As filed with the Securities and Exchange Commission on June 9, 2015

Registration No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

—————————

FORM F-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

—————————

INTEC PHARMA LTD.
(Exact name of Registrant as specified in its charter)

N/A
(Translation of Registrant’s name into English)

—————————

Israel

 

2834

 

Not Applicable

(State or other jurisdiction of
incorporation or organization)

 

(Primary standard industrial
classification code number)

 

(I.R.S. employer
identification number)

12 Hartom Street
Har Hotzvim, Jerusalem 777512, Israel
(+972) (2) 586-4657

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

—————————

Vcorp Agent Services, Inc.
25 Robert Pitt Drive, Suite 204
Monsey, New York 10952
(888) 528-2677
(845) 818-3588 (facsimile)

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

—————————

With copies to:

Robert L. Grossman, Esq.

Joshua M. Samek, Esq.

Greenberg Traurig, P.A.

333 Avenue of the Americas

Miami, FL 33131

(305) 579-0500

(305) 579-0717 (facsimile)

 

Benjamin Waltuch, Esq.
Pearl Cohen Zedek Latzer Baratz
One Azrieli Center, Round Tower

Tel-Aviv 6702101, Israel

+972 (3) 607-3777
+972 (3) 607-3778 (facsimile)

 

Steven M. Skolnick, Esq.

Lowenstein Sandler LLP

1251 Avenue of the Americas

New York, NY 10020

(212) 262-6700

(212) 262-7402 (facsimile)

 

Dr. Shachar Hadar

Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co.

One Azrieli Center, Round Tower

Tel Aviv 6702101, Israel

+972 (3) 607-4479

+972 (3) 607-4566 (facsimile)

—————————

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, please check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered

 

 

Proposed maximum aggregate offering
price (2)(3)

 

 

Amount of
registration fee (3)

Ordinary shares, no par value (1)

 

$  

46,000,000.00

 

$

5,345.20

____________

(1)    Pursuant to Rule 416 under the Securities Act of 1933, as amended, or the Securities Act, the ordinary shares registered hereby also include an indeterminate number of additional ordinary shares as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.

(2)    Includes ordinary shares that the underwriters may purchase solely to cover over-allotments, if any.

(3)    Estimated solely for purposes of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment, which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

SUBJECT TO COMPLETION, DATED JUNE 9, 2015

Ordinary Shares

INTEC PHARMA LTD.

——————————

This is a firm commitment underwritten initial public offering in the United States of Intec Pharma Ltd. We are offering       ordinary shares, no par value.

The expected public offering price of the ordinary shares is between $       and $      per share.

Our ordinary shares currently trade on the Tel Aviv Stock Exchange, or the TASE, under the symbol “INTP.” The last reported sale price of our ordinary shares on the TASE on           , 2015 was NIS      , or $     , per share (based on the exchange rate reported by the Bank of Israel on that date, which was NIS      = $1.00). There currently is no public market for our ordinary shares in the United States. We intend to apply to list our ordinary shares on the NASDAQ Capital Market under the symbol “    .” We make no representation that such application will be approved or that the ordinary shares will trade on such market either now or at any time in the future.

As an emerging growth company, as that term is used in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and, as such, we are eligible for certain reduced public company reporting requirements.

Investing in our ordinary shares involves certain significant risks. See “Risk Factors” beginning on page 14 of this prospectus. You should carefully consider these risk factors, as well as the information contained in this prospectus, before you invest.

Neither the Securities and Exchange Commission, the Israeli Securities Authority nor any other state or foreign regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Per share

 

Total

 

 

 

 

 

Public offering price

 

$

 

 

$

 

Underwriting discounts and commissions (1)

 

$

 

 

$

 

Proceeds to us, before expenses

 

$

 

 

$

 

____________

(1)    We have agreed to reimburse the underwriters for certain expenses as described under “Underwriting” on page 140 of this prospectus.

We have granted the underwriters an option to purchase up to an additional      ordinary shares within 45 days of the date of this prospectus solely to cover over-allotments, if any.

The underwriters expect to deliver the ordinary shares to purchasers on or about      , 2015.

Joint Book-Running Managers

Maxim Group LLC

 

Roth Capital Partners

Prospectus dated           , 2015.

 

TABLE OF CONTENTS

PROSPECTUS SUMMARY

 

1

THE OFFERING

 

10

SUMMARY FINANCIAL DATA

 

12

RISK FACTORS

 

14

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

47

PRICE RANGE OF OUR ORDINARY SHARES

 

48

USE OF PROCEEDS

 

49

DIVIDENDS AND DIVIDEND POLICY

 

50

CAPITALIZATION

 

51

DILUTION

 

53

SELECTED FINANCIAL DATA

 

55

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

 

57

BUSINESS

 

66

MANAGEMENT

 

96

PRINCIPAL SHAREHOLDERS

 

118

RELATED PARTY TRANSACTIONS

 

120

DESCRIPTION OF SHARE CAPITAL

 

121

SHARES ELIGIBLE FOR FUTURE SALE

 

127

TAXATION

 

129

UNDERWRITING

 

140

NOTICE TO INVESTORS

 

143

ENFORCEMENT OF FOREIGN JUDGMENTS

 

145

EXPENSES RELATING TO THIS OFFERING

 

146

LEGAL MATTERS

 

147

EXPERTS

 

147

WHERE YOU CAN FIND MORE INFORMATION

 

147

INDEX TO FINANCIAL STATEMENTS

 

F-1

—————————

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by, or on behalf of, us or to which we have referred you to or otherwise authorized. Neither we nor any of the underwriters have authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the underwriters are offering to sell these securities in any jurisdiction where their offer or sale is not permitted, and this prospectus is not an offer to sell or the solicitation of an offer to buy our ordinary shares in any circumstances under which such offer or solicitation is unlawful. This document may only be used where it is legal to sell these securities. The information in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of this prospectus or when any sale of the ordinary shares occurs. Our business, financial condition, results of operations and prospects may have changed since that date. Neither we nor the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any information other than the information in this prospectus and any free writing prospectus prepared by us or on our behalf. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus.

—————————

Before you invest in our ordinary shares, you should read the registration statement (including the exhibits thereto) of which this prospectus forms a part.

—————————

i

Throughout this prospectus, unless otherwise designated, the terms “we”, “us”, “our”, “Intec”, “the Company” and “our company” refer to Intec Pharma Ltd. References to “ordinary shares” and “share capital” refer to ordinary shares and share capital of Intec.

Market data and certain industry data and forecasts used throughout this prospectus were obtained from market research databases, consultant surveys commissioned by us, publicly available information, reports of governmental agencies and industry publications and surveys. Industry surveys, publications, consultant surveys commissioned by us and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. We have relied on certain data from third-party sources, including internal surveys, industry forecasts and market research, which we believe to be reliable based on our management’s knowledge of the industry. Statements as to our market position are based on the most currently available data. While we are not aware of any misstatements regarding the industry data presented in this prospectus, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Notwithstanding the foregoing, we remain responsible for the accuracy and completeness of the historical information presented in this prospectus, as of the date on the front cover of this prospectus.

Our financial statements are prepared and presented in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. Our historical results do not necessarily indicate our expected results for any future periods.

Unless otherwise indicated, all information contained in this prospectus (i) gives retrospective effect to a one-for-50 reverse split of our ordinary shares, or the Reverse Split, which was effected on March 29, 2015, and (ii) assumes no exercise of the underwriter’s option to purchase up to       additional ordinary shares to cover over-allotments, if any.

We have not taken any action to permit a public offering of the ordinary shares outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ordinary shares and the distribution of this prospectus outside of the United States.

Certain figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Unless derived from our financial statements or otherwise noted, New Israeli Shekel, or NIS, amounts presented in this prospectus are translated at the rate of $1.00 = NIS 3.98, the exchange rate reported by the Bank of Israel as of Marc h 3 1, 2015. Unless otherwise indicated, “U.S. dollar,” “USD” and “$” refer to the United States dollar and “NIS” refers to the N ew Israeli Sh ekel.

TRADEMARK NOTICE

As used in this prospectus, Accordion Pill™ is a registered trademark of ours in Israel, and we are in the process of registering this trademark in the United States. All other brand names, trademarks or service marks of any other person referred to in this prospectus are the property of their respective owners.

ii

PROSPECTUS SUMMARY

This summary highlights selected information presented in greater detail elsewhere in this prospectus. This summary does not include all the information you should consider before investing in the ordinary shares. Before investing in the ordinary shares, you should read this entire prospectus carefully for a more complete understanding of our business and this offering, including our audited and unaudited financial statements and related notes and the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Intec Pharma Ltd.

We are a clinical stage biopharmaceutical company focused on developing drugs based on our proprietary Accordion Pill platform technology, which we refer to as the Accordion Pill. Our Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention, or GR, and specific release mechanism. Our product pipeline currently includes two product candidates in clinical trial stages. Our leading product candidate, Accordion Pill Carbidopa/Levodopa, or AP-CDLD, is indicated for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients. We have successfully completed a Phase II clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and have agreed with the U.S. Food and Drug Administration, or the FDA, on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients. See “Business — Current Regulatory Status of AP-CDLD.” We are preparing to commence a Phase III clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and currently anticipate that such trial will begin in the second half of 2015, assuming the successful completion of this offering. See “Business — Current Regulatory Status of AP-CDLD.” Our second product candidate, Accordion Pill Zaleplon, or AP–ZP, is indicated for the treatment of insomnia, including sleep induction and the improvement of sleep maintenance. We have successfully completed a Phase II clinical trial for AP–ZP for the treatment of insomnia under an Investigational New Drug, or IND, application that we submitted to the FDA on August 10, 2009 for AP–ZP as a treatment for the induction and maintenance of sleep in patients suffering from insomnia. In our correspondence with the FDA, the FDA has previously agreed that an acceptable regulatory pathway for each of AP-CDLD and AP–ZP would be to file a new drug application, or NDA, pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, which is a streamlined approval pathway that may accelerate the time to commercialize and decrease the costs of AP–CDLD and AP–ZP, as compared to those typically associated with a new chemical entity, or NCE. See “Business — Government Regulation — 505(b)(2) Applications.” The FDA also agreed that one pivotal Phase III clinical trial might be sufficient for the NDA submission for AP–ZP.

Our Accordion Pill Platform Technology

We believe that our Accordion Pill technology has the potential to improve the performance of approved drugs and drugs in development, including improving Levodopa, by providing several distinct advantages, including, but not limited to:

      increasing efficacy of the drug incorporated into the Accordion Pill;

      improving safety of the drug incorporated into the Accordion Pill by reducing the side effects of such drugs;

      reducing the number of daily administrations required to achieve the same or superior therapeutic effect as the non-Accordion Pill version of such drugs; and

      expanding the intellectual property protection period of the drug incorporated into the Accordion Pill.

Our anticipated ability to file NDAs pursuant to Section 505(b)(2) for our existing pipeline and future products increases the likelihood of accelerating the time to commercialization of our products and decreasing costs when compared to those typically associated with NCEs.

Our Accordion Pill platform technology is designed to increase the time that drugs are retained in the stomach as compared to other oral dosage forms, such as tablets and capsules. This capability is particularly important to drugs with a narrow absorption window, or NAW, which are absorbed mainly in the upper part of the gastrointestinal, or GI, tract. Regular controlled-release formulations of such drugs currently on the market sometimes fail to provide an efficient solution, as once the regular dosage form has passed the drug’s NAW in the upper GI tract, the drug is not, or is very poorly, absorbed in the distal parts of the GI tract. The Accordion Pill platform technology is also designed for drugs with low solubility, which do not efficiently dissolve in the GI tract, and drugs with low permeability, which do not efficiently penetrate the intestinal wall and reach the blood stream, such

1

as Biopharmaceutics Classification System, or BCS, Class II (low solubility, high permeability) and Class IV (low solubility, low permeability) drugs. According to The AAPS Journal published by the American Association of Pharmaceutical Scientists, of the top 200 oral drugs in the United States, Great Britain, Spain and Japan in 2006, approximately 30% to 35% were BCS Class II drugs and approximately 5% to 10% were BCS Class IV drugs. Further, according to Drug Development & Delivery, in 2006 approximately 90% of NCEs in development were either BCS Class II or Class IV drugs. The Accordion Pill’s efficient GR and specific release mechanism prolongs the absorption phase of drugs with an NAW, which can result in significantly more stable plasma levels. In addition, the Accordion Pill has demonstrated an enhancement of the absorption of a poorly soluble, BCS Class II/IV drug in a crossover pharmacokinetics, or PK, clinical study in 12 healthy volunteers. For poorly soluble drugs, we believe that our technology acts through the gradual delivery of an undissolved drug by the Accordion Pill in the stomach, which allows for the complete dissolution of the drug dose in the stomach over the delivery period. The gradual passage of the drug from the stomach to the upper part of the GI tract enables an increase in the amount of the drug that can be dissolved and thus absorbed, in the upper small bowel. In addition, we believe that bile secretion in the upper part of the GI tract also improves the intestinal environment for better absorption. Finally, the significant dilution of the drug solution in the small bowel caused by prolonged delivery increases the amount of the drug available for absorption.

Our clinical trials to date have demonstrated that the Accordion Pill is retained in the stomach for eight to 12 hours, as compared to significantly shorter time periods, typically as little as two to three hours, when using other solid dosage forms. The efficient GR and the predetermined release profile for each specific drug associated with our Accordion Pill technology demonstrated a significant improvement in PK, which is the drug plasma level over time and a corresponding improvement in efficacy and safety.

Our Accordion Pill technology enables us to combine active pharmaceutical ingredients, or APIs, which are also referred to as drugs, and inactive ingredients that are included in the FDA’s list of approved inactive ingredients, into pharmaceutical-grade, biodegradable polymeric films, welded into a planar structure, folded into the shape of an accordion and placed inside of a capsule. While in the stomach, the capsule dissolves and the Accordion Pill unfolds and releases the drug in a predetermined profile. In order to provide optimum results for each drug, each Accordion Pill drug differs and will likely differ in several ways, including composition, structure and properties.

The diagram below illustrates the general structure of the Accordion Pill:

All of the ingredients in the Accordion Pill (active and inactive) are combined physically, not chemically, thus maintaining the chemical composition of the active ingredients.

The Accordion Pill has a drug release mechanism that is independent of the retention mechanism. It can combine both immediate and controlled release profiles, as well as more than one drug. We have demonstrated that the Accordion Pill has the ability to carry a drug load of up to 550 mg. We have also demonstrated that the Accordion Pill fully degrades in the intestine once it is expelled from the stomach.

2

We have conducted more than 30 clinical trials with more than 3,000 administrations to study the safety and efficacy of the Accordion Pill, including the Accordion Pill platform alone and the Accordion Pill platform with various APIs. No significant adverse events related to the Accordion Pill were reported in these clinical studies. These studies demonstrated that increasing gastro-retention time improves the performance of certain NAW and BCS Class II/IV drugs.

Our Product Pipeline

Our current product development pipeline includes two products in clinical trial stages. Our leading pipeline product, AP-CDLD, is focused on leveraging our Accordion Pill technology to improve the efficacy and safety of an approved drug for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients . We have agreed with the FDA on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients, which we anticipate initiating in the second half of 2015, assuming the successful completion of this offering. Our second product, AP–ZP, is for the treatment of insomnia. We are currently seeking a potential strategic partner for further clinical development and commercialization of AP–ZP and our future development plans for AP–ZP will depend on the results of this process. We have an exclusive license from Yissum, an affiliate of The Hebrew University of Jerusalem, for developing, manufacturing and global marketing of products based on the core technology used in the Accordion Pill.

AP-CDLD

AP-CDLD is an Accordion Pill that contains the generic drugs Carbidopa and Levodopa, which are currently approved for the treatment of Parkinson’s disease symptoms. We achieved our primary endpoints in our Phase II clinical trial of AP-CDLD, and the FDA has permitted us to initiate a Phase III clinical trial of AP-CDLD. On May 5, 2015, we held an end of Phase II meeting with the FDA, for which we have received the FDA’s memorandum of minutes, to discuss the clinical development program for AP-CDLD. We agreed with the FDA on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , including the main principles of the single required pivotal Phase III clinical trial in advanced Par kinson’s dise ase patients, which will be as follows:

      A multicenter, randomized, double-blind, double-dummy, parallel, active-controlled trial, comparing the efficacy and safety of AP-CDLD to Sinemet IR, an immediate release CDLD, which is a conventional Levodopa medication for the treatment of Parkinson’s disease symptoms that is currently on the market.

      Approximately 460 advanced Parkinson’s disease patients will be enrolled into the trial.

3

      The total treatment period for each patient will be 25 weeks, composed of:

Six weeks open-label titration on Sinemet IR (all patients);

Six weeks open-label titration on two AP-CDLD strengths, given b.i.d. or t.i.d. (all patients); and

13 weeks double-blind, double-dummy active comparator period, in which half of the patients will be randomized to AP-CDLD and half of the patients will be randomized to Sinemet IR.

      The primary efficacy endpoint will be a change from baseline to termination of treatment in the percent of daily off time during waking hours based on Hauser home diaries.

In addition, we will be required to submit evidence of the adequate safety experience of 100 patients receiving AP-CDLD for one year, with at least 50% receiving the highest proposed dose of AP-CDLD, as is required for drugs intended for long-term treatment of non-life-threatening conditions. We intend to collect this safety data, fully or partially, from an open label extension of the Phase III study of AP-CDLD.

We also agreed, at the FDA’s request, to conduct an additional bioavailability study to compare the PK between Sinemet IR and the to-be-marketed formulation of AP-CDLD because the formulation of AP-CDLD has changed from our previously completed comparative bioavailability study. We currently intend to conduct this study during 2016. The FDA also strongly suggested that we conduct additional dissolution testing and we anticipate doing so.

AP-CDLD is designed to provide a combination of immediate release and a continuous release of Levodopa, in the stomach, in proximity to its absorption site through our Accordion Pill. AP-CDLD is designed to provide stable Levodopa plasma therapeutic levels, resulting in reduced total off time, or debilitating periods of decreased motor and non-motor functions, while reducing or avoiding inducement of troublesome dyskinesia, or movement disorders. The stable therapeutic levels of Levodopa in a patient’s plasma provided by AP-CDLD are intended to significantly reduce the motor complications because the motor complications which are associated with Levodopa treatment are strongly correlated with the drug’s peripheral PK profile. More specifically, AP-CDLD is intended to reduce total off time while not increasing, or even reducing, troublesome dyskinesia.

We anticipate that AP-CDLD will be available in three dosages of Levodopa (250 mg, 400 mg and 500 mg), each provided in two release profiles (immediate release and controlled release), along with 50 mg of Carbidopa that is included in AP-CDLD. This array of dosages is designed to cover Parkinson’s disease patients in various stages of the disease. AP-CDLD is designed to be taken twice daily, or b.i.d.

AP–ZP

AP-ZP is an Accordion Pill that contains the generic drug Zaleplon, which is currently approved for the treatment of insomnia. AP–ZP is designed, using our patented Accordion Pill technology, to maintain the drug in the stomach and continuously release the drug during the night in order to maintain sleep and minimize “next-day” residual side effects. Due to the short half-life of Zaleplon, minimal hangover effects are expected, improving on certain leading currently marketed treatments. However, as noted below, the FDA will require the labeling for AP–ZP to carry the required “next-day” warning relating to potential residual side effects, such as impairment of activities that require alertness. AP–ZP is an Accordion Pill that contains 25 mg to 35 mg of the generic drug Zaleplon, with combined immediate and controlled release profiles. We achieved our primary endpoints in our Phase II clinical trial of AP–ZP, and we recently had discussions with the FDA regarding further clinical development. See “Business — Current Regulatory Status of AP–ZP.”

Other Studies

We have also completed other studies, including a PK clinical study that we performed in collaboration with a global pharmaceutical company using a BCS Class II/IV drug that is currently available on the market, which demonstrated approximately a 100% increase in bioavailability with our Accordion Pill technology as compared to the commercial formulation of the drug, and a Phase I clinical trial for an Accordion Pill using the drug Baclofen, which is indicated for the treatment of spasticity. Due to changes in the projected market for Baclofen, we have no current plans to further develop or commercialize our Accordion Pill Baclofen. See “Business — Our Accordion Pill Platform Technology” and “Business — Accordion Pill Baclofen” for a more detailed discussion of these studies.

4

New Product Development for Global Pharmaceutical Company

On April 15, 2015, we entered into an agreement for the development of a designated Accordion Pill with a marketed, proprietary drug of a global pharmaceutical company, which, to our knowledge, is one of the world’s 20 largest pharmaceutical companies in terms of market capitalization. Pursuant to the agreement, we will conduct activities for the development of the designated Accordion Pill pursuant to an agreed upon research plan, which will be funded by the global pharmaceutical company, subject to the achievement of certain research plan milestones. We granted the global pharmaceutical company an option to obtain an exclusive, worldwide, royalty bearing license to our technology, as implemented in the product being developed, for the current approved indication of its proprietary drug. Pursuant to the agreement and to the extent we are not otherwise precluded from doing so, at the request of the global pharmaceutical company, we will negotiate in good faith the expansion of the license field for additional indications, and the terms and conditions thereof. Upon exercise of the option, the global pharmaceutical company will be responsible for, and bear all costs associated with, pre-clinical and clinical activities required for the purpose of obtaining regulatory approval for the product being developed, as well as for the manufacturing and commercialization thereof. The global pharmaceutical company has also agreed to consider in good faith engaging us as a manufacturer of commercial supply of the product being developed.

Pursuant to the agreement, we will be entitled to the following payments:

      $250,000 within 15 days from the execution of the agreement, for funding the research plan, and an additional aggregate amount of up to $670,000 for the achievement of research plan milestones;

      $8,000,000 in consideration for the exercise of the option;

      Several payments in an aggregate amount of $39 million upon the achievement of milestones related to the development of the product, regulatory filings for the purpose of obtaining regulatory approvals and reaching first commercial sales in the United States and Europe; and

      Royalties in a low single-digit rate on net sales, provided that the aggregate annual royalties will not exceed $25 mill ion and the aggregate amount of royalties payable under the agreement will not exceed $100 million.

The agreement further includes provisions with respect to regulatory collaboration, confidentiality, title and maintenance of intellectual property owned by the parties and developed under the agreement, liability, indemnification and insurance. Pursuant to the agreement, our know-how and intellectual property existing as of the date of the agreement and new know-how and intellectual property developed by the parties under the agreement in connection with the Accordion Pill, which is not specifically related to the product being developed, will be owned by us and may be used by us for products and for purposes of additional collaborations, subject to the limits of the license.

Our Competitive Strengths

We believe our principal competitive strengths include the following:

      A leading product candidate, AP-CDLD, for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , which has received permission from the FDA to initiate a Phase III clinical trial that is expected to commence in 2015 . AP-CDLD, our leading product candidate, for the treatment of Parkinson’s disease symptoms  in advanced Parkinson’s disease patients, has received permission from the FDA to initiate a Phase III clinical trial. We anticipate initiating our Phase III clinical trial of AP-CDLD in the second half of 2015, assuming the successful completion of this offering. The European Parkinson’s Disease Association, or EPDA, estimated in 2007 that 6.3 million people worldwide suffer from Parkinson’s disease, and a 2014 report by Global Data estimated that the pharmaceutical market for Parkinson’s disease will reach $5.2 billion in the United States, Japan, France, Germany, Italy, Spain and the United Kingdom, or the Seven Major Markets, plus Brazil by 2022.

      Innovative and leverageable platform technology that enables us to develop multiple products and to provide substantial benefits for various classes of drugs with large potential markets.  Our platform enables us to develop and produce multiple products for diverse markets, including our leading product – AP-CDLD. Our platform includes our proprietary technology and know-how, with which we have developed the Accordion Pill, including its independent drug release and GR mechanisms, and have combined various drugs with the Accordion Pill. Our platform technology can combine immediate and controlled release drug profiles and more than one drug and can incorporate drugs of various chemical and physical characteristics. Our Accordion Pill has improved PK and efficacy in clinical studies

5

via its combination with various drugs belonging to different drug classes such as NAW and poorly soluble drugs (BC S Class II/IV).

      Lower development risks and costs for our pipeline products . We believe that developing Accordion Pills for additional drug candidates will be associated with reduced costs and regulatory risks compared to the development of NCEs and will allow us to develop our products in a cost-effective manner. The FDA has previously agreed that our two pipeline products in clinical trial stages would likely be eligible to file under Section 505(b)(2), assuming the successful completion of their respective Phase III clinical trials.

      No “special diet” requirements when using our Accordion Pill products . In our clinical trials, our Accordion Pill products provided better PK and efficacy of the drugs with which it was combined through prolonged GR under a regular calorie diet and did not require administration with a high calorie and high fat meal, which is a prerequisite for the administration of approved GR products currently on the market. This is highly important in the treatment of various diseases.

      Strong intellectual property protection . We believe that we have a strong intellectual property portfolio protecting our platform, combination of specific drugs with our platform and manufacturing and production processes. See “Business — Intellectual Property.”

      Proven manufacturing capabilities for clinical batches of our Accordion Pill platform technology . We have proven manufacturing capacity of clinical batches of our platform technology in our compliant GMP facility. See “Business — Manufacturing.”

Our Business Strategy

We plan to leverage our Accordion Pill technology platform to become a leading specialty pharmaceutical company focused on developing, manufacturing and commercializing improved proprietary versions of approved and development stage drugs for the treatment of various diseases.

We will continue to develop our existing product candidates while reviewing other drug candidates that may also benefit from our platform technology. We seek to create global partnerships to assist us in the development and marketing of our products and may also independently commercialize certain products in the U.S. We believe that our approach will allow us to continue to advance our current product candidates and should allow us to avoid dependency on a small number of drugs.

Using this approach, we have advanced our product candidates into various stages of clinical development. Specific elements of our current strategy include the following:

      Continue to advance our current pipeline by developing improved versions of drugs with reduced side effects and that enhance the efficacy of existing drugs . We expect that our products will offer significant advantages over the original versions of the drugs. Results from our completed Phase II clinical trial demonstrate that AP-CDLD can improve motor function in patients suffering off time episodes. We are pursuing the development and approval of AP-CDLD under the Section 505(b)(2) pathway, which allows an abbreviated path to approval relying on a single pivotal Phase III clinical trial. We anticipate initiating our pivotal Phase III clinical trial of AP-CDLD in the second half of 2015. If our pivotal Phase III clinical trial is successful, we intend to file for regulatory approval in the United States.

      Utilize the 505(b)(2) regulatory pathway to leverage extensive existing clinical and regulatory experience with the original drugs and bring our improved versions of these drugs to market more quickly . An NDA submitted under Section 505(b)(2) of the FDCA is permitted to reference safety and effectiveness data submitted by the original manufacturer of the underlying approved drug as part of its NDA, be based on the FDA’s prior conclusions regarding the safety and effectiveness of that previously approved drug, or rely on in part on data in the public domain. Reliance on data collected by others may expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate to submit an NDA. As the FDA has previously agreed that our two current pipeline products in clinical trial stages would likely be eligible to file under Section 505 (b)(2), assuming the successful completion of the Phase III clinical trials, we believe that there is a strong likelihood that our future products would similarly qualify. The factors related to this qualification are expected to reduce the time and costs associated with clinical trials when compared to a traditional NDA for an NCE. We also believe the strategy of targeting drugs with proven safety and efficacy provides a better prospect of clinical success of our proprietary

6

development portfolio as compared to de novo drug development. We estimate that the average time to market and cost of clinical trials for our products could be less than that required to develop a new drug.

      Use our expertise with our platform technology to evaluate drug development and commercialization opportunities . We continuously seek attractive product candidates to develop and commercialize. We intend to focus on product candidates that we believe would be synergistic with our Accordion Pill technology. We intend to use our expertise in our technology and our pharmacological expertise to grow our product candidate portfolio.

      Seek attractive partnership opportunities . We believe that our Accordion Pill technology can be applied to many drugs that have already been approved by the FDA, as well as developmental stage drugs. We believe that the proprietary rights provided by our Accordion Pill technology, together with the clinical and compliance benefits, will be attractive to potential partners. We will seek to build a portfolio of commercially attractive partnerships in a blend of co-developments and licenses. Where possible, we will seek partnerships that allow us to participate significantly in the commercial success of each of the drugs. Although we are currently developing most of our current pipeline, we are looking to partner with the owners of rights to patented drugs in order to develop Accordion Pill versions of those drugs, and we may seek strategic partners to market our Accordion Pill products worldwide. We may also seek arrangements with third parties to assist in the development and commercialization of our products. These arrangements will allow us to share the high development cost, minimize the risk of failure and enjoy our partners’ marketing capabilities, while also enabling us to treat a more significant number of patients.

      Develop products that target significant commercial opportunities . Our existing product candidates are directed at diseases that have major global markets. Our intent is to continue to develop products that present significant market opportunities by leveraging our According Pill technology.

      Maintain a prominent intellectual property position . We believe our licensed and proprietary patents and patent applications provide and will provide broad and comprehensive coverage for the use of our Accordion Pill technology for the treatment of certain diseases, focusing on BCS Class II/IV and NAW drugs, or drugs where longer retention in the upper GI could improve efficacy and absorption and reduce side effects. We seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that we believe are important to the development of our business. We also rely on know-how and continuing technological innovation to develop and maintain our proprietary position. We have submitted and intend to continue to submit patent applications for various Accordion Pill and drug combinations that we develop.

Risk Factors

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary. You should read and carefully consider these risks and all of the other information in this prospectus, including the financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in our ordinary shares. If any of the risks discussed in this prospectus actually occur, our business, financial condition, operating results or cash flows could be materially adversely affected. The following is a summary of some of the principal risks we face:

      We are a clinical stage biopharmaceutical company with a history of operating losses, are not currently profitable, do not expect to become profitable in the near future and may never become profitable.

      Because of our limited operating history, we may not be able to successfully operate our business or execute our business plan.

      We face continuous technological change, and developments by competitors may render our products or technologies obsolete or non-competitive. If our new or existing product candidates are rendered obsolete or non-competitive, our marketing and sales will suffer and we may never be profitable.

      We license our core technology on an exclusive basis from Yissum (Hebrew University), and we could lose our rights to this license if a dispute with Yissum arises or if we fail to comply with the financial and other terms of the license.

      If we fail to adequately protect, enforce or secure rights to the patents which were licensed to us or any patents we may own in the future, the value of our intellectual property rights would diminish and our business and competitive position would suffer.

7

      Our product candidates are at various stages of preclinical and clinical development and may never be commercialized.

      We cannot be certain that the results of our potential Phase III clinical trials, even if all endpoints are met, will support regulatory approval of any of our product candidates for any indication.

      Our product candidates are subject to extensive regulation and are at various stages of regulatory development and may never obtain regulatory approval.

      We are subject to anti-kickback laws and regulations. Our failure to comply with these laws and regulations could have adverse consequences to us.

      Potential political, economic and military instability in the State of Israel, where our senior management, our head executive office, research and development, and manufacturing facilities are located, may adversely affect our results of operations.

      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 be negatively impacted.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company,” as defined in the JOBS Act. For as long as we are deemed an emerging growth company, we may take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies. These provisions include:

      an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002;

      an exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

      an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board, or the PCAOB, requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements; and

      reduced disclosure about our executive compensation arrangements.

We will continue to be deemed an emerging growth company until the earliest of:

      the last day of our fiscal year in which we have total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every five years by the Securities and Exchange Commission, or the SEC, to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest $1,000,000) or more;

      the last day of our fiscal year 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 of 1933, as amended, or the Securities Act;

      the date on which we have, during the prior three-year period, issued more than $1,000,000,000 in non-convertible debt; or

      the date on which we are deemed to be a “large accelerated filer,” as defined in Regulation S-K under the Securities Act.

8

Our Corporate Information

We were incorporated in Israel in 2000 as an Israeli privately held company. In February 2010, we completed an initial public offering in Israel of our ordinary shares on the TASE.

Our principal executive offices are located at 12 Hartom Street, Har Hotzvim, Jerusalem 91450, Israel, and our telephone number is (+972) (2) 586-4657. Our website is www.intecpharma.com. Information contained on, or accessible through, our website is not incorporated by reference herein and shall not be considered part of this prospectus. Our agent for service of process in the United States is Puglisi & Associates, whose address is 850 Library Avenue, Suite 204, Newark, Delaware 19711 and whose telephone number is (302) 738-6680.

Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act of 1934, as amended, or the Exchange Act, that are applicable to “foreign private issuers,” and under those requirements we will file reports with the SEC. Those other reports, or other information, may be inspected without charge at the locations described above. As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, we will not be required under the Exchange Act to file annual or other reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Instead, we will file with the SEC, within 120 days after the end of each fiscal year, or such other 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. We also intend to furnish certain other material information to the SEC under cover of Form 6-K.

9

THE OFFERING

Ordinary shares offered

 

 

 

 

 

Ordinary shares outstanding before this offering

 

 

 

 

 

Ordinary shares outstanding immediately after this offering

 

     ordinary shares (or      ordinary shares if the underwriters exercise their over-allotment option in full).

 

 

 

Offering price

 

We estimate that the initial public offering price will be between $     and $     per ordinary share. The offering price will be determined by reference to the closing price of our ordinary shares on the Tel Aviv Stock Exchange, or the TASE, on the pricing date after taking into account prevailing market conditions and through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. On     , 2015, the last reported sale price of our ordinary shares was New Israeli Shekel, or NIS,     , or $    , per share (based on the exchange rate reported by the Bank of Israel for such date).

 

 

 

Over-allotment option

 

The underwriters have an option to purchase up to an additional      ordinary shares within 45 days of the date of this prospectus solely to cover over-allotments, if any.

 

 

 

Use of proceeds

 

We estimate that the net proceeds to us from this offering will be approximately $     million (or $     million if the underwriters exercise their over-allotment option in full), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds to fund our Phase III clinical trial for AP-CDLD and for working capital, capital expenditures and other general corporate purposes. See “Use of Proceeds.”

 

 

 

Listing

 

We intend to apply for the listing of our ordinary shares issued in this offering on the NASDAQ Capital Market under the symbol “    .”

 

 

 

Risk factors

 

See “Risk Factors” beginning on page 14 for a discussion of certain important risks you should carefully consider before deciding to invest in our ordinary shares.

The number of ordinary shares to be outstanding immediately after this offering is based on 5,609,310 ordinary shares outstanding as of May 15, 2015. This number excludes:

      the 819,662 ordinary shares that we have reserved for issuance upon the exercise of outstanding options under the Intec Pharma Ltd. 2005 Share Option Plan, or the 2005 Plan, and 8,035 options issued outside of the 2005 Plan, as of M ay 15 , 2015 at a weighted average exercise price of NIS 41.13 per share and that expire between 2016 and 2021;

      the 80,166 ordinary shares issuable upon exercise of 80,166 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on October 22, 2016; and

      the 198,812 ordinary shares issuable upon exercise of 198,812 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on September 17, 2017.

10

Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

      the Reverse Split;

      an initial public offering price of $     per ordinary share, which is the mid-point of the price range on the cover of this prospectus;

      no anti-dilution adjustments are triggered with respect to the ordinary shares and warrants issued pursuant to an investment agreement that we entered into in connection with our August 2013 financing round; for more information on the potential anti-dilution adjustments with respect to these shares and warrants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Financial derivatives instrument”; and

      no exercise of the underwriters’ over-allotment option.

11

SUMMARY FINANCIAL DATA

The following tables summarize our financial data. We have derived the summary statements of comprehensive loss data for the years ended 2013 and 2014 and the statements of financial position as of December 31, 2013 and 2014 from our audited financial statements included elsewhere in this prospectus. The summary financial statement data as of March 31, 2015 and for the three months ended March 31, 2014 and 2015 are derived from our unaudited interim financial statements that are included elsewhere in this prospectus.  In the opinion of management, these unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position and operating results for these periods.  Results from interim periods are not necessarily indicative of results that may be expected for the entire year. Our historical results are not necessarily indicative of the results that may be expected in the future. The following summary financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

 

Year ended December 31,

 

Three months ended March 31,

 

 

2013

 

2014

 

2014

 

2014

 

2015

 

2015

 

 

NIS in thousands

 

Convenience translation
into USD
in thousands

 

NIS in thousands

 

Convenience translation
into USD
in thousands

Statements of comprehensive loss data: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

17,410

 

 

17,740

 

 

4,457

 

 

5,149

 

 

5,593

 

 

1,405

 

Less-participation in research and development expenses

 

(8,393

)

 

(5,544

)

 

(1,393

)

 

(1,707

)

 

(135

)

 

(34

)

Research and development expenses, net

 

9,017

 

 

12,196

 

 

3,064

 

 

3,442

 

 

5,458

 

 

1,371

 

General and administrative expenses

 

9,633

 

 

9,332

 

 

2,345

 

 

2,124

 

 

2,412

 

 

606

 

Other gains, net

 

(474

)

 

(836

)

 

(210

)

 

(275

)

 

(91

)

 

(22

)

Operating loss

 

18,176

 

 

20,692

 

 

5,199

 

 

5,291

 

 

7,779

 

 

1,955

 

Financial income

 

(434

)

 

(1,136

)

 

(285

)

 

(482

)

 

(596

)

 

(150

)

Financial expenses

 

648

 

 

812

 

 

204

 

 

28

 

 

336

 

 

84

 

Financial expenses (income), net

 

214

 

 

(324

)

 

(81

)

 

(454

)

 

(260

)

 

(66

)

Loss and comprehensive loss

 

18,390

 

 

20,368

 

 

5,118

 

 

4,837

 

 

7,519

 

 

1,889

 

 

 

 

NIS

 

USD

 

NIS

 

USD

Basic and diluted loss per ordinary share

 

4.25

 

4.22

 

1.06

 

1.05

 

1.39

 

0.35

Number of ordinary shares used in computing loss per ordinary share
(in tho usands)

 

4,322

 

4,825

 

4,825

 

4,596

 

5,400

 

5,400

 

 

 

December 31,

 

December 31,

 

March 31,

 

March 31,

 

 

2013

 

2014

 

2014

 

2014 – Pro Forma (2)

 

2015

 

2015

 

2015 – Pro Forma (2)

 

 

NIS in thousands

 

Convenience translation into USD in thousands

 

NIS in thousands

 

Convenience translation into USD
in thousands

 

NIS in thousands

 

Convenience
translation
into USD
in thousands

 

NIS in thousands

 

Convenience
translation
into USD
in thousands

Statement of financial position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

11,763

 

22,287

 

5,599

 

 

 

 

 

12,674

 

3,184

 

 

 

 

Financial assets at fair value through profit or loss

 

17,887

 

7,820

 

1,965

 

 

 

 

 

8,038

 

2,020

 

 

 

 

Other receivables

 

2,583

 

1,120

 

282

 

 

 

 

 

1,550

 

389

 

 

 

 

Restricted bank deposits

 

260

 

292

 

73

 

 

 

 

 

287

 

72

 

 

 

 

Property and equipment

 

14,991

 

17,101

 

4,297

 

 

 

 

 

17,002

 

4,272

 

 

 

 

Total assets

 

47,484

 

48,620

 

12,216

 

 

 

 

 

39,551

 

9,937

 

 

 

 

Accounts payable and accruals

 

4,923

 

7,219

 

1,814

 

 

 

 

 

5,605

 

1,408

 

 

 

 

Derivative financial instruments

 

10,298

 

4,528

 

1,138

 

 

 

 

 

4,227

 

1,062

 

 

 

 

Total liabilities

 

15,221

 

11,747

 

2,952

 

 

 

 

 

9,832

 

2,470

 

 

 

 

Total equity

 

32,263

 

36,873

 

9,264

 

 

 

 

 

29,719

 

7,467

 

 

 

 

____________

(1)    Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.

12

(2)    The unaudited pro forma column in the balance sheet data above gives effect to the sale of      ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us, as if the sale had occurred on March 31, 2015.

We prepare our financial statements in NIS. This prospectus contains conversions of NIS amounts into U.S. dollars at specific rates solely for the convenience of the reader. Unless otherwise noted, for the purposes of annual financial data, all conversions from NIS to U.S. dollars and from U.S. dollars to NIS were made at a rate of 3.98 NIS to $1.00 U.S. dollar, the daily representative rate in effect as of March 31, 2015. No representation is made that the NIS amounts referred to in this prospectus could have been or could be converted into U.S. dollars at any particular rate or at all.

As of May 15, 2015, the daily representative rate of NIS per U.S. dollars was 3.825. The following table sets forth information regarding the exchange rates of NIS per U.S. dollars for the periods indicated. Average rates are calculated by using the daily representative rates as reported by the Bank of Israel on the last day of each month during the periods presented.

 

 

NIS per U.S. $

Year Ended December 31,

 

High

 

Low

 

Average

 

Period End

2014

 

3.994

 

3.402

 

3.577

 

3.889

2013

 

3.791

 

3.471

 

3.609

 

3.471

 

 

 

NIS per U.S. $

Month Ended

 

High

 

Low

 

Average

 

Period End

May 2015

 

3.89

 

3.819

 

3.862

 

3.876

April 2015

 

4.014

 

3.861

 

3.938

 

3.861

March 2015

 

4.053

 

3.926

 

3.998

 

3.980

February 2015

 

3.966

 

3.844

 

3.893

 

3.966

January 2015

 

3.998

 

3.899

 

3.946

 

3.924

December 2014

 

3.994

 

3.889

 

3.935

 

3.889

13

RISK FACTORS

An investment in our securities involves a high degree of risk. We operate in a dynamic and rapidly changing industry that involves numerous risks and uncertainties. You should carefully consider the factors described below, together with all of the other information contained in this prospectus, including the audited and unaudited financial statements and the related notes included elsewhere in this prospectus, before deciding whether to invest in our ordinary shares. If any of the risks discussed below actually occur, our business, financial condition, operating results and cash flows could be materially adversely affected. The risks described below are not the only risks facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. This could cause the trading price of our ordinary shares to decline, and you may lose all or part of your investment.

Risks Related to Our Company and Its Business

We are a clinical stage biopharmaceutical company with a history of operating losses, are not currently profitable, do not expect to become profitable in the near future and may never become profitable.

We are a clinical stage biopharmaceutical company that was incorporated in 2000. Since our incorporation, we have primarily focused our efforts on research and development and clinical trials. Our two most advanced therapeutic candidates are in clinical trials. We are not profitable and have incurred losses since inception, principally as a result of research and development, clinical trials and general administrative expenses in support of our operations. We have not generated any revenue, expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to incur significant operating and capital expenditures and anticipate that our expenses and losses will increase substantially in the foreseeable future as we:

      initiate and manage preclinical development and clinical trials for our current and any new product candidates;

      prepare NDAs for our product candidates, assuming that the clinical trial data support an NDA;

      seek regulatory approvals for our current product candidates, or future product candidates, if any;

      implement internal systems and infrastructure;

      seek to in-license additional technologies for development, if any;

      hire additional management and other personnel; and

      move towards commercialization of our product candidates and future product candidates, if any.

We may out-license our ability to generate revenue from one or more of our product candidates, depending on a number of factors, including our ability to:

      obtain favorable results from and progress the clinical development of our product candidates;

      develop and obtain regulatory approvals in the countries and for the uses we intend to pursue for our product candidates;

      subject to successful completion of registration, clinical trials and perhaps additional clinical trials of any product candidate, apply for and obtain marketing approval in the countries we intend to pursue for such product candidate; and

      contract for the manufacture of commercial quantities of our product candidates at acceptable cost levels, subject to the receipt of marketing approval.

For the years ended December 31, 2013 and 2014 and for the three month period ended March 31, 2015, we had net losses of NIS 18.4 million, NIS 20.4 million and NI S 7.5 million, respectively, and we expect such losses to continue for the foreseeable future. In addition, as of March 31, 2015, we had an accumulated deficit of approximately NIS 174 million, and we expect to experience negative cash flow for the foreseeable future. As a result, we will ultimately need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. If our product candidates fail in clinical trials or do not gain regulatory clearance or approval, or if our product

14

candidates do not achieve market acceptance, we may never become profitable. Our failure to achieve or maintain profitability, or substantial delays in achieving profitability, could negatively impact the value of our ordinary shares and our ability to raise additional financing. A substantial decline in the value of our ordinary shares would also affect the price at which we could sell shares to secure future funding, which could dilute the ownership interest of current shareholders.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate our business prospects. Moreover, our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company in highly regulated and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of our products are uncertain. There can be no assurance that our efforts will ultimately be successful or result in revenues or profits.

Because of our limited operating history, we may not be able to successfully operate our business or execute our business plan.

We have a limited operating history upon which to evaluate our proposed business and prospects. Our proposed business operations will be subject to numerous risks, uncertainties, expenses and difficulties associated with early-stage enterprises. Such risks include, but are not limited to, the following:

      the absence of a lengthy operating history;

      insufficient capital to fully realize our operating plan;

      our ability to obtain FDA approvals in a timely manner, if ever, or that the approved label indications are sufficiently broad to make sale of the products commercially feasible;

      expected continual losses for the foreseeable future;

      operating in an environment that is highly regulated by a number of agencies;

      operating in multiple currencies;

      social and political unrest;

      our ability to anticipate and adapt to a developing market(s);

      acceptance of the Accordion Pill by the medical community and consumers;

      limited marketing experience;

      a competitive environment characterized by well-established and well-capitalized competitors;

      the ability to identify, attract and retain qualified personnel; and

      reliance on key personnel.

Because we are subject to these risks, evaluating our business may be difficult, our business strategy may be unsuccessful and we may be unable to address such risks in a cost-effective manner, if at all. If we are unable to successfully address these risks our business will be harmed.

We have not yet commercialized any products or technologies, and we may never become profitable.

We have not yet commercialized any products or technologies, and we may never be able to do so. We do not know when or if we will complete any of our product development efforts, obtain regulatory approval for any product candidates incorporating our technologies or successfully commercialize any approved products. We are currently seeking a potential strategic partner for further clinical development and commercialization of AP–ZP. If we are not able to enter into a relationship with a strategic partner for further clinical development and commercialization of AP–ZP, we may not be able to obtain sufficient capital to independently develop and commercialize AP–ZP. Even if we are successful in developing products that are approved for marketing, we will not be successful unless these products gain market acceptance for appropriate indications at favorable

15

reimbursement rates. The degree of market acceptance of these products will depend on a number of factors, including, but not limited to:

      the timing of regulatory approvals in the countries, and for the uses, we intend to pursue with respect to the commercialization of our product candidates;

      the competitive environment;

      the establishment and demonstration in, and acceptance by, the medical community of the safety and clinical efficacy of our products and their potential advantages over other therapeutic products;

      our ability to enter into strategic agreements with pharmaceutical and biotechnology companies with strong marketing and sales capabilities;

      the adequacy and success of distribution, sales and marketing efforts;

      the establishment of external, and potentially, internal, sales and marketing capabilities to effectively market and sell our product candidates in the United States and other countries; and

      the pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations and other plan administrators.

Physicians, patients, third-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in the case of third-party payors, cover payment for, any of our current or future products or products incorporating our technologies. As a result, we are unable to predict the extent of future losses or the time required to achieve profitability, if at all. Even if we successfully develop one or more products that incorporate our technologies, we may not become profitable.

Our business is currently in the research and development stage, and we have not yet generated revenues from our operations.

Our business is currently in the research and development stage, and we have not yet generated revenues from our operations. Our financial statements include a note describing our current operations and the incurrence of future losses from our research and development activities. As of March 31, 2015, we had incurred cumulative losses of approximately NIS 174 million. We have no current source of revenue to sustain our present activities, and we do not expect to generate revenue until, and unless, the FDA or other regulatory authorities approve one of our product candidates and/or we successfully commercialize (including out-licensing) such product candidate. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations. If we are unsuccessful in raising capital, we may need to curtail or cease operations.

If we are unable to establish sales, marketing and distribution capabilities, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales and marketing organization.

In the future, we may consider building a focused sales and marketing infrastructure to market AP-CDLD and, potentially, other product candidates in the United States, if and when they are approved. There are risks involved with establishing our own sales, marketing and distribution capabilities. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.

Factors that may inhibit our efforts to commercialize our products on our own include:

      our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

      the inability of sales personnel to obtain access to physicians;

16

      the lack of adequate numbers of physicians to prescribe any future products;

      the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and

      unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we are unable to establish our own sales, marketing and distribution capabilities and enter into arrangements with third parties to perform these services, our product revenues and our profitability, if any, are likely to be lower than if we were to market, sell and distribute any products that we develop ourselves.

In addition, we may not be successful in entering into arrangements with third parties to sell, market and distribute our product candidates outside of the United States or may be unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively. If we do not establish sales, marketing and distribution capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

The members of our management team are important to the efficient and effective operation of our business, and we may need to add and retain additional leading experts. Failure to retain our management team and add additional leading experts could have a material adverse effect on our business, financial condition or results of operations.

Our executive officers and our management team are important to the efficient and effective operation of our business. Our failure to retain our management personnel that have developed much of the technology we utilize today, or any other key management personnel, could have a material adverse effect on our future operations. Our success is also dependent on our ability to attract, retain and motivate highly-trained technical and management personnel, among others, to continue the development and commercialization of our current and future products.

As such, our future success highly depends on our ability to attract, retain and motivate personnel required for the development, maintenance and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional qualified personnel. The loss of personnel or the inability to hire and retain additional qualified personnel in the future could have a material adverse effect on our business, financial condition and results of operation.

We face significant competition. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.

We will compete against fully-integrated pharmaceutical and biotechnology companies and smaller companies that are collaborating with pharmaceutical companies, academic institutions, government agencies and other public and private research organizations. In addition, many of these competitors, either alone or together with their collaborative partners, operate larger research and development programs than we do, and have substantially greater financial resources than we do, as well as significantly greater experience in:

      developing drugs;

      undertaking preclinical testing and human clinical trials;

      obtaining FDA approvals and addressing various regulatory matters and obtaining other regulatory approvals of drugs;

      formulating and manufacturing drugs; and

      launching, marketing and selling drugs.

Our competitors currently include companies with marketed products and/or an advanced research and development pipeline. The competitive landscape in the Parkinson’s disease drug delivery field includes Novartis AG, Orion Corporation, Solvay Pharmaceuticals, Impax Laboratories, Inc., XenoPort Inc., Teva Pharmaceuticals, Depomed, Inc., and more. The competitive landscape in the insomnia drug delivery field includes Sanofi S.A., Sepracor Inc. (now known as Sunovion Pharmaceuticals Inc.), King Pharmaceuticals, Merck, Somnus Therapeutics, Inc., Neurim Pharmaceuticals, Ltd., and more. The competitive landscape in the gastric retention system field includes Depomed, Inc., Merrion Pharmaceuticals, Flamel Technologies S.A.,

17

XenoPort Inc., and more. Management is not aware of any companies that are developing or planning to develop a drug delivery system similar to our Accordion Pill platform technology.

We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits, which may result in substantial losses.

Any of our product candidates could cause adverse events, including injury, disease or adverse side effects. These adverse events may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may render our product candidates ineffective or harmful in some patients, and our sales would suffer, materially adversely affecting our business, financial condition and results of operations.

In addition, potential adverse events caused by our product candidates could lead to product liability lawsuits. If product liability lawsuits are successfully brought against us, we may incur substantial liabilities and may be required to limit the marketing and commercialization of our product candidates. Our business exposes us to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product liability claims. Product liability insurance for the pharmaceutical and biotechnology industries is generally expensive, if available at all. If, at any time, we are unable to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to clinically test, market or commercialize our product candidates. A successful product liability claim brought against us in excess of our insurance coverage, if any, may cause us to incur substantial liabilities, and, as a result, our business, liquidity and results of operations would be materially adversely affected. In addition, the existence of a product liability claim could affect the market price of our ordinary shares.

We face continuous technological change, and developments by competitors may render our products or technologies obsolete or non-competitive. If our new or existing product candidates are rendered obsolete or non-competitive, our marketing and sales will suffer and we may never be profitable.

If our competitors develop and commercialize products faster than we do, or develop and commercialize products that are superior to our product candidates, our commercial opportunities will be reduced or eliminated. The extent to which any of our product candidates achieve market acceptance will depend on competitive factors, many of which are beyond our control. Competition in the biotechnology and biopharmaceutical industry is intense and has been accentuated by the rapid pace of technology development. Our competitors include large integrated pharmaceutical companies, biotechnology companies that currently have drug and target discovery efforts, universities, and public and private research institutions. Almost all of these entities have substantially greater research and development capabilities and financial, scientific, manufacturing, marketing and sales resources than we do. These organizations also compete with us to:

      attract parties for acquisitions, joint ventures or other collaborations;

      license proprietary technology that is competitive with the technology we are developing;

      attract funding; and

      attract and hire scientific talent and other qualified personnel.

Our competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA more rapidly than we do. Our competitors may also develop products or technologies that are superior to those we are developing, and render our product candidates or technologies obsolete or non-competitive. If we cannot successfully compete with new or existing products, our marketing and sales will suffer and we may never be profitable.

We may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business, results of operations and financial condition.

We may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth, including potentially rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place a strain on our human and capital resources. To manage growth effectively, we will be required to continue to implement and improve our operating and financial systems and controls to expand, train

18

and manage our employee base. Our ability to manage our operations and growth effectively requires us to continue to expend funds to enhance our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient talented personnel. If we are unable to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls, then we will not be able to make available the products required to successfully commercialize our technology. Failure to attract and retain sufficient talented personnel will further strain our human resources and could impede our growth or result in ineffective growth. Moreover, the management, systems and controls currently in place or to be implemented may not be adequate for such growth, and the steps taken to hire personnel and to improve such systems and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations and financial condition.

If we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.

We may not be able to obtain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss or claims by third parties. To the extent our business or property suffers any damages, losses or claims by third parties, which are not covered or adequately covered by insurance, our financial condition may be materially adversely affected.

We may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage our company.

We could incur substantial costs in connection with product liability claims relating to our current or potential product candidates.

The nature of our business exposes us to potential liability inherent in the testing and manufacturing of pharmaceutical and therapeutic products. Our product candidates and the clinical trials utilizing our product candidates may expose us to product liability claims and possible adverse publicity. For example, any of our product candidates could cause adverse events, including injury, disease or adverse side effects. These adverse events may not be observed in clinical trials, but may nonetheless occur in the future. If any of these adverse events occur, they may render our product candidates ineffective or harmful in some patients, and our sales would suffer, materially adversely affecting our business, financial condition and results of operations. Furthermore, changes in laws outside the U.S. are expanding our potential liability for injuries that occur during clinical trials.

Product liability insurance is expensive, subject to deductibles and coverage limitations, and may not be available in the amounts that we desire for a price we are willing to pay. We currently do not maintain product liability insurance coverage. In addition, we cannot be sure that we will be able to obtain or maintain insurance coverage at acceptable costs or in sufficient amounts, or that a product liability claim would not otherwise adversely affect our business, operating results or financial condition. The cost of defending any products liability litigation or other proceeding, even if resolved in our favor, could be substantial. Uncertainties resulting from the initiation and continuation of products liability litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Product liability litigation and other related proceedings may also absorb significant management time.

Recent disruptions in the financial markets and economic conditions could affect our ability to raise capital and could disrupt or delay the performance of our third-party contractors and suppliers.

In past years, the U.S. and global economies have taken a dramatic downturn as the result of the deterioration in the credit markets and related financial crisis as well as a variety of other factors including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. The U.S. and certain foreign governments have recently taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments are not successful, the continued economic decline may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at all. In addition, we rely and intend to rely on third parties, including our clinical research organizations, third-party manufacturers and second-source suppliers, and certain other important vendors and consultants. As a result of the current volatile and unpredictable global economic situation, there

19

may be a disruption or delay in the performance of our third-party contractors and suppliers. If such third parties are unable to satisfy their contractual commitments to us, our business could be severely adversely affected.

Our current management team has no experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results of operations and financial condition.

Although our Ordinary Shares trade on the TASE and we file reports in Israel, our current management team has no experience managing and operating a publicly-traded U.S. company. Failure to comply or adequately comply with any laws, rules or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation or financial condition and could result in delays in achieving the development of an active and liquid trading market for our ordinary shares.

We will incur significant additional increased costs as a result of the listing of our ordinary shares for trading on the NASDAQ Capital Market and thereby being a public company in the United States as well as in Israel, and our management will be required to devote substantial additional time to new compliance initiatives as well as to compliance with ongoing U.S. and Israeli reporting requirements.

As a public company in the U.S., we will incur additional significant accounting, legal and other expenses that we did not incur before the offering. We also anticipate that we will incur costs associated with corporate governance requirements of the Securities and Exchange Commission, or the SEC, and the NASDAQ Capital Market, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs such as investor relations, stock exchange listing fees and shareholder reporting, and to make some activities more time consuming and costly. The implementation and testing of such processes and systems may require us to hire outside consultants and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the NASDAQ Capital Market, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, if any, or as executive officers.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have a material adverse effect on the price of our ordinary shares.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. In addition, if we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal controls, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the price of our ordinary shares. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our ordinary shares pursuant to an effective registration statement, (iii) the date on which we have, during

20

the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated issuer” as defined in Regulation S-K of the Securities Act. For so long as we remain an emerging growth company, we will not be required to:

      have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

      comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

      submit certain executive compensation matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and

      include detailed compensation discussion and analysis in our filings under the Exchange Act, and instead may provide a reduced level of disclosure concerning executive compensation.

Although we intend to rely on the exemptions provided in the JOBS Act, the exact implications of the JOBS Act for us are still subject to interpretations and guidance by the SEC and other regulatory agencies. In addition, as our business grows, we may no longer satisfy the conditions of an emerging growth company. We are currently evaluating and monitoring developments with respect to these new rules and we cannot assure you that we will be able to take advantage of all of the benefits from the JOBS Act.

In addition, as an “emerging growth company,” we may elect under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Therefore, our financial statements may not be comparable to those of companies that comply with standards that are otherwise applicable to public companies.

We are a “foreign private issuer” and have disclosure obligations that are different from those of U.S. domestic reporting companies.

We are a foreign private issuer and are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we will be subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting companies. Furthermore, although under a recent amendment to the regulations promulgated under the Companies Law, as an Israeli public company listed overseas we will be required to disclose the compensation of our five most highly compensated officers on an individual basis (rather than on an aggregate basis, as was previously permitted for Israeli public companies listed overseas), this disclosure will not be as extensive as that required of U.S. domestic reporting companies. We will also have four months after the end of each fiscal year to file our annual reports with the SEC and will not be required to file current reports as frequently or promptly as U.S. domestic reporting companies. Furthermore, our officers, directors and principal shareholders will be exempt from the requirements to report short-swing profit recovery contained in Section 16 of the Exchange Act. Also, as a “foreign private issuer,” we are not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting companies.

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

As a “foreign private issuer,” we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the NASDAQ Capital Market for domestic U.S. issuers. For instance, we intend to follow home country practice in Israel with regard to, among other things, board independence requirements, director nomination procedures and quorum requirements. In addition, we may follow our home country law

21

instead of the Listing Rules of the NASDAQ Capital Market that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of our company, certain transactions other than a public offering involving issuances of a 20% or greater interest in our company, and certain acquisitions of the stock or assets of another company. We also intend to follow our home country practices with respect to our compensation committee, which conducts itself in accordance with the provisions governing its composition and responsibilities as set forth in the Companies Law, not the Listing Rules of the NASDAQ Capital Market. We may in the future elect to follow home country corporate governance practices in Israel with regard to other matters. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Capital Market may provide less protection to you than what is accorded to investors under the Listing Rules of the NASDAQ Capital Market applicable to domestic U.S. issuers. See “Management — NASDAQ Capital Market Listing Rules and Home Country Practices.”

Risks Related to Our Intellectual Property

We license our core technology on an exclusive basis from Yissum (Hebrew University), and we could lose our rights to this license if a dispute with Yissum arises or if we fail to comply with the financial and other terms of the license.

We license our core intellectual property from Yissum, an affiliate of Hebrew University. We initially entered into an exclusive license agreement with Yissum in 2000 and, in 2004 and 2005, we amended the license, which we refer to, as amended, as the License Agreement. According to the License Agreement, we hold an exclusive license for developing, manufacturing and/or world marketing of products that are directly or indirectly based on the patent owned by Yissum and/or other related intellectual property (including any information, research results and related know-how). Yissum is not permitted to transfer such intellectual property to third parties without our prior written consent. Yissum may obtain future financing from other entities for its research, provided that such entities will not be granted rights in its results (including other IP rights) in a way prejudicing the rights granted to us in accordance with the License Agreement. We are entitled to grant perpetual sublicenses of this intellectual property to third parties, and such third parties will not be required to assume any undertaking towards Yissum. We are obligated to research and develop products that are based on the IP and to pay Yissum from the date of first sale an amount equal to 3% of our net sales of products based on the intellectual property and 15% from all other payments or benefits received from any such sublicense. In addition, also in consideration of the exclusive license granted to us pursuant to the License Agreement, we issued 5,618 ordinary shares to Yissum. As of the date of this prospectus, no payments were paid and/or are due under the License Agreement. The License Agreement will be in effect until the earliest of: (1) the expiration of the last registered patent within the relevant territory in November 2020; and (2) 15 years from the date of the first commercial sale. We also contracted with Yissum for laboratory services. In January 2008, we signed an addendum to the License Agreement to conduct an additional joint development and study regarding a technology, different from the Accordion Pill, for the GR of a drug. This addendum provides that the intellectual property rights produced as a result of the joint development and study will be jointly owned and we are entitled to receive a license for Yissum’s share in these rights in return for payment of royalties. One patent application has been filed by Yissum and us as a result of the development related to that joint project, but this patent application was abandoned.

The License Agreement imposes certain payment, reporting, confidentiality and other obligations on us. In the event that we were to breach any of our obligations under the License Agreement and fail to cure such breach, Yissum would have the right to terminate the License Agreement upon 30 days’ notice. In addition, Yissum has the right to terminate the License Agreement upon our bankruptcy or receivership. If any dispute arises with respect to our arrangement with Yissum, such dispute may disrupt our operations and would likely have a material and adverse impact on us if resolved in a manner that is unfavorable to us. Most of our current product candidates are partly based on the intellectual property licensed under the License Agreement, and if the License Agreement was terminated, it would have a material adverse effect on our business, prospects and results of operations.

If we fail to adequately protect, enforce or secure rights to the patents which were licensed to us or any patents we may own in the future, the value of our intellectual property rights would diminish and our business and competitive position would suffer.

Our success, competitive position and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual property covering our products and product candidates, know-how, methods, processes and other technologies, to protect our trade secrets, to prevent others from using our intellectual property and to operate without infringing the intellectual property rights of third parties.

22

The risks and uncertainties that we face with respect to our intellectual property rights include, but are not limited to, the following:

      the degree and range of protection any patents will afford us against competitors;

      if and when patents will be issued;

      whether or not others will obtain patents claiming aspects similar to those covered by our own or licensed patents and patent applications;

      we may be subject to interference proceedings;

      we may be subject to opposition or post-grant proceedings in foreign countries;

      any patents that are issued may not provide meaningful protection;

      we may not be able to develop additional proprietary technologies that are patentable;

      other companies may challenge patents licensed or issued to us or our customers;

      other companies may independently develop similar or alternative technologies, or duplicate our technologies;

      other companies may design around technologies we have licensed or developed;

      enforcement of patents is complex, uncertain and expensive; and

      we may need to initiate litigation or administrative proceedings that may be costly whether we win or lose.

If patent rights covering our products and methods are not sufficiently broad, they may not provide us with any protection against competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the USPTO, or foreign patent offices issue patents to us or our licensors, others may challenge the patents or design around the patents, or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may not provide any protection against our competitors.

We cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any of our issued patents or patents licensed from Yissum (or any other third party in the future), will give us adequate protection from competing products. For example, issued patents, including the patents licensed by us, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope.

In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions.

It is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.

In addition to patents and patent applications, we depend upon trade secrets and proprietary know-how to protect our proprietary technology. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. We also require our employees and consultants to disclose and assign to us their ideas, developments, discoveries and inventions. These agreements may not, however, provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The

23

Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his inventions. Recent decisions by the Committee (which have been upheld by the Israeli Supreme Court on appeal) have created uncertainty in this area, as it held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights. However, a recent decision by the Committee held that such right can be waived by the employee. The Committee further held that an explicit reference to the waived right is not necessary in every circumstance in order for the employee’s waiver of such right to be valid. Such waiver can be formalized in writing or orally or be implied by the actions of the parties in accordance with the rules of interpretation of Israeli contract law. We generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service invention rights, we may face claims demanding remuneration in consideration for assigned inventions.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market, which would have a material adverse effect on our business.

Costly litigation may be necessary to protect our intellectual property rights, and we may be subject to claims alleging the breach of license or other agreements that we have entered into with third parties or the violation of the intellectual property rights of others.

We may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual property rights of others. In the event that another party has also filed a patent application or been issued a patent relating to an invention or technology claimed by us in pending applications, we may be required to participate in an interference proceeding declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual outcome were favorable to us. We, or our licensors, also could be required to participate in interference proceedings involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require us to cease using the technology or to license rights from prevailing third parties.

The cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved in our favor, could be substantial and could divert management’s resources and attention. Our ability to enforce our patent protection could be limited by our financial resources, and may be subject to lengthy delays. A third party may claim that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time and other resources. There is a risk that the court will decide that we are infringing the third party’s patents and will order us to stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses (which may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us to pay the other party damages for having infringed their patents.

Moreover, there is no guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us with respect to our product candidates, technologies or other matters. Any claims of infringement asserted against us, whether or not successful, may have a material adverse effect on us.

We entered into a feasibility and option agreement with a pharmaceutical company and engaged in a feasibility study over a period of several months during the early stage of formulation of the Accordion Pill for Carbidopa/Levodopa. The agreement included a right of first offer, under certain circumstances. In 2012, the pharmaceutical company asserted that it has a right of

24

first refusal in the event that we seek to grant a license to certain intellectual property contained in AP-CDLD to any third party. We believe that the pharmaceutical company does not have such right and that the right of first offer included in the agreement terminated in 2008. In addition, we believe that such right of first offer only applied to licenses for use in the United States. If we seek to grant a license to certain intellectual property contained in AP-CDLD to any third party, we can, in our discretion, either first offer the main terms of such license to the other pharmaceutical company pursuant to the alleged right of first offer, which we believe terminated in 2008, or seek to grant such license to a third party without first offering the main terms of such license to the other pharmaceutical company, in which case the other pharmaceutical company may seek to challenge such third-party license or claim damages. Although we would intend to vigorously defend against any such challenge or claim, there can be no guarantee that we would be successful in such defense. Any such challenge or claim for damages made by the other pharmaceutical company, if we choose not to make a first offer, could adversely affect our ability to develop, or the timing of our development of, AP-CDLD. Further, the allegation that any such right exists, even though we believe that any such right has terminated, could discourage other potential licensees from working with us. Either of these events could have a material adverse effect on our business, prospects and results of operations.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property to compete against us.

Although we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements can be difficult and costly to enforce. Although we seek to obtain these types of agreements from our contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with our products. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

      these agreements may be breached;

      these agreements may not provide adequate remedies for the applicable type of breach;

      our trade secrets or proprietary know-how will otherwise become known; or

      our competitors will independently develop similar technology or proprietary information.

International patent protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend substantial sums and management resources.

Patent law outside the United States may be different than in the United States. Further, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States, if at all. A failure to obtain sufficient intellectual property protection in any foreign country could materially and adversely affect our business, results of operations and future prospects. Moreover, we may participate in opposition proceedings to determine the validity of our foreign patents or our competitors’ foreign patents, which could result in substantial costs and divert management’s resources and attention. Additionally, due to uncertainty in patent protection law, we have not filed applications in many countries where significant markets exist.

Risks Related to the Regulation of our Company and Its Business

Our product candidates are at various stages of preclinical and clinical development and may never be commercialized.

The progress and results of any future preclinical testing or future clinical trials are uncertain, and the failure of our product candidates and additional product candidates which we may license, acquire or develop in the future to receive regulatory approvals will have a material adverse effect on our business, operating results and financial condition to the extent we are unable to commercialize any such products. None of our product candidates has received regulatory approval for commercial sale. In addition, we face the risks of failure inherent in developing therapeutic products. Our product candidates are not expected to be commercially available for several years, if at all.

25

Our product candidates are subject to extensive regulation and are at various stages of regulatory development and may never obtain regulatory approval.

Our product candidates must satisfy rigorous standards of safety and efficacy for a specific indication before they can be approved for commercial use by the FDA or foreign regulatory authorities. The FDA and foreign regulatory authorities have full discretion over this approval process. We will need to conduct significant additional research, including testing in animals and in humans, before we can file applications for product approval. Typically, in the pharmaceutical industry, there is a high rate of attrition for product candidates in preclinical testing and clinical trials. Also, even though we believe that some of our product candidates may be eligible for FDA review under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA may not agree with that assessment, and may require us to submit the application under Section 505(b)(1) which usually requires more comprehensive clinical data than applications submitted under Section 505(b)(2). Even under Section 505(b)(2), satisfying FDA’s requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of substantial resources. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful. For example, a number of companies in the pharmaceutical industry, including biotechnology companies, have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. In addition, delays or rejections may be encountered based upon additional government regulation, including any changes in legislation or FDA policy, during the process of product development, clinical trials and regulatory reviews. After clinical trials are completed, the FDA has substantial discretion in the drug approval process and may require us to conduct additional preclinical and clinical testing or to perform post-marketing studies.

In order to receive FDA approval or approval from foreign regulatory authorities to market a product candidate or to distribute our products, we must demonstrate through preclinical testing and through human clinical trials that the product candidate is safe and effective for its intended uses (e.g., treatment of a specific condition in a specific way subject to contradictions and other limitations). Even if we comply with all FDA requests, the FDA may ultimately reject or decline to approve one or more of our new drug applications, or it may grant approval for a narrowly intended use that is not commercially feasible. We might not obtain regulatory approval for our product candidates in a timely manner, if at all. Failure to obtain FDA approval of any of our product candidates in a timely manner or at all will severely undermine our business by delaying or halting commercialization of our products, imposing costly procedures, diminishing competitive advantages and reducing the number of salable products and, therefore, corresponding product revenues.

We have collected limited clinical data about the safety and efficacy of AP-CDLD in an open-label Phase II clinical trial that was not conducted under an FDA issued IND and we may be unable to replicate these results in large-scale and double-blind controlled clinical trials.

Although the clinical trials performed to date using AP-CDLD have shown promising results, these results were generated from open-label studies not performed under an FDA issued IND and were conducted at a limited number of clinical sites on a limited number of patients. An “open-label” trial is one where both the patient and investigator know whether the patient is receiving the test article or either an existing approved drug or placebo. Open-label trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label studies are aware that they are receiving treatment. Open-label trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge.

Given that these were open label studies, not conducted under an FDA issued IND, the FDA may decide not to consider the data that we collected from these open-label studies, even though we are obligated to submit these data to the FDA.

Our Phase II clinical trial for AP-CDLD was conducted at several medical centers in Israel. Patients in Israel are genetically similar to European and North American patients, but there may be unidentified genetic differences that may result in variable therapeutic response in patients in other countries. Furthermore, although our initial safety profile has been favorable, safety could be dependent on operator skills. It is possible that we may experience a higher rate of adverse events in the future with wider application of our Accordion Pill technology in real-world practice outside of clinical trials.

If the FDA does not conclude that a given product candidate using our Accordion Pill technology satisfies the requirements for approval under the Section 505(b)(2) regulatory approval pathway, or if the requirements for approval of our product

26

candidates under Section 505(b)(2) are not as we expect, the approval pathway will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in any case may not be successful.

We intend to seek FDA approval for our product candidates implementing our Accordion Pill technology through the Section 505(b)(2) regulatory pathway. Pursuant to Section 505(b)(2) of the FDCA, a new drug application, or NDA, under Section 505(b)(2) is permitted to reference safety and effectiveness data submitted by the original manufacturer of the underlying approved drug as part of its NDA, or rely on FDA’s prior conclusions regarding the safety and effectiveness of that previously approved drug, or rely on in part on data in the public domain. Reliance on data collected by others may expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for product approval. If this were to occur, the time and financial resources required to obtain FDA approval, and complications and risks associated with regulatory approval of our product candidates, would likely substantially increase. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway may result in new competitive products reaching the market more quickly than our product, which would likely materially adversely impact our competitive position and prospects. Even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this will ultimately lead to accelerated product development or earlier approval.

In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that may be referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDA for up to 30 months or longer depending on the outcome of any litigation. Further, it is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of a new product. Even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. Amendments to the FDCA attempt to limit the delay that can be caused by a citizen petition to 150 days, although court action by a dissatisfied petitioner is a possibility and this could, in theory, adversely affect the approval process.

Moreover, even if product candidates implementing our Accordion Pill technology are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

We will seek approval in the European Union, or the EU, on a product-by-product basis, either by ourselves or with a third-party licensee.

A fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

We may seek fast track designation for some of our product candidates and may seek such designation for future product candidates. The FDA has broad discretion whether to grant this designation, and even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we apply for and receive fast track designation for one or more of our product candidates or future product candidates, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

We might be unable to develop any of our product candidates to achieve commercial success in a timely and cost-effective manner, or ever.

Even if regulatory authorities approve any of our product candidates, they may not be commercially successful. Our product candidates may not be commercially successful because government agencies or other third-party payors may not provide reimbursement for the costs of the product or the reimbursement may be too low to be commercially successful. In addition, physicians and others may not use or recommend our products candidates, even following regulatory approval. A product approval, even if issued, may limit the uses for which such product may be distributed, which could adversely affect the commercial viability of the product. Moreover, third parties may develop superior products or have proprietary rights that preclude us from marketing our products. We also expect that our product candidates, if approved, will generally be more

27

expensive than the non-Accordion Pill version of the same medication available to patients. Physician and patient acceptance of, and demand for, any product candidates for which we obtain regulatory approval or license will depend largely on many factors, including, but not limited to, the extent, if any, of reimbursement of costs by government agencies and other third-party payors, pricing, competition, the effectiveness of our marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with such products. If physicians, government agencies and other third-party payors do not accept the use or efficacy of our products, we will not be able to generate significant revenue, if any.

We cannot be certain that the results of our potential Phase III clinical trials, even if all endpoints are met, will support regulatory approval of any of our product candidates for any indication.

Endpoints for most Phase III clinical trials may vary from drug candidate to drug candidate and from indication to indication; therefore, there are no universally accepted endpoints for Phase III clinical trials. Accordingly, the development pathway for AP-CDLD, which is indicated for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , and our other product candidates, is not completely clear yet.

It is possible that even if the results of a potential Phase III clinical trial meet the primary endpoints, the FDA will require other data of our product candidates prior to granting marketing approval.

Our product candidates and future product candidates will remain subject to ongoing regulatory requirements even if they receive marketing approval, and if we fail to comply with these requirements, we may not obtain such approvals or could lose those approvals that have been obtained, and the sales of any approved commercial products could be suspended.

Even if we receive regulatory approval to market a particular product candidate, any such product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and record keeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the uses for which the product may be marketed or the conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product, which could negatively impact us or our collaboration partners by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. In addition, as clinical experience with a drug expands after approval, typically because it is used by a greater number and more diverse group of patients after approval than during clinical trials, side effects and other problems may be observed over time after approval that were not seen or anticipated during pre-approval clinical trials or other studies. Any adverse effects observed after the approval and marketing of a product candidate could result in limitations on the use of, withdrawal of FDA approval or withdrawal of any approved products from the marketplace. Absence of long-term safety data may also limit the approved uses of our products, if any. If we fail to comply with the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities, or previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions or other setbacks, including, without limitation, the following:

      suspension or imposition of restrictions on the products, manufacturers or manufacturing processes, including costly new manufacturing requirements;

      warning letters;

      civil or criminal penalties, fines and/or injunctions;

      product seizures or detentions;

      import or export bans or restrictions;

      voluntary or mandatory product recalls and related publicity requirements;

      suspension or withdrawal of regulatory approvals;

      total or partial suspension of production; and

      refusal to approve pending applications for marketing approval of new products or supplements to approved applications.

28

If we or our collaborators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements or policies, marketing approval for our product candidates may be lost or cease to be achievable, resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our business, financial condition or results of operations.

Clinical trials are very expensive, time-consuming and difficult to design and implement, and, as a result, we may suffer delays or suspensions in future trials which would have a material adverse effect on our ability to generate revenues.

Human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Regulatory authorities, such as the FDA, may preclude clinical trials from proceeding. Additionally, the clinical trial process is time-consuming, failure can occur at any stage of the trials and we may encounter problems that cause us to abandon or repeat clinical trials. The commencement and completion of clinical trials may be delayed by several factors, including, but not limited to:

      unforeseen safety issues;

      clinical holds or suspension of a clinical trial by the FDA, us, the institutional review board, or IRB, or the data safety monitoring board, or DSMB, determination of proper dosing;

      lack of effectiveness or efficacy during clinical trials;

      failure of our contract manufacturers to manufacture our product candidates in accordance with current Good Manufacturing Practices, or cGMP;

      failure of third party suppliers to perform final manufacturing steps for the drug substance;

      slower than expected rates of patient recruitment and enrollment;

      lack of healthy volunteers and patients to conduct trials;

      inability to monitor patients adequately during or after treatment;

      failure of third party contract research organizations to properly implement or monitor the clinical trial protocols;

      failure of IRBs to approve or renew approvals of our clinical trial protocols;

      inability or unwillingness of medical investigators to follow our clinical trial protocols; and

      lack of sufficient funding to finance the clinical trials.

As noted above, we, regulatory authorities, IRBs or DSMBs may suspend our clinical trials at any time if it appears that we are exposing participants to unacceptable health risks or if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of these trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact our ability to develop products and generate revenue.

We may be forced to abandon development of certain products altogether, which will significantly impair our ability to generate product revenues.

Upon the completion of any clinical trial, if at all, the results of these trials might not support the claims sought by us. Further, success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and the results of later clinical trials may not replicate the results of prior clinical trials and preclinical testing. The clinical trial process may fail to demonstrate that our product candidates are safe for humans and effective for indicated uses. Any such failure may cause us to abandon a product candidate and may delay development of other product candidates. Any delay in, or termination or suspension of, our clinical trials will delay the requisite filings with the FDA and, ultimately, our ability to commercialize our product candidates and generate product revenues. If the clinical trials do not support our drug product claims, the completion of development of such product candidates may be significantly delayed or abandon, which would significantly impair our ability to generate product revenues and would materially adversely affect our business, financial condition or results of operations.

29

Positive results in the previous clinical trials of one or more of our product candidates may not be replicated in future clinical trials of such product candidate, which could result in development delays or a failure to obtain marketing approval.

Positive results in the previous clinical trials of one or more of our product candidates may not be predictive of similar results in future clinical trials for such product candidate. Also, interim results during a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed preclinical studies and clinical trials for our product candidates may not be predictive of the results we may obtain in later stage trials of such product candidates. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Clinical trial results may be inconclusive, or contradicted by other clinical trials, particularly larger clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA or European Medicines Agency, or other applicable regulatory agency, approval for their products.

Reimbursement may not be available for our products, which could make it difficult for us to sell our products profitably.

Market acceptance and sales of our products will depend on coverage and reimbursement policies and may be affected by healthcare reform measures. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which products they will pay for and establish reimbursement levels. We cannot be sure that coverage and reimbursement will be available for our products. We also cannot be sure that the amount of reimbursement available, if any, will not reduce the demand for, or the price of, our products. If reimbursement is not available or is available only at limited levels, we may not be able to successfully compete through sales of our proposed products.

Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and certain others. Prior to MMA, Medicare did not cover most outpatient prescription drugs. MMA created a new voluntary Part D, which covers outpatient drugs for Medicare beneficiaries and is administered by private insurance plans that operate partially at-risk under contract with the Centers for Medicare & Medicaid Services, or CMS. These private Part D plans have incentives to keep costs down. MMA also introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of certain outpatient drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These and future cost-reduction initiatives could decrease the coverage and price that we receive for our products, if approved, and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policies and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement under Medicare may result in a similar reduction in payments from private payors.

In March 2010, the Patient Protection and Affordable Care Act, as amended, or the Affordable Care Act, which was amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the United States. The goal of PPACA is to reduce the cost of healthcare and substantially change the way healthcare is financed by both governmental and private insurers. Among other measures, PPACA imposes increased rebates on manufacturers for certain covered drug products reimbursed by state Medicaid programs. While we cannot predict the full effect PPACA will have on federal reimbursement policies in general or on our business specifically, the PPACA may result in downward pressure on drug reimbursement, which could negatively affect market acceptance of our products. In addition, we cannot predict whether new proposals will be made or adopted, when they may be adopted or what impact they may have on us if they are adopted.

We expect to experience pricing pressures in connection with the sale of our products generally due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative proposals. If we fail to successfully secure and maintain adequate coverage and reimbursement for our future products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our products and our business will be harmed.

We are subject to extensive and costly government regulation.

The products we are developing and planning to develop in the future are subject to extensive and rigorous domestic government regulation, including regulation by the FDA, the CMS, other divisions of the U.S. Department of Health and Human

30

Services, including its Office of Inspector General, the Office of Civil Rights, which administers the privacy provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the U.S. Department of Justice, the Departments of Defense and Veterans Affairs, to the extent our products are paid for directly or indirectly by those departments, state and local governments, and their respective foreign equivalents. The FDA regulates the research, development, preclinical and clinical testing, manufacture, safety, effectiveness, record keeping, reporting, labeling, storage, approval, advertising, promotion, sale, distribution, import and export of pharmaceutical products under various regulatory provisions. If any drug products we develop are tested or marketed abroad, they will also be subject to extensive regulation by foreign governments, whether or not we have obtained FDA approval for a given product and its uses. Such foreign regulation may be equally or more demanding than corresponding U.S. regulation.

Government regulation substantially increases the cost and risk of researching, developing, manufacturing, and selling products. Our failure to comply with these regulations could result in, by way of example, significant fines, criminal and civil liability, product seizures, recalls, withdrawals, withdrawals of approvals, and exclusion and debarment from government programs. Any of these actions, including the inability of our proposed products to obtain and maintain regulatory approval, would have a materially adverse effect on our business, financial condition, results of operations and prospects.

In addition to government regulation, rules and policies of professional and other quasi and non-governmental bodies and organizations may impact the prescription of products, as well as the manner of their promotion, marketing, and education. Examples of such bodies are the American Medical Association, the Accreditation Council of Continuing Medical Education, American Council of Physicians and the American Academy of Family Physicians.

We are subject to additional federal and state laws and regulations relating to our business, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.

In the event that we were to market products in the United States, we would be subject to additional healthcare regulation and enforcement by the federal government and the states in which we conduct or will conduct our business. The laws that may affect our ability to operate include, but are not limited to, the following:

      the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under government healthcare programs such as the Medicare and Medicaid programs;

      the Anti-Inducement Law, which prohibits persons from offering or paying remuneration to Medicare and Medicaid beneficiaries to induce them to use items or services paid for in whole or in part by the Medicare or Medicaid programs;

      the Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, prohibits physicians from referring Medicare or Medicaid patients for certain designated items or services where that physician or family member has a financial interest in the entity provided the designated item or service;

      federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent;

      federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and

      state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers.

Further, the recently enacted PPACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity can now be found guilty of fraud or false claims under PPACA without actual knowledge of the statute or specific intent to violate it. In addition, PPACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statue constitutes a false or fraudulent claim for purposes of the false claims statutes. Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare, Medicaid and other government programs and forfeiture of amounts collected in violation of such prohibitions. Any violations of these laws, or any action against us for violation of

31

these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.

PPACA also imposes new reporting requirements on device and pharmaceutical manufacturers to make annual public disclosures of payments to physicians and teaching hospitals and ownership of their stock by physicians. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not reported. Manufacturers were required to begin data collection on August 1, 2013 and report such data to CMS by March 31, 2014, but that has been delayed and final reconciliation of data was supposed to have occurred on October 31, 2014.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing. Some states, such as California, Massachusetts and Vermont, mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians, and some states limit or prohibit such gifts.

The scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. We cannot predict the impact on our business of any changes in these laws. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, results of operations, and financial condition. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming.

Changes in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, which may result in necessary changes to clinical trial protocols, which could result in increased costs to us, delay our development timeline or reduce the likelihood of successful completion of our clinical trials.

Changes in regulatory requirements and guidance or unanticipated events during our clinical trials may occur, as a result of which we may need to amend clinical trial protocols. Amendments may require us to resubmit our clinical trial protocols to IRBs for review and approval, which may adversely affect the cost, timing and successful completion of a clinical trial. If we experience delays in the completion of, or if we terminate, any of our clinical trials, the commercial prospects for our affected product candidates would be harmed and our ability to generate product revenue would be delayed, possibly materially.

Our product candidates are manufactured through a compounding, film casting and assembly process, and if we or one of our materials suppliers encounters problems manufacturing our products or raw materials, our business could suffer.

We and our contract manufacturers, if any, are, and will be, subject to extensive governmental regulation in connection with the manufacture of any pharmaceutical products. The FDA and foreign regulators require manufacturers to register manufacturing facilities. The FDA and foreign regulators also inspect these facilities to confirm compliance with cGMP or similar requirements that the FDA or foreign regulators establish. We and our contract manufacturers must ensure that all of the processes, methods and equipment are compliant with cGMP for drugs on an ongoing basis, as mandated by the FDA and other regulatory authorities, and conduct extensive audits of vendors, contract laboratories and suppliers. The FDA will likely condition granting any marketing approval, if any, on a satisfactory on-site inspection of our manufacturing facilities.

We currently manufacture our product candidates used in clinical testing. We have not currently determined whether we will engage in the manufacture of our products for commercial purposes. We order certain materials from single-source suppliers. If the supply of any of these single-sourced materials is delayed or ceases, we may not be able to produce the related product in a timely manner or in sufficient quantities, if at all, causing us to be unable to further develop our product candidates or bring them to market or continue to develop our technology, which could materially and adversely affect our business. In addition, a single-source supplier of a key component of one or more of our product candidates could potentially exert significant bargaining power over price, quality, warranty claims or other terms relating to the single-sourced materials. Our materials suppliers may face manufacturing or quality control problems causing product production and shipment delays or a situation where the supplier may not be able to maintain compliance with the FDA’s cGMP requirements, or those of foreign regulators, necessary to continue manufacturing our drug substance or raw materials. Drug manufacturers are subject to ongoing periodic unannounced inspections by the FDA, the United States Drug Enforcement Agency, or DEA, and corresponding foreign regulatory agencies to ensure strict compliance with cGMP requirements and other governmental regulations and corresponding foreign standards. Any failure by us or our suppliers to comply with DEA requirements or FDA or foreign regulatory requirements could adversely affect our clinical research activities and our ability to market and develop our products.

32

We intend to manufacture our own product candidates for Phase III clinical trials and may, to some extent, manufacture our product candidates for commercialization or rely on third parties to implement our manufacturing strategies. Manufacturing our product candidates is subject to extensive governmental regulation. Our failure or the failure of these third parties in any respect (including noncompliance with governmental regulations) could have a material adverse effect on our business, results of operations and financial condition.

Completion of any potential future Phase III clinical trials and commercialization of our product candidates will require access to, or development of, facilities to manufacture a sufficient supply of our product candidates. There can be no assurance that our product candidates, if approved, can be manufactured in sufficient commercial quantities, in compliance with regulatory requirements and at an acceptable cost. Although we believe our facilities are sufficient to manufacture our product candidate needs for Phase III clinical trials, we may be incorrect and we may not have the resources or facilities to manufacture our product candidates for Phase III clinical trials or commercial purposes on our own, and we may not develop or acquire facilities for the manufacture of product candidates for such purposes in the foreseeable future. We may rely on contract manufacturers to produce sufficient quantities of our product candidates necessary for any Phase III clinical testing we undertake in the future and for commercialization of our products. Such contract manufacturers may be the sole source of production, and they may have limited experience at manufacturing, formulating, analyzing, filling and finishing our types of product candidates. Establishing a manufacturing facility to produce commercial quantities of our products will require a substantial investment by any party intending to manufacture our products. If our current and future manufacturing and supply strategies are unsuccessful, we may be unable to conduct and complete any future Phase III clinical trials or commercialize our product candidates in a timely manner, if at all.

Manufacturing our product candidates is subject to extensive governmental regulation. See “Business — Government Regulation.” Future FDA, state and foreign inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers, if any, that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development. The FDA will likely condition granting any marketing approval on a satisfactory on-site inspection of our manufacturing facilities.

We have limited experience manufacturing our product candidates at a commercial scale. We may not be able to manufacture our product candidates in quantities sufficient for commercial launch of our product candidates, if our product candidates are approved, or for any future commercial demand for our product candidates.

Although we have manufactured clinical quantities of AP-CDLD and other products and product candidates in our manufacturing facility, we have only limited experience in manufacturing commercial quantities of our product candidates. If AP-CDLD or AP–ZP is approved for commercialization and marketing, we may be required to manufacture the product in large quantities to meet demand. Producing products in commercial quantities requires developing and adhering to complex manufacturing processes that are different from the manufacture of products in smaller quantities for clinical trials, including adherence to regulatory standards. Although we believe that we have developed processes and protocols that will enable us to manufacture commercial-scale quantities of products at acceptable costs, we cannot provide assurance that such processes and protocols will enable us to manufacture AP-CDLD or AP–ZP in quantities that may be required for commercialization of the applicable product with yields and at costs that will be commercially attractive. If we are unable to establish or maintain commercial manufacture of the product or are unable to do so at costs that we currently anticipate, our business will be adversely affected.

If we are unable to use our manufacturing facility for any reason, the manufacture of clinical supplies of our candidates would be delayed, which would harm our business.

We currently manufacture all clinical supply of AP-CDLD and AP–ZP at our own manufacturing facility. If we were to lose the use of our facility or equipment, our manufacturing facility and manufacturing equipment would be difficult to replace and could require substantial replacement lead time and substantial additional funds. Our facility may be affected by natural disasters, such as floods or fire, or we may lose the use of our facility due to manufacturing issues that arise at our facility, such

33

as contamination or regulatory concerns following a regulatory inspection of our facility. We do not currently have back-up capacity. In the event of a loss of the use of all or a portion of our facility or equipment for the reasons stated above or any other reason, we would be unable to manufacture any of our product candidates until such time as our facility could be repaired, rebuilt or we are able to address other manufacturing issues at our facility. Although we currently maintain property insurance with personal property limits of NIS 38.0 million and business interruption insurance coverage of NIS 17.0 million for damage to our property and the disruption of our business from fire and other casualties, such insurance may not cover all occurrences of manufacturing disruption or be sufficient to cover all of our potential losses in the event of occurrences that are covered and may not continue to be available to us on acceptable terms, or at all.

We may rely on third-party manufacturers to manufacture commercial quantities of our product candidates, if our products are approved, and any failure by a third-party manufacturer or supplier may delay or impair our ability to commercialize our product candidates.

We have manufactured our product candidates for our preclinical studies, Phase I clinical trials and Phase II clinical trials of our product candidates in our own manufacturing facility and have started, and expect to continue, to do so for our pivotal Phase III clinical trial of AP-CDLD. We have relied, and we expect to continue to rely, on third-party manufacturers for certain raw materials (excipients, solvents and APIs). Our reliance on third parties for the manufacture of these items increases the risk that we will not have sufficient quantities of these items or will not be able to obtain such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts. We have recently ordered enough of these items to complete our pivotal Phase III clinical trial for AP-CDLD. If the third-party manufacturers on whom we rely fail to supply these items and we need to enter into alternative arrangements with a different supplier, it could delay our product development activities, as we would have to requalify the casting and assembly processes pursuant to FDA requirements. If this failure of supply were to occur after we received approval for and commenced commercialization of AP-CDLD, we might be unable to meet the demand for this product and our business could be adversely affected. In addition, because we do not have any control over the process or timing of the supply of the APIs used in AP-CDLD, there is greater risk that we will not have sufficient quantities of these APIs at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

Our third-party manufacturers and suppliers may be subject to FDA inspection from time to time. Failure by our third-party manufacturers to pass such inspections and otherwise satisfactorily complete the FDA approval regimen with respect to our product candidates may result in regulatory actions such as the issuance of Form FDA 483 notices of observations, warning letters or injunctions or the loss of operating licenses. Based on the severity of the regulatory action, our clinical or commercial supply of the items manufactured by third-party manufacturers could be interrupted or limited, which could have a material adverse effect on our business.

If we acquire or license additional technologies or product candidates, we may incur a number of additional costs, have integration difficulties and/or experience other risks that could harm our business and results of operations.

We may acquire and in-license additional product candidates and technologies. Any product candidate or technologies we in-license or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate or product developed based on in-licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot assure you that any product candidate that we develop based on acquired or licensed technology that is granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted or competitive in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming. If we cannot effectively manage these aspects of our business strategy, our business may not succeed.

We may be subject to extensive environmental, health and safety, and other laws and regulations in multiple jurisdictions.

