a valuable right or of a material debt owed to it;

 

(d)        any execution of, or a change or amendment to, a material agreement by which the Company, or any of its assets or properties are bound or subject;

 

(e)        any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other Company Intellectual Property Rights (as defined below) or intangible assets of the Company;

 

(f)        any resignation or termination of employment of any officer or key employee of the Company;

 

(g)      any change in the accounting methods or accounting principles or practices employed by the Company; or

 

(h)       any distribution to shareholders or any other entity of dividends, nor did the Company pay in any manner, directly or indirectly, any funds to any of the shareholders, including by way of loans, payments of wages, grants or the like (other than payment under their employment agreements, if applicable).

 

3.9.   Intellectual Property; Patents .

 

  3.9.1. Schedule  ‎3.9.1 sets forth all patents and patent applications and other registered and unregistered intellectual property rights owned by the Company (the same, including all technology, computer software, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, databases and compilations, information, ideas, know-how and trade secrets related thereto or otherwise owned by the Company or in which the Company has any interest, collectively, the “ Intellectual Property Rights ” and/or “ Intellectual Property ”). Furthermore: (i)  no Intellectual Property Right is subject to any law, outstanding order, stipulation or agreement of the Company, restricting the use or licensing thereof; (ii)  no Person other than the Company has any ownership right, title, interest, claim in or lien on any of the Intellectual Property Rights; and (iii)  the Company has not granted, and there are not outstanding, any options, licenses or agreements of any kind relating to any Intellectual Property Rights, nor is the Company bound by or a party to any option, license or agreement of any kind with respect to any of the Intellectual Property Rights.

 

  3.9.2. The Company has good, valid, subsisting, unexpired and enforceable title to, free and clear of all security interests to the Intellectual Property Rights. No intellectual property necessary to enable the activities or the business of the Company is held by any of the Founders, employee, director, consultant or shareholder of the Company, whether directly or indirectly. None of the Intellectual Property Rights has been or is now involved in any interferences or reissue, reexamination or opposition proceedings.

 

  - 10 -  

 

 

  3.9.3.  To the Company’s best knowledge, all intellectual property used or required for use in the conduct of the Company's business as now conducted and as proposed to be conducted, do not infringe upon, misappropriate or violate any right, lien, or claim of others. The Company has not received any communications, written, or verbal, alleging that the Company has violated or infringed on any intellectual property rights of any third party.

 

  3.9.4. All Intellectual Property Rights that were developed, or are currently being developed, by the Company’s Founders, past and present employees, officers, directors and/or consultants (the “ Company Personnel ”), were/are being developed on behalf of the Company and have been fully assigned to and vested with the Company.

 

  3.9.5.  To the Company’s best knowledge, at no time during the conception of or reduction to practice of any of the Intellectual Property Rights was any developer, inventor or other contributor to such Intellectual Property Rights operating under any financial contributions and/or financial consideration from any governmental entity or agency, performing research sponsored by any governmental entity or agency or private source. The Company is not aware that at any time during the conception of or reduction to practice of any Intellectual Property Right, any such developer, inventor or other contributor was operating or subject to any employment agreement, or invention assignment or nondisclosure agreement, or other obligation with any third party that could adversely affect the rights of the Company in such intellectual property.

 

  3.9.6.  Except as described in Schedule 3.9.6 , the Company has not transferred, disposed of, pledged or otherwise granted to any third party any right, option or license, express or implied, with respect to the Company’s Intellectual Property Rights.

 

  3.9.7. The Company has taken all precautions, actions and security measures necessary and customary in the industry in which the Company operates (and to companies in similar stage as the Company) to protect its Intellectual Property Rights and to protect the secrecy, confidentiality and value of the intellectual property used or required for use in the conduct of the Company's business as now conducted and as proposed to be conducted.

 

  3.9.8. The Company has not used with or embedded in any of its products generally available or in development, and shall not use and/or embed, any open source, copyleft or community source code.

 

3.10.   Ownership of Assets . The Company has good and marketable title to, and is the sole and exclusive owner of, or hold interests as lessee under leases in full force and effect in, all of the properties and assets of the Company - free from all liens, charges, encumbrances or any other third party right or claim of any kind or nature whatsoever.

 

  - 11 -  

 

 

3.11.   Employees.

 

  3.11.1. All employees (current, and former employees participating in the conception, reduction to practice, development, invention, discovery or design of any items included in the Company Intellectual Property), service providers and consultants of the Company have signed valid non-competition, assignment of invention and confidentiality undertakings toward the Company. Other than as set forth in the Transaction Documents, the Company has no engagement or employment contracts with any officer or employee or any other service provider or person, which is not terminable by it at will without liability (other than payment of social benefits pursuant to applicable law), upon up to thirty (30) days prior notice. Except as set forth in Schedule 3.11.1a , the Company has no deferred compensation covering any of its officers or employees. The Company has materially complied with all applicable employment laws, policies, procedures and agreements relating to employment, terms and conditions of employment and complied with 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 and provided all contributions to pension or managers funds, as applicable, required by law or by any other arrangements between the Company and such employees, on or prior to the date hereof.

 

3.12.   Litigation . There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened against the Company, or any of the Company’s’ properties or against any of its officers, directors, or employees (in their capacity as such), or that the Company has or currently intends to initiate.

 

3.13.   Governmental Grants and Benefits . The Company has not applied for or received any grants, incentives, investments, loans, benefits (including tax benefits), subsidies or allowance and applications therefor (collectively, “ Grants ”) from any governmental or regulatory authority or any agency thereof, or from any foreign governmental or administrative agency, granted to the Company.

 

3.14.   Taxes . The Company is currently not liable for any tax (whether income tax, capital gains tax, or otherwise) that became due and was not duly paid which may have a material adverse effect on the business of the Company. Except as set forth in Schedule 3.14‎ , there are no closing agreements or tax rulings requested or received by the Company from any taxing authority.