Our business involves the controlled use, directly or indirectly through our service providers, of hazardous materials, various biological compounds and chemicals; therefore, we, our agents and our service providers may be subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. The risk of accidental contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals or substances occurs, we could be held liable for resulting damages, including for

34

investigation, remediation and monitoring of the contamination, including natural resource damages, the costs of which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials and chemicals. Although we maintain workers’ compensation insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Additional or more stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future. We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these or certain other laws or regulations and the terms and conditions of any permits or licenses required pursuant to such laws and regulations, including costs to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities or the facilities of our service providers. For instance, we have undergone inspections and obtained approvals from various governmental agencies. We hold a business license with respect to testing, developing, storing and manufacturing pharmaceutical products at our current location from the municipality of Jerusalem. We also hold a toxic substances permit from the Israeli Office of Environmental Quality, Hazardous Material Division and a Certificate of GMP Compliance of a Manufacturer from the Israeli Ministry of Health – Pharmaceutical Administration. In addition, fines and penalties may be imposed for noncompliance with environmental, health and safety and other laws and regulations or for the failure to have, or comply with the terms and conditions of our business license or, required environmental or other permits or consents.

We are subject to government regulations and we may experience delays or may be unsuccessful in obtaining required regulatory approvals within or outside of the United States to market our proposed product candidates, and even if we obtain approval, the approved indications may impair our ability to successfully market the product or make commercial distribution not feasible.

Various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention and, consequently, could adversely affect our business operations and financial performance.

Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory approval may have a material adverse effect on us. If we experience significant delays in testing or receiving approvals or sign-offs to conduct clinical trials, our product development costs, or our ability to license product candidates, will increase. If the FDA or other foreign regulatory entities grant regulatory approval to market a product, this approval will be limited to those diseases and conditions for which the product has demonstrated, through clinical trials, to be safe and effective. Any product approvals that we receive in the future could also include significant restrictions on the use or marketing of our products. Product approvals, if granted, can be withdrawn for failure to comply with regulatory requirements or upon the occurrence of adverse events following commercial introduction of the products. Failure to comply with applicable FDA or other applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against our product candidates or us. If approval is withdrawn for a product, or if a product were seized or recalled, we would be unable to sell or license that product and our revenues would suffer. In addition, outside the United States, our ability to market any of our potential products is contingent upon receiving market application authorizations from the appropriate regulatory authorities. These foreign regulatory approval processes may include all of the risks associated with the FDA approval process described above, if not more.

We expect the healthcare industry to face increased limitations on reimbursement, rebates and other payments as a result of healthcare reform, which could adversely affect third-party coverage of our products and how much or under what circumstances healthcare providers will prescribe or administer our products.

In both the United States and other countries, sales of our products will depend in part upon the availability of reimbursement from third-party payors, which include governmental authorities, managed care organizations and other private health insurers. Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.

Increasing expenditures for healthcare have been the subject of considerable public attention in the United States. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.

35

In the United States, the Medicare Modernization Act changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs. In recent years, Congress has considered further reductions in Medicare reimbursement for drugs administered by physicians. The CMS has issued and will continue to issue regulations to implement the new law which will affect Medicare, Medicaid and other third-party payors. Medicare, which is the single largest third-party payment program and which is administered by CMS, covers prescription drugs in one of two ways. Medicare part B covers outpatient prescription drugs that are administered by physicians and Medicare part D covers other outpatient prescription drugs, but through private insurers. Medicaid, a health insurance program for the poor, is funded jointly by CMS and the states, but is administered by the states; states are authorized to cover outpatient prescription drugs, but that coverage is subject to caps and to substantial rebates. The CMS also has the authority to revise reimbursement rates and to implement coverage restrictions for some drugs. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. While the Medicare Modernization Act and Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from federal legislation or regulation may result in a similar reduction in payments from private payors.

In March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers and impose additional health policy reforms. The Affordable Care Act expanded manufacturers’ rebate liability to include covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, increased the minimum rebate due for innovator drugs (both single source drugs and innovator multiple source drugs) from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP or the difference between the AMP and best price, whichever is greater. The total rebate amount for innovator drugs is capped at 100.0% of AMP. The Affordable Care Act and subsequent legislation also narrowed the definition of AMP. Furthermore, the Affordable Care Act imposes a significant annual, nondeductible fee on companies that manufacture or import certain branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners, and a significant number of provisions are not yet, or have only recently become, effective. Although it is too early to determine the effect of the Affordable Care Act, it appears likely to continue to put pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. More recently, in August 2011, the President Obama signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, starting in 2013. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. If we ever obtain regulatory approval and commercialization of any of our product candidates, these new laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates may be.

Although we cannot predict the full effect on our business of the implementation of existing legislation, including the Affordable Care Act or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for or restrict coverage of our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our products. In addition, we believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact product sales.

36

Risks Related to Our Industry

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly the countries comprising the EU the pricing of pharmaceuticals and certain other therapeutics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

We are subject to anti-kickback laws and regulations. Our failure to comply with these laws and regulations could have adverse consequences to us.

There are extensive U.S. federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result in significant criminal and civil penalties. These federal laws include: the anti-kickback statute, which prohibits certain business practices and relationships, including the payment or receipt of compensation for the referral of patients whose care will be paid by Medicare or other federal healthcare programs; the physician self-referral prohibition, commonly referred to as the Stark Law; the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; the civil False Claims Act in 1986, or the False Claims Act, which prohibits any person from knowingly presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare and Medicaid programs; and the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services to impose civil penalties administratively for fraudulent or abusive acts. In addition, the Affordable Care Act requires drug manufacturers to report to the government any payments to physicians for consulting services and the like.

Sanctions for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments, monetary penalties, imprisonment, denial of Medicare and Medicaid payments or exclusion from the Medicare and Medicaid programs, or both, and debarment. As federal and state budget pressures continue, federal and state administrative agencies may also continue to escalate investigation and enforcement efforts to reduce or eliminate waste and to control fraud and abuse in governmental healthcare programs. Private enforcement of healthcare fraud has also increased, due in large part to amendments to the False Claims Act that were designed to encourage private persons to sue on behalf of the government. The Fraud Enforcement and Recovery Act of 2009 may further encourage whistleblowers to file suit under the qui tam provisions of the False Claims Act. A violation of any of these federal and state fraud and abuse laws and regulations could have a material adverse effect on our liquidity and financial condition. An investigation into the use by physicians of any of our products, if ever commercialized, may dissuade physicians from either purchasing or using them, and could have a material adverse effect on our ability to commercialize those products.

In addition, we are subject to analogous foreign laws and regulations, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and foreign laws governing the privacy and security of health information in certain circumstances. Many of these laws differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Risks Related to Our Operations in Israel

Potential political, economic and military instability in the State of Israel, where our senior management, our head executive office, research and development, and manufacturing facilities are located, may adversely affect our results of operations.

Our head executive office, our research and development facilities, our current manufacturing facility, as well as some of our clinical sites are located in Israel. Our officers and all of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business and operations. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring

37

countries, as well as terrorist acts committed within Israel by hostile elements. 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. During November 2012 and as recently as July through August 2014, Israel was engaged in an armed conflict with a militia group and political party who 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 December 2008 and January 2009 there was an escalation in violence among Israel, Hamas, the Palestinian Authority and other groups, as well as extensive hostilities along Israel’s border with the Gaza Strip, which resulted in missiles being fired from the Gaza Strip into Southern Israel. Similar hostilities accompanied by missiles being fired from the Gaza Strip into Southern Israel, as well at areas more centrally located near Tel Aviv and at areas surrounding Jerusalem, occurred during November 2012 and July through August 2014. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel.

Since February 2011, Egypt has experienced political turbulence and an increase in terrorist activity in the Sinai Peninsula following the resignation of Hosni Mubarak as president. This included protests throughout Egypt, and the appointment of a military regime in his stead, followed by the elections to parliament which brought groups affiliated with the Muslim Brotherhood (which had been previously outlawed by Egypt), and the subsequent overthrow of this elected government by a military regime instead. Such political turbulence and violence may damage peaceful and diplomatic relations between Israel and Egypt, and could affect the region as a whole. Similar civil unrest and political turbulence has occurred in other countries in the region, including Syria which shares a common border with Israel, and is affecting the political stability of those countries. Since April 2011, internal conflict in Syria has escalated, and evidence indicates that chemical weapons have been used in the region. Intervention may be contemplated by outside parties in order to prevent further chemical weapon use. This instability and any intervention may lead to deterioration of the political and economic relationships that exist between the State of Israel and some of these countries, and may have the potential for additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, and various rebel militia groups in Syria. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.

Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

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 condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

Our operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.

Many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) 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 military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include the call-up of members of our management. Such disruption could materially adversely affect our business, financial condition and results of operations.

38

Investors may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal securities laws against us, or our executive officers and directors or asserting U.S. securities laws claims in Israel.

None of our directors or officers are residents of the United States and most of their and our assets are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S. our directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws against us or our officers and directors because Israel may not be the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, 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 addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect on judgments rendered against us or our officers and directors.

Moreover, among other reasons, including but not limited to, fraud or absence of due process, or the existence of a judgment which is at variance with another judgment that was given in the same matter if a suit in the same matter between the same parties was pending before a court or tribunal in Israel, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of the State of Israel.

Under current Israeli law, we may not be able to enforce employees’ 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 key employees, in most cases within the framework of their employment agreements. These agreements prohibit our key employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period. Under applicable Israeli law, we may be unable to enforce these agreements or any part thereof. If we cannot enforce our non-competition agreements with our employees, then we may be unable to prevent our competitors from benefiting from the expertise of our former employees, which could materially adversely affect our business, results of operations and ability to capitalize on our proprietary information.

Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations.

Since we are incorporated under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards us and other shareholders and to refrain from abusing its power in our company, including, among other things, in voting at the general meeting of shareholders on certain matters, such as an amendment to our articles of association, an increase of our authorized share capital, a merger of our company and approval of related party transactions that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholders vote or to appoint or prevent the appointment of an office holder in our company or other power towards us has a duty to act in fairness towards us. However, Israeli law does not define the substance of this duty of fairness. See “Management — Approval of Related Party Transactions under Israeli Law.” Since Israeli corporate law underwent extensive revisions approximately 15 years ago, the parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. These provisions may be interpreted to impose additional obligations and liabilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.

Provisions of Israeli law and our articles of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.

Certain provisions of Israeli law and our articles of association could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or for our shareholders to elect different individuals to our

39

board of directors, even if doing so would be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares. For example, Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. With respect to certain mergers, Israeli tax law may impose certain restrictions on future transactions, including with respect to dispositions of shares received as consideration, for a period of two years from the date of the merger. See “Description of Share Capital — Articles of Association — Acquisitions under Israeli Law.”

Furthermore, under the Encouragement of Industrial, Research and Development Law, 5744-1984, or the Research Law, to which we are subject due to our receipt of grants from the Office of the Chief Scientist of the Israeli Ministry of Economy, or OCS, a recipient of OCS grants such as us must report to the applicable authority of the OCS regarding any change of control or any change in the holding of the means of control of our Company which transforms any non-Israeli citizen or resident into an “interested party”, as defined in the Research Law, in our Company, and in the latter event, the non-Israeli citizen or resident shall execute an undertaking in favor of the OCS, in a form provided under the OCS guidelines.

Because a certain portion of our expenses is incurred in currencies other than the U.S. Dollar, our results of operations may be harmed by currency fluctuations and inflation.

Our reporting and functional currency is NIS, but some portion of our clinical trials and operations expenses are in the U.S. Dollar and Euro. As a result, we are exposed to some currency fluctuation risks. We may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the NIS. These measures, however, may not adequately protect us from adverse effects.

We have received Israeli government grants for certain of our research and development activities. The terms of these grants may require us 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 the repayment of the grants. Such grants may be terminated or reduced in the future, which would increase our costs.

Under the Research Law, research and development programs which meet specified criteria and are approved by a committee of the OCS are eligible for grants. The grants awarded are typically up to 50% of the project’s expenditures, as determined by the research committee. The grantee is required to pay royalties to the OCS on income generated from the sale of products (and related services associated with such products), whether received by the grantee or any affiliated entity, as defined in the Encouragement of Industrial Research and Development Regulations (Royalty Rates and Rules for Payment), 5756-1996, or the Royalty Regulations, developed, in whole or in part, within the framework of an OCS-funded project or deriving therefrom. In accordance with the provisions of the Royalty Regulations, royalties are paid beginning from the date of the sale of the first product developed according to an OCS-funded project at rates between 3% to 6% (though typically not greater than 4.5%) of sales of the product, depending on the situation and applicable criteria, and are payable until the repayment of the full amount of the total OCS funding linked to the U.S. Dollar and accrued interest (LIBOR), or in certain cases, payable up to the increased royalty cap. The terms of the OCS participation also require that products developed using government grants be manufactured in Israel and that the technology developed thereunder may not be transferred outside of Israel, unless approval is received from the OCS (such approval is not required for the transfer of a portion of the manufacturing capacity which does not exceed, in the aggregate, 10% of the portion declared to be manufactured abroad in the applications for funding, in which case only notification is required) and additional payments are made to the OCS. However, this does not restrict the export of products that incorporate the funded technology. Following the full payment of such royalties and interest, there is generally no further liability for payment. Nonetheless, the restrictions under the Research Law (as generally specified herein) will continue to apply even after we have repaid the full amount of royalty payable pursuant to the grants.

Ordinarily, as a condition to obtaining approval to manufacture outside Israel, we would be required to pay increased royalties, as set forth in the Research Law. The total amount to be repaid to the OCS would also be adjusted to between 120% and 300% of the grants, depending on the manufacturing volume that is performed outside Israel. A company also has the option of declaring in its OCS grant application its intention to exercise a portion of the manufacturing capacity abroad, thus avoiding the need to obtain additional approval after approval of such application by the OCS. However, even if OCS approval is granted for the manufacture of products outside Israel or if the transfer of manufacturing abroad is at a rate that does not require such approval (i.e., at a rate of up to 10% in excess of the portion declared to be manufactured abroad in the applications),

40

the obligation with regard to payment of increased royalties still applies with respect to, and to the extent of, such transfer of manufacturing outside of Israel.

The Research Law restricts the ability to transfer know-how funded by the OCS outside of Israel. Transfer of OCS-funded know-how outside of Israel requires prior OCS approval and is subject to certain payments to the OCS calculated according to formulae provided under the Research Law. A transfer for the purpose of the Research Law means an actual sale of the OCS-funded know-how, any license to develop the OCS-funded know-how or the products resulting from the OCS-funded know-how or any other transaction, which, in essence, constitutes a transfer of the OCS-funded know-how. A mere license solely to market products resulting from the OCS-funded know-how would not be deemed a transfer for the purpose of the Research Law. It should be noted that specific regulations regarding licensing of OCS-funded intellectual property are under preparation but are not yet public.

If we wish to transfer OCS-funded know-how, the terms for approval shall be determined according to the character of the transaction and the consideration paid to us for such transfer. The OCS approval to transfer know-how created, in whole or in part, in connection with an OCS-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 OCS calculated according to a formula provided under the Research Law that is based, in general, on the ratio between the aggregate OCS grants received by the company and the company’s aggregate investments in the project that was funded by these OCS 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 new redemption fee formula that is based, in general, on the ratio between aggregate OCS grants received by the company and the company’s aggregate research expenses, multiplied by the transaction consideration. The Regulations for the Encouragement of Research and Development in the Industry (the Maximum Payment for the Transfer of Know-How in Accordance with Section 19B(b)(1) and (2), 5777-2012), or the Cap Regulations, establish a maximum payment of the redemption fee paid to the OCS under the above mentioned formulas and differentiates between two situations: (i) in the event that the company sells its OCS-funded know-how, in whole or in part, or is sold as part of certain merger and acquisition transactions, and subsequently ceases to conduct business in Israel, the maximum redemption fee under the above mentioned formulas shall be no more than six times the amount received (plus annual interest) for the applicable know-how being transferred, or the entire amount received, as applicable; (ii) in the event that following the transactions described above (i.e., asset sale of OCS-funded know-how or transfer as part of certain merger and acquisition transactions), the company continues to conduct its research activity in Israel (for at least three years following such transfer and keeps on staff at least 75% of the number of research employees it had for the six months before the know-how was transferred), then the company is eligible for a reduced cap of the redemption fee of no more than three times the amounts received (plus annual interest) for the applicable know-how being transferred, or the entire amount received, as applicable.

Subject to prior consent of the OCS, the company may transfer the OCS-funded know-how to another Israeli company. If the OCS-funded know-how is transferred to another Israeli entity, the transfer would still require OCS approval but will not be subject to the payment of the redemption fee (although there will be an obligation to pay royalties to the OCS from the income of such sale transaction as part of the royalty payment obligation). In such case, the acquiring company would have to assume all of the selling company’s responsibilities towards the OCS as a condition to OCS approval.

Our research and development efforts have been financed, partially, through grants that we have received from the OCS. We therefore must comply with the requirements of the Research Law and related regulations. As of March 31, 2015, we have received approximately NIS 26.4 million. Therefore, the discretionary approval of an OCS committee will be required for any transfer to third parties outside of Israel of rights related to our Accordion Pill, which has been developed with OCS funding. We may not receive the required approvals should we wish to transfer this technology, manufacturing and/or development outside of Israel in the future. We may be required to pay penalties in addition to repayment of the grants. Such grants may be terminated or reduced in the future, which would increase our costs. OCS approval is not required for the export of any products resulting from the OCS-funded research or development in the ordinary course of business.

41

Risks Related to Ownership of Our Ordinary Shares

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 be negatively impacted.

The trading market for our 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 negatively impact our share price or trading volume.

We have not paid, and do not intend to pay, dividends on our ordinary shares and, therefore, unless our ordinary shares appreciate in value, our investors may not benefit from holding our ordinary shares.

We have not paid any cash dividends on our ordinary shares since inception. We do not anticipate paying any cash dividends our ordinary shares in the foreseeable future. Moreover, the Israeli Companies Law, as amended, or the Companies Law, imposes certain restrictions on our ability to declare and pay dividends. See “Description of Share Capital — Dividends” for additional information. As a result, investors in our ordinary shares will not be able to benefit from owning our ordinary shares unless the market price of our ordinary shares becomes greater than the price paid for the shares by such investors and they are able to sell such shares. We cannot assure you that you will ever be able to resell our ordinary shares at a price in excess of the price paid for the shares.

The public trading market for our ordinary shares is volatile and may result in higher spreads in share prices, which may limit the ability of our investors to sell their ordinary shares at a profit, if at all.

Our ordinary shares currently trade on the TASE. Our results of operations and the value of our investments are affected by volatility in the securities markets. These difficulties and the volatility of the securities markets in general, and specifically during economic slowdowns, have affected and may continue to affect our ability to realize our investments or to raise financing, which in turn may result in us having to record impairment charges.

Our ordinary shares will be traded on more than one market and this may result in price variations.

Our ordinary shares have been traded on the TASE since 2010, and we are applying for listing our ordinary shares on the NASDAQ Capital Market. Trading in our ordinary shares on these markets will take place in different currencies (U.S. dollars on the NASDAQ Capital Market and NIS on the TASE), and at different times (resulting from different time zones, trading days and public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price of our ordinary shares in the United States.

We do not know whether a market in the United States for our ordinary shares will be sustained or what the market price of our ordinary shares will be and as a result it may be difficult for you to sell your ordinary shares at or above the offering price or at all.

Although our ordinary shares now trade on the TASE, an active trading market for our shares may not be sustained. The initial public offering price will be based, in part, on the price of our ordinary shares on the TASE and determined by negotiation between us and the representatives of the underwriters, and the price may not be indicative of prices that will prevail in the trading market. The market price of our ordinary shares following this offering is therefore likely to be highly volatile and could be subject to wide fluctuations in price as a result of various factors, some of which are beyond our control. It may be difficult for you to sell your ordinary shares without depressing the market price for the ordinary shares or at all. As a result of these and other factors, you may not be able to sell your ordinary shares at or above the offering price or at all. Further, an inactive market may also impair our ability to raise capital by selling our ordinary shares and may impair our ability to enter into strategic partnerships or acquire companies or products by using our ordinary shares as consideration. Although we intend to apply for the listing of our ordinary shares on the NASDAQ Capital Market, an active trading market for our ordinary shares may never

42

develop or may not be sustained if one develops. If an active market for our ordinary shares does not develop or is not sustained, it may be difficult to sell your ordinary shares.

The market price of our ordinary shares may fluctuate significantly, which could result in substantial losses by our investors.

The market price of our ordinary shares may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

      inability to obtain the approvals necessary to commence further clinical trials;

      results of clinical and preclinical studies;

      announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

      announcements of technological innovations, new products or product enhancements by us or others;

      adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

      changes or developments in laws, regulations or decisions applicable to our product candidates or patents;

      any adverse changes to our relationship with manufacturers or suppliers;

      announcements concerning our competitors or the pharmaceutical or biotechnology industries in general;

      achievement of expected product sales and profitability or our failure to meet expectations;

      our commencement of or results of, or involvement in, litigation, including, but not limited to, any product liability actions or intellectual property infringement actions;

      any major changes in our board of directors, management or other key personnel;

      legislation in the United States, Europe and other foreign countries relating to the sale or pricing of pharmaceuticals;

      announcements by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;

      expiration or terminations of licenses, research contracts or other collaboration agreements;

      public concern as to the safety of therapeutics we, our licensees or others develop;

      success of research and development projects;

      developments concerning intellectual property rights or regulatory approvals;

      variations in our and our competitors’ results of operations;

      changes in earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts;

      future issuances of ordinary shares or other securities;

      general market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors, including factors unrelated to our operating performance; and

      the other factors described in this “Risk Factors” section.

These factors and any corresponding price fluctuations may materially and adversely affect the market price of our ordinary shares, which would result in substantial losses by our investors.

43

Further, the stock market in general, the NASDAQ Capital Market and the market for biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of small companies like ours. Broad market and industry factors may negatively affect the market price of our ordinary shares regardless of our actual operating performance. In addition, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly. Price volatility of our ordinary shares might be worse if the trading volume of our ordinary shares is low. In the past, following periods of market volatility, shareholders have often instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful. Future sales of our ordinary shares could also reduce the market price of such shares.

Moreover, the liquidity of our ordinary shares will be limited, not only in terms of the number of ordinary shares that can be bought and sold at a given price, but by potential delays in the timing of executing transactions in our ordinary shares and a reduction in security analyst and media’s coverage of our Company, if any. These factors may result in lower prices for our ordinary shares than might otherwise be obtained and could also result in a larger spread between the bid and ask prices for our ordinary shares. In addition, without a large float, our ordinary shares will be less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of our ordinary shares may be more volatile. In the absence of an active public trading market, an investor may be unable to liquidate its investment in our ordinary shares. Trading of a relatively small volume of our ordinary shares may have a greater impact on the trading price of our shares than would be the case if our public float were larger. We cannot predict the prices at which our ordinary shares will trade in the future.

The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.

We have obtained a tax ruling from the Israeli Tax Authority according to which our activity has been qualified as an “industrial activity,” as defined in the Law for the Encouragement of Capital Investments, 1959, generally referred to as the Investment Law, and is eligible for tax benefits as a “Benefited Enterprise,” which will apply to the turnover attributed to such enterprise, for a period of up to ten years from the first year in which we generated taxable income. The tax benefits under the Benefited Enterprise status are scheduled to expire at the end of 2023.

In order to remain eligible for the tax benefits of a Benefited Enterprise, we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. In addition, in order to remain eligible for the tax benefits available to the Benefited Enterprise, we must also comply with the conditions set forth in the tax ruling. These conditions include, among other things, that the production, directly or through subcontractors, of all our products should be performed within certain regions of Israel. If we do not meet these requirements, the tax benefits would be reduced or canceled.

There is no assurance that our future taxable income will qualify as Benefited Enterprise income or that the benefits described above will be available to us in the future.

We expect to be characterized as a passive foreign investment company for the taxable year ending December 31, 2015, and, as such, our U.S. shareholders may suffer adverse tax consequences.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. We expect to be classified as a PFIC for 2015. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, there can be no assurance that we will not be classified as a PFIC in any future year. If we were to be characterized as a PFIC for U.S. federal income tax purposes in any taxable year during which a U.S. Investor, as defined in “Taxation — U.S. Federal Income Tax Consequences”, owns ordinary shares, such U.S. Investor could face adverse U.S. federal income tax consequences, including having gains realized on the sale of our ordinary shares classified as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Investors, and having interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. Investors to make “qualified electing fund elections” if we are classified as a PFIC. See “Taxation — U.S. Federal Income Tax Consequences.”

44

Your percentage ownership in us may be diluted by future issuances of share capital, which could reduce your influence over matters on which shareholders vote.

Following the completion of this offering, our board of directors will have the authority, in most cases without action or vote of our shareholders, to issue all or any part of our authorized but unissued shares, including ordinary shares issuable upon the exercise of outstanding warrants and options. Issuances of additional shares would reduce your influence over matters on which our shareholders vote.

The sale of a substantial number of our ordinary shares after this offering may cause the market price of our ordinary shares to decline.

Sales of a substantial number of ordinary shares in the public market following this offering, or the perception that these sales could occur, could cause the market price of our ordinary shares to decline. Prior to the date of this prospectus, we had 5,609,310 ordinary shares outstanding. Of those shares, 5,530,724 were freely tradable, without restriction, in the public markets in Israel. Such shares represented approximately 98.6% of our outstanding ordinary shares as of that date. Any sales of those shares or any perception in the market that such sales may occur could cause the trading price of our ordinary shares to decline. The remaining 78,586 shares are currently restricted as a result of securities laws, but will become eligible to be sold at various times after the date of this prospectus. In addition, in connection with our August 2013 financing round, we agreed to file a registration statement in the U.S., registering for resale by the purchasers, subject to certain conditions, up to 519,475 ordinary shares, including 198,812 ordinary shares underlying purchased warrants. In addition, we issued to these investors an additional 80,166 warrants exercisable into ordinary shares because we did not complete (i) a public offering raising at least $12.0 million on the NASDAQ Stock Market or (ii) a merger with a company traded on the NASDAQ Stock Market which holds at least $12.0 million of unencumbered cash prior to September 30, 2014. We agreed to file a registration statement registering for resale the ordinary shares underlying these warrants as well.

All of our directors and executive officers, as well as our principal shareholders, have agreed with the underwriters, subject to certain exceptions, not to dispose of, exercise, convert or hedge any of their ordinary shares or securities convertible into or exchangeable for ordinary shares during the period from the date of this prospectus continuing through the date 180 days after the completion of this offering, subject to extension in some circumstances, except with the prior written consent of the representatives of the underwriters. Upon expiration of this lock-up period, up to approximately        ordinary shares held by affiliates and others may become eligible for sale, subject to the restrictions under Rule 144.

In addition, up to 1.4 million ordinary shares that are either subject to outstanding options or reserved for future issuance under the 2005 Plan will be eligible for sale in the public market. We intend to file a registration statement on Form S-8 under the Securities Act after this offering to register such ordinary shares.

If these additional ordinary shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our ordinary shares could decline.

Because our ordinary shares may be, or become, a “penny stock,” it may be more difficult for investors to sell their ordinary shares, and the market price of our ordinary shares may be adversely affected.

Our ordinary shares may be, or become, a “penny stock” if, among other things, the share price is below $5.00 per share, they are not listed on a national securities exchange or they have not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.

If applicable, the penny stock rules may make it difficult for investors to sell their ordinary shares. Because of the rules and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our ordinary shares may be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not

45

always be able to resell their ordinary shares publicly at times and prices that they feel are appropriate and the market price of our ordinary shares may be adversely affected.

If our ordinary shares are approved for listing on the NASDAQ Capital Market, we must then meet the NASDAQ Capital Market’s continued listing requirements and comply with the other NASDAQ rules, or we may risk delisting. Delisting could negatively affect the price of our ordinary shares, which could make it more difficult for us to sell securities in a financing and for you to sell your ordinary shares.

If our ordinary shares are approved for listing on the NASDAQ Capital Market, we will be required to meet the continued listing requirements of the NASDAQ Capital Market and comply with the other NASDAQ rules, including those regarding director independence and independent committee requirements, minimum shareholders’ equity, minimum share price and certain other corporate governance requirements. In particular, we would be required to maintain a minimum bid price for our listed ordinary shares of $1.00 per share. If we do not meet these continued listing requirements, our ordinary shares could be delisted. Delisting of our ordinary shares from the NASDAQ Capital Market would cause us to pursue eligibility for trading on other markets or exchanges, or on the pink sheets. In such case, our shareholders’ ability to trade, or obtain quotations of the market value of, our ordinary shares would be severely limited because of lower trading volumes and transaction delays. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our securities. There can be no assurance that our ordinary shares, if delisted from the NASDAQ Capital Market in the future, would be listed on a national securities exchange or quoted on a national quotation service, the OTCBB or the pink sheets. Delisting from the NASDAQ Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make it more difficult for us to raise additional capital, adversely affect the market liquidity of our ordinary shares, reduce security analysts’ coverage of us and diminish investor, supplier and employee confidence. In addition, as a consequence of any such delisting, our share price could be negatively affected and our shareholders would likely find it more difficult to sell, or to obtain accurate quotations as to the prices of, our ordinary shares.

46

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements about our expectations, beliefs and intentions regarding, among other things, our product development efforts, business, financial condition, results of operations, strategies, plans and prospects. In addition, from time to time, we or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should”, “could”, “might”, “seek”, “target”, “will”, “project”, “forecast”, “continue” or “anticipate” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements may be included in, among other things, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements.

This prospectus identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth under the heading “Risk Factors.”

We believe these forward-looking statements are reasonable; however, these statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere in this prospectus. Given these uncertainties, you should not rely upon forward-looking statements as predictions of future events.

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this prospectus and are expressly qualified in their entirety by the cautionary statements included in this prospectus. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events, except as required by applicable law. In evaluating forward-looking statements, you should consider these risks and uncertainties.

47

PRICE RANGE OF OUR ORDINARY SHARES

Our ordinary shares have been trading on the TASE under the symbol “INTP” since February 16, 2010. No trading market currently exists for our ordinary shares in the United States. We have applied to list our ordinary shares on the NASDAQ Capital Market under the symbol “    .”

The following table sets forth, for the periods indicated, the reported high and low closing sale prices of our ordinary shares on the TASE in NIS and U.S. dollars.

 

 

NIS

 

U.S. Dollar ($)

 

 

Price Per Ordinary Share

 

Average Daily

 

Price Per Ordinary Share

 

 

High

 

Low

 

Trading Volume

 

High

 

Low

Annual:

 

 

 

 

 

 

 

 

 

 

2014

 

53.27

 

18.15

 

321,031

 

13.38

 

4.56

2013

 

78.18

 

33.64

 

475,647

 

19.64

 

8.45

 

 

 

 

 

 

 

 

 

 

 

Quarterly:

 

 

 

 

 

 

 

 

 

 

First Quarter 2015

 

29.75

 

24.35

 

224,477

 

7.47

 

6.12

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2014

 

34.05

 

18.15

 

387,649

 

8.56

 

4.56

Third Quarter 2014

 

43.45

 

28.70

 

383,179

 

10.92

 

7.21

Second Quarter 2014

 

42.31

 

34.53

 

289,747

 

10.63

 

8.68

First Quarter 2014

 

53.27

 

42.56

 

221,625

 

13.38

 

10.69

 

 

 

 

 

 

 

 

 

 

 

Fourth Quarter 2013

 

61.09

 

33.64

 

442,141

 

15.35

 

8.45

Third Quarter 2013

 

61.04

 

52.72

 

332,181

 

15.34

 

13.25

Second Quarter 2013

 

67.72

 

52.97

 

518,635

 

17.02

 

13.31

First Quarter 2013

 

78.18

 

60.79

 

612,878

 

19.64

 

15.27

 

 

 

 

 

 

 

 

 

 

 

Most Recent Six Months:

 

 

 

 

 

 

 

 

 

 

May 2015

 

33.25

 

30.23

 

177,655

 

8.35

 

7.60

April 2015

 

35.72

 

28.74

 

545,984

 

8.97

 

7.22

March 2015

 

29.75

 

26.45

 

176,159

 

7.47

 

6.65

February 2015

 

29.50

 

25.75

 

110,302

 

7.41

 

6.47

January 2015

 

29.20

 

24.35

 

381,534

 

7.34

 

6.12

December 2014

 

31.00

 

18.15

 

418,022

 

7.79

 

4.56

On March 31, 2015, the last reported sale price of our ordinary shares on the TASE was NIS 27.52 per share.

As of March 31, 2015, there was one shareholder of record of our ordinary shares. The number of record holders is not representative of the number of beneficial holders of our ordinary shares, as the shares of all shareholders who hold ordinary shares that are traded on the TASE are recorded in the name of our Israeli share registrar, Mizrahi Tfahot Registration Company Ltd. As of March 31, 2015, there were no record holders of our ordinary shares in the United States.

48

USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $     million (after deducting underwriting discounts and commissions and estimated offering expenses payable by us) or approximately $     million if the underwriters exercise their over-allotment option in full, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. These estimates are based upon an assumed initial public offering price of $     per ordinary share, which is the mid-point of the price range on the cover of this prospectus. Each $1.00 increase (decrease) in the assumed initial public offering price of $     per share would increase (decrease) the net proceeds to us from this offering by approximately $     million, or approximately $     million if the underwriters exercise their over-allotment option in full, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We currently intend to use the net proceeds from this offering as follows:

      approximately $30 million to fund our Phase III clinical trial for our current product candidate, AP-CDLD, and its continued development; and

      the balance for working capital, capital expenditures and other general corporate purposes, including a Phase I clinical trial that we expect to initiate in the second half of 2015 for one of our early stage pipeline products.

Although we have listed above how we currently intend to use the proceeds from this offering, our management retains broad discretion over the use of the proceeds. We currently anticipate that our costs for completion of the Phase III clinical trial for AP-CDLD will be approximately $30 million and that our other general corporate and research and development costs until  the completion of the Phase III clinical trial will be an additional approximately $10 million, inclusive of cash currently on hand. If our net proceeds from this offering are less than $35 million or if our costs for completion of the Phase III clinical trial for AP-CDLD or other general corporate and research and development expenses costs are higher than we currently anticipate, we will need to raise additional capital in order to complete our Phase III clinical trial for AP-CDLD. We may ultimately use the proceeds for different purposes than what we currently intend. Pending the uses described above, we intend to invest the net proceeds in accordance with our investment policy, as may be amended from time to time, which currently includes investments in bonds issued by the State of Israel and corporate bonds with a minimum of an A rating by Israeli rating agencies, bank deposits carrying interest and bank deposits in foreign currency.

If the anticipated proceeds will not be sufficient to fund all the proposed purposes, our management will determine the order of priority for using the proceeds, as well as the amount and sources of other funds needed.

49

DIVIDENDS AND DIVIDEND POLICY

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.

In addition, the distribution of dividends is limited by Israeli law, which permits the distribution of dividends only out of distributable profits. See “Description of Share Capital — Dividends.” In addition, if we pay a dividend out of income attributed to our Benefited Enterprise during the tax exemption period, we may be subject to tax on the grossed-up amount of such income at the corporate tax rate which would have been applied to such Benefited Enterprise’s income had we not enjoyed the exemption. See “Taxation — Israeli Tax Considerations and Government Programs.”

50

CAPITALIZATION

The following table sets forth our cash and cash equivalents, total debt and capitalization as of March 31, 2015:

      on an actual basis; and

      on a pro forma, as adjusted, basis to also give effect to our sale of      ordinary shares in this offering at an assumed initial public offering price of $     per ordinary share, the mid-point of the price range on the cover of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

You should read this table in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

 

 

As of March 31, 2015

 

 

Actual

 

As Adjusted

 

 

(unaudited)

 

(unaudited)

 

 

In thousands, in $

Cash and cash equivalents

 

3,184

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

Ordinary shares

 

679

 

 

 

Share premium

 

50,227

 

 

 

Warrants

 

229

 

 

 

Accumulated deficit

 

(43,668

)

 

 

Total shareholders’ equity

 

7,467

 

 

 

Total capitalization

 

7,467

 

 

 

A $1.00 increase (decrease) in the assumed public offering price of $     per ordinary share would increase (decrease) the adjusted amount of each of cash and cash equivalents and total shareholders’ equity by approximately $     million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A      ordinary share increase in the number of ordinary shares offered by us together with a concomitant $1.00 increase in the assumed public offering price of $     per ordinary share would increase our as adjusted cash and cash equivalents by approximately $     million after deducting estimated underwriting discounts and estimated offering expenses payable by us. Conversely, a      ordinary share decrease in the number of ordinary shares offered by us together with a concomitant $1.00 decrease in the assumed public offering price of $     per ordinary share would decrease our as adjusted cash and cash equivalents by approximately $     million after deducting estimated underwriting discounts and estimated offering expenses payable by us.

The number of ordinary shares to be outstanding immediately after this offering is based on 5,609,310 ordinary shares outstanding as of May 15, 2015. This number excludes:

      the 819,662 ordinary shares that we have reserved for issuance upon the exercise of outstanding options under the 2005 Plan and 8,035 options issued outside of the 2005 Plan, as of May 15, 2015 at a weighted average exercise price of NIS 41. 13 per share and that expire between 2016 and 2021;

      the 80,166 ordinary shares issuable upon exercise of 80,166 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on October 22, 2016;

      the 198,812 ordinary shares issuable upon exercise of 198,812 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on September 17, 2017; and

      any ordinary shares issuable as a result of anti-dilution adjustments that may be triggered with respect to the ordinary shares and warrants issued pursuant to an investment agreement that we entered into in connection with our August 2013 financing round; for more information on the potential anti-dilution adjustments with respect to these shares and warrants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Financial derivatives instrument.”

51

[If we were to sell ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), we would be required to issue approximately      ordinary shares to investors in our August 2013 financing round in accordance with a formula set forth in the investment agreement for such financing round, less the shares that we already issued following any previous event that triggered the anti-dilution right, or Downside Protection, based on approximately 192,398 ordinary shares held by investors in our August 2013 financing round as of May 15, 2015 and the exercise price of the warrants described above still held by investors in our August 2013 financing round would be reduced to approximately NIS       .]

52

DILUTION

If you purchase ordinary shares in this offering, your ownership interest in us will be diluted to the extent of the difference between the public offering price per share of our ordinary shares and the pro forma net tangible book value per share of our ordinary shares as adjusted to give effect to this offering. Dilution results from the fact that the per share offering price of the ordinary shares is substantially in excess of the book value per share attributable to the ordinary shares held by existing shareholders.

Our net tangible book value as of March 31, 2015, was approximately NIS 33.9 million, or $8.5 million, corresponding to NIS 6.28, or $1.58, per share of our ordinary shares. We calculate net tangible book value per share by taking the amount of our total tangible assets, reduced by the amount of our total liabilities, and then dividing that amount by the total number of ordinary shares outstanding. On a pro forma basis, giving effect to the sale of the ordinary shares in this offering at an assumed public offering price of NIS     , $    , per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Dilution is determined by subtracting pro forma net tangible book value per share of ordinary shares, as adjusted to give effect to this offering, from the public offering price per share of ordinary shares. The pro forma net tangible book value per share after the offering is calculated by dividing the pro forma net tangible book value of NIS     , or $    , by     , which is equal to our pro forma issued and outstanding ordinary shares. The difference between the public offering price and the pro forma net tangible book value (deficit) per share represents an immediate increase in the net tangible book value of NIS     , or $    , per share to existing shareholders and immediate dilution of NIS     , $    , per share to new investors purchasing our ordinary shares in this offering.

The following table illustrates this dilution on a per share basis:

Assumed public offering price per Share

 

NIS

 

$

 

Increase in net tangible book value per share attributable to purchasers purchasing ordinary shares in this offering

 

 

 

 

 

Pro forma net tangible book value per share of ordinary shares, as adjusted to give effect to this offering

 

 

 

 

 

Dilution per share to purchasers in this offering

 

NIS

 

$

 

The following table summarizes, as of March 31, 2015, the differences between the number of shares purchased from us, the total consideration paid to us and the average price per share paid by existing shareholders in purchases of our shares from us and by purchasers in this offering. [As the table shows, new purchasers purchasing shares in this offering will pay an average price per share substantially higher than our existing shareholders paid.] The table below is based on      ordinary shares outstanding immediately after the consummation of this offering and excludes:

      the 819,662 ordinary shares that we have reserved for issuance upon the exercise of outstanding options under the 2005 Plan and 8,035 options issued outside of the 2005 Plan, as of May 15, 2015 at a weighted average exercise price of NIS 41. 13 per share and that expire between 2016 and 2021;

      the 80,166 ordinary shares issuable upon exercise of 80,166 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on October 22, 2016;

      the 198,812 ordinary shares issuable upon exercise of 198,812 warrants outstanding as of May 15, 2015 at an exercise price of NIS 35 per share that expire on September 17, 2017; and

      any ordinary shares issuable as a result of anti-dilution adjustments that may be triggered with respect to the ordinary shares and warrants issued pursuant to an investment agreement that we entered into in connection with our August 2013 financing round; for more information on the potential anti-dilution adjustments with respect to these shares and warrants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Financial derivatives instrument.”

53

[If we were to sell ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), we would be required to issue approximately      ordinary shares to investors in our August 2013 financing round as a result of the Downside Protection based on approximately 192,398 ordinary shares held by investors in our August 2013 financing round as of May 15, 2015 and the exercise price of the warrants described above still held by investors in our August 2013 financing round would be reduced to approximately NIS     .]

The table below is based upon a public offering price of NIS     , $    , per share (the midpoint of the price range set forth on the cover page of this prospectus, and excludes underwriting discounts and commissions and estimated offering expenses payable by us):

 

 

 

 

 

 

Average

 

Average

 

 

 

 

 

 

Price

 

Price

 

 

Shares Purchased

 

Total Consideration

 

Per Share

 

Per Share

 

 

Number

 

Percent

 

Amount

 

Amount

 

Percent

 

(NIS)

 

(USD)

 

 

 

 

 

 

(thousands
in NIS)

 

(thousands
in USD)

 

 

 

 

 

 

Existing shareholders

 

 

 

%

 

 

 

$

 

 

%

 

 

 

$

 

Purchasers in this offering

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

%

 

 

 

$

 

 

%

 

 

 

$

 

An increase or decrease in the assumed public offering price by NIS     , or $1.00, per share would increase or decrease our pro forma net tangible book value per share after this offering by NIS     , or $    , and would increase or decrease the dilution to new purchasers by NIS     , or $    , per ordinary share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and estimated offering expenses payable by us.

54

SELECTED FINANCIAL DATA

The following tables summarize our financial data. We have derived the selected statements of comprehensive loss data for the years ended December 31, 2013 and 2014 and the balance sheet data as of December 31, 2013 and 2014 from our audited financial statements included elsewhere in this prospectus. The summary financial statement data as of March 31, 2015 and for the three months ended March 31, 2014 and 2015 are derived from our unaudited interim financial statements that are included elsewhere in this prospectus.  In the opinion of management, these unaudited interim financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of our financial position and operating results for these periods.  Results from interim periods are not necessarily indicative of results that may be expected for the entire year. Our historical results are not necessarily indicative of the results that may be expected in the future. The following selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included elsewhere in this prospectus.

Our financial statements included in this prospectus were prepared in accordance with IFRS, as issued by the IASB, and reported in NIS. The report of Kesselman & Kesselman, our independent registered public accounting firm, a member firm of PricewaterhouseCoopers International Limited on those financial statements is also included elsewhere in this prospectus.

The following selected financial data for the periods and as of the dates indicated are qualified by reference to and should be read in conjunction with our financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are included elsewhere in this prospectus.

 

 

Year ended December 31,

 

Three months ended March 31,

 

 

2013

 

2014

 

2014

 

2014

 

2015

 

2015

 

 

NIS in thousands

 

Convenience translation
into USD
in thousands

 

NIS in thousands

 

Convenience translation
into USD
in thousands

Statements of comprehensive loss data: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

17,410

 

 

17,740

 

 

4,457

 

 

5,149

 

 

5,593

 

 

1,405

 

Less-participation in research and development expenses

 

(8,393

)

 

(5,544

)

 

(1,393

)

 

(1,707

)

 

(135

)

 

(34

)

Research and development expenses, net

 

9,017

 

 

12,196

 

 

3,064

 

 

3,442

 

 

5,458

 

 

1,371

 

General and administrative expenses

 

9,633

 

 

9,332

 

 

2,345

 

 

2,124

 

 

2,412

 

 

606

 

Other gains, net

 

(474

)

 

(836

)

 

(210

)

 

(275

)

 

(91

)

 

(22

)

Operating loss

 

18,176

 

 

20,692

 

 

5,199

 

 

5,291

 

 

7,779

 

 

1,955

 

Financial income

 

(434

)

 

(1,136

)

 

(285

)

 

(482

)

 

(596

)

 

(150

)

Financial expenses

 

648

 

 

812

 

 

204

 

 

28

 

 

336

 

 

84

 

Financial expenses (income), net

 

214

 

 

(324

)

 

(81

)

 

(454

)

 

(260

)

 

(66

)

Loss and comprehensive loss

 

18,390

 

 

20,368

 

 

5,118

 

 

4,837

 

 

7,519

 

 

1,889

 

 

 

 

NIS

 

USD

 

NIS

 

USD

Basic and diluted loss per ordinary share

 

4.25

 

4.22

 

1.06

 

1.05

 

1.39

 

0.35

Number of ordinary shares used in computing loss per ordinary share (in tho usands)

 

4,322

 

4,825

 

4,825

 

4,596

 

5,400

 

5,400

55

 

 

December 31,

 

March 31,

 

March 31,

 

 

2013

 

2014

 

2014

 

2015

 

2015

 

2015 – Pro Forma (2)

 

 

NIS in thousands

 

Convenience translation into USD in thousands

 

NIS in thousands

 

Convenience
translation
into USD
in thousands

 

NIS in thousands

 

Convenience
translation
into USD
in thousands

Statement of financial position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

11,763

 

22,287

 

5,599

 

12,674

 

3,184

 

 

 

 

Financial assets at fair value through profit or loss

 

17,887

 

7,820

 

1,965

 

8,038

 

2,020

 

 

 

 

Other receivables

 

2,583

 

1,120

 

282

 

1,550

 

389

 

 

 

 

Restricted bank deposits

 

260

 

292

 

73

 

287

 

72

 

 

 

 

Property and equipment

 

14,991

 

17,101

 

4,297

 

17,002

 

4,272

 

 

 

 

Total assets

 

47,484

 

48,620

 

12,216

 

39,551

 

9,937

 

 

 

 

Accounts payable and
accruals

 

4,923

 

7,219

 

1,814

 

5,605

 

1,408

 

 

 

 

Derivative financial instruments

 

10,298

 

4,528

 

1,138

 

4,227

 

1,062

 

 

 

 

Total liabilities

 

15,221

 

11,747

 

2,952

 

9,832

 

2,470

 

 

 

 

Total equity

 

32,263

 

36,873

 

9,264

 

29,719

 

7,467

 

 

 

 

____________

(1)    Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.

56

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

You should read the following discussion along with our financial statements and the related notes included in this prospectus. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed under “Risk Factors.” U.S. dollar amounts herein have been translated for the convenience of the reader from the original NIS amounts at the representative rate of exchange as of March 31, 2015 (NIS 3.98 = $1.00). Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forward-looking statements. See “Special Note About Forward-Looking Statements.” We have prepared our financial statements in accordance with IFRS, as issued by the IASB.

Overview

We are a clinical stage biopharmaceutical company focused on developing drugs based on our proprietary Accordion Pill platform technology, which we refer to as the Accordion Pill. Our Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention, or GR, and specific release mechanism. Our product pipeline currently includes two product candidates in clinical trial stages. Our leading product candidate, Accordion Pill Carbidopa/Levodopa, or AP-CDLD, is indicated for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients . We have successfully completed a Phase II clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and have agreed with the U.S. Food and Drug Administration, or the FDA, on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients. See “Business — Current Regulatory Status of AP-CDLD.” We are preparing to commence a Phase III clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and currently anticipate that such trial will begin in the second half of 2015, assuming the successful completion of this offering. See “Busin ess — Current Regulatory Status of AP-CDLD.” Our second product candidate, Accordion Pill Zaleplon, or AP–ZP, is indicated for the treatment of insomnia, including sleep induction and the improvement of sleep maintenance. We have successfully completed a Phase II clinical trial for AP–ZP for the treatment of insomnia under an Investigational New Drug, or IND, application that we submitted to the FDA on August 10, 2009 for AP–ZP as a treatment for the induction and maintenance of sleep in patients suffering from insomnia. In our correspondence with the FDA, the FDA previously agreed that an acceptable regulatory pathway for each of AP-CDLD and AP–ZP would be to file a new drug application, or NDA, pursuant to Section 505 (b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA. See “Business — Government Regulation — 505(b)(2) Applications.” The FDA also agreed that one pivotal Phase III clinical trial might be sufficient for the NDA submission for AP–ZP.

Our Accordion Pill platform technology is designed to increase the time that drugs are retained in the stomach as compared to other oral dosage forms, such as tablets and capsules. This capability is particularly important to drugs with a narrow absorption window, or NAW, which are absorbed mainly in the upper part of the gastrointestinal, or GI, tract. Regular controlled-release formulations of such drugs currently on the market sometimes fail to provide an efficient solution, as once the regular dosage form has passed the drug’s NAW in the upper GI tract, the drug is not, or is very poorly, absorbed in the distal parts of the GI tract. The Accordion Pill platform technology is also designed for drugs with low solubility, which do not efficiently dissolve in the GI tract, and drugs with low permeability, which do not efficiently penetrate the intestinal wall and reach the blood stream, such as Biopharmaceutics Classification System, or BCS, Class II (low solubility, high permeability) and Class IV (low solubility, low permeability) drugs. According to The AAPS Journal published by the American Association of Pharmaceutical Scientists, of the top 200 oral drugs in the United States, Great Britain, Spain and Japan in 2006, approximately 30% to 35% were BCS Class II drugs and approximately 5% to 10% were BCS Class IV drugs. Further, according to Drug Development & Delivery, in 2006 approximately 90% of new chemical entities, or NCEs, in development were either BCS Class II or Class IV drugs. The Accordion Pill’s efficient GR and specific release mechanism prolongs the absorption phase of drugs with an NAW, which can result in significantly more stable plasma levels. In addition, the Accordion Pill has demonstrated an enhancement of the absorption of a poorly soluble, BCS Class II/IV drug in a crossover pharmacokinetics, or PK, clinical study in 12 healthy volunteers. For poorly soluble drugs, we believe that our technology acts through the gradual delivery of an undissolved drug by the Accordion Pill in the stomach, which allows for the complete dissolution of the drug dose in the stomach over the delivery period. The gradual passage of the drug from the stomach to the upper part of the GI tract enables an increase in the amount of the drug that can be dissolved and thus absorbed, in the upper small bowel. In addition, we believe that bile secretion in the upper part of the GI tract also improves the intestinal environment for better absorption. Finally, the significant dilution of the drug solution in the small bowel caused by prolonged delivery increases the amount of the drug available for absorption.

Our clinical trials to date have demonstrated that the Accordion Pill is retained in the stomach for eight to 12 hours, as compared to significantly shorter time periods, typically as little as two to three hours, when using other solid dosage

57

forms. The efficient GR and the predetermined release profile for each specific drug associated with our Accordion Pill technology demonstrated a significant improvement in pharmacokinetics, or PK, which is the drug plasma level over time and a corresponding improvement in efficacy and safety.

History of Losses

Since our inception, we have generated significant losses in connection with our research and development, including the clinical development of AP-CDLD and AP–ZP. As of March 31, 2015, we had an accumulated deficit of NIS 174 million (approximately $43.7 million). We expect that additional losses will be accumulated in the near future as a result of our research and development activities. Such research and development activities will require further resources if we are to be successful. As a result, we may continue to incur operating losses, and we may need to obtain additional funds to further develop our research and development programs and our product candidates.

As a result of, among other things, our research and development activities, as well as the fact that we have not generated revenues since our inception, for the three months ended March 31, 2015 and for the year ended December 31, 2014, our net loss was approximately NIS 7.5 million (approximately $1.9 million) and NIS 20.4 million (approximately $5.1 million), respectively.

We have funded our operations primarily through the sale of equity securities (both in private placements and in public offerings on the TASE as described above), funding received from the OCS and other funds, and reimbursements received pursuant to collaborations with multinational pharmaceutical companies in connection with certain research and development activities. From our inception until our initial public offering in Israel in February 2010, we raised approximately NIS 8 4.5 milli on in various private placements. We received approximately NIS 35.3 million in gross proceeds from our initial public offering in Israel and have raised an additional NIS 88.9 million from various rights issuances and private placements since February 2010. As of March 31, 2015, we had approximately NIS 20.7 million (approximately $5.2 million) of cash, cash equivalents and financial assets at fair value.

Operating Expenses

Our current operating expenses consist of two components, research and development expenses and general and administrative expenses.

Research and Development Expenses :

Our research and development expenses during the 12 months ended 2013, 2014 and the three month period ended Mar ch 31 , 2015 relate primarily to the development of AP–CDLD. We record expenses for each product candidate on a direct cost basis only, rather than on a project basis. Direct costs, which include contract research organization expenses, clinical trials and pre-clinical trials, consulting expenses, APIs, and other similar expenses are recorded to the product candidate for which such expenses are incurred. However, salaries and related personnel expenses, indirect materials and costs for facilities and equipment are considered overhead and are shared among all of our product candidates and are not recorded on a product-by-product basis. Our direct costs related to product candidates other than AP–CDLD for 2013, 2014 and the three month period ended March 31, 2015 were insignificant. We expect our research and development expense to remain our primary expense in the near future as we continue to develop our products. Increases or decreases in research and development expenditures are primarily attributable to the number and/or duration of the clinical studies that we conduct.

We expect that a large percentage of our research and development expense in the future will be incurred in support of our current and future clinical development projects. Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we will incur in the continued development of our product candidates in our pipeline for potential commercialization. Clinical development timelines, the probability of success and development costs can differ materially from expectations. We expect to continue to conduct additional clinical trials for our product candidates.

While we are currently focused on advancing our product development, our future research and development expenses will depend on the clinical success of our product candidates, as well as ongoing assessments of the candidates’ commercial potential. As we obtain results from clinical studies, we may elect to discontinue or delay clinical studies for one or more of our product candidates in certain indications in order to focus our resources on more promising product candidates. Completion of clinical studies may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

We expect our research and development expenses to increase in the future from current levels as we continue the advancement of our clinical product development. The lengthy process of completing clinical studies and seeking regulatory

58

approval for our product candidates requires the expenditure of substantial resources. Any failure or delay in completing clinical studies, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.

General and Administrative Expenses :

Our general and administrative expenses consist primarily of salaries and expenses related to employee benefits, including share-based compensation, for our general and administrative employees, which includes employees in executive and operational roles, including finance and human resources, as well as consulting, legal and professional services related to our general and administrative operations.

We expect our general and administrative expenses, such as accounting and legal fees, to increase after we become a public company in the United States.

Other Gains, Net

Other gains, net, consist of change in the fair value of the financial assets at fair value through profit or loss and indemnification from an insurance company that was received in 2014.

Financial Income

Financial income consists primarily of change in fair value of derivative financial instruments, interest income on our cash and cash equivalents and foreign currency exchange income.

Financial Expenses

Financial expenses consist primarily of change in fair value of derivative financial instruments, expenses related to bank charges and foreign currency exchange expense.

Results of Operations

The table below provides our results of operations for the year ended December 31, 2014 as compared to the year ended December 31, 2013 and for the three month period ended March 31, 2015 compared to the three month period ended Mar ch 31, 2014.

 

 

Year ended December 31,

 

Three months ended March 31,

 

 

2013

 

2014

 

2014

 

2014

 

2015

 

2015

 

 

NIS in thousands

 

Convenience translation
into USD
in thousands

 

NIS in thousands

 

Convenience translation
into USD
in thousands

Statements of comprehensive loss data: (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

17,410

 

 

17,740

 

 

4,457

 

 

5,149

 

 

5,593

 

 

1,405

 

Less-participation in research and development expenses

 

(8,393

)

 

(5,544

)

 

(1,393

)

 

(1,707

)

 

(135

)

 

(34

)

Research and development expenses, net

 

9,017

 

 

12,196

 

 

3,064

 

 

3,442

 

 

5,458

 

 

1,371

 

General and administrative expenses

 

9,633

 

 

9,332

 

 

2,345

 

 

2,124

 

 

2,412

 

 

606

 

Other gains, net

 

(474

)

 

(836

)

 

(210

)

 

(275

)

 

(91

)

 

(22

)

Operating loss

 

18,176

 

 

20,692

 

 

5,199

 

 

5,291

 

 

7,779

 

 

1,955

 

Financial income

 

(434

)

 

(1,136

)

 

(285

)

 

(482

)

 

(596

)

 

(150

)

Financial expenses

 

648

 

 

812

 

 

204

 

 

28

 

 

336

 

 

84

 

Financial expenses (income), net

 

214

 

 

(324

)

 

(81

)

 

(454

)

 

(260

)

 

(66

)

Loss and comprehensive loss

 

18,390

 

 

20,368

 

 

5,118

 

 

4,837

 

 

7,519

 

 

1,889

 

 

 

 

NIS

 

USD

 

NIS

 

USD

Basic and diluted loss per ordinary share

 

4.25

 

4.22

 

1.06

 

1.05

 

1.39

 

0.35

____________

(1)    Data on diluted loss per share were not presented in the financial statements because the effect of the exercise of the options and warrants is anti-dilutive.

59

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

Research and Development Expenses, Net

Our research and development expenses, net, for the three months ended March 31, 2015 amounted to approximately NI S 5.5 m illion (approximately $1.4 million) compared to approximately NIS 3.4 million for the three months ended March 31, 2014. The increase was primarily due to the decrease in research and development-related grants received in the three months ended March 31, 2015 compared to the three months ended March 31, 2014 of approximately NIS 1.6 million since the OCS grant for the year 2015 was approved in May 2015 and the grant for the three month period ended March 31, 2015 will be recorded in the second quarter of 2015. In addition, expenses for professional services, materials and subcontractors increased by approximately NIS 449,000 for the three months ended March 31, 2015 compared to the comparable prior year period.

General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2015 amounted to approximately NI S 2.4 mil lion (approximately $606,000) compared to approximately NIS 2.1 million for the three months ended March 31, 2014. The increase was primarily due to an increase in professional services of approximately NIS 284,000.

Other Gains, Net

Our other gains, net, for the three months ended March 31, 2015 amounted to approximately NIS 91,000 (approximately $23,000), compared to approximately NIS 275,000 for the three months ended March 31, 2014. The other gains, net, for the three months ended March 31, 2015 consisted of change in the fair value of the financial assets at fair value through profit or loss of approximately NIS 91,000. The other gains, net, for the three months ended March 31, 2014 consisted primarily of indemnification from an insurance company of approximately NIS 300,000.

Operating Loss

As a result of the foregoing research and development, net, general and administrative expenses, and other gains, net, as well as the fact that we have not generated revenues since our inception, for the three months ended March 31, 2015 our operating loss was approximately NIS 7.8 million (approximately $2 million) compared to our operating loss for the three months ended March 31, 2014 of approximately NIS 5.3 million. This increase primarily resulted from a decrease in research and development-related grants received in the three months ended March 31, 2015 compared to the three months ended March 31, 2014 of approximately NIS 1.6 million since the OCS grant for the year 2015 was approved in May 2015 and the grant for the three months period ended March 31, 2015 will be recorded in the second quarter of 2015. In addition, expenses for professional services, materials and subcontractors increased by approximately NIS 733,000.

Financial Income, Net

For the three months ended March 31, 2015, we had financial income from changes in fair value of derivative financial instruments of approximately NIS 301,000 and financial income from interest on cash equivalents of approximately NIS 26,000. In addition to bank fees, we also had financial expenses, net, from foreign currency exchange of approximately NIS 47,000.

Loss and Comprehensive Loss

As a result of the foregoing research and development, net, general and administrative expenses, and other gains, net and financial income, net, as well as our failure to generate revenues since our inception, for the three months ended March 31, 2015 our loss and comprehensive loss was approximately NIS 7.5 million (approximately $1.9 million) compared to our net loss for the three months ended March 31, 2014 of approximately NIS 4.8 million. This increase primarily resulted from a decrease in research and development-related grants received in the three months ended March 31, 2015 compared to the three months ended March 31, 2014 of approximately NIS 1.6 million since the OCS grant for the year 2015 was approved in May 2015 and the grant for the three months period ended March 31, 2015 will be recorded only in the second quarter of 2015. In addition, expenses for professional services, materials and subcontractors increased by approximately NIS 733,000 and financial income, net, decreased by approximately NIS 194,000.

60

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

Research and Development Expenses, Net

Our research and development expenses, net, for the year ended December 31, 2014 amounted to approximately NIS 12.2 million (approximately $3.1 million) compared to approximately NIS 9.0 million for the year ended December 31, 2013. The increase was primarily due to the decrease in research and development-related grants received in 2014 compared to 2013 in the amount of approximately NIS 2.8 million.

General and Administrative Expenses

Our general and administrative expenses for the year ended December 31, 2014 amounted to approximately NIS 9.3 million (approximately $2.3 million) compared to approximately NIS 9.6 million for the year ended December 31, 2013. The decrease was primarily due to a decrease in share-based compensation in the amount of approximately NIS 646,000 and an increase in professional services in the amount of approximately NIS 175,000.

Other Gains, Net

Our other gains, net, for the year ended December 31, 2014 amounted to approximately NIS 836,000 (approximately $210,000), compared to approximately NIS 474,000 for the year ended December 31, 2013. The other gains for the year ended December 31, 2014 consist primarily of indemnification from an insurance company in the amount of approximately NIS 887,000. The other gains for the year ended December 31, 2013 consist of change in the fair value of the financial assets at fair value through profit or loss in the amount of approximately NIS 474,000.

Operating Loss

As a result of the foregoing research and development, net, general and administrative expenses, and other gains, net, as well as our failure to generate revenues since our inception, for the year ended December 31, 2014 our operating loss was approximately NIS 20.7 (approximately $5.2 million) compared to our operating loss for the year ended December 31, 2013 of approximately NIS 18.2 million. This increase primarily resulted from a decrease in research and development-related grants received in 2014 compared to 2013 in the amount of approximately NIS 2.8 million.

Financial Income (Expense), Net

For the year ended December 31, 2014, we had financial income from interest on cash equivalents in the amount of approximately NIS 617,000 and foreign currency exchange income in the amount of approximately NIS 519,000. In addition to bank fees, we also had financial expenses from change in fair value of derivative financial instruments in the amount of approximately NIS 729,000.

Loss and Comprehensive Loss

As a result of the foregoing research and development, net, general and administrative expenses, and other gains, net and financial expense/income, net, as well as our failure to generate revenues since our inception, for the year ended December 31, 2014 our loss and comprehensive loss was approximately NIS 20.4 million (approximately $5.1 million) compared to our net loss for the year ended December 31, 2013 of approximately NIS 18.4 million. This increase primarily resulted from a decrease in research and development-related grants received in 2014 compared to 2013 in the amount of approximately NIS 2.8 million, net of an increase in financial income in 2014 compared to 2013 in the amount of approximately NIS 702,000.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through public (in Israel) and private offerings of our equity securities, grants from the OCS and other grants from organizations such as the Michael J. Fox Foundation, and payments received under the feasibility and related agreements we have entered into with multinational pharmaceutical companies, pursuant to which we are entitled to full coverage of our development costs with regard to the projects specified in those agreements.

61

As of March 31, 2015, we had cash and cash equivalents and financial assets at fair value through profit or loss of approximately NIS 20.7 million (approximately $5.2 million) as compared to approximately NIS 25.6 million as of March 31, 2014.

Net cash used in operating activities was approximately NIS 6.8 million (approximately $1.7 million) for the three months ended March 31, 2015 compared with net cash used in operating activities of approximately NIS 4.4 million for the three months ended March 31, 2014. This increase primarily resulted from an increase in our loss and comprehensive loss of approximately NIS 2.7 million, net of an increase in changes in operating asset and liability items of approximately NIS 372,000.

We had negative cash flow from investing activities of approximately NIS 2.5 million (approximately $624,000) for the three months ended March 31, 2015 compared to negative cash flow from investing activities of approximately NIS 3.0 million for the three months ended March 31, 2014. The change primarily resulted from a decrease in acquisition of financial assets at fair value through profit or loss of approximately NIS 2.6 million and an increase in purchase of property and equipment of approximately NIS 2.2 million.

During the three months ended March 31, 2015 we had no financing activities.

As of December 31, 2014, we had cash and cash equivalents and financial assets at fair value through profit or loss of approximately NIS 30.1 million (approximately $7.6 million) as compared to approximately NIS 29.6 million as of December 31, 2013.

Net cash used in operating activities was approximately NIS 17 million (approximately $4.3 million) for the year ended December 31, 2014 compared with net cash used in operating activities of approximately NIS 12.2 million for the year ended December 31, 2013. This increase primarily resulted from an increase in our loss and comprehensive loss in the amount of approximately NIS 2 million and decrease in our accounts payable and accruals in the amount of approximately NIS 3.1 million.

We had positive cash flow from investing activities of approximately NIS 9.7 million (approximately $2.4 million) for the year ended December 31, 2014 as compared to a negative cash flow from investing activities of approximately NIS 11.3 million for the year ended December 31, 2013. The change primarily resulted from a decrease in purchase of property and equipment in the amount of approximately NIS 5.1 million and from proceeds from disposal of financial assets at fair value through profit or loss, net, in the amount of approximately NIS 16 million.

We had positive cash flow from financing activities of approximately NIS 17.2 million (approximately $4.3 million) for year ended December 31, 2014 as compared to a positive cash flow from financing activities of approximately NIS 33.5 million for the year ended December 31, 2013. The positive cash flow from financing activities for the year ended December 31, 2014 was primarily due to proceeds from the issuance of shares and warrants in the amount of approximately NIS 16.6 million.

As of March 31, 2015, we believe our existing cash resources will be sufficient to fund our projected cash requirements approximately through at least the next 12 months. Nevertheless, we will require significant additional financing in the future to fund our operations if and when we progress into additional clinical trials of our product candidates for their respective indications and clinical trials for other indications, obtain regulatory approval for one or more of our product candidates obtain commercial manufacturing capabilities and commercialize one or more of our product candidates.

Current Outlook

According to our estimates and based on our budget, we believe our existing cash resources will be sufficient to fund out projected cash requirements through at least the next 12 months. Even if we are able to raise funds in the offering contemplated herein, we believe we will need to raise significant additional funds before we have any cash flow from operations, if at all.

Developing drugs, conducting clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. We will require significant additional financing in the future to fund our operations, including if and when we progress into additional clinical trials of our product candidates, obtain regulatory approval for one or more of our product candidates, obtain commercial manufacturing capabilities and commercialize one or more of our product candidates. We currently anticipate that, assuming consummation of the current offering, we will utilize approximately $     million for clinical trial activities over the course of the next 12 months. Our future capital requirements will depend on many factors, including, but not limited to:

      the progress and costs of our clinical trials and other research and development activities;

      the scope, prioritization and number of our clinical trials and other research and development programs;

62

      the amount of revenues and contributions we receive under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates;

      the costs of the development and expansion of our operational infrastructure;

      the costs and timing of obtaining regulatory approval for one or more of our product candidates;

      the ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under our potential future licensing agreements;

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

      the costs and timing of securing manufacturing arrangements for clinical or commercial production;

      the costs of contracting with third parties to provide sales and marketing capabilities for us or establishing such capabilities ourselves;

      the costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or technology;

      the magnitude of our general and administrative expenses; and

      any cost that we may incur under future in- and out-licensing arrangements relating to one or more of our product candidates.

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through the net proceeds from the current offering, debt or equity financings or by out-licensing applications of one or more of our product candidates. 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, one or more of our product candidates.

Contractual Obligations

Our significant contractual obligations as of March 31, 2015 included the following (in thousands):

 

 

Total

 

Less than
1 Year

 

1 – 3 Years

 

3 – 5 Years

 

More than
5 Years

Operating Lease Obligations in NIS

 

1.3 million

 

1.3 million

 

 

 

Operating Lease Obligations in $

 

330,000

 

330,000

 

 

 

In connection with the purchase of an automated manufacturing line for the production of the Accordion Pill, we had a contractual obligation as of March 31, 2015 of approximately NIS 2.4 million. We did not have any other material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment, as of March 31, 2015.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Quantitative and Qualitative Disclosure of 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, results of operations or cash flows due to adverse changes in financial market prices and rates, including interest rates and foreign exchange rates, of financial instruments. Our market risk exposure is primarily a result of interest rates and foreign currency exchange rates.

Interest Rate Risk

Following the filing of this Registration Statement on Form F-1, we do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily of cash and cash equivalents and financial assets at fair value. Following

63

this filing, we may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities, if any, of our investments to date, their carrying value has always approximated their fair value. If we decide to invest in investments other than cash and cash equivalents, it will be our policy to hold such investments to maturity in order to limit our exposure to interest rate fluctuations.

Foreign Currency Exchange Risk

Our foreign currency exposures give rise to market risk associated with exchange rate movements of the NIS, our functional and reporting currency, mainly against the U.S. dollar and the Euro. Although the NIS is our functional currency, a small portion of our expenses are denominated in both U.S. dollar and Euro. Our U.S. dollar and Euro expenses consist principally of payments made to sub-contractors and consultants for clinical trials and other research and development activities as well as payments made to purchase new equipment. We anticipate that a sizable portion of our expenses will continue to be denominated in currencies other than the NIS. If the NIS fluctuates significantly against either the U.S. dollar or the Euro, it may have a negative impact on our results of operations. To date, fluctuations in the exchange rates have not materially affected our results of operations or financial condition for the periods under review.

To date, we have not engaged in hedging transactions. In the future, we may enter into 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.

Trend Information

We are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research and development efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Critical Accounting Policies

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires management to make estimates that affect the reported amounts of our assets, liabilities and expenses. Significant accounting policies employed by us, including the use of estimates, are presented in the notes to the financial statements included elsewhere in this prospectus. We periodically evaluate our estimates, which are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s subjective or complex judgments, resulting in the need for management to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.

Share-based payments

For the purpose of the evaluation of the fair value and the manner of the recognition of share-based compensation, our management is required to estimate, among others, various parameters that are included in the calculation of the fair value of the option as well as our results and the number of options that will vest. The fair value of our ordinary shares used in the calculation of the fair value of the option is the market price of our ordinary shares on the TASE. The actual results and the estimates that are made in the future may be significantly different from the current estimates.

Financial derivatives instrument

The investors in our August 2013 financing round have the benefit of anti-dilution protection until the occurrence of the earliest of one of the following events: (1) the consummation of an initial public offering of our ordinary shares on the NASDAQ

64

Stock Market in which we raise at least $12.0 million or a merger with a company traded on the NASDAQ Stock Market which immediately following the closure of such merger holds free and unencumbered cash and/or publically raised, prior to September 30, 2014, a cumulative amount of at least $12.0 million, (2) the consummation of a merger or acquisition event, or an M&A Event, or (3) four years from the execution of the investment agreement. During this period, in the event of the occurrence of an M&A Event or new investment in our company at a price per share that is lower than NIS 66.93, or the Protection Threshold Price, an investor who still holds ordinary shares purchased in the August 2013 financing round will be entitled to [additional shares in accordance with a formula set forth in the investment agreement, less the shares that were already issued following any previous event that triggered the anti-dilution right, or] Downside Protection. As a result of anti-dilution shares issued to investors in our August 2013 financing round following our October 2014 rights offering, the Protection Threshold Price has effectively been reduced to NIS 32.65. [If we were to sell ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), we would be required to issue approximately      ordinary shares to investors in our August 2013 financing round as a result of the Downside Protection based on approximately 192,398 ordinary shares held by investors in our August 2013 financing round as of May 15, 2015.] In addition, in the event that the Downside Protection mechanism is activated, the exercise price of the warrants still held by investors in our August 2013 financing round will be reduced by a percentage equal to the same percentage discount that the price per share in the applicable investment or M&A Event bears to NIS 36.5, which is the current adjustment threshold for the warrants. [If we were to sell ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), the exercise price of the warrants still held by investors in our August 2013 financing round would be reduced to approximately NIS      .] Under the terms of the investment agreement, the investors have the right to exercise the warrants into shares through a net-settlement mechanism. Both the Downside Protection mechanism and the net-settlement mechanism were accounted for as financial liabilities that are financial derivatives instruments. We anticipate that the Downside Protection will terminate immediately following this offering.

These liabilities are measured at fair value using the Monte Carlo model, a standard valuation technique for this type of instrument, on the basis of observable inputs (such as the price of our shares, the risk-free interest and the exercise price) and unobservable inputs (such as expected volatility, expected life and the probability of potential scenarios as described in the investment agreement).

Jumpstart Our Business Startups Act of 2012

We are an emerging growth company within the meaning of the rules under the Securities Act, and we will utilize certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies. Such exemptions include, but are not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404, (ii) being exempt from adoption of new or revised financial accounting standards until they would apply to private companies, (iii) being exempt from compliance with any new requirements adopted by the PCAOB requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements and (iv) reduced disclosure obligations regarding executive compensation. We could remain an “emerging growth company” for up to five years from the date of our first sale of common equity securities pursuant to an effective registration statement under the Securities Act, or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenue exceeds $1.0 billion (as such amount is indexed for inflation every five years by the SEC to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest $1.0 million) or more, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three year period.

The JOBS Act also permits us, as an “emerging growth company,” to take advantage of an extended transition period to comply with certain new or revised accounting standards if such standards apply to companies that are not issuers. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards when they are required to be adopted by issuers. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Government Policies and Factors

We believe certain governmental policies and factors could materially affect, directly or indirectly, our operations or your investment. Please see “Risk Factors — Risks Related to Our Company and Its Business” and “Risk Factors — Risks Related to the Regulation of Our Company and Its Business.”

65

BUSINESS

Overview

We are a clinical stage biopharmaceutical company focused on developing drugs based on our proprietary Accordion Pill platform technology, which we refer to as the Accordion Pill. Our Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention, or GR, and specific release mechanism. Our product pipeline currently includes two product candidates in clinical trial stages. Our leading product candidate, Accordion Pill Carbidopa/Levodopa, or AP-CDLD, is indicated for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients . We have successfully completed a Phase II clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and have agreed with the U.S. Food and Drug Administration, or the FDA, on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients. See “— Current Regulatory Status of AP-CDLD.” We are preparing to commence a Phase III clinical trial for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and currently anticipate that such trial will begin in the second half of 2015, assuming the successful completion of this offering. See “— Current Regulatory Status of AP-CDLD.” Our second product candidate, Accordion Pill Zaleplon, or AP–ZP, is indicated for the treatment of insomnia, including sleep induction and the improvement of sleep maintenance. We have successfully completed a Phase II clinical trial for AP–ZP for the treatment of insomnia under an Investigational New Drug, or IND, application that we submitted to the FDA on August 10, 2009 for AP–ZP as a treatment for the induction and maintenance of sleep in patients suffering from insomnia. In our correspondence with the FDA, the FDA previously agreed that an acceptable regulatory pathway for AP-CDLD and AP–ZP would be to file a new drug application, or NDA, pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, which is a streamlined approval pathway that may accelerate the time to commercialize and decrease the costs of AP–CDLD and AP–ZP, as compared to those typically associated with a NCE. See “— Government Regulation — 505(b)(2) Applications.” The FDA also agreed that one pivotal Phase III clinical trial might be sufficient for the NDA submission for AP–ZP.

Our Accordion Pill Platform Technology

We believe that our Accordion Pill technology has the potential to improve the performance of approved drugs and drugs in development, including Levodopa, by providing several distinct advantages, including, but not limited to:

      increasing efficacy of the drug incorporated into the Accordion Pill;

      improving safety of the drug incorporated into the Accordion Pill by reducing the side effects of such drugs;

      reducing the number of daily administrations required to achieve the same or superior therapeutic effect as the non-Accordion Pill version of such drugs; and

      expanding the intellectual property protection period of the drug incorporated into the Accordion Pill.

Our anticipated ability to file NDAs pursuant to Section 505(b)(2) for our existing pipeline and future products increases the likelihood of accelerating the time to commercialization of our products and decreasing costs when compared to those typically associated with NCEs.

Our Accordion Pill platform technology is designed to increase the time that drugs are retained in the stomach as compared to other oral dosage forms, such as tablets and capsules. This capability is particularly important to drugs with a NAW, which are absorbed mainly in the upper part of the gastrointestinal, or GI, tract. Regular controlled-release formulations of such drugs currently on the market sometimes fail to provide an efficient solution, as once the regular dosage form has passed the drug’s NAW in the upper GI tract, the drug is not, or is very poorly, absorbed in the distal parts of the GI tract. The Accordion Pill platform technology is also designed for drugs with low solubility, which do not efficiently dissolve in the GI tract, and drugs with low permeability, which do not efficiently penetrate the intestinal wall and reach the blood stream, such

66

as Biopharmaceutics Classification System, or BCS, Class II (low solubility, high permeability) and Class IV (low solubility, low permeability) drugs. According to The AAPS Journal published by the American Association of Pharmaceutical Scientists, of the top 200 oral drugs in the United States, Great Britain, Spain and Japan in 2006, approximately 30% to 35% were BCS Class II drugs and approximately 5% to 10% were BCS Class IV drugs. Further, according to Drug Development & Delivery, in 2006 approximately 90% of NCEs in development were either BCS Class II or Class IV drugs. Poorly soluble drugs are sometimes characterized by low bioavailability, which is strongly affected by the drug’s solubility. In addition, the extent of absorption of poorly soluble drugs can be dose dependent, leading to non-linear pharmacokinetics, or PK, behavior. The Accordion Pill’s efficient GR and specific release mechanism prolongs the absorption phase of drugs with an NAW, which can result in significantly more stable plasma levels. In addition, the Accordion Pill has demonstrated an enhancement of the absorption of a poorly soluble, BCS Class II/IV drug in a crossover PK clinical study in 12 healthy volunteers. For poorly soluble drugs, we believe that our technology acts through the gradual delivery of an undissolved drug by the Accordion Pill in the stomach, which allows for the complete dissolution of the drug dose in the stomach over the delivery period. The gradual passage of the drug from the stomach to the upper part of the GI tract enables an increase in the amount of the drug that can be dissolved and thus absorbed, in the upper small bowel. In addition, we believe that bile secretion in the upper part of the GI tract also improves the intestinal environment for better absorption. Finally, the significant dilution of the drug solution in the small bowel caused by prolonged delivery increases the amount of the drug available for absorption.

Our clinical trials to date have demonstrated that the Accordion Pill is retained in the stomach for eight to 12 hours, as compared to significantly shorter time periods, typically as little as two to three hours, when using other solid dosage forms. The efficient GR and the predetermined release profile for each specific drug associated with our Accordion Pill technology demonstrated a significant improvement in pharmacokinetics, or PK, which is the drug plasma level over time and a corresponding improvement in efficacy and safety.

The following chart depicts the Accordion Pill’s capability to improve the PK of Levodopa, which is a drug characterized by an NAW:

AP-CDLD Phase II clinical trial — more stable Levodopa levels with statistically significant
reduced peak-to-trough fluctuations

Levodopa plasma levels in n=8 advanced Parkinson’s disease patients following twice daily, or b.i.d, administration (eight hours apart) of AP-CDLD 50/375 versus four times daily, or q.i.d, administration (four hours apart) of a commercial Carbidopa/Levodopa formulation (equivalent daily Levodopa dose). The PK study was performed on day seven, following six days of drug administration at home. No Levodopa medication was allowed for ten hours before the first administration at day seven. The PK results showed that the peak to trough ratio, which measures the maximum average concentration relative to the minimum average concentration of LD plasma levels, was reduced from 29.9 to 3.2 with the AP-CDLD.

67

The following chart depicts the Accordion Pill’s capability to improve the PK of a BCS Class II/IV drug combined with our Accordion Pill technology that is currently on the market and is characterized with poor solubility:

PK results with the Accordion Pill with a BCS Class II/IV drug that is currently available
on the market in 12 healthy volunteers

The results of our clinical trial have demonstrated approximately a 100% increase in bioavailability, or drug plasma levels, in 12 healthy volunteers with our Accordion Pill technology, as compared to the commercial formulation of the drug. Furthermore, the results demonstrated that the increase in bioavailability obtained when administering one Accordion Pill and two Accordion Pills was proportional to the increase in dosage, or linear absorption, whereas the commercial formulation does not show linear absorption in these dosage ranges.

Although there is no assurance that these results will be repeated in other instances, we believe that these results are important because the enhancement of bioavailability of poorly soluble drugs is one of the main challenges facing the pharmaceutical industry. According to The AAPS Journal published by the American Association of Pharmaceutical Scientists, of the top 200 oral drugs in the United States, Great Britain, Spain and Japan in 2006, approximately 30% to 35% were BCS Class II drugs and approximately 5% to 10% were BCS Class IV drugs. Further, according to Drug Development & Delivery, in 2006 approximately 90% of NCEs in development were either BCS Class II or Class IV drugs.

Our Accordion Pill technology enables us to combine active pharmaceutical ingredients, or APIs, which are also referred to as drugs, and inactive ingredients that are included in the FDA’s list of approved inactive ingredients, into pharmaceutical-grade, biodegradable polymeric films, welded into a planar structure, folded into the shape of an accordion and placed inside of a capsule. While in the stomach, the capsule dissolves and the Accordion Pill unfolds and releases the drug in a predetermined profile. In order to provide optimum results for each drug, each Accordion Pill drug differs and will likely differ in several ways, including composition, structure and properties.

The diagram below illustrates the general structure of the Accordion Pill:

68

All of the ingredients in the Accordion Pill (active and inactive) are combined physically, not chemically, thus maintaining the chemical composition of the active ingredients.

The Accordion Pill has a drug release mechanism that is independent of the retention mechanism. It can combine both immediate and controlled release profiles, as well as more than one drug. We have demonstrated that the Accordion Pill has the ability to carry a drug load of up to 550 mg. We have also demonstrated that the Accordion Pill fully degrades in the intestine once it is expelled from the stomach.

We have conducted more than 30 clinical trials with more than 3,000 administrations to study the safety and efficacy of the Accordion Pill, including the Accordion Pill platform alone and the Accordion Pill platform with various APIs. No significant adverse events related to the Accordion Pill were reported in these clinical studies. These studies demonstrated that increasing gastro-retention time improves the performance of certain NAW and BCS Class II/IV drugs.

Our Product Pipeline

Our current product development pipeline includes two products in clinical trial stages. Our leading pipeline product, AP-CDLD, is focused on leveraging our Accordion Pill technology to improve the efficacy and safety of an approved drug for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients . We have agreed with the FDA on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients , including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients, which we anticipate initiating in the second half of 2015, assuming the successful completion of this offering. Our second product, AP–ZP, is for the treatment of insomnia. We are currently seeking a potential strategic partner for further clinical development and commercialization of AP–ZP and our future development plans for AP–ZP will depend on the results of this process. We have an exclusive license from Yissum, an affiliate of The Hebrew University of Jerusalem, for developing, manufacturing and global marketing of products based on the core technology used in the Accordion Pill.

New Product Development for Global Pharmaceutical Company

On April 15, 2015, we entered into an agreement for the development of a designated Accordion Pill with a marketed, proprietary drug of a global pharmaceutical company, which, to our knowledge, is one of the world’s 20 largest pharmaceutical companies in terms of market capitalization. Pursuant to the agreement, we will conduct activities for the development of the designated Accordion Pill pursuant to an agreed upon research plan, which will be funded by the global pharmaceutical company, subject to the achievement of certain research plan milestones. We granted the global pharmaceutical company an option to obtain an exclusive, worldwide, royalty bearing license to our technology, as implemented in the product being developed, for the current approved indication of its proprietary drug. Pursuant to the agreement and to the extent we are not otherwise precluded from doing so, at the request of the global pharmaceutical company, we will negotiate in good faith the

69

expansion of the license field for additional indications, and the terms and conditions thereof. Upon exercise of the option, the global pharmaceutical company will be responsible for, and bear all costs associated with, pre-clinical and clinical activities required for the purpose of obtaining regulatory approval for the product being developed, as well as for the manufacturing and commercialization thereof. The global pharmaceutical company has also agreed to consider in good faith engaging us as a manufacturer of commercial supply of the product being developed.

Pursuant to the agreement, we will be entitled to the following payments:

      $250,000 within 15 days from the execution of the agreement, for funding the research plan, and an additional aggregate amount of up to $670,000 for the achievement of research plan milestones;

      $8,000,000 in consideration for the exercise of the option;

      Several payments in an aggregate amount of $39 million upon the achievement of milestones related to the development of the product, regulatory filings for the purpose of obtaining regulatory approvals and reaching first commercial sales in the United States and Europe; and

      Royalties in a low single-digit rate on net sales, provided that the aggregate annual royalties will not exceed $2 5 milli on and the aggregate amount of royalties payable under the agreement will not exceed $100 million.

The agreement further includes provisions with respect to regulatory collaboration, confidentiality, title and maintenance of intellectual property owned by the parties and developed under the agreement, liability, indemnification and insurance. Pursuant to the agreement, our know-how and intellectual property existing as of the date of the agreement and new know-how and intellectual property developed by the parties under the agreement in connection with the Accordion Pill, which is not specifically related to the product being developed, will be owned by us and may be used by us for products and for purposes of additional collaborations, subject to the limits of the license.

Our Competitive Strengths

We believe our principal competitive strengths include the following:

      A leading product candidate, AP-CDLD, for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, which has received permission from the FDA to initiate a Phase III clinical trial that is expected to commence in 2015 . AP-CDLD, our leading product candidate, for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, has received permission from the FDA to initiate a Phase III clinical trial. We anticipate initiating our Phase III clinical trial of AP-CDLD in the second half of 2015. The European Parkinson’s Disease Association, or EPDA, estimated in 2007 that 6.3 million people worldwide suffer from Parkinson’s disease, and a 2014 report by Global Data estimated that the pharmaceutical market for Parkinson’s disease will reach $5.2 billion in the United States, Japan, France, Germany, Italy, Spain and the United Kingdom, or the Seven Major Markets, plus Brazil by 2022.

      Innovative and leverageable platform technology that enables us to develop multiple products and to provide substantial benefits for various classes of drugs with large potential markets . Our platform enables us to develop and produce multiple products for diverse markets, including our leading product – AP-CDLD. Our platform includes our proprietary technology and know-how, with which we have developed the Accordion Pill, including its independent drug release and GR mechanisms, and have combined various drugs with the Accordion Pill. Our platform technology can combine immediate and controlled release drug profiles and more than one drug and can incorporate drugs of various chemical and physical characteristics. Our Accordion Pill has improved PK and efficacy in clinical studies via its combination with various drugs belonging to different drug classes such as NAW and poorly soluble drugs (BCS Class II/IV).

      Lower development risks and costs for our pipeline products . We believe that developing Accordion Pills for additional drug candidates will be associated with reduced costs and regulatory risks compared to the development of NCEs and will allow us to develop our products in a cost-effective manner. The FDA has previously agreed that our two pipeline products in clinical trial stages would likely be eligible to file under Section 505(b)(2), assuming the successful completion of their respective Phase III clinical trials.

      No “special diet” requirements when using our Accordion Pill products . In our clinical trials, our Accordion Pill products provided better PK and efficacy of the drugs with which it was combined through prolonged GR under a regular calorie diet and did not require administration with a high calorie and high fat meal, which is a prerequisite for the administration of approved GR products currently on the market. This is highly important in the treatment of various diseases.

70

      Strong intellectual property protection . We believe that we have a strong intellectual property portfolio protecting our platform, combination of specific drugs with our platform and manufacturing and production processes. See “— Intellectual Property.”

      Proven manufacturing capabilities for clinical batches of our Accordion Pill platform technology . We have proven manufacturing capacity of clinical batches of our platform technology in a compliant GMP facility. See “— Manufacturing.”

Our Business Strategy

We plan to leverage our Accordion Pill technology platform to become a leading specialty pharmaceutical company focused on developing, manufacturing and commercializing improved proprietary versions of approved and development stage drugs for the treatment of various diseases.

We will continue to develop our existing product candidates while reviewing other drug candidates that may also benefit from our platform technology. We seek to create global partnerships to assist us in the development and marketing of our products and may also independently commercialize certain products in the U.S. We believe that our approach will allow us to continue to advance our current product candidates and should allow us to avoid dependency on a small number of drugs.

Using this approach, we have advanced our product candidates into various stages of clinical development. Specific elements of our current strategy include the following:

      Continue to advance our current pipeline by developing improved versions of drugs with reduced side effects and that enhance the efficacy of existing drugs . We expect that our products will offer significant advantages over the original versions of the drugs. Results from our completed Phase II clinical trial demonstrate that AP-CDLD can improve motor function in patients suffering “off time” episodes. “Off time” refers to debilitating periods of decreased motor and non-motor functions. We are pursuing the development and approval of AP-CDLD under the Section 505(b)(2) pathway, which allows an abbreviated path to approval relying on a single pivotal Phase III clinical trial. We anticipate initiating our pivotal Phase III clinical trial of AP-CDLD in the second half of 2015, assuming the successful completion of this offering. If our pivotal Phase III clinical trial is successful, we intend to file for regulatory approval in the United States.

      Utilize the 505(b)(2) regulatory pathway to leverage extensive existing clinical and regulatory experience with the original drugs and bring our improved versions of these drugs to market more quickly . An NDA submitted under Section 505(b)(2) of the FDCA is permitted to reference safety and effectiveness data submitted by the original manufacturer of the underlying approved drug as part of its NDA, be based on the FDA’s prior conclusions regarding the safety and effectiveness of that previously approved drug, or rely on in part on data in the public domain. Reliance on data collected by others may expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate to submit an NDA. As the FDA has previously agreed that our two current pipeline products in clinical trial stages would likely be eligible to file under Section 505(b)(2), assuming the successful completion of the Phase III clinical trials, we believe that there is a strong likelihood that our future products would similarly qualify. The factors related to this qualification are expected to reduce the time and costs associated with clinical trials when compared to a traditional NDA for an NCE. We also believe the strategy of targeting drugs with proven safety and efficacy provides a better prospect of clinical success of our proprietary development portfolio as compared to de novo drug development. We estimate that the average time to market and cost of clinical trials for our products could be less than that required to develop a new drug.

      Use our expertise with our platform technology to evaluate drug development and commercialization opportunities . We continuously seek attractive product candidates to develop and commercialize. We intend to focus on product candidates that we believe would be synergistic with our Accordion Pill technology. We intend to use our expertise in our technology and our pharmacological expertise to grow our product candidate portfolio.

      Seek attractive partnership opportunities . We believe that our Accordion Pill technology can be applied to many drugs that have already been approved by the FDA, as well as developmental stage drugs. We believe that the proprietary rights provided by our Accordion Pill technology, together with the clinical and compliance benefits, will be attractive to potential partners. We will seek to build a portfolio of commercially attractive partnerships in a blend of co-developments and licenses. Where possible, we will seek partnerships that allow us to participate significantly in the commercial success of each of the drugs. Although we are currently developing most of our current pipeline,

71

we are looking to partner with the owners of rights to patented drugs in order to develop Accordion Pill versions of those drugs, and we may seek strategic partners to market our Accordion Pill products worldwide. We may also seek arrangements with third parties to assist in the development and commercialization of our products. These arrangements will allow us to share the high development cost, minimize the risk of failure and enjoy our partners’ marketing capabilities, while also enabling us to treat a more significant number of patients.

      Develop products that target significant commercial opportunities . Our existing product candidates are directed at diseases that have major global markets. Our intent is to continue to develop products that present significant market opportunities by leveraging our According Pill technology.

      Maintain a prominent intellectual property position . We believe our licensed and proprietary patents and patent applications provide and will provide broad and comprehensive coverage for the use of our Accordion Pill technology for the treatment of certain diseases, focusing on BCS Class II/IV and NAW drugs, or drugs where longer retention in the upper GI could improve efficacy and absorption and reduce side effects. We seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that we believe are important to the development of our business. We also rely on know-how and continuing technological innovation to develop and maintain our proprietary position. We have submitted and intend to continue to submit patent applications for various Accordion Pill and drug combinations that we develop.

AP-CDLD for the Treatment of Parkinson’s Disease Symptoms in Advanced Parkinson’s Disease Patients

Parkinson’s disease

Parkinson’s disease is a progressive, degenerative disease characterized by movement symptoms such as involuntary tremor or trembling in the hands, arms and legs; muscle rigidity of the limbs and trunk; slowness of and a decline in movement; and impaired balance and coordination. In its advanced stages, the disease causes comprehensive dysfunction of the patient’s bodily systems, including difficulties in swallowing, speech disorders and significant mental decline. Parkinson’s disease results from a continuing loss of dopamine-producing nerve cells. Dopamine is required for normal functioning of the central nervous system and smooth, coordinated function of the body’s muscles and movement. According to the National Parkinson’s Foundation, the symptoms of Parkinson’s disease appear when approximately 60–80% of dopamine-producing cells are damaged.

Although there is presently no cure for Parkinson’s disease, there are a number of medications that provide relief from the symptoms. Dopamine replacement therapy with Levodopa is generally considered to be the most effective treatment for Parkinson’s disease. After 50 years of clinical use, Levodopa therapy still offers the best symptomatic control of Parkinson’s disease and is the most widely used therapy. Levodopa is converted into dopamine in the brain and is usually administered with Carbidopa, which helps prevent Levodopa from converting to dopamine outside the brain. Levodopa helps reduce tremor, stiffness and slowness and helps improve muscle control, balance and walking. Virtually all Parkinson’s disease patients will require Levodopa therapy during the course of their disease.

Parkinson’s disease patients typically experience a satisfactory response to initial treatment with Levodopa. However, at later stages of Parkinson’s disease, there is a decline in the capacity of the nigrostriatal dopaminergic system, or the brain pathways that moderate control of voluntary movement, to synthesize, store, and release dopamine. Therefore, the dopaminergic system becomes more and more dependent on dopamine from external sources, such as Levodopa treatment.

As the disease progresses, it becomes increasingly difficult to control the symptoms adequately by Levodopa treatment, and patients invariably develop motor complications, for the following reasons:

      The duration of the response after each Levodopa dose declines, resulting in a “wearing off” effect, wherein the clinical benefits of Levodopa are lost until the next dose reaches therapeutic levels.

      The patients suffer from longer periods in which Levodopa does not provide symptom relief and patients’ movements are severely restricted (i.e., off time).

      When Levodopa doses are increased to address the loss of clinical benefit, involuntary movements or troublesome dyskinesia emerges.

Recent studies have reported that up to 50% of patients show the onset of motor fluctuations within two years of starting conventional Levodopa therapy. For many patients with advanced Parkinson’s disease, the repeated emergence of off states can

72

occupy up to one-third or more of a typical waking day. The loss of consistent symptomatic control from Levodopa is a major challenge for the long-term management of Parkinson’s disease. When Parkinson’s disease patients experience “wearing off” between Levodopa doses, this short-duration response occurs in parallel to the drug’s peripheral PK profile. Therefore, with the evolution of these short-duration responses, improving the consistency in Levodopa’s plasma levels becomes the major factor for improving symptom control.

Oral Levodopa formulations currently on the market do not provide satisfactory consistent Levodopa plasma levels. There are two major challenges to maintaining consistency in Levodopa plasma levels: (i) the very short half-life of Levodopa (approximately 90 minutes) and (ii) the fact that Levodopa’s absorption is confined to the upper part of the GI tract (i.e., it has an NAW). For drugs with an NAW, conventional controlled release formulations are limited in providing long-acting performance, as once the drug has passed through the upper GI tract, it will no longer be absorbed. These factors result in high peak-to-trough ratios of Levodopa in the plasma, namely high variability of the concentration of the drug in the blood, rather than a consistent level being maintained, reducing the clinical benefits of Levodopa therapy. Providing stable Levodopa plasma levels is therefore a major unmet need for the long-term management of Parkinson’s disease.

Key opinion leaders interviewed by Datamonitor, a market research provider, summarized the unmet needs in Parkinson’s disease treatment to include, among others, greater efficacy in reducing motor complications, reducing side effects and reducing pill burden.

Market . According to a 2014 report by Global Data, Parkinson’s disease is the second most common chronic progressive neurodegenerative disorder in the elderly after Alzheimer’s disease, affecting 1%–2% of individuals worldwide over the age of 65. The EPDA estimated in 2007 that 6.3 million people worldwide suffer from Parkinson’s disease. According to a 2014 report by Global Data, the annual growth of Parkinson’s disease cases in individuals over the age of 65 from 2012 to 2022, in the Seven Major Markets plus Brazil, is estimated to be 3.28%. According to Global Data, in 2012 the market for pharmaceutical treatments for Parkinson’s disease was approximately $3.6 billion a year in the Seven Major Markets plus Brazil. Global Data estimates that the pharmaceutical market for Parkinson’s disease will reach $5.2 billion in the Seven Major Markets plus Brazil by 2022.

73

Our Solution — AP-CDLD

AP-CDLD, our lead product candidate, is in development for the treatment of Parkinson’s disease symptoms. AP-CDLD is an Accordion Pill that contains the generic drugs Carbidopa and Levodopa, which are currently approved for the treatment of Parkinson’s disease symptoms. We have successfully completed a Phase II clinical trial, and the FDA has permitted us to initiate a Phase III clinical trial of AP-CDLD. On May 5, 2015, we held an end of Phase II meeting with the FDA, for which we have received the FDA’s memorandum of minutes, to discuss the clinical development program for AP-CDLD. We agreed with the FDA on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, including the main principles of the single required pivotal Phase III clinical trial in advanced Par kinson’s dise ase patients, which will be as follows:

      A multicenter, randomized, double-blind, double-dummy, parallel, active-controlled trial, comparing the efficacy and safety of AP-CDLD to Sinemet IR, an immediate release CDLD, which is a conventional Levodopa medication for the treatment of Parkinson’s disease symptoms that is currently on the market.

      Approximately 460 advanced Parkinson’s disease patients will be enrolled into the trial.

      The total treatment period for each patient will be 25 weeks, composed of:

Six weeks open-label titration on Sinemet IR (all patients);

Six weeks open-label titration on two AP-CDLD strengths, given b.i.d. or t.i.d. (all patients); and

13 weeks double-blind, double-dummy active comparator period, in which half of the patients will be randomized to AP-CDLD and half of the patients will be randomized to Sinemet IR.

      The primary efficacy endpoint will be a change from baseline to termination of treatment in the percent of daily off time during waking hours based on Hauser home diaries.

In addition, we will be required to submit evidence of the adequate safety experience of 100 patients receiving AP-CDLD for one year, with at least 50% receiving the highest proposed dose of AP-CDLD, as is required for drugs intended for long-term treatment of non-life-threatening conditions. We intend to collect this safety data, fully or partially, from an open label extension of the Phase III study of AP-CDLD.

We also agreed, at the FDA’s request, to conduct an additional bioavailability study to compare the PK between Sinemet IR and the to-be-marketed formulation of AP-CDLD because the formulation of AP-CDLD has changed from our previously completed comparative bioavailability study. We currently intend to conduct this study during 2016. The FDA also strongly suggested that we conduct additional dissolution testing and we anticipate doing so. See “— Current Regulatory Status of AP-CDLD.”

AP-CDLD is designed to provide a combination of immediate release and a continuous release of Levodopa, in the stomach, in proximity to its absorption site through our Accordion Pill. AP-CDLD is designed to provide stable Levodopa plasma therapeutic levels, resulting in reduced total off time while reducing or avoiding inducement of troublesome dyskinesia, or movement disorders. The stable therapeutic levels of Levodopa in a patient’s plasma provided by AP-CDLD are intended to significantly reduce the motor complications because the motor complications which are associated with Levodopa treatment are strongly correlated with the drug’s peripheral PK profile. More specifically, AP-CDLD is intended to reduce total off time while not increasing, or even reducing, troublesome dyskinesia.

We anticipate that AP-CDLD will be available in three dosages of Levodopa (250 mg, 400 mg and 500 mg), each provided in two release profiles (immediate release and controlled release), along with 50 mg of Carbidopa that is included in AP-CDLD. This array of dosages is designed to cover Parkinson’s disease patients in various stages of the disease. AP-CDLD is designed to be taken b.i.d.

AP-CDLD – Clinical Trials

Phase II Clinical Trial

Our Phase II clinical trial with AP-CDLD was a multi-center, open-label, randomized, crossover, active control trial that included five groups. Overall, 60 patients completed the trial per protocol, in several medical centers in Israel. The Phase II clinical trial assessed safety, PK and pharmacodynamics/efficacy in patients with various stages of Parkinson’s disease compared with their current Levodopa treatment. Each group of the clinical trial was deemed to initiate upon the first patient enrolling in

74

a group and to be completed upon the conclusion of data analysis. The initiation and completion dates for groups 1, 3, 4, 5 and 6 were Au gust 2009 – December 20 09, April 2010 – August 2010, December 2010 – July 2011, August 2011 – November 2011 and December 2011 – October 2012 , respectively. The following table details the structure, design and purpose of the Phase II clinical trial:

Group Number

 

Trial Design

 

Trial Purpose

 

Population

 

N (PP)

 

Test Treatment

 

Treatment
and Duration*

Group 1

 

Open-label, multi-dose, multi-center, randomized

 

2-way crossover comparative PK trial

 

Early-stage PD patients

 

12

 

AP-CDLD 50/250 mg

 

b.i.d for
7 days

Group 2

 

This trial was originally planned in early non-fluctuators with a dose of 50/375 mg b.i.d. In light of the satisfactory PK results with 50/250 mg b.i.d in this population, the higher dose was considered unnecessary and therefore the trial was not performed.

Group 3**

 

Open-label, multi-dose, multi-center, randomized

 

2-way crossover comparative PK and PHDS trial

 

Advanced PD patients

 

10 a

 

AP-CDLD 50/375 mg

 

b.i.d for
7 days

Group 4**

 

Open-label, multi-dose, multi-center, randomized

 

2-way crossover comparative PHDS trial

 

Advanced PD patients

 

16

 

AP-CDLD 50/375 mg

 

b.i.d for 21 days

Group 5 b **

 

Open-label, multi-dose, multi-center, randomized

 

2-way crossover comparative PHDS trial

 

Advanced PD patients

 

4

 

AP-CDLD 50/500 mg

 

b.i.d for 21 days

Group 6**

 

Open-label, multi-dose, multi-center, randomized

 

2-way crossover comparative PHDS trial

 

Advanced PD patients

 

18

 

AP-CDLD 50/500 mg

 

b.i.d for
21 days

____________

a          Eight patients completed the PK trial.

b         Group 5 was terminated early due to low enrollment.

d = days; PP = Per Protocol; N = number of subjects; PD = Parkinson’s disease; PHDS = pharmacodynamics.

*       Not including add-on dosing of immediate release Carbidopa/Levodopa, if needed.

**      Compared against each patient’s optimized current Levodopa treatment.

Pharmacokinetic Results

Group 1 of our Phase II clinical trial with AP-CDLD was conducted with 12 male and female patients with non-fluctuating Parkinson’s disease. The crossover design included the following treatment arms: (i) AP-CDLD 50/250 mg administered b.i.d and (ii) immediate release CDLD 25/250 mg administered by half tablet q.i.d, resulting in a total daily dosage of 50/500mg. The treatments were administered for six days, with the seventh day consisting of PK testing. On the PK day of the control period, patients were given an additional 50 mg of Carbidopa (12.5 mg q.i.d) to achieve the recommended daily 70 – 100 mg dose of Carbidopa. Immediately following the PK testing on day seven, the patients crossed over to the other treatment to repeat the seven day process. This study concluded that (i) the bioavailability of Levodopa when administered via AP-CDLD was similar to the immediate release reference; (ii) AP-CDLD provided more stable plasma levels of Levodopa, with reduced peak-to-trough ratio, when compared to the immediate release reference; and (iii) AP-CDLD provided higher morning Levodopa plasma levels than the immediate release reference.

Group 3 of our Phase II clinical trial with AP-CDLD was conducted with ten male and female patients with advanced, fluctuating Parkinson’s disease, of which eight completed the PK trial per protocol. The crossover design included the following treatment arms: in the AP-CDLD treatment arm, the AP-CDLD 50/375 mg was administered b.i.d for six at home days of treatment with up to an additional three add-on immediate release Carbidopa/Levodopa, as needed, and on day seven, b.i.d administration of AP-CDLD 50/375 mg. In the control arm, the patient’s current treatments were administered for six at home days and, on the seventh day, they were given immediate release Carbidopa/Levodopa 18.75/187.5 mg q.i.d, resulting in a total dosage of 75/750 mg. On the seventh day of each treatment regime, we conducted PK testing. Immediately following the PK testing on day seven, the patients were crossed over to the other treatment to repeat the seven day process.

These trials concluded that (i) the PK of AP-CDLD demonstrated an efficient controlled-release profile, with significantly more stable Levodopa levels; (ii) the Levodopa absorption phase was increased more than six-fold versus the control treatment; (iii) the b.i.d administration of AP-CDLD provided daily coverage of therapeutic Levodopa plasma levels; (iv) the peak-to-trough ratio in

75

Levodopa plasma levels was half of those of the control; (v) the morning, or pre-first dose, Levodopa plasma levels of AP-CDLD, were significantly higher than the control; and (vi) Levodopa’s high bioavailability was preserved when using AP-CDLD.

The following figure displays the concentrations of Levodopa in plasma of patients over time, comparing AP-CDLD [(pink)] to the reference treatment [(blue)]:

AP-CDLD Phase II clinical trial — more stable Levodopa levels with statistically significant reduced
peak-to-trough fluctuations

The PK results showed that peak to trough ratio, which measures the maximum average concentration relative to the minimum average concentration of LD plasma levels, was reduced from 29.9 to 3.2 with the AP-CDLD. Cmax/Cmin with the AP-CDLD was 5.8. The average LD plasma levels during time 0-16 hours was 1,038 ng/ml.

Pharmacodynamics Results

The following figure sets forth the structure of the Phase II clinical trial for Groups 4 and 6:

____________

* Patient’s optimized CD/LD regimen.

CD/LD = Carbidopa/Levodopa

Groups 3, 4 and 6 of our Phase II clinical trial examined the pharmacodynamic effects of AP-CDLD. Each group assessed the effects in patients with advanced Parkinson’s disease; ten, 16 and 18 patients completed the trials per protocol in Groups 3, 4 and 6, respectively. Groups 3 and 4 tested AP-CDLD in the 50/375 mg strength, administered b.i.d. with additional CDLD immediate release tablets if needed; Group 6 tested the 50/500 mg strength administered b.i.d. with additional CDLD immediate release tablets if needed. In these three trials, AP-CDLD was compared to the patients’ current Levodopa treatment (including a dopamine decarboxylase inhibitor, such as Carbidopa). All three groups were cross-over, with Group 3 receiving the treatments as described above and Groups 4 and 6 receiving each of their current treatment and AP-CDLD for 21 days, with the second tested treatment starting immediately after completion of the first. In Groups 4 and 6, off time, on time and dyskinesia were assessed by patient-completed home diaries during days 18 through 20 of each arm.

Because Levodopa is usually prescribed for long-term treatment, three weeks of treatment with AP-CDLD was sufficient to demonstrate statistically significant improvements in the primary endpoint, as well as most of the secondary endpoints. The statistical significance of a result was captured by the associated “p-value”, or the estimated probability that the observed effect

76

was by chance. A “p-value” of less than 0.05 implied that there was less than a 5% probability that the observed effect was by chance, and was generally accepted as a statistically significant event. These studies demonstrated that (i) total off time was decreased when taking AP-CDLD versus the control, by 44% and 45% in Groups 4 and 6, respectively (statistically significant p<0.0001); (ii) improvements in off time and on time without troublesome dyskinesia did not come at the expense of an increase of on time with troublesome dyskinesia, and, moreover, with the AP-CDLD 50/500 mg troublesome dyskinesia was decreased by 0.5 hours (statistically significant p = 0.002); (iii) the effect of AP-CDLD on total off time and on time with troublesome dyskinesia resulted in a total increase of “good” on time (i.e., without troublesome dyskinesia) of 2.1 and 2.7 hours per day in Groups 4 and 6, respectively (statistically significant p<0.0001); (iv) the improvements in treating symptoms with AP-CDLD were achieved with fewer daily doses; and (v) the improvements in treating symptoms with AP-CDLD correlate with stable Levodopa plasma levels throughout the day with appropriate therapeutic levels of the drug.

The figure below reflects the mean total off time in hours over a 24 hour period during days 18 through 20 of Groups 4 and 6. The average total off time was reduced by 1.9 hours and 2.3 hours with AP-CDLD 50/375 mg (Group 4) and 50/500 mg (Group 6), respectively. This reduction is statistically significant (p<0.0001).

AP-CDLD – Significant reduction of total off time compared to current Levodopa treatment

The figure below reflects the mean total “good” on time (on time without troublesome dyskinesia) in hours over a 24 hour period during days 18 through 20 of Groups 4 and 6. The average total “good” on time was increased by 2.1 hours and 2.7 hours with AP-CDLD 50/375 mg (Group 4) and 50/500 mg (Group 6), respectively. This reduction is statistically significant (p<0.0001).

AP-CDLD – Increase of total “good” on time compared to current Levodopa treatment

77

The figure below reflects the mean total on time with troublesome dyskinesia in hours over a 24 hour period during days 18 through 20 of Groups 4 and 6. On time with troublesome dyskinesia was not changed and decreased by 0.5 hours (p = 0.002) with AP-CDLD 50/375 mg (Group 4) and 50/500 mg (Group 6), respectively.

AP-CDLD – Reduction of total on time with dyskinesia compared to current Levodopa treatment

Finally, the figure below displays the mean number of daily Levodopa administrations of the treatments in Groups 4 and 6.

AP-CDLD –Number of daily Levodopa administrations compared to current Levodopa treatment

*       In the administration of the AP-CDLD arm, patients received b.i.d AP-CDLD pills and were allowed to take additional commercially available immediate release Carbidopa/Levodopa formulations, as add-ons when needed. As seen in the figure above, patients took, in addition to the b.i.d AP-CDLD pills, one-and-a-half to two commercially available immediate-release Carbidopa/Levodopa formulations, in Groups 4 and 6, respectively.

78

Phase I Clinical Trials

We conducted four Phase I clinical trials - three to assess the PK profile of Levodopa when administered in several formulations and one to measure the gastric retention, or GR, time of our Accordion Pill without an active ingredient.

The first PK trial was conducted with early formulations in 24 healthy volunteers to assess the PK profile of Levodopa when administered in the following three forms: (i) in an Accordion Pill with a dosage of 75/300 mg; (ii) in the immediate release form currently on the market, Sinemet; and (iii) in the controlled release form currently on the market, Sinemet CR. This group underwent a partially randomized open trial compared with immediate release Sinemet and controlled release Sinemet. The trial results indicated a significant prolongation of Levodopa’s mean residence time, or MRT, in the blood when administered with the Accordion Pill compared with the Sinemet and Sinemet CR. Furthermore, the study showed the level of Levodopa received with the Accordion Pill reached treatment-relevant levels.

The second PK trial was conducted with early formulations in 23 healthy volunteers to assess the PK profile of Levodopa when administered in the following two forms: (i) an Accordion Pill in two formulations, 75/300 mg and 50/200 mg; and (ii) in the currently marketed immediate release form, Sinemet. This was a randomized open trial, compared with immediate release Sinemet. The trial results indicated a very significant increase in the MRT of Levodopa in the blood when administered with the Accordion Pill in both formulations, and a very significant prolongation of the absorption phase (up to 12 hours) of Levodopa was demonstrated when administered with the Accordion Pill compared with Sinemet (two hours).

The third PK trial was conducted with the AP-CDLD 50/500 mg Phase II formulation in 18 healthy volunteers to assess the PK profile of Levodopa when administered in the following two forms: (i) AP-CDLD 50/500 mg; and (ii) the currently marketed immediate release form, Sinemet. This was a randomized open trial, compared with immediate release Sinemet. The trial results indicated that the absorption phase of Levodopa was increased to approximately 10 hours when administered with the Accordion Pill compared to approximately two hours with Sinemet.

The GR Phase I clinical trial was a MRI study conducted with 17 Parkinson’s patients to measure the GR time of the Accordion Pill without an active pharmaceutical ingredient. This trial was a non-randomized open trial comparison of a few formulations. The results indicated that GR of over 13 hours can be achieved in these patients using all three formulations.

Safety

AP-CDLD was tested for safety on Göttingen minipigs in accordance with the FDA’s guidelines. The study was 180 days and a subgroup of minipigs were kept for recovery for an additional 30 days without receiving any treatments. This study included the following four arms: AP-CDLD 50/400 mg three times daily, AP-CDLD 50/500 mg b.i.d, a Carbidopa/Levodopa reference (Sinemet) and a placebo. The study was completed in March 2014. The study evaluated (i) animal wellbeing as represented by behavior, food consumption and weight, (ii) microscopic and macroscopic organ pathology, (iii) ophthalmic evaluation and (iv) electrocardiograms of the miniature pigs, which is the recording of the electrical activity of the heart. This study’s results form an additional basis regarding the safety of AP-CDLD.

In the Phase I and Phase II clinical trials, AP-CDLD was well-tolerated with no serious adverse events that were related to the study drug. Adverse events were generally mild in severity and resolved without intervention. The most common adverse events reported included nausea, vomiting, diarrhea, abdominal pain, chest pain and fatigue, which are known adverse events associated with Levodopa treatment.

Current Regulatory Status of AP-CDLD

On May 5, 2015, we held an end of Phase II meeting with the FDA, for which we have received the FDA’s memorandum of minutes, to discuss the clinical development program for AP-CDLD. We agreed with the FDA on the remaining clinical development program for AP-CDLD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, including the main principles of the single required pivotal Phase III clinical trial in advanced Par kinson’s dise ase patients, which will be as follows:

      A multicenter, randomized, double-blind, double-dummy, parallel, active-controlled trial, comparing the efficacy and safety of AP-CDLD to Sinemet IR, an immediate release CDLD, which is a conventional Levodopa medication for the treatment of Parkinson’s disease symptoms that is currently on the market.

      Approximately 460 advanced Parkinson’s disease patients will be enrolled into the trial.

79

      The total treatment period for each patient will be 25 weeks, composed of:

Six weeks open-label titration on Sinemet IR (all patients);

Six weeks open-label titration on two AP-CDLD strengths, given b.i.d. or t.i.d. (all patients); and

13 weeks double-blind, double-dummy active comparator period, in which half of the patients will be randomized to AP-CDLD and half of the patients will be randomized to Sinemet IR.

      The primary efficacy endpoint will be a change from baseline to termination of treatment in the percent of daily off time during waking hours based on Hauser home diaries.

In addition, we will be required to submit evidence of the adequate safety experience of 100 patients receiving AP-CDLD for one year, with at least 50% receiving the highest proposed dose of AP-CDLD, as is required for drugs intended for long-term treatment of non-life-threatening conditions. We intend to collect this safety data, fully or partially, from an open label extension of the Phase III study of AP-CDLD.

A Data Safety Monitoring Board, or DSMB, has been selected for the Phase III clinical trial of AP-CDLD, as is commonly done in double blind multicenter studies. The DSMB will periodically review the safety data of the trial and will specifically focus on the safety of AP-CDLD in the upper GI tract, including through gastric evaluations to be performed before and after the treatment period in the first 100 patients enrolled in the study.

We also agreed, at the FDA’s request, to conduct an additional bioavailability study to compare the PK between Sinemet IR and the to-be-marketed formulation of AP-CDLD because the formulation of AP-CDLD has changed from our previously completed comparative bioavailability study. We currently intend to conduct this study during 2016. The FDA also strongly suggested that we conduct additional dissolution testing and we anticipate doing so.

AP–ZP for the Treatment of Insomnia

Insomnia

Insomnia is a condition characterized by difficulty falling asleep or maintaining sleep during the night. Chronic insomnia, or insomnia lasting more than four weeks, is often associated with a wide range of adverse conditions, including mood disturbances, difficulties with concentration and memory, and certain cardiovascular, pulmonary and GI disorders. Chronic sleep deprivation has also been associated with an increased risk of depression, diabetes and obesity, among other disorders. Historically, insomnia therapies have addressed sleep onset rather than sleep maintenance. Newer therapies have been approved with indications for sleep maintenance, although the ability of currently-available drugs to maintain sleep throughout the night without unwanted next-day residual effects remains limited.

Zaleplon, branded as Sonata, is a sedative (also called a hypnotic) approved for the treatment of insomnia. Zaleplon belongs to the nonbenzodiazepines hypnotic drug family, which is the most common type of class of drug used to treat insomnia. Zaleplon is known to induce the rapid and effective onset of sleep and generally does not have the next-day residual effects, that are characteristic of many other drugs that are currently being marketed to treat insomnia. The lack of next-day effects is largely due to Zaleplon’s short half-life (approximately one hour), but, because of this short half-life, Zaleplon is cleared from the blood relatively rapidly and is generally not effective for maintaining sleep throughout the night. Thus, Zaleplon is currently not approved for a sleep maintenance indication and Zaleplon is not recommended for chronic use in the elderly. Sonata has been off patent since June 2008.

Market . Global Data estimates that, in 2013, there were approximately 140 million prevalent cases of chronic insomnia (including cases both fulfilling the definition of chronic insomnia in the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-IV), and not fulfilling the DSM-IV criteria) in the Seven Major Markets. In 2015, Global Data estimated that the sleep disorder drug market in the Seven Major Markets will reach approximately $1.8 billion in 2023.

Although there are currently numerous drugs available for the treatment of insomnia, according to members of our Scientific Advisory Team, such as Dr. Thomas Roth, none of the currently available drugs provides a comprehensive solution that (i) rapidly induces the onset of sleep within a short time after administration, (ii) maintains continuous sleep throughout the night and (iii) has no or minimal “next-day” residual side effects, such as drowsiness or “hangover.” According to Medscape from WebMD, in 2011 the Centers for Disease Control and Prevention estimated that drowsy driving contributes to an estimated 100,000 car accidents and approximately 1,500 deaths each year in the United States.

80

The FDA’s policy with regard to insomnia drugs has been changed due to concerns regarding next day alertness and functionality. To date, the two leading insomnia drugs that are indicated for both sleep induction and sleep maintenance are Zolpidem CR and Lunesta. In May 2013, the FDA announced that patients who take modified-release formulations of Zolpidem should refrain, for the day after using the drug, from driving or engaging in any activity that requires full alertness, even if the patient has slept for the required eight-hour period after taking the drug. Further, in January 2014, the FDA ordered a reduction of the recommended dosages of certain sleep drugs that contained Zolpidem by one half due to the decline in next day functionality and alertness of people using such drugs. According to the FDA, Zolpidem was the most widely used drug in prescription sleep medications in 2011. In May 2014, the FDA ordered a reduction of the recommended starting dose of Lunesta (eszopiclone) to the minimum approved dose because eszopiclone levels in some patients may be high enough the morning after use to impair activities that require alertness, including driving, even if the patients feel fully awake. Accordingly, we believe that, notwithstanding the expected minimal hangover effects of AP–ZP, the FDA will require the labeling for AP–ZP to carry a “next day” warning.

Our Solution – AP–ZP

AP–ZP, our second product candidate, is intended to provide a comprehensive solution for the treatment of insomnia. AP–ZP is designed, using our patented Accordion Pill technology, to maintain the drug in the stomach and continuously release the drug during the night in order to maintain sleep, and minimize “next-day” residual side effects. Due to the short half-life of Zaleplon, minimal hangover effects are expected, improving on certain leading currently marketed treatments. However, as noted below, the FDA will require the labeling for AP–ZP to carry the required “next-day” warning relating to potential residual side effects, such as impairment of activities that require alertness. AP–ZP is an Accordion Pill that contains 25 mg to 35 mg of the generic drug Zaleplon, with combined immediate and controlled release profiles. We achieved our primary endpoints in our Phase II clinical trial of AP–ZP, and we recently had discussions with the FDA regarding further clinical development. See “— Current Regulatory Status of AP–ZP.”

AP–ZP – Clinical Trials

Proof of Concept and Phase II Clinical Trial

A double-blind, three-way crossover, randomized, placebo-controlled proof of concept, or POC, study of AP–ZP was performed in two medical centers in Israel, following which a separate double-blind, two-way crossover, randomized, placebo-controlled Phase II clinical trial of AP–ZP was conducted under an IND in five medical centers in the United States and in one medical center in Israel. The POC study was initiated in October 2010 and was completed in December 2010. The Ph ase I I clinical trial of AP–ZP was initiated in April 2011 and was completed in November 2011. Both studies assessed the efficacy, next day residual effects and safety in patients with primary insomnia, who experience difficulty both falling and staying asleep, comparing AP–ZP versus a placebo. Both studies assessed efficacy by using polysomnography, or PSG, a multi-parametric objective test for studying sleep conducted at night. The next day residual effect was assessed in both studies within one hour of waking using: Digital Symbol Substitution Test, or DSST, a neuropsychological test used to evaluate cognitive condition by having the patient match provided symbols to digits as quickly as possible, Visual Analog Scale, or VAS, a questionnaire aimed at measuring the patient’s subjective impressions as to his or her cognitive condition, and memory testing.

The POC study included ten patients with primary insomnia and tested two AP–ZP strengths. This study demonstrated a trend toward improved efficacy in reducing wake time after sleep onset, or WASO, with the high dose tested. Similar trends of improved efficacy were demonstrated in the latency to persistent sleep, or LPS, and total sleep time, or TST, with the same dose. No residual sedition was found by both DSST and VAS tests in both tested strengths.

The Phase II clinical trial with AP–ZP assessed the efficacy and safety in 83 patients with primary insomnia, who experienced difficulty both falling and staying asleep, comparing AP–ZP versus a placebo. This trial used PSG. The patients each participated in six nights of PSG (two nights for each of screening, test formulation and placebo) with four to seven days between each treatment. The primary endpoint was TST, measured by both PSG and patient reports, with secondary endpoints of (i) effectiveness of sleep induction, measured as LPS and (ii) sleep maintenance, measured as WASO and number of awakenings. Residual effects were evaluated within one hour of waking using the DSST, VAS and memory testing. Safety was also evaluated.

The primary endpoint of increased TST was achieved in the Phase II clinical trial. TST measured by PSG for patients after receiving the test article was 382.4 minutes, in comparison to 364.1 minutes for those same patients after receiving the placebo (statistically significant p<.001). In addition, statistically significant improvement of LPS was achieved in the Phase II clinical

81

trial as the mean LPS for patients after receiving the test article was 31.6 minutes, in comparison to 45.5 minutes for those same patients after receiving the placebo (statistically significant (p<.001). Thus, this trial revealed that when patients received AP–ZP they tended to fall asleep faster and sleep longer when compared to the placebo. This trial, through both DSST and VAS, demonstrated an important attribute of AP–ZP. AP–ZP did not show residual sedative effect when compared to a placebo. There were no clinically significant adverse events reported, and the drug was well-tolerated. In a post hoc analysis, a statistically significant improvement of WASO in the first four hours of the night was demonstrated as WASO in the first four hours was 16.1 minutes for patients after receiving the test article, in comparison to 26.3 minutes for those same patients after receiving the placebo (statistically significant (p<.0001).

The following table demonstrates that no residual sedition was found by both DSST and VAS with the AP–ZP as compared to the placebo:

 

 

Least Square Means and Standard Errors

 

 

AP–ZP

 

Placebo

Outcome Measure

 

Mean

 

Standard
Error

 

Mean

 

Standard
Error

DSST

 

41.6

 

0.68

 

41.7

 

0.63

VAS

 

58.63

 

1.80

 

55.34

 

1.67

We believe that these results are important in light of the FDA’s growing concern related to next day effects of hypnotic drugs.

Phase I Clinical Trials

We conducted four Phase I clinical trials of which three groups assessed the PK profile of Zaleplon when administered in several formulations, and one assessed the effect of food on the overnight GR of the Accordion Pill when administered immediately, one-and-a-half, or three hours after dinner.

The first trial was an open-label trial conducted with early formulations of AP–ZP in 16 healthy volunteers to compare the PK profile of Zaleplon in two AP–ZP strengths to the currently marketed drug. The trial results indicated a significant increase in the mean MRT of Zaleplon in the plasma when administered with AP–ZP compared with the drug currently on the market.

The second PK trial was an open-label trial conducted with AP–ZP Phase II formulations in 12 healthy volunteers to compare the PK profile of Zaleplon in two AP–ZP strengths to the currently marketed drug. The trial results showed that the PK profile was significantly better when the drug was administered with the Accordion Pill. The Accordion Pill maintained the rapid appearance of the drug in the blood and the drug blood concentration level was maintained for a significantly longer period compared with the preparation currently on the market.

The third PK trial was a Phase I double-blind, crossover, randomized, four-armed trial with 32 healthy volunteers to assess the “next day effect” of two additional AP–ZP formulations. The four arms included: (i) Zopiclone, a nonbenzodiazepine hypnotic agent that is used in the treatment of insomnia and is not commercially available in the United States, as a positive control, (ii) a placebo and (iii) two doses of AP–ZP. The trial revealed no difference in next-day cognitive side-effects between the AP–ZP groups and the placebo group; cognitive side effects were observed with the usage of the commercially available Zopiclone (the positive control).

The GR trial was a MRI open-label trial conducted in 14 healthy volunteers to assess the effect of food on the overnight GR of the Accordion Pill when administered immediately, one-and-a-half, or three hours after dinner. The results showed that very good GR can also be achieved if Accordion Pill is taken one-and-a-half or three hours following dinner.

Current Regulatory Status of AP–ZP

Based on various communications with the FDA regarding the clinical development pathway of AP–ZP, the FDA has agreed that:

      the duration of treatment for each patient in any Phase III clinical study must be three months;

      the Section 505(b)(2) pathway will be appropriate for the submission of the AP–ZP NDA;

82

      one single study in separate groups of females (adults and elderly) and males (adults and elderly) may suffice for an NDA submission;

      a driving safety study prior to the approval of AP–ZP will be required;

      a three month safety non-clinical study will be required prior to the initiation of the Phase III clinical study; and

      a detailed Phase III protocol should be submitted and approved by the FDA.

We are currently seeking a potential strategic partner for further clinical development and commercialization of AP–ZP and our future development plans for AP–ZP will depend on the results of this process.

Accordion Pill Baclofen

We previously completed a Phase I clinical trial for an Accordion Pill using the drug Baclofen, which is indicated for the treatment of spasticity. Due to changes in the projected market for Baclofen, we have no current plans to further develop or commercialize our Accordion Pill Baclofen.

Development of Accordion Pills with additional drugs

We are continuously evaluating the possibilities of developing Accordion Pills with various additional specific drugs for its pipeline. We estimate that we will commence a Phase I clinical trial for a product for the prevention and treatment of small bowel nonsteroidal anti-inflammatory drug (NSAID) induced ulcers during the second half of 2015 and complete such trial during 2016.

Manufacturing

We are currently manufacturing the Accordion Pill in our production and packaging facility located in Har Hotzvim, in Jerusalem, Israel, in the same building as our offices. This production and packaging facility granted the Certificate of GMP Compliance of Manufacturer from the Israeli Ministry of Health in April 2014. This certificate applies in Israel, as well as in the EU, in accordance with the Conformity Assessment and Acceptance of Industrial Products (CAA) agreement between the EU and Israel. The certificate is valid for two years as of the day it was issued.

We have the capacity to manufacture the required quantities for our planned Phase III study of AP-CDLD. We are in the process of installing a fully automated assembly line during the second quarter of 2015 that will enable us to manufacture approximately two to three million capsules annually. We have not yet determined if we or one or more of our future commercial partners will manufacture commercial quantities of our products. See “Risk Factors — Risks Related to Our Operations in Israel — We have received Israeli government grants for certain of our research and development activities. The terms of these grants may require us 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 the repayment of the grants. Such grants may be terminated or reduced in the future, which would increase our costs.”

The FDA will likely condition granting any marketing approval, if any, on a satisfactory on-site inspection of our manufacturing facilities. See “Risk Factors — Risks Related to the Regulation of Our Company and its Business — Our product candidates are manufactured through a compounding, film casting and assembly process, and if we or one of our materials suppliers encounters problems manufacturing our products or raw materials, our business could suffer.”

We anticipate that we will continue to produce our drug products for clinical trials and, we are evaluating several alternatives for the production of our drug products for commercialization. We are considering various possibilities for manufacturing, including, among others, outsourcing or licensing the manufacturing rights to third party manufacturers or business partners, or establishing a specially designed production plant in Israel to produce our drug products for commercialization. We may also pursue a combination of producing our own drug products, outsourcing and licensing. Establishing a manufacturing facility to produce commercial quantities of our products will require a substantial investment by any party intending to manufacture our products.

Our manufacturing process consists of the following stages: compounding, which includes manufacturing of solutions and/or suspensions; film casting, which involves manufacturing of specific layers of films, including films containing the

83

applicable drug; assembly and capsulation, which is processing and folding the films into an accordion shape and capsulation; and packaging, which entails packaging the pills in plastic bottles or blister packs.

Raw Materials and Supplies

With the exception of three inactive ingredients, we believe the raw materials that we require to manufacture AP-CDLD and AP–ZP, as well as the raw materials that we require for our research and development operations relating to our products, are widely available from numerous suppliers and are generally considered to be generic pharmaceutical materials and supplies. Except as described below, we do not rely on a single supplier for the current production of any product in our pipeline or for our research and development operations relating to our products.

We usually contract with suppliers in Israel and worldwide to purchase the materials required for the research and development operations of our products. All the materials required in the research and development operations of our products are off-the-shelf pharmaceutical products; special production or special requirements are not required to order these materials. We have no written agreements with most of our suppliers. Rather, we submit purchase orders to our suppliers from time to time and as required.

Three of our inactive ingredients used in our products have only one supplier of each such ingredient. The three suppliers are each large, well-established suppliers (BASF, the Dow Chemical Company and Evonik), and most of the pharmaceutical industry relies on these suppliers when they need to purchase certain pharmaceutical products such as these inactive ingredients. To avoid a shortfall of these materials, we usually purchase sufficient material in advance for a period of at least one year. The pharmaceutical industry usually relies on these three manufacturers as suppliers of specific materials. The prices of these commonly used raw materials are not volatile.

Marketing and Sales

We do not currently have any marketing or sales capabilities. We intend to license to, or enter into strategic alliances with, companies in the pharmaceutical business, which are equipped to market and/or sell our products, if any, through their well-developed marketing and distribution networks. We may establish marketing and/or sales forces in the future in addition to licensing arrangements or strategic alliances.

Competition

The pharmaceutical and drug delivery technologies industries are characterized by rapidly evolving technology, intense competition and a highly risky, costly and lengthy research and development process. Adequate protection of intellectual property, successful product development, adequate funding and retention of skilled, experienced and professional personnel are among the many factors critical to success in the pharmaceutical industry.

Depomed, Inc. has several products on the market based on its GR technology. Several companies have reported the commencement of research projects related to systems designed for GR including Teva Pharmaceutical Industries, Flamel Technologies S.A., Sun Pharma and others, all of which develop products delivered orally that are designed for GR. We are not aware of any approved drug delivery system currently on the market that is similar to the Accordion Pill, nor are we aware of any product candidates that are similar to our Accordion Pill with respect to mechanism of action.

Other drug delivery technologies, other drugs on the market, new drugs under development (including drugs that are in more advanced stages of development in comparison to our product pipeline) and additional drugs that were originally intended for other purposes, but were found effective for the indications we target, may all be competitive to the current products in our pipeline. In fact, some of these drug delivery systems and drugs are well-established and accepted among patients and physicians in their respective markets, are orally bioavailable, can be efficiently produced and marketed, and are relatively safe and inexpensive. Moreover, other companies of various sizes engage in activities similar to ours, including large pharmaceutical companies, such as Pfizer and Novartis, who have established in-house capabilities for the development of drug delivery technologies. Most, if not all, of our competitors have substantially greater financial and other resources available to them. Competitors include companies with marketed products and/or an advanced research and development pipeline.

Current Treatments on the Market and in Development for Parkinson’s Disease

The current common treatments for Parkinson’s disease include Levodopa (usually used in conjunction with other drugs such as Carbidopa), which is currently the standard and most efficient Parkinson’s medication used, and dopamine agonists,

84

such as bromocriptine, pergolide, pramipexole and ropinirole, as well as MAO inhibitors and COMT inhibitors. However, Levodopa therapy is associated with “wearing-off”, a condition in which a treatment’s effects diminish over time as the disease progresses, and dyskinesia, or involuntary disturbing movements.

We believe our direct competition will only include other technologies designed to address the need for more stable Levodopa levels. As such, AP-CDLD will compete against other Levodopa-based Parkinson’s drugs that are already on the market, such as Sinemet, a combination of Levodopa and Carbidopa, which is sold by Merck, as well as generic Sinemet, which is sold by various generic manufacturers. In addition, other technologies and drug delivery systems designed to address the Levodopa blood concentration problem currently exist. To our knowledge, based on publicly-filed documents, press releases and published studies, we believe the companies described below would be our primary competition with respect to AP-CDLD.

Novartis and Orion combine Levodopa and Carbidopa with Comtan (entacapone), a drug that inhibits the clearance of Levodopa from the blood, thereby slowing the rapid drop in the Levodopa level in the blood. Additional drug candidates that are developed by Bial and Orion are based on the same approach.

Solvay Pharmaceuticals, which has been acquired by Abbott Laboratories, and assigned to AbbVie Inc., introduced a drug delivery system based on implanting a tube in the duodenum area attached to an external pump that releases Levodopa formulation directly to the NAW. This product has been approved for marketing in Europe. The invasive nature of implanting a tube in patients, most of whom are elderly, as well as various difficulties related to the system, are certain disadvantages of this technology.

Impax Laboratories has developed a product, RytaryTM, or IPX066, a continuous release Levodopa capsule formulation. The product was approved in January 2015.

XenoPort is developing a product, XP21279, based on the chemical modification of Levodopa to enable absorption along the entire GI tract. According to its 2014 annual report, XenoPort plans to continue development of XP21279 to the extent its resources permit or it enters into a collaboration with a third party.

Depomed, Inc. has a Phase II product candidate, DM-1992, for the treatment of motor symptoms associated with Parkinson’s disease. Depomed completed a Phase II study for DM-1992 and it announced a summary of the results of the Phase II study in November 2012. According to its 2014 annual report, Depomed is continuing to evaluate partnering opportunities for DM-1992 and monitoring competitive developments.

Civitas Therapeutics, Inc., which was acquired by Acorda Therapeutics, Inc. in September 2014, has a Phase IIb product candidate, CVT-301, a self-administered, adjunctive, as needed, inhaled oral Levodopa, for the ability to rapidly and predictably treat “off” episodes as they occur. In December 2014, Acorda announced the initiation of a Phase III clinical trial of CVT-301 in Parkinson’s disease.

NeuroDerm Ltd. has multiple product candidates, including subcutaneous (ND0612H and ND0612L) and intra-duodenal (ND0680) administration forms, for the treatment of patients suffering from severities of Parkinson’s disease. These product candidates are currently in development, ranging from planned bioequivalence trials (ND0680) to an ongoing Phase IIa trial (ND0612H and ND0612L) to completed Phase II clinical trials (ND0612L). According to its amended registration statement filed in November 2014, NeuroDerm expects to initiate pivotal 1 and 2 Phase III clinical trials for ND0612L in 2015 and a Phase II clinical trial, bioequivalence trial and Phase III clinical trial in 2015 for ND0612H.

Other technologies for delivering Levodopa, such as through the skin (transdermal administration) using a patch, injections or inhalations, as well as new formulations and chemical modifications of Levodopa and/or complementary drugs, currently exist and might compete with AP-CDLD as well, but, to our knowledge, these technologies, formulations and modifications have not yet been submitted for approval.

Current Treatments for Insomnia

There are numerous drugs in use for sleep disorders and the global market is currently controlled by drugs belonging to a group of substances that activate GABA receptors in the brain, a neurotransmitter found in the brain that is involved in sleep. These drugs include Ambien and Ambien CR from Sanofi, Zolpidem, the generic form of Ambien, zolpidem ER, the generic form of Ambien CR, Lunesta from Sepracor and Sonata from King Pharmaceuticals, which became the generic drug Zaleplon during 2008. We will also compete against other drugs commonly used for sleep disorders, including melatonin agonists such as Rozerem, several hypnotic benzodiazepines such as temazapam (Restoril) and flurazepam (Dalmane), sedating antidepressants

85

such as trazodone (Desyrel), and orexin receptor antagonists such as suvorexant (Belsomra), a recently approved insomnia drug from Merck. Furthermore, several new drugs are currently under development for treating insomnia. Based on a survey by Global Data, the following products are in Phase II and higher developmental stages: SKP1041 (controlled-release Zaleplon) from Somnus, Piromelatine from Neurim and EVT-201 from Evotec. We are not aware of any marketed product that does not contain the “next day” warning on its label.

Government Regulation

In the United States, the FDA regulates pharmaceuticals and biologics under the FDCA and the Public Health Service Act, or PHS Act, and their implementing regulations. These products are also subject to other federal, state, and local statutes and regulations, including federal and state consumer protection laws, laws protecting the privacy of health-related information, and laws prohibiting unfair and deceptive acts and trade practices.

The process required by the FDA before a new drug product may be marketed in the United States generally involves the following: completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations; submission to the FDA of an IND which FDA must allow to become effective before human clinical trials may begin and must be updated annually; performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication; and submission to the FDA of an NDA for a drug, and BLA for biological product, after completion of all pivotal clinical trials.

An IND is a request for authorization from the FDA to administer an investigational drug product to humans. We currently have effective INDs for two of our potential products: AP-CDLD for the treatment of Parkinson’s disease symptoms and AP–ZP for the treatment of insomnia.

Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators in accordance with Current Good Clinical Practices, or cGCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. Additionally, approval must also be obtained from each clinical trial site’s Institutional Review Board, or IRB, before the trials may be initiated, and the IRB must monitor the trial until completed. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.

Clinical trials are usually conducted in three phases. Phase I clinical trials are normally conducted in small groups of healthy volunteers to assess safety and find the potential dosing range. After a safe dose has been established, the drug is administered to small populations of sick patients (Phase II) to look for initial signs of efficacy in treating the targeted disease or condition and to continue to assess safety. Phase III clinical trials are usually multi-center, double-blind controlled trials in hundreds or even thousands of subjects at various sites to assess as fully as possible both the safety and effectiveness of the drug.

The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group reviews unblinded data from clinical trials and provides authorization for whether or not a trial may move forward at designated check points. A DSMB may order a trial halted if it believes the dangers posed by the trial are unacceptable or the product is so effective as to make it unethical to administer placebos or alternate treatments to the non-treatment arms. We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications. The application includes all relevant data available from pertinent preclinical and clinical trials, including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing, controls and proposed labeling, among other things.

Once the NDA submission has been accepted for filing, the FDA’s goal is to review applications within ten months of filing. However, the review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations.

86

After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product will be formulated and its drug will be produced, it may issue an approval letter or, instead, a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A Complete Response Letter indicates that the review cycle of the application is complete and the application is not ready for approval. A Complete Response Letter may require additional clinical data or an additional pivotal Phase III clinical trial(s), or other significant, expensive and time-consuming requirements related to clinical trials, preclinical studies or manufacturing, or any combination thereof. Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. The FDA could also approve the NDA with restrictive indications, labeling that includes particular risk information, a risk evaluation and strategy to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials. Such post-market testing may include Phase IV clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

After regulatory approval of a drug product is obtained, we are required to comply with a number of post-approval requirements. As a holder of an approved NDA, we would be required to report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional labeling for any of our products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval to ensure and preserve the long term stability of the drug product. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive, and record keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

We produce, and expect to continue to produce, the quantities of our product candidates required for our clinical trials, and we do not yet have a need to produce our product candidates for commercial purposes. Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers or licensees that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary withdrawal of the product’s approval, seizure, or FDA-initiated judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or effectiveness data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

In addition, as the NDA holder, we are responsible for legal and regulatory compliance for advertising and promotion of the drug product. We are required to provide to the FDA copies of all drug promotion at the time of first use, and to ensure that all information disseminated conforms to the product’s approved labeling and other FDA regulations and policies.

505(b)(2) Applications

We intend to submit NDAs for our two proposed products, assuming that the clinical data justify submission, under Section 505(b)(2) of the FDCA, assuming the FDA agrees with our assessment that a given proposed product qualifies for review under that section. If the FDA disagrees with that assessment or revises its decision at a later date, we would be compelled to file under section 505(b)(1), which is the normal route used for traditional new drugs where the data relied upon for the NDA filing have been developed by the sponsor during its clinical trials. In contrast, Section 505(b)(2) permits the filing of an NDA when at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. The applicant may rely on published literature and the FDA’s findings of safety and effectiveness based on certain pre-clinical or clinical studies conducted for an approved product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has

87

been approved, as well as for any new indication sought by the Section 505(b)(2) applicant. The abbreviated Section 505(b)(2) approval pathway increases the likelihood that the timeframe and costs associated with commercializing products will be lower than under a typical Section 505(b)(1) approval pathway.

Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book, which is an FDA resource listing approved drug products with therapeutic equivalence evaluations. When an Abbreviated New Drug Application, or ANDA, applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.

Specifically, the applicant must certify with respect to each patent that:

      the required patent information has not been filed;

      the listed patent has expired;

      the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or

      the listed patent is invalid, unenforceable or will not be infringed by the new product.

A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicate that it is not seeking approval of a patented method of use, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant.

Patent Term Restoration and Extension

A patent claiming a new drug product may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for the patent term lost during product development and the FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA.

Marketing Exclusivity

A Section 505(b)(2) NDA applicant may be eligible for its own regulatory exclusivity period, such as three-year exclusivity. The first approved Section 505(b)(2) NDA applicant for a particular condition of approval, or change to a marketed product, such as a new extended release formulation for a previously approved product, may be granted a three-year market exclusivity if one or more clinical studies, other than bioavailability or bioequivalence studies, were essential to the approval of the application and were conducted or sponsored by the applicant. Should this occur, the FDA would be precluded from approving any other application for the same new condition of use or for a change to the drug product that was granted exclusivity until after that three-year exclusivity period has run. Additional exclusivities may also apply.

88

Other U.S. Healthcare Laws and Compliance Requirements

For products distributed in the United States, we will also be subject to additional healthcare regulation and enforcement by the federal government and the states in which we conduct our business. Applicable federal and state healthcare laws and regulations include the following:

      The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order, or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid.

      The federal Anti-Inducement Act which prohibits persons from offering remuneration beneficiaries to induce them to use a particular item or service payable in whole or in part by Medicare or Medicaid.

      The Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, and its corresponding regulations, prohibit physicians from referring patients for designated health services (including outpatient drugs) reimbursed under the Medicare or Medicaid programs to entities with which the physicians or their family members have a financial relationship or an ownership interest, subject to narrow regulatory exceptions, and prohibits those entities from submitting claims to Medicare or Medicaid for payment of items or services provided to a referred beneficiary.

      The federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government.

      HIPAA imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

      The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items, or services.

      Analogous state laws and regulations, such as state anti-kickback and false claims laws, apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government.

      An Affordable Care Act provision, generally referred to as the Physician Payment Sunshine Act or Open Payments Program, imposes reporting and disclosure requirements for applicable drug and device manufacturers of covered products with regard to payments or other transfers of value made to physicians, dentists and teaching hospitals, and certain investment/ownership interests held by physicians in the reporting entity. These disclosures are publicly available.

Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations could be costly. Although we believe our business practices are structured to be compliant with applicable laws, it is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our past or present operations, including activities conducted by our sales team or agents, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from third party payor programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians, providers or entities with whom we do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusion from government funded healthcare programs.

Many aspects of these laws have not been definitively interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of subjective interpretations which increases the risk of potential violations. In addition, these laws and their interpretations are subject to change. Any action against us for violation of these laws, even if we successfully

89

defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and damage our reputation.

In addition, from time to time in the future, we may become subject to additional laws or regulations administered by the FTC, or by other federal, state, local or foreign regulatory authorities, to the repeal of laws or regulations that we generally consider favorable or to more stringent interpretations of current laws or regulations. We are not able to predict the nature of such future laws, regulations, repeals or interpretations, and we cannot predict what effect additional governmental regulation, if and when it occurs, would have on our business in the future. Such developments could, however, require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, additional personnel or other new requirements. Any such developments could have a material adverse effect on our business.

The growth and demand for eCommerce could result in more stringent consumer protection laws that impose additional compliance burdens on online retailers. These consumer protection laws could result in substantial compliance costs and could interfere with the conduct of our business.

There is currently great uncertainty in many states whether or how existing laws governing issues such as property ownership, sales and other taxes, and libel and personal privacy apply to the Internet and commercial online retailers. These issues may take years to resolve. For example, tax authorities in a number of states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce and new state tax regulations may subject us to additional state sales and income taxes. New legislation or regulation, the application of laws and regulations from jurisdictions whose laws do not currently apply to our business, or a change in application of existing laws and regulations to the Internet and commercial online services could result in significant additional taxes on our business. These taxes could have an adverse effect on our results of operations.

Intellectual Property

Our success depends, at least in part, on our ability to protect our proprietary technology and intellectual property, and to operate without infringing or violating the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws, know-how, intellectual property licenses and other contractual rights (including confidentiality and invention assignment agreements) to protect our proprietary technology and intellectual property, including related intellectual property rights.

Patents

As of March 31, 2015, we own or exclusively license three families of patents to use within our field of business that are registered in various countries, including in the United States, Israel, Australia, Canada, South Africa, France, Germany, Spain, Switzerland, Ireland, the United Kingdom and other countries. We have also filed patent applications with respect to eight additional patent families in various countries, four of which have active pending applications that have yet to be approved. Our patents and patent applications generally relate to gastroretentive delivery devices for oral intake of agents and the integration of drugs into our delivery systems and their production, and are expected to expire at various dates between 2020 and 2029. We also rely on trade secrets to protect certain aspects of our technology. The following discussion describes certain of what we consider to be our material patents and patent applications.

IN-1 and Yissum License Agreement

At present, among other patents, we consider our patent family that we exclusively license from Yissum (i.e., Gastroretentive Controlled Release Pharmaceutical Dosage Forms) pursuant to the license agreement described below, or the License Agreement, and which we refer to as IN-1, to be material to the operation of our business. This patent covers the gastroretentive controlled release of an active ingredient in the GI tract. This patent does not cover the implementation of the accordion technology with respect to any particular drug or in a manner that is readily manufactured commercially, but it forms the foundation for the accordion technology in its most basic form. The system is intended mainly for drugs with an NAW, drugs that act locally in the digestive system and drugs whose active receptors are in the upper part of the GI tract. The system is intended for clinical use in humans and in animals. The patent is issued in the United States, Israel, Japan Australia, Canada, South Africa, the United Kingdom and six other European countries, and expires in 2020.

90

In the License Agreement, Yissum granted us an exclusive license for developing, manufacturing and marketing of products based, directly or indirectly, on the IN-1 patent, the know-how and research results defined therein. Under the provisions of the License Agreement, as amended, Yissum may not transfer its rights in the patent without our prior written consent. In consideration of the license, we have undertaken to pay Yissum royalties equaling 3% of the total net revenues from the sale of products based on Yissum’s patent and royalties equal to 15% of any payment or benefit whatsoever received by us from any sublicensee. At the current time we have not commenced sales and have not granted any sublicenses to any third parties. The parties to the License Agreement are entitled to terminate the agreement in case of bankruptcy or receivership of the other party, or a material breach (including in respect of any payment obligations) that is not cured within 30 days. The License Agreement will remain in effect until the later of the expiration date of the patent or 15 years from the first commercial sale on the basis of the license. We have the right to assign our rights in the License Agreement with the prior consent of Yissum, not to be unreasonably withheld, and we are entitled to grant sublicenses under the licensed IP to third parties in our sole discretion, and any sublicensee(s) thereunder will not be required to assume any undertaking towards Yissum.

In January 2008, we signed an addendum to the License Agreement to conduct an additional joint development and study regarding a technology, different from the Accordion Pill, for the GR of a drug. This addendum provides that the intellectual property rights produced as a result of the joint development and study will be jointly owned and we are entitled to receive a license for Yissum’s share in these rights in return for payment of royalties. One patent application has been filed by Yissum and us as a result of the development related to that joint project, but this patent application was abandoned.

IN-3

An additional patent family (i.e., Method and Apparatus for Forming Delivery Devices for Oral Intake of an Agent), which we refer to as IN-3, covers various methods for making and folding the gastroretentive drug delivery system, and for folding it in an accordion configuration allowing its integration into an ordinary oral capsule. The IN-3 family patents, which expire in 2027, except for the first United States patent of this family, which expires in 2028, allow the Accordion Pill to be manufactured in mass quantities and therefore to be more readily commercialized. We consider our licensed proprietary process for folding and cutting the films forming the drug delivery system for integration in an accordion-like configuration into an ordinary oral capsule to be material to our business. In addition to two granted patents, we recently received a notice of allowance from the USPTO in respect of an additional patent application in connection with IN-3, although this notification itself is not an assurance that a patent will be granted. Importantly, the second IN-3 patent granted in the U.S. covers a specific embodiment of the Accordion Pill, particularly suitable for insoluble or poorly soluble drugs. Similar divisional applications have been filed in other countries.

IN-7 and IN-8

Two additional patents families (i.e., Accordion Pill with Levodopa and Zaleplon as the active ingredient, respectively) that we consider material to our business, which we refer to as IN-7 and IN-8, respectively, relate to the integration of specific drugs into Accordion Pill products. The accordion technology covered by our other patents cannot be applied in an obvious manner to any given drug that might benefit from prolonged gastroretentive release. This is because the layer structure of an Accordion Pill must be varied and specially designed by reference to factors that are unique to any given drug and indication, such as the quantity of active ingredient desired to be released, the length of time for which the release is indicated, the relative solubility of the particular drug molecule, and other factors. IN-7 and IN-8 relate to applications to protect the specific integration of Levodopa and Zaleplon, respectively, into an Accordion Pill. The IN-7 patent family relates to the Accordion Pill dosage form, the main feature of which is the uniform inner drug-containing layer, which allows for, but does not require, high load of the drug, while maintaining the requisite structural or mechanical strength of the Accordion Pill. These two patent applications were each filed in the United States, the European Patent Office, Japan and several other countries in April 2009 and October 2009. In March 2013, the IN-7 patent was granted in South Africa. On April 24, 2014, the USPTO issued a notice of allowance of the U.S. application for an Accordion Pill with Carbidopa/Levodopa as the active ingredient(s) (IN-7). On July 8, 2014, the USPTO granted us a U.S. patent entitled “Carbidopa/Levodopa Gastrorententive Drug Delivery” (IN-7), which will remain in force until April 17, 2029.

An additional family of our patent applications that is related to IN-7, which we refer to as IN-11, seeks protection for the formulation of an Accordion Pill containing Levodopa that is specifically formulated for Parkinson’s disease in a specific treatment regimen. We filed the IN-11 patent application in the United States, Canada, EPO, India and Israel. Any granted patent of IN-11 will expire in November 2031.

91

General

We intend to submit patent applications for each Accordion Pill and drug combination that we develop. The patent outlook for companies like ours is generally uncertain and may involve complex legal and factual questions. Our ability to maintain and consolidate our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent applications or any patent applications that we license will result in the issuance of any patents. Our issued patents and those that may be issued in the future, or patents that we exclusively license, may be challenged, narrowed, circumvented or found to be invalid or unenforceable, which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have for our products. We cannot be certain that we were the first to invent the inventions claimed in our owned patents or patent applications, or that Yissum was the first to invent the invention claimed in the patent that we exclusively license from Yissum. In addition, our competitors may independently develop similar technologies or duplicate any technology developed by us, and the rights granted under any issued patents may not provide us with any meaningful competitive advantages against these competitors. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

Trademarks

We rely on trade names, trademarks and service marks to protect our name brands. Our registered trademarks are registered in Israel and include RETACCORD and ACCORDION PILL. We are in the process of registering the ACCORDION PILL trademark in the United States and Europe.

Trade Secrets and Confidential Information

In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We rely on, among other things, confidentiality and invention assignment agreements to protect our proprietary know-how and other intellectual property that may not be patentable, or that we believe is best protected by means that do not require public disclosure. For example, we require our employees to execute confidentiality agreements in connection with their employment relationships with us, and to disclose and assign to us inventions conceived in connection with their services to us. However, there can be no assurance that these agreements will be enforceable or that they will provide us with adequate protection. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.

We may be unable to obtain, maintain and protect the intellectual property rights necessary to conduct our business, and may be subject to claims that we infringe or otherwise violate the intellectual property rights of others, which could materially harm our business. For a more comprehensive summary of the risks related to our intellectual property, see “Risk Factors — Risks Related to Our Intellectual Property.”

Employees

As of March 31, 2015, we had 44 employees, five of whom were employed in management, six of whom were employed in finance and administration, 28 of whom were employed in research and development and operations and five of whom were employed in clinical trials and quality assurance. All of these employees are located in Israel.

Israeli labor laws principally govern the length of the workday, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination of employment, equal opportunity and anti-discrimination laws and other conditions of employment. Subject to certain exceptions, Israeli law generally requires severance pay upon the retirement, death or dismissal of an employee, and requires us and our employees to make payments to the National Insurance Institute, which is similar to the U.S. Social Security Administration. Our employees have defined benefit pension plans that comply with applicable Israeli legal requirements, which also include the mandatory pension payments required by applicable law and allocations for severance pay.

While none of our employees are party to any collective bargaining agreements, certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (including the Industrialists’ Associations) are applicable to our employees by extension orders issued by the

92

Israel Ministry of Economy (previously the Israeli Ministry of Trade, Industry and Labor). These provisions primarily concern the length of the workweek, pension fund benefits for all employees and for employees in the industry section, insurance for work-related accidents, travel expenses reimbursement, holiday leave, convalescent payments and entitlement for vacation days. We generally provide our employees with benefits and working conditions beyond the required minimums. We have never experienced any employment-related work stoppages and believe our relationship with our employees is good.

Properties

Our principal executive offices are located in Har Hotzvim at 12 Hartom Street, Jerusalem, Israel 9777512. The space is in a commercial office building and houses our office space of approximately 900 square meters, manufacturing facility for our clinical trials of approximately 600 square meters, which includes production, packaging, warehousing and logistics areas, and our laboratory facilities of approximately 200 square meters.

The manufacturing and laboratory facilities are fully equipped for manufacturing and testing of the required quantities for Phase III clinical trials, including, mixers, casting equipment, laminating equipment, capsulating equipment and analytical equipment such as High Pressure/Performance Liquid Chromatography and dissolution testers. These facilities are cGMP compliant and approved by Israeli and European regulatory authorities and qualified for Phase III manufacturing.

We lease this space, which presently consists of a total area of approximately 1,700 square meters, from an unaffiliated third party, pursuant to a lease that expires on December 31, 2015. Pursuant to the lease, our annual rental costs for 2014 were NIS 1.7 million (excluding VAT) and our expected rental costs for 2015 will be approximately NIS 1.7 million (excluding VAT).

Although we will continue to produce product candidates ourselves for use in clinical trials, we are currently evaluating several alternatives for the production of our drug products for commercialization, including the possibility of establishing our own production plant, outsourcing or licensing the manufacturing rights to third-party manufacturers. However, at this time, no decision has been made regarding the location or method of production of our drug products for commercialization. We believe this existing property is sufficient for our needs in the foreseeable future and that we have the ability to renew our lease at market terms and expand if required.

Insurance

We have obtained directors’ and officers’ liability insurance with maximum coverage of $7.5 million in the aggregate for the benefit of our office holders and directors, and we intend to purchase additional insurance with maximum coverage of $40 million in the aggregate effective upon the closing of this offering. Such directors’ and officers’ liability insurance does and will contain certain standard exclusions.

We also maintain insurance for our premises for a maximum of NIS 38.0 million, including coverage of equipment and lease improvements against risk of loss (fire, natural hazard and allied perils, excluding damage from inventory theft) and business interruption insurance coverage of NIS 17.0 million. In addition, we maintain the following insurance: employer liability with coverage of NIS 20.0 million; third-party liability with coverage of NIS 20.0 million; and all risk coverage for machinery breakdown of our casting machine of approximately NIS 5.0 million.

We also procure additional insurance for each specific clinical trial which covers a certain number of trial participants and which varies based on the particular clinical trial. Certain of such policies are based on the Declaration of Helsinki, which is a set of ethical principles regarding human experimentation developed for the medical community by the World Medical Association, and certain protocols of the Israeli Ministry of Health.

We believe our insurance policies are adequate and customary for a business of our kind. However, because of the nature of our business, we cannot assure you that we will be able to maintain insurance on a commercially reasonable basis or at all, or that any future claims will not exceed our insurance coverage.

Research Grants

A grant from the Michael J. Fox Foundation

On April 14, 2013 we reported that we had received a grant from the Michal J. Fox Foundation. The Michael J. Fox Foundation is dedicated to finding a cure for Parkinson’s disease through an aggressively funded research agenda and to

93

ensuring the development of improved therapies for those currently living with Parkinson’s disease. The grant in the amount of $705,000 is dedicated for the funding of a preclinical study with AP-CDLD. We have received and utilized the full grant and the study has been completed.

Grants under the Israeli Encouragement of Industrial and Development Law

Under the Encouragement of Industrial and Development Law, 5744-1984, or the Research Law, research and development programs which meet specified criteria and are approved by a committee of the OCS are eligible for grants. The grants awarded are typically for up to 50% of the project’s expenditures, as determined by the research committee. The grantee is required to pay royalties to the State of Israel on income generated from the sale of products (and related services associated with such products), whether received by the grantee or any affiliated entity (as defined in the Royalty Regulations), developed, in whole or in part, within the framework of an OCS-funded project or deriving therefrom. In accordance with the provisions of the Encouragement of Industrial Research and Development Regulations (Royalty Rates and Rules for Payment), 5756-1996, or the Royalty Regulations, royalties are paid beginning from the date of the sale of the first product developed according to an OCS-funded project at rates between 3% to 6% (though typically not greater than 4.5%) of sales of the product, depending on the situation and applicable criteria, and are payable until the repayment of the full amount of the total OCS funding, linked to the U.S. Dollar, and accrued interest (LIBOR), or in certain cases, payable up to the increased royalty cap of up to six times the amount received, plus interest. The terms of the Israeli government participation also require that products developed using government grants be manufactured in Israel and that the technology developed thereunder may not be transferred outside of Israel, unless approval is received from the OCS (such approval is not required for the transfer of a portion of the manufacturing capacity which does not exceed, in the aggregate, 10% of the portion declared to be manufactured abroad in the applications for funding, in which case only notification is required) and additional payments are made to the State of Israel. However, this does not restrict the export of products that incorporate the funded technology. See “Risk Factors — Risks Related to Our Operations in Israel” for additional information.

From January 1, 2009 through March 31, 2015, we received approximately NIS 26.4 million in grants from the OCS to support our research and development programs. In February 2014, the OCS approved a grant of up to NIS 6.3 million with respect to a follow-up program for the clinical development of the Accordion Pill for the period from January 1, 2014 through December 31, 2014. In November 2014, we submitted to the OCS a change request for its 2014 program and, consequently, the grant was reduced to NIS 4.7 million. As of the date of this prospectus, we have received approximately NIS 3.7 million of the 2014 grant. In May 2015, the OCS approved a grant of up to NIS 6.4 million with respect to a follow-up program for the clinical development of the Accordion Pill for the period from January 1, 2015 through December 31, 2015.

Environmental Matters

We are subject to various environmental, health and safety laws and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal of hazardous materials and wastes and the cleanup of contaminated sites. We believe our business, operations and facilities are being operated in compliance in all material respects with applicable environmental and health and safety laws and regulations. We have ongoing communication with the Israeli Ministry of Environmental Protection in order to verify compliance with relevant instructions and regulations. In addition, all of our laboratory personnel participate in instruction on the proper handling of chemicals, including hazardous substances before commencing employment, and during the course of their employment with us. In addition, all information with respect to any chemical substance that we use is filed and stored as a Material Safety Data Sheet, as required by applicable environmental regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material adverse effect on us. The operation of our facilities, however, entails risks in these areas. Significant expenditures could be required in the future if we are required to comply with new or more stringent environmental or health and safety laws, regulations or requirements.

We hold a business license from the Jerusalem Municipality with respect to manufacturing pharmaceutical products at 12 Hartom Street, Har Hotzvim in Jerusalem. The license is valid until December 31, 2017. The business license was granted after an inspection of our raw materials inventory, which we are permitted to maintain in our facilities and warehouses located at 12 Hartom Street. We also hold a toxic substance permit from July 29, 2012, which is valid until July 28, 2015.

94

Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as set forth below, there are currently no pending material legal proceedings, and we are currently not aware of any legal proceedings or claims against us or our property that we believe will have any significant effect on our business, financial position or operating results. None of our officers or directors is a party against us in any legal proceeding.

Historical Background and Corporate Structure

Intec Pharma Ltd. was established and incorporated in Israel on October 23, 2000 as a private Israeli company under the name Orly Guy Ltd. In February 2001, our name was changed to Intec Pharmaceuticals (2000) Ltd. Our research and development activities began originally through a private partnership, Intec Pharmaceutical Partnership I.P.P, a general Israeli partnership, formed on September 21, 2000. Its operations were transferred in full to us at the beginning of 2002 in return for the allocation of shares in our company to the partners in the partnership, pro rata with their ownership in the partnership. In March 2004, we changed our corporate name to Intec Pharma Ltd. On February 14, 2010, we successfully completed an initial public offering in Israel on the TASE. We do not have any subsidiaries and do not hold any investments in other entities.

We completed our initial public offering of securities in Israel on February 10, 2010. In connection with the offering, we raised approximately NIS 35.3 million before issuance costs and issued 783,969 ordinary shares and registered warrants (Series 1) to purchase 313,588 of our ordinary shares. As of the date of this prospectus, all warrants issued in our initial public offering in Israel have expired.

95

MANAGEMENT

Executive Officers and Directors

We are managed by a board of directors, which is currently comprised of six members, and our executive officers. Each of our executive officers is appointed by our board of directors. The table below sets forth our directors and executive officers as of May 15, 2015. The business address for each of our executive officers and directors is c/o Intec Pharma Ltd., 12 Hartom Street, Har Hozvim, Jerusalem 9777512, Israel.

Name

 

Age

 

Position

Zvika Joseph

 

49

 

Chairman of the Board of Directors

Zeev Weiss

 

53

 

Chief Executive Officer and Director

Liat Flaishon

 

49

 

Vice President of Business Development and Clinical Affairs

Nadav Navon

 

46

 

Executive Vice President of Research & Development and Operations

Oren Mohar

 

44

 

Chief Financial Officer

Gil Bianco

 

63

 

External Director and Chairperson of the Audit Committee

Amir Hayek

 

51

 

Director

Hila Karah

 

46

 

Director

Issac Silberman

 

63

 

External Director and Chairperson of the Compensation Committee

Our Executive Officers and Directors

Mr. Zvika Joseph has been our chairman of the board of directors since March 2002. Mr. Joseph is the co-founder of Intec. Prior to co-founding Intec, Mr. Joseph served as head of marketing of Adgar Ltd., a public real estate investment and development company whose shares are traded on the TASE. Mr. Joseph is an experienced investment professional with diverse contacts within Israeli and European financial circles. He has a BSc in business administration from Mercy College in New York.

Mr. Zeev Weiss has been our Chief Executive Officer since October 2014 and has served on our board of directors since October 2014. Prior to that, he served as our Co-Chief Executive Officer from November 2013 until October 2014. Prior to serving as our Co-Chief Executive Officer, he served as our Executive Vice President of Commercial Operations commencing in September 2006. Mr. Weiss has approximately 15 years of experience in healthcare corporate development, strategic planning and corporate finance. Prior to his service with us, Mr. Weiss served as the Head of Life Sciences Strategic consulting with PricewaterhouseCoopers Israel, an accounting firm, from 2002 until 2006. He is a certified public accountant in Israel, and has a BSc in Biology, a B.A. in accounting and has completed MSc studies in neuro-biochemistry, each from Tel Aviv University in Tel Aviv, Israel.

Dr. Liat Flaishon joined us in December 2013 and was appointed as our Vice President Business Development and Clinical Affairs in March 2014. Prior to her service with us, Dr. Flaishon served as the business development director at Pluristem Therapeutics, a call-therapy biotechnology company, where she was responsible for the development of the clinical pipeline. Prior to that, from 2007 to 2011, Dr. Flaishon worked for over five years at Teva Pharmaceuticals, a pharmaceutical company, holding numerous positions, the most recent of which was the director of Drug Safety Risk Management Plans in the global pharmacovigilance department. Dr. Flaishon received her medical degree from the Sackler School of Medicine at Tel-Aviv University, and her Ph.D. in immunology from The Weizmann Institute of Science in Rehovot, Israel. Dr. Flaishon is also a board-certified internal medicine physician who worked for 10 years at the Tel-Aviv Sourasky Medical Center in Tel-Aviv, Israel.

Dr. Nadav Navon has been with us since January 2006 and has served as our Executive Vice President of Research & Development and Operations since March 2015. Before that he served as our Vice President of Research & Development and Operations since May 2013. Prior to his service with us, Dr. Navon headed the analytical and quality assurance operations at Sharon Laboratories Ltd., a chemical company that develops and manufactures raw materials for the pharmaceutical, cosmetic and food industries, from 2001 to 2006. Prior to that, Dr. Navon led a number of research and development projects in the Negev’s Nuclear Research Center. Dr. Navon has a Ph.D. in inorganic and analytical chemistry, and an MBA and a BSc in chemistry, each from Ben-Gurion University in Beer-Sheva, Israel.

96

Oren Mohar has served as our Chief Financial Officer since January 2015. From January 2010 to December 2014, he was an Audit and Corporate Finance senior partner at PricewaterhouseCoopers in Tel Aviv, Israel. From July 2005 to December 2009, he was an Audit partner at PricewaterhouseCoopers in Tel Aviv, Israel. Prior to joining PricewaterhouseCoopers in 2002, he was a certified public accountant at Andersen in Tel Aviv, Israel. Mr. Mohar is a certified public accountant in Israel and holds a B. A. in Accounting and Business awarded by the Israeli College of Management in Rishon LeZion, Israel.

Mr. Gil Bianco has served as one of our external directors since April 2010. From November 2009 to November 2012, Mr. Bianco served as a director of D-Pharm Ltd., an Israeli public biopharmaceutical company, and from May 2007 to May 2010, Mr. Bianco served as a director of BioLineRx Ltd. (NASDAQ: BLRX), a clinical-stage biopharmaceutical development company. From December 2003 to December 2009, Mr. Bianco served as an external director of the Tel Aviv Stock Exchange Ltd. Prior to that, from 2001 to 2003, Mr. Bianco served as chief executive officer of Agis Industries Ltd., a pharmaceutical manufacturer. Mr. Bianco currently serves as an external director at Mazor Robotics Ltd. (NASDAQ: MZOR and TASE: MZOR.TA), a medical device company. Mr. Bianco is also a director of several private companies in the fields of biotech and medical devices. Mr. Bianco holds a B.A. in economics and accounting from Tel-Aviv University in Tel-Aviv, Israel and is a certified public accountant in Israel.

Mr. Amir Hayek has served as one of our directors since December 2009. Mr. Hayek is the chief executive officer of The Manufacturers Association of Israel. Prior to joining The Manufacturers Association of Israel, Mr. Hayek was the president and chief executive officer of Electronics Line 3000, a developer, manufacturer and provider of advanced security, safety, connectivity and control solutions, and held many high-level business-related leadership roles with the Israeli government, including the chief executive officer of the Ministry of Industry and Trade, the chief executive officer of the Israeli Export Institute and economic advisor to the Minister of Industry and Trade. Mr. Hayek has also served as a director for many public and private companies, including Castro Ltd., a publicly-traded Israeli clothing company (TASE: CAST), and Glycominds Ltd. a publicly-traded Israeli biodiagnostics company (TASE: GLCM). Mr. Hayek has B.A. degrees in both economics and accounting from Tel-Aviv University in Tel-Aviv, Israel and is a certified public accountant in Israel.

Ms. Hila Karah has served as one of our directors since December 2009. Ms. Karah was the chief investment officer of Eurotrust Ltd., an investment company, from 2006 until 2013, where she focused primarily on making early-stage investments in life science companies. Ms. Karah has been a private and public equity investor in several high-tech, bio-tech and internet companies since 1999. Prior to joining Eurotrust, she served as a partner and financial analyst at Perceptive Life Sciences Ltd., a New York-based hedge fund. Prior to her position at Perceptive Life Sciences, Ms. Karah was a research analyst at Oracle Partners Ltd., a healthcare-focused hedge fund based in Connecticut. Ms. Karah currently serves as a director at Cyren Ltd., a publicly-traded Israeli technology and security company (TASE: CTCH), and from May 2011 until May 2013, Mrs. Karah served as a director of Glycominds Ltd., a publicly-traded Israeli biodiagnostics company (TASE: GLCM), and since November 2014 Ms. Karah has served as a director of Labstyle Innovations Ltd., a publicly-traded Israeli biodiagnostics company headquartered in Israel (OTCMKTS: DRIO). She has a B.A. in molecular and cell biology from the University of California, Berkeley, in Berkeley, California and has studied at the University of California, Berkeley – University of California, San Francisco School of Medicine Joint Medical Program.

Mr. Issac Silberman has served as one of our external directors since April 2010. Since 2007, Mr. Silberman has also served as a special investment advisor at Sullam Holdings L.R. Ltd., a financial services corporation in the Lenny Recanati Group, focusing primarily on investments in high-tech, biotechnology and real estate companies. Mr. Silberman also serves as a director in other private Israeli companies, and has over 20 years of prior experience as an executive officer of various public and private companies. Mr. Silberman holds a B.A. in economics and accounting from Tel Aviv University in Tel Aviv, Israel, and he is a certified public accountant in Israel.

Our Scientific Advisory Team

Our Scientific Advisory Team including specialists and experts from the United States, Europe and Israel, with experience in the fields of gastroenterology, the central nervous system, neurological diseases, and safety and regulation. Our Scientific Advisory Team plays an active role in advising us with respect to our products, technology development, clinical trials and safety. The following sets forth certain information with respect to our Scientific Advisory Team members.

Prof. Nir Giladi , a leader in the field of movement disorders, is an associate professor at the Sackler Faculty of Medicine at Tel Aviv University and chairman of the Department of Neurology at the Tel Aviv Sourasky Medical Center. Prof. Giladi has been a member of the International Movement Disorders Society (MDS) since 2010. Prof. Giladi is also a member of the International Board of the Research Group of the World Health Organization on Parkinson’s Disease and other Movement

97

Disorders. Prof. Giladi has published extensively in peer-reviewed journals and has served on the editorial boards of the Movement Disorders Journal, Parkinsonism & Related Disorders and the Journal of Neural Transmission (associate editor).

Prof. Zamir Halpern , a gastroenterologist, is the head of the Department of Gastroenterology and Liver Diseases at the Sourasky Medical Center (Ichilov Hospital) and a professor of internal medicine at Tel Aviv University, both in Tel Aviv, Israel.

Dr. Peter LeWitt , a neurologist, is a professor of neurology at Wayne State University School of Medicine in Detroit and directs the Parkinson’s Disease and Movement Disorders Program at Henry Ford Hospital in Detroit, Michigan, where he also maintains a movement disorders subspecialty practice. His clinical and basic neuroscience research has targeted neurodegenerative and symptomatic therapies for Parkinson’s disease and other neurological disorders, and his range of research interests has included animal models of neurological disease, biomarkers, gene therapy and pharmacokinetic analysis. Dr. LeWitt is affiliated with the Parkinson Study Group and other clinical research consortia, and has extensive experience in clinical trials and regulatory aspects of drug development.

Dr. Werner Poewe , a neurologist, is a professor of neurology and director of the Department of Neurology at Innsbruck Medical University in Innsbruck, Austria. Dr. Poewe’s main research interests are in the field of movement disorders with particular emphasis on the clinical pharmacology of Parkinson’s disease and dystonia. He has authored and co-authored more than 550 original articles and reviews in the field of movement disorders. He served as President of the International Movement Disorder Society from 2000 through 2002, as President of the Austrian Society of Neurology from 2002 to 2004 and is the past President of the Austrian Parkinson’s Disease Society.

Prof. Thomas Roth is the director of the Sleep Disorders and Research Center at Henry Ford Health System in Detroit, Michigan. Dr. Roth’s research primarily focuses on sleep processes. His work includes research on sleep loss, sleep fragmentation and deviation from sleep processes, including pharmacological effects and sleep pathologies. Dr. Roth has held numerous leadership positions within his field. He is a former chairman of the National Center on Sleep Disorders Research Advisory Board at the National Institutes of Health and a former president of the United States Sleep Research Society, the American Sleep Disorders Association and the National Sleep Foundation. He also served as past editor-in-chief of the journal Sleep . In addition to his position at Henry Ford, he is a clinical professor of psychiatry at the University of Michigan School of Medicine in Ann Arbor, Michigan. He has published extensively in these areas.

Dr. James Walsh is the executive director and senior scientist of the Sleep Medicine and Research Center at St. Luke’s Hospital in St. Louis, a visiting professor in the Department of Psychiatry at Stanford University and an adjunct professor of psychology at Saint Louis University. He also serves as executive director of the Academic Alliance for Sleep Research. His primary research interests include insomnia, clinical pharmacology, shiftwork and the relationship of sleep and behavior. Dr. Walsh has published extensively in these areas.

Most of the members of our Scientific Advisory team are paid for their services to us at their hourly consulting fees. We paid members of our Scientific Advisory Team an aggregate of approximately NIS 154,000 for services rendered during 2014.

Compensation

The following table sets forth the annual compensation (excluding option grants) of members of our senior management and board of directors for the year ended December 31, 2014.

98

Annual Compensation (excluding option grants) of our Senior Management and Board of Directors

Name

 

Salary and related benefits (in NIS)

 

Bonus

Zvika Joseph

 

767,539

 

Giora Carni (1)

 

603,462

 

Zeev Weiss

 

763,983

 

Liat Flaishon

 

646,489

 

Nadav Navon

 

758,643

 

Oren Mohar (2)

 

 

Nir Sassi (2)

 

690,296

 

Gil Bianco

 

91,550

 

Amir Hayek

 

42,331

 

Hila Karah

 

43,603

 

Issac Silberman

 

90,986

 

____________

(1)    In October 2014, Mr. Carni resigned from his position as Co-Chief Executive Officer and as a director of ours, and on the same date, Mr. Weiss became our Chief Executive Officer and a director of ours. Mr. Carni now serves in a non-executive officer capacity as our Director of Technology.

(2)    In January 2015, Mr. Sassi, who previously served as our Chief Financial Officer, became our Vice President of Finance, and on the same date, Mr. Mohar became our Chief Financial Officer.

We set aside or accrue certain amounts for pension or other retirement benefits for our senior management in 2014. Such amounts are included in the annual compensation chart above.

The following table sets forth information with respect to the options to purchase ordinary shares at the specified purchase prices granted to the members of our senior management and board of directors as of May 15, 2015. Except to the extent specified below, the options vest ratably over time in accordance with the 2005 Plan an annual basis over the vesting periods set forth below.

Name

 

Date of Grant

 

Purchase
Price
(in NIS)

 

Number of Options

 

Vesting Period

 

Expiration Date

 

Total Benefit
(in NIS)

 

Benefit recognized in 2014
(in NIS)

Zvika Joseph

 

08/26/2013

 

56.35

 

6,000

 

Immediate vesting

 

08/26/2019

 

124,839

 

 

 

 

08/26/2013

 

56.35

 

20,000

 

3 years

 

08/26/2019

 

413,131

 

205,997

 

 

08/26/2013

 

56.35

 

14,000

 

(1)

 

08/26/2019

 

197,377

 

64,460

 

 

05/01/2011

 

81.1

 

41,654

 

(1)

 

05/01/2017

 

954,661

 

99,520

 

 

05/01/2011

 

81.1

 

20,827

 

vested

 

05/01/2017

 

728,835

 

 

 

 

10/20/2009

 

0.5

 

35,463

 

(1)

 

10/20/2019

 

 

 

 

 

07/20/2006

 

0.5

 

9,127

 

vested

 

Exercised

 

464,195

 

 

 

 

09/20/2009

 

0.5

 

35,463

 

vested

 

Exercised

 

1,299,684

 

 

Giora Carni (2)

 

08/26/2013

 

56.35

 

20,000

 

(1)

 

08/26/2019

 

 

 

 

 

10/13/2010

 

47.6

 

80,631

 

vested

 

10/13/2016

 

2,557,409

 

 

 

 

08/09/2008

 

0.5

 

50,909

 

(1)

 

08/09/2018

 

1,347,051

 

 

 

 

09/09/2008

 

0.5

 

35,749

 

vested

 

Exercised

 

3,479,552

 

 

Zeev Weiss

 

08/26/2013

 

56.35

 

15,000

 

(1)

 

08/26/2019

 

 

 

 

 

05/30/2012

 

47.6

 

40,000

 

4 years

 

05/30/2018

 

1,046,096

 

235,240

 

 

09/09/2009

 

0.5

 

42,023

 

(1)

 

09/09/2019

 

 

 

 

 

10/21/2007

 

0.5

 

15,348

 

vested

 

Exercised

 

1,495,893

 

 

 

 

09/09/2009

 

0.5

 

39,402

 

vested

 

Exercised

 

1,475,424

 

 

Oren Mohar

 

01/28/2015

 

27.93

 

20,000

 

4 years

 

01/01/2021

 

201,403

 

 

 

 

01/28/2015

 

27.93

 

12,000

 

(1)

 

01/01/2021

 

120,842

 

 

 

 

01/28/2015

 

(3)

 

28,000

 

(3)

 

01/01/2021

 

281,965

 

 

99

Name

 

Date of Grant

 

Purchase
Price
(in NIS)

 

Number of Options

 

Vesting Period

 

Expiration Date

 

Total Benefit
(in NIS)

 

Benefit recognized in 2014
(in NIS)

Nir Sassi

 

08/26/2013

 

56.35

 

35,000

 

(1)

 

08/26/2019

 

 

 

 

08/26/2013

 

56.35

 

15,000

 

4 years

 

08/26/2019

 

536,255

 

222,841

 

 

10/13/2010

 

52.5

 

5,422

 

3 years

 

03/01/2020

 

170,287

 

 

 

 

10/13/2010

 

42.5

 

6,600

 

4 years

 

10/13/2016

 

189,416

 

3,787

Liat Flaishon

 

08/28/2014

 

39.55

 

24,000

 

4 years

 

08/28/2020

 

416,842

 

59,264

 

 

08/28/2014

 

39.55

 

36,000

 

(1)

 

08/28/2020

 

 

 

Nadav Navon

 

08/26/2013

 

56.5

 

57,200

 

(1)

 

08/26/2019

 

 

 

 

 

08/26/2013

 

56.5

 

10,000

 

4 years

 

08/26/2019

 

357,504

 

148,561

 

 

10/13/2010

 

42.69

 

21,000

 

vested

 

10/13/2016

 

602,687

 

12,051

 

 

12/08/2009

 

0.5

 

3,765

 

vested

 

Exercised

 

140,595

 

 

 

 

06/17/2009

 

0.5

 

3,389

 

vested

 

Exercised

 

133,852

 

 

 

 

07/20/2006

 

0.5

 

1,581

 

vested

 

Exercised

 

103,339

 

 

Gil Bianco

 

07/01/2010

 

48.91

 

10,751

 

vested

 

07/01/2020

 

387,417

 

 

Amir Hayek

 

07/01/2010

 

48.91

 

10,751

 

vested

 

07/01/2020

 

387,417

 

 

Hila Karah

 

07/01/2010

 

48.91

 

10,751

 

vested

 

07/01/2020

 

387,417

 

 

Issac Silberman

 

07/01/2010

 

48.91

 

10,751

 

vested

 

07/01/2020

 

387,417

 

 

____________

(1)    The options will be exercisable in the event that a Material Agreement is entered into between us and a third party. A “Material Agreement” means an agreement satisfying the following cumulative conditions: (a) an agreement shall have been signed with a company or an entity, (b) in a transaction with us (or with another entity designated by us for the purpose of such engagement) in connection with our core business, (c) the agreement shall have been approved by a majority of the votes of our board of directors as a material agreement for us, and (d) the agreement significantly increases our value for a reasonable duration of time.

(2)    On October, 2014, Mr. Carni resigned from his position as Co-Chief Executive Officer and as a director of ours, and on the same date, Zeev Weiss became our Chief Executive Officer and a director of ours.

(3)    The options will be exercisable upon completion of an issuance of our shares on a foreign stock exchange. In the event that we do not complete an issuance of our shares on a foreign stock exchange within 18 months from the date of grant, but sign a Material Agreement (as described above), then 8,000 of the 28,000 options will vest at the time such Material Agreement is executed, in addition to 12,000 options that will become exercisable as described in footnote (1) above. The exercise price of the options granted if we complete an issuance of our shares on a foreign stock exchange will be NIS 27.93. In the event that a Material Agreement is signed, the exercise price will be the higher of NIS 27.93 and the average of the share price for the 30 trading days after the signing of a Material Agreement.

Employment and Consulting Agreements

Our employees are employed under the terms prescribed in their respective personal contracts, in accordance with the decisions of our management. Under these employment contracts, the employees are entitled to the social benefits prescribed by law and as otherwise provided in their personal contracts. These employment contracts each contain provisions standard for a company in our industry regarding non-competition, confidentiality of information and assignment of inventions. Under current 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. See “Risk Factors — Risks Related to Our Company and Its Business” for a further description of the enforceability of non-competition clauses. We also provide certain of our employees with a company car, which is leased from a leasing company.

Our office holders are also employed under the terms and conditions prescribed in personal contracts, with Zeev Weiss, our Chief Executive Officer, and Zvika Joseph, our chairman of the Board, being employed by us on an hourly basis and part-time, respectively. These personal contracts provide for notice periods of varying duration for termination of the agreement by us or by the relevant executive officer, during which time the executive officer will continue to receive base salary and benefits. These agreements also contain customary provisions regarding non-competition, confidentiality of information and assignment of inventions. However, the enforceability of the non-competition and assignment of inventions provisions may be limited under applicable law. See “Risk Factors — Risks Related to Our Company and Its Business.”

100

Services and Employment Agreements with Our Chairman of the Board of Directors

Zvika Joseph

Mr. Joseph has been the chairman of our board of directors since 2002. Under Mr. Joseph’s employment agreement, he is entitled to a gross monthly salary of NIS 45,000 linked to the Israeli consumer price index, and to social benefits, such as annual paid vacation days, convalescent payment, manager’s insurance, sick leave vocational studies fund and disability insurance. In addition, we provide Mr. Joseph with a leased company car and a mobile phone. Mr. Joseph’s employment agreement is terminable by either us or Mr. Joseph upon six months prior written notice.

As of March 31, 2015, Mr. Joseph held options to purchase 137,944 ordinary shares, of which 33,494 were vested and 104,450 will vest subject to certain conditions. See “— Compensation.”

Services and Employment Agreements with Our Chief Executive Officer

Zeev Weiss

Mr. Weiss has served as our Chief Executive Officer since October 2014. Prior to that, he served as our Co-Chief Executive Officer alongside Mr. Giora Carni, from November 2013 until October 2014. Prior to serving as our Co-Chief Executive Officer, he served as our Executive Vice President of Commercial Operations commencing in September 2006. Mr. Weiss is an independent contractor, and pursuant to his consulting agreement with us, he is entitled to payment on an hourly basis, at the rate of NIS 315 per working hour, subject to a monthly aggregate cap of no more than 200 monthly billable working hours. The monthly consideration is linked to the Israeli consumer price index for April 2012 and is updated on a quarterly basis. In addition, we provide Mr. Weiss with a leased company car, for which we bear any expenses related thereto, and with a mobile phone. Furthermore, we will bear any travel expenses in connection with any of Mr. Weiss’ travels on our behalf. Mr. Weiss’s consulting agreement is terminable by either us or Mr. Weiss upon 180 days’ prior written notice, or immediately by us upon certain “for cause” events. Mr. Weiss’ employment agreement contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions.

As of March 31, 2015, Mr. Weiss held options to purchase 97,023 ordinary shares, of which 30,000 were vested and 67,023 will vest subject to certain conditions. See “— Compensation.”

Services and Employment Agreement with Our Chief Financial Officer

Oren Mohar

Mr. Mohar has served as our Chief Financial Officer since January 2015. Under Mr. Mohar’s employment agreement, he is entitled to a monthly gross salary of NIS 45,000, which is linked to the Israeli consumer price index for December 2014 and is updated on a quarterly basis, and to social benefits, such as annual paid vacation days, severance pay, recuperation pay, manager’s insurance, sick leave and studies fund. In addition, we provide Mr. Mohar with a leased company car and a mobile phone. Mr. Mohar’s employment agreement is terminable by either us or Mr. Mohar upon 90 days’ prior written notice. Mr. Mohar’s employment agreement contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions. Mr. Mohar’s employment agreement also provides that we will grant him options to purchase up to 60,000 ordinary shares under the 2005 Plan, which will vest subject to certain conditions.

Services and Employment Agreement with Our Vice President of Research & Development and Operations

Dr. Nadav Navon

Dr. Navon has served as our Executive Vice President of Research & Development and Operations since March 2015. Under Dr. Navon’s employment agreement, he is entitled to a monthly gross salary of NIS 44,000, and to social benefits, such as annual paid vacation days, convalescent payment, manager’s insurance, sick leave vocational studies fund and disability insurance. In addition, we provide Dr. Navon with a leased company car and a mobile phone. Dr. Navon’s employment agreement is terminable by either us or Dr. Navon upon 3 months’ prior written notice. Dr. Navon’s employment agreement contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions.

101

As of March 31, 2015, Dr. Navon held options to purchase 88,200 ordinary shares, of which 21,000 were vested and 67,200 will vest subject to certain conditions. See “— Compensation.”

Services and Employment Agreement with Our Vice President of Business Development and Clinical Affairs

Dr. Liat Flaishon

Dr. Flaishon has served as our Vice President of Business Development and Clinical Affairs since March 2014, after the completion of a successful trial period. Under Dr. Flaishon’s employment agreement, she is entitled to a gross monthly salary of 38,000 NIS, and to social benefits, such as annual paid vacation days, convalescent payment, manager’s insurance, sick leave, vocational studies fund and disability insurance. In addition, we provide Dr. Flaishon with a leased company car and a mobile phone. Dr. Flaishon’s employment agreement is terminable by either us or Dr. Flaishon by prior written notice in accordance with the provisions of the Prior Notice Upon Termination Law (2001), or immediately by us upon certain “for cause” events. Dr. Flaishon’s employment agreement contains customary provisions regarding noncompetition, confidentiality of information and assignment of inventions.

As of March 31, 2015, Dr. Flaishon held options to purchase 60,000 ordinary shares, of which none were vested; the options will vest subject to certain conditions. See “— Compensation.”