 

3.15.   Contracts . Schedule 3.15 contains a true and complete list of all material agreements, understandings, instruments, proposed transactions, judgments, orders, writs and decrees (both orally or in writing) to which the Company is a party or by which it is bound, accurate copies of which (or written descriptions if oral) have been provided to the Investors. Each of such material agreements is in full force and effect; neither the Company nor, to the best knowledge of the Company, any other party thereto is in breach thereof. The Company has not received any notice of any intention to terminate any such agreement. Except as set forth in Schedule 3.15 , there are no contracts, agreements, understandings, instruments, commitments or proposed transactions, judgments, orders, writs and/or decrees to which the Company is a party or by which it is bound which involve (i) provisions restricting or affecting the development, manufacture, assembly or distribution of the Company’s products or services, (ii) granting rights to manufacture, produce, assemble, license, market or sell products or services, (iii) indemnification by the Company with respect to infringements of proprietary rights, or (iv) restrictions or limitations on the Company's right to do business or compete in any area or field with any person, firm or company.

 

3.16.   Interested Party Transactions . Except as set forth in Schedule 3. 16 , no employee, officer, director or shareholder of the Company, nor any affiliate or family member of any such person or entity or the Company, has or has had, either directly or indirectly, (a) an interest in any person or entity which (i) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company, or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any contract or agreement to which the Company is a party or by which it may be bound or affected. Except as set forth in Schedule 3.16 no employee, shareholder, officer, or director of the Company is indebted to the Company, nor is the Company indebted (or committed to make loans or extend or guarantee credit) to any of them.

 

3.17.   Brokers . Except as set forth in Schedule 3.17 , 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.

 

  - 12 -  

 

 

3.18.   Full Disclosure . The Company has provided the Investors with all information that the Investors have requested and all information that the Company believes is reasonably necessary to enable the Investor to make their decision to enter into this Agreement. Neither this Agreement (including the Schedules hereto) nor any document, information, representation or certificates made or delivered in connection herewith by the Company, 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.

 

4.        Representations and Warranties of the Investors . Each of the Investors, severally and not jointly, hereby represents warrants and undertakes to the Company with respect to itself only that:

 

4.1.     Authorization; Enforceability . It has full power and authority to enter into this Agreement and/or into any other agreement, document or schedule attached thereto. This Agreement, when executed and delivered by it, will constitute the valid and legally binding obligations of the Investor, legally enforceable against the Company in accordance with its terms.

 

4.2.     Experience. It is an experienced investor in securities of companies in development stage and acknowledges that it is able to fend for itself, can bear the economic risks of such investment in the Closing Shares and the Option Shares (including the complete loss thereof) and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of this investment in the Company.

 

4.3.     Purchase Entirely for Own Account . The Purchased Shares and Warrants will be acquired for investment for the Investor’s own account and, where applicable, for the account of the Investors as a trustee on behalf of other persons and entities (the “ Beneficiaries ”). By executing this Agreement, the Investor further represents that, other than the sale, transfer or the grant of participation rights to the Beneficiaries, it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to any of the Purchased Shares and the Warrants.

 

4.4.     Disclosure of Information . Without derogating from the representations and warranties of the Company or the Founders, the Investors are experienced investors and have had an opportunity to discuss the terms and conditions of the offering of the Purchased Shares and the Warrants and the Company’s business, management and financial affairs with the Company’s management and have conducted due diligence concerning the Company's business, assets and financial position (the “ Investors Review ”). The Investors entry into this Agreement is made based on the Investors Review, which, however, does not limit, impair, derogate or modify the right of the Investors to rely on the Company’s and the Founders’ representations and warranties herein contained. The Investors further represent and warrant that they understand the risks and other considerations relating to the purchase of the Purchased Shares, and that they are able to bear the economic risk of losing any part or all of its Initial Investment Amount and Second Investment Amount or any amounts being paid by it for the exercise of the Warrant, if any.

 

  - 13 -  

 

 

5.        Representations of Founders; Founders’ Services

 

5.1.     Representations . The Founders, jointly and severally, hereby represent and warrant to the Investors that:

 

5.1.1. There are no agreements or arrangements among the Founders and/or between the Founders and any third party, nor any regulations or codes that are reasonably likely or may have a material effect upon the title to and other rights respecting the Intellectual Property. Without derogating from the forgoing the Intellectual Property was and/or shall be developed exclusively and independently by the Founders, and the Company shall be the exclusive proprietor of all rights in, and relating to, the Intellectual Property; except as set forth in the rights in the Intellectual Property shall be free and clear of any third party's rights whatsoever, including attachments and/or charges; the Founders have not granted and have not undertaken to grant any right whatsoever in the Intellectual Property or any part thereof to any third party.

 

5.1.2. The Founders will take all reasonable security measures to protect the secrecy, confidentiality and value of the Intellectual Property and have not taken any action or, to their knowledge, failed to take an action that will directly or indirectly cause the Intellectual Property to enter the public domain or in any way affect its value or any of the Company absolute and unconditional ownership thereof.

 

5.1.3. Except as set forth in Schedule 5.1.3 , no party or person other than the Company has or shall have any right, title or interest in the Intellectual Property and the Company shall be subject to no limitations, obligations or restrictions with regard to the sale, license, distribution or other transfer or exploitation of the Intellectual Property. The Founders have not been nor are they currently under any obligation to pay any other party any royalties or other fixed or contingent amounts based upon the sale, license, distribution or other use or exploitation of the Intellectual Property (the “ Royalties ”). In the event the Founders are or will at any time in the future be under any obligation to pay such Royalties, the Founders hereby represent and warrant that: (i) any or all such Royalties or consideration will be fully paid by the Founders; and (ii) the Founders shall fully indemnify and hold harmless the Company in connection with any obligation to pay such Royalties or any portion or consideration thereof, and the Founders shall have no claims whatsoever against the Company and/or Investors and/or Additional Investors with respect to the Royalties and/or future developed Intellectual Property.

 

5.1.4. To the best knowledge of the Founders, the Intellectual Property does not and shall not infringe the rights of others nor of any intellectual property rights of others.