Equity Compensation Plan

We maintain the 2005 Plan, which was adopted by our board of directors on September 19, 2005, that provides for granting options to our directors, officers, employees, consultants, advisers and service providers. As of May 15, 2015, a total of 1,400,000 options were reserved for issuance under the 2005 Plan, of which options to purchase 819,662 ordinary shares were issued and outstanding thereunder. In addition, as of May 15, 2015, we had outstanding options to purchase 8,035 ordinary shares that were issued to consultants outside of the 2005 Plan; all of these options are vested and outstanding. Of such outstanding options, options to purchase 272,465 ordinary shares were vested as of May 15, 2015, with a weighted average exercise price of NI S 48 .72 per share, and will expire between 2016 and 2020.

The 2005 Plan permits options to be awarded to Participants (as such term is defined in the 2005 Plan) pursuant to Section 102 of the Ordinance, and section 3(I) of the Ordinance, based on entitlement and compliance with the terms for receiving options under these sections of the Ordinance. Section 102 of the Ordinance provides to employees, directors and officers who are not controlling shareholders (i.e., such persons are not deemed to hold 10% of the company’s share capital, or to be entitled to 10% of the company’s profits or to appoint a director to the company’s board of directors) and are Israeli residents, favorable tax treatment for compensation in the form of shares or options issued or granted, as applicable, to a trustee under the “capital gains track” for the benefit of the applicable employee, director or officer and are (or were) to be held by the trustee for at least two years after the date of grant or issuance. Options granted under Section 102 of the Ordinance will be deposited with a trustee appointed by the company in accordance with Section 102 of the Ordinance and the relevant income tax regulations and guidelines, and will be granted in the employee income track or the capital gains track. The 2005 Plan will be managed by the board of directors of the company or any other committee or person that our board of directors of authorizes for this purpose. According to our board of directors’ resolution of September 19, 2005, the options granted under Section 102 of the Ordinance will be granted under the capital gains track. The 2005 Plan also permit us to grant options to U.S. residents, which may qualify as “incentive stock options” within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended, or the Code, and to residents of other jurisdictions.

Options granted under the 2005 Plan are subject to applicable vesting schedules and generally for all awards granted after May 27, 2010, expire six years from the grant date (however, generally, awards granted prior to such date, expire ten years from the grant date).

Upon the termination of a Participant’s engagement with us for any reason other than death, retirement, disability or due cause, all unvested options allocated shall automatically expire 90 days after the termination, unless expired earlier due to their term. If the Participant’s engagement was terminated for cause (as defined in the 2005 Plan), the Participant’s right to exercise any unexercised options, awarded and allocated in favor of such Participant, whether vested or not, shall immediately cease and expire as of the date of such termination. If the Participant dies, retires or is disabled, any vested but unexercised options shall automatically expire 12 months from the termination of the engagement, unless expired earlier due to their term.

102

In the event that options allocated under the 2005 Plan expire or otherwise terminate in accordance with the provisions of the 2005 Plan, such expired or terminated options shall become available for future grant awards and allocations under the 2005 Plan.

In the event of (i) the sale of all or substantially all of our assets; (ii) a sale (including an exchange) of all or substantially all of our share capital; or (iii) a merger, consolidation or like transaction of ours with or into another corporation, then, subject to obtaining the applicable approvals of the Israeli tax authorities, the board of directors in its sole discretion shall resolve: (a) if and how any unvested options shall be canceled, replaced or accelerated; (b) if and how any vested options (including options with respect to which the vesting period has been accelerated according to the foregoing) shall be exercised, replaced and/or sold by a trustee or us (as the case may be) on the behalf of the respective Israeli Participants; and (c) how any underlying shares issued upon exercise of the options and held by a trustee on behalf any Israeli Participants shall be replaced and/or sold by such trustee on behalf of the Israeli Participants.

Corporate Governance Practices

Companies incorporated under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on the NASDAQ Capital Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements under Israeli law relating to such matters as external directors, the audit committee, the compensation committee and an internal auditor. These requirements are in addition to the corporate governance requirements imposed by the Listing Rules of the NASDAQ Capital Market and other applicable provisions of U.S. securities laws to which we will become subject (as a foreign private issuer) upon the closing of this offering and the listing of our ordinary shares on the NASDAQ Capital Market. Under the Listing Rules of the NASDAQ Capital Market, a foreign private issuer, such as us, may generally follow its home country rules of corporate governance in lieu of the comparable requirements of the Listing Rules of the NASDAQ Capital Market, except for certain matters including (among others) the composition and responsibilities of the audit committee and the independence of its members within the meaning of the rules and regulations of the SEC.

NASDAQ Capital Market Listing Rules and Home Country Practices

In accordance with Israeli law and practice, and subject to the exemption set forth in Rule 5615 of the Listing Rules of the NASDAQ Capital Market, if our ordinary shares are approved for listing on the NASDAQ Capital Market we intend to follow the provisions of the Companies Law, rather than the Listing Rules of the NASDAQ Capital Market, with respect to the following requirements:

      Distribution of certain reports to shareholders.  As opposed to the Listing Rules of the NASDAQ Capital Market, which require listed issuers to make certain reports, such as annual reports, interim reports and quarterly 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 plan to 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. See “Where You Can Find More Information” for a description of our Exchange Act reporting obligations.

      Nomination of directors.  With the exception of our external directors and directors elected by our board of directors due to vacancy, our directors are elected by an annual meeting of our shareholders to hold office until the next annual meeting following his or her election. See “Management — Board Practices.” 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 articles of association and the Companies Law. One or more shareholders of a company holding at least 1% of the voting power of the company may nominate a currently serving external director for an additional three year term. Nominations need not be made by a nominating committee of our board of directors consisting solely of independent directors or by independent directors constituting a majority of independent directors, as required under the Listing Rules of the NASDAQ Capital Market.

      Compensation of officers.  We follow the provisions of the Companies Law with respect to matters in connection with the composition and responsibilities of our compensation committee, office holder compensation and any required approval by the shareholders of such compensation. Israeli law and our articles of association do not require that

103

the independent members of our board of directors, or a compensation committee composed solely of independent members of our board of directors, determine an executive officer’s compensation, as is generally required under the Listing Rules of the NASDAQ Capital Market with respect to the Chief Executive Officer and all other executive officers of a company. However, Israeli law requires that each of our audit and compensation committees be comprised of at least three members, including all of our external directors, and that the external or independent directors must constitute a majority of the members of each committee. See “Management — Board Practices — External Directors.” In addition, Israeli law requires that additional members of the compensation committee and the external directors be compensated equally. Our compensation committee has been established and conducts itself in accordance with the provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Companies Law. Furthermore, compensation of office holders is determined and approved by our compensation committee, and in general, by our board of directors as well, and in certain circumstances by our shareholders, as detailed below under the caption “—Shareholder Approval.” Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation (including the compensation required to be approved for our chief executive officer) requiring such approval under the requirements of the Companies Law, including seeking prior approval of the shareholders for the compensation policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with Listing Rules of the NASDAQ Capital Market. See “— Compensation Committee and Compensation Policy” below.

      Compensation Committee . According to the Companies Law, we established a compensation committee as detailed below. Prior to the consummation of this offering, our board of directors will affirmatively determine that each member of our compensation committee qualifies as “independent” under applicable NASDAQ Capital Market and SEC rules.

      Independent directors . Israeli law does not require that a majority of the directors serving on our Board be “independent,” as defined under NASDAQ Capital Market Listing Rule 5605(a)(2), but rather requires we have at least two external directors who meet the requirements of the Companies Law, as described below under “Management — Board Practices — External Directors.” We are required, however, to ensure that all members of our audit committee are “independent” under the Companies Law and the applicable NASDAQ Capital Market and SEC criteria for independence and under Israeli law, the audit committee and compensation committee must each include all external directors then serving on our board of directors. We must also ensure that a majority of the members of our audit committee are “unaffiliated directors” as defined in the Companies Law as described below under the caption “— Audit Committee — Companies Law Requirements.” Israeli law does not require that our independent directors conduct regularly scheduled meetings at which only such independent directors are present, as required by the NASDAQ Capital Market Listing Rules. Prior to the consummation of this offering, our board of directors will affirmatively determine which of our directors qualifies as “independent” under the NASDAQ Capital Market independence standards. We anticipate that our board of directors will determine that each of Gil Bianco, Amir Hayek, Hila Karah and Issac Silberman is independent under such standards.

      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 corporate actions in accordance with NASDAQ Capital Market Listing Rule 5635. In particular, under this NASDAQ Capital Market rule, shareholder approval is generally required for: (i) an acquisition of shares or 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 or amendment of equity compensation arrangements; 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 (or via sales by directors, officers or 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: (a) 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, (b) extraordinary transactions with controlling shareholders of publicly held companies, which require the special approval described below under “Disclosure of personal interests of controlling shareholders and approval of certain transactions,” (c) terms of office and employment or other engagement of our controlling shareholder, if any, or such controlling shareholder’s relative, which require the special approval described below under “Disclosure of personal interests of controlling shareholders and approval of certain transactions,” (d) approval of transactions with our Chief Executive Officer with respect to his or her compensation, whether in accordance with our approved compensation policy or not in accordance with our

104

approved compensation policy, or transactions with our officers not in accordance with our approved compensation policy, and (e) approval of our compensation policy for office holders. In addition, under the Companies Law, a merger requires approval of the shareholders of each of the merging companies. See also “Description of Share Capital — Acquisitions under Israeli Law — Merger” below.

      Quorum for shareholder meetings . As permitted under the Companies Law, pursuant to our articles of association, the quorum required for an ordinary meeting of shareholders will consist of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law, who hold at least 25% of the voting power of our shares (and in an adjourned meeting, with some exceptions, any number of shareholders), instead of 33 ⅓% of the issued share capital required under the NASDAQ Capital Market corporate governance rules.

Other than the foregoing home country practices, we otherwise intend to comply with the rules generally applicable to U.S. domestic companies listed on the NASDAQ Capital Market. We may in the future decide to use the foreign private issuer exemption with respect to some or all of the other NASDAQ Capital Market corporate governance rules. Following our home country corporate governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Capital Market may provide less protection to you than what is accorded to investors under the Listing Rules of the NASDAQ Capital Market applicable to domestic U.S. issuers.

Board practices

Board of Directors

Under the Companies Law and our articles of association, 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 his personal contract that we have entered into with him. All other executive officers are also appointed by our board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with them.

Prior to the consummation of this offering, our board of directors will affirmatively determine that a majority of our directors are independent in accordance with the NASDAQ Capital Market rules. We anticipate that our board of directors will determine that all of our directors other than Zeev Weiss and Zvika Joseph are independent under such rules. The definition of independent director under the NASDAQ Capital Market rules and external director under the Companies Law overlap to a significant degree such that we would generally expect the two directors serving as external directors to satisfy the requirements to be independent under the NASDAQ Capital Market rules. The definition of external director includes a set of statutory criteria that must be satisfied, including criteria whose aim is to ensure that there is no factor which would impair the ability of the external director to exercise independent judgment. The definition of independent director specifies similar, if slightly less stringent, requirements in addition to the requirement that the board consider any factor which would impair the ability of the independent director to exercise independent judgment. In addition, our external directors each serve for a period of three years. However, external directors must be elected by a special majority of shareholders while independent directors may be elected by an ordinary majority. See “— External Directors” below for a description of the requirements under the Companies Law for a director to serve as an external director.

Under our articles of association, our board of directors must consist of at least four and not more than nine directors, including at least two external directors required to be appointed under the Companies Law. Our board of directors currently consists of six members, including our non-executive Chairman of the board of directors. Other than our two external directors, our directors are elected by an ordinary resolution at the annual and/or special general meeting of our shareholders. Because our ordinary shares do not have cumulative voting rights in the election of directors, the holders of a majority of the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval requirements for external directors (See “— External Directors”). We have held elections for each of our non-external directors at each annual meeting of our shareholders since our initial public offering in Israel.

In addition, our articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors, for a term of office ending on the earlier of the next annual general meeting of our shareholders, or the conclusion of the term of office in accordance with our articles or any applicable law, subject to the maximum number of directors allowed under the articles of association. External directors are elected for an initial term of three years and may be elected for up to

105

two additional three-year terms, provided that, for Israeli companies traded on NASDAQ Capital Market and certain other international exchanges, such term may be extended indefinitely in increments of additional three-year terms. External directors may be removed from office only under the limited circumstances set forth in the Companies Law. See “— External Directors.”

Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. See “— External Directors.” 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 one. Our board of directors has determined that Mr. Amir Hayek, Mr. Bianco and Mr. Silberman have accounting and financial expertise and possess professional qualifications as required under the Companies Law.

Chairman of the Board

Our articles of association provide that the chairman of the board is appointed by the members of the board of directors and serves as chairman of the board throughout his term as a director, unless resolved otherwise by the board of directors. Under the Companies Law, the chief executive officer or a relative of the general manager may not serve as the chairman of the board of directors, and the chairman or a relative of the chairman may not be vested with authorities of the general manager without shareholder approval consisting of a majority vote of the shares present and voting at a shareholders meeting, provided that either:

      such majority includes at least 2/3 of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such appointment, present and voting at such meeting (not including abstaining shareholders); or

      the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such appointment voting against such appointment does not exceed 2% of the aggregate voting rights in the company.

In addition, a person subordinated, directly or indirectly, to the general manager may not serve as the chairman of the board of directors; the chairman of the board may not be vested with authorities that are granted to those subordinated to the general manager; and the chairman of the board may not serve in any other position in the company or a controlled company, except as a director or chairman of a controlled company.

External Directors

Under the Companies Law, we are required to include at least two members who qualify as external directors, one of which has accounting and financial expertise. Gil Bianco and Issac Silberman have served as our external directors since 2010. Mr. Bianco and Mr. Silberman were reelected to serve a second term from April 2013 and until April 2016. Our board of directors has determined that both Mr. Bianco and Mr. Silberman have accounting and financial expertise.

The provisions of the Companies Law set forth special approval requirements for the election of external directors. External directors must be elected by a majority vote of the shares present and voting at a shareholders meeting, provided that either:

      such majority includes at least a majority of the shares held by all shareholders who are non-controlling shareholders and do not have a personal interest in the election of the external director (other than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions, to which we refer as a disinterested majority; or

      the total number of shares voted by non-controlling shareholders and by shareholders who do not have a personal interest in the election of the external director, against the election of the external director, does not exceed 2% of the aggregate voting rights in the company.

The term controlling shareholder is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, excluding such ability deriving solely from his or her position as a director of the company or from any other position with the company. 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.

106

With respect to certain matters, a controlling shareholder is deemed to include a shareholder that holds 25% or more of the voting rights in a public company if no other shareholder holds more than 50% of the voting rights in the company.

The initial term of an external director is three years. Thereafter, an external director may be reelected by shareholders to serve in that capacity for up to two additional three-year terms, except as provided below, provided that either:

(i)        his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders’ meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company. In such event, the external director so reappointed may not be a Related or Competing Shareholder, or a relative of such shareholder, at the time of the appointment, and is not and has not had any affiliation with a Related or Competing Shareholder, at such time or during the two years preceding such person’s reappointment to serve an additional term as external director. The term “Related or Competing Shareholder” means a shareholder proposing the reappointment or a shareholder holding 5% or more of the outstanding shares or voting rights of the company, provided, that at the time of the reappointment, such shareholder, the controlling shareholder of such shareholder, or a company controlled by such shareholder, have a business relationship with the company or are competitors of the company. Additionally, the Israeli Minister of Justice, in consultation with the Israeli Securities Authority, may determine matters that under certain conditions will not constitute a business relationship or competition with the company;

(ii)       the external director proposed his or her own nomination, and such nomination was approved in accordance to the requirements described in the paragraph above; or

(iii)      his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above).

The term of office for external directors for Israeli companies traded on certain foreign stock exchanges, including the NASDAQ Capital 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 from office by a special general meeting of shareholders called by the board of directors, which approves such dismissal by the same shareholder vote percentage required for their election or by a court, in each case, only under limited circumstances, including ceasing to meet the statutory qualifications for appointment, or violating their duty of loyalty to the company. If an external directorship becomes vacant and there are fewer than two external directors on the board of directors at the time, then the board of directors is required under the Companies Law to call a shareholders’ meeting as soon as practicable to appoint a replacement external director.

Each committee of the board of directors that is authorized to exercise the powers of the board of directors must include at least one external director, except that the audit committee and the compensation committee must include all external directors then serving on the board of directors. Under the Companies Law, external directors of a company are prohibited from receiving, directly or indirectly, any compensation from the company other than compensation and reimbursement of expenses amounts for their services as external directors prescribed under the Companies Law and the regulations promulgated thereunder. Compensation of an external director is determined prior to his or her appointment and may not be changed during his or her term subject to certain exceptions.

The Companies Law provides that a person is not qualified to serve as an external director if (i) the person is a relative of a controlling shareholder of the company, or (ii) if that person or his or her relative, partner, employer, another person to whom he or she was directly or indirectly subordinate, or any entity under the person’s control, has or had, during the two years preceding the date of appointment as an external director: (a) any affiliation with the company, with any person or entity controlling the company or a relative of such person on the date of appointment, or with any entity controlled by or under common control with the company; or (b) in the case of a company with no shareholder holding 25% or more of its voting rights, had at the date

107

of appointment as an external director, any affiliation with a person then serving as chairman of the board or chief executive officer, a holder of 5% or more of the issued share capital or voting power in the company or the most senior financial officer.

The term relative is defined as a spouse, sibling, parent, grandparent or descendant; spouse’s sibling, parent or descendant; and the spouse of each of the foregoing persons.

The term affiliation includes (subject to certain exceptions):

      an employment relationship;

      a business or professional relationship even if not maintained on a regular basis (excluding insignificant relationships);

      control; and

      service as an office holder, excluding service as a director in a private company prior to the initial public offering of its shares if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

Additionally, the Israeli Minister of Justice, in consultation with the Israeli Securities Authority, is authorized to determine that certain matters will not constitute an affiliation.

The term “office holder” is defined under the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of that person’s title, a director and any other manager directly subordinate to the general manager.

In addition, no person may serve as an external director of a company if: (i) that person’s position or professional or other activities create, or may create, a conflict of interest with that person’s responsibilities as a director or otherwise interfere with that person’s ability to serve as an external director; (ii) at the time of appointment, such person serves as a director of another company and an external director of the other company is also a director of the company; (iii) the person is an employee of the Israel Securities Authority or of an Israeli stock exchange; or (iv) such person received direct or indirect compensation from the company in connection with such person’s services as an external director, other than as permitted by the Companies Law and the regulations promulgated thereunder.

Following the termination of an external director’s service on a board of directors, such former external director and his or her spouse and children may not be provided a direct or indirect benefit by the company, its controlling shareholder or any entity under its controlling shareholder’s control. This includes engagement as an office holder or director of the company or a company controlled by its controlling shareholder or employment by, or provision of services to, any such company for consideration, either directly or indirectly, including through a corporation controlled by the former external director. This restriction extends for a period of two years with regard to the former external director and his or her spouse or child and for one year with respect to other relatives of the former external director.

If at the time at which an external director is appointed all members of the board of directors who are not controlling shareholders or relatives of controlling shareholders of the company are of the same gender, the external director to be appointed must be of the other gender.

According to regulations promulgated under the Companies Law, a person may be appointed as an external director only if he or she has professional qualifications. In addition, at least one of the external directors must be determined by our board of directors to have accounting and financial expertise. However, if at least one of our other directors (i) meets the independence requirements under the Exchange Act, (ii) meets the standards of the NASDAQ Capital Market Listing Rules for membership on the audit committee and (iii) has accounting and financial expertise as defined under Companies Law, then neither of our external directors is required to possess accounting and financial expertise as long as each possesses the requisite professional qualifications.

A director with accounting and financial expertise is a director who, due to his or her education, experience and skills, possesses an expertise in, and an understanding of, financial and accounting matters and financial statements, such that he or she is able to understand the financial statements of the company and initiate a discussion about the presentation of financial data. In determining whether the director has financial and accounting expertise the board of directors shall consider education, experience and the knowledge in the following subjects: (i) accounting issues and internal auditing issues typical to the

108

company’s industry and to companies of the same size and complexity as the company; (ii) the nature of the Internal Auditor’s position in the company and his or her duties; and (iii) the preparation of financial statements and their approval subject to the Companies Law and the Israeli Securities Law.

A director is deemed to have professional qualifications if he or she has any of (i) an academic degree in economics, business management, accounting, law or public administration, (ii) an academic degree or has completed another form of higher education in the primary field of business of the company or in a field which is relevant to his/her position in the company, or (iii) at least five years of experience serving in one of the following capacities, or at least five years of cumulative experience serving in two or more of the following capacities: (a) a senior business management position in a company with a significant volume of business; (b) a senior position in the company’s primary field of business; or (c) a senior position in public administration or service. The board of directors is charged with determining whether a director possesses financial and accounting expertise or professional qualifications.

Audit Committee

Our audit committee consists of Mr. Amir Hayek, along with our two external directors, Gil Bianco and Issac Silberman. Mr. Bianco serves as the Chairman of the audit committee.

Companies Law Requirements

Under the 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 chairman of the committee. The audit committee may not include the chairman of the board of directors, 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 most of whose livelihood depends on a controlling shareholder.

In addition, under the Companies Law, the audit committee of a publicly traded company must consist of a majority of unaffiliated directors. In general, an “unaffiliated director” under the Companies Law is defined as either an external director or as a director who meets the following criteria:

      he or she meets the qualifications for being appointed as an external director, except for the requirement that the director be an Israeli resident (which does not apply to companies such as ours whose securities have been offered outside of Israel or are listed outside of Israel); and

      he or she has not served as a director of the company for a period exceeding nine consecutive years, provided that, for this purpose, a break of less than two years in service shall not be deemed to interrupt the continuation of the service.

The Companies Law further requires that generally, any person who does not qualify to be a member of the audit committee may not attend the audit committee’s meetings and voting sessions, unless such person was invited by the chairperson of the committee for the purpose of presenting on a specific subject, provided, however, that an employee of the company who is not the controlling shareholder or a relative thereof, may attend the discussions of the committee provided that the resolutions are resolved without his or her presence. A company’s legal advisor and company secretary whom are not the controlling shareholder or a relative thereof may attend the meeting and voting sessions, if required by the committee.

The quorum required for the convening of meetings of the audit committee and for adopting resolutions by the audit committee is a majority of the members of the audit committee, provided such majority is comprised of a majority of independent directors, and at least one of those present is an external director.

Listing Requirements

Under the NASDAQ Capital Market corporate governance rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise.

109

All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Capital Market corporate governance rules. Prior to the consummation of this offering, our board of directors will affirmatively determine that Gil Bianco is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the NASDAQ Capital Market corporate governance rules.

Each of the members of the audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different from the general test for independence of board and committee members.

Audit Committee Role

Prior to the consummation of this offering, our board of directors will adopt an audit committee charter to be effective upon the listing of our shares on the NASDAQ Capital Market that will set forth the responsibilities of the audit committee consistent with the rules of the SEC and the Listing Rules of the NASDAQ Capital Market, as well as the requirements for such committee under the Companies Law, including the following:

      oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law;

      recommending the engagement or termination of the person filling the office of our internal auditor; and

      recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors.

Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.

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

(i)        determining whether there are deficiencies in the business management practices of our Company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the board of directors to improve such practices;

(ii)       determining the approval process for transactions that are ‘non-negligible’ (i.e., transactions with a controlling shareholder that are classified by the audit committee as non-negligible, even though they are not deemed extraordinary transactions), as well as determining which types of transactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by the audit committee;

(iii)      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) (see “— Approval of Related Party Transactions under Israeli Law”);

(iv)      where the board of directors approves the working plan of the internal auditor, to examine such working plan before its submission to our board of directors and proposing amendments thereto;

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

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

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

110

Our audit committee may not approve any actions requiring its approval (see “— 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.

Compensation Committee and Compensation Policy

Our compensation committee currently consists of Mr. Amir Hayek, Mr. Issac Silberman and Mr. Gil Bianco. Mr. Silberman serves as the Chairman of the compensation committee.

Under the Companies Law, the board of directors of a public company must appoint a compensation committee and adopt a compensation policy. 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, and one of the external directors must serve as chairman of the committee. However, subject to certain exceptions, Israeli companies whose securities are traded on stock exchanges such as the NASDAQ Capital Market, and who do not have a controlling shareholder, 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 who may not be a member of the committee.

The compensation policy must be based on certain considerations, must include certain provisions and needs to reference certain matters as set forth in the Companies Law. The compensation policy must be approved by the company’s board of directors after considering the recommendations of the compensation committee. In addition, the compensation policy needs to be approved by the company’s shareholders by a simple majority, provided that (i) such majority includes a majority of the votes cast by the shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting (abstentions are disregarded) or (ii) the votes cast by shareholders who are not controlling shareholders and who do not have a personal interest in the matter who were present and voted against the compensation policy, constitute two percent or less of the voting power of the company. Such majority determined in accordance with clause (i) or (ii) is hereinafter referred to as the “Compensation Majority.”

To the extent a compensation policy is not approved by shareholders at a duly convened shareholders meeting, the board of directors of a company may override the resolution of the shareholders following a re-discussion of the matter by the board of directors and the compensation committee and for specified reasons, and after determining that despite the rejection by the shareholders, the adoption of the compensation policy is for the benefit of the company.

A compensation policy that is for a period of more than three years must be approved in accordance with the above procedure every three years.

Notwithstanding the above, the amendment of existing terms of office and employment of office holders (other than directors or controlling shareholders and their relatives, who serve as office holders) requires the approval of only the compensation committee, if such committee determines that the amendment is not material in relation to its existing terms.

Pursuant to the Companies Law, following the recommendation of our compensation committee, our board of directors approved our compensation policy, and our shareholders, in turn, approved the compensation policy at our annual general meeting of shareholders that was held in January 2014. 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. That policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee, and will need to be brought for approval by the company’s shareholders, which approval requires a Special Approval for Compensation as defined below under “— Approval of related party transactions under Israeli law — Fiduciary duties of directors and executive officers.”

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

111

      the knowledge, skills, expertise and accomplishments of the relevant office holder;

      the office holder’s roles and responsibilities and prior compensation agreements with him or her;

      the ratio between the cost of the terms of employment of an office holder and the cost of the compensation of the other employees of the company, including those employed through manpower companies, in particular the ratio between such cost and the average and median compensation of the other employees of the company, as well as the impact such disparities may have on the work relationships in the company;

      the possibility of reducing variable compensation, if any, at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and

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

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 an office holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements;

      the minimum holding or vesting period for variable, equity-based compensation; and

      maximum limits for severance compensation.

The compensation committee is responsible for (a) recommending the compensation policy to a company’s board of directors for its approval (and subsequent approval by its shareholders) and (b) duties related to the compensation policy and to the compensation of a company’s office holders as well as functions previously fulfilled by a company’s audit committee with respect to matters related to approval of the terms of engagement of 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; and

      determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.

Compensation Committee Role

The responsibilities of our compensation committee include:

      reviewing and recommending overall compensation policies with respect to our Chief Executive Officer and other executive officers and recommending once every three years the extension of such compensation policies;

      reviewing and approving from time to time corporate goals and objectives relevant to the compensation of our Chief Executive Officer and other executive officers including evaluating their performance in light of such goals and objectives;

      reviewing and approving the granting of options and other incentive awards as may be required by the Companies law; and

112

      reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors.

Internal Auditor

Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor in accordance with the recommendation of the audit committee. An internal auditor may not be:

      a person (or a relative of a person) who holds more than 5% of the company’s outstanding shares or voting rights;

      a person (or a relative of a person) who has the power to appoint a director or the general manager of the company;

      an office holder (including a director) of the company (or a relative thereof); or

      a member of the company’s independent accounting firm, or anyone on his or her behalf.

The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures. 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. Mr. Haim Halfon has been appointed as our internal auditor. Mr. Haim Halfon is a certified internal auditor and a partner of Amit, Halfon CPA.

The board of directors shall determine the direct supervisor of the internal auditor. The internal auditor is required to submit his findings to the audit committee, unless specified otherwise by the board of directors.

Approval of Related Party Transactions under Israeli Law

Fiduciary Duties of Directors and Executive Officers

The Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under “Management — Executive Officers and Directors” is an office holder under the Companies Law.

An office holder’s fiduciary duties consist of a duty of care and a duty of loyalty. 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 loyalty requires that an office holder act in good faith and in the best interests of the company.

The duty of care includes a duty to use reasonable means to obtain:

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

      all other important information pertaining to any such action.

The duty of loyalty includes a duty to:

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

      refrain from any activity that is competitive with the company;

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

      disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder.

113

Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions

The Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and all related material information or documents concerning any existing or proposed transaction with the company. An interested office holder’s disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest stemming from one’s ownership of shares in the company. A personal interest furthermore includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter. An office holder is not however, obligated to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary transaction. Under the Companies Law, an extraordinary transaction is defined as any of the following:

      a transaction other than in the ordinary course of business;

      a transaction that is not on market terms; or

      a transaction that may have a material impact on a company’s profitability, assets or liabilities.

If it is determined that an office holder has a personal interest in a transaction, approval by the board of directors is required for the transaction, unless the company’s articles of association provide for a different method of approval. Our articles of association do not provide otherwise. Further, so long as an office holder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemed a breach of the duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that is not performed by the office holder in good faith. An extraordinary transaction in which an office holder has a personal interest requires approval first by the company’s audit committee and subsequently by the board of directors. The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director requires approval first by the company’s compensation committee, then by the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify or insure is inconsistent with the company’s stated compensation policy or if the office holder is the Chief Executive Officer (apart from a number of specific exceptions), then such arrangement is subject to the approval of a majority vote of the shares present and voting at a shareholders meeting, provided that either: (a) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation arrangement (excluding abstaining shareholders); or (b) the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate voting rights. We refer to this as the Special Approval for Compensation. Arrangements regarding the compensation, indemnification or insurance of a director require the approval of the compensation committee, board of directors and shareholders by ordinary majority, in that order, and under certain circumstances, a Special Approval for Compensation.

Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors, as applicable, determines that he or she should be present in order to present the transaction that is subject to approval. Generally, if a majority of the members of the audit committee or the board of directors, as applicable, have a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors, as applicable. In the event a majority of the members of the board of directors have a personal interest in the approval of a transaction, then the approval thereof shall also require the approval of the shareholders.

Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions

Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. 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

114

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. The approval of the audit committee or the compensation committee, as the case may be, the board of directors and the shareholders of the company, in that order is required for (a) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling shareholder or his or her relative, directly or indirectly, for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her relative who is not an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder (collectively referred as Transaction with a Controlling Shareholder). In addition, such shareholder approval requires one of the following, which we refer to as a Special Majority:

      at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present and voting at the meeting approving the transaction, excluding abstentions; or

      the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and voting at the meeting do not exceed 2% of the voting rights in the company.

To the extent that any such Transaction with a Controlling Shareholder is for a period extending beyond three years, approval is required once every three years, unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances related thereto.

Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require the approval of the compensation committee, board of directors and shareholders by a Special Majority and the terms thereof may not be inconsistent with the company’s stated compensation policy.

Pursuant to regulations promulgated under the Companies Law, certain transactions with a controlling shareholder, a relative thereof, or with a director, that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval upon certain determinations of the audit committee and board of directors. Under these regulations, a shareholder holding at least 1% of the issued share capital of the company or the voting rights may require, within 14 days of the publication of such determinations, that despite such determinations by the audit committee and the board of directors, such transaction will require shareholder approval under the same majority requirements that would otherwise apply to such transactions.

Shareholder Duties

Pursuant to the Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:

      an amendment to the company’s articles of association;

      an increase of the company’s authorized share capital;

      a merger; or

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

In addition, a shareholder also has a general duty to refrain from discriminating against other shareholders.

In addition, certain shareholders also have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that he or she has the power to determine the outcome of a shareholder vote at a general meeting or a shareholder class meeting and any shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Companies Law does not define the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.

115

Exculpation, Insurance and Indemnification of Directors and Officers

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.

Under the Companies Law, a company may indemnify an office holder in respect of 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:

      financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;

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

      reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.

Under the Companies Law and the Israeli Securities Law 5728-1968, or the Israeli Securities Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

      a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

      a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and

      a financial liability imposed on the office holder in favor of a third party.

Under our articles of association, we may insure and indemnify an office holder against the aforementioned liabilities as well as the following liabilities:

      a breach of duty of care to the Company or to a third party;

      any other action which is permitted by law to insure an office holder against;

      expenses incurred and/or paid by the office holder in connection with an administrative enforcement procedure under any applicable law including the Efficiency of Enforcement Procedures in the Securities Authority Law (legislation amendments), 5771-2011 and the Israeli Securities Law, which we refer to as an Administrative Enforcement Procedure, and including reasonable litigation expenses and attorney fees; and

      a financial liability in favor or a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.

Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

116

      a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

      a breach of duty of care committed intentionally or recklessly, excluding a breach arising solely out of the negligent conduct of the office holder;

      an act or omission committed with intent to derive illegal personal benefit; or

      a civil or administrative fine 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. See “— Approval of Related Party Transactions under Israeli Law.”

Our articles of association permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law and the Israeli Securities Law.

We have entered into agreements with each of our directors and executive officers exculpating them, to the fullest extent permitted by law and our articles of association, and undertaking to indemnify them to the fullest extent permitted by law and our articles of association. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.

The maximum indemnification amount set forth in such agreements is limited to an amount which shall not exceed 25% of our shareholders equity based on our most recently audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.

In the opinion of the SEC, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.

We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, prior to the closing of this offering, we intend to enter into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance.

Code of Ethics

In November 2011, our board of directors adopted a Code of Ethics that was amended in April 2014, applicable to all of our directors, officers, managers and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions. Our board of directors will further amend the Code of Ethics prior to the effectiveness of the registration statement of which this prospectus forms a part so that the Code of Ethics qualifies as a “code of ethics” as defined in Item 16B of Form 20-F promulgated by the SEC. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of the Code of Ethics will be posted on our website at www.intecpharma.com . Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. If we make any amendment to the Code of Ethics or grant any waivers, including any implicit waiver, from a provision of the Code of Ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC. Under Item 16B of the SEC’s Form 20-F, if a waiver or amendment of the Code of Ethics applies to our principal executive officer, principal financial officer, principal accounting officer or controller and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we are required to disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.

117

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial ownership of our ordinary shares as of M ay 15 , 2015 and as adjusted to reflect the sale of the ordinary shares offered by us (assuming no exercise of the underwriter’s overallotment option), by:

      each of our directors and executive officers;

      all of our executive officers and directors as a group; and

      each person (or group of affiliated persons) known by us to be the beneficial owner of more than 5% of the outstanding ordinary shares.

Except as otherwise indicated in the footnotes to this table, we believe the persons named in this table have sole voting and investment power with respect to all the ordinary shares indicated. The following table sets forth information relating to the beneficial ownership of our ordinary shares as of May 15, 2015 and as adjusted to give effect to this offering.

 

 

As of May 15, 2015

 

After Offering

 

 

Ordinary Shares

 

%

 

Ordinary Shares

 

%

Zvika Joseph

 

181,372

(1)

 

2.70

%

 

 

 

 

Zeev Weiss

 

92,163

(2)

 

1.37

%

 

 

 

 

Oren Mohar

 

(3)

 

 

 

 

 

 

Liat Flaishon

 

 

 

 

 

 

 

 

Nadav Navon

 

29,585

(4)

 

0.44

%

 

 

 

 

Gil Bianco

 

10,751

(5)

 

0.16

%

 

 

 

 

Amir Hayek

 

10,751

(5)

 

0.16

%

 

 

 

 

Hila Karah

 

10,751

(5)

 

0.16

%

 

 

 

 

Issac Silberman

 

11,551

(6)

 

0.17

%

 

 

 

 

All executive officers and directors as a group (9 people)

 

346,924

(7)

 

5.17

%

 

 

 

 

Phoenix Holdings Ltd.

 

555,161

(8)

 

8.27

%

 

 

 

 

Yehuda Shimoni

 

431,702

(9)

 

6.43

%

 

 

 

 

Hawthorn Asset Management Inc.

 

305,136

(10)

 

4.54

%

 

 

 

 

Alpha Beta Investments and Entrepreneurship Ltd.

 

282,021

(11)

 

4.20

%

 

 

 

 

____________

*       Percentages and number of ordinary shares calculated in accordance with SEC rules and based upon 5,609,310 ordinary shares issued and outstanding as of May 15, 2015, in addition the following types of warrants and options: (a) 198,812 non-tradable warrants with an exercise price of NIS 35 per share and which will expire on September 17, 2017, (b) 827,697 options granted to employees and service providers, with an exercise price range between NIS 0.5 and NIS 81.1 per option, and (c) 80,166 non-tradable warrants with an exercise price of NIS 35 per share and which will expire on October 22, 2016.

(1)    Consists of 147,878 ordinary shares, options to purchase 20,827 ordinary shares with an exercise price of NIS 81.1 per share and with an expiration date of May 1, 2017 and options to purchase 12,667 ordinary shares with an exercise price of NIS 56.35 per share and with an expiration date of August 26, 2019. All such options have vested or will vest within 60 days of May 15, 2015.

(2)    Consists of 59,663 ordinary shares, and options to purchase 32,500 ordinary shares with an exercise price of NIS 47.60 per share and with an expiration date of May 30, 2018. All such options have vested or will vest within 60 days of May 15, 2015.

(3)    Does not include options to purchase 28,000 ordinary shares with an exercise price of NIS 27.93 that will vest and become exercisable upon completion of an issuance of our shares on a foreign stock exchange.

(4)    Consists of 8,585 ordinary shares and options to purchase 21,000 ordinary shares with an exercise price of NIS 42.69 per share and with an expiration date of October 13, 2016. All such options have vested or will vest within 60 days of May 15, 2015.

(5)    Consists of options to purchase 10,751 ordinary shares with an exercise price of NIS 48.91 per share and with an expiration date of July 1, 2020. All such options have vested or will vest within 60 days of May 15, 2015.

(6)    Consists of 800 ordinary shares and options to purchase 10,751 ordinary shares with an exercise price of NIS 48.91 per share and with an expiration date of July 1, 2020. All such options have vested or will vest within 60 days of May 15, 2015.

118

(7)    See footnotes (1) through (6).

(8)    Consists of 555,161 ordinary shares. The ordinary shares are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holding Ltd. The Phoenix Holding Ltd. is a majority-owned subsidiary of Delek Group Ltd. The majority of Delek Group Ltd.’s outstanding shares and voting rights are owned, directly and indirectly, by Itshak Sharon (Tshuva) through private companies wholly-owned by him, and the remainder is held by the public according to the following segmentation: 4,533 ordinary shares held by Phoenix Holdings Ltd. - Participant, 76,246 ordinary shares held by Phoenix Holdings Ltd. - Nostro, 402,780 ordinary shares held by Phoenix Holdings Ltd. - Gemel and Pension, 21,684 ordinary shares held by Excellence Investments Ltd - Gemel and Pension, 9,904 ordinary shares held by Excellence Investments Ltd - mutual funds and 40,014 ordinary shares are held by Excellence Investments Ltd ETF.

(9)    Mr. Yehuda Shimoni holds 274,866 ordinary shares, non-tradable warrants to purchase 9,620 ordinary shares with an exercise price of NIS 35 per share and with an expiration date of September 17, 2017 and non-tradable warrants to purchase 4,810 ordinary shares with an exercise price of NIS 35 per share and with an expiration date of October 22, 2016 directly, and 142,406 ordinary shares through Nice Orchid Ltd. Nice Orchid is owned by Mr. Yehuda Shimoni.

(10) Consists of 305,136 ordinary shares.

(11) Consists of 260,788 ordinary shares held by Alpha Beta Investments and Entrepreneurship Ltd. and 21,233 ordinary shares held by Eli Joseph, who is the owner of Alpha Beta Investments and Entrepreneurship.

None of our shareholders has different voting rights from other shareholders.

119

RELATED PARTY TRANSACTIONS

The following is a description of some of the transactions with related parties to which we are party and which were in effect within the past three fiscal years. The descriptions provided below are summaries of the terms of such agreements and do not purport to be complete and are qualified in their entirety by the complete agreements.

We believe that we have executed all of our transactions with related parties on terms no less favorable to us than those we could have obtained from unaffiliated third parties. See “Management — Approval of Related Party Transactions under Israeli Law.”

Indemnification Agreements

Our articles of association permit us to exculpate, indemnify and insure our directors and officeholders to the fullest extent permitted by the Companies Law. We have obtained directors’ and officers’ insurance for each of our officers and directors and have entered into indemnification agreements with all of our current officers and directors.

We have entered into indemnification and exculpation agreements with each of our current office holders and directors exculpating them to the fullest extent permitted by the law and our articles of association and undertaking to indemnify them to the fullest extent permitted by the law and our articles of association, including with respect to liabilities resulting from this offering, to the extent such liabilities are not covered by insurance. See “Management — Exculpation, Insurance and Indemnification of Directors and Officers.”

Registration Rights Agreement

The investors in our August 2013 financing round, who include Yehuda Shimoni, a holder of more than 5% of our ordinary shares, have piggyback registration rights for any ordinary shares purchased in the round or received pursuant to the exercise of warrants issued in the round. Because such shares are not included in the registration statement of which this prospectus is a part, following the expiration or earlier waiver of the lock-up period for this offering, the holders of up to 599,641 ordinary shares, consisting of (a) 320,663 ordinary shares, (b) 198,812 ordinary shares underlying warrants issued as part of the August 2013 financial round and (c) an additional 80,166 ordinary shares underlying warrants that were issued as part of the August 2013 financing round because we did not complete certain obligations by September 30, 2014, are entitled to request that we register such securities under the Securities Act, subject to cutback for marketing reasons and certain other conditions. As of the date hereof, 128,265 of the 320,663 ordinary shares originally issued in the August 2013 financing round have been sold on the TASE, thus we no longer have any registration rights with respect to such ordinary shares.

Lock Up Agreements

We and our executive officers, directors and all of our substantial shareholders have entered into lock-up agreements, pursuant to which our executive officers, directors and all of our substantial shareholders have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any ordinary shares or any securities convertible into or exchangeable for ordinary shares except for the ordinary shares offered in this offering without the prior written consent of the underwriters for a period of 180 days after the date of this prospectus. After the expiration of the 180 day period, the ordinary shares held by our directors, executive officers or certain of our other existing shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

Employment and Consulting Agreements

We have or have had employment, consulting or related agreements with each member of our senior management. See “Management — Executive Officers and Directors — Employment and Consulting Agreements.”

120

DESCRIPTION OF SHARE CAPITAL

The following description of our share capital is a summary of the material terms of our articles of association and Israeli corporate law regarding our shares and the holders thereof. This description contains all material information concerning our ordinary shares but does not purport to be complete. For a complete description, you should read our articles of association, a copy of which has been filed with the SEC as an exhibit to the registration statement of which this prospectus is a part. The following description is qualified in its entirety by reference to our articles of association and applicable law.

Ordinary Shares

As of May 15, 2015, our authorized share capital consists of (i) 16,000,000 ordinary shares, no par value. As of the date hereof, there are 5,609,310 ordinary shares issued and outstanding. All of our outstanding ordinary shares will be validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights.

Pursuant to Israeli securities laws, a company whose shares are traded on the TASE may not have more than one class of shares for a period of one year following its registration, after which it is permitted to issue preferred shares (which shall bear a dividend preference and shall not have any voting rights), and all outstanding shares must be validly issued and fully paid. All outstanding shares must be registered for trading on the TASE which currently prohibits the issuance of more than one class of shares.

Warrants

On October 21, 2010, we issued (in addition to 311,021 ordinary shares) 103,674 warrants to institutional investors which were not traded on the TASE. The warrants were offered and sold in units together with our ordinary shares for aggregate consideration of approximately NIS 14.93 million before issuance costs prior to deduction of issuance expenses. None of these warrants were exercised. The exercise period for these warrants expired on October 21, 2014.

In September 2011, we issued and listed on the TASE 166,743 Series 2 Warrants (in addition to 333,486 ordinary shares), exercisable for ordinary shares at an exercise price of NIS 60. Nine hundred warrants were exercised for total consideration of NIS 54,000 prior to their expiration on June 30, 2012.

In May 2012, we issued and listed on the TASE 143,796 Series 3 Warrants (in addition to 287,593 ordinary shares), exercisable for ordinary shares at an exercise price of NIS 60. 4,181 warrants were exercised for total consideration of approximately NIS 251,000 prior to their expiration on May 30, 2013.

In February 2013, we made a private offering to the Phoenix Insurance Company Ltd. and Meitav Provident & Pension Ltd. by which we issued (in addition to 231,000 ordinary shares) 92,400 warrants exercisable into shares in consideration of NIS 15 million. The warrants exercisable into shares were offered for no consideration. None of these warrants were exercised prior to their expiration on February 13, 2015.

As part of our August 2013 financing round, we issued (in addition to 320,663 ordinary shares) 198,812 warrants exercisable into ordinary shares with an exercise price of NIS 35 per share as part of a private offering to certain investors. In addition, we issued to these investors an additional 80,166 warrants exercisable into ordinary shares with an exercise price of NIS 35 per share because we did not complete (i) a public offering raising at least $12.0 million on NASDAQ Stock Market or (ii) a merger with a company traded on the NASDAQ Stock Market which holds at least $12.0 million of unencumbered cash prior to September 30, 2014. The exercise period for the first 198,812 warrants will expire on September 17, 2017, and the exercise period for the additional 80,166 warrants will expire on October 22, 2016. The aggregate consideration received by us for the August 2013 financing round was NIS 17.9 million and we would receive an estimated NIS 9.8 million in additional consideration if all of the warrants (including the additional warrants) are exercised at their current exercise prices. The warrants contain anti-dilution protection in the event of the occurrence of an M&A Event or new investments in our company at a price per share that is lower than a specified adjustment threshold, which is currently NIS 36.5. In the event that the Downside Protection mechanism is activated, the exercise price of the warrants still held by investors in our August 2013 financing round will be reduced by a percentage equal to the same percentage discount that the price per share in the applicable investment or M&A Event bears to the then-applicable adjustment threshold. [If we were to sell ordinary shares in this offering at the initial public offering price of $     per share (which is the mid-point of the price range on the cover of this prospectus), the exercise price of the warrants still held by investors in our August 2013 financing round would be reduced to approximately NIS     .]

121

On October 1, 2014, we issued 577,795 ordinary shares and 577,795 warrants exercisable into ordinary shares (Series 7) in a rights offering to our shareholders by the means of a shelf offering report, published on September 3, 2014 and a related report dated September 7, 2014. The rights offering provided that each shareholder holding 15 ordinary shares was entitled to purchase two ordinary shares and two Series 7 warrants exercisable into ordinary shares, for total consideration of NIS 60. Each warrant was exercisable at an initial price per underlying ordinary share of NIS 35. The aggregate consideration received by us with respect to such rights offering was NIS 17.3 million before issuance costs. 208,843 Series 7 warrants were exercised for total consideration of approximately NIS 7.3 million prior to their expiration on April 23, 2015. In connection with the rights offering we issued 202,018 ordinary shares to the investors in our August 2013 financing round as a result of the Downside Protection included in the investment agreement.

Until and unless such investors exercise our warrants, the holders thereof are not entitled to any rights from which our shareholders benefit under our articles of association and the Companies Law, such as voting rights and the right to receive dividends that may be declared from time to time with respect to our ordinary shares. Nevertheless, the number of warrants held by any holder thereof will be adjusted following any distribution of bonus shares, the conduct of any rights offerings and any cash dividend distributions by us, in each case to the extent that any such event occurs prior to the expiration of the exercise period for the relevant series of warrants.

Articles of Association

The following are summaries of material provisions of our articles of association and the Companies Law insofar as they relate to the material terms of our ordinary shares.

Holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote of shareholders at a shareholder meeting. Shareholders may vote at shareholder meetings either in person, by proxy or by written ballot. Israeli law does not allow public companies to adopt shareholder resolutions by means of written consent in lieu of a shareholder meeting. The board of directors shall determine and provide a record date for each shareholders meeting and all shareholders at such record date may vote. Unless stipulated differently in the Companies Law or in the articles of association, all shareholders’ resolutions shall be approved by a simple majority vote. Except as otherwise disclosed herein, an amendment to our articles of association requires the prior approval of a simple majority of our shares represented and voting at a general meeting and of the holders of a class of shares whose rights are being affected (or the consent in writing of all the holders of such class of shares). Our number with the Israeli Registrar of Companies is 513022780. Our purpose is set forth in Section 3 of our articles of association and includes every lawful purpose.

Our ordinary shares that are fully paid for are issued in registered form and may be freely transferred under our articles of association, unless the transfer is restricted or prohibited by applicable law or the rules of a stock exchange on which the shares are traded. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our articles of association or Israeli law, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

Pursuant to the Companies Law and our articles of association, our board of directors may exercise all powers and take all actions that are not required under law or under our articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.

Our articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at a general or special meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings and profits and an issuance of shares for less than their nominal value, require a resolution of our board of directors and court approval.

Dividends

Under Israeli law, we may declare and pay dividends only if, upon the determination of our board of directors, there is no reasonable concern that the distribution will prevent us from being able to meet the terms of our existing and foreseeable obligations as they become due. Under the Companies Law, the distribution amount is further limited to the greater of retained earnings or earnings generated over the two most recent years legally available for distribution according to our then last reviewed or audited financial statements, provided that the date of the financial statements is not more than six months prior to

122

the date of distribution. In the event that we do not have retained earnings or earnings generated over the two most recent years legally available for distribution, we may seek the approval of the court in order to distribute a dividend. The court may approve our request if it is convinced that there is no reasonable concern that the payment of a dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

Shareholder Meetings

Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be 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 meetings. Our board of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law and our articles of association provide that our board of directors is required to convene a special meeting upon the written request of (i) any two of our directors or one quarter of the directors then in office (ii) one or more shareholders holding, in the aggregate, 5% of the our issued share capital and 1% of our outstanding voting power or 5% 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. Furthermore, 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;

      appointment or termination of our auditors;

      appointment of directors and appointment and dismissal of external directors;

      approval of acts and transactions requiring general meeting approval pursuant to the Companies Law;

      director compensation, indemnification and change of the principal executive officer;

      increases or reductions of our authorized share capital;

      a merger;

      the exercise of our board of directors’ 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; and

      authorizing the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority.

The Companies Law requires that a notice of any annual or special shareholders meeting be provided at least 21 days prior to the meeting and if the agenda of the meeting includes 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.

The Companies Law does not allow shareholders of publicly traded companies to approve corporate matters by written consent. Consequently, our articles of association do not allow shareholders to approve corporate matters by written consent.

Pursuant to our articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting.

Quorum

The quorum required for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who hold or represent between them at least 25% of the total outstanding voting rights, within half an hour from the appointed time.

123

A meeting adjourned for lack of a quorum is adjourned to the same day in the following week at the same time and place or on a later date if so specified in the summons or notice of the meeting. At the reconvened meeting, any number of our shareholders present in person or by proxy shall constitute a lawful quorum.

Resolutions

Our articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by applicable law.

Israeli law provides that a shareholder of a public company may vote in a meeting and in a class meeting by means of a written ballot in which the shareholder indicates how he or she votes on resolutions relating to the following matters:

      an appointment or removal of directors;

      an approval of transactions with office holders or interested or related parties, that require shareholder approval;

      an approval of a merger;

      authorizing the chairman of the board of directors or his relative to act as the company’s chief executive officer or act with such authority; or authorize the company’s chief executive officer or his relative to act as the chairman of the board of directors or act with such authority;

      any other matter that is determined in the articles of association to be voted on by way of a written ballot. Our articles of association do not stipulate any additional matters; and

      other matters which may be prescribed by Israel’s Minister of Justice.

The provision allowing the vote by written ballot does not apply where the voting power of the controlling shareholder is sufficient to determine the vote.

The Companies Law provides that a shareholder, in exercising his or her rights and performing his or her obligations toward the company and its other shareholders, must act in good faith and in a customary manner, and avoid abusing his or her power. This is required when voting at general meetings on matters such as changes to the articles of association, increasing the company’s registered capital, mergers and approval of certain interested or related party transactions. A shareholder also has a general duty to refrain from depriving any other shareholder of its rights as a shareholder. In addition, any controlling shareholder, any shareholder who knows that its vote can determine the outcome of a shareholder vote and any shareholder who, under such company’s articles of association, can appoint or prevent the appointment of an office holder or other power towards the company, is required to act with fairness towards the company. The Companies Law does not describe the substance of this duty except that the remedies generally available upon a breach of contract will also apply to a breach of the duty to act with fairness, and, to the best of our knowledge, there is no binding case law that addresses this subject directly.

Under the Companies Law, unless provided otherwise in a company’s articles of association, a resolution at a shareholders meeting requires approval by a simple majority of the voting rights represented at the meeting, in person, by proxy or written ballot, and voting on the resolution. Generally, a resolution for the voluntary winding up of the company requires the approval of holders of 75% of the voting rights represented at the meeting, in person, by proxy or by written ballot and voting on the resolution.

In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Access to Corporate Records

Under the Companies Law, all shareholders of a company generally have the right to review minutes of the company’s general meetings, its shareholders register and principal shareholders register, articles of association, financial statements and any document it is required by law to file publicly with the Israeli Companies Registrar and the Israeli Securities Authority, or ISA. Any of our shareholders may request access to review any document in our possession that relates to any action or

124

transaction with a related party, interested party or office holder that requires shareholder approval under the Companies Law. We may deny a request to review a document if we determine that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise prejudice our interests.

Acquisitions under Israeli Law

Full Tender Offer

A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the target company’s issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the same class for the purchase of all of the issued and outstanding shares of the same class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law (provided that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer except that if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital, in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to complete the tender offer). However, a shareholder that had its shares so transferred may petition the court within six months from the date of acceptance of the full tender offer, whether or not such shareholder agreed to the tender or not, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court unless the acquirer stipulated in the tender offer that a shareholder that accepts the offer may not seek appraisal rights, so long as prior to the acceptance of the full tender offer, the acquirer and the company disclosed the information required by law in connection with the full tender offer. If the shareholders who did not accept the tender offer hold 5% or more of the issued and outstanding share capital of the company or of the applicable class, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.

Special Tender Offer

The Companies Law provides that an acquisition of shares of a public Israeli company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met. This rule does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares in a public company must be made by means of a tender offer if as a result of the acquisition the purchaser would become a holder of 45% or more of the voting rights in the company, if there is no other shareholder of the company who holds 45% or more of the voting rights in the company, unless one of the exemptions in the Companies Law is met.

A special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered by shareholders. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer.

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.

Under regulations enacted pursuant to the Companies Law, the above special tender offer requirements may not apply to companies whose shares are listed for trading on a foreign stock exchange if, among other things, the relevant foreign laws or the rules of the stock exchange, include provisions limiting the percentage of control which may be acquired or that the purchaser is required to make a tender offer to the public. However, the Israeli Securities Authority’s opinion is that such leniency does not apply with respect to companies whose shares are listed for trading on stock exchanges in the United States, including the NASDAQ Capital Market, which do not provide for sufficient legal restrictions on obtaining control or an obligation to make a tender offer to the public, therefore the special tender offer requirements shall apply to such companies.

125

Merger

The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements described under the Companies Law are met, a majority of each party’s shares voted on the proposed merger at a shareholders’ meeting called with at least 35 days’ prior notice.

For purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or by any person who holds 25% or more of the outstanding shares or the right to appoint 25% or more of the directors of the other party, vote against the merger. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the value of the parties to the merger and the consideration offered to the 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 50 days have passed from the date that a proposal for approval of the merger was filed by each party with the Israeli Registrar of Companies and 30 days have passed from the date the merger was approved by the shareholders of each party.

Antitakeover Measures

The Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred rights, distributions or other matters and shares having preemptive rights. As of the date of this prospectus, we do not have any authorized or issued shares other than our ordinary shares. In the future, if we do create and issue a class of shares other than ordinary shares, such class of shares, depending on the specific rights that may be attached to them, may delay or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization of a new class of shares will require an amendment to our articles of association which requires the prior approval of the holders of a majority of our shares at a general meeting. In addition, the rules and regulations of the TASE also limit the terms permitted with respect to a new class of shares and prohibit any such new class of shares from having voting rights. Shareholders voting in such meeting will be subject to the restrictions provided in the Companies Law as described above.

126

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering our ordinary shares have been traded only on the TASE. In connection with this offering, we intend to apply to have our ordinary shares listed on the NASDAQ Capital Market, under the symbol “      .” Sales of substantial amounts of our ordinary shares in the public market, or the perception that such sales could occur, could adversely affect prevailing market prices of our ordinary shares. Upon completion of this offering, we will have      outstanding ordinary shares, assuming the underwriters do not exercise their option to purchase additional ordinary shares. All of the ordinary shares sold in this offering will be freely transferable without restriction or further registration under the Securities Act by persons other than by our affiliates. In addition, all of our ordinary shares outstanding before this offering will be freely transferable and may be resold in the United States without restriction or further registration under the Securities Act, other than shares held by our affiliates and those of our existing shareholders who have signed lock-up agreements. Under Rule 144 of the Securities Act, or Rule 144, an “affiliate” of a company is a person that directly or indirectly controls, is controlled by or is under common control with that company. Affiliates may sell only the volume of shares described below and their sales are subject to additional restrictions described below.

The remaining ordinary shares will be held by our existing shareholders. Because substantially all of these shares were sold outside the United States to persons residing outside the United States at the time, they also will be freely tradable without restriction or further registration, except for the restrictions described below, and except for the lock-up restrictions described under “Underwriting” below. Approximately      % of our outstanding shares will be subject to such lock-up agreements.

Lock-up Agreements

We and our executive officers, directors, and all of our substantially shareholders have agreed not to offer, sell, agree to sell, directly or indirectly, or otherwise dispose of any ordinary shares or any securities convertible into or exchangeable for ordinary shares except for the ordinary shares offered in this offering without the prior written consent of the underwriters for a period of 180 days after the date of this prospectus. After the expiration of the 180 day period, the ordinary shares held by our directors, executive officers or certain of our other existing shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

Rule 144

In general, under Rule 144 as in effect on the date hereof, beginning 90 days after the date hereof, a person who holds restricted shares (assuming there are any restricted shares) and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned these restricted shares for at least six months, would be entitled to sell an unlimited number of our ordinary shares, provided current public information about us is available. In addition, under Rule 144, a person who holds restricted shares in us and is not one of our affiliates at any time during the three months preceding a sale, and who has beneficially owned these restricted shares for at least one year, would be entitled to sell an unlimited number of shares immediately upon the closing of this offering without regard to whether current public information about us is available. Beginning 90 days after the date hereof, our affiliates who have beneficially owned our ordinary shares for at least six months are entitled to sell within any three month period a number of shares that does not exceed the greater of:

      1% of the number of shares of our ordinary shares then outstanding, which will equal approximately ordinary shares immediately after this offering, assuming no exercise of the underwriter’s over-allotment option; or

      the average weekly trading volume of our ordinary shares on the national securities exchange on which our ordinary shares trade during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale; provided that current public information about us is available and the affiliate complies with the manner of sale requirements imposed by Rule 144.

Upon expiration of the lock-up restrictions described under “Underwriting” below, substantially all of our outstanding ordinary shares will either be unrestricted or will be eligible for sale under Rule 144, subject to Rule 144 volume limitations applicable to our affiliates. We cannot estimate the number of our ordinary shares that our existing shareholders will elect to sell.

Rule 701

In general, under Rule 701 of the Securities Act, or Rule 701, as currently in effect, each of our employees, consultants or advisors who purchased, or who purchases pursuant to an offer made prior to the date hereof, ordinary shares from us in

127

connection with a compensatory share plan or other written agreement, if such purchase or offer, as applicable, was made in accordance with Rule 701, is eligible, beginning 90 days from the date hereof, to resell such shares in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144. We make no assurance that any such prior purchase or offer was made in accordance with Rule 701.

Options

Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register 1,400,000 ordinary shares reserved for issuance under the 2005 Plan. The registration statement on Form S-8 will become effective automatically upon filing.

Ordinary shares issued upon exercise of a share option and registered under the Form S-8 registration statement will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately after the 180 day lock-up agreements expire.

Registration Rights

Following the expiration or earlier waiver of the lock-up period following this offering, the holders of up to 599,641ordinary shares, consisting of (a) 320,663 ordinary shares, (b) 198,812 ordinary shares underlying warrants issued in our August 2013 financing round and (c) an additional 80,166 ordinary shares underlying warrants that we issued as part of the August 2013 financing round because we did not complete certain obligations by September 30, 2014, are entitled to request that we register their ordinary shares under the Securities Act, subject to cutback for marketing reasons and certain other conditions. As of the date hereof, 128,265 of the 320,663 ordinary shares originally issued as part of the August 2013 financing round have been sold on the TASE, thus we no longer have any registration rights with respect to such ordinary shares. See “Related Party Transactions — Registration Rights Agreement.” Any sales of securities by these shareholders could have a material adverse effect on the trading price of our ordinary shares.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL SHARE TRANSFER RESTRICTION MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN LEGAL ADVISOR REGARDING THE PARTICULAR SECURITIES LAWS AND TRANSFER RESTRICTION CONSEQUENCES OF PURCHASING, HOLDING, AND DISPOSING OF OUR ORDINARY SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

128

TAXATION

The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

Israeli Tax Considerations and Government Programs

The following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that may benefit us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our ordinary shares purchased by investors in this offering. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include certain residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. Because parts of this discussion are based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below.

General corporate tax structure in Israel

Israeli companies are generally subject to corporate tax, currently at the rate of 26.5% of a company’s taxable income. However, the effective tax rate payable by a company that derives income from an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company are subject to tax at the prevailing corporate tax rate.

Law for the Encouragement of Industry (Taxes), 1969

The Law for the Encouragement of Industry (Taxes), 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 incorporated in Israel, 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 and located in Israel or in the “Area”, in accordance with the definition in the section 3a of the Income Tax Ordinance, or the Ordinance. An “Industrial Enterprise” is defined as an enterprise which is held by an Industrial Enterprise whose principal activity in a given tax year is production activity.

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

      amortization over an eight-year period of the cost of patents and rights to use a patent and know-how that were purchased in good faith and are used for the development or advancement of the Industrial Enterprise, commencing from the tax year where the Industrial Enterprise began to use them;

      under certain 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.

There can be no assurance that we will continue to qualify as an Industrial Company or that the benefits described above will be available to us in the future.

Law for the Encouragement of Capital Investments, 1959

The Law for the Encouragement of Capital Investments, 1959 or the Investment Law, provides incentives for capital investments in production facilities (or other eligible assets) by “Industrial Enterprises” (as defined under the Investment Law).

The Investment Law was significantly amended effective April 1, 2005, or the 2005 Amendment, and further amended as of January 1, 2011, or the 2011 Amendment. Pursuant to the 2005 Amendment, tax benefits granted in accordance with

129

the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly, the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. We have examined the possible effect, if any, of these provisions of the 2011 Amendment on our financial statements and have decided, at this time, not to opt to apply the new benefits under the 2011 Amendment.

Tax benefits prior to the 2005 Amendment

An investment program that is implemented in accordance with the provisions of the Investment Law prior to the 2005 Amendment, referred to as an “Approved Enterprise,” is entitled to certain benefits. A company that wished to receive benefits as an Approved Enterprise must have received approval from the Investment Center of the Israeli Ministry of the Economy (formerly the Ministry of Industry, Trade and Labor), or the Investment Center. Each certificate of approval for an Approved Enterprise relates to a specific investment program in the Approved Enterprise, delineated both by the financial scope of the investment and by the physical characteristics of the facility or the asset.

In general, an Approved Enterprise is entitled to receive a grant from the Government of Israel or an alternative package of tax benefits, known as the alternative benefits track. The tax benefits from any certificate of approval relate only to taxable income attributable to the specific Approved Enterprise. Income derived from activity that is not integral to the activity of the Approved Enterprise does not enjoy tax benefits.

In addition, a company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign Investors’ Company, or FIC, which is a company with a level of foreign investment, as defined in the Investment Law, of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares, rights to profits, voting and appointment of directors), and of combined share capital and shareholder loans, that are owned, directly or indirectly, by persons who are not residents of Israel. The determination as to whether a company qualifies as an FIC is made on an annual basis.

Amendment 68 to the Encouragement Law, the 2011 Amendment and/or the 2011 Amended Law, eliminated the definition of a FIC. However, according to the 2011 Amendment’s transitional provisions, the tax benefits of companies with Approved Enterprise or Benefited Enterprise plans that opt to remain under the Benefited Enterprise regime in accordance with the Encouragement Law prior to the 2011 Amendment, will be preserved. In circular no. 3/2012, or the Circular, the ITA addressed its position regarding the implementation of the aforementioned transitional provisions. According to the Circular, a company’s foreign ownership percentage for purposes of Approved Enterprise or Benefited Enterprise benefits cannot exceed its percentage on December 31, 2010, the last day before the 2011 Amendment was implemented.

If a company elects the alternative benefits track and distributes a dividend out of income derived by its Approved Enterprise during the tax exemption period it will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have been applicable without the benefits under the alternative benefits track. In addition, dividends paid out of income attributed to an Approved Enterprise are generally subject to withholding tax at source at the rate of 15%, or such lower rate as may be provided in an applicable tax treaty.

The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an Approved Enterprise program during the first five years in which the equipment is used.

The benefits available to an Approved Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and its regulations and the criteria in the specific certificate of approval. If a company does not meet these conditions, it would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest.

Tax benefits subsequent to the 2005 Amendment

The 2005 Amendment applies to new investment programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions

130

of the Investment Law as in effect on the date of such approval. Pursuant to the 2005 Amendment, the Investment Center will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise, such as provisions generally requiring that at least 25% of the Approved Enterprise’s income be derived from exports.

The 2005 Amendment provides that a certificate of approval from the Investment Center will only be necessary for receiving cash grants. As a result, it was no longer necessary for a company to obtain an Approved Enterprise certificate of approval in order to receive the tax benefits previously available under the alternative benefits track. Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set forth in the 2005 Amendment. In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which meets all of the conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment allows a company to receive “Benefited Enterprise” status, and may be made over a period of no more than three years ending at the end of the year in which the company chose to have the tax benefits apply to its Benefited Enterprise.

The extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depends on, among other things, the geographic location in Israel of the Benefited Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed income generated by the Benefited Enterprise for a period of between two to ten years, depending on the geographic location of the Benefited Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in the company in each year. The benefits period is limited to 12 or 14 years from the year the company first chose to have the tax benefits apply, depending on the location of the company. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Benefited Enterprise during the tax exemption period will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have otherwise been applicable. Dividends paid out of income attributed to a Benefited Enterprise are generally subject to tax at the rate of 15%, or such lower rate as may be provided in an applicable tax treaty.

Under the Investment Law, we may be entitled to tax benefits, by virtue of our status as a “Benefited Enterprise,” which was awarded to us in October 2007. We received the status of a plant under establishment in Development Area A in a tax-exempt track, subject to compliance with the applicable requirements of the Investment Law. As of March 31, 2015, we had not yet generated operating income that will allow us to benefit from the tax benefits under the Investment Law. The tax benefits under the Investment Law will apply for a period of up to ten years from the first year in which taxable income will be generated and are scheduled to expire at the end of 2023.

In order to remain eligible for the tax benefits of a Benefited Enterprise, we must continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended. In addition, in order to remain eligible for the tax benefits available to the Benefited Enterprise, we must also comply with the conditions set forth in the tax ruling. These conditions include, among other things, that the production, directly or through subcontractors, of all our products should be performed within certain regions of Israel. If we do not meet these requirements, the tax benefits would be reduced or canceled.

Tax benefits under the 2011 Amendment

The 2011 Amendment canceled the availability of the benefits granted to companies under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not wholly-owned by a governmental entity, as well as a partnership registered under the Israeli Partnerships Ordinance (New Version), 5735-1975, and that is entitled to, among other things, a Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment as was further amended by the Israeli Knesset in 2013, a Preferred Company is currently 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 development zone A, in which case the rate will be 9%. Our facilities are located in a development zone A.

It should be noted that the classification of income generated from the provision of usage rights in know-how or software that were developed in the Preferred Enterprise, as well as royalty income received with respect to such usage, as Preferred Enterprise income is subject to the issuance of a pre-ruling from the Israel Tax Authority stipulating that such income is associated with the productive activity of the Preferred Enterprise in Israel.

131

Dividends paid on or after January 1, 2014 out of income attributed to a “Preferred Enterprise” or a “Special Preferred Enterprise” will be generally subject to tax at the rate of 20%, subject to certain conditions. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, such dividends would be subject to tax at a rate of 20%, subject to certain conditions, or such lower rate as may be provided in an applicable tax treaty).

The 2011 Amendment also provided transitional provisions to address companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things, that unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January 1, 2011: (i) the terms and benefits included in any certificate of approval that was granted to an Approved Enterprise which chose to receive grants before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, and subject to certain other conditions; (ii) terms and benefits included in any certificate of approval that was granted to an Approved Enterprise which had participated in an alternative benefits track before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval, provided that certain conditions are met; and (iii) a Benefited Enterprise can elect to continue to benefit from the benefits provided to it before the 2011 Amendment came into effect, provided that certain conditions are met.

The termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax liabilities.

We have examined the possible effect, if any, of the provisions of the 2011 Amendment on our financial statements and have decided, at this time, not to apply for the new benefits under the 2011 Amendment.

Taxation of our Israeli shareholders

Taxation of Our Israeli Individual Shareholders on Receipt of Dividends . Israeli residents who are individuals are generally subject to Israeli income tax on dividends paid on our ordinary shares (other than bonus shares or share dividends) at a rate of 25%, or 30% if the recipient of such dividend is a “substantial shareholder” (as defined below) at the time of distribution or at any time during the preceding 12 month period, 15% if such dividend is paid from a Benefited Enterprise or Approved Enterprise, or 20% if the income from which the dividend was distributed is attributable to a Preferred Enterprise.

An additional income tax at a rate of 2% will be imposed on high earners whose annual income or gains exceed NIS 810,720 for the 2015 tax year.

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 exercise such right, regardless of the source of such right.

With respect to individuals, the term “Israeli resident” is generally defined under Israeli tax legislation as a person whose center of life is in Israel. The Israeli Tax Ordinance (as amended by Amendment Law No. 132 of 2002), states that in order to determine the center of life of an individual, consideration will be given to the individual’s family, economic and social connections, including: (i) place of permanent residence; (ii) place of residential dwelling of the individual and the individual’s immediate family; (iii) place of the individual’s regular or permanent occupation or the place of his or her permanent employment; (iv) place of the individual’s active and substantial economic interests; (v) place of the individual’s activities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (i) the individual was present in Israel for 183 days or more in the tax year; or (ii) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual’s presence in Israel in that tax year and the two previous tax years is 425 days or more. Such presumption may be rebutted either by the individual or by the assessing officer.

Taxation of Israeli Resident Corporations on Payment of Dividends . Israeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on ordinary shares held by such Israeli resident corporations as long as the profits out of which the dividends were paid were derived in Israel.

However, dividends paid out of income attributed to an Approved Enterprise or a Benefited Enterprise are generally subject to Israeli income tax at a rate of 15%. However, according to a temporary transitional provision of the 2011 Amendment, such

132

withholding tax does not apply to dividends distributed to an Israeli company where the paying company elected by June 2015 to transition to the Preferred Enterprise regime. No tax is required to be required to be withheld on dividends paid to an Israeli corporation out of income attributed to a Preferred Enterprise, although if such dividends are subsequently distributed to individuals or non-Israeli corporations, withholding tax at a rate of 20%, or such lower rate as may be provided in an applicable tax treaty, will apply.

Capital Gains Taxes Applicable to Israeli Resident Shareholders.  The income tax rate applicable to real capital gains derived by an Israeli individual resident from the sale of shares that were purchased after January 1, 2012, whether listed on a stock exchange or not, is 25%. However, if such shareholder is considered a “substantial shareholder” at the time of sale or at any time during the preceding 12 month period, such gain will be taxed at the rate of 30%. In addition, as noted above, an additional tax at a rate of 2% will be imposed on high earners whose annual income or gains exceed NIS 810,720 for the 2015 tax year.

Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at ordinary income rates (currently 26.5% in 2015 for corporations and up to 50% for individuals).

Taxation of our non-Israeli 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 that were purchased after the company was listed for trading on a stock exchange outside of Israel will be exempt from Israeli tax so long as such gains were not attributable to a permanent establishment that the non-resident maintains in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemption if: (i) an Israeli resident has a controlling interest, directly or indirectly, alone or together with another (i.e., together with a relative, or together with someone who is not a relative but with whom, according to an agreement, there is regular cooperation in material matters of the company, directly or indirectly), or together with another Israeli resident, exceeding 25% in one or more of the means of control in such non-Israeli resident corporation or (ii) Israeli residents are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli resident 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.

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%. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or at any time during the preceding twelve months, the applicable tax rate is 30%.

However, dividends paid out of income attributed to an Approved Enterprise or a Benefited Enterprise are generally subject to Israeli income tax at a rate of 15%. Dividends paid out of income attributed to a Preferred Enterprise are generally subject to Israeli income tax at a rate of 20%.

If the dividend is attributable partly to income derived from an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly from other sources of income, the income tax rate will be a blended rate reflecting the relative portions of the types of income. In addition to all the rates detailed above, an additional 2% tax might be applicable to individual shareholders if certain conditions are met. Notwithstanding all the above, relief with respect to the aforementioned tax rates may be provided in a treaty between Israel and the shareholder’s country of residence.

From a withholding tax perspective, under Israeli domestic law, dividends paid to a non-Israeli resident shareholder are subject to a withholding tax at a rate of 25% (for non-substantial shareholders) or 30% (for substantial shareholders) (however, dividends paid to a non-Israeli resident “substantial shareholder” on publicly traded shares, like our ordinary shares, which are held via a “nominee company”, as defined under the Securities Law, 1968, are generally subject to Israeli withholding tax at a rate of 25%), while dividends paid out of income attributed to an Approved Enterprise or Benefited Enterprise are generally subject to withholding tax at a rate of 15%, and dividends paid out of a Preferred Enterprise are generally subject to a

133

withholding tax at a rate of 20%, provided that a certificate from the Israeli Tax Authority allowing for the reduced withholding tax rate is obtained in advance. If the dividend is attributable partly to income derived from an Approved Enterprise, Benefited Enterprise or Preferred Enterprise, and partly from other sources of income, the withholding tax rate will be a blended rate reflecting the relative portions of the two types of income. The aforementioned withholding tax rates shall apply unless a different rate is provided under an applicable tax treaty and a certificate from the Israeli Tax Authority allowing for a reduced withholding tax rate is obtained in advance.

For example, under the United States-Israel Tax Treaty, the maximum rate of tax withheld at the source in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident (for purposes of the United States-Israel Tax Treaty) is 25%. However, for dividends not attributable to income generated by an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise, and paid to a U.S. corporation holding 10% or more of the outstanding voting rights throughout the tax year in which the dividend is distributed as well as during the distributing company’s entire previous tax year, the maximum rate of withholding tax is generally 12.5%, provided that no more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends attributable to income generated by an Approved Enterprise, a Benefited Enterprise or a Preferred Enterprise, are subject to withholding tax at a rate of 15% for such U.S. corporation shareholder, provided that the condition related to our gross income for the previous year is met and a certificate from the Israeli Tax Authority allowing for a reduced withholding tax rate is obtained in advance. U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for Untied States federal income tax purposes in the amount of the taxes withheld, subject to detailed rules and limitations under U.S. tax laws applicable to foreign tax credits.

We cannot assure you that in the event we declare a dividend we will designate the income out of which the dividend is paid in a manner that will reduce our shareholders’ tax liability.

Estate and gift tax

Israeli law presently does not impose estate or gift taxes.

U.S. Federal Income Tax Consequences

The following is a general summary of what we believe to be certain material U.S. federal income tax consequences relating to the purchase, ownership and disposition of our ordinary shares by U.S. Investors (as defined below) that hold such ordinary shares as capital assets. This summary is based on the Code, the regulations of the U.S. Department of the Treasury issued pursuant to the Code, or the Treasury Regulations, the income tax treaty between the United States and Israel (the “U.S.-Israel Tax Treaty”), and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. No ruling has been sought from the IRS with respect to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position. This summary is for general information purposes only and does not constitute tax advice. This summary does not address all of the tax considerations that may be relevant to specific U.S. Investors in light of their particular circumstances or to U.S. Investors subject to special treatment under U.S. federal income tax law (including, without limitation, banks, financial institutions, insurance companies, tax-exempt entities, retirement plans, tax-deferred accounts, regulated investment companies, “S corporations,” grantor trusts, partnerships, dealers or traders in securities or currencies, brokers, real estate investment trusts, certain former citizens or residents of the United States, persons who acquire our ordinary shares as part of a straddle, hedge, conversion transaction or other integrated investment, persons subject to the alternative minimum tax, persons who acquire our ordinary shares through the exercise or cancellation of employee stock options or otherwise as compensation for their services, persons that have a “functional currency” other than the U.S. dollar, persons that own (or are deemed to own, indirectly or by attribution) 10% or more of our ordinary shares, or persons that mark their securities to market for U.S. federal income tax purposes). This summary does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift, generation skipping or alternative minimum tax considerations or any U.S. federal tax consequences other than U.S. federal income tax consequences.

As used in this summary, the term “U.S. Investor” means a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust with respect to which a court within the United States is able to exercise primary supervision over its

134

administration and one or more U.S. persons have the authority to control all of its substantial decisions, or that has a valid election in effect under applicable Treasury Regulations to be treated as a “United States person.”

If an entity treated as a partnership for U.S. federal income tax purposes holds our ordinary shares, the tax treatment of such partnership and each partner thereof will generally depend upon the status and activities of the partnership and such partner. A holder that is treated as a partnership for U.S. federal income tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners of the purchase, ownership and disposition of its ordinary shares.

Prospective investors should be aware that this summary does not address the tax consequences to investors who are not U.S. Investors. Prospective investors should consult their own tax advisors as to the particular tax considerations applicable to them relating to the purchase, ownership and disposition of their ordinary shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.

Taxation of U.S. Investors

The discussions under “— Distributions” and under “— Sale, Exchange or Other Disposition of Ordinary Shares” below assumes that we will not be treated as a PFIC for U.S. federal income tax purposes. We expect to be classified as a PFIC for 2015, but have not determined whether we will be a PFIC in 2016 or any subsequent year, and it is possible that we will be a PFIC in 2016 or in any subsequent year. For a discussion of the rules that would apply if we are treated as a PFIC, see the discussion under “— Passive Foreign Investment Company.”

Distributions . We have no current plans to pay dividends. To the extent we pay any dividends, a U.S. Investor will be required to include in gross income as a taxable dividend (without reduction for any Israeli tax withheld from such distribution) the amount of any distributions made on the ordinary shares to the extent that those distributions are paid out of our current or accumulated earnings and profits as determined for U.S. federal income tax purposes. Any distributions in excess of our earnings and profits will be applied against and will reduce (but not below zero) the U.S. Investor’s tax basis in its ordinary shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the U.S. Investor on a subsequent disposition of the ordinary shares), and, to the extent they exceed that tax basis, will be treated as gain from the sale or exchange of those ordinary shares. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Investor should expect that the entire amount of any distribution generally may be treated as dividend income.

If we were to pay dividends, we expect to pay such dividends in NIS. A dividend paid in NIS, including the amount of any Israeli taxes withheld, will be includible in a U.S. Investor’s income as a U.S. dollar amount calculated by reference to the exchange rate in effect on the date such dividend is received, regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted to U.S. dollars on the date of receipt, a U.S. Investor generally will not recognize a foreign currency gain or loss. However, if the U.S. Investor converts the NIS into U.S. dollars on a later date, the U.S. Investor must include, in computing its income, any gain or loss resulting from any exchange rate fluctuations. The gain or loss will be equal to the difference between (i) the U.S. dollar value of the amount included in income when the dividend was received and (ii) the amount received on the conversion of the NIS into U.S. dollars. Such gain or loss will generally be ordinary income or loss and United States source for U.S. foreign tax credit purposes. U.S. Investors should consult their own tax advisors regarding the tax consequences to them if we pay dividends in NIS or any other non-U.S. currency.

Subject to certain significant conditions and limitations, including potential limitations under the U.S.-Israel Tax Treaty, any Israeli income taxes paid on or withheld from distributions from us and not refundable to a U.S. Investor may be credited against the investor’s U.S. federal income tax liability or, alternatively, may be deducted from the investor’s taxable income. The election to deduct, rather than credit, foreign taxes, is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Investor or withheld from a U.S. Investor that year. Dividends paid on the ordinary shares generally will constitute income from sources outside the United States, which may be relevant in calculating a U.S. Investor’s foreign tax credit limitation. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends paid on our ordinary shares should generally be categorized as “passive category income” or, in the case of some U.S. Investors, as “general category income” for U.S. foreign tax credit purposes.

Because the rules governing foreign tax credits are complex, U.S. Investors should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.

135

Dividends paid on the ordinary shares will not be eligible for the “dividends-received” deduction generally allowed to corporate U.S. Investors with respect to dividends received from U.S. corporations.

Certain distributions treated as dividends that are received by an individual U.S. Investor from “qualified foreign corporations” generally qualify for a 20% reduced maximum tax rate so long as certain holding period and other requirements are met. A non-U.S. corporation (other than a corporation that is treated as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. Dividends paid by us in a taxable year in which we are not a PFIC and with respect to which we were not a PFIC in the preceding taxable year are expected to be eligible for the 20% reduced maximum tax rate, although we can offer no assurances in this regard. However, any dividend paid by us in a taxable year in which we are a PFIC or were a PFIC in the preceding taxable year will be subject to tax at regular ordinary income rates (along with any applicable additional PFIC tax liability, as discussed below). As noted above, we expect to be classified as a PFIC for 2015 but have not determined whether we will be a PFIC for any subsequent year. In addition, a non-corporate U.S. Investor will not be eligible for reduced U.S. federal income tax rate with respect to dividend distributions on ordinary shares if (a) such U.S. Investor has not held the ordinary shares for at least 61 days during the 121-day period starting on the date which is 60 days before, and ending 60 days after the ex-dividend date, (b) to the extent the U.S. Investor is under an obligation to make related payments on substantially similar or related property or (c) with respect to any portion of a dividend that is taken into account by the U.S. Investor as investment income under Section 163(d)(4)(B) of the Code. Any days during which the U.S. Investor has diminished its risk of loss with respect to ordinary shares (for example, by holding an option to sell the ordinary shares) are not counted towards meeting the 61-day holding period. Non-corporate U.S. Investors should consult their own tax advisors concerning whether dividends received by them qualify for the reduced rate of tax.

The additional 3.8% net investment income tax (described below) may apply to dividends received by certain U.S. Investors who meet the modified adjusted gross income thresholds.

Sale, Exchange or Other Disposition of Ordinary Shares . Subject to the discussion under “— Passive Foreign Investment Company” below, a U.S. Investor generally will recognize capital gain or loss upon the sale, exchange or other disposition of our ordinary shares in an amount equal to the difference between the amount realized on the sale, exchange or other disposition and the U.S. Investor’s adjusted tax basis in such ordinary shares. The adjusted tax basis in an ordinary share generally will be equal to the cost basis of such ordinary share. This capital gain or loss will be long-term capital gain or loss if the U.S. Investor’s holding period in our ordinary shares exceeds one year. Preferential tax rates for long-term capital gain (currently, with a maximum rate of 20%) will apply to individual U.S. Investors. The deductibility of capital losses is subject to limitations. The gain or loss will generally be income or loss from sources within the United States for U.S. foreign tax credit purposes, subject to certain exceptions under the U.S.-Israel Tax Treaty. Additionally, certain losses may be treated as foreign source to the extent certain dividends were received by the U.S. Investor within the 24-month period preceding the date on which the U.S. Investor recognized the loss. The additional 3.8% net investment income tax (described below) may apply to gains recognized upon the sale, exchange or other taxable disposition of our ordinary shares by certain U.S. Investors who meet the modified adjusted gross income thresholds.

U.S. Investors should consult their own tax advisors regarding the U.S. federal income tax consequences of receiving currency other than U.S. dollars upon the disposition of their ordinary shares.

Passive Foreign Investment Company

In general, a corporation organized outside the United States will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of its gross income is “passive income” or (ii) on average at least 50% of its 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 the public offering. Assets that produce or are held for the production of passive income include, among other things, cash, even if held as working capital or raised in a public offering, marketable securities and other assets that may produce passive income. 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.

136

A foreign corporation’s PFIC status is an annual determination that is based on tests that are factual in nature and our status for any year will depend on our income, assets, and activities for such year, including, without limitation, how quickly we use the cash proceeds from this offering in our business. In addition, because the value of our gross assets may be determined in part by reference to our market capitalization, a decline in the value of our ordinary shares may result in our becoming a PFIC. We expect to be classified as a PFIC for 2015, but have not determined whether we will be a PFIC in 2016 or in future years. Because the PFIC determination is highly fact intensive, there can be no assurance that we will not be a PFIC in 2016 or any subsequent year.

U.S. Investors should be aware of certain tax consequences of investing directly or indirectly in us if we are a PFIC. A U.S. Investor is subject to different rules depending on whether the U.S. Investor makes an election to treat us as a “qualified electing fund,” known as a QEF election, makes a “mark-to-market” election with respect to the ordinary shares, or makes neither election. An election to treat us as a QEF will not be available if we do not provide the information necessary to make such an election. It is not expected that a U.S. Investor will be able to make a QEF election because we do not intend to provide U.S. Investors with the information necessary to make a QEF election.

QEF Election . One way in which certain of the adverse consequences of PFIC status can be mitigated is for a U.S. Investor to make a QEF election. Generally, a shareholder making the QEF election is required for each taxable year to include in income a pro rata share of the ordinary earnings and net capital gain of the QEF, subject to a separate election to defer payment of taxes, which deferral is subject to an interest charge. An election to treat us as a QEF will not be available if we do not provide the information necessary to make such an election. It is not expected that a U.S. Investor will be able to make a QEF election because we do not intend to provide U.S. Investors with the information necessary to make a QEF election. As discussed below, however, a mark-to-market election that may alleviate some of the adverse consequences of PFIC status may be available to a U.S. Investor.

Mark-to-Market Election . Alternatively, if our ordinary shares are treated as “marketable stock,” a U.S. Investor would be allowed to make a “mark-to-market” election with respect to our ordinary shares, provided the U.S. Investor completes and files IRS Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Investor generally would include as ordinary income in each taxable year the excess, if any, of the fair market value of our ordinary shares at the end of the taxable year over such holder’s adjusted tax basis in such ordinary shares. Thus, the U.S. Investor may recognize taxable income without receiving any cash to pay its tax liability with respect to such income. The U.S. Investor would also be permitted an ordinary loss in respect of the excess, if any, of the U.S. Investor’s adjusted tax basis in our ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Investor’s tax basis in our ordinary shares would be adjusted to reflect any such income or loss amount. Gain realized on the sale, exchange or other disposition of our ordinary shares would be treated as ordinary income, and any loss realized on the sale, exchange or other disposition of our ordinary shares would be treated as ordinary loss to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Investor, and any loss in excess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains.

Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange” within the meaning of applicable Treasury Regulations. A class of stock is regularly traded on an exchange during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. To be marketable stock, our ordinary shares must be regularly traded on a qualifying exchange (i) in the United States that is registered with the SEC or a national market system established pursuant to the Exchange Act or (ii) outside the United States that is properly regulated and meets certain trading, listing, financial disclosure and other requirements. Our ordinary shares are expected to constitute “marketable stock” as long as they remain listed on the NASDAQ Capital Market and are regularly traded.

A mark-to-market election will not apply to our ordinary shares held by a U.S. Investor for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. The election will not remain in effect if the ordinary shares are no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election. A mark-to-market election will not apply to any PFIC subsidiary that we own. Each U.S. Investor is encouraged to consult its own tax advisor with respect to the availability and tax consequences of a mark-to-market election with respect to our ordinary shares.

137

Each U.S. investor should consult its own tax adviser with respect to the applicability of the “net investment income tax” (discussed below) where a mark-to-market election is in effect.

Default PFIC Rules . A U.S. Investor who does not make a timely QEF election or a mark-to-market election, referred to in this disclosure as a “Non-Electing U.S. Investor,” will be subject to special rules with respect to (i) any “excess distribution” (generally, the portion of any distributions received by the Non-Electing U.S. Investor on the ordinary shares in a taxable year in excess of 125% of the average annual distributions received by the Non-Electing U.S. Investor in the three preceding taxable years, or, if shorter, the Non-Electing U.S. Investor’s holding period for the ordinary shares), and (ii) any gain realized on the sale or other disposition of such ordinary shares. Under these rules:

      the excess distribution or gain would be allocated ratably over the Non-Electing U.S. Investor’s holding period for such ordinary shares;

      the amount allocated to the current taxable year and any year prior to us becoming a PFIC would be taxed as ordinary income; and

      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.

If a Non-Electing U.S. Investor who is an individual dies while owning our ordinary shares, the Non-Electing U.S. Investor’s successor would be ineligible to receive a step-up in tax basis of such ordinary shares. Non-Electing U.S. Investors should consult their tax advisors regarding the application of the “net investment income tax” (described below) to their specific situation.

To the extent a distribution on our ordinary shares does not constitute an excess distribution to a Non-Electing U.S. Investor, such Non-Electing U.S. Investor generally will be required to include the amount of such distribution in gross income as a dividend to the extent of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax consequences of such distributions are discussed above under “— Taxation of U.S. Investors — Distributions.” Each U.S. Investor is encouraged to consult its own tax advisor with respect to the appropriate U.S. federal income tax treatment of any distribution on our ordinary shares.

If we are treated as a PFIC for any taxable year during the holding period of a Non-Electing U.S. Investor, we will continue to be treated as a PFIC for all succeeding years during which the Non-Electing U.S. Investor is treated as a direct or indirect Non-Electing U.S. Investor even if we are not a PFIC for such years. A U.S. Investor is encouraged to consult its tax advisor with respect to any available elections that may be applicable in such a situation, including the “deemed sale” election of Section 1298(b)(1) of the Code (which will be taxed under the adverse tax rules described above).

We may invest in the equity of foreign corporations that are PFICs or may own subsidiaries that own PFICs. If we are classified as a PFIC, under attribution rules U.S. Investors will be subject to the PFIC rules with respect to their indirect ownership interests in such PFICs, such that a disposition of the ordinary shares of the PFIC or receipt by us of a distribution from the PFIC generally will be treated as a deemed disposition of such ordinary shares or the deemed receipt of such distribution by the U.S. Investor, subject to taxation under the PFIC rules. There can be no assurance that a U.S. Investor will be able to make a QEF election with respect to PFICs in which we invest, and a U.S. Investor may not make a mark-to-market election with respect to a PFIC in which we invest. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of an investment by us in a corporation that is a PFIC.

In addition, U.S. Investors should consult their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of ordinary shares in a PFIC, including IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund).

The U.S. federal income tax rules relating to PFICs, QEF elections, and mark-to market elections are complex. U.S. Investors are urged to consult their own tax advisors with respect to the purchase, ownership and disposition of our ordinary shares, any elections available with respect to such ordinary shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of our ordinary shares.

138

Certain Reporting Requirements

Certain U.S. Investors are required to file IRS Form 926, Return by U.S. Transferor of Property to a Foreign Corporation, and certain U.S. Investors may be required to file IRS Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Investor and us. Substantial penalties may be imposed upon a U.S. Investor that fails to comply.

In addition, recently enacted legislation requires certain U.S. Investors to report information on IRS Form 8938 with respect to their investments in certain “foreign financial assets,” which would include an investment in our ordinary shares, to the IRS.

Investors who fail to report required information could become subject to substantial civil and criminal penalties. U.S. Investors should consult their tax advisors regarding the possible implications of these reporting requirements on their investment in our ordinary shares.

Disclosure of Reportable Transactions

If a U.S. Investor sells or disposes of the ordinary shares at a loss or otherwise incurs certain losses that meet certain thresholds, such U.S. Investor may be required to file a disclosure statement with the IRS. Failure to comply with these and other reporting requirements could result in the imposition of significant penalties.

Backup Withholding Tax and Information Reporting Requirements

Generally, information reporting requirements will apply to distributions on our ordinary shares or proceeds on the disposition of our ordinary shares paid within the United States (and, in certain cases, outside the United States) to U.S. Investors other than certain exempt recipients, such as corporations. Furthermore, backup withholding (currently at 28%) may apply to such amounts if the U.S. Investor fails to (i) provide a correct taxpayer identification number, (ii) report interest and dividends required to be shown on its U.S. federal income tax return, or (iii) make other appropriate certifications in the required manner. U.S. Investors who are required to establish their exempt status generally must provide such certification on IRS Form W-9.

Backup withholding is not an additional tax. Amounts withheld as backup withholding from a payment may be credited against a U.S. Investor’s U.S. federal income tax liability and such U.S. Investor may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the IRS and furnishing any required information in a timely manner.

Medicare Tax on Investment Income

Certain U.S. persons, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax, or “net investment income tax,” on unearned income. For individuals, the additional net investment income tax applies to the lesser of (i) “net investment income” or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends, annuities, royalties, rents, and capital gains. U.S. Investors are urged to consult their own tax advisors regarding the implications of the additional net investment income tax resulting from their ownership and disposition of our ordinary shares.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.

139

UNDERWRITING

We have entered into an underwriting agreement with Maxim Group LLC and Roth Capital Partners, LLC, acting as the representatives of the several underwriters named below, with respect to the ordinary shares subject to this offering. Subject to certain conditions, we have agreed to sell to the underwriters, and the underwriters have severally agreed to purchase, the number of ordinary shares provided below opposite their respective names.

Underwriters

 

Number of
Ordinary Shares

Maxim Group LLC

 

 

Roth Capital Partners, LLC

 

 

Total

 

 

The underwriters are offering the ordinary shares subject to their acceptance of the ordinary shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the ordinary shares offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the ordinary shares if any such ordinary shares are taken. However, the underwriters are not required to take or pay for the ordinary shares covered by the underwriters’ over-allotment option described below.

Over-Allotment Option

We have granted the underwriters an option, exercisable for 45 days from the date of this prospectus, to purchase up to an aggregate of      additional ordinary shares to cover over-allotments, if any, at the public offering price set forth on the cover page of this prospectus, less the underwriting discount. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the ordinary shares offered by this prospectus. If the underwriters exercise this option, each underwriter will be obligated, subject to certain conditions, to purchase a number of additional ordinary shares proportionate to that underwriter’s initial purchase commitment as indicated in the table above.

Discount, Commissions and Expenses

The underwriters have advised us that they propose to offer the ordinary shares to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $     per ordinary share. The underwriters may allow, and certain dealers may reallow, a discount from the concession not in excess of $     per ordinary share to certain brokers and dealers. After this offering, the initial public offering price, concession and reallowance to dealers may be changed by the representatives. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The ordinary shares are offered by the underwriters as stated herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. The underwriters have informed us that they do not intend to confirm sales to any accounts over which they exercise discretionary authority.

The following table shows the underwriting discount payable to the underwriters by us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ over-allotment option to purchase additional ordinary shares.

 

 

Per Ordinary Share

 

Total Without Exercise of Over-Allotment Option

 

Total With Exercise of Over-Allotment Option

Public offering price

 

$

 

 

$

 

 

$

 

Underwriting discount

 

$

 

 

$

 

 

$

 

We estimate that expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $     . We have agreed to reimburse the underwriters for certain out-of-pocket expenses not to exceed $160,000 for all expenses other than attorneys fees and expenses and $     for the underwriter’s attorneys fees and expenses.

140

No Public Market

Prior to this offering, there has not been a public market for our ordinary shares in the United States and the public offering price for our ordinary shares will be determined through negotiations between us and the underwriters. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.

No assurance can be given that the initial public offering price will correspond to the price at which our ordinary shares will trade in the public market subsequent to this offering or that an active trading market for our ordinary shares will develop and continue after this offering.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.

Lock-up Agreements

We, our officers, directors and certain of our shareholders have agreed, subject to limited exceptions, for a period of 180 days after the date of the underwriting agreement, not to offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, directly or indirectly any ordinary shares or any securities convertible into or exchangeable for our ordinary shares either owned as of the date of the underwriting agreement or thereafter acquired without the prior written consent of the representatives. The representatives may, in their sole discretion and at any time or from time to time before the termination of the lock-up period release all or any portion of the securities subject to lock-up agreements; provided, however, that, subject to limited exceptions, at least two business days before the release or waiver or any lock-up agreement, the representatives must notify us of the impending release or waiver and announce the impending release or waiver through a major news service.

Price Stabilization, Short Positions and Penalty Bids

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:

      Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

      Over-allotment involves sales by the underwriters of ordinary shares in excess of the number of ordinary shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of ordinary shares over-allotted by the underwriters is not greater than the number of ordinary shares that they may purchase in the over-allotment option. In a naked short position, the number of ordinary shares involved is greater than the number of ordinary shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing ordinary shares in the open market.

      Syndicate covering transactions involve purchases of ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of ordinary shares to close out the short position, the underwriters will consider, among other things, the price of ordinary shares available for purchase in the open market as compared to the price at which it may purchase ordinary shares through the over-allotment option. If the underwriters sell more ordinary shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying ordinary shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the ordinary shares in the open market after pricing that could adversely affect investors who purchase in the offering.

141

      Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of our ordinary shares. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares. In addition, neither we nor the underwriters make any representations that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Passive Market Making

In connection with this offering, the underwriters and any selling group members may engage in passive market making transactions in our ordinary shares on the NASDAQ Capital Market in accordance with Rule 103 of Regulation M under the Exchange Act during a period before the commencement of offers or sales of ordinary shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.

Listing and Transfer Agent

We intend to apply to list our ordinary shares on the NASDAQ Capital Market under the trading symbol “    .” Our ordinary shares are also listed on the TASE and trade under the symbol “INT P.” Th e transfer agent of our ordinary shares is      .

Electronic Distribution

This prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.

Other

Upon the completion of the Offering, for a period of twelve (12) months from the effectiveness of the registration statement of which this prospectus forms a part, each of the representatives of the several underwriters has the right of participation to act as lead managing underwriter and book runner or minimally as a co-lead manager with each representative receiving at least 30% of the economics for any and all of future public and private equity and debt offerings we or any successor to or any subsidiary of ours completes during such twelve (12) month period.

Except for services provided in connection with this offering, no underwriter has provided any investment banking or other financial services during the 180-day period preceding the date of this prospectus and we do not expect to retain any underwriter to perform any investment banking or other financial services for at least 90 days after the date of this prospectus. In the course of their businesses, the underwriters and their affiliates may actively trade our securities for their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities.

142

NOTICE TO INVESTORS

Notice to Investors in Israel

This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange Ltd., underwriters, each purchasing for their own account, venture capital funds, entities with shareholders’ equity in excess of NIS 50 million and ”qualified individuals”, each as defined in the Addendum (as it may be amended from time to time). Such individuals are collectively referred to as qualified investors. Qualified investors shall be required to submit written confirmation that they fall within the scope of the Addendum.

Notice to Investors in the United Kingdom

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant UK Member State”) an offer to the public of any securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant UK Member State except that an offer to the public in that Relevant UK Member State of any such securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant UK Member State:

(a)    to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b)    to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

(c)    by the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive); or

(d)    in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of these securities shall result in a requirement for the publication by the issuer or the underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any of the securities in any Relevant UK Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any such securities to be offered so as to enable an investor to decide to purchase any such securities, as the same may be varied in that Relevant UK Member State by any measure implementing the Prospectus Directive in that Relevant UK Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant UK Member State.

Each underwriter has represented, warranted and agreed that:

(a)    it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the FSMA)) received by it in connection with the issue or sale of any of the securities in circumstances in which section 21(1) of the FSMA does not apply to the issuer; and

(b)    it has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom.

European Economic Area

This document does not constitute an approved prospectus in accordance with European Commission’s Regulation on Prospectuses no. 809/2004, and no such prospectus is to be prepared and approved in connection with this offering. Accordingly, in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (being the

143

Directive of the European Parliament and of the Council 2003/71/EC and including any relevant implementing measure in each Relevant Member State) (each, a “Relevant EU Member State”), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant EU Member State (the “Relevant Implementation Date”) an offer of securities to the public may not be made in that Relevant EU Member State prior to the publication of a prospectus in relation to such securities which has been approved by the competent authority in that Relevant EU Member State or, where appropriate, approved in another Relevant EU Member State and notified to the competent authority in that Relevant EU Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of securities to the public in that Relevant EU Member State at any time:

      to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

      to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in the last annual or consolidated accounts; or

      in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of securities to the public” in relation to any of the securities in any Relevant EU Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Relevant EU Member State by any measure implementing the Prospectus Directive in that Relevant EU Member State. For these purposes the ordinary shares offered hereby are “securities.”

144

ENFORCEMENT OF FOREIGN JUDGMENTS

We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in this registration statement, substantially all of whom reside outside of the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside of the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.

We have been informed by our legal counsel in Israel, Pearl Cohen Zedek Latzer Baratz, that it may be difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on a violation of U.S. securities laws because Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law.

Subject to specified time limitations and legal procedures, Israeli courts may enforce a United States judgment in a civil matter which, subject to certain exceptions, is non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:

      the judgment is obtained after due process before a court of competent jurisdiction, according to the laws of the state in which the judgment is given and the rules of private international law currently prevailing in Israel;

      the judgment is final and is not subject to any right of appeal;

      the prevailing law of the foreign state in which the judgment was rendered allows for the enforcement of judgments of Israeli courts and the substance of the judgment is not contrary to public policy; and

      the judgment is executory in the state in which it was given.

Even if these conditions are met, an Israeli court will not declare a foreign civil judgment enforceable if:

      the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases);

      the judgment was obtained by fraud;

      the possibility given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court;

      the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel;

      the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid;

      at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel; or

      the enforcement of the judgment may impair the security or sovereignty of Israel.

If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.

145

EXPENSES RELATING TO THIS OFFERING

We estimate that the total expenses of this offering payable by us, excluding the underwriting discounts, commissions and expenses, will be approximately $       as follows:

 

 

Amount

Securities and Exchange Commission registration fee

 

$

 

*

NASDAQ Capital Market listing fee

 

 

 

*

Financial Industry Regulatory Authority, Inc. filing fee

 

 

 

*

Printing and engraving expenses

 

 

 

*

Edgarizing costs

 

 

 

*

Transfer Agent fees and expenses

 

 

 

*

Legal fees and expenses

 

 

 

*

Accountant fees and expenses

 

 

 

*

Public offering director and officer insurance

 

 

 

*

Miscellaneous costs

 

 

 

*

Total

 

$

____________

*       To be completed

All amounts in the table are estimated except the Securities and Exchange Commission registration fee, the NASDAQ Capital Market listing fee and the FINRA filing fee.

The total underwriting discounts that we will be required to pay will be approximately $     million and $     million or     % and      %, of the gross proceeds of this offering, respectively, assuming no exercise of the over-allotment option.

146

LEGAL MATTERS

Certain legal matters in connection with this offering relating to U.S. law will be passed upon for us by Greenberg Traurig, P.A., Miami, Florida. The validity of the ordinary shares being offered by this prospectus and other legal matters concerning this offering relating to Israeli law will be passed upon for us by Pearl Cohen Zedek Latzer Baratz, Tel-Aviv, Israel. Certain legal matters in connection with this offering will be passed upon for the underwriters by Lowenstein Sandler LLP, New York, New York, with respect to U.S. law, and by Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co., Tel Aviv, Israel, with respect to Israeli law.

EXPERTS

The financial statements as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 included in this prospectus have been so included in reliance on the report of Kesselman & Kesselman, Certified Public Accountant (Israel), a member firm of PricewaterhouseCoopers International Limited, an independent registered public accounting firm given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

When this Registration Statement on Form F-1 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. Those other reports or other information and this Registration Statement may be inspected without charge at 12 Hartom Street, Har Hozvim, Jerusalem 9777512, Israel, and inspected and copied at the public reference facilities of the SEC located at 100 F Street, N.E., Washington, D.C. 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., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a website at http://www.sec.gov from which certain filings may be accessed.

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. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, we will not be required under the Exchange Act to file annual or other reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. Instead, we will file with the SEC, within 120 days after the end of each fiscal year, or such other 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. We also intend to furnish certain other material information to the SEC under cover of Form 6-K.

In addition, because 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 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 at www.intecpharma.com. Information contained on, or that can be accessed through, our website does not constitute a part of this Registration Statement on Form F-1. We have included our website address in this Registration Statement on Form F-1 solely as an inactive textual reference.

147

INTEC PHARMA LTD.
2014 ANNUAL REPORT

TABLE OF CONTENTS

 

 

Page

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

F-2

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2014:

 

 

Statements of Financial Position

 

F-3

Statements of Comprehensive Loss

 

F-4

Statements of Changes in Equity

 

F-5 - F-6

Statements of Cash Flows

 

F-7 - F-8

Notes to the Financial Statements

 

F-9 - F-37

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders of

INTEC PHARMA LTD.

We have audited the accompanying statements of financial position of Intec Pharma Ltd. (the “Company”) at December 31, 2013 and 2014 and the related statements of comprehensive loss, changes in equity and cash flows for the years ended on those dates. These financial statements are the responsibility of the Company’s Board of Directors and management. Our responsibility is to express an opinion on these 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s Board of Directors and 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, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2014 and the results of its operations, changes in equity and cash flows for each of the years ended on those dates in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

We draw your attention to note 1 to the financial statements, which notes that the Company has not yet generated any revenues from its operations and has cumulative losses (as of December 31,2014 the cumulative losses were approximately NIS 167 million). Management expects that the Company will continue to incur losses in the foreseeable future from its activities, which will result in negative cash flows from operating activities. Management believes its cash and cash equivalents as of December 31, 2014 will allow the Company to fund its operating plan through at least the next 12 months.

Tel-Aviv, Israel

 

/s/ Kesselman & Kesselman

March 30, 2015

 

Certified Public Accountants (Isr.)

 

 

A member firm of PricewaterhouseCoopers International Limited

Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,
P.O Box 50005 Tel-Aviv 6150001 Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il

F-2

INTEC PHARMA LTD.

STATEMENTS OF FINANCIAL POSITION

 

 

 

 

 

 

 

 

Convenience translation into USD (note 1b)

 

 

Note

 

December 31

 

December 31,

 

 

 

 

2013

 

2014

 

2014

 

 

 

 

NIS in thousands

 

In thousands

Assets

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

5

 

11,763

 

 

22,287

 

 

5,599

 

Financial assets at fair value through profit or loss

 

6

 

17,887

 

 

7,820

 

 

1,965

 

Restricted bank deposits

 

11e, 11g

 

50

 

 

292

 

 

73

 

Other receivables

 

7

 

2,583

 

 

1,120

 

 

2,812

 

 

 

 

 

32,283

 

 

31,519

 

 

7,919

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Restricted bank deposits

 

11e

 

210

 

 

 

 

 

 

 

Property and equipment

 

8

 

14,991

 

 

17,101

 

 

4,297

 

 

 

 

 

15,201

 

 

17,101

 

 

4,297

 

TOTAL ASSETS

 

 

 

47,484

 

 

48,620

 

 

12,216

 

Liabilities and equity

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accruals:

 

 

 

 

 

 

 

 

 

 

 

Trade

 

 

 

1,323

 

 

716

 

 

180

 

Other

 

9

 

3,600

 

 

6,503

 

 

1,634

 

 

 

 

 

4,923

 

 

7,219

 

 

1,814

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

10

 

10,298

 

 

4,528

 

 

1,138

 

COMMITMENTS AND CONTINGENT LIABILITIES

 

11

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

 

15,221

 

 

11,747

 

 

2,952

 

EQUITY:

 

13

 

 

 

 

 

 

 

 

 

Ordinary shares

 

 

 

2,278

 

 

2,701

 

 

679

 

Share premium

 

 

 

168,459

 

 

198,566

 

 

49,891

 

Warrants

 

 

 

8,753

 

 

2,249

 

 

565

 

Accumulated deficit

 

 

 

(147,227

)

 

(166,643

)

 

(41,871

)

TOTAL EQUITY

 

 

 

32,263

 

 

36,873

 

 

9,264

 

TOTAL LIABILITIES AND EQUITY

 

 

 

47,484

 

 

48,620

 

 

12,216

 

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

F-3

INTEC PHARMA LTD.

STATEMENTS OF COMPREHENSIVE LOSS

 

 

 

 

Year ended December 31

 

Convenience translation into USD (note 1b)

 

 

Note

 

2013

 

2014

 

2014

 

 

 

 

NIS in thousands

 

In thousands

 

 

 

 

 

 

 

 

 

RESEARCH AND DEVELOPMENT EXPENSES

 

14

 

(17,410

)

 

(17,740

)

 

(4,457

)

LESS- PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES

 

11b,11c, 11d

 

8,393

 

 

5,544

 

 

1,393

 

RESEARCH AND DEVELOPMENT EXPENSES, net

 

 

 

(9,017

)

 

(12,196

)

 

(3,064

)

GENERAL AND ADMINISTRATIVE EXPENSES

 

15

 

(9,633

)

 

(9,332

)

 

(2,345

)

OTHER GAINS, net

 

6, 11j

 

474

 

 

836

 

 

210

 

OPERATING LOSS

 

 

 

(18,176

)

 

(20,692

)

 

(5,199

)

FINANCIAL INCOME

 

16

 

434

 

 

1,136

 

 

285

 

FINANCIAL EXPENSES

 

16

 

(648

)

 

(812

)

 

(204

)

FINANCIAL INCOME (EXPENSES), net

 

 

 

(214

)

 

324

 

 

81

 

LOSS AND COMPREHENSIVE LOSS

 

 

 

(18,390

)

 

(20,368

)

 

(5,118

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NIS

 

USD

 

BASIC AND DILUTED LOSS PER ORDINARY SHARE

 

17

 

(4.25

)

 

(4.22

)

 

(1.06

)

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

F-4

INTEC PHARMA LTD.

STATEMENTS OF CHANGES IN EQUITY

 

 

Ordinary shares

 

Share premium

 

Warrants

 

Accumulated deficit

 

Total

 

 

NIS in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JANUARY 1, 2013

 

1,992

 

146,357

 

7,877

 

 

(130,666

)

 

25,560

 

CHANGES DURING 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of shares and warrants,
see note 13b(4)

 

116

 

13,561

 

1,338

 

 

 

 

 

15,015

 

Proceeds from issuance of shares as part of an investment agreement, see note 10

 

160

 

7,290

 

 

 

 

 

 

 

7,450

 

Exercise of warrants (Series 3)

 

2

 

262

 

(13

)

 

 

 

 

251

 

Expiration of warrants (Series 3)

 

 

 

449

 

(449

)

 

 

 

 

 

Exercise of options by employees and service providers

 

8

 

540

 

 

 

 

 

 

 

548

 

Share-based compensation

 

 

 

 

 

 

 

 

1,829

 

 

1,829

 

Comprehensive loss

 

 

 

 

 

 

 

 

(18,390

)

 

(18,390

)

BALANCE AT DECEMBER 31, 2013

 

2,278

 

168,459

 

8,753

 

 

(147,227

)

 

32,263

 

CHANGES DURING 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of shares and warrants net of NIS 742 thousand issuance costs, see note 13b(6)

 

289

 

15,392

 

911

 

 

 

 

 

16,592

 

Proceeds from issuance of shares as part of an addendum to an investment agreement, see note 10

 

101

 

6,499

 

 

 

 

 

 

 

6,600

 

Issuance of shares to former related party, see note 11g

 

26

 

229

 

 

 

 

(255

)

 

 

Expiration of warrants (Series 1)

 

 

 

5,197

 

(5,197

)

 

 

 

 

 

Expiration of non-tradable warrants, see note 13b(2)

 

 

 

2,218

 

(2,218

)

 

 

 

 

 

Exercise of options by employees and service providers

 

7

 

572

 

 

 

 

 

 

 

579

 

Share-based compensation

 

 

 

 

 

 

 

 

1,207

 

 

1,207

 

Comprehensive loss

 

 

 

 

 

 

 

 

(20,368

)

 

(20,368

)

BALANCE AT DECEMBER 31, 2014

 

2,701

 

198,566

 

2,249

 

 

(166,643

)

 

36,873

 

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

F-5

INTEC PHARMA LTD.

STATEMENTS OF CHANGES IN EQUITY (CONTINUED)

 

 

Ordinary shares

 

Share premium

 

Warrants

 

Accumulated deficit

 

Total

 

 

Convenience translation into USD (note 1b) in thousands

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JANUARY 1, 2014

 

572

 

42,326

 

2,199

 

 

(36,991

)

 

8,106

 

CHANGES DURING 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of shares and warrants net of $191 thousand issuance costs, see note 13b(6)

 

73

 

3,867

 

229

 

 

 

 

 

4,169

 

Proceeds from issuance of shares as part of an addendum to the investment agreement, see note 10

 

25

 

1,633

 

 

 

 

 

 

 

1,658

 

Issuance of shares to former related party, see note 11g

 

7

 

58

 

 

 

 

(65

)

 

 

Expiration of warrants (Series 1)

 

 

 

1,306

 

(1,306

)

 

 

 

 

 

Expiration of non-tradable warrants, see note 13b(2)

 

 

 

557

 

(557

)

 

 

 

 

 

Exercise of options by employees and service providers

 

2

 

144

 

 

 

 

 

 

 

146

 

Share-based compensation

 

 

 

 

 

 

 

 

303

 

 

303

 

Comprehensive loss

 

 

 

 

 

 

 

 

(5,118

)

 

(5,118

)

BALANCE AT DECEMBER 31, 2014

 

679

 

49,891

 

565

 

 

(41,871

)

 

9,264

 

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

F-6

INTEC PHARMA LTD.

STATEMENTS OF CASH FLOW

 

 

Year ended December 31

 

Convenience translation into USD (note 1b)

 

 

2013

 

2014

 

2014

 

 

NIS in thousands

 

In thousands

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Loss for the year

 

(18,390

)

 

(20,368

)

 

(5,118

)

Adjustments to reconcile comprehensive loss to net cash from operations (see appendix A)

 

6,172

 

 

3,371

 

 

847

 

Net cash used in operating activities

 

(12,218

)

 

(16,997

)

 

(4,271

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(5,376

)

 

(271

)

 

(68

)

Proceeds from disposal ( purchase) of financial assets at fair value through profit or loss, net

 

(5,955

)

 

10,016

 

 

2,517

 

Changes in restricted bank deposits, net

 

76

 

 

(31

)

 

(8

)

Net cash provided by (used in) investing activities

 

(11,255

)

 

9,714

 

 

2,441

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Exercise of options by employees and service providers

 

548

 

 

579

 

 

146

 

Exercise of warrants (series 3)

 

251

 

 

 

 

 

Issuance of shares and warrants as part of an investment agreement, net of issuance costs, see note 10

 

17,692

 

 

 

 

 

Issuance of shares as part of an addendum to the investment agreement, see note 10

 

 

 

101

 

 

25

 

Issuance of shares and warrants, net of issuance costs

 

15,015

 

 

16,592

 

 

4,169

 

Net cash provided by financing activities

 

33,506

 

 

17,272

 

 

4,340

 

INCREASE IN CASH AND CASH EQUIVALENTS

 

10,033

 

 

9,989

 

 

2,510

 

CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR

 

1,953

 

 

11,763

 

 

2,955

 

EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS

 

(223

)

 

535

 

 

134

 

CASH AND CASH EQUIVALENTS – END OF YEAR

 

11,763

 

 

22,287

 

 

5,599

 

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

F-7

INTEC PHARMA LTD.

STATEMENTS OF CASH FLOW

 

 

Year ended December 31

 

Convenience translation into USD (note 1b)

 

 

2013

 

2014

 

2014

 

 

NIS in thousands

 

In thousands

APPENDIX A

 

 

 

 

 

 

 

 

 

Adjustments to reconcile loss and comprehensive loss to net cash provided from operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income and expenses not involving cash flows:

 

 

 

 

 

 

 

 

 

Depreciation

 

2,176

 

 

2,092

 

 

525

 

Exchange differences on restricted deposits

 

(6

)

 

(1

)

 

*

 

Changes in the fair value of derivative financial instruments

 

(32

)

 

729

 

 

183

 

Exchange differences on cash and cash equivalents

 

223

 

 

(535

)

 

(134

)

Losses (gains) on financial assets at fair value through profit or loss

 

(474

)

 

51

 

 

13

 

Share-based compensation to investors as part of investment agreement, see note 10

 

88

 

 

 

 

 

Share-based compensation to employees and service providers

 

1,829

 

 

1,207

 

 

303

 

 

 

3,804

 

 

3,543

 

 

890

 

 

 

 

 

 

 

 

 

 

 

Changes in operating asset and liability items:

 

 

 

 

 

 

 

 

 

Decrease in other receivables

 

871

 

 

1,463

 

 

368

 

Increase (decrease) in accounts payable and accruals

 

1,497

 

 

(1,635

)

 

(411

)

 

 

2,368

 

 

(172

)

 

(43

)

 

 

6,172

 

 

3,371

 

 

847

 

APPENDIX B:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Information regarding investment and financing activities not involving cash flows:

 

 

 

 

 

 

 

 

 

Liability with respect to property purchase order, see note 11(h)

 

 

 

3,931

 

 

988

 

Settlement of liability in respect to derivative financial instrument to equity, see note 10

 

 

 

6,499

 

 

1,633

 

 

 

 

 

 

 

 

 

 

 

Supplementary information to the statement of cash flows –

 

 

 

 

 

 

 

 

 

Interest received

 

402

 

 

617

 

 

155

 

* Represents an amount less than USD 1,000

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

F-8

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 — GENERAL INFORMATION:

a.        General Information

Intec Pharma Ltd. (the “Company”) is engaged in the development of proprietary technology, which enables the gastric retention of certain drugs. The technology is intended to significantly improve the efficiency of the drugs and substantially reduce their side-effects or the effective doses.

The Company is a limited liability public company incorporated and domiciled in Israel. The registered address of its offices is 12 Hartom St., Jerusalem, Israel.

The Company’s shares are being traded on the Tel-Aviv Stock Exchange Ltd.

The Company is in the research and development stages and has not yet generated revenues from its operations. As of December 31, 2014 the cumulative losses of the Company were approximately NIS 167 million. Management expects that the Company will continue to incur losses from its operations in the foreseeable future, which will result in negative cash flows from operating activities.

The Company plans to fund its future operations through submission of applications for grants from governmental authorities and private funds and raising capital from the public and/or private investors and/or institutional investors.

The Company’s management believes its cash and cash equivalents as of December 31, 2014 will allow the Company to fund its operating plan through at least the next 12 months. If the Company is unsuccessful in executing the abovementioned plans, it may need to make adequate changes to its operations.

b.      Convenience translation into US dollars (“dollars”, “USD” or “$”)

For the convenience of the reader, the reported New Israeli Shekel (NIS) amounts as of December 31, 2014 and for the year then ended have been translated into dollars at the Bank of Israel’s representative rate of exchange for March 31, 2015 ($1 = NIS 3.98). The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollars or convertible into dollars, unless otherwise indicated.

c.        Approval of financial statements

The financial statements were approved by the Board of Directors on March 30, 2015.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

a.        Basis of presentation of the financial statements:

The Company’s financial statements as of December 31, 2014 and December 31, 2013 and the years then ended have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

The significant accounting policies described below have been applied on a consistent basis for all years presented, unless noted otherwise.

The financial statements have been prepared on the basis of historical cost, subject to adjustments in respect of revaluation of financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s

F-9

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Actual results may differ materially from estimates and assumptions used.

Following the reverse share split that was executed on March 29, 2015 (see note 20c), all of the shares numbers, options and warrants numbers, loss per share amounts, share prices, warrant exercise prices and option exercise prices in these financial statements have been adjusted, on a retroactive basis, to reflect the reverse share split.

b.        Foreign currency transaction:

1)     Functional and presentation currency

Items included in the Company’s financial statements are measured by using the currency of the primary economic environment in which the Company operates (the “functional currency”). The Company’s financial statements are presented in NIS, which is the Company’s functional and presentation currency.

2)     Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of each transaction. Foreign exchange gains which derive from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recorded to the statement of comprehensive loss among financing income or expenses.

c.        Property and equipment

Property and equipment items are stated at cost less accumulated depreciation. Depreciation is computed by the straight-line method, over the estimated useful lives as follows:

 

 

Years

Computer and peripheral equipment

 

3

Laboratory equipment

 

10

Office furniture and equipment

 

5-14

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Leasehold improvements are depreciated by the straight-line method over the shorter of the lease term and the estimated useful life of the improvements.

Depreciation of property under construction begins when it is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

d.        Intangible assets

The Company applies the cost method of accounting for initial and subsequent measurements of intangible assets. Under this method of accounting, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

F-10

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

Costs associated with research are recognized as an expense as incurred. Costs associated with development projects (which relate to the design and the testing of new products or improvements) are recognized as intangible assets when the following criteria are met:

-        It is technically feasible to complete the intangible assets so that it will be available for use;

-        Management intends to complete the intangible assets and use or sell it;

-        There is an ability to use or sell the intangible assets;

-        It can be demonstrated how the intangible assets will generate probable future economic benefits;

-        Adequate technical, financial and other resources to complete the development and to use or sell the intangible assets are available; and costs associated with the intangible asset during development can be measured reliably.

Other development costs that do not meet the above criteria are recognized as expenses as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.

As of December 31, 2014, the Company has not yet capitalized development costs.

e.        Government grants and other grants:

1)     The Company receives participation in research and development expenses from the State of Israel through the Office of the Chief Scientist of the Israeli Ministry of Economy (“OCS”) in the form of grants which qualify as “forgivable loans”, in accordance with IAS 20, “Accounting for Government Grants and Disclosure of Government Assistance,” since the grants are repayable only if the Company generates revenues related to the project that is the subject of the grant.

The Company recognizes each forgivable loan as a grant receivable and a reduction of expenses on a systematic basis at the same time the Company records, as an expense, the related development costs for which the loan is received, provided that there is reasonable assurance that (a) the Company complies with the conditions attached to the loan and (b) the loan will be received. The amount of the forgivable loan is recognized based on the participation rate approved by the OCS.

Since the Company has reasonable grounds to believe it will meet the terms for forgiveness, the loan is accounted for as a government grant. Government grants relating to costs are deferred and recognized in the statement of loss over the period necessary to match them with the costs that they are intended to compensate.

2)     The Company receives other grants from certain funds. The grants are recorded to the comprehensive loss as a reduction of related research and development expenses over the period necessary to match these grants with the costs that they are intended to compensate.

f.         Financial assets:

1)     Classification

The Company classifies its financial assets in the following categories: (i) at fair value through profit or loss and (ii) loans and receivables. The classification depends on the purpose for which each financial asset was acquired. The Company’s management determines the classification of financial assets at initial recognition.

a)     Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These assets are included in current assets, except for maturities

F-11

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

greater than 12 months after the end of the reporting period, which are classified as non-current assets. The Company’s loans and receivables are comprised of “accounts receivable,” “cash and cash equivalents” and “bank restricted deposits” in the statement of financial position (See note g below).

b)     Financial assets at fair value through profit or loss

This category includes financial assets that are managed and their performance is evaluated on a fair value basis. Thus upon their initial recognition, these assets are designated by management at fair value through profit or loss. Assets in this category are classified as current assets if they are expected to be settled within 12 months.

2)     Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade date, which is the date on which the asset is delivered to the Company or delivered by the Company.

Investments are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in profit or loss. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently recorded at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” are presented in the statement of comprehensive loss within “Other gains, net” in the period in which they arise.

g.        Cash and cash equivalents

Cash and cash equivalents include cash on hand and short-term bank deposits (original maturities of three months or less) that are not restricted as to withdrawal or use and are therefore considered to be cash equivalents.

h.        Restricted deposits

The Company has placed a lien on NIS deposits in banks to secure its liabilities and commitments to various parties. Those deposits are presented separately as current assets and non-current assets, in accordance with the timing of the relevant restrictions. See notes 11e and 11g.

i.         Share capital

The Company’s ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new shares are shown in equity as a deduction from the issue proceeds.

j.         Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

F-12

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

k.        Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

l.         Derivative financial instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivative financial instruments are recognized in the statement of comprehensive loss within financing income or expenses.

Derivative financial instruments issued by the Company include the following:

      Derivative financial instrument warrants (“Warrants”)

      Derivative financial instrument anti-dilution rights (“Anti-dilution rights”)

      Derivative financial instrument additional warrants, which were issued in November 2014 (“Additional warrants”)

m.      Employee benefits:

1)     Retirement benefit obligations

The retirement benefit obligation of the Company is a defined contribution plan. A defined contribution plan is a post-employment benefit plan which is subject to section 14 of the Israeli severance pay law under which the Company pays fixed contributions into a separate and independent entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Company operates various pension plans. The plans are generally funded through payments to insurance companies or trustee-administered funds. In accordance with their terms, the pension plans meet the definition of a defined contribution plan, as described above.

2)     Vacation days and recreation pay

Labor laws in Israel entitle every employee to vacation days and recreation pay, both of which are computed annually. The entitlement with respect to each employee is based on the employee’s length of service at the Company. The Company recognizes a liability and an expense in respect of vacation and recreation pay as earned by the employee based on his or her entitlement.

3)     Bonus plans

The Company recognizes a liability and an expense for bonuses based on a target-based remuneration policy. The Company recognizes a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

n.        Share-based payments

The Company operates an equity-settled, share-based compensation plan for employees, under which it receives services from employees as consideration for equity instruments (options) of the Company. The fair value of such services received in exchange for the grant of the options is recognized as an expense in the statement of comprehensive loss.

F-13

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total amount of expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions.

The Company recognizes the impact of a revision in the original estimates, if any, in the statement of comprehensive loss, with a corresponding adjustment to equity.

When the options are exercised, the Company issues new shares. The proceeds received, net of any directly attributable transaction costs, are credited to share capital (at par value) and share premium when the options are exercised.

The fair value of the services received from service providers, other than labor services, are determined according to fair value of the services received, unless that value cannot be reliably measured, in which case the value of the benefit is determined based on the value of the instruments issued.

o.        Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statement of comprehensive loss on a straight-line basis over the period of the lease.

p.        Loss per share

The computation of basic loss per share is based, on the Company’s loss divided by the weighted average number of ordinary shares outstanding during the period.

In calculating the diluted loss per share, the Company adds to the average number of shares outstanding that was used to calculate the basic loss per share the weighted average of the number of shares to be issued assuming all shares that have a potentially dilutive effect have been converted into shares. The potential shares, as described, are only taken into account in cases where their effect is dilutive (increasing the loss per share). Since the addition of potential shares reduces loss per share, these potential shares are not taken into account, and basic and diluted loss per share are identical.

q.        Deferred taxes

Deferred income taxes are recognized, using the liability method, for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred income taxes are determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Since the Company is unable to assess whether it will have taxable income in the foreseeable future, no deferred taxes were recorded in these financial statements.

F-14

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ( continued)

r.         Standard that is not yet in effect and has not been early adopted by the Company for the financial year beginning 1 January 2014

IFRS 9, Financial instruments (“IFRS 9”)

IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling.

The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Company has not yet assessed IFRS 9’s full impact.

NOTE 3 — CRITICAL ACCOUNTING ESTIMATES

The accounting estimates are continually evaluated and adjusted based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future.

Such estimates, by nature, are subjective and complex and consequently may differ from actual results.

The estimates for which there is significant risk of causing a material adjustment to the carrying amounts of liabilities within the next financial year are outlined below:

a.        Share-based payments

For the purpose of the evaluation of the fair value and the manner of the recognition of share-based compensation, the Company’s management is required to estimate, among other things, various parameters that are included in the calculation of the fair value of the option as well as the Company’s results and the number of options that will vest. The actual results and the estimates that are made in the future may be significantly different from the current estimates.

b.        Derivative financial instruments

As described in note 10, the Company has financial liabilities in respect to derivative financial instruments.

These liabilities are measured at fair value using a standard valuation technique for this type of instrument (Monte Carlo model) on the basis of observable inputs (such as the price of the Company’s shares, risk-free interest and exercise price) and unobservable inputs (such as expected volatility, expected life and the probability of potential scenarios as described in the agreement). Changes in the financial inputs underlying the model may cause significant changes in the fair value of the liability.

F-15

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 4 — FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT:

a.        Financial risk management:

1)     Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial performance. In the Company’s opinion, the influence of market risk and credit risk is immaterial.

Risk management is carried out by the Company’s management which identifies and evaluates the financial risks in close cooperation with the Company’s management.

a)     Market risk

Foreign exchange risk — the Company’s operations are exposed to foreign exchange risk derived from cash and cash equivalents, other receivables and other payables. Changes in foreign exchange rates did not have a material effect on the Company during 2014.

Set forth below is information on the linkage of monetary items:

 

 

December 31, 2013

 

December 31, 2014

 

 

NIS

 

Dollar

 

Other currencies

 

NIS

 

Dollar

 

Other currencies

 

 

NIS in thousands

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

10,752

 

896

 

115

 

12,800

 

4,731

 

4,756

Financial assets at fair value through profit or loss

 

17,887

 

 

 

7,820

 

 

Restricted deposits

 

50

 

 

 

292

 

 

Other receivables

 

1,088

 

774

 

 

1,120

 

 

Total current assets

 

29,777

 

1,670

 

115

 

22,032

 

4,731

 

4,756

Non-current assets -

 

 

 

 

 

 

 

 

 

 

 

 

restricted deposits

 

210

 

 

 

 

 

Total assets

 

29,987

 

1,670

 

115

 

22,032

 

4,731

 

4,756

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accruals:

 

 

 

 

 

 

 

 

 

 

 

 

Trade

 

767

 

556

 

 

399

 

317

 

Other

 

2,372

 

496

 

 

2,234

 

338

 

3,931

Total current liabilities

 

3,139

 

1,052

 

 

2,633

 

655

 

3,931

Non-current liabilities -

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives financial instruments

 

10,298

 

 

 

4,528

 

 

Total liabilities

 

13,437

 

1,052

 

 

7,161

 

655

 

3,931

Net asset value

 

16,550

 

618

 

115

 

14,871

 

4,076

 

825

F-16

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 4 — FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: ( continued)

b)     Credit risks

Credit risks are handled by the Company’s management. Credit risks arise from cash and cash equivalents, deposits in banks and receivable balances that have not yet been settled. The portfolio is well diversified (without a material investment in any single corporate bond) and, accordingly, minimal credit risk exists with respect to these investments.

The Company’s cash and cash equivalents and financial assets at fair value through profit or loss at December 31, 2014 and 2013 were deposited with an A-rated Israeli bank. In the Company’s opinion, the credit risk in respect of these balances is remote.

c)     Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities.

Management monitors rolling forecasts of the Company’s liquidity reserve (comprising cash and cash equivalents, financial assets at fair value through profit or loss and deposits). This is generally carried out based on the expected cash flows in accordance with practice and limits set by the management of the Company.

The Company has not yet generated any revenue from the sale of drugs or royalties; the Company is therefore exposed to liquidity risk, taking into consideration the forecasts of cash flows required to finance its investments and other activities.

The table presented below classifies the Company’s financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts presented in the table represent the contractual undiscounted cash flows.

 

 

Less than
one year

 

 

NIS in thousands

Non-derivative financial liabilities:

 

 

As of December 31, 2014 -

 

 

accounts payable and accruals

 

6,803

As of December 31, 2013 -

 

 

accounts payable and accruals

 

3,774

As of December 31, 2014, the cash and cash equivalents balance amounted to approximately NIS 22.3 million and the investment of bonds issued by the State of Israel and other bonds amounted to approximately NIS 7.8 million, which are expected to generate sufficient cash flow to the company for liquidity risk management in the upcoming year.

2)     Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. It should be indicated that the Company is in the development stage and has not yet generated revenue from the sale of drugs or from royalties.

F-17

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 4 — FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: ( continued)

3)     Fair value estimations

The following is an analysis of the financial instruments measured at fair value through profit or loss, using valuation methods. The different levels have been defined as follows:

*       Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

*       Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

*       Inputs for the asset or liability that are not based on observable market data (that is unobservable input) (Level 3).

The following table presents the Company’s assets and liabilities that are measured at fair value at December 31, 2013 and December 31, 2014.

 

 

2013

 

2014

 

 

Level 1

 

Level 3

 

Level 1

 

Level 3

 

 

NIS in thousands

Assets -

 

 

 

 

 

 

 

 

financial assets at fair value through profit and loss

 

17,887

 

 

 

7,820

 

 

Liabilities -

 

 

 

 

 

 

 

 

derivative financial instruments

 

 

 

10,298

 

 

 

4,528

The following table presents the changes in Level 3 instruments for the years ended December 31, 2014 and 2013:

 

 

Derivative financial instrument - warrants

 

Derivative financial instrument - anti dilution rights

 

Derivative financial instrument -
additional warrants

 

Total

 

 

NIS in thousands

Opening balance as of the date of issuance

 

4,781

 

 

4,384

 

 

1,165

 

 

10,330

 

Loss (gain) recognized in profit or loss during 2013

 

(1,408

)

 

1,470

 

 

(94

)

 

(32

)

Closing balance as of December 31, 2013

 

3,373

 

 

5,854

 

 

1,071

 

 

10,298

 

Settlement of liability in respect to derivative financial instrument to equity

 

 

 

 

(6,499

)

 

 

 

 

(6,499

)

Loss (gain) recognized in profit or loss during 2014

 

(2,141

)

 

3,568

 

 

(698

)

 

729

 

Issuance of additional warrants (see note 10e)

 

373

 

 

 

 

 

(373

)

 

 

Closing balance as of December 31, 2014

 

1,605

 

 

2,923

 

 

 

 

4,528

 

For more information about the assumptions used for measuring the fair value of the derivative financial instruments (level 3), See Note 10.

F-18

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 4 — FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT: ( continued)

b.        Financial instruments:

Assets:

 

 

December 31

 

 

2013

 

2014

 

 

NIS in thousands

1) Loans and receivables:

 

 

 

 

Cash and cash equivalents

 

11,763

 

22,287

Restricted bank deposits

 

260

 

292

Other receivables

 

1,862

 

1,021

2) Financial assets at fair value through profit or loss

 

17,887

 

7,820

Liabilities:

 

 

December 31

 

 

2013

 

2014

 

 

NIS in thousands

1) Financial liabilities at amortized cost trade and other payables

 

3,774

 

6,803

2) Derivative financial instruments

 

10,298

 

4,528

NOTE 5 — CASH AND CASH EQUIVALENTS

As of December 31, 2014 and December 31, 2013, cash and cash equivalents includes cash in hand. The carrying amount of cash and cash equivalents approximates their fair value, since the effect of discounting is immaterial.

NOTE 6 — FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

The Company holds financial assets at fair value through profit or loss. Those assets include bonds issued by the State of Israel and corporate bonds with a minimum of A rating, by Israeli rating agencies. As of December 31, 2014 and December 31, 2013, the amount of the financial assets at fair value through profit or loss is approximately NIS 7.8 million and NIS 17.9 million, respectively.

Changes in the fair value of the financial assets at fair value through profit or loss are recorded in the statement of comprehensive loss as “Other gains, net.” The loss from changes in the fair value of the financial assets at fair value through profit or loss amounted in 2014 to approximately NIS 51 thousand. The gain from changes in the fair value of the financial assets at fair value through profit or loss amounted in 2013 to approximately NIS 474 thousand.

NOTE 7 — OTHER RECEIVABLES:

 

 

December 31

 

 

2013

 

2014

 

 

NIS in thousands

Prepaid expenses

 

117

 

99

Advances to suppliers

 

604

 

Institutions

 

761

 

203

Grants receivable

 

1,101

 

818

 

 

2,583

 

1,120

F-19

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 8 — PROPERTY AND EQUIPMENT

Composition and movement grouped by major classifications:

 

 

Cost

 

Accumulated depreciation

 

Net book value

 

 

Balance at
beginning
of year

 

Additions
during
year

 

Balance at
end of
year

 

Balance at
beginning
of year

 

Additions
during
year

 

Balance at
end of
year

 

Beginning
of the
year

 

End
of the year

 

 

NIS in thousands

 

NIS in thousands

 

NIS in thousands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Composition in 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computers and communications equipment

 

385

 

47

 

432

 

331

 

35

 

366

 

54

 

66

Laboratory equipment

 

12,875

 

215

 

13,090

 

6,164

 

1,220

 

7,384

 

6,711

 

5,706

Office furniture and equipment

 

492

 

9

 

501

 

314

 

36

 

350

 

178

 

151

Leasehold improvements

 

6,206

 

 

 

6,206

 

4,291

 

801

 

5,092

 

1,915

 

1,114

 

 

19,958

 

271

 

20,229

 

11,100

 

2,092

 

13,192

 

8,858

 

7,037

Automated production line, see note 11h

 

6,133

 

3,931

 

10,064

 

 

 

 

 

 

 

6,133

 

10,064

 

 

26,091

 

4,202

 

30,293

 

11,100

 

2,092

 

13,192

 

14,991

 

17,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Composition in 2013:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computers and communications equipment

 

338

 

47

 

385

 

303

 

28

 

331

 

35

 

54

Laboratory equipment

 

12,420

 

455

 

12,875

 

4,899

 

1,265

 

6,164

 

7,521

 

6,711

Office furniture and equipment

 

489

 

3

 

492

 

263

 

51

 

314

 

226

 

178

Leasehold improvements

 

6,174

 

 32

 

6,206

 

3,459

 

832

 

4,291

 

2,715

 

1,915

 

 

19,421

 

537

 

19,958

 

8,924

 

2,176

 

11,100

 

10,497

 

8,858

Automated production line, see note 11h

 

1,294

 

4,839

 

6,133

 

 

 

 

1,294

 

6,133

 

 

20,715

 

5,376

 

26,091

 

8,924

 

2,176

 

11,100

 

11,791

 

14,991

NOTE 9 — ACCOUNTS PAYABLE AND ACCRUALS - OTHER:

 

 

December 31

 

 

2013

 

2014

 

 

NIS in thousands

Expenses payabl e

 

1,577

 

1,363

Liability with respect to property, see note 11h

 

 

3,931

Salary and related expenses, including social security and other taxes

 

775

 

793

Accrual for vacation days and recreation pay for employees

 

363

 

363

Grants received in advance (see note 11d)

 

732

 

Other

 

153

 

53

 

 

3,600

 

6,503

The carrying amount of others accounts payables approximates their fair value, since effect of discounting is immaterial.

NOTE 10 — INVESTMENT AGREEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS:

a.     In August 2013, the Company signed an agreement with several investors, led by Gabriel Capital Management Ltd., in a total amount of US$5 million (“the Agreement”). According to the Agreement, the Company issued to the investors 320,663 ordinary shares with no par value and Warrants exercisable into 192,398 ordinary shares with no par value. These warrants are exercisable over a period of four years from the date of their issuance for an exercise price of NIS 64.14. Under the terms of these Warrants, the investors have the right to exercise them into shares through a net-settlement mechanism (“net settlement”).

F-20

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 10 — INVESTMENT AGREEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS: ( continued)

In addition, the Company undertook to issue Additional warrants exercisable into 80,166 ordinary shares with no par value, in the event in that, by September 30, 2014, the Company did not consummate an initial public offering of its ordinary shares on the NASDAQ Stock Market in which it raised at least US$12 million or a merger with a company traded on the NASDAQ Stock Market which immediately following the closure of such merger held free and unencumbered cash and/or publically raised, prior to September 30, 2014, a cumulative amount of at least US $12 million (“Dual Listing”). These Additional warrants were issued in November 2014 and are exercisable over a period of two years from the date of their issuance for an exercise price of NIS 64.14.

The investors are also entitled to anti-dilution protection until the occurrence of the earliest of one of the following events: (1) the Dual Listing, (2) consummation of a merger or acquisition event (“M&A Event”) or (3) four years from the signing date of the Agreement. During this period, in case of the occurrence of an M&A Event or new investment in the Company at a price per share that is lower than NIS 66.93 (the “Protection Threshold Price”), an investor will be entitled to an additional allotment of shares in accordance with a formula set forth in the Agreement, less the shares that were already issued following any previous anti-dilution right (“Downside Protection”). In the event of the activation of the Downside Protection mechanism, the exercise price of the Warrants which are still held by an investor will be reduced by the same calculation.

b.     The gross consideration in respect of the Agreement, which was recorded in 2013, amounted to approximately NIS 17.9 million. The issuance expenses amounted to approximately NIS 427 thousand.

Due to their terms, the Warrants do not qualify for equity classification and are treated as a derivative financial liability. Also the Anti-dilution rights and the Additional warrants are classified as derivative financial liabilities.

Out of the gross consideration in respect of the Agreement, amounts of NIS 4.6 million, NIS 4.4 million and NIS 1.2 million were allocated to the Warrants, the Anti-dilution and the Additional warrants, respectively, based on their fair value on the date of transaction. The remainder, at NIS 7.7 million, was allocated to ordinary shares and share premium. Issuance expenses of NIS 427 thousand were allocated both to the liability instruments and to the equity component, based on their relative fair values. Expenses allocated to the liability instruments, at NIS 234 thousand, were carried directly to the statement of comprehensive loss, and expenses in the amount of NIS 193 thousand allocated to the equity component were carried against share premium.

c.     As part of closing of the Agreement, 6,414 warrants were granted to third parties who assisted the Company with the investment process. These warrants have the same terms as the Warrants issued to the investors. The fair value of these warrants, amounting to NIS154 thousand at date of grant, was recorded as part of the issuance expenses as described above and were allocated to the Warrants.

d.     On October 22, 2014 the Company and the investors signed an Addendum to the Agreement (“the Addendum”) following the rights issuance that was completed on October 1, 2014 (see note 13b(6)). According to the Addendum 202,018 additional ordinary shares were issued in consideration of approximately NIS 101 thousand. Due to the additional ordinary shares issuance, Anti-dilution in the amount of NIS 6.5 million was settled to equity.

In addition, the exercise price of the Warrants which were issued to the investors, reduced from NIS 64.14 to NIS 35. Following the rights issuance, the conversion rate was adjusted so each warrant which was issued to the investors in 2013 is exercisable into 1.003 ordinary shares.

e.     In November 2014, the Company issued to the investors Additional warrants since the Company failed to fulfill the Dual Listing goal. These Warrants are exercisable until October 22, 2016 for an exercise price of NIS 35 which was reduced from NIS 64.14 following the rights issuance. Under the terms of the Warrants, the investors have the right to exercise them into shares through a net-settlement.

F-21

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 10 — INVESTMENT AGREEMENT AND DERIVATIVE FINANCIAL INSTRUMENTS: ( continued)

f.      These instruments are measured at fair value using standard valuation techniques for these types of instruments (Monte Carlo model) on the basis of the following inputs:

 

 

December 31

 

 

2013

 

2014

Observable Inputs :

 

 

 

 

Share price (NIS)

 

47.95

 

23.55

Exercise price (NIS)

 

64.14

 

35

Volatility

 

46.92%-49.46% 

 

48.7%-49.6% 

Risk free rate

 

0.89%-1.81% 

 

0.26%-0.67% 

Expected term (years)

 

0.75-3.75

 

0.75-2.75

Additional unobservable inputs for December 31, 2014:

Scenarios

 

Probability

Probability of occurrence of Qualifying Events only in 2015

 

15%-45.1% 

Probability of occurrence of Qualifying Events only in 2016

 

2.5% 

Probability of occurrence of Qualifying Events only in 2015 and 2016

 

2.4% 

Probability of occurrence of Qualifying Events in 2015 and 2017

 

1.8% 

Additional unobservable inputs for December 31, 2013:

Scenarios

 

Probability

Probability of occurrence of Qualifying Events only in 2014

 

5%-22.5% 

Probability of occurrence of Qualifying Events only in 2015

 

6% 

Probability of occurrence of Qualifying Events in 2014 and 2015

 

2.5%-17.5% 

Probability of occurrence of Qualifying Events in 2014, 2015 and 2016

 

0.9% 

Probability of occurrence of Qualifying Events in 2014, 2015 and 2017

 

0.9% 

NOTE 11 — COMMITMENTS AND CONTINGENT LIABILITIES:

a.        Joint venture and exclusive license agreement

In June 2000, the Company engaged in a joint venture and exclusive license agreement (“license agreement”) with Yissum Research and Development Company, owned by the Hebrew University of Jerusalem (“Yissum”). Under the license agreement, the Company has been granted a perpetual and exclusive license to develop, manufacture and market products globally, which are based directly or indirectly on a patent owned by Yissum and based on the intellectual property that has been created as a result of the research that has been conducted by Yissum and financed by the Company under the license agreement.

The Company is entitled to grant sub-licenses to third parties and said sub-licenses may be perpetual, and any sublicensee thereunder will not be required to assume any undertaking towards Yissum.

Under the license agreement, the Company committed to act for the future development of products that are based on Yissum’s patent and on the initial research activity that was undertaken under the license agreement (the “Products”). Several pending patents have resulted from the development work done by the Company, on its behalf or on behalf of the Company and Yissum jointly.

Further, the Company assumed in the license agreement all costs of submitting and managing patent applications, as well as maintaining pending and granted patents.

F-22

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 11 — COMMITMENTS AND CONTINGENT LIABILITIES: ( continued)

In accordance with an amendment to the license agreement dated July 13, 2005 (which reduced royalty rates), and in exchange for the license, the Company agreed to pay 3% royalties on its overall net income (as defined in the license agreement) from the sale of the Products, to Yissum from the time of the first commercial sale. Furthermore, the Company agreed to pay 15% royalties on sub-licenses on any payment or benefit whatsoever that the Company may receive from sub-licenses.

As of the date of approval of the financial statements, the Company has not yet begun to sell and has not yet granted sub-licenses to any party, and, accordingly, no obligation has yet to arise to pay royalties in accordance with the license agreement.

The parties are entitled to cancel the license agreement in the following cases: (a) the appointment of a liquidator or a receiver or the submission of an application for liquidation in relation to the other party, which is not cancelled within 180 days; (b) attachment proceedings, debt collecting agency proceedings and similar proceedings in connection with a significant portion of the other party’s assets; (c) the liquidation or bankruptcy of the other party; (d) a significant breach that is not repaired within 30 days from the time warning is given. If the license agreement is cancelled except in the case of its cancellation as a result of a breach by Yissum, the rights that were granted under the license will return to Yissum.

In accordance with the license agreement, the agreement will remain in force until the later of the expiry of the last patent that partially underlies the Products on a global basis or 15 years from the time of the first commercial sale under the license agreement.

In addition, as part of its development activities, the Company has engaged, from time to time, with Yissum in agreements for the provision of laboratory and research services for optimizing the technology that is being developed by the Company.

In January 2008, the Company engaged with Yissum in an agreement for the joint development of additional technology for the gastric retention of drugs. Among other things, pursuant to that agreement, intellectual property rights that may be created as a result of the joint research will be jointly owned and the Company will be granted a license to Yissum’s share of those rights, in consideration for royalties at the rates detailed above. It was also clarified that the rights in intellectual property that may be developed by the Company independently and without Yissum’s involvement, or that of employees of the Hebrew University, will belong entirely to the Company.

b.        Cooperation agreements

As part of its operations, the Company entered into feasibility agreements with multinational companies for the development of products that combine the Company’s proprietary Accordion Pill platform technology with certain drugs for the treatment of various indications. These agreements sometimes include a mutual possibility of entering into negotiations for the acquisition of a future license for the commercial use of the products that are being developed by the multinational companies under the feasibility agreements. In addition, the companies agreed to reimburse the Company for its expenses, based on milestones that are detailed in the feasibility agreements. This funding is recognized in the statement of comprehensive loss as a deduction from research and development expenses, as they are incurred.

c.        OCS grants program

In February 2014, in addition to previously approved programs, the Company received approval from the OCS for a participation in research and development activities performed by the Company (“Support Grant”) in the amount of NIS 6.3 million. In November 2014, the Company submitted to the OCS a change request for the 2014 program and, consequently, the Support Grant was reduced to NIS 4.7 million.

F-23

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 11 — COMMITMENTS AND CONTINGENT LIABILITIES: ( continued)

The Company is obligated to pay 3% to 4.5% royalties to the government of Israel, computed based on the revenues from licensing the products that the Company is developing that are assisted by the governmental grants. Such commitment is up to the amount of grants received by the Company, linked to the U.S. dollar. Pursuant to reporting and royalty payment procedures of the OCS, such royalties will be paid at an annual interest rate equal to LIBOR. The Company is subject to the provisions of the Israeli Law for the Encouragement of Industrial Research and Development and related regulations (the “Encouragement Regulations”). Pursuant to the Encouragement Regulations there are restrictions regarding intellectual property and manufacturing, as defined in the Encouragement Regulations, outside of Israel, unless approval is received and additional payments are made to the OCS.

Since management’s assessment is that it is reasonably assured that the Company will comply with the conditions for the forgiveness of the OCS loan, this loan is treated as a government grant and, accordingly, no liability has been recognized in the financial statements.

In 2014 and 2013, the participation in research and development expenses, amounts to approximately NIS 4.6 million and NIS 3.5 million, respectively.

In January 2015, in addition to previously approved programs, the Company submitted to the OCS a program of research and development activities as of January 1, 2015 to December 31, 2015. As of the date of approval of the financial statements, the Company has not yet received approval from the OCS for this program.

d.        Michael J. Fox Foundation

In April 2013, the Company received approval for a grant of approximately US$ 705 thousand from the Michael J. Fox Foundation for Parkinson’s Research (the “Foundation”). Pursuant to the approval, the Company agreed that the grant would be used by the Company for the purposes of financing a safety study in animals only (the “Study”), and that the grant would be given to the Company by the Foundation in three installments, and subject to the Company’s compliance with various milestones relating to its progress in the Study (the “Milestones”).

The parties further agreed that the Company is required to complete the Study within the period of time defined in the agreement (the “Grant Period”). The full grant had been received by December 31, 2013 and the Study ended in March 2014.

e.        Operating long-term leases

The Company is a tenant under a lease agreement in respect of offices and operational spaces until December 31, 2015. Rent payments are linked to the CPI.

The lease payments amounted in 2014 to approximately NIS 1.7 million.

The forecast lease payments for 2015 are approximately NIS 1.7 million.

To secure the Company’s obligations to the lease agreement, the Company has granted a bank guarantee to the lessor, which amounted to approximately NIS 209 thousand as of December 31, 2014.

f.         Insurance and indemnification for directors and executive officers

The Company has taken out an insurance policy for directors and executive officers, for a period ending on February 1, 2016. In accordance with the terms of the insurance program, the liability limit on claims per event and per period is $ 7.5 million (approximately NIS 29 million) with an additional 20% above the amount of the claim for legal expenses in Israel.

F-24

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 11 — COMMITMENTS AND CONTINGENT LIABILITIES: ( continued)

In addition, in letters of indemnity that the Company has extended to directors and executive officers, the Company has undertaken to indemnify each officer for a liability or expense that may be imposed upon them as a result of an act they may perform in their capacity as officers, subject to certain conditions. It has been determined that the amount of the indemnification that the Company will be required to provide to all of its executive officers, may not exceed 25% of the Company’s equity.

g.        A lawsuit

On March 31, 2011, the Company received a statement of claim from a former related party, for an allocation of approximately 50,909 of the Company’s ordinary shares.

The lawsuit was in respect of a performance target relating to a share-based compensation transaction with the plaintiff. The Company has recorded expenses in its 2006 financial statements (the year in which the service was rendered) with respect to the share-based compensation.

On September 8, 2013, the Israeli District Court ruled in favor of the plaintiff and ordered the Company to allocate to the plaintiff ordinary shares constituting approximately 0.89% of the Company’s share capital at full dilution.

The Company filed an appeal to the Israeli Supreme Court and concurrently issued the shares to the plaintiff on April 22, 2014.

To secure the Company’s obligations that may arise as part of the appeal proceedings, the Company has granted a bank guarantee to the plaintiff, which as of December 31, 2014 amounted to approximately NIS 50 thousand.

h.        Automated Production Line

On August 30, 2011, the Company entered into an agreement with an international manufacturer for ordering an automated production line for Accordion Pills. The order covers engineering design and planning, and amounted to approximately NIS 1.3 million. In May 2013, the Company entered into a follow on order to manufacture and assemble the automated production line. In addition, due to adjustments to the automated production line made by the Company, additional costs were added. As of December 31, 2014 the Company had transferred payments of approximately NIS 6.1 million and recognized a liability for an additional amount of approximately NIS 3.9 million. The Company expects to incur additional costs of approximately NIS 1.0 million until the operation of the automated production line. In February 2015 the Company transferred additional payment of approximately NIS 2.1 million. In accordance with the provisions of the agreement, the Company may terminate the engagement with the international manufacturer at any time, and it that case, it will bear the costs accumulated until the termination date.

i.         Employment agreements

1)     See note 19a(1) in respect of the employment agreement with the Chairman of the Board of Directors.

2)     See notes 19a(2) and 19a(3) in respect of the employment agreements with the Company’s Chief Executive Officer (“CEO”) and Company’s former Co-Chief Executive Officer (“former Co-CEO”).

j.         Indemnification from insurance company

In 2014, the Company received indemnification from an insurance company for damage caused to the Company’s offices and operational spaces in 2013, in the amount of NIS 887 thousand.

F-25

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 12 — TAXES ON INCOME:

a.        Corporate taxation in Israel:

1)     Measurement of results for tax purposes

The results of the Company are measured for tax purposes in accordance with Generally Accepted Accounting Principles in Israel (“Israeli GAAP”). These financial statements are prepared in accordance with IFRS. The difference between IFRS and Israeli GAAP, both on an annual and a cumulative basis, causes a difference between taxable results and the results reflected in these financial statements.

2)     Tax rates

The income of the Company is subject to corporate tax. The Israeli corporate tax rates for 2014 and 2013 were 26.5% and 25%, respectively.

On August 5, 2013, the Law of Change of National Priorities (Legislative Amendments for Achieving Budget Objectives for the Years 2013 and 2014), was published, which raised the corporate tax rate to a rate of 26.5% for the year 2014 and thereafter.

In the absence of the expectation of taxable income in the future, no deferred tax asset is recorded in the financial statements.

Capital gains are taxed at the standard corporate tax rate.

b.        Tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Law”)

Under the Law, the Company may be entitled to tax benefits, by virtue of its status as a “Benefited Enterprise”, which was awarded to the Company in October 2007.

The Company received the status of a “plant under establishment” in Development Area A in a tax-exempt track, subject to compliance with the applicable requirements by the Law.

As of December 31, 2014, the Company has not yet generated operating income that will allow it to benefit from the tax benefits under the Law.

The tax benefits under the Law will apply for a period of up to ten years from the first year in which taxable income will be generated and are scheduled to expire at the end of 2023.

c.        Tax loss carryforwards

As of December 31, 2014 and 2013, the tax loss carryforwards of the Company were approximately NIS 160 million and NIS 144 million, respectively.

The Company has not created deferred tax assets in respect of these tax loss carryforwards since their utilization is not expected in the foreseeable future. There is no expiration date on these loss carry forwards.

d.        Tax assessments

Final tax assessments have been received by the Company through the year ended December 31, 2010.

e.        Value-added tax (VAT)

The Company is registered as an authorized business for VAT purposes.

F-26

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY:

a.        Share capital:

1)     Composition

Share capital is composed of ordinary shares with no par value, as follows:

 

 

Number of ordinary shares December 31

 

 

2013

 

2014

Authorized share capital

 

8,000,000

 

8,000,000

Issued and paid up share capital

 

4,555,531

 

5,400,467

2)     The ordinary shares confer upon their holders participating and voting rights in shareholders meetings (where the holder of an ordinary share has one vote), a right to receive a share of earnings and the right to receive assets of the Company upon its liquidation.

b.        Changes in share capital:

1)     In February 2010, the Company issued 783,969 ordinary shares and 313,588 unlinked warrants (Series 1) to the public in Israel.

Each warrant (Series 1) was exercisable into one ordinary share at an exercise price of NIS 60 (unlinked).

Issuance proceeds, net of issuance costs, amounted to approximately NIS 32 million.

The warrants were exercisable until February 9, 2014 and all expired on that date.

2)     On October 21, 2010, the Company entered into agreements for a private placement with two institutional investors, in accordance with which the Company allocated the offerees a total of 311,021 ordinary shares and 103,674 non-tradable and unlinked warrants (at a ratio of three shares to one warrant). Each warrant was exercisable into one ordinary share, each for an exercise price of NIS 69 (unlinked). Issuance proceeds, net of issuance costs, amounted to approximately NIS 14.6 million

The warrants were exercisable until October 21, 2014 and all expired on that date.

3)     On May 4, 2011, the Company issued a shelf prospectus on the Tel Aviv Stock Exchange (“TASE”) for the issue of 4,000,000 ordinary shares, registered in the holder’s name, and up to 4,000,000 warrants (Series 1), registered in the holder’s name, which will be offered by way of the expansion of the series of warrants (Series 1), that was initially issued in February 2010 (“Warrant (Series 1)”).

Each Warrant (Series 1) can be exercised into one ordinary share and up to five series of warrants (Series 2 to 6), each of which may include no more than 4,000,000 warrants, registered in the holder’s name, which are exercisable such that each warrant from each of the series 2 to 6 will be exercisable into one ordinary share.

The following are the rights issued based on this shelf prospectus-

In May 2012, the Company issued 287,593 ordinary shares and 143,796 unlinked warrants (Series 3) through a rights issuance. Each warrant (Series 3) was exercisable into one ordinary share, each for an exercise price of NIS 60 (unlinked). The shares and warrants were offered through a rights issuance to the Company’s shareholders at the beginning of the trading day on the TASE on May 13, 2012, such that each

F-27

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY: ( continued)

shareholder who held 22 ordinary shares was entitled to two ordinary shares and 1 warrant (Series 3) for an overall price of NIS 90. Issuance proceeds, net of issuance costs, amounted to NIS 12.6 million.

Until May 30, 2013, 4,181 warrants (Series 3) were exercised to purchase 4,181 ordinary shares for consideration of approximately NIS 251 thousand. The remaining 139,615 unexercised warrants (Series 3) expired on May 30, 2013.

4)     On February 13, 2013, the Company entered into agreements for a private placement with two institutional investors, in accordance with which the Company allocated the offerees an overall quantity of 231,000 ordinary shares and 92,400 non-tradable and unlinked warrants (at a ratio of 2.5 shares to one warrant), Each warrant was exercisable into one ordinary share, each for an exercise price of NIS 80 (unlinked). Issuance proceeds amounted to approximately NIS 15 million. In respect of this issuance, there were no issuance costs.

The warrants were exercisable until February 13, 2015 and all expired on that date.

5)     Based on the investment agreement signed on August 6, 2013 and the Addendum to the investment agreement signed on October 22, 2014, the Company issued to several investors during 2013, 320,663 ordinary shares and 198,812 warrants and, in November 2014, 202,018 ordinary shares and 80,166 warrants. For more details, see note 10.

6)     On May 27, 2014, the Company issued on the TASE a shelf prospectus for the issue of 4,000,000 ordinary shares and of up to 10 series of warrants (Series 7 to 16 ), each of which may include no more than 4,000,000 warrants, which are exercisable such that each warrant from each of the series 7 to 16 will be exercisable into one ordinary share. The following are the rights issued based on this shelf prospectus-

On October 1, 2014, the Company issued 577,795 ordinary shares and 577,795 unlinked warrants (Series 7) through a rights issuance. Each warrant (Series 7) is exercisable into one ordinary share, each for an exercise price of NIS 35 (unlinked). The warrants will expire on April 23, 2015.

The shares and warrants were offered through a rights issuance to the Company’s shareholders at the trading day on the TASE on September 15, 2014, such that each shareholder holding 15 ordinary shares was entitled to two ordinary shares and two warrants (Series 7) for an overall price of NIS 60.

Issuance proceeds, net of issuance costs, amounted to NIS 16.6 million.

As of December 31, 2014 none of the warrants were exercised.

c.        Share-based payment to employees and service providers:

1)     On March 28, 2012, the Board of Directors approved a grant of 10,000 options to Company employees, where each option will be exercisable into one ordinary share, each for an exercise price of NIS 51. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the employees’ continued employment with the Company at the time that each tranche vests. The options will expire six years after the date of grant. The value of the benefit in respect of said options, as calculated on the grant date, is approximately NIS 290 thousand. See note 13c(12)(a) regarding the assumptions in respect of this calculation.

2)     In May 2012, the CEO was granted 40,000 options. Each option will be exercisable into one ordinary share. For details relating to the primary terms of these options, see note 19a(2).

F-28

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY: ( continued)

3)     On May 26, 2013, the Board of Directors approved a grant of 15,000 options to Company employees, where each option will be exercisable into one ordinary share, each for an exercise price of NIS 60.42. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the employees’ continued employment with the Company at the time that each tranche vests. The options will expire six years after the date of grant. The value of the benefit in respect of said options, as calculated on the grant date, is approximately NIS 530 thousand. See note 13c(12)(c) regarding the assumptions in respect of this calculation.

4)     In August 2013, the Company’s officers were granted options. Each option will be exercisable into one ordinary share. See section 5 and section 6 of this note 13 below for options granted to the VP R&D and Operations and the Company’s former Chief Financial Officer (“former CFO”) respectively. See note 19 regarding the options granted to the Chairman of the Company’s Board of Directors, CEO and former Co-CEO.

5)     On October 21, 2013, the Company’s general meeting approved, further to a resolution adopted by the Board of Directors on August 26, 2013 and the recommendation of the compensation committee on August 21, 2013, the amendment to the employment agreement with the Company’s Vice President R&D and Operations. As part of the updates, the Company’s Vice President R&D and Operations was granted options to purchase 57,200 ordinary shares, each for an exercise price of NIS 56.35. These options will be exercisable only in the event that a material agreement, as defined in his agreement, is signed between the Company and a third party, and subject to his continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit of these options is approximately NIS 2 million and will be recognized in the financial statements of the Company only if a material agreement is signed. In addition, the Company’s Vice President R&D and Operations was granted options to purchase 10,000 ordinary shares, each for an exercise price of NIS 56.35.

These options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half of the options vesting in eight equal quarterly tranches subsequent to the two-year period from the grant date, subject to his continued employment at the time that each tranche vests. The value of the benefit of those options, as calculated at the date of grant, is approximately NIS 300 thousand. See note 13c(12)(f) regarding the assumptions in respect of this calculation.

6)     On October 21, 2013, the Company’s general meeting approved, further to a resolution adopted by the Board of Directors on August 26, 2013 and recommendation of the compensation committee on August 21, 2013, the amendment to the employment agreement with the Company’s financial manager, who served as CFO until December 31, 2014. As part of the updates to the agreement the Company’s former CFO will be granted options to purchase 35,000 ordinary shares, each for an exercise price of NIS 56.35. These options will be exercisable only in the event that a material agreement, as defined in his agreement, is signed between the Company and a third party, subject to his continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit of those options is approximately NIS 1.25 million and will be recognized in the financial statements of the Company only if a material agreement is signed. In addition, the Company’s former CFO was granted options to purchase 15,000 ordinary shares, each for an exercise price of NIS 56.35. These options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date

F-29

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY: ( continued)

of grant, and the second half of the options will vest in eight equal quarterly tranches subsequent to the two-year period from the grant date, subject to his continued employment at the time that each tranche vests. The value of the benefit of these options, as calculated at the date of grant, is approximately NIS 500 thousand. See note 13c(12)(f) regarding the assumptions in respect of this calculation.

7)     See note 11g regarding the issuance of shares to former related party in April 2014.

8)     On August 28, 2014, the Board of Directors approved a grant of 10,000 options to Company employees, where each option will be exercisable into one ordinary share, each for an exercise price of NIS 39.55. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the employees’ continued employment with the Company at the time that each tranche vests. The options will expire six years after the date of grant. The value of the benefit in respect of the said options, as calculated at the date of grant, is approximately NIS 175 thousand. See note 13c(12)(g) regarding the assumptions in respect of this calculation.

9)     On August 28, 2014, the Board of Directors approved, further to a recommendation of the Compensation Committee, a grant of 24,000 options to the Company’s VP Business Development and Clinical Affairs, where each option will be exercisable into one ordinary share, each for an exercise price of NIS 39.55. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the employees’ continued employment with the Company at the time that each tranche vests. The options will expire six years after the date of grant. The value of the benefit in respect of the said options, as calculated at the date of grant, is approximately NIS 400 thousand. In addition, the Company’s VP Business Development and Clinical Affairs will be granted options to purchase 36,000 ordinary shares, each for an exercise price of NIS 39.55. These options will be exercisable only in the event that a material agreement, as defined in the Company’s compensation policy, is signed between the Company and a third party, subject to her continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit of those options is approximately NIS 620 thousand and will be recognized in the financial statements of the Company only if a material agreement is signed. See note 13c(12)(g) regarding the assumptions in respect of this calculation.

10)   On October 6, 2014, the Board of Directors approved a grant of 61,200 options to Company employees, where each option will be exercisable into one ordinary share, each for an exercise price of NIS 32.47. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the employees’ continued employment with the Company at the time that each tranche vests. The options will expire six years after the date of grant. The value of the benefit in respect of the said options, as calculated at the date of grant, is approximately NIS 810 thousand. See note 13c(12)(h) regarding the assumptions in respect of this calculation.

11)   See note 20a regarding the options granted to the CFO.

F-30

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY: ( continued)

12)   Grants of options

The fair value of the options at the date of grant was calculated on the basis of the Black-Scholes model. The assumptions used in calculating the fair value of the options granted are as follows:

Date of grant

 

The Company’s ordinary share price

 

Expected annual volatility*

 

Risk-free interest rate**

 

Expected life to exercise

 

 

NIS

 

%

 

%

 

In years

(a) March 2012

 

45.5

 

69.70

 

4

 

6

(b) May 2012

 

42.5

 

67.85

 

3.9

 

6

(c) May 2013

 

57

 

68

 

3

 

6

(d) August 2013

 

60

 

45.07

 

1.9

 

3

(e) August 2013

 

60

 

51.61

 

2.6

 

4.5

(f) August 2013

 

60

 

59.95

 

3.2

 

6

(g) August 2014

 

38.5

 

46.24

 

1.9

 

6

(h) October 2014

 

30

 

46.64

 

1.9

 

6

____________

*       Until the end of third quarter 2013 the Company’s expected volatility was derived from an average of historical volatilities of certain companies that are similar to the Company (same market cap, clinical stage, etc.). In the following periods the Company used its volatility in the calculation of expected volatility.

**      The risk-free interest rate was determined on the basis of the yield rates to maturity of unlinked government bonds bearing a fixed interest rate, whose maturity dates correspond to the expected exercise dates of the options.

13)   The following table contains additional information concerning options granted to employees and service providers:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

Number of options

(a) Options with an exercise price of NIS 0.5:

 

 

 

 

 

 

Outstanding at beginning of year

 

145,565

 

 

140,195

 

Granted

 

 

 

 

Exercised

 

(5,370

)

 

(2,244

)

Forfeited

 

 

 

 

Expired

 

 

 

 

Outstanding at end of year

 

140,195

 

 

137,951

 

Exercisable at end of year

 

11,800

 

 

9,557

 

Weighted average remaining contractual life (years)

 

2.5

 

 

2.15

 

 

 

 

 

 

 

 

(b) Options with an exercise price of NIS 32.47 – NIS 81.1:

 

 

 

 

 

 

Outstanding at beginning of year

 

327,586

 

 

519,740

 

Granted

 

207,200

 

 

131,200

 

Exercised

 

(9,872

)

 

(11,970

)

Forfeited

 

(5,174

)

 

(8,881

)

Expired

 

 

 

 

Outstanding at end of year

 

519,740

 

 

630,089

 

Exercisable at end of year

 

223,334

 

 

257,714

 

Weighted average remaining contractual life (years)

 

2.5

 

 

2.41

 

F-31

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 13 — EQUITY: ( continued)

Each option that is exercisable affords the right to acquire one ordinary share of the Company.

The options granted to the Company’s employees are governed by principles of section 102 of the Israeli Income Tax Ordinance. Under the tax classification elected by the Company and in accordance with those principles, the Company is not entitled to deduct the share- based payment as a salary expense in the Company’s accounting records.

NOTE 14 — RESEARCH AND DEVELOPMENT EXPENSES:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands

Payroll and related expense s

 

6,530

 

7,505

Materials and subcontractors

 

1,013

 

1,707

Professional services

 

2,246

 

1,674

Research and clinical trials

 

2,356

 

1,597

Rent and maintenance

 

2,460

 

2,329

Depreciation

 

2,097

 

2,021

Share-based compensation

 

359

 

384

Overseas travel and others

 

349

 

523

 

 

17,410

 

17,740

NOTE 15 — GENERAL AND ADMINISTRATIVE EXPENSES:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands

Payroll and related expenses

 

2,778

 

2,826

Rent and maintenance

 

665

 

736

Professional services

 

3,990

 

4,165

Overseas travel and trade shows

 

151

 

89

Depreciatio n

 

79

 

71

Share-based compensation

 

1,470

 

823

Others

 

500

 

622

 

 

9,633

 

9,332

F-32

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 16 — FINANCIAL INCOME (EXPENSES):

Financial income:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands

Income from interest on cash equivalents

 

402

 

 

617

Changes in fair value of derivative financial instruments, see note 10

 

32

 

 

 

Gain on changes in exchange rates

 

 

 

 

519

 

 

434

 

 

1,136

Financial expenses:

 

 

 

 

 

 

 

 

 

 

 

Bank fees

 

85

 

 

83

Changes in fair value of derivative financial instruments, see note 10

 

 

 

 

729

Loss on changes in exchange rates

 

239

 

 

 

Transaction costs for investment agreement, see note 10

 

324

 

 

 

 

 

648

 

 

812

Total financial income (expenses), net

 

(214

)

 

324

NOTE 17 — LOSS PER SHARE

The basic loss per share is computed by dividing the Company’s loss attributable to the holders of shares by the weighted average number of ordinary shares outstanding during the period.

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands (except per share amounts)

Loss per year as reported in the statements of comprehensive loss

 

18,390

 

 

20,368

 

Weighted average of ordinary shares outstanding during the period

 

4,322

 

 

4,825

 

Basic and diluted loss per share

 

(4.25

)

 

(4.22

)

The basic loss per share does not include 828,040 and 659,935 options granted to employees and service providers for the years ended December 31, 2014 and 2013, respectively, 313,588 warrants (Series 1), which were issued in 2010 and expired in 2014, 577,795 warrants (Series 7), which were issued in 2014, 103,674 warrants, which were issued to institutional investors in 2010 and expired in 2014, 92,400 warrants, which were issued to institutional investors in 2013 and 198,812 and 80,166 warrants, which were issued to several investors in 2013 and in 2014, respectively, as part of an investment agreement, because the effect of their inclusion in the calculation would be anti-dilutive.

NOTE 18 — EXPENSES RELATING TO EMPLOYEE BENEFITS:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands

Payroll and other benefits

 

8,734

 

9,667

Social security

 

405

 

456

Share-based compensation

 

1,707

 

1,207

Post-employment benefits –defined contribution plan

 

910

 

1,038

 

 

11,756

 

12,368

Average number of employees to which these benefits are related

 

41

 

43

F-33

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 19 — TRANSACTIONS AND BALANCES WITH RELATED PARTIES

“Related party” – has the meaning set forth in IAS 24R (2009).

The Company’s key management personnel (who are included, together with other persons, within the definition of “related parties” as defined in IAS 24R) include the members of the Board of Directors, the CEO and the former Co-CEO.

a.        Transactions with related parties:

 

 

Year ended December 31

 

 

2013

 

2014

 

 

NIS in thousands

Key management compensation expenses:

 

 

 

 

Salaries and short-term employee benefits

 

2,312

 

2,239

Long term employment benefits

 

169

 

165

Employee share-based compensation expenses

 

1,359

 

605

 

 

3,840

 

3,009

1)     Employment agreement with the Chairman of the Board (the “Chairman”)

On October 21, 2013, the Company’s general meeting approved, further to a resolution adopted by the Board of Directors on August 26, 2013 and recommendation of the compensation committee on August 21, 2013, the amendment to the employment agreement with the Chairman.

The following are the main updates to the agreement:

a)     Continued service in that position for an additional three years beginning on the date of the approval of the agreement by the general meeting.

b)     The Chairman was granted options to purchase 26,000 ordinary shares, each for an exercise price of NIS 56.35. 6,000 options were fully vested immediately following the approval of the general meeting and 20,000 options will vest in three equal annual tranches over a three-year period, subject to his continued employment at the time that each tranche vests. These options will expire after six years from the grant date. The value of the benefit of these options, as calculated at the date of grant, is approximately NIS 500 thousand. See note 13c(12)(d) regarding the assumptions in respect of this calculation.

c)     The Chairman was granted options to purchase 14,000 ordinary shares, each for an exercise price of NIS 56.35. These options will be exercisable only in the event that a material agreement, as defined in the employment agreement, is signed between the Company and a third party, during the course of the period of the employment agreement or within 18 months from the termination of employment. These options will expire after six years from the grant date.

The value of the benefit of those options, as calculated at the date of grant, is approximately NIS 200 thousand. In addition, options to purchase 35,463 ordinary shares at an exercise price of NIS 0.5 and options to purchase 41,654 ordinary shares at an exercise price of NIS 81.1 were granted under previous amendments of his employment agreement from October 2009 and May 2011, respectively, and will be exercisable only if a material agreement is signed between the Company and a third party, during the course of the period of the employment agreement or within 18 months from the termination of the employment. The value of the benefit of the extension period, as calculated at the date of change, is approximately NIS 300 thousand. See note 13c(12)(e) regarding the assumptions in respect of this calculation.

F-34

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 19 — TRANSACTIONS AND BALANCES WITH RELATED PARTIES ( continued)

d)     The Company and the Chairman will be entitled to terminate the engagement between them upon six months prior written notice.

In addition, on May 2011 the Chairman was granted options to purchase 20,827 ordinary shares at an exercise price of NIS 81.1. These options will expire after six years from grant date.

As of the date of approval of these financial statements these options had vested but were not yet exercised.

2)     Employment agreement with CEO

On October 21, 2013, the Company’s general meeting approved, further to a resolution adopted by the Board of Directors on August 26, 2013 and recommendation of the compensation committee on August 21, 2013, the amendment to the employment agreement with the CEO Mr. Zeev Weiss, who was appointed as Co-CEO by the Board of Directors on November 7, 2013 and who was appointed as CEO by the Board of Directors on October 7, 2014 after the former Co-CEO, Mr. Giora Carni, stepped down.

The following are the main updates to the agreement:

a)     A grant of up to $300 thousand, to which the CEO was entitled subject to the signing of a material agreement as defined in the employment agreement, will be cancelled.

b)     The CEO was granted options to purchase 15,000 ordinary shares with an exercise price of NIS 56.35. These options will be exercisable only in the event that a material agreement, as defined within his employment agreement, is signed between the Company and a third party, subject to his continued employment in the Company. These options will expire after six years from grant date. The value of the benefit in those options as calculated at the date of grant is approximately NIS 500 thousand and will be recognized in the financial statements of the Company only if the material agreement is signed.

c)     The Company and the CEO will be entitled to terminate the engagement after six months’ prior written notice.

On June 9, 2009, the CEO was granted options to purchase 42,023 ordinary shares at an exercise price of NIS 0.5. These options are exercisable only in the event that a material agreement, as defined within his employment agreement, is signed between the Company and a third party. These options will expire after six years from the date of grant.

In addition, on May 2012, the CEO was granted options to purchase 40,000 ordinary shares at an exercise price of NIS 47.6. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half of the options vesting in eight equal quarterly tranches subsequent to the two-year period from the grant date, subject to his continued employment at the time that each tranche vests. These options will expire after six years from the date of grant. The value of the benefit in these options, as calculated at the date of grant, is approximately NIS 1.1 million. See note 13c(12)(b) regarding the assumptions in respect of this calculation.

3)     Employment agreement with the former Co-CEO

On October 21, 2013, the Company’s general meeting approved, further to a resolution adopted by the Board of Directors on August 26, 2013 and recommendation of the Compensation Committee on August 21, 2013, the amendment to the employment agreement with the Company’s former Co-CEO, Mr. Giora Carni, who was appointed as Co-CEO on November 7, 2013, and who ceased to be Co-CEO and a related party on October 7, 2014.

F-35

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 19 — TRANSACTIONS AND BALANCES WITH RELATED PARTIES ( continued)

The following are the main updates to the agreement:

a)     The former Co-CEO was granted options to purchase 20,000 ordinary shares at an exercise price of NIS 56.35. These options will be exercisable only in the event that a material agreement, as defined in his agreement, is signed between the Company and a third party, subject to his continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit of those options is approximately NIS 700 thousand and will be recognized in the financial statements of the Company only if a material agreement is signed.

b)     Options to purchase 50,909 ordinary shares with an exercise price of NIS 0.5 were granted under the employment agreement dated September 2008. Such options will be exercisable only if a material agreement is signed between the Company and a third party, during the course of the period of the employment agreement.

In addition, in August 2010, the former Co-CEO was granted options to purchase 80,631 ordinary shares at an exercise price of NIS 47.6. As of the date of approval of the financial statements, these options were vested but were not yet exercised.

4)     On June 27, 2010, at a general meeting of the Company’s shareholders, further to a decision by the Company’s Audit Committee and its Board of Directors, the Company’s shareholders approved the grant of 10,751 options to each of the three executive members of the Company’s Board of Directors and to the two external directors. Each option will be exercisable into one ordinary share at an exercise price of NIS 48.91. These options will expire after ten years from the date of grant. As of the date of approval of the financial statement all these options were vested. On March 2014, one of the directors, who ceased to serve as a director in January 2014, exercised 10,751 options that were granted to him in 2010 into 10,751 ordinary shares and 904 options that were granted to him in 2006 into 904 ordinary shares for consideration of approximately NIS 526 thousand.

b.        Balances with related parties:

 

 

December 31

 

 

2013

 

2014

 

 

NIS in thousands

Statement of financial position items -

 

 

 

 

current liabilities - Accounts payable and accruals - other

 

240

 

181

NOTE 20 — EVENTS SUBSEQUENT TO DECEMBER 31, 2014

a.        On December 31, 2014, the Board of Directors approved, further to a recommendation of the compensation committee, effective January 1, 2015, the appointment of the Company’s Chief Financial Officer (“CFO”). As part of his employment agreement, a grant of 20,000 options was approved. Each option will be exercisable into one ordinary share, each for an exercise price of NIS 27.93. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the two-year period from the grant date, subject to the CFO’s continued employment with the Company at the time that each tranche vests. These options will expire after six years from the date of grant. The value of the benefit in respect of the said options, as calculated at the date of grant, is approximately NIS 200 thousand. In addition, a grant of 40,000 options was approved of which 12,000 options to purchase 12,000 ordinary shares, each for an exercise price of NIS 27.93. These options will be exercisable only in the event that a material agreement, as defined in the Company’s compensation policy, is signed between the Company and a third party, subject to his continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit

F-36

INTEC PHARMA LTD.

NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE 20 — EVENTS SUBSEQUENT TO DECEMBER 31, 2014 ( continued)

of those options is approximately NIS 120 thousand and will be recognized in the financial statements of the Company only if a material agreement is signed. 28,000 options to purchase 28,000 ordinary shares will be exercisable upon completion of an issuance of the Company’s shares in a foreign stock exchange, subject to his continued employment with the Company. If within 18 months from the date of the grant, the Company has not complete the issuance of the Company’s shares in a foreign stock exchange, but has signed a material agreement, 8,000 options from the 28,000 options will vest, in addition to 12,000 options as described above. The exercise price of these options will be NIS 27.93, and in the event that a material agreement has been signed, the higher of NIS 27.93 and the average of the share price for the 30 trading days after the signing of a material agreement. These options will expire after six years from the date of grant.

The value of the benefit of those options is up to approximately NIS 280 thousand and will be recognized in the financial statements of the Company, in accordance with the achievement of the targets as described above.

b.        As of the date of the approval of the financial statements, options to purchase 344 ordinary shares granted to employees were forfeited.

c.        On March 29, 2015, the Company executed a 50-to-1 reverse share split of the Company’s ordinary shares and eliminated their par value. Upon the effectiveness of the reverse share split, (i) the number of ordinary shares was proportionally decreased and their par value was eliminated, (ii) the number of ordinary shares into which each outstanding option and outstanding warrant to purchase ordinary shares is exercisable was proportionally decreased, and (iii) the exercise price of each outstanding option and outstanding warrant to purchase ordinary shares was proportionally increased. Unless otherwise indicated, all of the shares numbers, the options and warrants numbers, loss per share amounts, share prices, warrant exercise prices and option exercise prices in these financial statements have been adjusted, on a retroactive basis, to reflect this 50-to-1 reverse share split.

F-37

INTEC PHARMA LTD.

CONDENSED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

MARCH 31, 2015

TABLE OF CONTENTS

 

 

Page

CONDENSED UNAUDITED FINANCIAL STATEMENTS - IN NIS:

 

 

Statements of Financial Position

 

F-39

Statements of Comprehensive Loss

 

F-40

Statements of Changes in Equity

 

F-41

Statements of Cash Flows

 

F-42 - F-43

Notes to the Condensed interim Financial Statements

 

F-44 - F-48

F-38

INTEC PHARMA LTD.

CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited)

 

 

 

 

 

 

Convenience translation into USD (note 1b)

 

 

December 31,
2014

 

March 31,
2015

 

March 31,
2015

 

 

NIS in thousands

 

In thousands

Assets

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

22,287

 

 

12,674

 

 

3,184

 

Financial assets at fair value through profit or loss

 

7,820

 

 

8,038

 

 

2,020

 

Restricted bank deposits

 

292

 

 

287

 

 

72

 

Other receivables

 

1,120

 

 

1,550

 

 

389

 

 

 

31,519

 

 

22,549

 

 

5,665

 

NON-CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

Property and equipment

 

17,101

 

 

17,002

 

 

4,272

 

TOTAL ASSETS

 

48,620

 

 

39,551

 

 

9,937

 

 

 

 

 

 

 

 

 

 

 

 Liabilities and equity

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Accounts payable and accruals:

 

 

 

 

 

 

 

 

 

Trade

 

716

 

 

991

 

 

249

 

Other

 

6,503

 

 

4,614

 

 

1,159

 

 

 

7,219

 

 

5,605

 

 

1,408

 

NON-CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

4,528

 

 

4,227

 

 

1,062

 

COMMITMENTS AND CONTINGENT LIABILITIES

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

11,747

 

 

9,832

 

 

2,470

 

 

 

 

 

 

 

 

 

 

 

EQUITY :

 

 

 

 

 

 

 

 

 

Ordinary shares

 

2,701

 

 

2,701

 

 

679

 

Share premium

 

198,566

 

 

199,904

 

 

50,227

 

Warrants

 

2,249

 

 

911

 

 

229

 

Accumulated deficit

 

(166,643

)

 

(173,797

)

 

(43,668

)

TOTAL EQUITY

 

36,873

 

 

29,719

 

 

7,467

 

TOTAL LIABILITIES AND EQUITY

 

48,620

 

 

39,551

 

 

9,937

 

The accompanying notes are an integral part of these condensed financial statements.

F-39

INTEC PHARMA LTD.

CONDENSED INTERIM STATEMENT OF COMPREHENSIVE LOSS

(Unaudited)

 

 

 

 

 

 

Convenience translation into USD (note 1b)

 

 

Three months ended March 31

 

Three months ended M arch 3 1, 2015

 

 

2014

 

2015

 

 

NIS in thousands

 

In thousands

RESEARCH AND DEVELOPMENT EXPENSES

 

(5,149

)

 

(5,593

)

 

(1,405

)

LESS – PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES

 

1,707

 

 

135

 

 

34

 

RESEARCH AND DEVELOPMENT EXPENSES, net

 

(3,442

)

 

(5,458

)

 

(1,371

)

GENERAL AND ADMINISTRATIVE EXPENSES

 

(2,124

)

 

(2,412

)

 

(606

)

OTHER GAINS, net

 

275

 

 

91

 

 

22

 

OPERATING LOSS

 

(5,291

)

 

(7,779

)

 

(1,955

)

FINANCIAL INCOME

 

482

 

 

596

 

 

150

 

FINANCIAL EXPENSES

 

(28

)

 

(336

)

 

(84

)

FINANCIAL INCOME, net

 

454

 

 

260

 

 

66

 

LOSS AND COMPREHENSIVE LOSS

 

(4,837

)

 

(7,519

)

 

(1,889

)

 

 

 

NIS

 

USD

BASIC AND DILUTED LOSS PER ORDINARY SHARE

 

1.05

 

1.39

 

0.35

The accompanying notes are an integral part of these condensed financial statements.

F-40

INTEC PHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

 

Ordinary
shares

 

Share
premium

 

Warrants

 

Accumulated
deficit

 

Total

 

 

NIS in thousands

BALANCE AT JANUARY 1, 2014

 

2,278

 

168,459

 

8,753

 

 

(147,227

)

 

32,263

 

CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options by employees and service providers

 

6

 

572

 

 

 

 

 

 

 

578

 

Expiration of warrants (Series 1)

 

 

 

5,197

 

(5,197

)

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

310

 

 

310

 

Comprehensive loss

 

 

 

 

 

 

 

 

(4,837

)

 

(4,837

)

BALANCE AT MARCH 31, 2014

 

2,284

 

174,228

 

3,556

 

 

(151,754

)

 

28,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT JANUARY 1, 2015

 

2,701

 

198,566

 

2,249

 

 

(166,643

)

 

36,873

 

CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

Expiration of non-tradable warrants,
see note 6c

 

 

 

1,338

 

(1,338

)

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

365

 

 

365

 

Comprehensive loss

 

 

 

 

 

 

 

 

(7,519

)

 

(7,519

)

BALANCE AT MARCH 31, 2015

 

2,701

 

199,904

 

911

 

 

(173,797

)

 

29,719

 

 

 

 

Ordinary
shares

 

Share
premium

 

Warrants

 

Accumulated
deficit

 

Total

 

 

Convenience translation into USD in thousands (note 1b)

BALANCE AT JANUARY 1, 2015

 

679

 

49,891

 

565

 

 

(41,871

)

 

9,264

 

CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

Expiration of non-tradable warrants,
see note 6c

 

 

 

336

 

(336

)

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

92

 

 

92

 

Comprehensive loss

 

 

 

 

 

 

 

 

(1,889

)

 

(1,889

)

BALANCE AT MARCH 31, 2015

 

679

 

50,227

 

229

 

 

(43,668

)

 

7,467

 

The accompanying notes are an integral part of these condensed financial statements.