 

5.1.5. The Founders have not agreed to indemnify any third party for or against any infringement of any intellectual property rights of such party in connection with the Intellectual Property or otherwise.

 

5.2.     Future IP Assignment . The Founders acknowledge that they have or may have in the future the opportunity to develop, design, prepare or otherwise create, reproduce, modify, or improve the Intellectual Property and/or related know how for the benefit of the Company. The Company, shall own all intellectual property rights in and to all matter which is created by the Founders with respect to all future projects, methods, techniques and know-how for which the Founders are or will be otherwise responsible, developed in the course of performing research and development on behalf of the Company, whether produced solely or jointly with others, and first conceived, fixed in tangible form, illustrated in a drawing, described in a written record or actually or constructively reduced to practice during the performance of research and development work on behalf of the Company (“ Future IP ”). Such ownership rights shall be exclusive, fully vested in the Company and indefeasible.

 

  - 14 -  

 

 

5.3.     Services . Each of the Founders undertakes to serve as employee or service provider of the Company under the terms and conditions of his respective agreement attached hereto as Schedules 2.2.2(i)-(iv). Each of the Founders undertakes to cease any prior activities, including but not limited to activities similar to and/or competing with the Company’s business, and to devote his entire time, efforts and attention to the Company, as determined hereunder and in his employment agreement. Each of the Founders shall be subject to the non-compete, confidentiality and inventions assignment provisions as set forth in his employment agreement.

 

6.        Further Investments and Anti-Dilution

 

6.1.   Subject to Section 6.2 hereinafter, if after the date of the Initial Closing and (i) unless the Second Closing is not consummated, until the consummation of the next financing round, or (ii) in any event if the Second Closing is consummated, until the six (6) months anniversary following the Second Closing Date, the Company issues additional equity securities or rights to acquire such equity securities or securities convertible into, or exchangeable for such equity securities (collectively the “ New Securities ”) at a purchase price less than the PPS (the “ New PPS ”), than the Company shall issue and sell to each and any Investor and Additional Investor, at their par value, and each such Investor and Additional Investor will be entitled to purchase from the Company, at their par value, the number of additional Ordinary Shares (the “ Additional Ordinary Shares ”) determined in accordance with the following formula:

 

AOS= IIS - IS
RP

 

where “AOS” is the Additional Ordinary Shares; “IIS” is an amount invested hereunder by an Investor or an Additional Investor; “RP” is the Reduced Price; “IS” is the number of issued Ordinary Shares held by an Investors or an Additional Investor immediately prior to the relevant issuance of the New Securities.

 

The Reduced Price shall be calculated in accordance with the following formula:

 

RP = [(PPS * InvS + SCPPS *InvOS] + [(New PPS) * (New Securities)] / Total Shares

 

where “PPS” is the PPS; “SCPPS” is Second Closing PPS; “InvS” is the total number of the Investors Shares issued hereunder; “InvOS” is the total number of the Investors’ Optional Shares issued hereunder ; “New PPS” and “New Securities” is as defined in this Section above; the “Total Shares” is the total aggregate number of the Company’s issued and outstanding shares.

 

6.2.    Anything herein to the contrary notwithstanding, the Company shall not be required to make to issue to the Investors and the Additional Investors Additional Ordinary Shares upon the issuance from and after the date of the Initial Closing of (i) Ordinary Shares issuable upon a share split, share dividend, or any subdivision of Ordinary Shares, reclassification and similar recapitalization events; (ii) shares issued to all Company shareholders pro-rata to their holdings, for nominal consideration.

 

6.3.   The anti-dilution protection rights provided under this Section 6 shall be deemed attached to each Company’s share held by any of the Investors and the Additional Investors, and shall automatically be transferred to transferees of such shares, pro rata to the share transferred to it. Such rights shall not however be otherwise transferrable or assignable.

 

  - 15 -  

 

   

7.       No-Sale

 

For the period of 24 months following the Initial Closing, and in the event the Second Closing is consummated, for the period of 24 months thereafter, each Founder shall be subject to a prohibition on transfers, pledges and other dispositions of any of his Ordinary Shares, options or convertible securities of the Company, other than in the context of a sale of all or substantially all of the shares of the Company in accordance with the applicable provisions herein. Notwithstanding the foregoing, a Founder shall have a right to transfer any of his securities in the Company to other Founders.

 

8.      Affirmative Covenants

 

8.1.     Use of Proceeds . The Company will use the proceeds from the sale of the Purchased Shares in accordance with the Company’s budget as shall be approved by the Board following the Initial Closing and for financing the following expenses, which in total shall not exceed US$250,000:

 

8.1.1. Costs of this transaction, and either an Registration for Trade or the consummation of the Merger Agreement, as shall be decided by the Investors pursuant to Section 1.3;

 

8.1.2. Costs of pre-ruling for the authorization of the applicable exemption from income tax;

 

8.1.3. Up to US$100,000 costs of public relation and investors relations to be spent during the first year of the Company’s activities immediately following the consummation of this transaction.

 

8.1.4. Costs of the preparation and the submission of a prospectus draft to release the lock up of the Purchased Shares and shares resulting from the exercise of the Warrants, as set forth in Section 1.6.

 

8.2.     Due Diligence . In the event the Investors decided to invest by way of Indirect Investment as set forth in Section 1.3.2, the Investors and the Company shall have the right to perform due diligence during the period between the date of delivery of the Investors’ Decision Notice and the Second Closing Date.

 

8.3.     Financial Statements; Information . As of the Initial Closing Date, the Company will prepare its annual and quarterly financial statements in accordance with Israeli Securities Laws of 1968 and the regulations promulgated thereunder, or at the reasonable request of Foresight, in accordance with US generally accepted accounting principles (US GAAP). As of the Initial Closing Date, the Company shall provide Foresight any and all information, including financial statements, as requested by Foresight in order to comply with the law and regulatory requirements applicable to Foresight as a public company.