F-41

INTEC PHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

Convenience translation into USD (note 1b)

 

 

Three months ended March 31

 

Three months ended Mar ch 31, 2015

 

 

2014

 

2015

 

 

NIS in thousands

 

In thousands

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(4,837

)

 

(7,519

)

 

(1,889

)

Adjustments to reconcile loss and comprehensive loss to net cash provided by operations (see appendix A)

 

410

 

 

676

 

 

170

 

Net cash used in operating activities

 

(4,427

)

 

(6,843

)

 

(1,719

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

(148

)

 

(2,357

)

 

(592

)

Acquisition of financial assets at fair value through profit or loss, net

 

(2,771

)

 

(127

)

 

(32

)

Changes in restricted bank deposits, net

 

(31

)

 

 

 

 

 

 

Net cash used in investing activities

 

(2,950

)

 

(2,484

)

 

(624

)

CASH FLOWS FROM FINANCING ACTIVITIES :

 

 

 

 

 

 

 

 

 

Exercise of options by employees and service providers

 

578

 

 

 

 

 

 

 

Net cash provided by financing activities

 

578

 

 

 

 

 

DECREASE IN CASH AND CASH EQUIVALENTS

 

(6,799

)

 

(9,327

)

 

(2,343

)

CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD

 

11,763

 

 

22,287

 

 

5,599

 

EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS

 

2

 

 

(286

)

 

(72

)

CASH AND CASH EQUIVALENTS – END OF PERIOD

 

4,966

 

 

12,674

 

 

3,184

 

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

F-42

INTEC PHARMA LTD.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

Convenience translation into USD (note 1b)

 

 

Three months ended March 31

 

Three months ended M arch 31, 2015

 

 

2014

 

2015

 

 

NIS in thousands

 

In thousands

APPENDIX A:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile loss and comprehensive loss to net cash provided by operations:

 

 

 

 

 

 

 

 

 

Income and expenses not involving cash flows:

 

 

 

 

 

 

 

 

 

Depreciation

 

537

 

 

495

 

 

124

 

Exchange differences on restricted deposits

 

1

 

 

5

 

 

1

 

Changes in the fair value of derivative financial instruments

 

(6

)

 

(301

)

 

(75

)

Exchange differences on cash and cash equivalents

 

(2

)

 

286

 

 

72

 

Losses (gains) on financial assets at fair value through profit or loss

 

25

 

 

(91

)

 

(23

)

Share-based compensation to employees and
service providers

 

310

 

 

365

 

 

92

 

 

 

865

 

 

759

 

 

191

 

 

 

 

 

 

 

 

 

 

 

Changes in operating asset and liability items:

 

 

 

 

 

 

 

 

 

Decrease (increase) in other receivables

 

537

 

 

(430

)

 

(108

)

Increase (decrease) in accounts payable and accruals

 

(992

)

 

347

 

 

87

 

 

 

(455

)

 

(83

)

 

(21)

 

 

 

410

 

 

676

 

 

170

 

APPENDIX B:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Information regarding investing activity not involving cash flows-Changes in liability with respect to property purchase order

 

2,599

 

 

99

 

 

25

 

 

 

 

 

 

 

 

 

 

 

Supplementary information to the statement of cash fl ows-int erest received

 

470

 

 

26

 

 

7

 

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

F-43

INTEC PHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — GENERAL:

a.        General

Intec Pharma Ltd. (the “Company”) is engaged in the development of proprietary technology, which enables the gastric retention of certain drugs. The technology is intended to significantly improve the efficiency of the drugs and substantially reduce their side-effects or the effective doses.

The Company is a limited liability public company incorporated and domiciled in Israel. The registered address of its offices is 12 Hartom St., Jerusalem, Israel.

The Company’s shares are being traded on the Tel-Aviv Stock Exchange Ltd.

The Company is in the research and development stages and has not yet generated revenues from its operations. As of March 31, 2015 the cumulative losses of the Company were approximately NIS 174 million.  Management expects that the Company will continue to incur losses from its operations in the foreseeable future, which will result in negative cash flows from operating activities.

The Company plans to fund its future operations through submission of applications for grants from governmental authorities and private funds and raising capital from the public and/or private investors and/or institutional investors.

The Company’s management believes its cash and cash equivalents as of March 31, 2015 will allow the Company to fund its operating plan through at least the next 12 months. If the Company is unsuccessful in executing the abovementioned plans, it may need to make adequate changes to its operations.

b.        Convenience translation into US dollars (“dollars” or “USD” or $)

For the convenience of the reader, the reported New Israeli Shekel (NIS) amounts as of March 31, 2015 and for the three-month period then ended have been translated into dollars at the Bank of Israel’s representative rate of exchange for March 31, 2015 ($1 = NIS 3.98). The dollar amounts presented in these financial statements should not be construed as representing amounts that are receivable or payable in dollars or convertible into dollars, unless otherwise indicated.

c.        Approval of financial statements

These condensed interim financial statements were approved by the Board of Directors on May 31, 2015.

NOTE 2 — BASIS OF PREPARATION

The Company’s condensed interim financial statements for the three months ended March 31, 2015 and 2014 (the “condensed interim financial statements”) have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting” (“IAS 34”). These condensed interim financial statements, which are unaudited, do not include all disclosures necessary for a complete statement of financial position, results of operations, and cash flow in conformity with International Financial Reporting Standards (“IFRS”). The condensed interim financial statements should be read in conjunction with the annual financial statements as of December 31, 2014 and for the year then ended and their accompanying notes, which have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”). The results of operations for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

F-44

INTEC PHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 — SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and calculation methods applied in the preparation of the condensed interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2014.

NOTE 4 — CRITICAL ACCOUNTING ESTIMATES

As part of the preparation of the condensed interim financial statements, Company management is required to make estimates that affect the value of assets, liabilities, income, expenses and certain disclosures included in the Company’s condensed interim financial statements. By their very nature, such estimates are subjective and complex and consequently may differ from actual results.

The critical accounting estimates applied in the preparation of the condensed interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2014.

NOTE 5 — FINANCIAL INSTRUMENTS:

a.        Financial risk management

The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Company’s annual financial statements as of December 31, 2014.

There have been no changes in the risk management department or in any risk management policies since year end.

b.        Financial instruments:

1)     As of March 31, 2015 and as of December 31, 2014, the Company holds financial assets at fair value through profit and loss in an amount of approximately NIS 8 million and NIS 7.8 million, respectively, which are included in Level 1.

2)     The fair value of restricted bank deposits, other receivables and other payables which constitute financial assets and financial liabilities, approximates their carrying amount.

3)     As of March 31, 2015 and as of December 31, 2014, there is a noncurrent liability in respect of derivative financial instruments which amounted to approximately NIS 4,227 thousand  and NIS 4,528 thousand, respectively, which are included in Level 3.

During the three-month period ended March 31, 2015, the changes in derivative financial instruments (Level 3) arose from changes in fair value which were recorded in the statement of comprehensive loss as financial income (expenses).

4)     In August 2013, the Company signed an agreement with several investors (“the Agreement”) that included ordinary shares and warrants issuance under the conditions specified in the Agreement and anti-dilution protection until the occurrence of the earliest of one of the following events: (1) the Dual Listing, (2) consummation of a merger or acquisition event (“M&A Event”) or (3) four years from the signing date of the Agreement. During this period, in case of the occurrence of an M&A Event or new investment in the Company at a price per share that is lower than NIS 66.93 (the “Protection Threshold Price”), an investor will be entitled to an additional allotment of shares in accordance with a formula

F-45

INTEC PHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 5 — FINANCIAL INSTRUMENTS: ( continued)

set forth in the Agreement, less the shares that were already issued following any previous anti-dilution right (“Downside Protection”). In the event of the activation of the Downside Protection mechanism, the exercise price of the Warrants which are still held by an investor will be reduced by the same calculation.

Due to their terms, the Warrants do not qualify for equity classification and are treated as a derivative financial liability. Also the Anti dilution rights and the additional warrants are classified as derivative financial liabilities.

The derivative financial instruments are measured at fair value each reporting period. The fair value of the Warrants, Anti-dilution rights and the Additional warrants, as at March 31, 2015 were approximately NIS 1,574 million, NIS 2,139 million and NIS 514 million, respectively. During the three-month period ended March 31, 2015, loss from changes in the fair value of the derivatives financial instruments amounted to approximately NIS 301 thousand. During the three-month period ended March 31, 2014, gain from changes in the fair value of the derivatives financial instruments amounted to approximately NIS 6 thousand.

These instruments are measured at fair value, at March 31, 2015, using standard valuation techniques for these types of instruments (Monte Carlo model) on the basis of the following inputs:

Observable Inputs:

 

March 31, 2015

Share price (NIS)

 

27.52

 

Exercise price (NIS)

 

35

 

Volatility

 

50.3%-53.6%

 

Risk free rate

 

0.07%-0.25%

 

Expected term (years)

 

0.5-2.5

 

Additional unobservable inputs for March 31, 2015:

Scenarios

 

Probability

Probability of occurrence of Qualifying Events only in 2015

 

15%-45.1%

 

Probability of occurrence of Qualifying Events only in 2016

 

1.8%

 

Probability of occurrence of Qualifying Events only in 2015 and 2016

 

2.5%

 

Probability of occurrence of Qualifying Events in 2015 and 2017

 

2.4%

 

NOTE 6 — EQUITY:

a.     On December 31, 2014, the Board of Directors approved, further to a recommendation of the compensation committee, effective January 1, 2015, the appointment of the Company’s Chief Financial Officer (“CFO”). As part of his employment agreement, a grant of 20,000 options was approved. Each option will be exercisable into one ordinary share, each for an exercise price of NIS 27.93. The options will vest over a four-year period, with half of the options vesting at the end of a two-year period from the date of grant, and the second half vesting in eight equal quarterly tranches, subsequent to the t wo-yea r period from the grant date, subject to the CFO’s continued employment with the Company at the time that each tranche vests. These options will expire after six years from the date of grant. The value of the benefit in respect of the said options, as calculated at the date of grant, is approximately NIS 200 thousand. In addition, a grant of 40,000 options was approved of which 12,000 options to purchase 12,000 ordinary shares, each for an exercise price of NIS 27.93. These options will be exercisable only in the event that a material agreement, as defined in the Company’s compensation policy, is signed between the Company and a third party, subject to his continued employment with the Company. These options will expire after six years from the date of grant. The value of the benefit of those options is approximately NIS 120 thousand and

F-46

INTEC PHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 6 — EQUITY: ( continued)

will be recognized in the financial statements of the Company only if a material agreement is signed. 28,000 options to purchase 28,000 ordinary shares will be exercisable upon completion of an issuance of the Company’s shares in a foreign stock exchange, subject to his continued employment with the Company. If within 18 months from the date of the grant, the Company has not completed the issuance of the Company’s shares in a foreign stock exchange, but has signed a material agreement, 8,000 options from the 28,000 options will vest, in addition to 12,000 options as described above. The exercise price of these options will be NIS 27.93, and in the event that a material agreement has been signed, the higher of NIS 27.93 and the average of the share price for the 30 trading days after the signing of a material agreement. These options will expire after six years from the date of grant.

The value of the benefit of those options is up to approximately NIS 280 thousand and will be recognized in the financial statements of the Company, in accordance with the achievement of the targets as described above.

b.     During the three-month period ended March 31, 2015, options to purchase 344 ordinary shares granted to employees were forfeited.

c.     On February 13, 2015 all 92,400 non-tradable and unlinked warrants that were issued as part of the agreements for a private placement with institutional investors in February 2013 expired.

d.     On March 29, 2015, the Company executed a 50-to-1 reverse share split of the Company’s ordinary shares and eliminated their par value. Upon the effectiveness of the reverse share split, (i) the number of ordinary shares was proportionally decreased and their par value was eliminated, (ii) the number of ordinary shares into which each outstanding option and outstanding warrant to purchase ordinary shares is exercisable was proportionally decreased, and (iii) the exercise price of each outstanding option and outstanding warrant to purchase ordinary shares was proportionally increased. Unless otherwise indicated, all of the shares numbers, the options and warrants numbers, loss per share amounts, share prices, warrant exercise prices and option exercise prices in these financial statements have been adjusted, on a retroactive basis, to reflect this 50-to-1 reverse share split. 

NOTE 7 — COMMITMENTS AND CONTINGENT LIABILITIES:

a.     On August 30, 2011, the Company entered into an agreement with an international manufacturer for ordering an automated production line for Accordion Pills. The order covers engineering design and planning, and amounted to approximately NIS 1.3 million. In May 2013, the Company entered into a follow on order to manufacture and assemble the automated production line. In addition, due to adjustments to the automated production line made by the Company, additional costs were added.

In April 2015, the installation of the automated production line on the Company’s facility was initiated. As of March 31, 2015 the Company had transferred payments of approximately NIS 8.2 million and recognized a liability for an additional amount of approximately NIS 1.7 million.

b.     On March 31, 2011, the Company received a statement of claim from a former related party, for an allocation of approximately 50,909 of the Company’s ordinary shares. 

The lawsuit was in respect of a performance target relating to a share-based compensation transaction with the plaintiff. The Company has recorded expenses in its 2006 financial statements (the year in which the service was rendered) with respect to the share-based compensation.

F-47

INTEC PHARMA LTD.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 7 – COMMITMENTS AND CONTINGENT LIABILITIES: ( continued)

On September 8, 2013, the Israeli District Court ruled in favor of the plaintiff and ordered the Company to allocate to the plaintiff ordinary shares constituting approximately 0.89% of the Company’s share capital at full dilution.

The Company filed an appeal to the Israeli Supreme Court and concurrently issued the shares to the plaintiff on April 22, 2014.

To secure the Company’s obligations that may arise as part of the appeal proceedings, the Company has granted a bank guarantee to the plaintiff, which as of March 31, 2015 amounted to approximately NI S 5 0 thousand.

On May 27, 2015, there was court hearing relating to the Company’s appeal. After the hearing, the Company decided to withdraw its appeal and because of this withdrawal, the Company is not required to pay costs to the plaintiff.

NOTE 8 — EVENTS SUBSEQUENT TO MARCH 31, 2015:

a.     On April 15, 2015 an agreement was signed between the Company and a global pharmaceutical company (the “Pharmaceutical Company“) with respect to the execution of a Research, Option and Licensing agreement. The agreement is for the development of a designated accordion pill with a marketed, proprietary drug of the Pharmaceutical Company. Under the agreement, the Company will conduct activities for the development of the collaboration product, pursuant to an agreed upon research plan, which activities shall be funded by the Pharmaceutical Company subject to achievement of certain research plan milestones. The Company shall be entitled to consideration of $920 thousand for achievement of research plan milestones. In addition for the exercise of the option, achievement of additional milestones as described in the agreement and royalties based on sales the Company shall be entitled to consideration of up to $147 million. As of the date of approval of the financial statements the Company received an advance payment of the funding of the research plan in the amount of $250 thousand.

b.     Until April 26, 2015, 208,843 unlinked warrants (Series 7) were exercised to purchase 208,843 ordinary shares for consideration of approximately NIS 7.3 million. The remaining 368,952 unexercised and unlinked warrants (Series 7) expired on April 26, 2015.

c.     In May 2015, in addition to previously approved programs, the Company received approval from the Office of the Chief Scientist of the Israeli Ministry of Economy for a participation in research and development activities performed by the Company from January 1, 2015 to December 31, 2015 in the amount of NIS 6.4 million.

F-48

ORDINARY Shares

INTEC PHARMA LTD.

__________________

PROSPECTUS

__________________

Joint Book-Running Managers

Maxim Group LLC

 

Roth Capital Partners

     , 2015

Through and including            , 2015 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligations to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 6. Indemnification of Directors and Officers

Under the Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. The company may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.

Under the Companies Law, a company may indemnify an office holder in respect of 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:

      financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;

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

      reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.

Under the Companies Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder if and to the extent provided in the company’s articles of association:

      a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

      a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and

      a financial liability imposed on the office holder in favor of a third party.

Under our articles of association, we may insure and indemnify an office holder against the aforementioned liabilities as well as the following liabilities:

      any other action which is permitted by law to insure an office holder against;

      expenses incurred and/or paid by the office holder in connection to with an Administrative Enforcement Procedure, in connection to such office holder, and including reasonable litigation expenses and attorney fees; and

      a financial liability in favor of a victim of a felony pursuant to Section 52ND of the Israeli Securities Law.

II-1

Under the Companies Law, a company may not indemnify, exculpate or insure an office holder against any of the following:

      a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

      a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder;

      an act or omission committed with intent to derive illegal personal benefit; or

      a civil or administrative fine 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. See “— Approval of Related Party Transactions under Israeli Law.”

We have entered into indemnification agreements with our office holders to exculpate, indemnify and insure our office holders to the fullest extent permitted by our articles of association, the Companies Law and the Israeli Securities Law. The indemnification thereunder is limited to events determined as foreseeable by the board of directors based on our activities, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.

The maximum indemnification amount set forth in such agreements is limited to an amount which shall not exceed 25% of our equity based on our most recently audited or reviewed financial statements prior to actual payment of the indemnification amount. Such maximum amount is in addition to any amount paid (if paid) under insurance and/or by a third-party pursuant to an indemnification arrangement.

In the opinion of the Securities and Exchange Commission, indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and therefore unenforceable.

There is no pending litigation or proceeding against any of our office holders as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any office holder.

We have obtained directors’ and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Companies Law. In addition, prior to the closing of this offering, we intend to enter into agreements with each of our office holders undertaking to indemnify them to the fullest extent permitted by the Companies Law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance.

Item 7. Recent Sales of Unregistered Securities

The following is a summary of transactions during the three years preceding this offering involving offers and sales of our securities by us. All such offers and sales took place outside the United States pursuant to Regulation S promulgated under the Securities Act and were not registered under the Securities Act:

On May 29, 2012, we issued 287,593 ordinary shares and 143,796 warrants exercisable into ordinary shares (Series 3) in a rights offering to our shareholders by the means of a shelf offering report, published on May 6, 2011. The rights offering provided that each shareholder holding 22 ordinary shares was entitled to two ordinary shares and one Series 3 warrant exercisable into ordinary shares, for total consideration of NIS 90. Each warrant was exercisable at an initial price per underlying ordinary share of NIS 60. The aggregate consideration received by us with respect to such rights offering was NIS 12.9 million before issuance costs, and NIS 251,000 was received by us in consideration for exercising 4,181 warrants. The exercise period for the remaining warrants expired on May 30, 2013.

On February 13, 2013, we issued 231,000 ordinary shares and 92,400 warrants exercisable into ordinary shares at an exercise price of NIS 80 per ordinary share as a part of a private offering to the Phoenix Insurance Company Ltd. and Meitav Provident & Pension Ltd. The aggregate consideration received by us with respect to such private placement was NIS 15 million. The exercise period for the remaining warrants expired on February 13, 2015.

II-2

As part of our August 2013 financing round, we issued an aggregate of 320,663 ordinary shares and 198,812 warrants exercisable into ordinary shares at an exercise price NIS 35 as part of a private offering to Gabriel Capital Fund (Israel), L.P., Gabriel Capital Management Ltd., Gabriel Capital Fund (US), L.P., Sphera Healthcare Fund, SPHERA Healthcare Fund, Sterling Group International Inc., Collace Services Ltd., Yehuda Shimoni, Gary Leibler, Jonathan Leibler, Roni Levi, GlenRock Israel Ltd., Steve Israel and Joe Franco. In addition, we issued to these investors 80,166 warrants exercisable into ordinary shares at an exercise price of NIS 35 because we did not complete (i) a public offering raising at least $12.0 million on NASDAQ Stock Market or (ii) a merger with a company traded on the NASDAQ Stock Market which holds at least $12.0 million of unencumbered cash, prior to September 30, 2014. We issued such additional 80,166 warrants on November 2014. The aggregate consideration received by us with respect to such private offering was NIS 17.9 million, and if all of the warrants issued in the private placement (including the additional warrants) are exercised at their current exercise prices, we would receive an estimated NIS 9.8 million. The warrants contain anti-dilution protection for merger and acquisition transactions with a price per share below NIS 36.5. The exercise period for the first 198,812 warrants will expire on September 17, 2017, and the exercise period for the additional 80,166 warrants will expire on October 22, 2016.

On April 22, 2014, we issued shares to Mr. Shlomo Cohen in connection with a court order relating to litigation involving an early investor in our company, Mr. Shlomo Cohen, with whom we entered into an agreement in 2006 with respect to certain services that Mr. Cohen provided to us. The agreement with Mr. Cohen stated, among other things, that we would grant him 50,909 of our ordinary shares (representing 2.5% of our outstanding shares on a fully diluted basis as of such time) if we would enter into a “strategic agreement” with respect to our business during a specified period. On March 31, 2011, Mr. Cohen filed suit against us in the district court of Tel Aviv alleging breach of contract and other claims resulting from our failure to issue him such shares. We defended the suit on the basis that, among other things, the conditions precedent specified in the contract were not satisfied. On September 8, 2013, the district court ruled in favor of Mr. Cohen and ordered us to issue him 50,909 of our ordinary shares (representing approximately 0.94% of our outstanding shares as of March 31, 2015) and to pay him NIS 150,000 in costs. The court ruled that one feasibility and option agreements signed in 2008 with a pharmaceutical company was a strategic agreement despite the fact that the pharmaceutical company did not sign another agreement with us, we did not receive any significant funding from the agreement and the value of our shares did not increase because of this agreement. We filed a notice of appeal to the Supreme Court with respect to the decision of the district court but have withdrawn this appeal and there will be no further appeals on this matter.

On October 1, 2014, we issued 577,795 ordinary shares and 577,795 warrants exercisable into ordinary shares (Series 7) in a rights offering to our shareholders by the means of a shelf offering report, published on September 3, 2014 and a related report dated September 7, 2014. The rights offering provided that each shareholder holding 15 ordinary shares was entitled to purchase two ordinary shares and two Series 7 warrants exercisable into ordinary shares, for total consideration of NIS 60. Each warrant was exercisable at an initial price per underlying ordinary share of NIS 35. The aggregate consideration received by us with respect to such rights offering was NIS 17.3 million before issuance costs. 208,843 Series 7 warrants were exercised for total consideration of approximately NIS 7.3 million prior to their expiration on April 23, 2015. In connection with the rights offering we issued 202,018 ordinary shares to the investors in our August 2013 financing round as a result of the Downside Protection included in the investment agreement.

None of the transactions after our initial public offering in Israel used the services of an underwriter.

During 2011, we granted options to purchase an aggregate of 75,841 ordinary shares to our officers and employees, with an average exercise price of NIS 79.83 per share. In 2011 an aggregate of 178,479 options were exercised into ordinary shares in consideration of NIS 89,000 and 6,916 options have lapsed and were forfeited and expired.

During 2012, we granted options to purchase an aggregate of 50,000 ordinary shares to our officers and employees with an average exercise price of NIS 48.28 per share. In 2012 an aggregate of 21,189 options were exercised into shares in consideration of NIS 337,000 and 22,952 options have lapsed and were forfeited and expired.

During 2013, we granted options to purchase an aggregate of 207,200 ordinary shares to our officers and employees, with an average exercise price of NIS 56.64 per share. In 2013 an aggregate of 15,242 options were exercised into shares in consideration of NIS 548,000 and 5,174 options have lapsed and were forfeited.

During 2014, we granted options to purchase an aggregate of 131,200 ordinary shares to our officers and employees, with an average exercise price of NIS 36.25 per share. In 2014 an aggregate of 14,214 options were exercised into shares in consideration of NIS 579,000 and 8,881 options have lapsed and were forfeited.

II-3

Item 8. Exhibits and Financial Statement Schedules

(a)    The “Exhibit Index” is hereby incorporated by reference herein.

(b)    Financial Statement Schedules

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 9. Undertakings

The undersigned Registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6 of this Registration Statement, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby also undertakes that:

1.     For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement at the time it was declared effective.

2.     For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Jerusalem, State of Israel on June 9, 2015.

 

 

Intec Pharma Ltd.

 

 

 

 

 

 

 

By:

 

/s/ Zeev Weiss

 

 

 

 

Name:

 

Zeev Weiss

 

 

 

 

Title:

 

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors and officers of the registrant, an Israeli corporation, which is filing a registration statement on Form F-1 with the U.S. Securities and Exchange Commission, Washington, D.C. 20549 under the provisions of the Securities Act of 1933, as amended, hereby constitute and appoint Messrs. Zeev Weiss and Oren Mohar, and each of them, the individual’s true and lawful attorneys-in-fact and agents, with full power to act separately and full power of substitution and resubstitution, for the person and in his or her name, place and stead, in any and all capacities, to sign such registration statement and any and all amendments (including post-effective amendments) to the registration statement, including a prospectus or an amended prospectus therein and any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and all other documents in connection therewith to be filed with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or his or her or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on June 9, 2015 in the capacities indicated:

Name

 

Title

 

Date

 

 

 

 

 

/s/ Zeev Weiss

 

Chief Executive Officer and Director

 

June 9, 2015

Zeev Weiss

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Oren Mohar

 

Chief Financial Officer

 

June 9, 2015

Oren Mohar

 

(Principal Financial Officer)

(Principal Accounting Officer)

 

 

 

 

 

 

 

/s/ Zvika Joseph

 

Chairman of the Board

 

June 9, 2015

Zvika Joseph

 

 

 

 

 

 

 

 

 

/s/ Gil Bianco

 

Director

 

June 9, 2015

Gil Bianco

 

 

 

 

 

 

 

 

 

/s/ Amir Hayek

 

Director

 

June 9, 2015

Amir Hayek

 

 

 

 

 

 

 

 

 

/s/ Hila Karah

 

Director

 

June 9, 2015

Hila Karah

 

 

 

 

 

 

 

 

 

/s/ Issac Silberman

 

Director

 

June 9, 2015

Issac Silberman

 

 

 

 

II-5

AUTHORIZED REPRESENTATIVE

Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Intec Pharma Ltd. has signed this registration statement in the city of Monsey, the State of New York, on June 9, 2015.

 

 

Vcorp Agent Services, Inc.

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Farah Moiso

 

 

 

 

Name:

 

Farah Moiso

 

 

 

 

Title:

 

Secretary

 

 

II-6

EXHIBIT INDEX

Exhibit No.

 

Exhibit Description

 

 

 

1.1*

 

Form of Underwriting Agreement

 

 

 

3.1

 

Certificate of Incorporation of Orly Guy Ltd., dated October 23, 2000

 

 

 

3.2

 

Certificate of Name Change of Orly Guy Ltd. to Intec Pharmaceutical (2000) Ltd., dated February 7, 2001

 

 

 

3.3

 

Certificate of Name Change of Intec Pharmaceutical (2000) Ltd. to Intec Pharma Ltd., dated March 15, 2004

 

 

 

3.4

 

Articles of Association of Intec Pharma Ltd.

 

 

 

4.1*

 

Specimen share certificate

 

 

 

5.1*

 

Opinion of Pearl Cohen Zedek Latzer Baratz, Israeli counsel to Intec Pharma Ltd., as to the validity of the ordinary shares

 

 

 

10.1+

 

Joint Venture for R&D, dated June 1, 2000, by and between Yissum Research Development Company of the Hebrew University of Jerusalem and Intec Pharmaceutical Partnership Ltd.

 

 

 

10.2+

 

Notice of Extension Letter, dated October 5, 2004, from Intec Pharma Ltd. to Yissum Research Development Company of the Hebrew University of Jerusalem

 

 

 

10.3

 

Amendment, dated July 13, 2005, by and between Yissum Research Development Company of the Hebrew University of Jerusalem and Intec Pharma Ltd., to the Joint Venture for R&D Agreement dated June 1, 2000

 

 

 

10.4

 

Research Agreement, dated January 15, 2008, by and between Yissum Research Development Company of the Hebrew University of Jerusalem and Intec Pharma Ltd.

 

 

 

10.5

 

Form of Indemnification Letter

 

 

 

10.6

 

Intec Pharma Ltd. 2005 Share Option Plan

 

 

 

10.7

 

Subscription Agreement between Intec Pharma Ltd. and the investors listed on Schedules A and C thereto, dated August 6, 2013, including forms of Certificates of Warrants

 

 

 

10.8

 

Addendum & Amendment to that certain Subscription Agreement of August 6, 2013, dated October 20, 2014, by and between Intec Pharma Ltd. and Gabriel Capital Management (GP) Ltd.

 

 

 

10.9

 

Michael J. Fox Foundation Research Grant 2013, dated March 29, 2013, between Intec Pharma Ltd. and the Michael J. Fox Foundation

 

 

 

10.10

 

Unprotected Lease Agreement between Intec Pharma Ltd. and R.M.P.A. Assets Ltd., dated June 2, 2003, together with supplements thereto dated as of April 21, 2004, January 1, 2006, December 15, 2009 and January 18, 2011

 

 

 

10.11

 

Employment Agreement, dated August 1, 2008, between Intec Pharma Ltd. and Giora Carni as amended by the Agreement, dated October 12, 2010, and the Addendum to Agreement, dated October 21, 2013

 

Exhibit No.

 

Exhibit Description

 

 

 

10.12

 

Employment Agreement, dated June 1, 2009, between Intec Pharma Ltd. and Zeev Weiss as amended by Amendment to Agreement, dated 2012 and Addendum to Agreement, dated November 11, 2013

 

 

 

10.13

 

Employment Agreement, dated November 25, 2013, between Intec Pharma Ltd. and Liat Flaishon

 

 

 

10.14

 

Employment Agreement, dated January 15, 2006, between Intec Pharma Ltd. and Nadav Navon, as amended by Annex to Employment Agreement, dated May 29, 2011, Addendum to Agreement, dated March 2012 and Amendment to Agreement, dated October 21, 2013

 

 

 

10.15

 

Employment Agreement, dated December 31, 2014, between Intec Pharma Ltd. and Oren Mohar

 

 

 

10.16

 

Employment Agreement, dated November 1, 2004, between Intec Pharma Ltd. and Zvika Joseph, as amended by Addendum to Employment Agreement, dated October 20, 2009, Amendment to Agreement, dated July 28, 2011 and Addendum to Agreement, dated October 21, 2013.

 

 

 

10.17+

 

Amendment, dated March 12, 2015, by and between Yissum Research Development Company of the Hebrew University of Jerusalem and Intec Pharma Ltd., to the Joint Venture of R&D Agreement dated June 1, 2000.

 

 

 

10.18+

 

Research, Option and License Agreement dated April 15, 2015.

 

 

 

23.1

 

Consent of Kesselman & Kesselman, Certified Public Accountant (Isr.), independent registered public accounting firm, a member of PricewaterhouseCoopers International Limited

 

 

 

23.2*

 

Consent of Pearl Cohen Zedek Latzer Baratz, Israeli counsel to Intec Pharma Ltd. (included in Exhibit 5.1)

 

 

 

24.1

 

Power of Attorney (included on the signature pages of this registration statement)

____________

*       To be filed by amendment.

+      Certain portions of this agreement have been omitted under a request for confidential treatment pursuant to Rule 406 of the Securities Act of 1933, as amended, and Rule 24b-2 of the Securities Exchange Act of 1934, as amended, and filed separately with the United States Securities and Exchange Commission.

 

 

Exhibit 3.1

 

 

 

 
 

 

 

 

 
 

 

Companies Registrar National Emblem Ministry of Justice

 

The state of Israel

 The Companies Law 5759 - 1999

 

A company certificate of Incorporation

 

This to state that:

 

(Name in Hebrew)

 

ORLY GUY LTD

 

Was incorporated and registered according to The Companies Act 1999 as a limited company.

 

23.10.2000

24 Tishrey, 5761

 

Given by my signature in Jerusalem

23.10.2000

24 Tishrey, 5761

 

Company No: 513022180

 

Avidan Sheldon, Adv

For and behalf of the Registrar of Companies

 

(Stamp)

(Signature)

 

 
 

 

 

 

 

 

Exhibit 3.2

 

 

 

 
 

 

Companies Registrar National Emblem Ministry of Justice

 

The state of Israel

The Companies Law 5759- 1999

 

Certificate of Company Name Change

 

By Virtue of my authority under section 31(b) of the Companies Law 5759 – 1999, I hereby authorize to the company:

 

(Name in Hebrew)

 

ORLY GUY LTD

 

To change its name and from hereforth is shall be named:

 

INTEC PHARMACEUTICAL (2000) LTD

 

7/02/2001

 

Given by my signature in Jerusalem

7/02/2001

Company No: 513022780

 

Zeev V. Frazer, Adv

For and behalf of the Registrar of Companies

 

  (Signature)

 

 
 

 

 

 

 

 

Exhibit 3.3

 

 

 

 
 

 

Companies Registrar National Emblem Ministry of Justice

 

The state of Israel

The Companies Law 5759- 1999

 

Certificate of Company Name Change

 

I hereby certify that in reliance on a resolution and in accordance with section 31(b) of the Companies Law 5759-1999 the company

 

(Name in Hebrew)

 

INTEC PHARMACEUTICAL (2000) LTS

 

Has changed its name and from hereforth is shall be named:

 

INTEC PHARMA LTD

 

Given by my signature in Jerusalem

22 Adar 5764

15/03/2004

Company No: 513022780

 

Yehuda Katz, Adv

For and behalf of the Registrar of Companies

 

  (Signature)

 

 
 

 

 

 

 

 

Exhibit 3.4

 

Articles of Association

 

of Intec Pharma Ltd.

 

(the “Company”)

 

Pursuant to

the Companies Law, 5759-1999

(the “Companies Law”)

 

 
 

  

1. Name of the Company

 

2. The Company’s name in Hebrew is “ Intec Pharma Ba’am ” and in English “Intec Pharma Ltd.”.

 

3. Objects of the Company

 

The Company’s object is to engage in any legal business.

 

4. Limited Liability

 

The shareholders’ liability for the Company’s debts is limited to the full amount (par value plus premium) that they were required to pay the Company for the shares and which has not yet been paid by them.

 

5. The Company’s Share Capital and the Rights Attached to the Shares

 

5.1. The Company’s authorized capital is NIS 4,000,000 divided into 400,000,000 ordinary shares of par value NIS 0.01 each (the “ Ordinary Shares ”).

 

5.2. The Ordinary Shares shall confer on their holders:

 

5.2.1. An equal right to participate in and vote at the Company’s general meetings, whether ordinary meetings or special meetings, and each one of the Company’s shares shall entitle its holder, who is present at the meeting and participates in the vote, in person, by proxy or by voting card, to one vote;

 

5.2.2. An equal right to participate in the distribution of dividends, whether in cash or in stock dividends, in the distribution of assets or in any other distribution, according to the ratio of the par value of the shares held by them;

 

5.2.3. An equal right to participate in the distribution of surplus assets of the Company upon dissolution thereof according to the ratio of the par value of the shares held by them.

 

5.3. The board of directors may issue shares and other securities, convertible for or exercisable into shares, up to the Company’s authorized share capital. For the purpose of calculation of the authorized capital, the securities convertible for or exercisable into shares shall be deemed as having been converted or exercised on the date of issuance thereof.

 

6. Co-Holding of Shares and Share Certificates

 

6.1. A shareholder registered in the shareholders’ register is entitled to receive from the Company, free of charge, within a period of three months after the allotment or registration of the transfer, a single share certificate signed with the Company’s stamp, in respect of all of the shares registered in his name, which shall specify the number of shares. In the case of a co-held share, the Company shall issue one share certificate to all of the co-holders of the share, and delivery of such certificate to one of the partners shall be deemed as delivery to all of them.

 

2
 

  

Each share certificate shall be signed by two directors or a director and the company secretary, plus the Company’s stamp or printed name.

 

6.2. A share certificate that is defaced, destroyed or lost may be renewed based on proof and guarantees as the Company shall demand from time to time.

 

7. The Company’s Remedies in relation to Shares not Fully Paid Up

 

7.1. If the consideration that the shareholder undertook to pay to the Company in consideration for his shares is not given, in whole or in part, on such date and under such conditions as are determined in the terms of allotment of his shares and/or in the call mentioned in Section 7.2 below, the Company may, in a resolution of the board of directors, forfeit the shares, the consideration for which was not paid in full. The shares will be forfeited provided that the Company shall have sent the shareholder a written warning of its intention to forfeit his shares within at least 7 days from the date of receipt of the warning in the event that the payment is not made during the period set forth in the warning letter.

 

The board of directors may, at any time before the date on which a forfeited share is sold, re-alloted or otherwise transferred, cancel the forfeiture under such conditions as it deems fit.

 

The forfeited shares will be held by the Company as treasury shares or sold to another.

 

7.2. If, according to the terms of issuance of shares, there is no fixed date for payment of any part of the price to be paid therefor, the board of directors may, from time to time, make calls on the shareholders for the unpaid money for the shares held by them, and each shareholder will be obligated to pay the Company the amount called from him on the date determined as aforesaid, provided that he receives prior notice of 14 days of the time and place of payment (“ Call ”). The notice will specify that non-payment on or before the date fixed at the place specified may result in forfeiture of the shares in relation to which the call was made. A Call may be retracted or postponed to another date, all as the board of directors shall decide.

 

7.3. Unless determined otherwise in the terms of allotment of the shares, a shareholder will not be entitled to receive a dividend or to exercise any right as a shareholder in respect of shares not yet fully paid up.

 

7.4. Persons who are co-holders of a share will be jointly and severally liable for payment of the amounts due to the Company in respect of the share.

 

7.5. The provisions of this section do not derogate from any other remedy of the Company vis-à-vis a shareholder who shall not have paid his debt to the Company in respect of his shares.

 

3
 

  

8. Transfer of Shares

 

8.1. The Company’s shares may be transferred.

 

8.2. Any transfer of shares must be done in writing and shall not be registered unless –

 

8.2.1. A valid share transfer deed is delivered to the Company at its registered office together with the certificates of the shares to be transferred, if issued. A transfer deed will be signed by the transferor and by a witness certifying the transferor’s signature. In the case of a transfer of shares that shall not have been fully paid up on the date of the transfer, the transfer deed will also be signed by the share recipient and by a witness certifying the share recipient’s signature; or

 

8.2.2. A court order is delivered to the Company to amend the registration; or

 

8.2.3. It is proven to the Company that legal conditions for endorsement of the right in the share have been fulfilled.

 

8.3. A transfer of shares that have not been fully paid up requires the approval of the board of directors, which may refuse to give its approval at its absolute discretion and without giving reasons therefor.

 

8.4. A transfer recipient shall be deemed as the shareholder in relation to the transferred shares from the moment of registration of his name in the shareholders’ register.

 

8.5. The guardians and executors of the estate of an individual shareholder who passes away or, in the absence of executors of the estate or guardians, persons who hold a right as the heirs of the individual shareholder who passed away, will be the individuals whom the Company shall recognize as the holders of a right in the share that was registered in the deceased’s name.

 

8.6. If a share is registered in the name of two or more holders, the Company shall only recognize the surviving partner or the surviving partners as the persons holding the right in the share or a benefit therein. If a share is registered in the name of several co-holders as aforesaid, each one of them will be entitled to transfer his right.

 

8.7. The Company may recognize a receiver or liquidator of a shareholder that is a corporation in liquidation or dissolution or a trustee in bankruptcy or any receiver of a bankrupt shareholder as the holders of a right to the shares registered in the name of such shareholder.

 

8.8. Any person who gains a right in shares due to the death of a shareholder will be entitled, upon presenting proof of probate or the appointment of a guardian or the issuance of an inheritance order, attesting that he holds the right to the deceased shareholder’s shares, to be registered as shareholder in respect of such shares, or may, subject to the provisions of these articles, transfer such shares.

 

4
 

  

8.9. The receiver or liquidator of a shareholder that is a corporation in liquidation or dissolution or the trustee in bankruptcy or any receiver of a bankrupt shareholder may, after having provided such evidence as the board of directors shall require of him, which testify that he has the right to the shares of the shareholder in liquidation or dissolution or in bankruptcy, with the board of directors’ consent, be registered as shareholder in respect of such shares, or may, subject to the provisions of these articles, transfer such shares.

 

9. Change in Capital

 

The general meeting may, by a simple majority of the shareholders present at the general meeting:

 

9.1. Increase the Company’s authorized share capital by creating new shares of an existing class or of a new class, all as shall be determined in a resolution of the general meeting.

 

9.2. Cancel authorized share capital that has not yet been allotted, provided that there is no undertaking of the Company, including a contingent undertaking, to allot the shares.

 

9.3. Consolidate and re-divide its share capital, or any part thereof, into shares of a greater par value than the amount of the par value of the existing shares.

 

9.4. Re-divide its share capital, in whole or in part, by re-dividing its existing shares, in whole or in part, into shares of a lesser par value than the par value of the existing shares.

 

9.5. Reduce its share capital and any capital redemption reserve fund in such manner and under such conditions and upon receipt of such approval as the Companies Law shall require.

 

9.6. Reduce shares in the Company’s issued capital, such that these shares shall be cancelled and any and all consideration paid in respect of the par value of the shares that were cancelled as aforesaid shall be recorded on the Company’s books as a capital reserve, which will be deemed, for all intents and purposes, as a premium paid on the shares that shall remain in the Company’s issued capital.

 

10. Change in Rights of Share Classes

 

10.1. Unless determined otherwise in the terms of issuance of the shares, and subject to the provisions of any law, the rights of any class of shares may be changed after the adoption of a resolution of the Company’s board of directors and with the approval of the general meeting of the holders of shares of the same class or written consent of all of the holders of the shares of the same class. The provisions of the Company’s articles regarding general meetings shall apply, mutatis mutandis , to a general meeting of the holders of such class.

 

5
 

  

10.2. The rights conferred on holders of shares of a certain class that were issued with special rights shall not be deemed as having been changed by the creation or issuance of additional shares ranking pari passu therewith, unless provided otherwise in the terms of issuance of such shares.

 

11. General Meetings

 

11.1. Resolutions of the Company on the following matters shall be adopted at the general meeting -

 

11.1.1. Changes to the articles;

 

11.1.2. Exercise of authorities of the board of directors when the board of directors is unable to perform its duties;

 

11.1.3. Appointment of the Company’s auditor and termination of his employment;

 

11.1.4. Appointment of directors, including outside directors;

 

11.1.5. Approval of actions and transactions which require the approval of the general meeting pursuant to the provisions of the Companies Law and any other law;

 

11.1.6. Increase and reduction of the authorized share capital;

 

11.1.7. Merger, as defined in the Companies Law;

 

11.1.8. Authorization of the chairman of the board or a relative thereof to perform the duties or exercise the powers of the CEO, and authorization of the CEO or a relative thereof to perform the duties or exercise the powers of the chairman of the board, as stated in Section 121(c) of the Companies Law.

 

12. Convening of General Meetings

 

12.1. Annual general meetings shall be convened at least once a year at such place and time as the board of directors shall determine, but no later than 15 months after the last annual general meeting. These general meetings shall be referred to as “Annual Meetings”. The other general meetings of the Company shall be referred to as “Special Meetings”.

 

12.2. The Annual Meeting shall appoint an auditor, appoint the directors according to these articles and discuss any and all other matters that need to be discussed at the annual general meeting of the Company, according to these articles or pursuant to the Companies Law, as well as any other matter as the board of directors shall determine.

 

12.3. The board of directors may convene a Special Meeting according to a resolution thereof and is obligated to convene a Special Meeting if it receives a written demand from any one of the following (the “ Demand to Convene ”) –

 

12.3.1. Two incumbent directors; and/or

 

6
 

  

12.3.2. One or more shareholders who hold at least five percent of the voting rights in the Company.

 

12.4. Any Demand to Convene needs to specify the objectives for which a meeting needs to be called and shall be signed by the demanding parties and be delivered to the Company’s registered office. The demand may comprise several documents in identical language, each one of which signed by one or more demanding parties.

 

12.5. The board of directors, if required to summon a Special Meeting, shall summon the same within twenty-one days from the date that the Demand to Convene is submitted thereto, for a date to be determined in the invitation according to Section 14.6 below and subject to any law.

 

12.6. Notice to the Company’s members regarding the convening of a general meeting shall be published in the manner set forth in the Companies Regulations (Publication of Notice of a General Meeting and a Class Meeting at a Public Company), 5760-2000 and pursuant to any law. The Company is not obligated to deliver personal notices of the convening of a meeting to the shareholders registered in the shareholders’ register of the Company.

 

13. Deliberation at the General Meetings

 

13.1. Deliberations at the general meeting shall not be opened unless a legal quorum is present at the time of opening of the deliberation. Legal quorum shall be formed upon the presence (including by proxy or by voting card) of at least two shareholders holding at least twenty-five percent of the voting rights within one half hour from the time scheduled for the opening of the meeting.

 

13.2. In the event that one half hour after the time scheduled for the meeting to begin legal quorum shall not have been formed at a general meeting, the meeting shall stand adjourned for one week, to the same day, time and place, or to a later date, if stated in the invitation to the meeting or in the notice of the meeting (the “ Adjourned Meeting ”).

 

13.3. Legal quorum for commencement of the Adjourned Meeting will be any number of participants.

 

13.4. The chairman of the board will act as chairman of the general meeting, and in his absence the chairman of the meeting shall be elected by the persons participating in the meeting at the beginning of the meeting.

 

13.5. A general meeting at which a legal quorum is present may decide to postpone the meeting to another place and to another time, to be determined, in which case notices of the said place and time shall be published in the manner of publication set forth in the Companies Regulations (Notice and Announcement of a General Meeting and a Class Meeting at a Public Company), 5760-2000.

 

7
 

  

14. Voting at the General Meeting

 

14.1. A shareholder of the Company will be entitled to vote at the general meetings in person or by proxy or by voting card.

 

The shareholders entitled to participate in and vote at the general meeting are the shareholders on the date that shall be determined by the board of directors in the resolution to summon the general meeting, and subject to any law.

 

14.2. At any vote, each shareholder shall have a number of votes in accordance with the number of shares held by him.

 

14.3. A resolution at the general meeting shall be adopted by a simple majority, unless another majority is determined in the Companies Law or in these articles.

 

14.4. A declaration by the chairman of the meeting that a resolution was adopted unanimously or by a certain majority, or was voted down or that a certain majority was not attained will be prima facie evidence thereof.

 

14.5. If the votes at the meeting are tied, the chairman of the meeting will not have the right to another or casting vote, and the resolution shall be voted down.

 

The Company’s shareholders may vote at a general meeting (including at a class meeting) via a voting card on issues on which they are entitled to do so pursuant to Section 87 of the Companies Law, as being from time to time.

 

14.6. A shareholder may state the manner of his vote on the voting card and deliver it to the Company up to 48 hours before the time of commencement of the meeting. A voting card on which a shareholder stated the manner of his vote which reached the Company at least 48 hours before the time of commencement of the meeting (and with respect to an Adjourned Meeting – 48 hours before the time of the Adjourned Meeting) shall be deemed as presence at the meeting, including for purposes of forming the legal quorum as stated in Section 12.1 above.

 

14.7. A proxy will be appointed in writing, signed by the principal (“ Power of Attorney ”). A corporation shall vote through its representatives who shall be appointed by a document that shall be duly signed by the corporation (“ Letter of Appointment ”).

 

14.8. Voting in accordance with the terms and conditions of the Power of Attorney shall be lawful even if the principal shall have previously passed away or become incapacitated, been dissolved, become bankrupt or shall have cancelled the Letter of Appointment or transferred the share in respect of which it was cast, unless written notice shall have been received at the office, prior to the meeting, that the shareholder passed away, became incapacitated, was dissolved, became bankrupt, or cancelled the Letter of Appointment or transferred the share as aforesaid.

 

14.9. The Letter of Appointment and Power of Attorney or a copy thereof shall be delivered to the Company’s registered office (by personal delivery or via fax) at least forty-eight (48) hours before the time scheduled for the meeting or for the adjourned meeting at which the person mentioned in the document intends to vote according thereto.

 

8
 

  

14.10. A shareholder of the Company will be entitled to vote at meetings of the Company through several proxies, who shall be appointed by him, provided that each proxy shall be appointed in respect of different portions of the shares held by the shareholder. There will be no impediment to each proxy as aforesaid voting differently at meetings of the Company.

 

14.11. If a shareholder is incapacitated, he may vote through his trustees, receiver, natural guardian or another legal guardian, and they will be entitled to vote in person or by proxy or by voting card.

 

14.12. Where two or more persons are co-holders of a share, at a vote on any matter, the vote of the person named first in the shareholders’ register as the holder of such share will be accepted, whether in person or by proxy, and he shall be entitled to deliver voting cards to the Company.

 

15. Amendment of the Articles

 

A resolution to amend these articles will require a simple majority of the shareholders present at the general meeting, whose agenda shall include amendment of the articles.

 

16. The Board of Directors

 

The board of directors will outline the Company’s policy and supervise performance of the CEO’s duties and actions. The board of directors may exercise any authority of the Company that is not conferred in the Companies Law or in the articles on another organ.

 

17. Appointment of the Board of Directors and Termination of Office

 

17.1. The number of directors of the Company (including outside directors) shall be determined from time to time by the annual general meeting (subject to Section 17.3 below), provided that it is no less than four and no more than nine.

 

17.2. The Company’s directors will be elected at an Annual Meeting and/or at a Special Meeting, and shall hold office until the end of the next coming Annual Meeting (i.e. at the end of the Annual Meeting all of the Company’s directors who served until such meeting shall resign, with the exception of outside directors, subject to the provisions at the end of this section below), or until they resign or until they cease to hold office according to the provisions of the articles or any law, all whichever is earlier. If, at a general meeting of the Company, new directors are not elected in the minimum number determined according to the articles, the directors who served until such meeting shall continue to hold office until their replacement by the Company’s general meeting.

 

9
 

  

17.3. In addition to the provisions of Section 17.2 above, the directors may appoint a director in lieu of a director whose position was vacated and/or as an addition to the board of directors, subject to the maximum number of directors on the board of directors as stated in Section 17.1 above. Appointment of a director by the board of directors will be valid until the next Annual Meeting or until he ceases to hold office according to the provisions of the articles or any law, all whichever is earlier.

 

17.4. A director whose term of office has ended may be reelected.

 

17.5. The term of office of a director shall begin on the date of his appointment by the Annual Meeting and/or the Special Meeting and/or the board of directors or on a later date if such date is determined in the appointment resolution of the Annual Meeting and/or the Special Meeting and/or the board of directors.

 

17.6. The board of directors shall elect the chairman of the board from among its members. If no chairman is elected or if the chairman is not present 15 minutes after the time scheduled for the meeting, the directors present shall elect one of them to preside over the meeting, and the elected director shall chair the meeting and sign the minutes.

 

The chairman of the board will not be the Company’s CEO other than upon the fulfillment of the conditions listed in Section 121(c) of the Companies Law.

 

17.7. The general meeting may remove from office any director before the end of his term of office, regardless of whether the director was appointed thereby by virtue of Section 17.2 above or the director was appointed by the board of directors by virtue of Section 17.3 above, provided that the director is given a reasonable opportunity to present his position to the general meeting.

 

17.8. If a director’s position is vacated, the remaining directors will be entitled to continue to act so long as the number of remaining directors shall not have fallen below the minimum number of directors determined in the articles. In a case in which the number of directors is less than the said minimum number, the remaining directors will be entitled to act only in order to fill the vacancy as stated in Section 17.3 above or in order to summon a general meeting of the Company, and until the convening of the general meeting as aforesaid, they may act for the management of the Company’s business only on urgent matters.

 

17.9. Each board member may, with the consent of the board of directors, appoint for himself an alternate (“ Alternate Director ”), subject to the provisions of the law.

 

Appointment or termination of office of an Alternate Director shall be made in a written document, signed by the director who appointed him, although in any event, an Alternate Director’s office shall end upon the occurrence to the Alternate Director of one of the cases specified in the paragraphs in Section 17.10 below or if the office of the board member for whom he acts as an alternate shall be vacated for whatever reason.

 

10
 

  

An Alternate Director is deemed as a director and he shall be subject to all of the legal provisions and the provisions of these articles, with the exception of the provisions regarding the appointment and/or termination of a director set forth in these articles.

 

17.10. A director’s position shall be vacated in any one of the following cases:

 

17.10.1. He resigned from office by a letter signed by him that was submitted to the Company and which specifies the reasons for his resignation;

 

17.10.2. He is removed from office by the general meeting;

 

17.10.3. He is convicted of an offense as stated in Section 232 of the Companies Law;

 

17.10.4. According to a court decision, as stated in Section 233 of the Companies Law;

 

17.10.5. He is declared incapacitated;

 

17.10.6. He is declared bankrupt.

 

18. Board Meetings

 

18.1. The board of directors shall convene for a meeting according to the needs of the Company and at least once every three months.

 

18.2. The chairman of the board may convene the board of directors at any time. In addition, the board of directors shall hold a meeting, on an issue to be specified, in the following cases:

 

18.2.1. At the demand of two directors, although if on such date the board of directors comprises five directors or less – at the demand of one director;

 

18.2.2. At the demand of one director if he stated in his demand to convene the board of directors that he has learned of a matter of the Company ostensibly revealing a breach of law or improper business conduct;

 

18.2.3. A notice or report of the CEO requires action by the board of directors;

 

18.2.4. The auditor has given notice to the chairman of the board of material deficiencies in the Company’s accounting control.

 

18.3. Notice of a board meeting shall be delivered to all of its members at least three days before the date of convening of the board of directors or by shorter notice with the consent of all of the directors. The notice shall be delivered to the address of the director that was provided to the Company in advance, and shall state the date of the meeting and the place at which it shall convene, as well as a reasonable specification of all of the issues on the agenda.

 

The aforesaid notwithstanding, the board of directors may convene for a meeting without notice with the consent of all of the directors.

 

11
 

  

18.4. The legal quorum for opening a board meeting will be a majority of the board members. If legal quorum is not present at the board meeting one half hour after the time scheduled for the meeting to begin, the meeting shall stand adjourned to another date to be decided on by the chairman of the board, or in his absence the directors who were present at the meeting summoned, provided that notice of the date of the adjourned meeting shall be delivered to all of the directors two days in advance. The legal quorum for opening an adjourned meeting will be any number of participants. The aforesaid notwithstanding, the legal quorum for discussions and resolutions at the board of directors regarding the termination or suspension of the internal auditor will be a majority of the board members.

 

18.5. The board of directors may hold meetings through the use of any means of communication, provided that all of the directors participating are able to hear one another simultaneously.

 

18.6. The board of directors may adopt resolutions even without convening in practice, provided that all of the directors who are entitled to participate in the deliberation and to vote on the matter presented for resolution have agreed thereto (i.e. agreed that the resolution be adopted without actually convening). If resolutions are adopted as stated in this section, the chairman of the board shall record minutes of the resolutions stating the manner of the vote of each director on the matters presented for resolution, as well as the fact that all of the directors agreed to adopt the resolution without convening.

 

19. Voting at the Board of Directors

 

19.1. At a vote at the board of directors, each director shall have one vote.

 

19.2. Resolutions of the board of directors shall be adopted by a majority of votes. The chairman of the board will not have an additional or casting vote, and in the case of a tied vote, the resolution shall be voted down.

 

20. Borrowing Powers

 

The board of directors may, from time to time, at its sole discretion, borrow or secure any amount or amounts of money for the Company’s objects. The Company’s board of directors will be entitled to obtain or secure payment of any such amount or amounts in such manner, on such dates and under such conditions as it deems fit, and in particular by the issuance of guaranties, fixed or redeemable bonds, bond stock or any mortgage, pledge or floating charge or any other security on the Company’s property, in whole or in part, whether in the present or the future, including the uncalled share capital and the share capital called up but unpaid.

 

21. Board Committees

 

21.1. The Company’s board of directors may set up committees and appoint thereto members from among the board members (“ Board Committee ”). If Board Committees are set up, the board of directors shall determine, in the terms and conditions of authorization thereof, whether certain authorities of the board of directors be delegated to the Board Committee, such that a resolution of the Board Committee be deemed as a resolution of the board of directors or whether a resolution of the Board Committee shall constitute a recommendation only, which is subject to the approval of the board of directors, provided that no deciding powers shall be delegated to a committee on the matters listed in Section 112 of the Companies Law.

 

12
 

  

21.2. The meetings and deliberations of any Board Committee comprising two or more members shall be subject to the provisions included in these articles regarding board meetings and voting therein, mutatis mutandis and subject to resolutions of the board of directors regarding committee meeting procedures (if any).

 

22. Audit Committee

 

22.1. The Company’s board of directors shall appoint an audit committee from among its members. The number of members of the audit committee will be no less than three and all of the outside directors will be members thereof. Neither the chairman of the board nor any director employed by the Company or who regularly provides services thereto nor the Company’s controlling shareholder nor his relative shall be appointed as members of the committee.

 

22.2. The audit committee’s duties will be –

 

22.2.1. To point out deficiencies in the Company’s business conduct, inter alia in consultation with the Company’s internal auditor or with the auditor, and to suggest to the board of directors ways to correct the same;

 

22.2.2. To decide whether to approve actions and transactions requiring the approval of the audit committee pursuant to the Companies Law.

 

23. Management of the Company

 

23.1. The Company’s board of directors will be authorized to appoint and, at its discretion, terminate or suspend officers (with the exception of directors), a CEO, secretary, clerk, employee or principal, regardless of whether they are employed permanently or temporarily or for special services, as the board of directors shall deem fit from time to time, and to define their powers and duties and to determine their salaries and fees and to demand collateral in such cases and amounts as the board of directors shall deem fit.

 

23.2. The CEO will be responsible for the current management of the Company’s affairs in the framework of the policy determined by the board of directors and subject to its instructions.

 

24. Exemption, Insurance and Indemnification

 

24.1. Exemption from liability

 

The Company is entitled, in a resolution adopted in the manner set forth in the Companies Law, to exempt an officer thereof in advance from his liability, in whole or in part, due to a breach of the duty of care thereto.

 

13
 

 

24.2. Liability insurance

 

Subject to the provisions of the Companies Law, the Company is entitled to enter into a contract for insurance of the liability of an officer thereof due to a liability that shall be imposed on him due to an action taken in his capacity as an officer thereof, in whole or in part, for any one of the following:

 

24.2.1. Breach of the duty of care vis-à-vis the Company or vis-à-vis another person;

 

24.2.2. Breach of the fiduciary duty vis-à-vis the Company, provided that the officer acted in good faith and had reasonable grounds to believe that the action would not prejudice the best interests of the Company;

 

24.2.3. Monetary liability that shall be imposed on him in favor of another person;

 

24.2.4. Another action that may be insured pursuant to the Companies Law;

 

24.2.5. Expenses incurred by or charged to the officer, in connection with an administrative enforcement proceeding conducted with respect to him, including reasonable litigation expenses, including legal fees. In this paragraph –

 

(a) “Administrative enforcement proceeding” – an administrative enforcement proceeding pursuant to the provisions of any law, including the Streamlining of Enforcement Procedures Law and the Securities Law, 5728-1968 (“ Securities Law ”), including an administrative petition or an appeal in connection with the said proceeding;

 

(b) “Streamlining of Enforcement Procedures Law” – The Streamlining of ISA Enforcement Procedures Law (Legislative Amendments), 5771-2011, as shall be updated from time to time;

 

24.2.6. Payment to a party injured by a breach as stated in Section 52BBB of the Securities Law, as amended in the Streamlining of Enforcement Procedures Law (“ Payment to a Party Injured by a Breach ”).

 

If the insurance contract mentioned in this section covers the Company’s liability, the officers will have priority, over the Company, in receiving the insurance proceeds.

 

24.3. Indemnification

 

Subject to the provisions of the Companies Law, the Company may, in a resolution adopted in the manner set forth in the Companies Law, indemnify an officer thereof due to liability or an expense as specified below, imposed on him due to an action taken in his capacity as an officer thereof:

 

14
 

  

24.3.1. A monetary liability imposed on him in favor of another person in a judgment, including a judgment issued in a settlement or an arbitration award that was approved by the court;

 

24.3.2. Reasonable litigation expenses, including legal fees, incurred by an officer due to an investigation or proceeding that was conducted against him by an authority which is authorized to conduct an investigation or proceeding, and which has ended without the filing of an indictment against him and without a monetary liability being imposed on him as a substitute for a criminal proceeding, or which has ended without the filing of an indictment against him but with the imposition of a monetary liability as a substitute for a criminal proceeding in an offense which requires no proof of general intent; in this paragraph –

 

(a) “A proceeding ended without the filing of an indictment in a case in which a criminal investigation has been made” - means the closing of the case pursuant to Section 62 of the Criminal Procedure Law [Consolidated Version], 5742-1982 (in this section: the “ Criminal Procedure Law ”), or a stay of proceedings by the Attorney General pursuant to Section 231 of the Criminal Procedure Law;

 

(b) “Monetary liability as a substitute for a criminal proceeding” – a monetary liability imposed by law as a substitute for a criminal proceeding, including an administrative fine pursuant to the Administrative Offenses Law, 5746-1985, a fine for an offense determined as an infraction pursuant to the provisions of the Criminal Procedure Law, a pecuniary sanction or a sanction;

 

24.3.3. Reasonable litigation expenses, including legal fees, incurred by or charged to the officer by a court, in a proceeding filed against him by or on behalf of the Company or by another person, or in a criminal indictment from which he is acquitted, or in a criminal indictment in which he is convicted of an offense requiring no proof of general intent;

 

24.3.4. Expenses incurred by or charged to the officer in connection with an administrative enforcement proceeding conducted with respect to him, including reasonable litigation expenses, and including legal fees;

 

24.3.5. Payment to a party injured by a breach;

 

24.3.6. Any liability or other expense for which it is and/or will be permitted to indemnify an officer;

 

15
 

  

24.3.7. The Company may undertake in advance to indemnify an officer thereof, provided that an indemnification undertaking pertaining to the provisions of Section 24.3 on the whole shall be restricted to such amount or criterion as the board of directors shall have determined are reasonable under the circumstances, and that the indemnification undertaking states the events which, in the board of directors’ opinion, are foreseeable in view of the Company’s business in practice at the time of the granting of the undertaking, as well as the amount or the criterion determined by the board of directors to be reasonable under the circumstances;

 

24.3.8. The Company may indemnify an officer thereof retroactively.

 

25. Internal Auditor

 

25.1. The Company’s board of directors shall appoint an internal auditor in accordance with the Audit Committee’s proposal. No person who is an interested party of the Company, an officer of the Company, a relative of any one of the above, or the auditor or anyone on his behalf shall serve as the Company’s internal auditor.

 

25.2. The board of directors shall determine which officer will be the organizational supervisor of the internal auditor.

 

25.3. The internal audit plan that shall be prepared by the auditor will be submitted for the audit committee’s approval, although the board of directors may determine that the plan be submitted for the board of directors’ approval.

 

26. Auditor

 

26.1. The Annual Meeting shall appoint an auditor for the Company, and the auditor shall hold office until the end of the following Annual Meeting.

 

26.2. The auditor’s fee for the audit function shall be determined by the board of directors. The board of directors will be entitled to delegate this power to a board committee.

 

26.3. The board of directors shall report to the Annual Meeting on the auditor’s fee.

 

27. Signature on behalf of the Company

 

27.1. The signatory rights on behalf of the Company shall be determined from time to time by the Company’s board of directors.

 

27.2. The person signing on the Company’s behalf will do so together with an imprint of the Company’s stamp or on or alongside its printed name.

 

28. Dividend and Stock Dividends

 

28.1. A resolution of the Company regarding the distribution of a dividend and/or the distribution of stock dividends will be adopted by the Company’s board of directors.

 

16
 

  

28.2. The shareholders entitled to a dividend are the shareholders on the date of the resolution regarding the dividend or on a later date if another date is determined in the resolution regarding the distribution of the dividend.

 

28.3. If the Company’s board of directors does not determine otherwise, it will be permissible to pay any dividend by check or payment order sent by mail according to the registered address of the shareholder or the person entitled thereto, or in the case of registered co-holders, to the shareholder named first in the shareholders’ register in relation to the co-holding. Any such check shall be drawn to the order of the person to whom it is sent. A receipt of a person whose name, on the date of declaration of the dividend, is registered in the shareholders’ register as the holder of any share or, in the case of co-holders, of one of the co-holders, shall serve as confirmation pertaining to all of the payments made in connection with such share and in respect of which the receipt was received.

 

28.4. For the purpose of performance of any resolution according to the provisions of this section, the Company’s board of directors may resolve, as it deems fit, any difficulty that arises with respect to the distribution of the dividend and/or the stock dividends, and in this context determine the value, for the purpose of the said distribution, of certain assets and decide that payments in cash shall be made to members based on the value so determined, determine provisions in respect of share fractions or in respect of non-payment of amounts smaller than NIS 200.

 

29. Redeemable Securities

 

The Company may, subject to any law, issue redeemable securities under such conditions as the board of directors shall determine, provided that the approval of the general meeting is given for the board of directors’ recommendation and the conditions determined thereby.

 

30. Invoices

 

30.1. The Company shall keep books and prepare financial statements pursuant to the Securities Law and any law.

 

30.2. The books shall be kept at the Company’s registered office or at such other site as the directors shall deem fit, and will be open for the directors’ inspection during normal working hours.

 

31. Dissolution of the Company

 

In the case of dissolution of the Company, whether voluntary or otherwise, unless explicitly determined otherwise in these articles or in the terms of issuance of any share, the following provisions shall apply:

 

31.1. The liquidator will first use all of the Company’s assets to pay its debts (the Company’s assets after payment of its debts shall hereinafter be referred to as: the “ Surplus Assets ”).

 

17
 

  

31.2. Subject to special rights attached to the shares, the liquidator shall distribute the Surplus Assets among the shareholders proportionately to the par value of the shares, pari passu .

 

31.3. In the Company’s approval in a resolution that shall be adopted at the general meeting by a majority of at least 50% of the shareholders’ votes, the liquidator may distribute the Company’s Surplus Assets or any part thereof among the shareholders in kind and deliver any of the Surplus Assets to a trustee in a deposit for the benefit of the shareholders, as the liquidator shall deem fit.

 

32. Notices

 

32.1. Subject to any law, a notice or any other document that the Company shall deliver and which it is entitled or required to give according to the provisions of these articles and/or the Companies Law, shall be delivered by the Company to each person either personally, by delivery by mail in a letter addressed according to the registered address of such shareholder in the shareholders’ register or according to such address as the shareholder stated in writing to the Company as the address for delivery of notices or other documents, or by delivery via facsimile according to the number stated by the shareholder as the number for delivery of notices via facsimile. Notices that the Company shall publish for all of the shareholders shall be published by publication in two daily newspapers appearing in Israel.

 

32.2. Any notice that must be given to the shareholders shall be given in relation to jointly held shares to the person named first in the shareholders’ register as the holder of such share, and any notice given in this manner shall be sufficient notice to the holders of such share.

 

32.3. Any notice or other document that shall be sent according to the provisions of Section 32.1 shall be deemed as having arrived at its destination within 3 business days if sent by registered mail and/or by regular mail in Israel, and if hand delivered or sent via facsimile, it shall be deemed as having arrived at its destination on the first business day after receipt thereof. For the purpose of proving the delivery, it shall be sufficient to prove that the letter that was sent by mail that contains the notice and that the document was addressed to the correct address and was delivered to the post office as a letter bearing stamps or as a registered letter bearing stamps, and in respect of a facsimile it is sufficient to provide a transmission confirmation page from the transmitting machine. With respect to notice published in newspapers – the date of the publication in the newspaper shall be deemed as the date of delivery of the notice to all of the shareholders.

 

32.4. Any record ordinarily made in the Company’s books shall be deemed as prima facie evidence regarding the delivery, as recorded therein.

 

32.5. When it is necessary to give prior notice of a certain number of days or notice which is valid for any period, the delivery date shall be counted in the number of days or the period.

 

18
 

  

33. Donations

 

The Company may donate a reasonable sum of money to a worthy cause.

 

34. Interpretation

 

34.1. Anything stated herein in the singular shall also import the plural and vice versa , anything stated in the masculine shall also import the feminine and vice versa .

 

34.2. Unless special definitions for certain terms are included in these articles, any word and expression in these articles shall bear the meaning afforded thereto in the Companies Law, unless the same contradicts the subject matter or content of the text.

 

34.3. For the avoidance of doubt, it is clarified that in respect of matters regulated in the Companies Law such that the arrangements in respect thereof may be modified in articles of association, and in respect of which these articles do not provide otherwise than in the Companies Law, the provisions of the Companies Law shall apply thereto.

 

*      *      *

 

19

 

 

Exhibit 10.1

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Joint Venture for R&D

 

Made in Jerusalem this 1 day of June 2000.

 

BETWEEN:

YISSUM RESEARCH DEVELOPMENT COMPANY

OF THE HEBREW UNIVERSITY OF JERUSALEM.

of 46 Jabotinsky Street

Jerusalem, 191042 Israel

(hereinafter referred to as “Yissum”);

of the one part;

 

AND BETWEEN:

 

  Intec Pharmaceutical Partnership Ltd.    
  of     
    (hereinafter referred to as “the Company”);
of the other part;
 

 

WHEREAS The Company wishes to enter into joint venture with Yissum including inter alia obtain a license from Yissum for the commercial development, production and marketing of a Product to be based on the Know-How and Research Results, subject to the terms and conditions of this Agreement; and

 

WHEREAS Yissum agrees to enter into the joint venture and grant the Company a license in accordance with the terms and conditions of this Agreement and subject to the full performance by the Company of its obligations in accordance with this Agreement, and

 

WHEREAS The Company shall finance the Research which shall be with regard to:

 

WHEREAS All rights, interest and title in the Know-How are owned solely by Yissum; and

 

WHEREAS All rights whatsoever in the Research and Research Results shall be assigned by the University, to Yissum;

 

AND

WHEREAS Yissum agrees to procure the performance of the Research at the University in accordance with the terms and conditions of this Agreement below:

 

ACCORDINGLY, IT IS WARRANTED, PROVIDED AND AGREED BETWEEN THE PARTIES AS FOLLOWS;

 

Recitals and Definitions

 

1.           (a)          The recitals hereto constitute an integral part hereof.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(b)          In this Agreement, unless otherwise required or indicated by the context, the singular shall include the plural and vice-versa, the masculine gender shall include all other genders.

 

(c)          In this agreement the following expressions shall have the meanings appearing alongside them, unless the context otherwise requires.

 

Affiliate ” - See definition of Parent below.

 

Agreement ” - means this agreement together with all the appendices and annexes hereto.

 

Development Plan ” - As defined in section 8(a).

 

Development Results ” - means the Development Plan, including any patents, patent applications, information, material, results, devices and know-how arising therefrom.

 

Distributor ” - Any distributor or marketer who engages, inter alia, in any one of the following activities; makes any payment to the Company which is not considered as Net Sales: undertakes to advertise the Product at its own expense undertakes to obtain relevant authorities approval for the sale of the product and liable for costs incurred in gaining such approval.

 

Indemnities ” - As defined in section 14(c).

 

Append. “B”

 

Know-How ” - means the patents and/or the patent applications listed in Appendix “B” and any information, materials, results, devices and/or know-how relating thereto developed at or by the University and acquired by the University and/or Yissum prior to the signing of this Agreement.

 

License ” - means the permission and right to be granted by Yissum to the Company to use the Know-How and the Research Results in accordance with section 4 hereinbelow.

 

Net Sales ” - means all amounts in respect whereof invoices are issued by the Company, a Related Entity, and/or Distributors in connection with the sale of Products. Sales between Related Entities shall not be considered Net Sales unless such Related Entity is the final user of the Product.

 

Net Sales will be calculated after deducting all discounts and returns given in respect of such sales and deducting sales taxes (including VAT). Such deductions shall be directly related to the sale of Products that were awarded within the regular running of the business of the Company and made at “arms length”. Net Sales will also include any payment received by the Company from any governmental agency directly in relation to sales. In the event of sales not made at “arms length”, Net Sales shall be calculated in accordance with the current market conditions, or in the absence of such conditions, according to reasonable conditions for such sale.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Parent, Subsidiary or Affiliate ” (as the case may be) - means a Related Entity in which the percentage of control is more than 75%.

 

Periodic Report ” means as defined in section 7(c).

 

Product ” means any product and/or product component and/or production supplement and/or process directly and/or indirectly based on and/or related to the Know-how and/or the Research Results and/or the Development Results and/or any part thereof.

 

Registered Patents ” - means all patent applications and/or registered patents detailed in Appendix “B” and/or resulting from the Research and/or Research Results.

 

Related Entity ” - means any person or organization controlling, controlled by or under common control with the Company, including any parent, subsidiary or affiliate company. The term “control” shall mean direct or indirect ownership of more than 25% (twenty five percent) of the outstanding stock or other voting interest, entitled to vote for the election of directors or to direct the management and policies of any party, directly or indirectly.

 

Research ” - means the research which shall be carried out and conducted in the University subject to and as detailed in the Research Program under the supervision of the Researcher.

 

Researcher ” - means Prof M. Friedman, or such other person as determined and appointed from time to time by Yissum to supervise and to perform the Research in accordance with the Research Program.

 

Append. “D”

 

Discounted Royalties ” - means an advanced payment which will be a part of the royalty payment as detailed in Appendix “D”.

 

Research Period ” - means the period set forth in the Research Program for the performance of the Research.

 

Append. “A”

 

Research Program ” - the research program relating to the planned performance of the Research attached hereto as Appendix “A”.

 

Research Results ” - means the Research, including any patents, patent applications, information, material, results, devices and know-how arising therefrom.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Append. “E”

 

Royalties ” - means royalties calculated on the basis of the Net Sales in accordance with the terms and conditions detailed in Appendix “E” attached hereto as an integral part of this Agreement.

 

Sub-License ” - As defined in section (6a).

 

Sub-License Consideration ” - As defined in section (7a).

 

Sub-Licensee ” - As defined in section (6a).

 

Subsidiary ” - See definition of “Parent” above.

 

University ” - means the Hebrew University of Jerusalem/or each of its branches.

 

The Research and its Performance

 

2.          (a)          The Company hereby undertakes to participate in the research inter alia by financing performance of the Research in accordance with the terms and conditions in this Agreement.

 

(b)          Yissum shall procure the conduct of the Research in accordance with the Research Program during the Research Period.

 

(c)          Yissum may extend the Research Period for a period of up to 90 days by written notice given to the Company at least 30 days prior to the expiration of the Research Period, but the extended period will not be financed by the company.

 

(d)          If the Research Period is extended pursuant to the provisions of sub-section (c) above or for any other reason, the provisions of this Agreement shall apply to the additional period, mutatis mutandis.

 

(e)          On the expiration of the Research Period or of the extended period, Yissum shall give the Company a report detailing the results and conclusions of the Research.

 

(f)           For the avoidance of doubt, the Agreement in general and this section in particular shall not constitute an obligation and/or confirmation on the part of Yissum that any results and/or conclusions will be achieved in consequence of the performance of the Research and/or that a Product may be developed as a result thereof.

 

Finance of the Research

 

3.          (a)          In consideration for the performance of the Research and in order to finance it, the Company undertakes to pay Yissum the discounted royalties regarding the Research in accordance with the terms and conditions as detailed in Appendix “D”.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(b)          The provisions of this Agreement shall not prevent Yissum and/or the University and/or the Researcher from obtaining further finance from other entities for the Research, provided that such entities shall not be granted rights in the Research and/or Research Results prejudicing the rights granted to the Company in accordance herewith.

 

(c)          The Company shall not cease the financing of the Research during the first 12 months of the Research Period. Thereafter the Company may only cease the financing of the Research at one of the termination points specified in the Research Plan. Any such cessation shall be subject to a written notice by the Company to Yissum, at least 30 days prior to the cessation.

 

(d)          In the event of cessation' of the financing of the Research, in accordance with sub-section (c) above, the Company shall in addition to the above sub-section 3(c) reimburse Yissum only for the expenses incurred in relation to the Research and where approved by the company prior the notice.

 

(e)          Upon notice of cessation of the financing of the Research in accordance with subsection 3(c) above, this Agreement shall be terminated and the provisions of section 15 shall apply.

 

The License

 

4.          Furthermore, Yissum shall grant the Company an exclusive license in the Territory to make commercial use of the Know-how and the Research Results, in order to develop, manufacture and/or market a Product, subject to the terms and conditions hereof.

 

Term of the License

 

5.          The License shall end, if not ended or terminated prior thereto pursuant to the provisions hereof, at the later of the following:

 

(a)          The date of expiration of the last valid Registered Patent in the Territory upon which the Product is partially based.

 

(b)          The end of a period of 15 years from the date of making the first commercial sale pursuant to the License in accordance with section 8(c) below.

 

Sub-Licenses

 

6.          (a)          The Company shall be entitled to sub-license the rights granted in the License, or any part thereof, (herein referred to as “Sub-License”) to third parties and shall disclose to Yissum within thirty (30) days of execution of such a Sub-License all documentation relating directly to the sub-license; provided, however, that if the Company sublicenses a material portion of the Know-how and the Research Results prior to the date which is three years from the date hereof, then the Company shall be responsible for continuing the Research in accordance with Appendix A, only in the event that the Sub-License will not undertake to finance the Research.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The Company shall be entitled to transfer its rights and duties, pursuant to this Agreement, provided however that Yissum will give its consent, in advance. Yissum shall not withhold its consent, without giving reasonable grounds.

 

(b)          The Company shall adequately disclose to Yissum any other business connection which it now has or is in the process of forming with the Sub-Licensee which may reasonably effect the Company's decision regarding the Sub-Licenses Terms and Conditions.

 

(c)          The Company shall notify Yissum in writing, whether a proposed Sub-Licensee is a Related Company, Parent, Subsidiary and/or Affiliate.

 

(d)          Any Sub-License shall be dependent on the validity of the Agreement and shall terminate in whole or in part upon termination of the Agreement or any part thereof.

 

(e)          The Company undertakes to submit to Yissum in writing the signed confirmation contained in Appendix “H” attached hereto, according to which the Sub-Licensee confirms its undertakings to Yissum.

 

(f)          For the avoidance of any doubt it is hereby declared that under no circumstance whatsoever shall a Sub-Licensee be entitled to grant the Sub-License or any part thereof to any third party.

 

Royalties and Reporting

 

7.          (a)          In consideration for the grant of the License and in addition to the discounted royalties the Company shall pay Yissum Royalties in accordance with the terms set out, specified and detailed in Appendix E attached hereto.

 

(b)          Thirty days after the end of each calendar half year (January 1, June 31) commencing from the date of the first commercial sale of the Product, the Company shall furnish Yissum with a half report (herein “Periodic Report”) detailing the total sales effected during the Reporting Period and the total Royalties due to Yissum in respect of that period.

 

(c)          The Periodic Reports shall contain full particulars of all sales made by the Company and/or Sub-Licensees and all of the proceeds obtained by the Company in respect of granting Sub-Licenses pursuant to section 6 above, including sales broken down according to countries, a breakdown of the number of Products sold, discounts, returns, the currency in which the sales were made, invoice date and all other relevant information enabling the Royalties. The Periodic Reports shall also specify any Net Sale to a Related Company and shall set forth full details thereof.

 

(d)          On the date prescribed for the submission of each Periodic Report, the Company shall pay the Royalties due to Yissum in accordance with the Periodic Report. The value of each sale shall be computed on the date of sale in US Dollars. The Royalties shall be computed and paid in US dollars. Payment of Value Added Tax (if charged, but not including VAT) shall be added to each payment in accordance with the statutory rate in force at such time.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

In event that the Company is prohibited under applicable foreign currency laws to transact in US Dollars, payment shall be made in New Israeli shekels according to the representative rate of exchange prevailing on the date of payment.

 

(e)          The Company shall keep full and correct books of accounts in accordance with General Accepted Accounting Procedures as required by International Accounting Standards enabling the Royalties and Sub-License considerations to be calculated. The Company shall procure that Sub-Licensees, if any, also keep such books of accounts as aforesaid. The Company shall submit to Yissum a report authorized by a certified public accountant containing all the particulars mentioned in subsection (d) above in respect of each Periodic Report detailing the Royalties and Sub-License consideration due to it in respect of the period covered by the Periodic Report. An annual report, authorized by a certified public accountant, shall be submitted at the end of each year, the first year for the purposes of this section commencing on the date the first commercial sale is made, or the date a Sub-License is granted, whichever occurs first.

 

(f)          Any sum of money due to Yissum which is not duly paid shall bear interest from the due date of payment until the actual date of payment at the maximum rate of interest for the time-being prevailing in respect of unauthorized withdrawals on a credit line at Bank Leumi Le-Israel Ltd. All payments required to be made in accordance with the provisions of this Agreement shall be free and clear of any taxes or withholding of any kind.

 

(g)          The provisions of this section are fundamental terms of the Agreement and the breach thereof shall constitute a fundamental breach of the Agreement.

 

Development and Commercialization

 

8.                 (a)          The Company undertakes, at its own expense, to carry out the development and manufacturing work necessary to develop the Product in accordance with the written plan and timetable for the development of the Product, a copy of which is attached hereto as Appendix “F” ( herein “Development Plan”).

 

(b)          The Company shall provide Yissum with bi-annual reports which shall detail the Development Results and other related work effected by the Company or by any Sub-Licensee during the six months prior to the report. Such report shall also set forth a general assessment regarding the completion date of the development of the Product and the marketing thereof and detail all proposed changes to the Development Plan.

 

(c)          The Company shall give Yissum written notice of the first commercial sale of the Product by itself or by any Sub-Licensee within 30 days thereof.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(d)          Upon completion of the development, as specified in the Development Plan the Company undertakes to perform all actions necessary to maximize Net Sales on a regular and consistent basis.

 

Ownership

 

9.          All rights in the Know-How, the Research, and the Research Results shall be solely owned by Yissum, and the Company shall hold the rights granted pursuant to the License and make use of them solely in accordance with the terms of this Agreement.

 

Patents

 

10.         (a)          In accordance to the above mentioned, during the term of the license all rights of the Know-How will be transferred and belong to the company, although the applications and registration will be in the name of Yissum.

 

(b)          The company shall proceed in registering a patent in the territory at its solely discretion. The applications and registration will be in the name of Yissum at the company's expense. The Company shall consult with Yissum relating to the manner of making applications and registering the patents, including the time of making the applications, the countries where applications will be made and all other particulars relating to patent registration as aforesaid.

 

(c)          Each application and every patent to be registered as aforesaid shall be made and registered on behalf and in the name of Yissum and at the Company's expense.

 

(d)          The foregoing constitutes no obligation on the part of Yissum or the Company that patent or patent registration applications will indeed be made and/or registered and/or registrable in respect of the Know-how and/or the Product and/or any part thereof, nor shall such constitute an obligation on the part of Yissum or the Company that a patent registered as aforesaid will afford due protection.

 

For the avoidance of doubt, it is hereby expressed that the provisions of this Agreement or of Appendix “B” do not constitute confirmation and/or representation by Yissum in connection with the validity and/or applicability of any of the patents and/or patent registration applications detailed in Appendix “B”, and Yissum expresses that it made no examination as to the validity of the patents and/or patent applications as aforesaid before they were submitted for registration.

 

(e)          The parties shall assist each other in all respects relating to the preparation of documents for the registration of a patent or any patent-related right forthwith upon the other's request.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(f)          The Company undertakes to act forthwith at its own expense to provide protection against a third party's infringement of the Know-how and/or the Product and/or any other right therein and forthwith to advise Yissum upon learning of the infringement The Company shall give Yissum notice of any approach with respect to infringement made to it by a patent examiner and/or attorney in connection with the subject matter of this Agreement. It is agreed that the Company shall reply to such approaches with respect to infringement after consultation with Yissum.

 

(g)          The Company shall use its reasonable best efforts at its own expense to defend any action, claim or demand made by any entity in connection with rights in the Know-how, or the Product which, if uncontested, would otherwise materially and adversely affect the Company's rights to use such Know-how, Product or Information; the Company shall give notice to Yissum upon learning of any such action, claim or demand as aforesaid.

 

Confidentiality

 

11.         (a)          The Company, Yissum and the University warrant and undertake that during the term of this Agreement and subsequent thereto, they shall maintain full and absolute confidentiality and shall also be liable for the employees and/or representatives and/or persons acting on their behalf maintaining absolute confidentiality concerning inter alia, all information, details and data which is in and/or comes to their knowledge and/or that of its employees, representatives and/or any person acting on their behalf directly or indirectly relating to the Research, the Know-How, the Research Results, Yissum, the University, the Researchers and their employees. The Company, Yissum and the University undertake not to convey or disclose anything in connection with the aforegoing to any entity.

 

(b)          The obligation contained in this section shall not apply to information which is in the public domain as at the date hereof or to information which hereafter comes into the public domain, unless the Company breaches its obligations pursuant to this Agreement as a result thereof the information comes into the public domain.

 

(c)          Notwithstanding section 11(a) the Company may disclose details and information to its employees and Sub-Licensees, as necessary for the performance of its obligations pursuant to this Agreement, provided that it procures that its employees and Sub-Licensees execute a confidentiality agreement in the form annex hereto as Appendix “G”.

 

(d)          Without prejudice to the aforegoing, the Company shall not mention the University's and/or Yissum's name, unless required by law, in any manner or for any purpose in connection with this Agreement, the subject of the Research or any matter relating to the Research Results or the Know-How, without obtaining Yissum's prior written consent.

 

Append. “G”

 

(e)          Yissum shall procure that its Researchers, employees and/or any other person connected with it with regard to the License execute the confidentiality agreement in the form annexed hereto as Appendix “G”.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(f)          As a precondition to any Sub-License, the Company shall ensure that the Sub-Licensee procure that the employees and persons engaged thereby execute a confidentiality agreement in the form annexed hereto as Appendix “G”.

 

(g)          The breach of this section, by any person or entity other than Yissum, the University or the Company shall not be deemed a breach of the Agreement, if Yissum, the University or the Company prove that they took all reasonable steps to avoid the breach.

 

(h)          The end or termination of this Agreement shall not release the parties from their obligations pursuant to this section.

 

(i)          The provisions of this section shall be subject to permitted publications pursuant to section 12 herein.

 

Publications

 

12.        (a)          There will be no publications of the Know - How as long as a patent application has been filed.

 

(b)          Yissum shall ensure that no publications in writing, in scientific journals or orally at scientific conventions relating to the Development Plan, the Development Results, the Know-How and the Research Results which are subject to the terms and conditions of this Agreement are published by it or its Researchers.

 

(c)          Notwithstanding as provided in sub-section (a) above, Yissum may publish, or allow the Researcher to publish, the Research Results, and anything relating to the application of the Know-How, the Research, and the Research Results, provided that it obtains the Company's consent. The Company undertakes to reply to such an application by Yissum within 30 days of receiving the application. The Company may only decline such an application upon reasonable grounds which shall be fully detailed in writing.

 

(d)          Should the Company decide not to allow publication as provided in sub-section (b) above for reasons which in Yissum's opinion are unreasonable, publication shall be postponed for a period of not more than 3 months to enable for the registration of patents.

 

(e)          The Company hereby undertakes not to publish any information relating to the Research Results, the Know-How, the Product, and/or the Development Results thereof without obtaining Yissum's prior written consent to the publication and the manner of making such publication. Yissum shall not withhold its consent as aforesaid without reasonable grounds.

 

(f)          The provisions of this section shall not prejudice any other right which the parties have pursuant to this Agreement and at law.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Master and Servant Relationship

 

13.         It is hereby agreed and declared between the parties that they shall act in all respects relating to this Agreement as an independent contractor and there neither is nor shall be any master and servant or principal and agent relationship and/or partnership in the relationship between the Company and/or any of its employees and Yissum.

 

Liability and Indemnity

 

14.         (a)          Yissum expressly disclaims any and all implied or express warranties and makes no express or implied warranties of merchantability or fitness for any particular purpose of the Know-how, the Research and/or the Research Results contemplated by this Agreement.

 

(b)          Any party shall be liable for any loss, injury and/or damage whatsoever caused to its employees and/or any person acting on its behalf.

 

(c)          During the Development and Research Period the Company shall procure and maintain comprehensive general liability insurance. Beginning at the time as any Product shall be commercially distributed or sold by the Company or by a Sub-Licensee, the Company shall procure and maintain comprehensive general liability insurance. The minimum amounts of insurance coverage required shall not be construed to create a limit of the Company's liability with respect to its indemnification under this Agreement.

 

Such comprehensive general liability insurance shall provide:

 

(i)          Product liability coverage,

 

(ii)         Contractual liability coverage for the Company's indemnification under this Agreement and in particular as stated in sub-section (b) and

 

(iii)        Name Yissum as an additional insured.

 

All required insurance will be at the Company's sole cost and expense.

 

(d)          The Company shall maintain comprehensive general liability insurance beyond the expiration or termination of this Agreement during the period that a Product relating to and/or developed pursuant to this Agreement is being commercially distributed or sold by the Company and/or Sub-Licensee, unless the Sub-Licensee undertake to maintain that liabilities insurance.

 

Termination of the Agreement

 

15.         (a)          Without prejudice to the party's rights at law or pursuant to this Agreement, any party may terminate this Agreement by notice given to the other party in any of the following cases:

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(i)          If a receiver or liquidator is appointed for a party and/or the party passes a resolution for voluntary winding up or a winding up application is made against the party and not set aside within 180 days;

 

(ii)         There shall be commenced against the party any case proceeding or other action seeking issuance of a warrant of attachment, execution, distriaint or similar process against a material portion of the party' s assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 180 days from the entry thereof.

 

(b)          Without prejudice to the party's rights pursuant to this Agreement or at law, any party shall be entitled to terminate the Agreement on the winding up or bankruptcy of the other party or should the party commit a fundamental breach of the Agreement and not remedy the breach within 30 days of receiving notice of the breach.

 

(c)          Should the Researcher fail to attain any milestone which will be done during the second and the third year, then the Company shall be entitled to terminate this Agreement within 60 days from a written notice by the Company.

 

(d)          Upon termination of this Agreement and termination of the License, or upon this Agreement ending for any reason, the License and other rights granted to the Company shall revert to Yissum, as long as the reason for Termination was not a breach of this Agreement made by Yissum. The Company shall return to Yissum, within 14 days of termination, all the materials relating to the Research and/or Know-How and/or Research Results and/or Development Results and/or Product connected with the License, and it may not make any further use thereof. In case of termination as set out herein, the Company will not be entitled to any reimbursement of any amount paid to Yissum in terms of this Agreement, as long as the reason for Termination was not a breach of this Agreement made by Yissum.

 

(e)          Notwithstanding as aforesaid, the end or termination of this Agreement shall not release the Company or Yissum from the performance of any obligation which it was liable to perform prior to the Agreement's end or termination.

 

Law

 

16.         The provisions of this Agreement and everything concerning the relationship between the parties in accordance with this Agreement shall be governed by Israeli law and jurisdiction shall be granted only to the appropriate court in Tel-Aviv.

 

Miscellaneous

 

17.         (a)          The parties may transfer and/or assign and/or endorse their rights and/or duties and/or any of them pursuant to this Agreement to another, provided, however, that each party will receive the other party's consent, in advance. Yissum shall not withhold its consent, without giving reasonable grounds.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(b)          The failure or delay of a party to the Agreement to claim the performance of an obligation of the other party shall not be deemed a waiver of the performance of such obligation.

 

(c)          All payments to be effected in accordance with the terms of this Agreement shall be linked to the Israeli Consumer Price Index, and the month of the signing of this Agreement shall serve as the base for all calculations.

 

(d)          Each party shall bear its own legal expenses involved in the making of this Agreement.

 

(e)          The headings to the sections in this agreement are for the sake of convenience only and shall not serve in the Agreement's interpretation.

 

(f)           This Agreement constitutes a full and complete Agreement between the parties and may only be amended by a document signed by both parties.

 

(g)          The Company does not have any existing agreement and/or arrangement of any kind with tnn Researcher and or any representative thereof.

 

(h)          The appendixes annexed hereto constitute an integral part hereof and shall be read jointly with its terms and provisions.

 

Notices

 

18.         All notices and communications pursuant to this Agreement shall be made in writing and sent by registered mail to or served at the following addresses:

 

  Yissum Research Development Company
  of the Hebrew University of Jerusalem,
  POB 4279
  Jerusalem 91042

 

The Company -    

 

or such other address furnished in writing by one party to the other. Any notice sent as aforesaid shall be deemed to have been received seven days after being posted by registered mail.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

YISSUM   THE COMPANY  
       
By: /s/ Perlmutter Mordehai   /s/ Zvi Joseph  
Name: Perlmutter Mordehai   Zvi Joseph  
Title: Managing Director and CEO      
Date: June 7, 2000      

 

/s/ M. Friedman  
Prof. M. Friedman  

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Appendix A

 

February 2000

 

Development of technology to expand the therapeutic potential of drugs having a narrow absorption window by means of biodegradable systems retained in the stomach.

 

Research infrastructure proposal for the development of innovative technology within “ Strategic Reserve” 2000 framework.

 

Submitting:

 

Head of Research:

Prof. Michael Friedman

Department of pharmaceutics

School of Pharmacy, the Hebrew University

PO box 12065 Jerusalem 91120.

Phone: 02-5758664, Fax: 02-6757246

 

Dr. Amnon Hoffman Director of Clinical Pharmacy and Pharmaceutics, School of Pharmacy, Faculty of medicine, the Hebrew University, Jerusalem.

 

Dr. Eran Lavy - Specialist in clinical medicine of domestic animals, Specialist Veterinary Pharmacology, the Hebrew University Koret School of Veterinary Medicine,

Rishon Le'Zion.