 

8.4.     Investors' Commission . In the event of the consummation of an Registration for Trade or the Merger Agreement, the Company or the Shell Company, as applicable, shall pay the Investors 7.5% plus VAT (if applicable) in cash, of any capital raised by the Company or the Shell Company, as the case may be through public offering (including the capital originating from exercise of any options to purchase the Company’s or the Shell Company’s shares, as the case may be, other than the Warrants granted hereunder or the options granted under the ESOP) (the " Investors' Commission "). The Investors' right to receive the Investors' Commission, if any, from the Company or the Shell Company, if applicable, shall expire upon the earlier of: (i) the raising by the Company or the Shell Company, as applicable, of an aggregate capital of US$ 10,000,000; or (II) the lapse of four (4) years from the Registration for Trade or the Merger Date, as applicable.

 

  - 16 -  

 

 

8.5.     D&O Insurance . Immediately following the Closing, the Company shall cause all directors appointed to the Board at the Closing to be covered by the Company’s directors’ and officers’ liability insurance policy.

 

8.6.     Conduct of Business . During the period from the date hereof and until the Second Closing Date, the Company will conduct its business only in the ordinary course.

 

8.7.     Information and Visitation Rights . The Company will furnish to each Investor, such information relating to the financial condition, business, prospects or corporate affairs of the Company as such Investor may from time to time reasonably request. The Company will permit each Investor and its representatives, at the Investor’s expense, full and free access, during normal business hours and upon reasonable notice, to visit and inspect any of the properties of the Company, to examine its books and records and to discuss its affairs, finances and accounts with the Company’s officers and auditor. This Section shall not limit any rights that an Investor may have under applicable law.

 

9.      Conditions for Closing

 

The obligations of the Investors and Additional Investors to purchase the Purchased Shares and transfer the First and/or Second Investment Amount are subject to the fulfillment by the Company and the Founders at or before the Initial Closing or the Optional Closing, as the case may be, of the following conditions, any or all of which may be waived, in whole or in part, in writing, by the Investors, which waiver shall be at the sole discretion of the Investors:

 

9.1.1. Representations and Warranties . The representations and warranties made by the Company and the Founders in this Agreement shall have been true and correct when made and true and correct as of the Initial Closing or the Optional Closing, as the case may be, as if made on the date of the Initial Closing or the Optional Closing, as the case may be.

 

9.1.2. Performance . All covenants, agreements and conditions contained in the Agreement to be performed or complied with by the Company or the Founders on or prior to the Initial Closing or the Optional Closing, as the case may be, shall have been performed or complied with in all respects.

 

9.1.3. Resolutions . The Company and the Founders shall have delivered to the Investors validly executed resolutions of the Board and the Company’s shareholders, approving the terms of this Agreement, allotment of the Purchased Shares and issuance of the Warrants and the Amended Articles shall have been duly adopted.

 

9.1.4. Delivery of Documents . All of the documents to be delivered by the Company and/or the Founders pursuant to Sections 2.2 and/or 2.3, as the case may be, shall be in forms attached hereto or in a form and substance satisfactory to the Investors and its counsel, in their sole discretion, and shall have been delivered to the Investors. All other actions and transactions set forth in Sections 2.2 and/or 2.3 shall have been completed on or prior to the Initial Closing or the Optional Closing, as the case may be.

 

9.1.5. Absence of Adverse Changes . There will have been no material adverse change to the business, operations, conditions, prospects or assets of the Company.

 

  - 17 -  

 

 

10.     Survival and Indemnification

 

10.1.   Survival . The representations, and warranties of the Company and the Founders contained in Section 3 of this Agreement are deemed to be made on the date of this Agreement and at the Initial Closing Date and the Company’s and Founders’ responsibility with respect to such representations shall remain in full force and effect until the earlier of (a) Registration for Trade or the consummation of the Merger Agreement, or (b) after the Initial Closing for a period of 24 months (the “ Survival Period ”), provided , however that (i) the representations and warranties of the Company set forth in Section 3.9 ( Intellectual Property; Patents ) shall survive and be in effect following the Survival Period for an additional 36 (thirty six) months, but in no event for a period longer than the applicable statute of limitation, and (ii) the representations and warranties of the Company (and the Founders only with respect to Sections 3.4 and 3.5 herein) set forth in Sections 3.4 ( Share Capital ), 3.5 ( Ownership of Shares ), 3.12 ( Litigation) and 3.14 ( Taxes ) shall survive and remain in effect until the expiration of the applicable statute of limitations. The Company, shall not have any liability with respect to any such representation and warranty (other than in case of fraud) unless a claim is made hereunder prior to the expiration of the applicable Survival Period for such representation and warranty, in which case such representation and warranty shall survive as to that claim until the claim has been finally resolved.

 

10.2.   Indemnification . The Company shall indemnify and hold harmless the Investors, Additional Investors and their officers, directors, shareholders, partners, members, employees, agents and affiliates (each an “ Indemnified Party ”) for any and all losses, liabilities, claims, damages, action, suits of any and every kind (including, without limitation, any judgments and costs of settlement, and reasonable expenses of any and every kind), any and all out-of-pocket costs and expenses (including reasonable attorneys’ fees) (collectively, the “ Damages ”), arising from or in connection with any misrepresentation or breach of any representation, warranty, covenant or agreement of the Company contained in this Agreement, in each case subject to the respective Survival Period of any representation or warranty according to Section 10.1 above.

 

10.3.   Limits on Indemnification . Notwithstanding anything to the contrary contained in this Agreement, other than in the case of fraud or intentional or willful misrepresentation: the Company shall not be liable for any claim for indemnification pursuant to Section 10.2 unless and until the aggregate amount of Damages equals or exceeds One Hundred Thousand New Israeli Shekels (NIS 100,000), in which case the Company shall be liable for the full amount of such Damages from the first dollar thereof.

 

10.4.   Notice . In the event that an Indemnified Party is entitled to indemnification as per this Section 10, it shall assert a claim for indemnification by giving prompt written notice thereof to Company, which shall describe in reasonable detail the facts and circumstances upon which the asserted claim for indemnification is based and shall indicate the amount (to the extent available and if not finally determined, a good faith estimate thereof) of the damages that has been or is reasonably expected to be suffered by the applicable Indemnified Party, and shall thereafter keep the Indemnitor reasonably informed with respect thereto provided, that failure of such Indemnified Party to give the Indemnitors prompt notice as provided herein shall not relieve the Indemnitors of any of their obligations hereunder, except to the extent that the Indemnitors are actually prejudiced by such failure.

 

  - 18 -  

 

 

10.5.   Third Party Claims . If any claim, suit, action or other proceeding to which the Indemnified Party set forth herein applies (the “ Claim ”) is brought against an Indemnified Party, such Indemnified Party shall promptly give the Company written notice of such Claim (the “ Notice of Claim ”); provided that failure of an Indemnified Party to give prompt notice as provided herein shall not relieve the Company of any of its obligations hereunder, except to the extent that such failure materially prejudiced its ability to defend against any such Claim. The Company shall have the right, at its own expense, to participate in or assume, at its sole discretion, the defense of such Claim, with counsel reasonably acceptable to the Indemnified Parties, and in such event the Indemnified Party shall be entitled to participate in the defense of such assumed Claim, with Indemnified Party’s own counsel and at its own expense, however, in any event, the Indemnified Party will fully cooperate with the Company in the defense of any such third party claim for which the Company assumes the defense thereof. The Company shall not consent to entry of any judgment or adjust, settle or compromise any Claim for which the indemnity set forth herein is sought without the prior written consent of the Indemnified Party which consent will not be unreasonably withheld (it being agreed that the Indemnified Party shall not be required to agree to any judgment or settlement or compromise which does not include an unconditional and full release from all liability in respect to such Claim). In the event the Company does not assume defense of a Claim with counsel reasonably acceptable to the Indemnified Parties, in connection with which the Indemnified Party asserts a right of indemnification pursuant to this Section 10.5 and the Indemnified Party defends such Claim, then, without limiting the foregoing, the Company shall advance to the Indemnified Party payment for all reasonable expenses incurred by the Indemnified Party in connection with the defense of such claim (including, without limitations, reasonable attorneys' legal fees) subject to the submission by the Indemnified Party of applicable bills. The indemnification provided by the Company hereunder and the enforcement of such indemnification shall be the sole and exclusive monetary remedies available to the Investors against the Company in connection with any inaccuracy in or breach of any representation or warranty contained herein other than with respect to any claims relating to fraud or willful misrepresentation by the Company.

 

11.     Miscellaneous

 

11.1.   Further cooperation . If requested by the Company, following the consummation of this Agreement Foresight shall use its best efforts to provide the Company with research and development services, upon the terms and conditions to be agreed by the parties in the future.

 

11.2.   Amendment of Articles of Association . The Parties hereto agree and acknowledge that prior to the registration of the Company’s securities on a stock exchange (whether by initial public offering, Registration for Trade or Merger), the Company’s articles of association then of effect will be amended in the manner that will, inter alia, provide that the Company’s share capital will be comprised of one class of shares, the rights for nomination of directors set forth in the attached Amended Articles will be forfeited and the directors in the Company will be elected by a general meeting of the Company’s shareholders. In such event, the Founders and the Investors will consider entering into appropriate voting agreement.

 

11.3.   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.

 

11.4.   Transfer; Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. This Agreement and all rights and obligations hereunder may not be assigned or transferred without the prior written consent of the other party except that each Investor may assign, transfer grant or encumber its rights together with its obligations hereunder to any of its affiliates or the Beneficiaries, or, following the Initial Closing, to its Permitted Transferee (as defined in the Amended Articles).

 

11.5.   Governing Law; Jurisdiction . This Agreement shall be governed by and construed according to the laws of the State of Israel, without regard to the conflict of laws provisions thereof. Any dispute arising under or in relation to this Agreement shall be resolved exclusively in the competent court in the District of Tel Aviv and each of the parties hereby irrevocably submits to the exclusive jurisdiction of such court.

 

  - 19 -  

 

 

11.6.   Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile or as a PDF file and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

11.7.   Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

11.8.   Notices . All notices and other communications given or made pursuant to this Agreement will be in writing and will be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours at the place of the recipient of the recipient, and if not so confirmed, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) two (2) days after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications will be sent to the respective parties at their address as set forth above (or in Schedule A ), and to the following email addresses: to the Company - attention: Elen Katz, email: elenktz@gmail.com ; to the Investors attention: Eli Yoresh, email: eli@foresightauto.com ; to the Founders - attention Elen Joseph Katz, email: elenktz@gmail.com ; to Shachar Hania, email __________; to Yuval Esby, email ____________ and to Noam Tich, email ________.

 

11.9.  Amendments and Waivers . 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 the Company and the Investors holding the majority of the Purchased Shares. Any amendment or waiver affected in accordance with this section shall be binding upon all parties hereto.

 

11.10.   Severability . The invalidity of unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

11.11.   Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default 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 party, shall be cumulative and not alternative.

 

11.12.   Entire Agreement . This Agreement (including the Schedules hereto, if any) constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties, including, but not limited to, the MOU, are expressly canceled.

 

[Signature page to follow]

 

  - 20 -  

 

 

[Signature Page – Railvision Ltd. SPA – August 2016]

 

IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed on the date hereinabove set forth.

 

The Company:  
     
  /s/ Elen Joseph Kate  
  Railvision, Ltd.  
     
By: Elen Joseph Kate  
     
Title: CEO  
     
The Founders:  
     
  /s/ Elen Joseph Kate  
  Elen Joseph Katz  
     
  /s/  Shachar Hania  
  Shachar Hania  
     
  /s/ Yuval Esby  
  Yuval Esby  
     
  /s/ Noam Tich  
  Noam Tich  

 

  - 21 -  

 

 

[Signature Page – Railvision Ltd. SPA – August 2016]

 

IN WITNESS WHEREOF, this Share Purchase Agreement has been duly executed on the date hereinabove set forth.