 

Prof. Joseph Zimmermann - specialist in Gastroenterology, Unit of Gastroenterology,

Department of internal medicine, Hadassah Medical Center, Ein Kerem, Jerusalem.

 

Prof. Evgeny Libson - specialist in Radiology, Department of Radiology, Hadassah Medical Center, Ein Kerem, Jerusalem.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Part II: Abstract

 

Objectives: The objective of the study is to develop a pharmaceutical gastroretentive system (with a prolonged retention property in the stomach) that will expand the therapeutic potential of a wide variety of drugs with ineffective absorption from the gastrointestinal system, and that are characterized by a narrow absorption window.

These drugs are divided into two types:

 

A. Drugs from various pharmacological families, clinically used, which bioavailability cannot be improved and duration of action cannot be prolonged using the existing pharmacological technology.

 

B. Drugs that demonstrate biological activity in laboratory tests but their development was ceased due to low bioavailability by oral administration and a relatively short half-life.

 

In order to achieve this purpose, several secondary goals were defined:

 

1. Development of an in- vitro gastroretentive system based on multilayer polymeric films and the investigation of the structure, the physical properties and the production processes of the system in order to control its physical parameters.

 

2. Demonstrating the gastroretentivity of the pharmaceutical system developed in dog model.

 

3. Demonstrating controlled release and enhanced absorption of drugs from this system using a dog model.

 

4. Testing the gastroretentivity of the system in humans.

 

5. Demonstrating controlled release and enhanced absorption of the drugs from this system in humans.

 

Methodology:

 

Execution of section (1) - creating different polymeric layers in controlled production conditions and investigating their physical properties using appropriate methods.

 

Execution of section (2) – monitoring the transition kinetics of the gastroretentive system marked with contrast medium along the intestinal tract of a dog, using x-rays at appropriate intervals in relation to appropriate control systems.

 

Execution of sections (3) and (5) will be carried out using pharmacokinetic monitoring of model drugs (such as Riboflavin, Atenolol, Furosemide) after oral administration of the gastroretentive composition, compared to a sustained release and immediate release conventional tablet.

 

Execution of section (4) - monitoring the transition kinetics of the gastroretentive system in humans gastrointestinal system using a radiological method and γ-scintigraphy method.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Scientific contribution of the study :

 

The use of important drugs of different pharmacological groups is limited due to their absorption properties from the gastrointestinal tract after oral administration.

In many cases the drug companies rule out, as of the initial research stages, drugs that are characterized by oral low bioavailability and short biological half-life that require frequent administrations.

 

The proposed project engages in the development of a technology to resolve the problem of drugs characterized by a narrow absorption window in the duodenum and proximal small intestine in which active absorption is possible.

In order to enable the optimal use of these drugs, a pharmaceutical system will be developed which, after oral administration, will be retained in the stomach and will release the drug in a controlled and slow manner thus providing the drug to the absorption sites of the intestine in slow perfusion, causing both to increase the degree of absorption and prolonging the duration of the absorption. Such pharmaceutical solution has numerous Pharmacokinetic (PK) and pharmacodynamic (PD) advantages.

 

So far, many efforts have been invested in the academia and the pharmaceutical industry in the development of such technology. Although none of the approaches that have been tested so far succeeded to solve the problem, extensive knowledge has been accumulated on the subject. This work is based on (1) the conclusions drawn from the approaches investigated so far, while combining the advantages learnt from past experience, to achieve an efficient gastroretentive system. (2) The results of the preliminary research conducted so far in our laboratories, essentials of which are protected in patent applications filed recently in Israel and in the United States.

 

Economic and social contribution of the research

 

The technology that will be developed, constitutes a non-specific “platform” that will enable to enhance the pharmacotherapeutic effectiveness of a wide range of drugs, some of which would not have reached the clinical phases of development, and therefore constitutes a very low investment in relation to the therapeutic efficacy that will be contributed, by its merit, to the health care system.

 

The proposed technology will lead to the reduction of side effects, improve compliance to drug therapy, reduce hospitalization time, expand the therapeutic potential and other ancillary advantages. These advantages amount to substantial financial savings to the health care system.

 

Keywords:

 

Controlled release; sustained release; gastric retention; gastroretentive; narrow absorption window; drug delivery system; bioavailability; drug therapy; delayed action preparation; local gastro-deudenum disease;

 

Part III: A detailed description of the research program

 

Research topic:

 

The research topic is the development of a technology that will enable the delivery and controlled release of a wide variety of drugs (without limitation of their physicochemical properties) in the stomach.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Such technology will constitute a significant improvement both in quality and in the cost of drug therapy in a wide variety of treatments.

 

The use of important drugs, of different pharmacological groups, is limited due to their absorption properties from the gastrointestinal system after oral administration (1). These drugs are characterized by a narrow absorption window in the duodenum and the proximal part of the small intestine (the jejunum), in which an active absorption is enabled through specific carriers in the intestine wall (2).

 

To allow optimal use of these drugs, there is a need to create a pharmaceutical system, which, after oral administration, will be retained in the stomach and release the drug in a slow and controlled manner, thus the drug will be delivered by slow perfusion to the intestine's absorption sites and lead to the optimization of the absorption (3).

 

It is known that such pharmaceutical solution has numerous Pharmacokinetic and pharmacodynamic advantages.

For example, lack of efficiency in the treatment of a wide range of drugs is manifested by a partial absorption which requires administrating high doses of the medication or an invasive delivery (booster shot or perfusion).

On the other hand, in the case of rapid absorption, a sharp increase of drug concentrations in the body may cause toxic effects.

Due to the relatively short time period in which the drug is present in the “absorption window” zone, it is impossible to engage the known technologies to the advantage of these medications for controlled release drug delivery, which occurs primarily in the colon.

 

The limitations in the use of these drugs are causing medical damages to the patient and indirectly generate high costs to the health system.

 

The retention of the drug in the pharmaceutical dosage form in the stomach enables the prolongation of the drug's perfusion duration from the stomach to the intestine.

 

This condition improves the absorption efficiency of drugs which have active absorption, and is carried out by specific endogenous carriers in the small intestine.

Increasing the efficiency of absorption will reduce the dosing frequency thus improving the patient compliance to drug therapy. Furthermore, this will reduce the gastro-intestinal side effects resulting from the decrease of the non-absorbable drug that remains in the intestinal tract.

The slow release of the drug from the retentive system will lead to the decrease of the maximal drug concentration (Cmax).

This reduction is manifested in the decrease of toxic side effects which intensity is directly dependent of drug concentration (Concentration dependent).

Additionally, many medications that demonstrate biological activity in laboratory tests fail to reach the development phase due to pharmaceutical reasons (4).

 

Examples of cessation of drug development due to pharmaceutical reasons are: physical instability, short half-life, low bioavailability after oral administration or lack of an appropriate pharmaceutical technology that will enable the prolongation of the biological activity (for local treatment as well).

 

The technology of gastroretenrive dosage form (hereinafter GRDF) that will be developed within the framework of this work, will enable the improvement of bioavailability, reduce the frequency of delivery and will prolong the biological activity (for local treatment as well) of various clinically used drugs and of drugs which development was ceased due to lack of an appropriate gastroretentive technology.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Examples of drugs relevant to the new technology are:

 

· Ionic drugs, such as lithium for the treatment of various mental disorders, mainly Bipolar Disorder.
· Antibiotics drugs of ß -lactam family such as amoxycillin and cephalosporines for the treatment of various Infections.
· Anti-viral drugs — for instance, important drugs for the treatment of HIV/ AIDS such as Zidovudine (AZT), Didanosine as well as drugs for the treatment of Herpes-simplex (valacyclovir, acyclovir).
· The key drug for the treatment of Parkinson disease - Levodopa.
· Various vitamins such as Riboflavin and vitamin E.
· Drugs from different families for the treatment of hypertension, including diuretics such as furosemide.
· A drug from the beta blockers family, Atenolol, and drugs from the family of ACE enzyme blockers (such as captopril, enalapril), which molecular structure is peptidomimetic.
· Methotrexate - an important antineoplastic drug which is also used, through oral administration, to treat autoimmune diseases such as rheumatoid arthritis and psoriasis.

 

Some examples of absorption problems of drugs with a narrow absorption window:

 

1. Acyclovir is the main drug used for the treatment of herpes-type viruses and varicella-zoster virus. Structurally, the drug is a synthetic derivative of nucleic acid guanine and therefore it is absorbed through a carrier of nucleic acids located in the wall of the small intestine.

The bioavailability of the drug is 15% - 30% and its half-life is 2.4 hours (5).

These data and the drug's pharmacodynamics (that requires a constant presence of the therapeutic concentration of the drug in the blood), result in the fact that the patient needs to swallow the drug 5 times a day.

 

2. Levodopa is the key drug for the treatment of Parkinson's disease. By its structure it is an amino acid (3, 4 Dihydroxy-phenylalanine) and therefore it is absorbed in an active absorption mechanism from the duodenum and from the small intestine, through a carrier of large neutral amino acids (6). The Pharmacodynamic profile of the drug demonstrates clearly that the decrease of the drug's concentration in the blood below a certain threshold causes an abrupt halt in the drug activity.

This fact accentuates the necessity of a steady and controlled delivery of the drug into the body. For this reason, a sustained release system has been developed in the past for Levodopa. The sustained release composition that was developed, regardless of its advantages compared to conventional tablets which release the drug immediately, still requires a 4 times a day delivery, when patients that have a clear short-term reaction phenomenon of the drug (wearing-off) need to use the sustained released composition at a frequency of less than 4 hours (7).

In comparison with the sustained release composition, an invasive clinical treatment directly perfused into the duodenum with a catheter, marked a spectacular success (8).

The prevention of sharp fluctuations of levodopa concentrations in the blood which are achieved in this manner, leads to the increase of the drug's efficacy for critically ill patients, the decrease of various side effects of the drug, (for example, early morning dystomia, peak dose dyskinesia) and mainly lead to the decrease of wearing off situations which are characteristic to the inefficient absorption of this drug.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3. Atenolol is a selectively antagonistic drug to ß 1 adrenergic receptor, devoid of intrinsic sympathetic activity. The drug is used for the treatment of hypertension, angina pectoris, angina and tachycardia. The treatment with atenolol in these situations is chronic and usually lifelong. The Activity of the drug is very similar to that of metoprolol both in terms of desired activities and side effects. Findings suggest that both drugs, in high concentrations, lose their selective effects on the activity on receptor ß 1 , and another activity is also generated on receptors ß 2 entailing side effects such as a depressing effect on the respiratory system, aggravation of peripheral vascular disease and aggravation of diabetes conditions (9).

Over ten years ago, a sustained release composition of metoprolol was developed.

It has been established that by administrating the drug in a controlled release delivery, effective drug concentration were achieved throughout the day without high peak concentrations (Cmax) which are responsible for the effects.

 

It is worth noting that since the introduction of this metoprolol composition in the market, its advantages in terms of effect selectivity and improvement of patient compliance caused that the immediate release composition of this drug is no longer used. The analogy to the case of Atenolol is obvious. The only limitation in this analogy is due to the various properties of this molecule which is more polar

Pka = 9.6, with an Octanol/water distribution coefficients logD = -1.8.

The absorption of atenolol is therefore limited to active absorption processes occurring in the proximal small intestine and only a minimal absorption in the colon (10).

 

In reference to the above, it is understood that, for this type of drugs, it is not possible to design a sustained release composition based on the existing technologies, for the reason that this composition, after oral delivery, will traverse within a matter of a few hours (4 to 6h) the active absorption sites and reach the colon where an absorption of these drugs to the systemic circulation will not occur, whatsoever.

 

It is noteworthy that the drugs mentioned above as examples of medical substances appropriate for transport by GRDF, are known and present for quite a while.

Every year, the pharmaceutical companies around the world synthesize thousands of new molecules which are investigated as potential medications. Often, such medications, do not reach clinical applicability due to their absorption limitations by oral administration.

A gastroretentive delivery system will be appropriate to a wide variety of such medications which are in a development process or will be developed in the future.

 

The principles of the proposed technology:

 

The new technology under development is a dosage form of two geometric shapes. The first is easy to swallow when folded and stored inside a gelatin capsule and the other is obtained in the stomach after the dissolution of the gelatin capsule. The dosage form is of considerable dimensions as well as of significant mechanical strength so as to prevent a rapid transition from the stomach forward to the gastrointestinal system.

As a matter of fact, the technology under development is the first one to combine all of the following elements:

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1. Easy swallowing of the GRDF.
2. Geometry and dimensions proven to be gastroretentive in humans.
3. Considerable mechanical strength that ensures the retention of the GRDF's geometric in the stomach and prevents its rapid decrease to the dimensions of a conventional dosage form. Without the assurance of the mechanical strength, the dimensions of the composition are meaningless, since the mechanical force exerted by the stomach leads to the rapid decrease of the dosage form and enables its fast evacuation from the stomach.
4. Degradability of the GRDF through a dissolution and/or disintegration mechanism.
5. The GRDF consists of polymers approved for use in humans.
6. The GRDF contains components that enable its rapid disintegration, when necessary, by the alkalization of the stomach; which ensure an especially high safety profile for this system.

 

The technology is based on the results of the preliminary study conducted so far in our laboratories. The specifications of the GRDF “prototype” under development appear in the preliminary results section.

 

Scientific and technological background:

 

Numerous resources have been invested in recent decades, in the academia and in the pharmaceutical industry for the development of complex dosage forms from which the active substance is released in a steady and gradual manner in relation to conventional dosage forms. These sustained release dosage forms can be used for local or systemic treatment and have the following advantages (11):

 

1. Reduction of dose frequency.
2. Decrease of the drug levels fluctuations in the blood.
3. Improving patient compliance.
4. Achieving a more uniform effect.
5. Diminution of side effects.

 

Nevertheless, the oral sustained release dosage forms, inclusive of all their different types, do not constitute a solution for (1) drugs with a narrow absorption window which are only permeated in the small intestine and duodenum; (2) when there is the need to generate a prolonged local activity of drugs on the wall of the stomach or duodenum, as in the case of ulcer (12).

Many drugs are absorbed mainly in the small intestine due to the fact that the surface available for absorption in the small intestine is enormous (approx.463 m 2 , about the surface of a basketball court) (3), but they are not absorbed from the colon.

 

Using a slow release dosage form of these drugs will cause that a small amount of the drug will be available for absorption in the parts where the absorption is efficient. On the other hand, the release of the drug from the composition will actually aim the areas where it has less absorption. The optimal formulation for such drugs is one that will be sustained in the stomach and release the active substance from there in a slow and controlled manner. Retention in the stomach will lead to a slow “perfusion” of the drug from the stomach to its absorption sites and thus enhance the absorption efficiency.

 

Already some 25 years ago, G. Levy demonstrated that a the prolongation of the retention duration of a drug in the stomach could lead to its enhanced bioavailability (13).

In an experiment he conducted, he found a direct link between the bioavailability of riboflavin and the gastric emptying rate.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The experiment showed that the biological availability of riboflavin is enhanced if taken with Coke versus diet Coke, whereas with diet Coke, the availability is high compared to administrating the drug with water. The reason for this phenomenon is that the sugar and the phosphoric acid in the Coke prolong the retention of the riboflavin in the stomach and since its absorption window is mainly in the small intestine, its bioavailability increases.

Similarly, with diet Coke, the phosphoric acid causes a prolonged retention of the drug in the stomach, but to a lesser extent in comparison with Coke, because it does not contain sugar.

Figure 1 shows the results of the experiment:

 

 

Figure 1. Effect of soft drinks on the bioavailability of Riboflavin in a health adult human subject. plotted are the excretion rates of Riboflavin as a function of time after oral administration of 41 mg. Riboflavin-5-phosphate in 450 ml water, (    ), sugar-free ·             coke (    ) and regular cola(    ).                o

 

(Figure 1 shows the absorbed quantity according to the urinary excretion rate).

 

In light of these findings and in an effort to enable a local treatment for problems in the stomach and the duodenum, numerous and diverse efforts were invested during a long period of time, both in academia and in the pharmaceutical industry, in the development of appropriate technology for effective GRDF. The many efforts invested to date (14-18) were unsuccessful; therefore nowadays there is not a technological solution in the world for this pharmaceutical problem.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

There are several reasons that led to the failures of the technological developments made thus far. The main reason is the natural physiology of the stomach and the gastrointestestinal system in which, in a state of fasting, there are regular and cyclical peristaltic waves which one of their purposes is to expel residues which were not digested in the fed state from the stomach further to the gastrointestinal tract. Thus, these strong peristaltic waves include a sequence of powerful contractions called housekeeper wave that lasts approximately 5-15 minutes and results in the expulsion of those residues. This wave can also expel from the stomach a pharmaceutical composition (or a part of it).

For this reason, conventional pharmaceutical dosage forms do not stay in the stomach in a fasting state beyond two hours. On the other hand, large dosage forms and objects are propelled from the pylorus and the distal antrum to the proximal antrum.

 

Other reasons for failing in developing this technology stem from the complexity of the emptying process of the stomach which is affected by the pylorus diameter , effects of food and food composition, concomitance of other drugs, smoking, posture of the body (upright or supine positions of the patient), mental state of the patient, physical activity, different disease states and pregnancy .

 

The extensive knowledge accumulated in the development and the assessment processes of the various GRDF technologies, allowed us to draw conclusions and to incorporate the physical and geometrical parameters found so far as important in determining the duration of the retention of the GRDF in the stomach, in a synergistic manner that will overcome the physiological emptying processes. These principles were incorporated in the compositions that are listed in the patent applications recently filed in Israel (19) and in the United States (20).

 

The main technologies developed so far for the purpose of retaining controlled release compositions in the stomach, were (12, 21):

 

· Use of transit inhibitors substances. These include auxiliary fatty materials in a formulation such as triethanolamine myristate. Fatty carrier and especially fatty acids, reduce the motility of the stomach and the intrinsic rate of the gastric evacuation. Preliminary experiments on animals have shown a problem of considerable interindividual variance. Another suggested approach was to use anticholinergic drugs (such as Propentelin) that inhibit the transition rate from the stomach to the small intestine by the suppression of the motility of the gastrointestinal system. Such an approach is not desirable due to possible side effects that are added to the medical treatment.

 

· Bioadhesion (adhesion of the pharmaceutical formulation to the wall of the stomach or intestine): so far there were no findings of polymers with proven adherence properties to the mucosa, in a manner that could notably prolong the retention time of solid dosage forms in the stomach of dogs or humans. Apparently, the reason for the failure derives from the rapid turnover rate (turnover) of the epithelial cells and the mucus layer in the wall of the stomach and the typical motility in the stomach as well as the proteolytic activity therein. It is well known that the turnover of the cells on the surface of the stomach, especially in fasting state, can occur every few minutes up to several hours.

 

· Floating systems: systems that include polymeric matrices with effervescent component (e.g. dry sodium bicarbonate) or matrices containing chambers of liquid that gasify at body temperature. Matrices that contain bicarbonate, upon contact with the acid medium of gastric fluids, a carbon dioxide gas (C02) is liberated and entrapped in the polymeric matrix. The decrease of the specific gravity should result in buoyancy. One of the reasons for the failure of this approach was that the amount of fluids in the stomach, in a fasting state, is not sufficient for the buoyancy of the dosage form and all the stomach's content empties within a few hours due to the physiological motility.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

· “Heavy” dosage forms: these dosage forms were based on the fact that the lower area of the stomach antrum is lower than the “gatekeeper” area (the pylorus), thus the sinking to the bottom of the stomach could lead to a prolonged retention of the dosage form in the stomach. Accordingly, there was an attempt to develop dosage forms with a specific gravity higher than the specific gravity of the gastric fluids.

This approach failed and it was found in animal studies that the retention time in the stomach was not longer compared to conventional pharmaceutical compositions.

 

· Dosage forms with variable geometry: In order to develop dosage forms that would be too large to pass from the stomach to the duodenum, two configurations were developed. One small for easy swallowing and a second, larger, which is obtained immediately upon arrival at the stomach. The second configuration should be too large to pass in an immediate manner from the stomach to the intestine and should simultaneously dissolve or disintegrate to ensure its evacuation from the stomach. The initial developments of these dosage forms were for veterinarian purposes (14). One of the obstacles in the development of such a system for humans derives from the potential danger that such compositions delivered in multi unit dosage forms will remain in the stomach without evacuating (22).

 

The development and assessments of various GRDFs were documented in numerous patents (23-26) and in scientific literature (1, 12, and 21).

Following are some examples of patents filed in this field:

 

US Patent 5,651,985 (27) describes a system that consists of a mixture of polyvinyl-lactams and polyacrylates which are characterized by a considerable swelling in the stomach.

 

US Patent 5,217,712 (28) describes a system that consists of biodegradable, cross-linked, polyorthoesters that expands from their compressed state upon delivery. The acidic environment of the stomach leads to the degradation of the polymers in the system and thus allows the evacuation of the system from the stomach. The system is characterized by a considerable elasticity.

 

US Patent 4,434,153 (29) describes a system that consists of polymeric layers generated from hydrogel that absorbs fluids from the stomach, swells and expands in the stomach. It also consists of tiny particles dispersed throughout the polymeric matrix; these particles have a core containing a drug and fatty acid that surrounds the core.

Of all the approaches that have been explored so far, it was concluded that the important parameters for the retention in the stomach, are the geometric dimensions and spatial form (2). A group of researchers from the pharmaceutical company MSD has reached the most advanced stages of developing a dosage form, based on this principle, on human beings (30-32). However, these works focused on compositions of a physical size of approximately 2 cm long dimension, which eventually did not lead to a successful retention in human stomach.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Unlike the aforementioned technologies, the dosage form being developed in our laboratories is based on dimensions which were proven in the literature as gastroretentive dimensions for foreign objects. These gastroretentive data show that blunt objects with less than 5 cm length or less than 3 cm diameter are evacuating from the stomach further to the gastrointestinal system and away from it without difficulty (33, 34). Accordingly, the developed GDRF reaches, after its expansion in the stomach, such or larger dimensions in order to facilitate retention in the stomach. In addition to geometric dimensions we found that the physical- mechanical properties of the composition in terms of strength, elasticity and plasticity, have a synergistic effect which considerably increases the probability of retention in the stomach, and this combination of properties is essential for achieving a breakthrough in the development of the proposed technology.

Furthermore, contrary to the characteristics of foreign bodies trapped in the stomach, the proposed dosage form undergoes a process of dissolution and/or disintegration which ensure its evacuation from the stomach after the drug is released from it.

 

The suitability of the study to the priority areas as published in Call for Proposals:

 

The study is infrastructural and innovative in the field of pharmaceutics, and as will be described in the section on the expected benefits of the study, it has applicable feasibility and a great economic potential. The study integrates several research groups contributing knowledge in the physical, pharmaceutical, biological and medical aspects required to overcome the difficulties involved in the development of the innovative technology.

The proposed technology provides answers to the lack of a pharmaceutical gastroretentive solution and the success of the project is expected to lead to economic success as a result of its implementation.

 

The expected benefits from the research:

 

The proposed technology uses biodegradable polymers approved for use in humans. The development costs are for the delivery system itself which will constitute a broad “platform” suitable for a wide variety of drugs.

The investment, compared to the investment required for the development of a new drug, is relatively modest. Since the polymers that comprise the product are approved for use in humans and are relatively inexpensive, the long and expensive process of toxicological testing, customary in new drugs, is expected to be, in this case, infinitely shorter and cheaper. This would lead to the possibility to sell the improved composition at the same cost as the compositions available today and thus, seize a huge market share in a relatively short time by virtue of the therapeutic advantages deriving from this new technology.

 

Since this is a technology that consists of a solution for a wide variety of clinically used drugs, and it could lead to the applicability of many drugs which development is currently stopped due to pharmaceutical considerations of lack of pharmaceutical technology for an appropriate delivery, the investment in its development is highly worthwhile in relation to the potential market it would serve. The considerable efforts invested so far by giant companies such as Roche, Alza, ALAN and Merck in the development of a similar technology, establish clearly that its target market is huge and the economic potential is substantial.

 

In order to clarify the size of such market, presented below are the global sales figures of a number of drugs which activities will be improved by the proposed technology:

 

· Global sales of amoxycillin (in Augmentin R composition) are over 3 billion Dollars.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

· Global sales of all the orally administered beta-lactam class antibiotics market (which all have a “narrow absorption window”) are 5 times larger in volume:

 

· Global sales of acyclovir are 1.9 billion dollars.

 

· Global sales of zidovudine (AZT) are 940 million dollars.

 

· Global sales of didanosine are 300 million dollars.

 

· Global sales of levodopa are 350 million dollars.

 

· Global sales of metformin are 1,160 million dollars.

 

· Global sales of captopril are 1,600 million dollars.

 

· Global sales of atenolol are 1,260 million dollars.

 

· Global sales of furosemide are 500 million dollars.

 

As evidently clear from these figures, the economic viability of this project which allows the takeover of an important segment of the pharmaceutical market is enormous, given the large volume of sales in this sector. In addition, improving the efficacy of drug treatment is of a crucial necessity for the health systems in the face of the sharp increase in the costs of treatments and the lack of funds to cover these costs, in Israel and around the world.

The technology to be developed consists of a non-specific “platform” that will enable to enhance the drug therapy of a wide variety of drugs, and therefore constitutes a very low investment in relation to the efficacy of treatment that will be enhanced, by its merit, to the health care system. The benefits of reducing side effects, the increase in the compliance to drug therapy, reducing bacterial resistance, decreasing hospitalization time, expanding the therapeutic potential and other ancillary benefits, all amount to substantial fmancial savings to the healthcare system and establish the necessity of the proposed technology for caregivers organizations and bodies.

 

Detailed program of the study:

 

The specific objectives are:

 

1. The development of an in- vitro gastroretentive system based on polymer layers and the investigation of the structure, physical characteristics and production processes of the system in order to control its physical parameters.

 

2. Assessment of the gastroretentivity of the pharmaceutical system developed in a dog model.

 

3. Demonstration of controlled release and enhanced absorption of medications of this system using a dog model.

 

4. Characterization of the retention mechanism of the composition in a dog stomach.

 

5. Examination of the gastroretentivity of the system in humans.

 

6. Demonstration of controlled release and enhanced absorption of this system in humans.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Methodology:

 

Execution of section (1) - using IR spectroscopy, DSC, SEM, optical microscopy, UV spectroscopy, atomic absorption spectroscopy, goniometric method to characterize the contact angle on the surface and measurement of mechanical properties.

The microscopic methods, IR spectroscopy and the calorimetric method

(Differential Scanning Calorimetry, DSC) will provide information on the solubility of the polymer layers components into each other. These methods will enable to track the changes in solubility after aging processes (rigidity of the polymeric matrix during the shelf life of the composition) that the composition might be subjected to during its stay on the shelf. Measurement of the mechanical properties (Yield strength, Young's modulus of elasticity) will be conducted by means of the stress-strain test using the Instron testing machine. This method enables to plan a composition that has optimal mechanical properties. Furthermore, the method allows the tracking of mechanical changes that the formulation undergoes after aging.

UV spectroscopy and atomic absorption spectroscopy will enable the characterization of the release kinetics of different drugs (e.g. Riboflavin and lithium carbonate respectively) from the dosage form. A Goniometric method for measuring the contact angle of the surface will allow an assessment of the hydrophobicity / hydrophilicity of the surface, in order to prevent the adhesion of the composition to itself in In-vivo conditions during the wetting of the dosage form by the stomach fluids.

Execution of section (2) - tracking the transition kinetics of the gastroretentive system marked with contrast medium along the intestinal tract of a dog, using x-rays at predetermined and appropriate intervals.

Each dog, at any point in time, will be photographed from two different angles (ventral-dorsal and right lateral) for accurate identification of the anatomical location of the gastroretentive system in the gastrointestinal system.

The marking of the system will be performed by the incorporation of contrasting fibers into different areas of the composition, in a defined and penetrable manner that will allow determining, aside from the anatomical position of the gastroretentive system, the extent of its physical entirety and the dimensions that it occupies in the stomach.

From our point of view, The dog model constitutes a complementary system for the investigation of the in- vitro technology and allows identifying which of the physical changes in the “prototype” of the composition helps to improve the gastroretentive properties, the release and the degradability rate of the GRDF. Thus and so, this model constitutes a crucial step toward the investigation this technology performances on humans.

 

Execution of sections (3) and (6) using a pharmacokinetic monitoring of model drugs (such as Atenolol, Furosemide Riboflavin) after oral administration of the composition, in comparison with a sustained release conventional tablet and an oral solution.

Measuring the model drugs concentrations in the blood will be executed using a chromatographic method.

 

Execution of section (3) shall be in parallel to the use of a radiological method as described in section (2) to track the anatomical location of the composition in the dog's intestinal tract to ratify that the blood concentrations do correspond to the location of the composition , and will contribute to prove the concept of improving the bioavailability of these drugs using the gastroretentive approach.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Execution of section (4) will be carried out using Immunochemistry methods which enable monitoring hormones that affect the motility of the intestinal tract, in order to demonstrate that a prolonged retention of the composition in the stomach does not cause a change in these hormones' levels, meaning that it is in a mechanism that combines physical size and mechanical properties only, and not due to the delay of the physiological peristalsis.

 

Execution of section (5), using a radiological method and y-scintigraphy method considered as state of the art in tracking the progress of pharmaceutical dosage forms in the body after different deliveries such as oral and pulmonary deliveries. The method requires the incorporation of Samarium Oxide ( Sm 152 ) to the dosage form, in a quantity of several milligrams only (according to the dimensions of the dosage form). The stable isotope turns into a radioactive isotope (Sm 153 ) by exposing the dosage form to neutrons bombardment. There is a need to verify that there is no change in the physical properties of the dosage form after the neutrons bombardment. The intensity and timing of the bombardment are planned so that when swallowing, each dosage form contains 1 MBq of Sm 153 (35). The volunteers will swallow the dosage form in a fasting state and will be photographed at appropriate intervals.

 

The radiological method will be used in preliminary trials to track the transition kinetics of the GRDF in the intestinal tract. At a later stage, these findings will be verified using they-scintigraphy method which enables a precise and detailed tracking of the dosage form. The characterization with this method will be executed on the optimal formulation in humans. The high safety profile of the y-Scintigraphy method and the monitoring quality on the dosage forms in the human body has become a state-of-the-art method for monitoring pharmaceutical dosage forms in the human body. Israel has no knowledge of using this method in pharmaceutics. The experiment will be carried out as a service work by Pharmaceutical Profiles Company in Nottingham, United Kingdom. This company accumulated an extensive experience in this area, and is considered to be the leading company in the world for pharmaceutical uses of Y-scintigraphy method.

 

Timetable of work execution:

 

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

 

Legend

 

Phase 1: Development and characterization of advanced GRDF based on the in- vitro “prototype”. The analysis will include the use of methods described in the methodology section.

Output : The improved developments will be tested on a dog model (phase 2). The development will take place in parallel and based on the results obtained in steps 3-4 and will enable the development of an optimal dosage form for trials in humans.

 

Phase 2 : characterization of residence time in a dog stomach of compositions with different geometrics, various dimensions and different mechanical properties which are made from different components.

Output : the characterization of the link between the abovementioned parameters and the extent of residence in the dog model stomach will facilitate selecting the preferred dosage form for experiments in human subjects.

 

Phase 3 : Incorporation of drugs into the GRDF and kinetic characterization.

Output : the dosage form will release model drugs in a controlled and sustained manner and the characterization of the parameters affecting the in-vitro release kinetics will allow control on the drugs release kinetics from the dosage form in in-vivo conditions.

 

Phase 4 : Pharmacokinetic characterization of the GRDF in dogs.

Output : demonstrating that a gastroretentive dosage forms allows obtaining a steady level of model drugs in the blood over time and an enhanced bioavailability in dogs.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Phase 5 : Characterization of the retention mechanism of the composition in dogs.

Output : demonstrating that the composition does not affect levels of hormones which affect the motility of the gastrointestinal system, and the retention mechanism does not include changes in the cyclic peristalsis, but it is rather based on a combination of physical size and mechanical characteristics only.

 

Phase 6 : Characterization of the GRDF gastroretentivity in humans.

Output: demonstrating that the dosage form proved to be gastroretentive in dog models is gastroretentive in humans as well.

 

Phase 7 : Pharmacokinetic characterization of the GRDF in humans.

Output : demonstrating that a gastroretentive dosage forms allows obtaining a steady level of model drug in the blood over time and an enhanced bioavailability in humans.

 

Phase 8 : Writing reports and articles based on the results that will be achieved in the study.

Output : Publication of the articles in professional journals of pharmaceutical sciences.

 

Methodology of the collaborative research group:

 

The various research groups collaborating in this project are working together for several years to achieve the research objectives of this project. It can be seen in the timetable how the contributions of the different groups integrate together.

For example, the characterization of the parameters affecting the release kinetic of drugs from the in vitro dosage form which is executed in phase 3, will enable controlling the parameters affecting the release kinetic of in vivo dosage form set in phases 4 and 7. In this manner, the in vivo release kinetic will be optimized.

Similarly , the physical characterization of different compositions in phase 1 include also an assessment of the mechanical characterization, thus the results obtained in the mechanical characterization, will allow to find a link between the mechanical properties and the extent of retention in the stomach as set in phases 2 and 6 for the optimization of the composition.

 

The study will be conducted in three centers: The pre-clinical part will take place at the School of Veterinary Medicine in Rishon Le'Zion; the chemo-physical development at the laboratory of Professor Friedman in the Department of pharmaceutics.

The pharmacokinetic assessment and clinical trials will be conducted by Dr. Hoffman while the radiological research which will be conducted by Prof. Libson and the gastroenterology support that will be provided by Prof. Zimmermann will be combined together and will take place at the faculty of medicine “Hadassah” Ein Kerem.

 

The State of the art in the world:

 

The accepted work method in the world for sustained oral administration of drugs is the administration of sustained release conventional tablets. This objective can be achieved through several methods (36), however, there is no application of these methods in a gastroretentive technology, as described.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The Level of the research group in relation to the pertaining global activity:

 

The Level of the research group on the field of sustained release drugs both from conventional compositions and novel compositions, is extremely high. Various compositions designed by this research group are clinically used on a daily basis, in Israel and throughout the world, after some of them were approved for use by eligible health authorities including the FDA. as an example of the group's competency to develop a new technology to the level of industrial production and clinical use, it is worth noting that Prof. Freedman, the head of the proposed research, has developed technologies of the controlled release of drugs for the field of dentistry and for other drug treatments which are remarkably successful, among them Theotrim R , Dilatram SR R , Perio-Sens R (37), Periochip R (38).

 

The research group has filed patent applications in the Israeli (19) and American (20) patent authorities. The preliminary results obtained in the present study (as will be described below) , position the group at the forefront of gastroretentive dosage forms research.

Out of the large number of groups in the world working in the field of sustained release drugs, some deal with the attempts to develop GRDF. Most of the current studies are based on principles such as buoyancy of the dosage form over the stomach fluids (39, 40) with the purpose to overcome the obstacles of previous developments which turned out to be problematic and did not yield the desired results.

 

As was also reported in a recently published summarizing article (21), currently there is not any research group in the world that works on the development of GRDF based on the principles of technology developed in our laboratories (which is based, as stated, on the combination of size, geometric shape and mechanical strength).

The dosage form that is being developed in our laboratories relies on the findings of other groups as a basis for an improved development of GRDF.

 

The relative advantages of the research group:

 

1.  The group consists of academic scholars highly experienced in developing novel, applicable pharmaceutical technologies as well as clinicians experienced in gastroenterological aspects and in suitable imaging techniques.

 

2.  Extensive knowledge has been accumulated during the research work of this team in recent years. The knowledge was accumulated after inferences and conclusions drawn from findings of previous work conducted on the subject throughout the world.

Identifying the vulnerabilities of earlier technologies that failed in achieving the goals, allows to avoid repeating the mistakes of the past and to address more promising concepts.

These relative advantages are the added value necessary for the success of the project.

 

Preliminary results relevant to the proposal:

 

The current phase of the project is the result of a research effort that lasted about 3-4 Years and was funded by internal funds of the Hebrew University in Jerusalem. During this period, different polymeric layers were developed which led to the formation of preliminary compositions that comply with the gastroretentive requirements in a dog model.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

In a pharmacokinetic research with GRDF that was developed according to the proposed technology, there was a demonstration of a prolonged and sustained release and enhanced absorption. The compositions are based on polymers approved for human use by health authorities around the world.

 

Development of dosage forms and experiments on dogs.

 

Several dosage forms have been developed that demonstrated, in experiments on dogs, as having retention properties in the stomach. Examples of dosage forms that retain in the stomach:

 

Dosage form A:

A schematic description of the dosage form is represented in figure 2 on page 17.

The GRDF shape is rectangular and its dimensions in its expanded form are 5 cm X 2.5 cm.

The dosage form consists of 3 layers whereas the two external layers are identical (sandwich).

Both external layers (layers A in figure 2) are a system of semi interpenetrating network type (SEMI-IPN). SEMI-IPN is a type of system consisting of two polymers, which only one of them is cross linked (appears as a network).

These layers are composed of a mixture of glycerin as a softener at a rate of 20%, enteric polymer (polymer soluble in a neutral medium of the intestine but not soluble in acidic medium of the stomach is a type of methacrylic – methylmethacrylate acid at a ratio of 1:2 respectively (with the trade name of Eudragit S, hereinafter referred to as ES) at a rate of 30% and Byco protein which is a product of enzymatically hydrolysed gelatin with a molecular weight of 10,000 to 12,000, cross linked with glutaraldehyde at a rate of 50% of this layer, while the amount of glutaraldehyde is 4% in weight ratio to the Byco.

The inner layer is made of polymeric layers frame with considerable mechanical strength (detailed in the results below) which is a mixture of polylactic acid (hereinafter referred to as I-PLA) and ethyl cellulose in a ratio of 9 : 1 respectively (polymeric layers B in Figure 2). The frame is 0.5 cm width and consists of 4 strips. In the long dimension of the dosage form, the length of the strips is 4.5 cm while in the short dimension the strips' length is 2 cm. The thickness of the strips is approximately 0.65 mm. In the center of the inner layer there is a polymeric layer (polymeric layer C in figure 2) containing the model drug (riboflavin) at a rate of 30% in a mixture with the enteric polymer (shellac) at a rate of 70%.

The external layer is enveloped by another thin layer of (Microcrystalline cellulose) avicel (layer D in Figure 2) which role is to prevent the adherence of the dosage form to itself during the in-vivo wetting process. Such adherence may prevent the expansion of the dosage form to the desired size and adding this layer has demonstrated its effectiveness.

 

Figure 2 “Prototype” of GRDF developed in our laboratories.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

 

A. External layer (polymeric layers that consist of cross-linked byco, Eudragit S and glycerin).

 

B. Strips of polymeric layers with considerable mechanical strength (A mixture of ethyl cellulose, L - Polylactic acid).

 

C. Inner layer (polymeric layer that contains the drug).

 

D. A thin layer of Avicel (for preventing the adherence of layer A to itself).

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Dosage form B:

This dosage form was used as a control trial (placebo) and does not contain, in the central layer, strips with considerable yield strength. This dosage form is of identical size as dosage form A, i.e. a rectangle in the dimensions of 5cm X 2.5 cm.

 

Dosage form C:

This dosage form is similar to dosage form A; however the length of the rigid strips of the I- PLA- ethyl cellulose mixture do not exceed 2.1 cm in the long dimension. I.e. on each side of the long dimension of the rectangle there are two strips of 2.1 cm length with 2 mm space between them. There is also a space of 2 mm between the strips in the long dimension and the strips in the short dimension.

 

Dosage form D:

This dosage form is similar to dosage form A; however the length of the rigid strips of the I- PLA- ethyl cellulose mixture do not exceed 1 cm in the long dimension. I.e. on each side of the long dimension of the rectangle there are four strips of 1 cm length with 2 mm space between them. There is also a space of 2 mm between the strips in the long dimension and the strips in the short dimension.

 

Dosage form E:

This dosage form is similar to dosage form A; however the polymeric layer that compose the rigid strips is comprised of ethyl cellulose (97%) which is softened by Methyl citrate (3%). The thickness of the strips is identical to the thickness of the strips in dosage form A.

 

Dosage form F:

This dosage form is similar to dosage form A; however the thickness of the rigid strips is approximately 0.2 mm

 

Dosage form G:

The dosage form components are identical to those of dosage form A; however it has a square shape of 2.5 cm x 2.5 cm.

The length and width of each of the four rigid strips is 2 and 0.5 cm respectively, and the size of the inner layer of the shellac-riboflavin polymeric layers is 1.5 cm X 1.5 cm. the size of the external layers are the same as the dosage form's size 2.5 cm X 2.5 cm.

 

In addition to dosage form B, an additional control trial was performed with non-degradable tablets of 8 mm diameter and 3 mm thickness that contained Ethyl cellulose (98%) and Polyvinylpyrrolidone (2%).

 

Role of the dosage form components:

As described above, the dosage form is built in the form of a sandwich.

The external dual layer (Layer A in figure 2) has 3 roles:

A. Maintaining the physical entirety of the dosage form so that components of the inner layer (polymeric layers B, C in figure 2) will not be subject to disintegration.
B. Controlling the pace of solubility of the external layer allows control of the disintegration pace that the dosage form will undergo.
C. This layer contributes to control the rate of drug release from the dosage form.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The external layer contains also ES which roles are:

A. Increasing the yield strength and rigidity of the external polymeric layer (as will be detailed below) ;
B. Ensuring that the external layer will indeed dissolve in the continuation of the gastrointestinal system where it is soluble.
C. The possibility of dissolving the dosage form in the stomach, if needed, by its alkalization. As mentioned above, the inner layer consists of a mixture of drug and a polymer, and of strips of considerable yield strength and rigidity.

 

Experiments to characterize the parameters affecting residence time in dogs' stomach:

Each experiment was carried out in 6 Beagle breed dogs with a weight range from 10.8 Kg to 17.4 Kg, including 2 males and 4 females. The experiment was carried out in a fasting state, after at least 18 hours fasting, whereas, throughout the duration of the experiment, the dogs were given water ad libitum. Each composition contained contrasting threads to x-rays (standard surgical gauze pads) that were fixed in the composition during the preparation. The composition is inserted, after being folded, into a gelatin capsule. Just before swallowing the composition, each dog received (through a gastric tube) 400 ml of acidic buffer solution ( (PH = 1.5) designed to simulate the acidity in a human stomach. Monitoring the transition kinetics of the composition in the stomach and along the gastrointestinal tract was carried out using x-rays in intervals of 1, 2, 4, 6, 8 and 13 hours after the administration of the drug. Each dog was filmed at any point in time from 2 angles (ventral-dorsal and lateral -right).

Additionally, further x-rays were performed later to ensure that the drugs are excreted spontaneously from the stomach without external intervention. All experiments began at 17:00.

 

Results:

Table 1 describes the number of dosage forms, out of the 6, that remained in the stomach at each time point.

 

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

One can see the effect of the pharmaceutical formulation on the duration of the retention in the stomach and that it is possible to assure retention of over 13 hours in the stomach.

Dosage form B, which was used as a control (Placebo), is retained much more briefly, similarly to the non degradable tablets.

It can be seen, already at the two hours time point, that three of the six type B dosage forms reached the intestine. The maximum time in which the control dosage form was retained in the stomach was 6 hours (one of six dosage forms).

X-rays performed at a later time demonstrated that all the dosage forms were excreted from the dogs' stomach spontaneously, without any external intervention.

 

Conclusions:

Drugs with strips of considerable mechanical strength own a gastroretentive property as opposed to dosage forms that are devoid of these strips and non-degradable tablets.

The purpose of dosage forms C - F in comparison to dosage form A is to examine the effect of the length of rigid strips (dosage forms C-D), the different polymeric layers that consist of the rigid strips (dosage form E) the thickness of rigid strips (dosage form G) and the different sizes of dosage forms (dosage form G) on the extent of gastroretentivity.

The results show that dosage forms with thinner or smaller rigid strips can be used to achieve a similar gastroretentivity. Replacing the polymeric layer that consists of the rigid strip, reducing the thickness of the rigid strips and even reducing the dosage form size by half (dosage form G), produce similar results as the “prototype” (dosage form A).

However, the existence of rigid strips is essential.

 

Experiments to assess the effect of a sustained release gastroretentive dosage form on the bioavailability and pharmacokinetic profile in comparison to administrating oral solution and intravenous injection.

In order to assess the effect of the mode of administration on riboflavin bioavailability, 6 Beagle dogs with a weight range from 10.8 Kg to 17.4 Kg, comprising of 2 males and 4 females, which were in a fasting state for at least 18 hr before and during the experiment, while all this time were provided with water ad libitum, received 100 mg riboflavin-5-phosphate by 3 different modes of administration: (1) 5 ml of sterile isotonic solution of the drug given by intravenous injection, in addition to oral administration of 400 ml acidic buffer solution (pH=1.5) delivered to the stomach by a gastric tube; (2) solution of the drug in 400 ml of the same acidic buffer solution; (3) GRDF device similar to device A (described in page 17, except that the matrix layer in the center of the device consisted of shellac-riboflavin-5-phosphate at a ratio of 4.5:5.5 respectively.

The device releases the drug in a sustained release manner and was administered folded inside a gelatin capsule soon after the administration of 400 ml of the buffer solution.

Following each administration blood samples (4 ml) were collected into heparinized test tubes wrapped in aluminum foil (to protect from light), for modes (1) and (2) at times 0, 0.25, 0.5, 1, 1.5, 2, 2.5, 3, 3.5, 4, 6, 8, 11, 24 hours, and for mode (3) at times 0, 0.5, 1, 1.5, 2, 2.5, 3, 4, 6, 9, 12, 15, 18, 21, 24, 27, 30, 33, 36 and 48 hours. Plasma was separated using centrifugation (4000 rpm for 10 minutes), and stored at —20° C pending analysis.

 

Subsequent to the GRDF administration (mode 3), X-ray images were taken from the same angles mentioned above (page 18) at times 4, 6, 8, 12, 24, 36 and 48 hours, to monitor the location of the delivery system. The dogs were allowed to eat 24 hrs after the beginning of the experiment and on.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Riboflavin plasma concentrations were determined as follows: 100 mcl of trichloroacetic acid (20%) were mixed with 300 mcl of a plasma sample. After the centrifugation of the mixture (13,000 rpm for 10 minutes) the upper liquid (supernatant) was separated and kept warm for 10 min at 85° C. After additional centrifugation (13,000 rpm for 10 minutes), 60 mcl of the solution were injected to HPLC system with C18 column, and mobile phase that consisted of 15% acetonitrile in solution A (10 mmol potassium dihydrogen phosphate/L and 5 mmol hexanesulfonic acid/L), brought to pH = 3 (using orthophosphoric acid) at a flow rate of 1 ml/min. A spectrofluorometric detector set at 445 nm for excitation wavelength and 530 nm for emission wavelength detected the drug. Drug concentrations were determined with appropriate standard curves.

 

Figure 3 presents the riboflavin plasma concentrations in the dogs vs. time after administration of 100 mg riboflavin-5-phosphate in the 3 modes of administration.

 

Effect of mode of administration of 100 mg riboflavin-5-phosphate on mean riboflavin plasma concentration in dogs. Drug given either as IV bolus, oral solution or gastroretentive dosage form (n=6)

 

 

The slopes of the log-terminal following the three modes of administration were 0.44±0.13, 0.35±0.14 and 0.021±0.014 hr-1 for intravenous, oral solution and GRDF, respectively. According to these results (no statistically significant difference between the injection and oral solution) it can be concluded that the rate of riboflavin elimination is 0.4 hr - ' (as found following both IV and oral administration of the solution). This finding also verifies that the rate of riboflavin absorption is faster than the rate of evacuation.

On the other hand, the fact that the log-terminal slope following the GRDF administration is considerably slower than the evacuation process indicates that this is flip-flop type kinetics, and this slope represents the absorption rate of the drug, thereby confirming that the sustained release of the drug from the GRDF is the rate-determining step in the absorption process.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The bioavailability of riboflavin after oral administration of the solution was found to be 5.8±2.2%, while the GRDF bioavailability was significantly larger.

Up until 48hrs after administration, a 4 fold increase in the bioavailability was obtained and theoretical calculations based on the found pharmacokinetic parameters, demonstrated a significant increase of the bioavailability (by 10 to 20 fold than the one obtained after the solution administration mode).

 

“[***]”

 

Experiment to control the release of the active agent from the polymeric layer:

 

Sandwich systems were prepared in dimensions of 2.5 cm x 2.5 cm in which the internal polymeric layer measured 2 cm x 2 cm. The external polymeric was as discussed in the experiments of dog model while the Internal was a mixture of shellac-riboflavin at a ratio of 1: 1 in figure 6 and 3: 1 in figure 7, respectively. The extraction medium for each dosage form was 900 ml of acidic buffer (pH-2.2). The experiments were conducted at 37° C in the second dissolution according to USP method, paddle rotation speed was kept at 100 rpm Each experiment was conducted at least twice in triplicate.

Samples of 3.5 ml were collected at regular times while returning an equivalent amount of buffer solution to the extraction medium of exhaustion at every time period. Riboflavin concentrations were measured in a spectrophotometer at a wavelength of UV 444 nm against a calibration curve.

 

The aim of the experiment described in figure 6 is to examine whether it is possible to control the release rate of riboflavin using compositions of different thickness of internal polymeric layers.

 

The aim of the experiment described in Figure 7 is to examine whether it is possible to control the release rate of the drug from the composition by taking advantage of the fact that the drug is not dispersed in a uniform manner in the thickness dimension of the inner polymeric layer (C in Figure 2) but rather sets in the internal polymeric layer during its preparation so that the lower part of the polymeric layer contains higher drug concentrations than its upper part. In order to investigate whether it is possible to take advantage of this uneven dispersion, two compositions were prepared in which both external layer entrap two identical internal polymeric layer joint to each other. The adherence of the two internal was in a manner that the upper sides face each other and the lower sides face the external polymeric layers (upper-upper in the chart).

In another composition, both lower sides of the polymeric layers were attached (glued) to each other in a manner that the upper sides were attached to the external polymeric layers (lower-lower in the chart) whereas in a third composition, the upper side of one internal polymeric layer was attached to the lower side of another internal polymeric layer (upper-lower in the chart).

 

Figure 6: The effect of the thickness of the internal polymeric layer on the release rate of riboflavin in an acidic medium.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

 

Figure 7: The effect of different form of attachment (gluing) of the internal polymeric layer on the release rate of riboflavin in an acidic medium.

 

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Results and conclusions

 

As can be seen in chart 6, a composition with a thinner internal polymeric layer released the riboflavin in a faster rate. This result is expected since in the thinner composition, the distance that the drug molecules have to traverse through the enteric polymer shellac is shorter.

Figure 7 shows that it is possible to control the release rate of the drug from the composition by using different attachment forms. Attaching two internal polymeric layers in a manner that an upper side is glued to an upper side and the two lower sides are glued to the external polymeric layers, lead to the acceleration of the release rate. Attachment of a lower side to a lower side in a manner that the two upper sides face the upper external polymeric layers sides slows the release rate. This result is expected in light of the aforementioned. When the upper sides of the internal polymeric layers are glued to each other, twice, then the drug, concentrated at the bottom of polymeric layer, must traverse a smaller diffusion distance through the enteric polymer shellac, on its way to the extraction medium and vice versa. Thus, In practice, different forms of attachment of the same internal polymeric layers allow to control the release rate by determining the diffusion distance that the molecules of the released drug need to traverse.

 

Experiment that illustrate the control of the dissolution rate of the external polymeric layer :

 

As described above, the polymeric layer comprising the external films in the composition must undergo a gradual dissolution that will allow the product to pass from the stomach to the duodenum.

Controlling the rate of Byco protein, which is the primary component of the external film, is achieved by cross linking varying quantities of glutaraldehyde.

Figure 8 describes polymeric layers which are cross linked in different sizes when the cross linked amount of glutaraldehyde in relation to the Byco is 1%-5% in weight. The experiment was conducted under the same conditions as experiments that demonstrated control on the release rate of riboflavin from different polymeric layers. The determination method of the dissolution rate of protein Byco was the Lowry method of determining protein. The measurements were performed by UV spectrophotometer at 730 nm wavelength against a suitable calibration curve.

 

Result and conclusion:

Raising the cross linking percentage reduces the solubility of Byco protein which is the main component in the external polymeric layer. By changing the amount of the glutaraldehyde cross linking, it is possible to control the dissolution rate of Byco protein.

 

Figure 8: The effect of glutaraldehyde percentage on the dissolution rate of Byco protein from a polymeric layer containing Byco, ES, glycerin and glutaraldehyde in acidic medium.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

 

The means available to the researchers:

 

The laboratories of the researchers Prof. Michael Friedman and Dr. Amnon Hoffman who collaborate on the pre-clinical development are equipped with all the instruments and equipment required for the development of sustained release dosage form of drugs and for the pharmacokinetic evaluation and activity of drugs. Both laboratories are located on the same floor in the Department of Pharmacology in the school of pharmacy of the Hebrew University. The equipment includes all the standard laboratorial accessories, HPLC, centrifuges, a caleva device for the investigation of the release rate from tablets (and other pharmaceutical compositions) that comply with the American standard, computers etc.

 

A DSC device and UV spectrophotometer are available to researchers in the Department of Pharmacy and a fluorimeter device (which may be used for the characterization of the release kinetics of drugs) is at their disposal in the Department of Chemistry of the school of pharmacy.

At the Inter-Departmental Equipment department of the Faculty of Medicine (adjacent to the school of pharmacy) there are available to researchers, IR spectroscopy measurement device, a device for measuring atomic absorption, a scanning electron microscopy device SEM, and an optical microscope. A device for characterizing mechanical properties (instrom) and a goniometric device for measuring contact angle on the surface are available to researchers and are located at the Casali Institute of applied chemistry at the Faculty of science of the Hebrew University which is located at Givat Ram.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Dr. Eran Lavy supervises the experiments in dog model and is the expert of the veterinary school of the Hebrew for veterinary Pharmacology with specific expertise in gastroenterology. He possesses all the knowledge, tools, and expertise to conduct the study, and has conducted similar studies several times in the past. At his disposal are the animals and dogs shelters of the veterinary teaching hospital of the Hebrew University that are operated in high standards and in accordance with the Protection of Animals Act.

 

A unique and sophisticated x-ray machine for pets is at the disposal of Dr. Lavy at the Veterinary Hospital. All experimental protocols are approved by the Institutional Ethics Committee.

 

Prof. Evgeny Libson from the Radiology Department at Hadassah Ein Kerem is in charge of the experiments of radiological monitoring of dosage forms in the intestinal tract of humans and the gastroretentive characterization of this model. He possesses the required knowledge and experience to perform these experiments.

 

Prof. Josef Zimmermann from the gastroenterology unit of the Internal Medicine Division at Hadassah Ein Kerem Medical Center, is the clinical-medical responsible of the trials to evaluate the composition in humans. He is an expert in gastroenterology and has conducted similar studies several times in the past.

 

The pharmacokinetic research, determining drug concentrations in blood in dog model and in humans and pharmacokinetic analysis of the data will be conducted by Dr. Amnon Hoffman who has extensive experience in the subject.

 

The necessary knowledge for a detailed monitoring of pharmaceutical dosage forms in the y-y-scintigraphy method does not exist in the country, therefore this work service will be executed in Nottingham, United Kingdom by a company that specializes in servicing this method, PHARMACEUTICAL PROFILES.

 

The technical work will be executed by the laborants of our laboratories and by the PhD. student, Eitan klausner that will carry out the proposed project within the PhD. studies framework and under the guidance of Prof. Friedman and Dr. Hoffman.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Bibliography

 

1. Deshpande, A. A., Rhodes, C. T., Shah, N. H., and Malick, W. Controlled-release drug delivery systems for prolonged gastric residence: An overview, Drug Development and Industrial Pharmacy. 22: 531-539, 1996.
2. Rubinstein, A. and Friend, D. Specific delivery to the gastrointestinal tract. In: A. J. Domb (ed.) Polymeric Site-Specific Pharmacotherapy, pp. 267-313: John Wiley & Sons Ltd, 1994.
3. Read, N. W. and Sugden, K. Gastrointestinal dynamics and pharmacology for the optimum design of controlled-release oral dosage forms, CRC Critical Reviews in Therapeutic Drug Carrier Systems. 4: 221-263, 1987.
4. Barbhaiya, R. H. Pharmacokinetic strategies in support of mechanistically-based drug discovery, development and life cycle management, European Journal of Pharmaceutical Sciences. 8: abstracts ii, 1999.
5. Laskin, O. L. Clinical pharmacokinetics of acyclovir, Clinical Pharmacokinetics. 8: 187-201, 1983.
6. Tsuji, A. and Tamai, I. Carrier-mediated intestinal transport of drugs, Pharmaceutical Research. 13: 963-977, 1996.
7. Rodnitzky, R. L. The use of Sinemet CR in the management of mild to moderate Parkinson's disease, Neurology. 42 (suppl 1): 44-50, 1992.
8. Deleu, D. and Michotte, Y. Clinical and pharmacokinetic comparison of oral and duodenal delivery of levodopa/carbidopa in patients with Parkinson's disease with a fluctuating response to levodopa, European Journal of Pharmacology. 41: 453-458, 1991.
9. Kendall, M. J., Maxwell, S. R. J., Sandberg, A., and Westergren, G. Controlled release metoprolol-clinical pharmacokinetics and therapeutic implications, Clinical Pharmacokinetics. 21: 319-330, 1991.
10. Raoof A., Moriarty, D., Brayden, D. Corrigan, O.I., Cumming, I., Butler, J., and Devane, J. Comparison of methodologies for evaluating regional intestinal permeability. In vito-In vivo Correlations, pp. 181-189. New York, 1997.
11. Welling, P. G. and Dobrinska, M. R. Dosing considerations and bioavailability assessment of controlled drug delivery systems. In: J. R. Robinson and V. H. L. Lee (eds.), Controlled Drug Delivery: Fundamentals and Applications, 2 edition, pp. 255. New York: Marcel Dekker, Inc., 1987.
12. Moes, A. J. Gastroretentive dosage forms, Critical Reviews in Therapeutic Drug Carrier Systems. 10: 143-195, 1993.
13. Levy, G. Pharmacokinetic approaches to the study of drug interactions, Ann. N.Y. Acad. Sci. 24-39, 1976.
14. Oth, M., Franz, M., Timmerman, J., and Moes, A. The bilayer floating capsule: A stomach-directed drug delivery system for misoprostol, Pharmaceutical Research. 9: 298-302, 1992.
15. Patel, V. R. and Amiji, M. M. Preparation and characterization of freeze-dried chitosan-poly (ethylene-oxide) hydrogels for site-specific antibiotics delivery in the stomach, Pharmaceutical Research. 13: 588-593, 1996.
16. Desai, S. and Bolton, S. A floating controlled-release drug delivery system: in vitro-in vivo evaluation, Pharmaceutical Research. 10: 1321-5, 1993.
17. Johnson, R. H. and Rowe, E. L. Medicinal dosage forms of unpolymerized thiolated gelatin with a cross-linking accelerating agent providing slowly released medication from a swollen matrix. U.S. Patent 3,574,820: Upjohn Company, 1971.
18. Mamajek, R. C. and Moyer, E. S. Drug-dispensing device and method. U.S. Patent 4,207,890: McNeilab, Inc., 1980.
19. Friedman, M., Klausner, E., Lavy, E., and Hoffman, A. Gastroretentive controlled release pharmaceutical dosage forms. Israel patent application number 133196, 1999.
20. Friedman, M., Klausner, E., Hoffman, A., and Lavy, E. Gastroretentive controlled release pharmaceutical dosage forms. US patent application submitted, 2000.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

21. Hwang, S. J., Park, H., and Park, K. Gastric retentive drug-delivery systems, Critical Reviews in Therapeutic Drug Carrier Systems. 15: 243-84, 1998.
22. Vere, D. Death from sustained release morphine sulphate, Lancet 1: 1477, 1984.
23. Caldwell, L. J., Gardner, C. R., and Cargill, R. C. Drug delivery device which can be retained in the stomach for a controlled period of time. U.S. Patent 4,735,804: Merck & Co., Inc., 1988.
24. Caldwell, L. J., Gardner, C. R., Cargill, R. C., and Higuchi, T. Drug delivery device which can be retained in the stomach for a controlled period of time. U.S. Patent 4,758,436: Merck & Co., Inc., 1988.
25. Caldwell, L. J., Gardner, C. R., and Cargill, R. C. Drug delivery device which can be retained in the stomach for a controlled period of time. U.S. Patent 4,767,627: Merck & Co., Inc., 1988.
26. Curatolo, W. J. and Lo, J. Gastric retention systems for controlled drug release. U.S. Patent 5,443,843: Pfizer Inc., 1995.
27. Penners, G., Klemens, L., and Gehr, J. P.-v. Expandable pharmaceutical forms. U.S. Patent 5,651,985: Bayer Aktiengesellschaft, 1997.
28. Pogany, S. A. and Zentner, G. M. Bioerodible therrmoset elastomers. U.S. Patent 5,217,712: Merck & Co., Inc., 1993.
29. Urquhart, J. and Theeuwes, F. Drug delivery system comprising a reservoir containing a plurality of tiny pills. U.S. Patent 4,434,153: Alza Corporation, 1984.
30. Cargill, R., Caldwell, L. J., Engle, K., Fix, J. A., Porter, P. A., and Gardner, C. R. Conrrolled gastric emptying. 1. Eflects of physical properties on gastric residence times of nondisintegating geometric shapes in beagle dogs, Pharmaceutical Research. 5: 533536, 1988.
31. Cargill, R., Engle, K., Gardner, C. R., Potter, P., Sparer, R. V., and Fix, J. A. Controlled gastric emptying. 2. In-vitro erosion and gastric residence times of an erodible device in beagle does, Pharmaceutical Research. 6: 506-509, 1989.
32. Fix, J. A., Cargill, R., and Engle, K. Controlled gastric emptying. 3. Gastric residence time of a nondisintegrating geometric shape in human volunteers, Pharmaceutical Research. 10: 1087-89, 1993.
33. Hamilton, J. K. and Palter, D. E. Gastrointestinal foreign bodies. In: M. H. Sleisenger and J. S. Fordtran (eds.), Gastrointestinal Disease, Fifth edition, Vol. 1, pp. 286-290. Philadelphia: W. B. Saunders Company, 1993.
34. Hamilton, K. and Ploter, D. Foreign bodies and bezoars. In Feldman, B. F. Scharschmidt, and M. H. Sleisenger (eds.), Sleisenger & Fordtran's Gastrointestinal and Liver Disease, 6 edition, Vol. 1, pp. 331-335. Philadelphia: W. B. Saunders Company, 1998.
35. Adkin, D. A., Kenyon, C. J., Lerner, E. I., Landau, I., Strauss, E., Caron, D., Penhasi, A., Rubinstein, A., and Wilding, I. R. The use of scintigraphy to provide “Proof of concept” for novel polysaccharide preparations designed for colonic drug delivery, Pharmaceutical Research. 14: 103-107, 1997.
36. Hui, H. W., Lee, V. H. L., and Robinson, J. R. Design and fabrication of oral controlled release drug delivery systems. In: J. R. Robinson and V. H. L. Lee (eds.), Controlled Drug Delivery, 2 edition, pp. 373-423. New York: Marcel Dekker, Inc., 1987.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

37. Friedman, M., Steinberg, D., Soskolne, A., and Sela, M. Sustained release pharmaceutical compositions. Eur. Patent 873,042,659, 1987.
38. Friedman, M. Dental composition for hypersensitive teeth. U.S. Patent 5,403,577: 1995.
39. Atyabi, F., Sharma, H. L., Mohammad, H. A. H., and Fell, J. T. In vivo evaluation of a novel gastric retentive formulation based on ion exchange resins, Journal of Controlled Release. 42: 105-113, 1996.
40. Whitehead, L., Fell, J. T., Collett, J. H., Sharma, H. L., and Smith, A. Floating dosage forms: an in vivo study demonstrating prolonged gastric retention, Journal of Controlled Release. 55 : 3-12, 1998

 

 
 

   

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

GASTRORETENTIVE CONTROLLED RELEASE PHARMACEUTICAL DOSAGE

FORMS

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The rationale for developing expandable drug delivery systems is based on the nature of the pyloric antrum that, by means of antiperistaltic motion, retropels large bodies away from the pylorus back to the fundus and body of the stomach, thus prolonging their gastric retention time (GRT). Such dosage forms should preferably be designed to undergo biodegradation or disintegration, to enable their evacuation from the stomach.

 

US Patent No. 3,574,820 teaches the use of a gelatin matrix which hydrates in the stomach, gels, swells and cross-links with N-acetyl-homocysteine thiolactone to form a matrix too large to pass through the pylorus.

 

US Patent No. 4,207,890 discloses a drug dispensing device which comprises a collapsed, expandable imperforate envelope, made of a non-hydratable, body fluid and drug-permeable polymeric film, which contains the drug, and an expanding agent also contained within the polymeric envelope which, when in contact with body fluids, causes the envelope to expand to a volume such that the device is retained in the stomach.

 

US Patent No. 4,434,153 describes a device comprised of a matrix formed of a hydrogel that absorbs and imbibes fluid from the stomach, expands and swells, in order to retain in the stomach for an extended period of time, and a plurality of tiny pills dispersed throughout the matrix, having a drug-containing core and a fatty acid and wax wall surrounding the core.

 

A significant disadvantage of the devices of the above publications is that they appear to ignore natural contractions of the stomach which may contribute to a rapid diminishing of size, leading to early removal of the device from the stomach. These devices lack the mechanical strength required to withstand the natural mechanical activity that includes contractions of the stomach.

 

U.S. Patents Nos. 4,767,627, 4,735,804 and 4,758,436 present dosage forms of various geometries: continuous solid stick; tetrahedron; planar disc; multi-lobed flat device; and ring. The devices are compressible to a size suitable for swallowing, and are self-expandable to a size which prevents passage through the pylorus. They are sufficiently resistant to forces of the stomach to prevent rapid passage through the pylorus for a pre-determined period of time and erode in the presence of gastric juices. The devices are homogenous, namely they contain the same polymer constitution in different areas of the device. The tetrahedron presented in Patent No. 4,735,804 is homogenous in its four lobes, which are attached to each other by a polymeric matrix.

 

2
 

   

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The medicaments are incorporated into the device as a liquid solution or suspension, which may necessitate the addition of mentioned preservatives or buffering agents. Alternatively, the controlled release drug module may be tethered or glued to the device.

 

US Patents Nos. 5,002,772 and 5,443,843 disclose an oral drug delivery system having a delayed gastrointestinal transit which releases the drugs contained therein a controlled manner and which in their expanded form resist gastrointestinal transit. These delivery systems comprise a non-continuous compressible element and an attached controlled release drug-containing device.

 

US Patents Nos. 5,047,464 and 5,217,712 describe a system comprising big-erodible, thermoset, covalently cross-linked, poly(ortho) ester polymers, which expand from a compressed state upon delivery thereof. The acidic environment of the stomach eventually results in the degradation of the polymers within the system, thus permitting its removal from the stomach. The system is characterized by high resiliency.

 

Finally, U.S. patent No. 5,651,985 describes a system devised from a mixture of polyvinyl-lactams and polyacrylates which are characterized by their high degree of swelling in the stomach, resulting in its retention in the stomach for a prolonged period of time.

 

Notwithstanding the developments in gastric retention devices, known devices still suffer many drawbacks, and there is need for yet improved delivery systems. The present invention is aimed at such improved devices, which would overcome the drawbacks of known devices.

 

3
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Summary of the Invention

 

The present invention relates to a pharmaceutical gastroretentive drug delivery system for the controlled release of an active agent in the gastrointestinal tract, which comprises a pharmaceutically effective amount of at least one drug; a matrix having a two- or three-dimensional geometric configuration comprising (1) a biodegradable polymer selected from a hydrophilic polymer which is not instantly soluble in gastric fluids; and/or an enteric polymer substantially insoluble at pH less than 5.5; or a mixture of at least one said hydrophilic polymer and at least one said enteric polymer; or (2) a non-degradable polymer, provided that the matrix formed therefrom has a size that does not retain in the stomach more than a conventional dosage form; or (3) a mixture of at least one polymer as defined in (1) with at least one polymer as defined in (2); and a continuous or non-continuous membrane affixed to said matrix, said membrane comprising at least one polymer having a substantial mechanical strength; wherein said drug is embedded in said matrix.

 

The delivery device of the present invention may further comprise a shielding layer covering at least one face of said matrix and optionally covering all or part of said membrane, said shielding layer comprising a hydrophilic polymer which is not instantly soluble in gastric fluids alone or in combination with an enteric polymer substantially insoluble at pH less than 5.5.

 

In addition, the delivery device of the invention may optionally further comprise a suitable plasticizer.

 

The delivery device of the invention is particularly suitable for the delivery of drugs which have a narrow absorption window in the gastrointestinal tract, or for local treatment of the gastrointestinal tract. The drug may also be a drug that degrades in the colon. The device of the invention may be used for delivery of drugs to both humans and other mammals.

 

The hydrophilic polymer of the device of the present invention may be a protein, a polysaccharide, a polyacrylate, a hydrogel or a derivative of such polymers. The polymer may be cross-linked with a suitable cross-linking agent.

 

The said enteric polymer may be shellac, cellulose acetate phthalate, hydroxypropyl methylcellulose phthalate, hydroxypropyl methylcellulose acetate succinate or methylmeth acrylate-methacrylic acid copolymer.

 

The delivery system may also comprise a mixture of said hydrophilic polymer and said enteric polymer.

 

4
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The said non-degradable polymer may be ethylcellulose or a coplymer of acrylic acid and methacrylic acid esters, preferably having from about 5 to 10% functional quaternary ammonium groups. Other suitable polymers are polyethylene, polyamide, polyvinylchloride, polyvinyl acetate and mixtures thereof. The said membrane may comprise degradable polymer/s, nondegradable polymer/s or mixtures thereof.

 

The said anti-adhering layer may comprise a pharmaceutically acceptable cellulose or derivative thereof, silicate or an enteric polymer substantially insoluble at pH less than 5.5.

 

The delivery device of the invention is particularly suitable for the treatment of gastrointestinal associated disorders selected from peptic ulcer, nonulcer dyspepsia, Zollinger-Ellison syndrome, gastritis, duodenitis and the associated ulcerative lesions, stomach or duodenum neoplasms.

 

Description of the Figures

 

  Figure 1 is a partially fragmented exploded perspective view of an embodiment of a device according to the present invention.
     
  Figure 2 is a partially fragmented exploded perspective view of a modification of the embodiment shown in Figure 1.
     
  Figure 3 is a partially fragmented exploded perspective view of another embodiment of a device according to the present invention.

  

Detailed Description of the Invention

 

Prolonged gastroretentive pharmaceutical dosage forms for releasing a drug in a controlled manner, such as that of the present invention, may provide many therapeutic benefits. One application in which the gastroretentive controlled delivery device of the invention may he advantageous is the administration of drugs having a narrow absorption window. These drugs are usually absorbed in limited segments of the upper parts of the gastrointestinal tract (most often in the duodenum and jejunum). In addition, many of these drugs are absorbed by active transport systems in the aforementioned upper parts of the gastrointestinal tract, or are poorly soluble at intestinal medium pH. It has been shown that prolonged duodenal delivery of drugs having a narrow absorption window enhances their bioavailability and evidently their therapeutic effect. One example for such an enhancement is the improved bioavailability and therapy of levodopa, infused directly into the duodenum.

 

5
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Another application in which use of a prolonged gastroretentive drug delivery system may be advantageous is local treatment of diseases of the stomach or duodenum. Targeting the drug to the pathological tissue is usually preferable for treatment of localized disorders, as the concentration of the drug attained in the diseased tissue or organ is higher than its systemic concentration, resulting in effectiveness of the drug in the target organ or tissue, with reduced systemic side effects.

 

The delivery system of the invention is also suitable for veterinary use, for the treatment of mammals, particularly domesticated animals and pets.

 

The present invention therefore relates to a pharmaceutical gastroretentive drug delivery system for the controlled release of a drug in the gastrointestinal tract, which system comprises a pharmaceutically effective amount of at least one drug; a matrix having a two- or three-dimensional geometric configuration comprising (1) a biodegradable polymer selected from a hydrophilic polymer which is not instantly soluble in gastric fluids; and/or an enteric polymer substantially insoluble at pH less than 5.5; or a mixture of at least one said hydrophilic polymer and at least one said enteric polymer; or said matrix comprises (2) a non-degradable polymer, provided that the matrix formed therefrom has a size that does not retain in the stomach more than a conventional dosage form; or a mixture of at least one polymers as defined in (1) with at least one polymer as defined in (2); said system also comprising a continuous or non-continuous membrane affixed to said matrix, said membrane comprising at least one polymer having a substantial mechanical strength: wherein said drug is embedded in said matrix.

 

By the term “a size that does not retain in the stomach more than a conventional dosage form” is generally meant a size that does not retain in the fasted stomach for over 2 hours.

 

By the term “a polymer which is instantly soluble in gastric fluids” is meant a polymer which dissolves in the stomach within about 15 minutes from administration. Such polymers are, for example water-soluble polymers independent of the pH of the environment (for example Byco R or hydroxypropyl methylcellulose (HPMC)).

 

6
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

By the term “a polymer which is not instantly soluble in gastric fluids” is meant a polymer which will gradually dissolve in the stomach during its stay therein. Such polymers are, for example, cross-linked polymers which would dissolve at a rate of about 50% of the polymer over 24 hours.

 

In order to control the mechanical strength, erosion and release characteristics of the drug or combinations of drugs contained in the delivery device, pharmaceutically acceptable, non-toxic fillers may optionally be added to the matrix. Examples for such fillers are starch, glucose, lactose, inorganic salts such as sodium or potassium chloride, carbonates, bicarbonates, sulfates, nitrates, silicates and alkali metals phosphates and oxides.

 

The membrane may be replaced by a suitable inert metal, e.g. titanium, or meal alloys, incorporated into the polymers of the invention. Such metals or alloys serve in preventing the device from rapidly diminishing upon administration.

 

The gastroretentive delivery device of the invention may further optionally comprise a shielding layer covering at least one face of said matrix and optionally covering all or part of said membrane, the shielding layer comprising a hydrophilic polymer which is not instantly soluble in gastric fluids, alone or in combination with an enteric polymer substantially insoluble at pH less than 5.5.

 

In addition, the device may be further coated with a pharmaceutically acceptable anti-adhering layer, to prevent its outer layers from adhering to each other in the folded configuration, thus enabling it to unfold during the wetting process in the gastric lumen after administration thereof.

 

The delivery device of the invention may further optionally comprise a pharmaceutically acceptable plasticizer. The plasticizer may be contained in any of the parts of the device, for example in the matrix, in the shielding layer or in the membrane. The plasticizer may be any suitable plasticizing agent, as known to the man of the art. For example; the plasticizer may be an ester, such as a phthalate ester, phosphate ester, citrate ester, fatty acid ester and tartarate ester, glycerine or glycol derivatives, or sorbitol. The plasticizer in the shielding layer is preferably glycerine.

 

7
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Further, the delivery device of the invention may optionally comprise a suitable gas-forming agent or a mixture of such gas-forming agents. An example of a gas-forming agent is sodium hydrogen carbonate or the like, which generate gas in an acidic environment like that of the stomach. Other gas-forming agents may be liquid substances which generate gas in the gastric medium at body temperature (34°C-40°C). The gas-forming agent may be in combination with said matrix or directly or indirectly affixed thereto.

 

Each of the components of the device may he affixed to other components, to form the device, by any conventional method known to the man of the art of pharmacy and drug design, for example, by heating or melting each layer or using compatible conventional adhesive materials, such as a-cyanoacrylates, acrylic or methacrylic adhesives, epoxides or plasticized polyvinyl adhesives. However, 'gluing' of the layers may preferably be performed with organic solvents, which slightly dissolve the polymers, such as ethyl alcohol, acetone, methylene chloride, chloroform or carbon tetrachloride.

 

The hydrophilic polymer suitable for the matrix or shielding layer of the delivery device of the invention may be any hydrophilic substance such as a protein, a polysaccharide, a polyacrylate, a hydrogel or a derivative of such substances.

 

Examples of proteins are proteins derived from connective tissues, such as gelatin and collagen, or an albumin such as serum albumin, milk albumin or soy albumin. In preferred embodiments, the hydrophilic polymer is gelatin or a gelatin derivative, preferably enzymatically hydrolyzed gelatin. A specific example is enzymatically hydrolyzed gelatin having a molecular weight of 10,000-12,000.

 

Examples of suitable polysaccharides are sodium alginate or carboxymethylcellulose.

 

8
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Other hydrophilic polymers may be polyvinyl alcohol, polyvinyl pyrrolidone or polyacrylates, such as polyhydroxyethylmethacrylate.

 

The hydrophilic polymer of the invention may be cross-linked with a suitable cross-linking agent. Such cross-linking agents are well known to the man of the art of pharmacy and drug design. These may be, for example, aldehydes (e.g. formaldehyde and glutaraldehyde), alcohols, di-, tri- or tetravelent ions (e.g. aluminum, chromium, titanium or zirconium ions), acyl chlorides (e.g. sepacoyl chloride, tetraphthaloyl chloride) or any other suitable cross-linking agent, such as urea, bis-diazobenzidine, phenol-2,4-disulfonyl chloride, 1.5-difluoro-2,4-dinitrobenzene. 3.6-bis-(mercuromethyl)-dioxane urea, dimethyl adipimidate, N.N'-ethylene- bis - (iodoacetamide) or N-acetyl homocysteine thiolactone. Other suitable hydrogels and their suitable cross-linking agents are listed, for example, in the Handbook of Biodegradable Polymers [A. J. Domb, J. Kost & D. M. Weisman, Eds. (1997) Harwood Academic Publishers], incorporated herein by reference.

 

A preferred cross-linking agent is glutaraldehyde.

 

The enteric polymer in the delivery device of the invention is preferably a polymer substantially insoluble in a pH less than 5.5. Such polymers, generally called enteric polymers, are used in the pharmaceutical industry for enteric coating of tables. Examples of such polymers are shellac, cellulose acetate phthalate, hydroxypropyl methylcellulose phthalate, hydroxypropyl methylcellulose acetate succinate or methylmethacrylate-methacrylic acid copolymers.

 

There are several advantages in combining the matrix or the shielding layer with an enteric polymer, as enteric polymers have improved mechanical properties (e.g. Young's modulus and yield strength). The addition of an enteric polymer to the shielding layer was shown to prevent rapid rupture of the shielding layer in vitro. A further advantage of using an enteric polymer is to ensure the complete dissolution and/or disintegration of all the components of the device, e.g. the matrix, the shielding layer and the membrane, in the intestine, had it not already occurred in the stomach.

 

9
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

A preferred enteric polymer according to the invention may be methylmethacrylate-methacrylic acid copolymer, at a ratio of 2:1 ester to free carboxylic groups.

 

According to a specific embodiment of the invention, the matrix comprises a drug embedded in an enteric polymer. In one such specific embodiment, the shielding layer comprises about 50% of the hydrophilic polymer which has been suitably cross-linked to reduce its solubility, about 30% enteric polymer and about 20% plasticizer.

 

As an alternative, the matrix of the delivery device of the invention may comprise a non-degradable polymer. Examples of non-degradable polymers which may be employed within the delivery device of the invention are ethylcellulose or an acrylic acid-methacrylic acid esters copolymer, having from about 5 to 10% functional quaternary ammonium groups. Other suitable polymers are polyethylene, polyamide, polyvinylchloride, polyvinyl acetate and mixtures thereof. Since such non-degradable polymers do not undergo erosion/degradation, when they are employed, the size of the matrix should not prevent it from leaving the stomach.

 

The delivery system of the invention further comprises a pharmaceutically effective amount of at least one active drug. This amount, for purposes herein, is that determined by such considerations as are known in the art, and generally means an amount sufficient to prevent, alleviate, treat or cure a disease or disorder. The active agent may be incorporated within the matrix (as a powder, solution, dispersion or any other suitable form) or in combination therewith. By the term “embedded within the matrix” is meant any such incorporation or combination of the drug with the matrix. The active drug embedded in the matrix may be in combination with suitable carriers, diluents and adjuvants, all being inert, non-toxic solid or liquid substances which assist in the delivery of the drug to the target tissue or organ.

 

The active drug according to the invention may be any drug suitable for preventing, alleviating, treating or curing a disease or disorder within the gastrointestinal tract.

 

The drug may be a drug having a narrow absorption window in the gastrointestinal tract. Examples of drugs having a narrow absorption window in the gastrointestinal tract are therapeutic nucleic acid sequences or derivatives, antibiotic anti-hypertensive anti-hyperlipidemic agents or ACE inhibitors.

 

10
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Examples of therapeutic nucleic acid derivatives are acyclovir, AZT or didanosine.

 

Examples of therapeutic amino acid sequences or their derivatives are gabapentin, levodopa, α-methyldopa, baclofen or valacyclovir or any other therapeutic amino acid sequence or peptidomimetic drug having a narrow absorption window in the gastrointestinal tract.

 

Examples of antibiotic agents having a narrow absorption window are nitrofurantoin, ciprofloxacin or ß-lactam antibiotic agents such as amoxycillin or cephalexin.

 

Examples of therapeutic ions are lithium carbonate or citrate, calcium carbonate or citrate:

 

Other examples of drugs having a narrow absorption window in the gastrointestinal tract are furosemide, allopurinol or atenolol.

 

Examples of vitamins are riboflavin, ascorbic acid, folic acid or vitamin E.

 

The anti-hyperlipidemic agent may be pravastatin.

 

Examples of ACE inhibitors are captopril, benazepril, enalapril cilazapril, fosinopril or ramipril.

 

Examples of bronchodilators are albuterol or pirbuterol.

 

In addition to drugs having a narrow absorption window in the gastrointestinal tract, the delivery system of the invention may comprise a drug for local treatment of the gastrointestinal tract. These may be used, for example, in the treatment of neoplasms of the stomach, such as adenocarcinoma of the stomach or gastric lymphoma.

 

Examples of drugs for the local treatment of the gastrointestinal tract are anti-tumor agents, histamine (H2) blockers, bismuth salts, synthetic prostaglandins or antibiotic agents.

 

H2 blockers may be cimetidine, famotidine and ranitidine.

 

11
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Bismuth salts may be bismuth subsalicylate or bismuth subcitrate.

 

An example of a synthetic prostaglandin is misoprostol.

 

The anti-tumor drug may be 5-fluorouracil, doxorubicin, mitomycin, semustine, cisplatin, etoposide or methotrexate.

 

Suitable antibiotic agents may be clarithromycin, amoxycillin metronidazole or a tetracycline.

 

In addition to the above drugs, which have a narrow absorption window in the gastrointestinal tract or which are intended to local treatment of the gastrointestinal tract, the delivery device of the invention may contain as the active agent a drug which degrades in the colon, for example, metoprolol.

 

Any agent having a therapeutic effect in the gastrointestinal tract, or which has a narrow absorption window in the gastrointestinal tract or which degrades in the colon, other than the aforementioned agents, may be delivered by the device of the invention. Such agents are well known to the man of the art and may be delivered alone or in combination with other suitable therapeutic agents.

 

The drug-containing layer (medicament reservoir) may be in the form of a continuous or non-continuous matrix or hydrogel, which contains the drug in solution, dispersion or both. The drug can also be incorporated into the device as a raw powder. In addition, the drug can be first incorporated into controlled release micro- or nanoparticles or micro- or nanospheres, to be combined with the matrix or hydrogel.

 

12
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The membranes used in the device of the invention have substantial mechanical strength. Such membranes may comprise, for example, cellulose ethers and other cellulose derivatives such as cellulose nitrate, cellulose acetate, cellulose acetate butyrate or cellulose acetate propionate; polyesters, such as polyethylene terephthalate, polystyrene, including copolymers and blends of the same; polylactides, including copolymers thereof with p-dioxanone; polyglycolids, polylactidglycolides; polyolefins, including polyethylene, and polypropylene; fluoroplastics, such as polyvinylidene fluoride and polytetrafluoroetnylene, including copolymers of the same with hexafluoropropylene or ethylene; polyvinylchloride, polyvinylidene chloride copolymers, ethylene vinyl alcohol copolymers, polyvinyl alcohols, ammonium-methacrylate copolymers, and other polyacrylates and polymethacrylates; polyacrylonitriles; polyurethanes: polyphthalamides; polyamides; polyimides; polyamide-imides; polysulfones; polyether sulfones; polyethylene sulfides; polybutadiene; polymethyl pentene; polyphenylene oxide (which may be modified); polyetherimides; polyhydroxyalkanoates; tyrosine derived polyarylates and polycarbonates including polyester carbonates, polyanhydrides, polyphenylene ethers, polyalkenamers, acetal polymers, polyallyls, phenolic polymers, polymelarnine formaldehydes, epoxy polymers, polyketones, polyvinyl acetates and polyvinyl carbazoles.

 

In one preferred example, the membrane comprises a mixture of 1-poly(lactic acid) (1-PLA) and ethylcellulose, at a ratio of 9:1, respectively.

 

It may be advantageous to further coat the device of the invention with a non-adhering material, which can be affixed to outer surface/s of the device. Such a material may be any inert, non-swelling material which will prevent self-adhesion of the outer layers (e.g. the matrix or shielding layer) of the device upon hydration thereof. The non-adhering material may be, for example, cellulose or a cellulose derivative, a silicate, such as magnesium silicate or aluminum silicate, or an enteric polymer substantially insoluble at pH less than 5.5. One preferred example for such a material, used as the non-adhering layer, is microcrystalline cellulose.

 

To facilitate administration, in dosage forms comprising a device in accordance with the invention, the device is preferably folded into a capsule, particularly a gelatin capsule. Such folded devices may further comprise a gas-forming agent, not intended inflation or buoyancy of the device, but rather to provide internal pressure allowing the folded device to unfold after administration of the capsule and its dissolution in the stomach.

 

The gas-forming agent may be a liquid gas-forming agent which boils at body temperature (34°C-40°C), or a solid gas-forming agent. An example for a solid agent is any suitable carbonate, such as calcium carbonate, sodium carbonate or sodium hydrogen carbonate, with sodium hydrogen carbonate being preferred.

 

13
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Liquid gas-forming agents may be methyl formate, tetramethyl silane, iso-pentane, isomers of perfluoropentane, diethyl or diethenyl ether.

 

One example of a device of the invention is illustrated in Figure 1. The device (1) comprises a matrix (100) having a three dimensional configuration, containing the drug. Strips (110), are affixed to the sides of the three dimensional matrix (110), forming a continuous membrane (also referred to as frame) having mechanical strength. The strips (110) are adjacent to each other and the drug-containing matrix is framed within them. The device further comprises shielding layers (120), covered on their exposed laces by non-adhering powder layers (130).

 

An alternative device (2) is illustrated in Figure 2. As can be seen from the Figure, the strips (210) are affixed to the drug-containing matrix with zaps therebetween, forming a non-continuous frame.

 

Another embodiment is illustrated in Figure 3. In this embodiment (3), the membrane (310) is comprised of one unit only. It is affixed to the top of the drug-containing matrix (100). Alternatively, the membrane (frame) may be fragmented-continuous as illustrated in the frame of Figure 1, or non-continuous in a manner similar to the frame of Figure 2. Shielding layers (320) are affixed to the bottom of the matrix (300) and onto top of the membrane (310). Anti-adhering powder layers (330) are affixed to the outer sides of the shielding layers. The shielding layers thus sandwich the drug-containing matrix and the mechanically strong membranes affixed thereto.

 

The continuous or non-continuous membrane (110 in Figure 1 and 210 in Figure 2, respectively) may be comprised of degradable polymer/s, non-degradable polymer-is or mixtures thereof, and due to its high mechanical properties, is intended to prevent the stomach from rapidly diminishing the size of the device, by its natural mechanical activity, which includes contractions, to a size which will enable rapid passage of the device to the intestine.

 

Gastrointestinal-associated diseases and disorders which may be prevented, alleviated, treated or cured using the delivery system of the invention may include, but are not limited to, peptic ulcer, nonulcer dyspepsia, Zollinger-Ellison syndrome, gastritis, duodenitis and the associated ulcerative lesions, stomach or duodenum neoplasms. Evidently, the device, of the invention may be employed for any other disorder associated with the gastrointestinal tract, as determined by such considerations known to the man of the art.

 

14
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The device of the invention may have numerous two or three dimensional configurations, such as a disc, a multi-lobed configuration, a triangle or a quadrangle and may be planar or non-planar. When the device has a rectangle geometry, it has preferably surface area and thickness of about 2-8 cm x 1.5-5 cm and 0.1-3 mm, respectively. Preferably the surface area is 5 cm x 2.5 cm and the thickness 0.9 mm.

 

It is not necessary that the drug or medicament reservoir be uniformly distributed in the inner matrix. For example, if the device has a multi-lobed configuration, it is possible that only some lobes contain the drug or medicament reservoir. Further, the active agent may be incorporated into only one lobe (or into only a part of any other form of the device) as a tablet affixed thereto.

 

The matrix preferably has the dimensions of about 0.5-7.0 cm x 0.5-4 cm, more preferably 4 cm x 1.5 cm.

 

The dimensions of the strips forming the membrane are preferably 0.5-7.0 cm x 0.1-1.0 cm, with a thickness of 0.05-2.5 mm, more preferably 2-4.5 cm x0.5 cm, with a thickness of 0.65 mm.

 

The dimensions of the shielding layers are preferably 2-3 cm x 1.5-5 cm, and more preferably 5 cm x 2.5 cm.

 

As the surface area of the device is substantially large for easy and convenient swallowing, it may be folded or rolled into a suitable carrier such as a pharmaceutically acceptable capsule. After reaching the stomach, the carrier dissolves and the device unfolds to its original size, resulting in its retention in the stomach for the desired, prolonged period of time. The drug is then released in a controlled manner in the target site.

 

15
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Examples

 

Materials and methods

 

Glycerine, ethyl alcohol and methylene chloride were purchased from Frutarom; enzymatically hydrolyzed gelatin with average molecular weight of 10,000-12,000 was purchased from Croda; methylmethacrylate-methacrylic acid copolymers were provided from Rhom Pharma; 1-PLA with a molecular weight of 427,000 and Mn of 224,500 were purchased from Boehringer Ingelheim; triethyl citrate was provided by Morflex; ethylcellulose was provided by Teva; polyvinyl pyrrolidone was provided by Taro; glutaraldehyde 25% was purchased from Merck; chloroform was purchased from Baker. All solvents were of analytical grade.

 

The layers of the exemplified devices were prepared by casting the suitable polymer solutions and evaporating the solvents at 37°C or in a laminar hood at ambient temperature. In the preparation of the 1-PLA and ethylcellulose containing layer, chloroform was used as the solvent.

 

A mixture of 50% ethyl alcohol and 50% NaOH-K 2 HPO 4 buffer (pH 12.7) was employed as a solvent for the preparation of the outer layers (shielding layers), in particular, for those comprising a mixture of a hydrophilic polymer and an enteric polymer.

 

Example 1 - Riboflavin-containing pharmaceutical devices

 

A. A disc of 9.5 cm diameter containing riboflavin (30%) in combination with shellac (70%) was prepared by dissolving shellac in ethyl alcohol (1:10) and dispersing riboflavin in the same. The mixture was then cast and the solvent removed by evaporation at 37°C. The dry disc was cut into 5 cm x 2.5 cm segments.

 

The cast was then sandwiched within two identical intermediate layers (the shielding layers) prepared by mixing enzymatically hydrolyzed gelatin (48%, average molecular weight 10.000-12,000), methylmethacrylate-methacrylic acid copolymer in a ratio of ester to free carboxylic groups of 2:1 (30%) and glycerine (20%) in a mixture of 50% ethyl alcohol and 50% NaOH-K 2 HPO 4 buffer. Glutaraldehyde (2%), diluted in the same solvent, was added whilst mixing, promptly before casting for cross-linking and evaporation. Contrast threads (0.5 cm long) were added to the cast before final evaporation of the solvent, to allow roentgenographic detection of the device after administration.

 

16
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The resulting layers were then coated with a thin (outer) layer of microcrystalline cellulose powder (the anti-adhering agent).

 

In principle, each layer, i.e. the intermediate (shielding) layers and the outer layers, were affixed by applying thereto a solution of ethyl alcohol and allowing the same to dry, such that the intermediate layers were affixed onto the surface of the riboflavin-containing layer (the inner layer), and the microcrystalline cellulose (outer) layers onto the intermediate layers.

 

The resulting device had a rectangular configuration of about 5 cm x 2.5 cm x 0.75 mm

 

B. A rectangular drug-containing layer (the inner layer) was prepared as described in A, and was continuously framed with four 0.5 cm-wide strips (4.5 cm and 2 cm long), containing 1-PLA (90%) and ethyl cellulose (10%) previously dissolved in chloroform and cast. The resulting frame, with no gaps between the strips, provided the device with some degree of mechanical strength. The strips contained threads of a contrast material (the longer strips contained two threads while the shorter strips contained only a single thread).

 

An intermediate layer (shielding layer) was prepared as described in A. The inner layer was affixed to a shielding layer by applying thereto a solution of ethyl alcohol.

 

The frame was adhered on the sides of the shielding layer using minute amounts of methylene chloride, which was then evaporated.

 

The second shielding layer was adhered to the inner layer and the frame using the mentioned solvents, i.e. ethyl alcohol and minute amounts of methylene chloride, respectively.