   

Investors:  
   
Capitalink Ltd.  
   
/s/ Lavi Karsney  
By: Lavi Karsney  
Title: CEO  
     
Foresight Autonomous Holdings Ltd.  
   
/s/ Haim Siboni  
By: Haim Siboni  
Title: CEO  
     
Amir Uziel Consulting Ltd.  
     
/s/ Amir Uziel  
By: Amir Uziel  
Title:

CEO

 

 

  - 22 -  

 

 
Schedule A

 

The Investors

 

Investors Initial Closing Investment Amount ($) Investors’ Shares Initial Warrant 3 Updated Warrant 3 Address
           
           
           
           
           
           
           
           
           
Total 1,000,000 11,821 3,284 4,627  

 

The Founders

 

  - 23 -  

 

 

Name Address
   
   
   
   

 

 

- 24 -

 

Exhibit 4.11

 

SERVICES AGREEMENT

 

Made and Entered into on the 5 th Day of January 2016.

 

Between: ASIA PITUACH (A.D.B.M.) LTD.

Company No. 520036062

of 7 Jabotinsky Street, Ramat Gan.

(hereinafter: the “ Company ”)

On the One Part ;

And: L.I.A. PURE CAPITAL LTD.

Company No. 514408715

of 112 Rokach Street, Ramat Gan

(hereinafter: the “ Service Provider ”)

On the Second Part ;

 

Whereas The Company is a public company, whose shares are traded on the Tel Aviv Stock Exchange Ltd.; and

 

Whereas The Company is contemplating to close a merger transaction by way of an exchange of stock with 4Eyes Autonomous Ltd. (hereinafter: the “ Merger Transaction ” and “ 4Eyes ”, respectively); and

 

Whereas The Service Provider serves as the Chief Executive Officer (hereinafter: the “ CEO ”) of the Company and the Company wishes that the Service Provider will continue to provide services to the Company as a business development consultant as well as a consultant in the field of capital markets following the closing of the Merger Transaction, as set forth in this Agreement below; and

 

Whereas The Service Provider is qualified, experienced and authorized under the provisions of any law to serve in such position; and

 

Whereas The Company is interested in receiving the services of the Service Provider in anything connected to such position; and

 

Whereas The Service Provider declares that he has the required experience, ability and knowledge to provide the aforesaid services and is capable of providing such services to the Company as set forth in this Agreement; and

 

Whereas The parties are interested in regulating the terms and conditions concerning the providing of the services to the Company by the Service Provider and to put them into writing, all as set forth in this Agreement below;

 

Therefore, it was Declared, Stipulated and Agreed between the Parties as follows :

 

1. Preamble, Interpretation and Definitions

 

1.1. The preamble hereto constitutes an integral part hereof.

 

1.2. The section headings are for convenience only and should not be relied upon for the construction or interpretation of this Agreement.

 

1.3. The provisions of any other and/or previous agreements among the Company and/or its held companies and the Service Provider are hereby made null and void, unless expressly provided otherwise herein.

 

 

 

 

2. Acceptance, Waiver and Settlement of Claims

 

2.1. The Service Provider hereby confirms that the providing of his services to the Company under this Agreement is not connected in any manner to the previous period of his service with the Company prior to the Merger Transaction and does not create any continuous or accrued seniority with respect to such previous period (hereinafter: the “ Previous Period ”).

 

2.2. The Service Provider hereby declares and acknowledges that he had received from the Company, on the due dates, all the rights and money to which he was entitled with respect to the Previous Period and that the Company is no longer liable to pay him any money for such Previous Period and for the termination thereof.

 

2.3. The Service Provider hereby declares and acknowledges that neither him nor any of his successors and/or those acting on his behalf have or shall have any demands and/or claims whatsoever, against the Company and/or against any of its subsidiaries and/or parent company and/or a combined company and/or any affiliate thereof, and/or anyone on their behalf and/or any of their past, present or future employees and/or managers and/or shareholders (hereinafter: “ Anyone on Behalf of the Company ”), with respect to the Previous Period and/or termination thereof, for any reason whatsoever and however caused and he hereby fully, finally and absolutely waives any such demands and/or claims.

 

3. The Nature and Scope of the Position

 

3.1. The Company will receive from the Service Provider and the Service Provider will provide the Company the following services: The Service Provider will serve as the Company's business development consultant as well as a consultant in the field of capital markets and devote his services hereunder in accordance with the Company’s needs in a scope of 40% of a position, this from the date of signing this Agreement and as provided in this Agreement above and below (hereinafter: the “ Services ”).

 

3.2. The Service Provider will report to and be subordinated to the Company’s CEO and to his decisions.

 

4. Identity and Declarations of the Service Provider

 

4.1. The Services will be provided to the Company on behalf of the Service Provider through Mr. Kfir Silberman, Identity Card No. 037202710 and anyone on his behalf and that this constitutes a fundamental condition of this Agreement.

 

4.2. The Service Provider will provide the Services to the Company in accordance with the needs of the Company at a scope which is not lower than 40% of the ordinary working hours of a salaried employee.

 

  - 2 -  

 

 

4.3. The Service Provider hereby declares that he is aware of everything that is required for the providing of the Services and undertakes to provide his Services to the Company with dedication and professionalism, subject to the Company’s policies, as applicable from time to time and in accordance with the instructions to be given to him from time to time by the Company and to efficiently, loyally and skillfully devote his best skills, time and efforts, as agreed upon in this Agreement.

 

4.4. The Service Provider hereby declares that no limitation and/or prevention exists under any agreement and/or law and/or any other prohibition for fulfilling his undertakings hereunder and that in the event that any such limitation arises in the future, he shall promptly inform same to the Company. The Service Provider further undertakes, that in the execution of his undertakings hereunder and in the providing of the Services, he shall comply with the provisions of any law.

 

5. The Agreement Term and Revocation

 

5.1. The engagement period under this Agreement will commence on the signing date of this Agreement (where this Agreement is signed immediately following the Closing of the Merger Transaction) and continue for a period of 12 months following the signing date of this Agreement and will be automatically renewed for an additional term of 12 months each time, for a total period of 36 months (without the need to sign the Agreement once again on each renewal date) (hereinafter: the “ Engagement Period ”).

 

5.2. Notwithstanding that stated in section 5.1 above, each party hereto may terminate the Engagement Period under this Agreement, for any reason whatsoever, provided the Service Provider gives the Company a prior written notice of 6 months, and to the extent that the Company wishes to terminate the engagement, then, the Company shall deliver a prior notice to the Service Provider 6 months in advance of its wish to terminate the engagement with him and such termination shall not be deemed as breach of the Agreement (hereinafter: the “ Prior Notice ” and the “ Prior Notice Period ”, respectively).

 

5.3. In the event that one of the parties notifies the other party of such termination of the Agreement as set forth in section 5.2 above, the Service Provider will continue to provide the Services hereunder, to the best of his ability and fully cooperate with the Company, until the expiry of the Prior Notice Period, against payment of the full consideration for such notice period. Notwithstanding the aforesaid, the Company may, at its sole discretion, instruct the Service Provider to immediately stop providing his Services, without the need to provide such Services during the Prior Notice Period, or terminate the Services at any time during the Prior Notice Period, provided the Company pays the Service Provider, in advance, on the due date for payment, the full consideration owing for the remainder of the Prior Notice Period.

 

  - 3 -  

 

 

5.4. Notwithstanding that stated in section 5.1 above, the parties agree that the Company may immediately terminate the engagement with the Service Provider, without Prior Notice and without obligating the Company to pay for such Prior Notice Period, in each of the following events:

 

5.4.1. The Service Provider has fundamentally breached his obligations under this Agreement.

 

5.4.2. The Service Provider was convicted of a criminal offense involving moral turpitude.

 

5.4.3. Initiation of the bankruptcy proceedings against the Service Provider.

 

5.4.4. The Service Provider passed away and/or became incapacitated and/or lost his work ability for a period exceeding 45 days.

 

5.5. Should the Service Provider's service end, for any reason, including, without limitation, under the provisions of this section above, the Service Provider undertakes to immediately and without delay return to the Company, at the location indicated by the Company, any written and/or printed and/or recorded and/or typed material and/or any other information that reached him or anyone on his behalf or was prepared by him or by anyone on his behalf in connection with the providing of the Services under this Agreement.

 

5.6. The Service Provider further undertakes to return to the Company any equipment and/or assets belonging to the Company and in his possession, all in good condition as such were received by the Service Provider, save for depreciation and normal wear and tear due to reasonable use thereof.

 

5.7. It is hereby clarified, that upon revocation of the Agreement, for any reason, any provisions which by their nature are intended to survive the expiry or termination of this Agreement, shall so survive, including, without limitation, the following sections: 5 (Agreement Term and Revocation), 8 (Absence of Employer - Employee Relationship), 9 (Confidentiality) and 10 (Miscellaneous).

 

6. Company Supervision

 

By virtue of his position, the Service Provider shall be subordinated to the CEO of the Company.

 

7. Consideration and Benefits

 

7.1. In consideration for and subject to full compliance of the Service Provider with the provisions hereof, the Company will pay the Service Provider a fixed monthly payment in the amount of NIS 27,500 (Twenty seven thousand five hundred Israeli Shekels), plus lawful VAT, against a duly issued tax invoice (hereinafter: the “ Monthly Payment ”).

 

7.2. In addition, the consultant/Service Provider will be entitled to reimbursement of his expenses incurred in Israel and abroad in connection with the providing of the Services, in accordance with the Company’s expenses’ coverage procedure.

 

  - 4 -  

 

 

7.3. To the extent that for any reason during a certain period (including reserve military service days) no Services are provided by the Service Provider, a pro rata share of the Service Provider’s Monthly Payment will be set off, excluding an accumulated period of up to 22 days each year, which for the purposes of implementing this provision will not be taken into account. The Service Provider will report, once a month, of any leave of absence and the number of reserve military service days taking place during the month, excluding weekends.

  

7.4. The Monthly Payment will be paid by the 15 th day of the month for the previous month and subject to the receipt of a duly issued tax invoice of the Service Provider.

 

7.5. Capital Raising - In addition to the Monthly Payment set forth above, the Service Provider is entitled to a 5% capital raising commission to be derived from each investment amount (including exercise of options arising from the investment amounts) actually received by the Company as a result of any capital raising transaction of any entity introduced by the Service Provider to the Company, subject to his assistance to the Company in the implementation of such capital raising transaction, as reasonably requested and acceptable to the Company and subject to the approval by the necessary corporate organs. It is clarified that the Service Provider will not be entitled to any such commission in case of exercise of options granted to the Company’s employees and/or service providers pursuant to an employee options plan adopted by the Company, including, without limitation, for the options allocated to Mr. Eliyahu Yoresh as part of, and/or as a result of, the Merger Transaction.

 

7.6. The amounts payable to the Service Provider as set forth in this section 7 constitute the full, agreed and final consideration for the Services to be provided by Service Provider hereunder, including any payment, tax, levy and/or fee of any kind whatsoever as well as all related and/or ancillary payments for the Services hereunder.

 

7.7. The Service Provider shall be responsible for the payment of any taxes and for any other mandatory payments applicable with respect to the payments, rights and benefits to which the Service Provider is entitled under this Agreement. Without derogating from the generality of the aforesaid, to the extent it is liable to do so under any law, the Company may withhold at source, from any consideration payable to the Service Provider hereunder, all taxes required to be paid under the law, unless the Service Provider delivers to the Company an exemption from the withholding of tax at source.

 

8. Absence of Employer - Employee Relationship

 

8.1. The Service Provider hereby declares that he owns an independent business, through which he provides the Services to the Company; the Service Provider further declares that he is registered as an independent dealer for VAT purposes and registered as an independent dealer/ self-employed with the National Insurance Institute and the Income Tax authorities.

 

  - 5 -  

 

 

8.2. The Service Provider declares and undertakes that this type of Engagement, as set forth herein, was specifically elected by him and that he is fully aware of any consequences and implications arising from this type of engagement.

 

8.3. The Service Provider hereby declares that in the framework of providing the Services under this Agreement, there have not been, and there will be no, employer - employee relationship between him and the Company with all the implications of that statement. This, in light of the Service Provider’s explicit election not to become an employee of the Company and his election to provide the Services in the status of an independent contractor, after fully understanding the entire significance of such status, as set forth in section 8.2 above.

 

8.4. The Service Provider hereby undertakes to indemnify the Company for any actions, whatsoever, commenced against the Company, due to the question of whether employer - employee relationship have existed between him and the Company, regardless of whether such action commences by the Service Provider and/or any of his employees and/or successors and/or their legal heirs or by any other third party.

 

8.5. Without derogating from the aforesaid in section 8.1 above, the Service Provider hereby declares that it is clear to him and he agrees that the consideration set forth in section 7 above is based on his declarations in sections 8.1-8.4 above, on the representation he made to the Company and the basic assumption underlying the agreement between him and the Company that there have not been, and there will be no, employer - employee relationship between him and the Company.

 

8.6. Therefore, the Service Provider hereby agrees that in the event that he claims and/or demands any rights from the Company due to the existence of employer - employee relationship between him and the Company and/or if any legal instance and/or any other entity determines, that indeed such employer - employee relationship exist, the Quantum meruit (reasonable value of services) of the Service Provider as employee will be calculated as 60% of the consideration stipulated in section 7 above and such consideration shall be deemed to have been initially agreed and the Service Provider will return to the Company the difference of 40% of the consideration plus lawful linkage differentials and interest, from the date of payment of any such consideration until actual payment thereof.

 

That stated in this section shall apply, regardless of whether a claim regarding the existence of any employer - employee relationship is raised and/or if any such action is commenced against the Company and/or any other affiliate thereof, by the Service Provider or by any of his employees and/or successors and/or their estate and/or their heirs and/or by any other third party related thereto and in this context, the Service Provider and/or his estate shall be deemed liable to make restitution as aforesaid, prior to making any payment whatsoever to the Service Provider and/or his estate and/or successors.

 

  - 6 -  

 

 

8.7. That stated in this section, including all of its subsections, shall be regarded as a fundamental condition of this Agreement.

 

9. Confidentiality

 

9.1. The Service Provider undertakes to comply with the provisions of any law, including the provisions of the Securities Law, 5728-1968 and/or the Regulations promulgated thereunder in anything relating to information on the business activities of the Company. The Service Provider is aware of the fact that any such information which is not publicly available is the property of the Company. The foregoing shall not apply to any information that is already generally available to the public, provided it has not reached the public domain as a result of an act or omission of the Service Provider and/or anyone on his behalf.

 

9.2. The Service Provider’s undertakings under this section constitute fundamental conditions of this Agreement.

 

10. Miscellaneous

 

10.1. Parties' addresses for the purposes of this Agreement are as follows:

 

10.1.1. The Service Provider - 112 Rokach Street, Ramat Gan.

 

10.1.2. The Company - 5 Kineret Street, Bnei Brak.

 

10.2. Any notice sent by one party to the other party will be deemed to have been received by the addressee within 72 hours after being posted at the post office in a registered letter and if delivered by hand, shall be deemed to have been immediately received.

 

10.3. This Agreement represents the entire agreements and understandings between the parties in relation to the providing of the Services and replaces and revokes any prior agreement and/or understanding.

 

10.4. Any change and/or revocation of any of the provisions hereof may only be made by a writing signed by both parties.

 

10.5. The Service Provider may not endorse or assign to any other person all or any of his rights and/or obligations under this Agreement, unless the Company has given its prior written approval for such.

 

10.6. The Service Provider has no and shall have no right of lien over any documents belonging to the Company, including documents which were prepared by and/or through him or any of the Company’s equipment, which was made available for his use in the course of providing the Services, and he will return any such documents or equipment to the Company upon its first demand, unless such involve a Substantial Default in payment of the Monthly Payment by the Company as set forth in section 7.4 above, and for this purpose, “Substantial Default” means a delay of 60 days following the due day for payment of the Monthly Payment set forth in section 7.4 above, in which case, the right of lien shall be available to the Service Provider. The foregoing shall not derogate from any rights and/or relief available to the Service Provider under any law.

 

  - 7 -  

 

 

10.7. No delay in exercising, or non-exercising, any of the parties’ rights under this Agreement shall be deemed as waiver or preclusion on the part of such party.

 

10.8. This Agreement is governed by the laws of the State of Israel. The parties hereby submit to the exclusive jurisdiction and venue of the competent courts and tribunals in the Tel-Aviv for any disputes arising in connection with this Agreement.

 

In Witness Whereof the Parties have set their
Hand on the Date set forth in the Preamble hereof :

 

/s/ Kfir Silberman   ASIA PITUACH (A.D.B.M.) LTD.
L.I.A. PURE CAPITAL LTD.    
By the authorized Signatory on its behalf   By: /s/ Eli Yoresh
Mr. Kfir Silberman   Name: Eli Yoresh
  Title: CFO

 

 

  - 8 -

 

Exhibit 8.1

 

LIST OF SUBSIDIARIES

 

Company Name   Jurisdiction of Incorporation
     

Foresight Automotive Ltd.

  Israel

Exhibit 15.1

 

Consent of Independent Registered Public Accounting Firm

We consent to the use in this registration statement on Form 20-F of our report dated April 19, 2017, relating to the consolidated financial statements of Foresight Autonomous Holdings Ltd. for the year ended December 31, 2016, and to the reference to our firm under the heading “Auditors” included in Item 1C in this registration statement.

/s/ Brightman Almagor Zohar & Co.
Certified Public Accountants (Israel)
Member firm of Deloitte Touche Tohmatsu Limited
Tel Aviv, Israel
May 11, 2017