 

17
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

In this embodiment, one of the shielding layers contained three contrast threads. The longer strips contained two contrast threads each, while the shorter strips contained one contrast thread each.

 

Then, the intermediate layers were coated with microcrystalline cellulose adhered thereto using ethyl alcohol.

 

The same principles were used to prepare devices with different characteristics, e.g. thickness of plastic membrane; plastic membrane polymeric constitution; size of device; and size, number and continuity of plastic strips.

 

Example 2 - In vivo experiments

 

Beagle dogs (six) were fasted for at least 18 hours before being administered with a delivery device (#1#8). Water was given to the dogs ad libitum. Each dog then received orally, through a gastric tube, 400 ml of buffer (HC1-KC1, pH 1.5), and subsequently the device, folded into a gelatin capsule- (000). The experiment was repeated with six dogs for each of the devices.

 

Device #1:

 

The two outer membranes (shielding layers) were identical and were constituted from 48% enzymatically hydrolyzed gelatin with average molecular weight 10,000-12,000, 30% methylmethacrylate-methacrylic acid copolymer at a ratio of ester to free carboxylic groups of 2:1, 20% glycerine and 2% glutaraldehyde, and were covered with a thin layer of microcrystalline cellulose powder.

 

The matrix comprised 70% shellac and 30% riboflavin.

 

The thickness of each shielding layer and of the matrix was 0.135 mm and 0.5 mm, respectively. The sizes of the matrix and of the shielding layers which cover the matrix, and therefore of the device was 5 cm x 2.5 cm.

 

One of the shielding layers contained nine contrast threads which were 0.5 cm long each.

 

18
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

The gluing of all membranes and the microcryitalline cellulose layer was by ethyl alcohol.

 

Device #2:

 

The size of the matrix which had the same constitution as in device #1 was 4 cm x 1.5 cm. The two shielding layers were as in device 41.

 

The matrix had a frame of four plastic strips of a mixture of 90% 1-PLA-10% ethylcellulose. The width of the strips was 0.5 cm. The length of each two scrips was 4.5 cm and 2 cm. The thickness of the strips was 0.65 mm.

 

The longer strips contained two contrast threads each, while the shorter strips contained one contrast thread each. One of the shielding layers contained three contrast threads.

 

Gluing the shielding layers to the matrix and the microcrystalline cellulose layer was with ethyl alcohol, while the plastic membrane was adhered using methylene chloride.

 

Device #3:

 

The two shielding layers, the matrix and their sizes were as in device #2.

 

All plastic strips are in the frame of the matrix. Two plastic strips in each side of the longer dimension were in a length of 2.1 cm (altogether four strips). Two plastic strips, one in each side of the shorter dimension, had the same length as in device #2 (2 cm). The thickness of the strips was as in device #2 (0.65 mm) There was a distinct gap of 2 mm between each of the six plastic strips.

 

Each of the plastic strips contained one contrast thread. One of the shielding layers contained three contrast threads.

 

The gluing of all layers was as device #2.

 

Device #4:

 

The two shielding layers, the matrix and their sizes were as in device #2.

 

19
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

All twelve plastic strips were in the frame of the matrix. Two and four plastic strips in each side of the shorter and longer dimensions of the frame, respectively, were all of the size of 0.5 cm xl cm. The thickness of the strips was as device #2. There was a distinct gap of 2 mm between each of the twelve plastic strips

 

Each of the plastic strips contained one contrast thread. One of the shielding layers contained three contrast threads.

 

The gluing of all layers was as in device #2.

 

Device #5 :

 

The shielding layers, the matrix and the strips were identical in their constituents to device #2.

 

The size of the matrix was 1.5 cm x 1.5 cm. The size of the four plastic strips was 0.5 cm x 2 cm. The thickness of the strips was as device #2. All plastic strips were in the frame of the matrix. The size of the shielding layers, which cover the matrix and the strips (and therefore is the size of the device) was 2.5 cm x 2.5 cm.

 

Each strip and one of the shielding layers contained one 0.5 cm long contrast.

 

The gluing of all layers was as device #2.

 

Device #6 :

 

The shielding layers, the matrix and their sizes were as in device #2.

 

The plastic strips were constituted from 97% ethylcellulose-3% triethyl citrate, previously dissolved in methylene chloride and cast. The strips which were in the frame of the matrix were identical in their sizes and thickness to the plastic strips in device #2.

 

The contrast threads and the gluing of all layers were as device #2.

 

Device #7 :

 

Device #7 was similar to device #2, but for the thickness of the plastic strips which was 0.2 mm.

 

20
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Device #8:

 

Tablets which were constituted from 98% ethylcellulose-2% polyvinyl pyrrolidone were prepared using the wet granulation method. The dimensions of the tablets were 0.8 cm diameter and 0.35 cm thickness.

 

Each tablet contained two 0.5 cm long contrast threads, positioned perpendicularly one to the other.

 

X-Ray pictures were then taken after 1, 2, 4, 6, 8 and 13 hours. The results of the GRTs are given in Table 1.

 

21
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Number of Devices (out of 6) Retained in Stomach

 

Time (hrs.) 0 1 2 4 6 8 13
Device #
1 6 6 3 2 1 0 0
2 6 6 6 6 6 6 6
3 6 6 6 6 6 5 4
4 6 6 6 5 4 4 4
5 6 6 6 6 5 5 5
6 6 6 6 6 5 4 3
7 6 6 6 6 5 5 5
8 6 6 5 2 0    

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

CLAIMS:

 

1) A pharmaceutical gastroretentive drug delivery system for the controlled release of an active agent in the gastrointestinal tract, which system comprises:

 

a) pharmaceutically effective amount of at least one drug;

 

b) a matrix having a two- or three-dimensional geometric configuration comprising

 

(1) a biodegradable polymer selected from:

 

i) a hydrophilic polymer which is not instantly soluble in gastric fluids; and/or

 

ii) an enteric polymer substantially insoluble at pH less than 5.5:

 

iii) a mixture of at least one said hydrophilic polymer and at least one said enteric polymer; or

 

(2) a non-degradable polymer, provided that the matrix formed therefrom has a size that does not retain in the stomach more than a conventional dosage form;

 

(3) a mixture of at least one polymers as defined in (1) with at least one polymer as defined in (2);

 

b) a continuous or non-continuous membrane affixed to said matrix, said membrane comprising at least one polymer having a substantial mechanical strength; wherein said drug is embedded in said matrix.

 

2) The delivery system as claimed in claim 1, further comprising a shielding layer covering at least one face of said matrix and optionally covering all or part of said membrane, said shielding layer comprising a hydrophilic polymer which is not instantly soluble in gastric fluids alone or in combination with an enteric polymer substantially insoluble at pH less than 5.5.

 

3) The delivery system as claimed in claim 1 or claim 2, further compromising a suitable plasticizer.

 

4) the delivery system as claimed in claim 3, wherein said plasticizer is contained in said shielding layer.

 

 
 

   

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5) The delivery system as claimed in any one of claims 1 to 4, further comprising at least one gas-forming agent.

 

6) The delivery system as claimed in claim 1, further comprising an anti-adhering layer affixed to at least one outer face thereof.

 

7) The delivery system as claimed in claim 2, further comprising an anti-adhering layer affixed to the at least one outer face thereof.

 

8) The delivery system as claimed in any one of claims 1 to 7, wherein said drug is a drug having a narrow absorption window in the gastrointestinal tract.

 

9) The delivery system as claimed in claim 8 wherein said drug is a therapeutic nucleic acid or amino acid sequence, a nucleic acid or amino acid derivative, a pepridomimetic drug, an antibiotic a therapeutic ion, a vitamin, a bronchodilator, an anti-gout agent, an anti-hypertensive agent a diuretic agent, an anti-hyperlipidemic agent or an ACE inhibitor.

 

10) The delivery system as claimed in claim 9, wherein said therapeutic nucleic acid derivative is acyclovir, AZT or didanosine.

 

11) The delivery system as claimed in claim 9, wherein said therapeutic amino acid derivative is gabapentin, levodopa, a -methyldopa, baclofen or valacyclovir or any other therapeutic amino acid sequence or derivative having a narrow absorption window in the gastrointestinal tract.

 

12) The delivery system as claimed in claim 9, wherein said antibiotic is nitrofurantoin; ciprofloxacin or a ß -lactam antibiotic selected from amoxycillin or cephalexin.

 

13) The delivery system as claimed in claim 9, wherein said ion is lithium carbonate or citrate, calcium carbonate or citrate.

 

14) The delivery system as claimed in claim 9, wherein said drug is pravastatin, furosemide, allopurinol or atenolol.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

15) The delivery system as claimed in claim 9, wherein said vitamin is riboflavin, ascorbic acid, folic acid or vitamin E.

 

16) The delivery system as claimed in claim 9, wherein said ACE inhibitor is captopril, benazepril, enalapril, cilazapril, fosinopril or ramipril.

 

17) The delivery system as claimed in claim 9, wherein said bronchadilator is albuterol or pirbuterol.

 

18) The delivery system as claimed in any one of claim 1 to 7, wherein said drug is a drug for local treatment of the gastrointestinal tract.

 

19) The delivery system as claimed in claim 18 wherein said drug is an anti-tumor agent, a histamine (H2) blocker, a bismuth salt, a synthetic prostaglandin or an antibiotic agent.

 

20) The delivery system as claimed in claim 18, wherein said H2 blacker is cimetidine, famotidine or ranitidine.

 

21) The delivery system as claimed in claim 18, wherein said bismuth salt is subsalicylate or subcitrate.

 

22) The delivery system as claimed in claim 18, wherein said synthetic prostaglandin is misoprostol.

 

23) The delivery system as claimed in claim 18, wherein said anti-tumor drug is 5-fluorouracil, doxorubicin, mitomycin, semustine, cisplatin, etoposide or methotrexate.

 

24) The delivery system as claimed in claim 18, wherein said antibiotic agent is clarithromycin, metronidazole, amoxycillin or a tetracycline.

 

25) The delivery system as claimed in any one of claims 1 to 7, wherein said active agent degrades in the colon and is preferably metoprolol.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

26) The delivery system as claimed in claim 1 or claim 2 wherein said hydrophilic polymer is a protein, a polysaccharide, a polyacrylate, a hydrogel or a derivative of such polymers.

 

27) The delivery system as claimed in claim 26, wherein said protein is a protein derived from connective tissue selected from gelatin and collagen; or an albumin selected from serum albumin, milk albumin and soy alb umin.

 

28) The delivery system as claimed in claim 26, wherein said polysaccharide is sodium alginate or carboxymethylcellulose.

 

29) The delivery system as claimed in claim 26, wherein said polyacrylate is polyhydroxyethylrnethacrylate.

 

31) The delivery system as claimed in claim 1 or claim 2, wherein said hydrophilic polymer is cross-linked with a suitable cross-linking agent.

 

32) The delivery system as claimed in claim 31, wherein said cross-linking agent is glutaraldehyde.

 

33) The delivery system as claimed in claim 32, wherein said hydrophilic polymer is an enzymatically hydrolyzed cross-linked gelatin or derivative thereof.

 

34) The delivery system as claimed in claim 1 or claim 2, wherein said enteric polymer is selected from the group consisting of shellac, cellulose acetate phthalate, hydroxypropyl methylcellulose phthalate, hydroxypoipyl methylceilulose acetate succinate or methylmethacrylate-methacrylic acid copolymers, preferably having a ratio of ester to free carboxylic groups of 2:1.

 

35) The delivery system as claimed in claim 1 or in claim 2, comprisine mixture of said hydrophilic polymer and said enteric polymer.

 

36) The delivery system as claimed in claim 1 or claim 2, wherein said non-degradable polymer is selected from ethylcellulose, a copolymer of acrylic acid and methacrylic acid esters, having from about 5 to 10% functional quaternary ammonium groups, polyethylene, polyamide, polyvinylchloride, polyvinyl acetate or mixtures thereof.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

37) The delivery system as claimed in claim 1, wherein said membrane comprises degradable polymer/s, non-degradable polymer/s or mixtures thereof.

 

38) The delivery system as claimed in claim 37, wherein said membrane is comprised of a mixture of 1-poly(lactic acid) (1-PLA) and ethycellulose at a ratio of 9:1, respectively.

 

39) The delivery system as claimed in claim 6, wherein said anti-adhering layer comprises a pharmaceutically acceptable cellulose or derivative thereof, silicate or an enteric polymer substantially insoluble at pH less than 5.5.

 

40) The delivery system as claimed in claim 39, wherein said non-adhering layer is microcrystalline cellulose.

 

41) The delivery system as claimed in claim 3 or 4, wherein said plasticizer is an ester selected from phthalate esters, phosphate esters, citrate esters fatty acid esters and tartarate esters, glycerine or glycol derivatives or sorbitol.

 

42) The deliver system as claimed in claim 41, wherein said plasticizer is glycerine.

 

43) The delivery system as claimed in claim 5, wherein said gas-forming agent is a liquid gas-forming agent which boils at body temperature or a solid gas-forming agent, preferably a pharmaceutically acceptable carbonate.

 

44) The delivery system as claimed in claim 43, wherein said liquid agent is methyl formate, diethyl or diethenyl ether or n-pentane, iso-pentane or a perfluoropentane isomer or tetramethyl silane.

 

45) The delivery system as claimed in claim 43, wherein said solid agent is selected from calcium carbonate, sodium carbonate or sodium hydrogen carbonate.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

46) Use of the delivery system as claimed in any one of claims 18 to 24 in the treatment of gastrointestinal associated disorders selected from peptic ulcer, nonulcer dyspepsia, Zollinger-Ellison syndrome, gastritis duodenitis and the associated ulcerative lesions, stomach or duodenum neoplasms.

 

47) The delivery system as claimed in any one of the preceding claims, having the form of a disc, multi-lobed configuration, a triangle or a quadrangle, said system being planar or non-planar.

 

48) The delivery system as claimed in claim 39, having a planar rectangular geometric configuration, wherein said rectangle is of 2-8cm x 1.5-5cm.

 

49) The delivery system as claimed in claim 48, having the size of 5cm x 2.5cm.

 

50) The delivery system as claimed in any one of the preceding claims being folded into a suitable capsule.

 

51) The delivery system as claimed in any one of the preceding claims substantially as herein described.

 

52) The delivery system as claimed in any one of the preceding claims substantially as herein exemplified.

 

53) The delivery system as claimed in any one of claims 1 to 7 for medical or veterinary use.

 

54) A capsule containing a system as claimed in any one of claims 1 to 53.

 

 
 

   

 

 
 

  

 

 
 

  

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

APPENDIX D — DISCOUNTED ROYALTIES

 

The Company will make the following payments to Yissum:

 

Year Date Sum ($)
1 Upon signing this Agreement 252,495
2 01.06.2001 123,216
2 01.12.2001 123,216
3 01.06.2002 126,648
3 01.12.2002 126,648

 

All payments will be paid in NIS according to the representative rate of the dollar on the day of payment, plus VAT.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

    

APPENDIX E — ROYALTIES

 

1. The Company will pay to Yissum 3% royalties from the net sales of the products from the first date of commercial sale in each country.

 

2. The Company shall be required to pay Yissum 30% of any payment or benefit of any sort or nature the Company may receive from the Sub-License.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Appendix “F” — Development Plan

 

The development plan as we see it will consist of two fundamental stages:

 

Stage A - In this stage the post - developed pharmaceutical product should demonstrate gastro retentive properties of a therapeutic drug in clinical trials this stage will be carried out in a structure that will enable us to collect data and useful information for further steps towards FDA approval in later stages.

 

Stage B - The objective of this stage, in the preliminary clinical trials, is to show an increase in drug absorption [in narrow absorption window drugs] and/or prolonged action [in short half - life drugs].

 

This stage will also determine the kind of drugs, which are more likely to be the subject of a further study in order to combine them together.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

“Appendix G”

 

I, the undersigned ______________________________, do hereby declare that I have knowledge of research on the subject

 

and that it is funded by

 

1. I do hereby undertake to keep secret and to do all in my power to prevent unauthorized disclosure of all information brought to my knowledge retarding the above research. I do further hereby consent to refrain from making public any work, report of work, or any other information concerning the above project, or to present in any other manner any work, report or information in writing and/or orally, without prior permission from Yissum and ________________________________. This undertaking does not include information already disclosed in publication generally in the public domain and under the contract dated ___________________________ between Yissum and

 

2. It is hereby agreed that the undertaking of section 1 above does not apply to these dissertations presented by candidates for Masters and Doctoral Degrees, to internal referee committees of the University, who will themselves ensure that such information is not received by unauthorized bodies.

 

3. In addition to all the above, I do also undertake to fully observe the instructions of the University administrative authorities as published by The Hebrew University of Jerusalem (Order No. 15-001 and 15-011).

 

4. I do hereby undertake to keep all the above secret and not to transfer to any person or persons, at any time, any information, in any way connected with the above subject without receiving the written permission of both Yissum and _______________________________.

 

       
  Signature   Date
       
  /s/ Michael Friedman    
  Form No.    
       
       
  Israel I.D. Card/Passport Number    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Append. “H”

 

Sub-Licensee's undertakings

 

Yissum Research Development Company

of The Hebrew University of Jerusalem

46 Jabotinsky Street

P.O.B. 4279

Jerusalem 91042

Israel

 

All the expressions and definitions in this letter will have the meaning as in the agreement signed between Yissum Research Development Company of the Hebrew University of Jerusalem and

Between ___________________ ; dated _____________

 

Whereas the Company has been granted a License; and:

 

Whereas we the undersigned have been granted a Sub-License (hereinafter “the Sub-License”); and

 

Whereas the License and Sub-License are subject to certain conditions as defined in the Agreement:

 

Accordingly, we undertake as follows:

 

1. We have read the Agreement and are familiar with all its terms and conditions which shall be binding upon us. The Sub-License validity shall at all times be conditioned on the validity of the License and shall terminate in whole or in part upon termination of the License or any part thereof.

 

2. The Sub-License has been granted to us on the condition that we undertake to fully abide by the terms and conditions of the Agreement.

 

3. We undertake to accept and be bound by any decision or ruling or an Israeli court or Israeli arbitration. We expressly waive the right to submit any claim, or challenge such decisions or rulings outside the appropriate court in Jerusalem, and we waive the right to motion for an injunction against the Company or Yissum in case of termination of the License.

 

_________________ day of _________________ Signed this

 

 

 

Exhibit 10.2

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

October 5, 2004

 

Mr. Reuven Ron

Yissum Research Development Company

of the Hebrew University of Jerusalem

P.O. Box 39135

Jerusalem, 91390

 

Dear Sir,

 

Re: Joint Venture for R&D Agreement

 

1.          This is to inform you that Intec Pharma Ltd. (the “Company”) has decided to extend the Research Period as defined in the Joint Venture for R&D Agreement between the Company and Yissum Research Development Company of the Hebrew University of Jerusalem (“Yissum) dated June 1, 2000 (the “Agreement), for an additional term from 01/01/2004 and until December 31, 2004 (the "Additional Research Period").

 

2.          During the Additional Research Period Yissum shall provide the Company with additional research services (the “Additional Research”), all in accordance with the Additional Research Plan, attached hereto as Appendix A and the Company shall finance the Additional Research as specified in Appendix B hereto.

 

3.          The terms of the Agreement shall apply mutatis-mutandis to the Additional Research and the Additional Research Period, except that the intellectual property rights and any patents arising from the Research Results and Know-How of the Additional Research only (the “Additional IP”) shall be jointly-owned by the Parties and will he registered in both their names. This section shall not derogate from the Company's obligations to pay royalties or any other consideration with respect to the use thereof accordance with the terms of the License.

 

Yissum shall grant the Company an exclusive, unlimited and perpetual license to use its rights in the Additional IP, under the same terms as the License, mutatis-mutandis (the “the Additional License”).

 

4.          In light of considerable progress achieved during the initial Research Period under the Agreement, supported by the Company's financing, and due to recent regulation of a patent in the name of Yissum, it is further agreed that:

 

4.1           In the event the company grants a Sub-Licenses under the Agreement, the Company shall inform Yissum of such Sub-License within a reasonable period of time after such Sub-License is granted, without being required to obtain Yissum's contract to such Sub-License, and without derogating from Yissum’s right to Royalties according to the provisions of this Agreement.

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.2           Such Sub-Licenses may be perpetual and the Sub-Licensees under such Sub-Licensees shall not be required to assume any undertaking towards Yissum.

 

4.3           To avoid any doubts, it is hereby clarified that The License granted to the Company under the Agreement is exclusive and perpetual, applies to the Know How (including the aforesaid patent) and the Research Results under the Agreement and to any Know How and Research Results under the Additional Research, and (ii) Yissum, as the sole owner and proprietor of the rights in and to the Patents, Know How and Search Results, shall not grant any of rights of any kind in or to the Patents, Know How and/or Search Results unless the Company's prior written consent is obtained.

 

4.4           At the end of the Additional Research Period Yissum shall provide the Company with a financial report, specifying the use of financial resources by Yissum in accordance with the Additional Research.

 

5.          By signing this letter each party confirms that, to the best of its knowledge, all the other party's undertakings under the Agreement were satisfactorily fulfilled and they have no claims or demands in such report.

 

Please confirm the aforesaid by signing this letter below and returning the signed copy to our address.

 

  Sincerely Yours,
  Zvika Joseph, CEO
  Intec Pharma Ltd.
   
  /s/ Zvika Joseph

 

We hereby confirm and agree to the conditions set in this letter. 

 

/s/ Abraham Barak  
Yissum Research Development Company  
of the Hebrew University of Jerusalem  

 

2
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

APPENDIX A

 

ADDITIONAL RESEARCH

 

Research Plan for INTEC Pharma: Improvement of the mechanical properties of the frame

 

Prof. M. Friedman

Scope : The following document describes the research activities to be carried out at Professor Friedman's laboratory at the Hebrew University in the months August to December 2004.

 

Aim: The main goal of this stage in development of the product is to improve the mechanical properties of the frame in order to maximize the retention of the GRDF in the stomach. Naturally, whatever formulation comes out as having the best properties, it will have to comply with his production and assembly methods at INTEC Pharma.

 

New formulations : Series of different formulations will be made and tested. These series will start as close as possible to the current formulation. This might not be the best approach, but because the short time available, we want to induce the smallest changes possible to the composition of the frame, to avoid problems in purchase and production.

 

I. A series of different proportions of ethyl cellulose (EC) to Eudragit L (EudL). This will require also optimization of the amount of triacetin for each EC/EudL combination.

 

II. We will try to substitute part of the triacetin with glycerol. Other plasticizers will also be tested.

 

III. A series of polymers will be tried as a substitute for EC, or part of the EC. For example, Eudragit RL/RS and polyvinyl acetate will be tried.

 

IV. Other enteric polymers will be tried as a substitution to the EudL. For example, several Kollidon (from BASF) grades might be useful.

 

Evaluation of the different formulations : In the first series, we will have to use qualitative methods to evaluate the films like visual uniformity, bar and break assessment, and finally, assemble and folding in actual GRDFs. Quantifications will be done by opening experiments. In parallel, we will develop methods for testing the mechanical properties of the GRDF and its different components. The development of these tests and accessories for the texture analyzer will be done in close collaboration with Stable Micro Systems Ltd. Surrey, U.K. We currently aim at two tests: I. simple and flat tests for the frame. It could be a three-points-heading test of something similar. Each new frame formulation will be testes with this method. II. a compression tests for the assembled GRDF. This tests, if provided predictive for GR, can be used to monitor mechanical properties during dissolution experiment and later, for quantifying changes during shelf life.

 

3
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Schedule: The first series can be completed and tested by the beginning of October (with EC and EudL and different plasticizers). Testing possible replacements for EC and/or EudL will take additional three months (minimum), thus until the end of 2004.

 

The development of the mechanical tests, including validation will take 3.5 months at least (middle of November). However, it is possible to complete the first and more straightforward test for the frame a month earlier (mid October).

 

Prof. A. Hoffman

 

A plan and a schedule for the research work at the School of Pharmacy of the Hebrew University by the laborites of Prof. Amnon Hoffman.

 

I. A. Development of a list of potential APIs that could benefit from GRDF

Timeframe: Jan.-Mar.

 

B. Evaluation of 3 new potential APIs in-vivo (in rats), in vitro or ex vivo. The means of evaluation will be based on the existing knowledge or extending the knowledge about the API in terms of “absorption window”, bioavailability following continuous duodenal infusion, stability in the stomach, pharmaco-dynamic advantages of sustained input function etc.

 

The methods that will be applied in this project will include Ussing diffusion chambers to establish absorption windows and/or duodenal infusion in rats in order to assess pharmacokinetics and/or pharmacodynamics of the API.

 

In addition, a suitable assay will be established (if existing in literature) or developed for the determination and quantification of each of the APIs.

 

The screening process will progress according to the actual findings for each API

 

Timeframe: Jan.-Dec.

 

The potential APIs that will be examined will consist of 3 different types:

 

“[***]”

 

4
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

APPENDIX B

 

FINANCING

 

Financing for the Additional Research in the amount of $94,250 has been provided by the Company prior to this Agreement as follows:

 

$37,000 - Paid.

 

$37,000 - Paid.

 

$20,250 - Paid.

 

Additional $23,250 will be paid to Yissum upon signing this Agreement.

 

5

 

 

Exhibit 10.3

 

AMENDMENT

 

THIS AMENDMENT (the “ Amendment ”) made on 13 day of July 2005 by and between Yissum Research Development Company of the Hebrew University of Jerusalem (“ Yissum ”), and Intec Pharma Ltd. (formerly Intec Pharmaceutical Partnership Ltd.) (“ Intec Pharma ”) (each a “ Party ” and together the “ Parties ”).

 

WHEREAS the Parties entered into the Joint Venture for R&D Agreement dated June 1, 2000 (the “ R&D Agreement ”), which was extended and amended on October 5, 2004 (the “ Extension ”) (the R&D Agreement and the Extension shall collectively be referred to as the “ Agreement ”); and

 

WHEREAS the Parties wish to amend the Agreement as detailed below.

 

NOW, THEREFORE, the Parties agree as follows:

 

1. Section 2 of Appendix E (Royalties) of the Agreement: Reference to “30%” is hereby replaced with “15%”.

 

Attached hereto as Annex A is the amended Appendix E.

 

2. In consideration for the reduction of royalties, as set forth in Section 1 above, Intec Pharma shall grant shares as set forth in the following provision, which shall be added to the Agreement as Section 7A (after Section 7g):

 

“7A Additional Consideration. In consideration for the grant of License, and in addition to the consideration set forth in Section 7(a), the Company shall grant 746 Ordinary Shares thereof, par value NIS 0.01 each (which amount of shares is equal to 1% of Intec Pharma’s issued and outstanding share capital on the date hereof) to each of the following: Yissum, Prof Michael Friedman and Prof Amnon Hoffman. Such grant of shares is subject to (i) the execution by such grantees of any document reasonably required by Intec Pharma in order to effectuate the grant; and (ii) payment by the grantees of the par value of the shares, as required by law.

 

3. Except as explicitly set forth in this Amendment, all other terms and provisions of the Agreement shall remain in full force and effect. In the event of contradiction between any term herein and that of the Agreement, this Amendment shall prevail.

 

 
 

 

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed by their duly authorized representatives.

 

Yissum Research Development   Intec Pharmaceutical Partnership  
Company of the Hebrew   Ltd.  
University of Jerusalem      
       
Signature: /s/ Abraham Barak   Signature: /s/ Zvi Joseph  
           
Name: Abraham Barak   Name: Zvi Joseph  
           
Title: President and CEO   Title: Chairman  

 

Each of the undersigned hereby confirm, with respect to himself, that (i) he has read the Agreement as herein amended; and (ii) agrees to the provisions of Section 2 of this Amendment, to that extent they apply thereto.

 

/s/ Michael Friedman   /s/ Amnon Hoffman  
Prof. Michael Friedman   Prof. Amnon Hoffman  
       
14/7/05   14/7/05  
Date   Date  

 

2
 

 

APPENDIX E - ROYALTIES

 

1.          The Company will pay to Yissum 3% royalties from the net sales of the products from the first date of commercial sale in each country.

 

2.          The Company shall be required to pay Yissum 15% of any payment or benefit of any sort or nature the Company may receive from the Sub-License.

 

3

 

Exhibit 10.4

 

RESEARCH AGREEMENT

 

Made in Jerusalem this 15 day of January 2008, by and between:

 

YISSUM RESEARCH DEVELOPMENT COMPANY OF THE HEBREW UNIVERSITY OF JERUSALEM , of Hi Tech Park, Edmond J. Safra Campus, Givat Ram, Jerusalem 91390, Israel (“ Yissum ”) of the one part; and

 

INTEC PHARMA LTD , of 12 Hartom St. Jerusalem 45219; (the “ Company ”), of the second part;

 

WHEREAS the Parties entered into the joint venture for R&D agreement dated June 1 st , 2000 ( the JV Agreement 2000 ) which was extended and amended on October 5 th , 2004 (the Extension ) and amended again on July 13 th , 2005 (the Second Amendment ) (the JV Agreement and the Extension and the Second Amendment shall collectively be referred to as the “ JV Agreement ”);

 

WHEREAS the Parties wish to further continue their joint venture for R&D under the terms of this Agreement and correspondingly with the JV Agreement, as stipulated and amended hereunder;

 

NOW, THEREFORE, the Parties agree as follows:

 

1. Interpretation and Definitions

 

1.1. The preamble and appendices annexed to this Agreement constitute an integral part hereof and shall be read jointly with its terms and conditions.

 

1.2. In this Agreement, unless otherwise required or indicated by the context, the singular shall include the plural and vice-versa , the masculine gender shall include the female gender.

 

1.3. The headings of the sections in this Agreement are for the sake of convenience only and shall not serve in the interpretation of the Agreement.

 

1.4. The terms in this Agreement shall have the meaning as detailed hereunder in section 1.5, and if a meaning has not been attached alongside it hereunder, shall have the meaning as agreed by the Parties in the JV Agreement.

 

1.5. The Parties agree that the terms of the JV Agreement, inasmuch as they conform with the provisions of this Agreement, shall be valid, stay in full force and bind the parties under this Agreement, mutatis mutandis. In case of contradiction between terms and/or provisions of this Agreement and the JV Agreement, the provisions of this Agreement shall prevail.

 

1.6. In this Agreement, the following capitalized terms shall have the meanings appearing alongside them, unless provided otherwise:

 

 
 

 

 

1.6.1. Intec Pharma Development Results ” shall mean all and any inventions, discoveries, know-how, improvements, new uses, methods, processes, compounds, information, material, products, devices, information and other results of whatsoever nature, whether patentable or not, that are created, generated, developed or discovered during the course of and/or arising from the performance of any research and development activities undertaken by the Company (or on its behalf), which (i) are not a part of the Research (as defined in the JV Agreement 2000), the Additional Research (as defined in the Extension), the Further Research, the Further Research Program and/or the Further Research Results; and (ii) do not involve any contribution by the University, Prof. Friedman or any other employee or student of the University (excluding, for the removal of doubt, Mr. David Kirmayer or any other employee of the Company) (hereinafter “ Employee or Student of the University ”).

 

1.6.2. Further Research ” shall mean the research, which shall be carried out and conducted, by Researchers pursuant to the Further Research Program hereunder.

 

1.6.3. Further Research Program ” shall mean the program under which the Further Research shall be carried out and conducted by the Researchers, as per Appendix B.

 

1.6.4. Researchers ” shall mean Prof. Micha Friedman (hereinafter: “ Prof. Friedman ”), on Yissum’s part, or such other person appointed by Yissum to supervise and to perform the Further Research, if applicable and Mr. David Kirmayer, on Company’s part (hereinafter: “ Mr. Kirmayer ”).

 

1.6.5. Further Research Results ” shall mean all and any inventions, discoveries, know-how, improvements, new uses, methods, processes, compounds, information, material, products, devices, information and other results of whatsoever nature (collectively “ Results ”), whether patentable or not, that are created, generated, developed or discovered during the course of the performance of the Further Research and all patent applications and patents (which shall be added to the list of Registered Patents set forth on Appendix A), covering any of the Results or any portion thereof

 

1.6.6. University ” shall mean the Hebrew University of Jerusalem and/or each of its branches.

 

2. Further Research

 

2.1. The Company hereby undertakes to finance performance of the Further Research in accordance with the Further Research Program or any amendment thereof, and subject to the terms of section 2.4 hereunder.

 

2
 

 

2.2. The Further Research shall be conducted by and under the supervision of Prof. Friedman and the Company. Should Prof. Friedman be unable to complete the Further Research or any of its stages, for any reason, Yissum shall notify the Company of the identity of a suitable replacement researcher of the same position and requisite skills as those of Prof Friedman. If the Company does not object to the replacement researcher on reasonable grounds within twenty (20) days of this notification, the substitute researcher shall be deemed acceptable to the Company. If the Company objects to the replacement researcher, the Parties shall amicably and in good faith negotiate a suitable replacement researcher acceptable by the Company. Alternatively, the Company shall have the right to terminate the Further Research, according to section 11 hereunder.

 

2.3. The parties undertake to perform all of their duties under this Agreement diligently and promptly, and, where applicable, according to the Further Research Program.

 

2.4. As compensation to Yissum for the performance of the part of the Further Research to be performed by Prof Friedman or any other scientist or Employee or Student of the University, subject to section 2.6 hereunder and/or any earlier termination of the Further Research pursuant to the termination section hereunder, and the compensation due thereupon, if applicable, the Company shall pay Yissum the total sum of sixty four thousand eight hundred US Dollars ($64,800) (of which $48,000 are to Prof. Friedman’s lab and the rest are Yissum’s overhead) payable as follows:

 

1. Upon execution of this Agreement: $ 16,200.
2. $ 16,200 upon the completion of stage I of the attached Further Research Program: “ Optimization of the lead ”.
3. $ 16,200: upon the completion of stage II of the attached Further Research Program: “ A feasibility of API Incorporation ”.
4. $ 16,200 upon the completion of stage III of the attached Further Research Program: “ Mechanism elucidation of the hardening ”.

 

2.5. Yissum and/or the University and/or the Researcher shall be allowed to obtain further finance or grants from other entities for research regarding the Further Research Program provided that Yissum shall provide Company with all necessary information concerning the finance terms and that such entities providing the further finance shall not be granted rights in the Further Research and/or Further Research Results prejudicial to the rights granted to the Company in this Agreement and subject to Company’s prior written approval, that shall not be unreasonably withheld and if withheld, shall include a reason based written notice to Yissum.

 

2.6. Within 30 days of the completion of each of the three stages described in the attached Further Research Program (i.e. Optimization of the Lead, A feasibility of API Incorporation and Mechanism Elucidation of the Hardening), and as a condition for the payment of the compensation detailed in section 2.4 hereunder, Yissum shall present the Company with a written report (the “ Further Research Report ”) summarizing the Results of the Further Research accomplished with respect to that stage. Furthermore, Yissum shall use its best efforts to further provide the Company with any other additional reports and/or details as the Company may reasonably require.

 

3
 

 

2.7. Nothing contained in this Agreement shall be construed as a warranty on the part of Yissum that any Results or inventions will be achieved by the Further Research, or that the Further Research Results, if any, are or will be commercially exploitable. Yissum makes no warranties whatsoever as to the commercial or scientific value of the Further Research Results. Notwithstanding the aforementioned in this section, Yissum undertakes and commits to do everything in its capacity and use its best efforts to achieve results or inventions that shall be of commercial or scientific value, under the terms of this Agreement.

 

2.8. Should the Company choose to, in addition to the terms agreed between the parties under this Agreement (i) retain the services of Prof Friedman and/or any other Employee or Student of the University as a consultant in connection with the Further Research and/or the License and/or the Further License (as defined below); and/or (b) grant any benefit, including but not limited to, cash payments or securities of any kind, to Prof Friedman and/or any other Employee or Student of the University, it shall do so only through a written agreement executed between the Company and Yissum.

 

3. Ownership

 

3.1. All rights and title in all Further Research Results shall be jointly owned by the Parties in equal parts (and not wholly by Yissum as per the JV Agreement 2000) and will be registered in both their names. All rights and title in the Intec Pharma Development Results and all patent applications and patents covering any Intec Pharma Development Results or any portion thereof shall be solely owned by the Company.

 

3.2. Yissum shall grant the Company an exclusive and worldwide license to its rights in and to the Further Research Results under this Agreement (50%), on the same terms and conditions of the License (as defined in the JV Agreement) granted to the Company under the JV Agreement which shall apply to Yissum’s rights in and to the Further Research Results, mutatis mutandis (the “ Further License ”).

 

3.3. The Company shall pay Yissum Royalties with respect to the use of the Further Research Results and the Further License granted by Yissum to the Company hereunder as follows:

 

3.3.1. 3% royalties from the Net Sales of the Products from the first date of commercial sale in each country.

 

3.3.2. 15% of any payment or benefit of any sort or nature the company may receive from Sub-Licenses.

 

4
 

 

It is hereby clarified for the avoidance of doubt that the said Royalties shall be paid with the respect to “Products” as defined below. For the purposes hereof, “Product(s)” means any product and/or product component and/or production supplement and/or process directly and/or indirectly based on and/or related to the Know-how and/or the Research Results (as defined in the JV Agreement), and/or the Further Research Results and/or the Intec Pharma Development Results and/or any part thereof.

 

3.4. Royalties under this Agreement shall not derogate from Yissum’s right to Royalties under JV Agreement for other Products, if applicable, provided, that, for the avoidance of doubt, at any time, Yissum shall not be entitled to receive Royalties or other payments both under this Agreement and the JV Agreement, for the same Product and/or in respect of the same payments or benefits received by the Company.

 

3.5. For the avoidance of doubt, the terms and definitions: Royalty, Net Sales, Product and Sub-License, shall have the meaning as agreed by the parties in the JV Agreement and shall apply hereto mutatis mutandis .

 

3.6. Company shall be required to pay for Development and Commercialization per section 8 of the JV Agreement and reimburse Yissum for patent application expenses, if incurred, per section 10 of the JV Agreement in respect of the Further Research Results hereunder.

 

3.7. For the avoidance of doubt, the Compensation, Royalties and expenses detailed in sections 2-3 hereunder, shall constitute the full and only consideration to Yissum under this Agreement, for whatever reason.

 

4. No Financial Report : Yissum is not expected to present any financial report and the expenses incurred in rendering the Further Research shall be Yissum’s responsibility alone.

 

5. Use of Names : The Company shall not make any use of any kind of the name of Prof. Friedman or Yissum or the Hebrew University without the prior written consent of Yissum, which shall not be unreasonably withheld and provided not later than 7 days of Company’s request. Notwithstanding the aforegoing, the Company shall not require Yissum’s consent for any mention of the name of Prof. Friedman or Yissum or the Hebrew University in any applications to official authorities for regulatory approval, or in the fulfillment of any duty owed to any competent authority (including a duty to make regulatory filings and/or reports) or in the presentation of activities to potential investors in the Company, potential business partners and/or collaborators, subject to the aforegoing being bound by customary confidentiality undertakings. Yissum shall not make any use of any kind of the name of the Company without the prior written consent of the Company, which shall not be unreasonably withheld.

 

5
 

 

6. Relationship of the Parties : Neither the Company nor Yissum stand in a relationship of employer employee with Prof. Friedman. The relationship of the Company and Yissum shall be that of requester – independent contractor.

 

7. Dispute Resolution : In all cases in which a dispute shall arise between the Company and Yissum regarding the Services or any other matter arising under this Agreement, the dispute shall be resolved exclusively and only in the competent courts of Tel Aviv and both parties hereby irrevocably consents to said jurisdiction.

 

8. Authorized Signatories : Signature by an authorized representative of Yissum on this copy of the document shall constitute Yissum’s approval and agreement to all that is written herein. The Company warrants that the person signing this agreement is authorized to bind the Company.

 

9. Value Added Tax : Amounts mentioned in this Agreement do not include Value Added Tax (VAT), which shall be added to such amounts as prescribed by law.

 

10. No Liability : Yissum, its ultimate parents, affiliates, officers, directors, employees, agents and contractors, shall not be liable for any and all claims, actions, demands, losses, damages, costs and expenses made or brought by third parties arising from or in connection with this Agreement or the use of the Further Research Results, except for loss, damage, liability and expenses resulting from negligence or willful misconduct on the part of Yissum.

 

11. Termination :

 

(a) Unless terminated in accordance with the provisions of this Agreement, this Agreement shall end upon the end of the term of the License, as defined under section 5 of the JV Agreement, for the Further Research Results under this Agreement.

 

(b) Each party shall be entitled to terminate this Agreement in the event of a breach by the other party of its obligations under this Agreement, which is not remedied by the breaching party within 30 days of receipt of written notice from the non-breaching party.

 

(c) Company shall be entitled to terminate this Agreement, upon the occurrence of any of the following and under the terms hereof:

 

(i) by prior 7 days written notice, during the term of 21 days after receipt of the Further Research Report for stages I or II, if, in its sole discretion, the completion of said stages was not successful.

 

If Agreement was not terminated by Company during the 21 day term following the receipt of the Further Research Report, it will constitute Company’s approval to Yissum to continue Further Research of the next stage of the Further Research Program.

 

6
 

 

(ii) By prior 14 days written notice, should Prof. Friedman be unable to complete the Further Research or any of its stages, for any reason, per section 2.2 hereunder.

 

(d) Upon termination or expiration of this Agreement, the Further License and other rights granted to the Company by Yissum under this Agreement shall terminate and shall revert to Yissum.

 

(e) Notwithstanding anything in this Agreement stating the contrary (1) no monies paid to Yissum for the Further Research pursuant to the schedule set forth in section 2.4, hereunder, will be refundable; and (2) except in the event of termination by the Company for breach by Yissum, the Company shall be liable to pay accrued fees and/or expenses that are: (i) based on work performed up to the date of termination; and (ii) constitute irrevocable commitments entered into by Yissum or the Researcher prior to termination and (iii) bind Yissum for the term of not longer than two months following termination and (iv) that Yissum did not succeed, after using its best efforts, to cancel.

 

(f) Sections 1, 3.1, 7, 10 and 11(d) and (e) shall survive the termination or expiration of this Agreement for any reason. In addition, any termination or expiration of this Agreement shall not release the Company or Yissum from the performance of any obligation which it was liable to perform prior to such termination or expiration.

 

12. Entire Agreement: This Agreement together with the JV Agreement (as amended hereby) constitutes the entire agreement between the Parties hereto in respect of the subject-matter hereof, and supersedes all prior agreements or understandings between the Parties relating to the subject-matter hereof. This Agreement may only be amended by a written document signed by the Parties.

 

Intec Pharma    
12 Hartom Street P.O. Box 45219    
Jerusalem 91450    
Company Name and Address    
     
/s/ Giora Carni   15/1/08
Signature of Authorized Co. Representative   Date Signed
     
Yissum hereby agrees and approves:    
     
/s/ Nava Swersky Sofer and Elana Canetti   15/1/08
Yissum Research Development Company of the Hebrew University of Jerusalem   Date Signed

 

7
 

 

Prof. Friedman's Agreement:

 

I the undersigned, Prof. Michael Friedman of the Hebrew University, have reviewed, am familiar with and agree to all of the above terms and conditions. I hereby undertake to fully cooperate with Yissum in order to ensure its ability to fulfill its obligations hereunder, as set forth herein.

 

/s/ Michael Friedman  
Date signed  

 

8
 

 

Appendix B

 

Further Research Program

 

Exhibit I – the Research Specification.

 

Submitted to Intecpharm

by Michael Friedman

School of Pharmacy

The Hebrew University of Jerusalem

 

Brief work plan for period 1-Jan-24-2008 to 31-Dec 20 2008
Submitted to Intec Pharma by Professor Michael Friedman’s group

 

Background

A novel buoyant hardening swelling-tablet platform was offered (see research offer from January 2006). A detailed research plan for the topic was submitted in January 2007. The basic points are outlined in the document below.

 

1. Optimisation of the lead

 

The key parameters that are responsible for the swelling of the current lead formulation have been spotted. More data will be amassed to verify the assumptions. Thereupon, a parametric experiment will be performed to optimise the formulation. Preliminary work will be required to define unequivocally the working windows for each of the formulatory and process parameters. The results will be processed with JMP software, and the lead formulation will be compounded for full characterisation.

 

The swelling properties of a tablet can be anisotropic, as reported in various sources in literature. Therefore, the optimal shape should be sought. There are several large-size tablets approved on the market, i.e. Augmentin 875, which exploit a singular form of a tablet to maximize capacity and facilitate swallowing. There is also a patent from Depomed on the subject. Similar forms should be considered theoretically, with calculations of the relative volume of the tablet, and the advantageous ones should be tested with the successful formulation.

 

The lead formulations will be produced in sufficient a quantity for full characterisation and for a short-term stability as placebo, according to the plan that remains to be determined.

 

9
 

 

Inputs :

 

·       Materials and facilities for production and facility time for analyses (available by then both at Intec and at Professor Friedman’s laboratory);

 

·       Novel dies and punches for an IR press;

 

·       Engineering council (possible to obtain from Avner Balshai);

 

·       Time on JMP software;

 

·       Laboratory aids (at Professor Friedman’s laboratory).

 

Performance : David Kirmayer.

 

Estimated time needed : six months

 

Output : interim report on the platform development and characterisation.

 

Milestone : to reach the output by 1 May 2008

 

2.      A feasibility of API incorporation

 

An API, tentatively gabapentin, will be incorporated and the possible weak points of the design will be discovered. Inherent controlled-release potential of the formulation will be evaluated. Mechanical consequences of drug release will be evaluated. Mechanical stability-preserving mechanisms (suggested in the original plan) will be tested in vitro, if needed. The ways to alter the controlled release will be investigated as well. The loading capacity will be determined per standard humane dose units.

 

Inputs .

 

·       Materials, including API, and facilities for production and facility time for analyses;

 

·       Laboratory aids (at Professor Friedman’s laboratory);

 

·       Analytical support or additional time for performing the analyses.

 

Performance : David Kirmayer

 

Estimated time needed : four months

 

Output : interim report on the product and characterisation.

 

Milestone : to reach the output by 1 October 2008

 

10
 

 

3.      stage 3: Mechanism elucidation of the hardening

 

The dependence of the system’s performance upon the mechanical properties is a by-design quality. Thus knowing the underlying mechanism of building up the mechanical strength is a key in understanding the mechanism of gastric retention of the system. The mechanism will be investigated using thermal analysis methods (DSC), chromatography (HPLC, GPC) and spectral methodology, known in polymer science. This research will be performed in parallel and in accordance with other branches of development, and may not be finished by the end of calendar 2007 th year.

 

Inputs :

 

·       Materials and facility time for analyses;

 

·       Funding for the analyses that can not be performed in-house;

 

·       Possibly external advisor.

 

Performance : David Kirmayer.

 

Estimated time needed : six months

 

Output : interim report on the hardening mechanism of the platform.

 

Milestone : none

 

11

 

 

Exhibit 10.5

 

Intec Pharma Ltd.

(the “Company”)

 

Date: ______________

To:

Mr./Ms. _______________

______________________

 

Dear Sir/Madam,

 

Re: Letter of Indemnification

 

Whereas You are serving or have served as a director and/or officer, as such term is defined in the Companies Law, 5759-1999 (“ Officer ” and the “ Companies Law ”), of Intec Pharma Ltd. (the “ Company ”); and

 

Whereas On _______________, the board of directors of the Company resolved that the Company shall indemnify and shall provide an advance indemnification undertaking to the Company’s Officers, as shall be determined from time to time by the Company, pursuant to this Letter of Indemnification; and

 

Whereas On ______________ 2007, the Company’s general meeting approved the indemnification resolution at the majority required under law, we hereby notify you that as you are serving or have served and/or may serve as an Officer of the Company and/or of subsidiary and/or affiliated companies of the Company and/or you are employed and/or were employed and/or may be employed by the Company and/or subsidiary and/or affiliated companies of the Company.

 

The Company confirms and undertakes toward you, subject to the provisions of any law and the provisions of this Letter of Indemnification below:

 

1. In your capacity as an Officer of the Company, the Company hereby undertakes to indemnify you for any liability or expense as detailed in this Section below, which shall be imposed upon you or which you shall expend as a result of action/s which you took in your capacity of Officer of the Company (including actions preceding the date of this Letter of Indemnification) and/or which you will take in your capacity of Officer of the Company and/or its representative and at its request in another corporation in which the Company holds rights, directly or indirectly, or in which it is an interested party (“ Other Company ”):

 

 
 

 

1.1. Monetary liability that shall be imposed on you in favor of another person according to a judgment, including a judgment which was issued in a settlement or an arbitration decision which was approved by a court, and provided that such monetary liability is related, directly or indirectly, to one or more of the types of the events or any part thereof or anything related thereto, that are detailed in Schedule A to this Letter of Indemnification, constituting an integral part thereof (the Schedule ”).

 

1.2. Reasonable litigation expenses, including attorneys' fees, expended by you as a result of an investigation or proceeding instituted against you by an authority that is authorized to hold an investigation or proceeding, which investigation or proceeding has not ended in a criminal charge against you and without you being charged with a monetary liability in lieu of a criminal proceeding, or has ended in imposing upon you a monetary liability in lieu of a criminal proceeding for an offence that does not require proof of criminal intent. In this sub-section, "proceeding that has not ended in a criminal charge" and "monetary liability in lieu of a criminal proceeding" shall have the meaning as defined in Section 260(a1) of the Companies Law, 1999), as amended from time to time.

 

1.3. Reasonable litigation expenses, including attorneys’ fees, expended by you or charged to you by a court in a proceeding instituted against you by the Company or on its behalf or by another person, or in a criminal prosecution from which you were acquitted, or in a criminal prosecution in which you were convicted of an offense that does not require proof of criminal intent.

 

In this Section “another person” – including in the event of a claim instituted against the Officer by way of a derivative suit.

 

1.4. Expenses expended by or charged to the Officer in connection with an administrative enforcement proceeding conducted in respect of the Officer, including reasonable litigation expenses, and including attorneys’ fees. In this sub-section –

 

(a) “administrative enforcement proceeding” – an administrative enforcement proceeding pursuant to the provisions of any law, including the Streamlining of Enforcement Procedures Law and the Securities Law, 5728-1968 (the “ Securities Law ”), including an administrative petition or appeal in respect of such proceeding;

 

(b) The “Streamlining of Enforcement Procedures Law” – the Streamlining of Enforcement Procedures Law at the Israel Securities Authority (Legislation Amendments), 5771-2011, as updated from time to time.

 

 
 

 

1.5. Payment to an injured party as set forth in Section 52(54) of the Securities Law, as amended by the Streamlining of Enforcement Procedures Law .

 

1.6. Any other legally indemnifiable liability or expense.

 

2. Amount of the Indemnification

 

2.1. The aggregate amount of the indemnification which the Company shall owe to each Officer of the Company under all letters of indemnification issued to them by the Company from time to time (the “ Letters of Indemnification ”), shall not exceed an amount equal to 25% (twenty five percent) of the Company's equity according to its last audited or reviewed annual financial statements that were known as of the date of actual indemnification payment (the Maximal Indemnification Amount "). It is hereby clarified that the payment of such indemnification amount shall not derogate from your right to receive insurance payments from the insurance company for types of events specified in the Schedule, in the framework of any directors’ and officers’ liability insurance policy.

 

2.2. For the avoidance of doubt it shall be clarified, that the Maximal Indemnification Amount under this Letter of Indemnification shall apply over and above any amount paid to you (if and to the extent so paid) in the framework of insurance and/or indemnification under a directors’ and officers’ policy of the Company, provided that you shall not be compensated twice for a liability or expense that is indemnifiable under Section 1.1 above, and in the event that you shall receive indemnification from an insurer of the Company under a directors’ and officers’ liability insurance policy for the indemnifiable matter, the Company shall indemnify you for the difference between the amount of monetary liability imposed on you and legal expenses, and the amount received under an insurance policy for same matter, provided that the amount of indemnification incurred by the Company shall not exceed the Maximal Indemnification Amount as set forth in Section 2.1 above.

 

2.3. If and to the extent the aggregate indemnification amounts per occurrence that the Company shall be required to pay at any time, in addition to the aggregate sum of all indemnification amounts paid by the Company up to such date under the Letters of Indemnification, shall exceed the Maximal Indemnification Amount, the Maximal Indemnification Amount shall be divided such that the indemnification amount actually received by each of the relevant Officers of the Company, shall be computed pursuant to the ratio between the amount of indemnification due to each Officer and the aggregate indemnification amount due to all of the Officers for same matter, had there been no limitation on the indemnification amount.

 

 
 

 

2.4. If the Company paid indemnification amounts to Officers of the Company in a sum that is equal to the Maximal Indemnification Amount, the Company shall not incur additional indemnification amounts unless the payment of the additional indemnification amounts is approved by the Company organs that are authorized to approve such increase under applicable law at the date of payment of the additional indemnification amounts and subject to a change in the Company’s articles of association, to the extent necessary under applicable law.

 

3. Interim Payments

 

3.1. Upon the occurrence of an event for which you may be entitled to indemnification under the provisions hereof, the Company shall make available to you, from time to time, the amounts required to cover the expenses and other various payments involved in handling such legal proceeding against you that is related to the same event, including in investigation proceedings, such that you shall not be required to pay for or finance them yourself, and all subject to the provisions of this Letter of Indemnification.

 

In the event that the Company pays you or on your behalf any amounts in respect of this Letter of Indemnification in connection with such legal proceeding, and subsequently it shall be discovered that you are not entitled to indemnification from the Company for those same amounts, the provisions of Section 4.7 below shall apply.

 

4. Terms of the Indemnification

 

Without derogating from the aforesaid, indemnification under this Letter of Indemnification is subject to the following terms :

 

4.1. Indemnification Notice

 

You shall notify the Company of any legal proceeding instituted against you or any written notice or suspected or threatened institution of such proceeding against you in connection with any event for which the indemnification may apply (collectively and severally: a " Legal Proceeding "), promptly after you are first made aware thereof (the “ Indemnification Notice ”), and you shall provide any document delivered to you in connection with such proceeding to the Company or to a person as notified by the Company. Failure to provide an Indemnification Notice in accordance with the foregoing shall not release the Company from its undertakings under this Letter of Indemnification, other than in the event where failure to provide such Notice of Indemnification shall materially prejudice the Company rights to defend the claim on its own behalf (in the event that it is also sued in such proceeding) and/or on your behalf.

 

 
 

 

4.2. Handling the Defense

 

4.2.1. The Company shall assume the handling of your defense in such Legal Proceeding and/or shall hand over such handling to any attorney chosen by the Company for such purpose. The Company and/or such attorney shall act in such framework towards bringing such proceeding to a close, shall deliver to you ongoing reports of the progression of the proceeding and shall consult with you as to the manner of handling thereof. An attorney who is appointed by the Company as aforesaid shall act and shall owe a duty of loyalty to the Company and to you. Where you or the attorney believed that a suspected conflict of interest emerged between you and the Company in your defense against such Legal Proceeding and/or if the Officer’s objection to the attorney appointed by the Company is based on other reasonable grounds, you shall so notify the Company and/or such attorney shall notify you of such conflict of interests, as the case may be, and you shall be entitled to appoint an attorney on your behalf to handle your defense and the provisions of this Letter of Indemnification shall apply to the expenses you shall incur in connection with the appointment of said attorney.

 

4.2.2. Unless your prior written consent for the compromise to be submitted was obtained, the Company shall not be entitled to end such Legal Proceeding by way of compromise and/or settlement as a result of which you shall be required to pay amounts for which you shall not be indemnified for under to this Letter of Indemnification and further will not be paid for in the framework of the officers’ liability insurance purchased or which shall be purchased by the Company. In addition, the Company shall not be entitled to bring the dispute which is the subject matter of the Legal Proceeding for resolution by way of arbitration or conciliation or mediation, except with your prior written consent; provided that you shall not refuse to render such consent other than on the basis reasonable grounds which shall be provided to the Company in writing. For the avoidance of doubt, it is hereby clarified that even if the dispute in the Legal Proceeding is brought for resolution by way of arbitration or conciliation or mediation or any other manner, the Company shall bear the expenses related thereto in the framework of the expenses of this Letter of Indemnification.

 

 
 

 

4.2.3. The aforesaid notwithstanding, the Company shall not be entitled to bring such Legal Proceeding to an end by way of conciliation and/or settlement and/or to bring the dispute which is the subject matter of the Legal Proceeding for resolution by way of arbitration or conciliation or mediation in the case of criminal allegations against you, unless you render your prior written consent therefor. You will be entitled to refuse to render the consent contemplated by this sub-section at your exclusive discretion and without you being required to explain your refusal.

 

4.2.4. At the Company’s request, you shall execute any document authorizing any such attorney to handle your defense on your behalf and to represent you in anything related therewith, in accordance with the foregoing. If the Company did not notify you within 14 days of receipt of the Notice of Indemnification as aforesaid that it assumed the handling of your defense in such Legal Proceeding, or if you shall object to your representation by the Company’s attorneys on the basis reasonable grounds or due to a suspected conflict of interests, you shall be entitled to appoint an attorney on your behalf and all provisions of this Letter of Indemnification shall apply, mutatis mutandis , including the expenses that you shall incur for appointing such attorney.

 

4.2.5. It shall be noted that to the extent that the Company and/or the Officer may be entitled to indemnification in the framework of officers’ insurance in connection with the proceeding, such appointment of attorney shall take into consideration the insurer’s right to determine the identity of the attorney representing the Officer in the proceeding, and the Company’s obligations in respect thereof under such insurance, particularly if under the terms of the insurance the insurer is entitled to determine the identity of the attorney representing the Officer in the proceeding, such that otherwise the insurer may be released from its undertaking to indemnify or such undertaking may be minimized. In any event, the Company shall exert best efforts, in the framework of the terms of the insurance and subject thereto, to influence the choice of attorney according to the Officer’s wishes.

 

 
 

 

4.3. Cooperation with the Company

 

You with cooperate with the Company and/or any such attorney as aforesaid and shall fulfil all of the insurers' instructions according to any officers' liability policy that the Company shall maintain in connection with the defense of a Legal Proceeding, in any reasonable manner required from you by any of the foregoing in the framework of their handling of the Legal Proceeding, and provided that the Company shall provide for the coverage of all expenses involved therein such that you shall not be required to pay for them or finance them yourself, and all subject to the provisions of this Letter of Indemnification.

 

4.4. Coverage of Liabilities

 

Whether or not the Company acts according to the provisions of this Section above, the Company shall ensure the coverage of all such liabilities and expenses, such that you shall not be required to pay for them or to finance them yourself; provided that the foregoing shall not derogate from the indemnification to which you are entitled according to this Letter of Indemnification and subject to its terms.

 

4.5. Inapplicability of Indemnification in Cases of Compromise or Admission

 

Indemnification in regards to a Legal Proceeding against you as stated in this Letter of Indemnification shall not apply to any amount which you shall owe the plaintiff as a result of a conciliation or arbitration, unless the Company agreed in writing to such conciliation or to the holding of such arbitration, as applicable, provided however, that the Company shall not refrain from rendering its consent except on the basis of reasonable grounds. In addition, the indemnification shall not apply in the event that you gave a confession in a criminal prosecution that does not require proof of criminal intent, unless your confession received the Company's prior written consent

 

4.6. Indemnification in the Event of Indemnification or Insurance from a Third Party

 

The Company shall not be required to pay any amounts for any event according to this Letter of Indemnification, to the extent that such amounts were actually paid to you or for you or in your stead in any manner whatsoever in the framework of an officers’ liability insurance policy of the Company.

 

 
 

 

4.7. Payment of the Indemnification

 

Upon your request for any payment whatsoever in respect of any event in accordance with this Letter of Indemnification, the Company shall pursue any actions legally required for making such payment, and shall pursue any approval required therefor, to the extent required, including court approval, if and to the extent required.

 

4.8. Repayment of Indemnification Amounts Paid

 

In the event that the Company paid any amounts to you or in your stead in the framework of this Letter of Indemnification in connection with such Legal Proceeding, and subsequently it shall be discovered that you are not entitled to be indemnified by the Company for such amounts, such amounts shall be considered a loan remitted to you by the Company bearing interest at the minimal rate prescribed from time to time by applicable law, linked to the consumer price index, and you will be obligated to repay such amounts to the Company when it so requires in writing in writing and pursuant to a payments arrangement determined by the Company.

 

4.9. In respect of the Company’ indemnification undertaking for an action taken or that will be taken by you in your capacity of an Officer and/or an employee of a subsidiary and/or affiliated company of the Company and/or of another corporation (collectively and severally, the “ Owing Corporation ”), the following provisions shall apply:

 

4.9.1. The Company shall not be required to pay amounts under this Letter of Indemnification that you will be entitled to receive and will actually receive from the Owing Corporation in the framework of an insurance policy maintained by the Owing Corporation and/or pursuant to an advance indemnification undertaking or pursuant to an indemnification permit provided by the Owing Corporation.

 

4.9.2. If your demand to receive indemnification and/or insurance coverage for an action you took in the capacity of your position in the Owing Corporation and which may be indemnifiable under this Letter of Indemnification, will be dismissed by the Owing Corporation or its insurance company, as the case may be, the Company shall pay you, under this Letter of Indemnification, the amounts that you shall be entitled to hereunder, if any, and you shall assign to the Company your rights to receive amounts from the Owing Corporation and/or under the Owing Corporation’s insurance policy and shall empower the Company to collect such amounts on your behalf to the extent that such consent is required to give effect to the provisions of this Section. For such purpose, you undertake to execute any document required by the Company for assigning your aforesaid rights and empowering the Company to collect such amounts on your behalf.

 

 
 

 

4.9.3. For the avoidance of doubt it is clarified, that nothing in this Letter of Indemnification serves to grant the Owing Corporation and/or any other third party any rights whatsoever toward the Company, including, but without derogating from the generality of the foregoing, a right to claim and/or demand any payment from the Company as participation in the indemnification and/or the insurance coverage provided to you by the Owing Corporation for an action you took in the capacity of your position at the Owing Corporation.

 

4.10. Term of indemnification. The Company’s undertakings under this Letter of Indemnification shall remain in force toward you or (god forbid) your estate indefinitely, also after termination of your service as Officer of the Company or of the Other Company, as defined above, as the case may be, provided that the indemnifiable actions took place during the term of your service as Officer of the Company and/or the Other Company and/or during the term of your employment with the Company, notwithstanding the date of discovery of the event for which you are entitled to indemnification hereunder.

 

5. The indemnification undertaking set forth in Section 1 above shall not apply in any of the following cases :

 

5.1. Breach of the fiduciary duty to the Company or its subsidiary or associated company or other entity, unless the Officer acted in good faith and had reasonable cause to assume that such action would not prejudice the interests of the Company or its subsidiary or associated company or other entity.

 

5.2. Intentional or reckless breach of duty of care, other than in case it such breach was brought forth negligently.

 

5.3. An action with the intention of generating unlawful personal gain.

 

5.4. A penalty or fine imposed upon the Officer.

 

6. Miscellaneous

 

6.1. Expressions importing the masculine gender shall implicitly include the feminine gender.

 

 
 

 

6.2. The Company's undertakings according to this Letter of Indemnification shall be interpreted broadly and in the manner designed for their fulfilment, to the extent permitted by law, for the purpose for which they were intended. In the event of a contradiction between any provision of this Letter of Indemnification and the provision of any law that may not be stipulated, modified or supplemented, said provision of law shall prevail, but this shall not impair or derogate from the validity of the remaining provisions of this Letter of Indemnification.

 

6.3. It is emphasized that this indemnification undertaking does not constitute a contract in favor of any third party including any insurer, and it is not assignable, and the insurer shall not have the right to demand the Company’s participation in a payment which the insurer is obligated to pay according to the insurance agreement made therewith, other that the deductible specified therein.

 

6.4. Noting in this Letter of Indemnification serves to limit the Company or prevent it from increasing the Maximal Indemnification Amount for indemnifiable events, whether due to a reduction in the insurance amounts under the officers’ liability insurance policy or due to the Company’s inability to purchase officers’ insurance that will cover the indemnifiable events upon reasonable terms or due to any other reason; provided that such resolution shall be adopted in the manner prescribed therefor by the Companies Law.

 

6.5. The Company shall be entitled, at its exclusive discretion and at any time, to cancel its undertakings to indemnify according to this Letter of Indemnification, or to reduce the Maximal Indemnification Amount thereunder, or to reduce the types of events to which it applies, whether in respect of all Officers or any part of them, to the extent that it addresses events which shall occur after the date of the amendment; provided however that the Officer was provided prior written notice of such intention at least 30 days prior to the date on which such resolution shall take effect. For the avoidance of doubt it is hereby clarified, that any such decision which may deteriorate the terms of this Letter of Indemnification or cancel it, shall not take any retroactive effect of any type whatsoever, and the Letter of Indemnification as in effect prior to its amendment or cancellation, as applicable, shall continue to apply and remain in force for all intents and purposes in relation to any event that occurred prior to the amendment or cancellation, even if the proceeding in respect therewith was filed against the Officer after the amendment or cancellation of the Letter of Indemnification. It is clarified that the amendment or modification of the Letter of Indemnification as aforesaid shall not be deemed a deterioration of employment terms where employment relations exist between the Officer and the Company; provided that the foregoing shall not constitute any statement or interpretation as to the existence of such employment relations.

 

 
 

 

6.6. No waiver, delay, failure to act or grant of an extension by the Company or by you, shall be interpreted under any circumstances as a waiver of rights under this Letter of Indemnification and under any law, and shall not prevent the Company or yourself from taking any legal or other steps required in order to realize said rights.

 

6.7. The Schedule to this Letter of Indemnification constitutes an integral part hereof.

 

6.8. This Letter of Indemnification expresses the entire and exhaustive letter of indemnification between the Company and yourself on the issues and matters contemplated thereby, and replaces and cancels any representation, memorandum of understandings, offers, discussion summaries, letters of intent and/or undertaking, agreement, letter of undertaking and/or any other document that prevailed or was exchanged, in writing or orally, on such issues and matters between the Company and yourself, prior to the execution of this Letter of Indemnification.

 

In witness whereof this Letter of Indemnification is executed by the Company by signatories lawfully empowered therefor.

 

____________________________________

 

Intec Pharma Ltd.

 

I confirm acceptance of this Letter of Indemnification, and confirm my consent to all of its terms in their entirety .

 

Name:  

 

Signature:  

 

Date:    

 

 
 

 

Schedule A

Types of Events

 

1. Any claim or demand filed in connection with a transaction (including an irregular transaction) as defined in Section 1 of the Companies Law, whether or not in the ordinary course of business of the Company, and including negotiations to engage in a transaction, transfer, sale, acquisition, lease or pledge of assets or obligations (including real property, securities or rights) or the receipt or grant or a right in any of the foregoing and/or of different rights, including a merger of the Company with another entity and including the acquisition of activity and its merger into the activity of the Company and any action involved directly or indirectly in such transaction.

 

2. Any transaction or arrangement, including the transfer, sale or acquisition or lease of assets or obligations, including, without derogating from the generality of the foregoing, goods, real property, securities or rights or the receipt or grant of a right in any of the foregoing.

 

3. Any claim or demand in connection with an action related directly or indirectly to the Company’s commercial relations, including negotiations and engagements in agreements of any type and kind whatsoever, including the delivery and/or termination thereof, with external contractors, agents, distributors, customers, suppliers, service providers and the like.

 

4. Any claim or demand in connection with the grant or receipt of credit, pledging of assets and obligations and the grant or receipt of securities, including the engagement in financing agreements with banks and/or other financial entities for the purpose of financing transactions or engagements performed, directly and/or indirectly, by the Company and any action involved in such matters.

 

5. Any claim and/or demand in connection with the issuance of securities, including, but without derogating from the generality of the foregoing, a public offering of securities to the public pursuant to a prospectus, private placement, issuance of stock dividends, or offering of the Company’s securities of any type whatsoever and in any other manner, and other actions relating to the Company’s capital.

 

6. Any claim or demand in connection with actions and/or events stemming from the Company being a public company and/or from the fact that its securities have been offered to the public and/or are traded on the Tel Aviv Stock Exchange Ltd., including from rendering notices and/or reports and/or avoiding from filing any such report or notice.

 

7. Events that materially affected or that may have a material effect on the Company’s profitability or its property or rights or obligations.

 

 
 

 

8. Any claim or demand regarding the non-disclosure or failure to provide any type of information at the time prescribed therefor by law, or regarding an erroneous or inadequate disclosure of information as aforesaid to third parties, including the Israel Tax Authority, the National Insurance Institute, the Investment Center, local municipalities, the Ministry of Environmental Protection, holders of the Company’s securities, and any other governmental or institutional entity, including in anything relating to the issuance, allocation, distribution, purchase, holding or link to securities of the Company or any other investment activity involving or influenced by the Company’s securities.

 

9. Any claim or demand in connection with the provision of information, representations, opinions, financial statements, reports or notices to any competent authority (including the Registrar of Companies, Israel Securities Authority, the Tel Aviv Stock Exchange Ltd.) under any law, including, but without derogating from the generality of the foregoing, the Companies Law and the Securities Law, including regulations promulgated thereunder, or pursuant to rules or guidelines that are customary at the Tel Aviv Stock Exchange Ltd. or pursuant to the taxation law provisions which apply to the Company.

 

10. Any claim or demand in connection with actions related to submitting offers to tenders and/or franchises and/or licenses, of any type or kind whatsoever.

 

11. Actions in the framework of legal proceedings of the Company and/or against it, including minority claims.

 

12. Any claim or demand in connection with actions or resolutions relating to the issuance and receipt of licenses and permits (including business permits and licenses and approvals required to manage the Company’s business).

 

13. Negotiation, engagement and performance of contracts of any type and kind whatsoever with suppliers, distributors, agents, human resources contractors, service contractors and the like.

 

14. Any claim or demand in connection with the distribution of dividends to the Company’s shareholders.

 

15. Any claim or demand filed by employees, consultants, agents or other individuals or entities employed or providing services to the Company regarding compensation owed to them or damage or liabilities suffered thereby upon their employment by the Company or their engagement with the Company, and including events related to employment terms of employees and employment relations including the promotion of employees, negotiation of employment terms or their termination, handling pension arrangements, insurance, providence or savings funds, loans to employees, grant of securities and other benefits.

 

 
 

 

16. Any claim or demand in connection with any action or resolution in issues relating, directly or indirectly, to safety at work, the environment or the applicable provisions of law, procedures or standards in Israel or abroad, contemplating safety at work or the environment and which relate, inter alia , to pollution, protection of health, manufacturing processes, distribution, use, handling, storage and transportation of certain materials or products and including for bodily injuries and property and environmental damages.

 

17. Any claim or demand filed by a third party suffering bodily injury or damage to business or to personal property, including loss of use thereof, within any action or omission attributed to the Company or, respectively, to its employees, agents or other persons acting on its behalf or purporting to do so.

 

18. Any claim and/or demand filed directly or in respect of an omission, in whole or part, by the Company and/or by the Officers, managers and/or employees of the Company, in connection with the payment, reporting or documentation, of one of the State’s authorities, foreign entity, municipal entity and/or any other payment required under the laws of the State of Israel, including payment of income taxes, value added taxes, stamp duty, customs, national insurance payments, salaries and/or salary withholding and/or other delays, including any type of interest and additions for linkage.

 

19. Any claim or demand in connection with an action or resolution, in issues relating, directly or indirectly, to antitrust matters including restrictive arrangements and/or mergers and/or monopolies.

 

20. Any claim or demand filed by a customer, supplier, contractor or other third party engaging in any form of business with the Company.

 

21. Any claim or demand referring to a change in the structure of the Company or its reorganization or any resolution pertaining thereto, including, but without derogating from the generality of the foregoing, an acquisition, merger, division, change in the Company's equity, arrangement between the Company and its shareholders or companies under their control, establishment of subsidiaries or affiliated companies, their liquidation or sale, issuance or distribution.

 

22. Any claim or demand referring to remarks or statements including expression of a position or opinion, which were made in good faith by an Officer in the course of performing his duties and by virtue of his position, including in the framework of meetings of the board of directors or one of its committees.

 

 
 

 

23. Any claim or demand filed by purchasers of the Company’s products for damage or loss related to such assets or products.

 

24. Any claim or demand referring to a resolution or activity of the Company or of the Officer in the framework of his position in the Company, after the appropriate examinations and consultations for such type of resolution or activity were carried out, including resolutions adopted by the board of directors of the Company or one of its committees.

 

25. Any provision included in this Schedule above which contemplates the performance of a certain action, shall be construed as including reference also to non-performance or avoidance from performing such action, unless the context of a certain provision cannot support such interpretation.

 

 

 

Exhibit 10.6

 

INTEC PHARMA LTD.

 

2005 SHARE OPTION PLAN

 

1. Purpose

 

The purpose of this Share Option Plan is to secure for Intec Pharma Ltd. and its shareholders the benefits arising from ownership of share capital by employees, officers, directors and consultants of the Company and its Affiliates (as defined below), who are expected to contribute to the Company’s future growth and success.

 

2. Definitions

 

2.1 Defined Terms

 

Initially capitalized terms, as used in this Plan, shall have the meaning ascribed thereto as set forth below:

 

“Administrator” means the Board of Directors of the Company, or a committee or any other person or persons, to which the Board of Directors shall have delegated power to act on its behalf with respect to the Plan.
   
“Affiliate(s)” means a present or future company that either (i) Controls Intec Pharma Ltd. or is Controlled by Intec Pharma Ltd.; or (ii) is Controlled by the same person or entity that Controls Intec Pharma Ltd..
   
“Allocate” or “Allocated” with respect to Options, means the allocation of Options by the Company to the Trustee on behalf of a Participant.
   
“Cause” means, when used in connection with the termination of a Participant's employment with, or service to the Company or an Affiliate, as a result of a basis for termination, including, but not limited to: dishonesty toward the Company or Affiliate, insubordination, substantial malfeasance or nonfeasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or Affiliate; or, any substantial breach by the Participant of (i) his or her employment or service agreement or (ii) any other obligations toward Company or Affiliate.
   
“Code” means the United States Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.

 

 
 

 

“Commencement Date” means the date of commencement of the vesting schedule with respect to a Grant of Options which, unless otherwise determined by the Administrator, shall be the date on which such Grant of Options shall be Allocated.
   
“Company” means Intec Pharma Ltd., a company incorporated under the laws of the State of Israel.
   
“Consultant” means an Israeli resident who is not entitled to receive Options under Section 102, on behalf of whom an Option is Granted under Section 3i.
   
“Control” or “Controlled” shall have the meaning ascribed thereto in Section 102.
   
“Disability” means physical or mental impairment or sickness of a Participant, making it impossible for the Participant to continue such Participant’s employment with or service to the Company or Affiliate.
   
“Exercise Price” means, the price determined by the Administrator in accordance with Section 7.1 below which is to be paid to the Company in order to exercise a Granted Option and convert such Option into an Underlying Share.
   
“Grant Letter” means a letter from the Company or Affiliate to a Participant in which the Participant is notified of the decision to Grant to the Participant Options according to the terms of the Plan. The Grant Letter shall specify (i) the Tax Provision under which the Option is Granted; (ii) the Tax Track that the Company chose according to Section 11 of the Plan (if applicable); (iii) the Exercise Price; (iv) the number of Options Granted to the Participant; and (v) the vesting schedule.
   
“Grant of Options” with respect to Options, means the grant of Options by the Company to a Participant pursuant to a Letter of Grant
   
“Holding Period” means with regard to Options Granted under Section 102, the period in which the Allocated Options granted to a Participant or, upon exercise thereof the Underlying Shares, are to be held by the Trustee on behalf of the Participant, in accordance with Section 102, and pursuant to the Tax Track which the Company selects.
   
“Incentive Stock Options” means Options Granted to Non-Israeli Participants, in accordance with the provisions of section 422 of the Code.

 

2
 

  

“IPO” means the initial public offering of shares of the Company and the listing of such shares for trading on any recognized stock exchange or over-the-counter or computerized securities trading system.
   
“Israeli Participant” means an Israeli resident who is an employee, officer or director of the Company or any Affiliate (provided that such person does not Control the Company as such term is defined in the Tax Ordinance), on behalf of whom an Option is Granted pursuant to Section 102.
   
“Law” means the laws of the State of Israel as are in effect from time to time and any US law applicable to Options Granted to Non-Israeli Participants.
   
“Merger Transaction” (i) a sale of all or substantially all of the assets of the Company; or (ii) a sale (including an exchange) of all or substantially all of the shares of the capital stock of the Company; or (iii) a merger, consolidation or like transaction of the Company with or into another corporation.
   
“Notice of Exercise” shall have the meaning set forth in Section 7.4 below.
   
“Option” means an option to purchase one Share of the Company.
   
“Non-Israeli Participant” means a non-Israeli resident, on behalf of whom an Option is Granted pursuant to the Code.
   
“Non-Qualified Israeli Participant” means an Israeli resident  is not qualified to receive Options under the provisions of Section 102, on behalf of whom an Option is Granted pursuant to Section 3i.
   
“Participant” means an Israeli Participant, or a Non-Qualified Israeli Participant, or a Non-Israeli Participant, or a Consultant.
   
“Plan” or “Option Plan” means this Share Option Plan, as may be amended from time to time.
   
“Retirement” means the termination of a Participant's employment as a result of his or her reaching the earlier of (i) the age of retirement as defined by Law; or (ii) the age of retirement specified in the Participant’s  employment agreement.
   
“Section 102” means Section 102 of the Tax Ordinance.

 

3
 

 

“Section 102 Rules” means the Income Tax Rules (Tax Relief for Issuance of Shares to Employees), 2003.
   
“Section 3(i)” or “Section 3(i) Rules” means section 3(i) of the Israeli Tax Ordinance and the applicable rules thereto or under applicable regulations.
   
“Share(s)” means an ordinary share of the Company, having a par value of NIS 0.01.
   
“Subsidiary” means a subsidiary of the Company as defined in the Code.
   
“Tax Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961, as amended, and any regulations, rules, orders or procedures promulgated thereunder.
   
“Tax Track” means one of the three tax tracks described under Section 102, specifically: (1) the “Capital Gains Track Through a Trustee”; (2) “Income Tax Track Through a Trustee”; or (3) the “Income Tax Track Without a Trustee”; each as defined in Sections 11.1-11.2 of this Plan, respectively.
   
“Tax Provision” means, with respect to the Grant of Options,  the provisions of one of the three Tax Tracks in Section 102, or the provisions of 3i, or the provisions of the Code.
   
“Term of the Options” means, with respect to Granted but unexercised Options, the time period set forth in Section 9 below.
   
“Trustee” means a Trustee appointed by the Company to hold in trust, Allocated Options and the Underlying Shares issued upon exercise of such Options, on behalf of Participants.
   
“Underlying Shares” means Shares issued or to be issued upon exercise of Granted Options all in accordance with the Plan.

 

2.2 General

 

Without derogating from the meanings ascribed to the capitalized terms above, all singular references in this Plan shall include the plural and vice versa, and reference to one gender shall include the other, unless otherwise required by the context.

 

3. Shares Available For Options

 

The total number of Underlying Shares reserved for issuance under the Plan and any modification thereof, shall be determined from time to time by the Board of Directors of the Company. Such number of Shares shall be subject to adjustment as required for the implementation of the provisions of the Plan, in accordance with Section 4 below.

 

4
 

 

In the event that Options Allocated under the Plan expire or otherwise terminate in accordance with the provisions of the Plan, such expired or terminated Options shall become available for future Grants and Allocations under the Plan.

 

4. Adjustments

 

In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, may (in its sole discretion) adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Option or Share Purchase Right. Upon the occurrence of any such adjustment, references in this Plan to Shares and Underlying Shares shall be construed to mean the Shares of the Company subject to the Plan as so determined by the Administrator, following such adjustment.

 

If the Change in Capitalization is the distribution of a cash dividend, the Company shall transfer to the Trustee the amount of dividend resulting from the Underlying Shares held by the Trustee for the benefit of Participants in accordance with the provisions of this Plan. The Trustee shall deduct all applicable taxes from the dividend amount and transfer the remaining dividend amount to such Participants.

 

5. Administration Of The Plan

 

5.1 Power

 

Subject to the Law, the Articles of Association of the Company, and any resolution to the contrary by the Company’s Board of Directors, the Administrator is authorized, in its sole and absolute discretion, to exercise all powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan; including, without limitation,

 

(A) to determine:

 

(i) the Participants in the Plan, and the number of Options to be Granted for each Participant’s benefit (subject to the approval of the Board of Directors if such approval is required by Law);

 

(ii) the time or times at which Options shall be Granted;

 

(iii) the Exercise Price for any Granted Option;

 

5
 

  

(iv) whether, to what extent, and under what circumstances an Option may be settled, canceled, forfeited, exchanged, or surrendered;

 

(v) any terms and conditions in addition to those specified in the Plan under which an Option may be Granted; and

 

(vi) any measures, and to take actions, as deemed necessary or advisable for the administration and implementation of the Plan.

 

(B) to interpret the provisions of the Plan and to take all actions resulting therefrom including without limitation;

 

(i) subject to Section 7, to accelerate the date on which any Allocated Option under the Plan becomes exercisable;

 

(ii) to waive or amend Plan provisions relating to exercise of Options, including exercise of Options after termination of employment, for any reason; and

 

(iii) to amend any of the terms of the Plan, or any prior determinations of the Administrator;

 

5.2 Limitations

 

Notwithstanding the provisions of Section 5.1 above, no interpretations, determinations or actions of the Administrator shall contradict the provisions of applicable Law.

 

6. Grant And Allocation Of Options

 

6.1 Conditions For Grant Of Options

 

Options may be Granted at any time after:

 

(A) the grant has been approved by the necessary corporate bodies of the Company; and

 

(B) all other approvals, consents or requirements necessary by Law have been received or met.

 

6.2 Conditions For Allocation Of Options

 

Options may be Allocated at any time after:

 

(A) the Plan has been approved by the necessary corporate bodies of the Company; and

 

(B) 30 days after a request for approval of the Plan has been submitted for approval to the Israeli Income Tax Authorities pursuant to the requirements of the Tax Ordinance; and

 

6
 

  

(C) all other approvals, consents or requirements necessary by Law have been received or met.

 

6.3 Date Of Grant Or Allocation

 

(a) The date on which Options shall be deemed Granted under the Plan shall be the date on which the Company shall notify the Participant in a Grant Letter that such Options have been Granted to the Participant (“Date of Grant”).

 

(b) The date on which Options shall be deemed Allocated under the Plan shall be the date on which the Company shall notify the Trustee that such Options have been Allocated in the name of the Trustee on behalf of a Participant (“Date of Allocation”).

 

7. Exercise Of Options

 

7.1 Exercise Price

 

The Exercise Price per Underlying Share deliverable upon the exercise of an Option shall be determined by the Administrator. The Exercise Price shall be set forth in the Grant Letter.

 

Notwithstanding the above, the exercise price of an Incentive Stock Options Granted to a Non-Israeli Participant shall not be less than 100% of the Fair Market Value of the Share as defined bellow. If an Incentive Stock Option is Granted to a Non-Israeli Participant owning more that ten percent of the shares of the Company or of a Subsidiary, or possessing at the time of the Grant more than ten percent of the total combined voting power of all classes of shares of the Company (or of its Subsidiary), then the Exercise Price shall be no less then 110% of the Fair Market Value of the Share at the time of Grant.

 

Notwithstanding the foregoing, Incentive Stock Options may be Granted with an Exercise Price other than as required above, pursuant to a Merger Transaction.

 

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

 

(1) if the Shares are listed on any established stock exchange or a national market system, including without limitation the NASDAQ National Market System, or the NASDAQ SmallCap Market of the NASDAQ Stock Market, the Fair Market Value shall be the closing sales price for such shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in the Wall Street Journal, or according to any other source the Administrator deems reliable;
     
(2) if the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the average between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination; or

 

7
 

  

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

 

7.2 Vesting Schedule

 

Unless otherwise determined by the Administrator, all Options Granted on a certain date shall, subject to continued employment with or service to the Company or Affiliate by the Participant, become vested and exercisable in accordance with the vesting schedule specified in the Grant Letter.

 

7.3 Minimum Exercise

 

An Option may not be exercised for fractional shares or for less than twenty five (25) Shares.

 

The exercise of a portion of the Options Granted shall not cause the expiration, termination or cancellation of the remaining unexercised Options held by the Trustee on behalf of the Participant.

 

7.4 Manner Of Exercise

 

An Option may be exercised by and upon the fulfillment of the following:

 

(A) Notice of Exercise

 

The signing by the Participant, and delivery to both the Company (at its principal office) and the Trustee (if the Options are held by a Trustee), of an exercise notice form as prescribed by the Administrator, including but not limited to: (i) the identity of the Participant, (ii) the number of Options to be exercised, and (iii) the Exercise Price to be paid (the “Notice of Exercise”).

 

(B) Exercise Price

 

The payment by the Participant to the Company, in such manner as shall be determined by the Administrator, of the Exercise Price with respect to all the Options exercised, as set forth in the Notice of Exercise.

 

(C) Allocation of Shares

 

Upon the delivery of a duly signed Notice of Exercise and the payment to the Company of the Exercise Price with respect to all the Options specified therein, the Company shall issue the Underlying Shares to the Trustee (according to the applicable Holding Period) or to the Participant, as the case may be.

 

8
 
(D) Expenses

 

All costs and expenses including broker fees and bank commissions, derived from the exercise of Options or Underlying Shares, shall be borne solely on the Participant.

 

8. Waiver Of Option Rights

 

At any time prior to the expiration of any Granted (but unexercised) Option, a Participant may waive his rights to such Option by a written notice to the Company's principal office. Such notice shall specify the number of Options Granted, which the Participant waives, and shall be signed by the Participant.

 

Upon receipt by the Company of a notice of waiver of such rights, such Options shall expire and shall become available for future Grants and Allocations under the Plan.

 

9. Term Of The Options

 

Unless earlier terminated pursuant to the provisions of this Plan, all Granted but unexercised Options shall expire and cease to be exercisable at 5:00 p.m. Israel time on the 10 th anniversary of the Commencement Date of such Options.

 

10. Termination Of Employment

 

10.1 Termination Of Employment

 

If a Participant ceases to be an employee, director, officer or Consultant of the Company or Affiliate for any reason (“Termination of Employment”) other than death, Retirement, Disability or Cause, then any vested but unexercised Options on the date of Termination of Employment (as shall be determined by the Company or Affiliate, in its sole discretion), Allocated on the Participant’s behalf (“Exercisable Options”) may be exercised, if not previously expired, not later than the earlier of (i) 90 days after the date of Termination of Employment; or (ii) the Term of the Options.

 

All other Granted Options for the benefit of Participant shall expire upon the date of Termination of Employment.

 

10.2 Termination For Cause

 

In the event of Termination of Employment of a Participant for Cause, the Participant's right to exercise any unexercised Options, Granted to such Participant, whether vested or not on the date of Termination of Employment, shall cease as of such date of Termination of Employment, and the Options shall thereupon expire.

 

If subsequent to the Participant's Termination of Employment, but prior to the exercise of Options Granted to such Participant, the Administrator determines that either prior or subsequent to the Participant's Termination of Employment, the Participant engaged in conduct which would constitute Cause, then the Participant’s right to exercise the Options Granted to such Participant shall immediately cease upon such determination and the Options shall thereupon expire.

 

9
 

  

The determination by the Administrator as to the occurrence of Cause shall be final and conclusive for all purposes of this Plan.

 

10.3 Termination By Reason Of Death, Retirement, Or Disability

 

In the event of Termination of Employment of a Participant by reason of death, Retirement, or Disability, any vested but unexercised Options shall be exercisable in the case of death, by his or her estate, personal representative or beneficiary, or in the case of Retirement or Disability, by the Participant or his or her personal representative (as the case may be), until the earlier of (i) 12 months after the date of Termination of Employment; or (ii) the Term of the Options.

 

All other Granted Options for the benefit of Participant shall expire upon the date of Termination of Employment.

 

10.4 Exceptions

 

In special circumstances, pertaining to the Termination of Employment of a certain Participant, the Administrator may in its discretion decide to extend any of the periods stated above in Sections 10.1-10.3.

 

10.5 Transfer Of Employment Or Service

 

Subject to the receipt of appropriate approvals from the Israeli Tax Authorities, if applicable, a Participant’s right to Options or the exercise thereof that were Granted to him or her under this Plan, shall not be terminated or expire solely as a result of the fact that the Participant’s employment or service as an employee, officer, director or Consultant changes from the Company to an Affiliate or vice versa.

 

11. Options And Tax Provisions

 

All Options under this Plan shall be Granted in accordance with one of the Tax Provisions as follows:

 

· The Company may Grant Options to Israeli Participants in accordance with the provisions of Section 102 and the Rules.
     
· The Company may Grant Options to Non-Qualified Israeli Participants in accordance with the provisions of Section 3(i).
     
· The Company may Grant Stock Incentive Options to Non-Israeli Participants under the Provisions of the Section 422 of the Code.

 

11.1 Tax Provision Selection

 

The Company shall elect under which Tax Provision each Option is Granted in accordance with any applicable Law and its sole discretion – i.e. the Company shall elect if to Grant Options to Participants under one of the three Section 102 Tax Tracks, or under the provisions of 3i, or under the provisions of the Code. The Company shall notify each Participant in the Grant Letter, under which Tax Provision the Options are Granted and, if applicable, under which Section 102 Tax Track, each Option is Granted.

 

10
 

  

11.2 Section 102 Trustee Tax Tracks

 

If the Company elects to Grant Options to Israeli Participants through (i) the Capital Gains Track Through a Trustee, or (ii) the Income Tax Track Through a Trustee, then, in accordance with the requirements of Section 102, the Company shall appoint a Trustee who will hold in trust on behalf of each Israeli Participant the Allocated Options and the Underlying Shares issued upon exercise of such Options in trust on behalf of each Israeli Participant.

 

The Holding Period for the Options will be as follows:

 

(A) The Capital Gains Tax Track Through a Trustee – if the Company elects to Allocate the Options according to the provisions of this track, then the Holding Period will be: (1) until 1.1.2006 24 months from the end of the tax year in which the Options were Allocated to the Trustee on behalf of the Israeli Participant; or (2) 24 months from the date of Allocation; or (3) such period as may be legislated by any amendment of Section 102.

 

(B) Income Tax Track Through a Trustee – if the Company elects to Allocate Options according to the provisions of this track, then the Holding Period will be (1) until 1.1.2006 12 months from the end of the tax year in which the Options were Allocated to the Trustee on behalf of the Israeli Participant; or (2) 12 months from the date of Allocation; or (3) such period as may be legislated by any amendment of Section 102.

 

Subject to Section 102 and the Rules, Israeli Participants shall not be able to receive from the Trustee, nor shall they be able to sell or dispose of Underlying Shares before the end of the applicable Holding Period. If a Participant sells or removes the Underlying Shares form the Trustee before the end of the applicable Holding Period (“Breach”), the Participant shall pay all applicable taxes imposed on such Breach by Section 7 of the Rules.

 

In the event of a distribution of rights, including an issuance of bonus shares, in connection with Options originally Allocated (the "Additional Rights"), all such Additional Rights shall be Allocated and/or issued to the Trustee for the benefit of Israeli Participants, and shall be held by the Trustee for the remainder of the Holding Period applicable to the Options originally Allocated. Such Additional Rights shall be treated in accordance with the provisions of the applicable Tax Track.

 

11.3 Income Tax Track Without A Trustee

 

If the Company elects to Allocate Options to Israeli Participants according to the provisions of this track, then the Options will not be subject to a Holding Period. However, upon exercise of Options under this Tax Track, the Trustee shall hold such Underlying Shares for the benefit of the Israeli Participant in accordance with the provisions of Section 15 of this Plan.

 

11
 

 

11.4 Concurrent Conditions

 

The Holding Period of Section 102, if any, is in addition to the vesting period as specified in Section 7.2 of the Plan. The Holding Period and vesting period may run concurrently, but neither is a substitute for the other, and each are independent terms and conditions for Options Granted.

 

11.5 Trust Agreement

 

The terms and conditions applicable to the trust relating to the Tax Track selected by the Company, as appropriate, shall be set forth in an agreement signed by the Company and the Trustee (the “Trust Agreement”).

 

11.6 Incentive Stock Options

 

If the Option Granted is an Incentive Stock Option, and if the Non-Israeli Participant sells or otherwise disposes of any of the Underlying Shares on or before the later of (i) the end of two years following the Date of Grant; and (ii) the end of one year following the transfer of such Underlying Shares to the Non-Israeli Participant upon exercise of the Option (“the Code Holding Period”), then the Non-Israeli Participant shall immediately notify the Company of such disposition of the Underlying Shares.

 

Any disposition of the Underlying Shares before the end of the Code Holding Period, may impose income tax withholding liabilities on the Company or Subsidiary as the case may be, and may impose other tax liabilities on the compensation income recognized from the such disposition.

 

12. Term Of Shares Held In Trust

 

No Underlying Shares or Additional Rights issued by the Company to the Trustee, shall be held by the Trustee on behalf of the Israeli Participant for a period longer than ten (10) years after the end of the Term of the Options. The Administrator shall instruct the Trustee as to the transfer of these Shares.

 

13. Rights As A Shareholder

 

Unless otherwise specified in the Plan, a Participant shall not have any rights as a shareholder with respect to Shares issued under this Plan, until such time as the Shares shall be registered in the name of the Participant in the Company’s register of shareholders.

 

14. No Special Employment Rights

 

Nothing contained in this Plan shall confer upon any Participant any right with respect to the continuation of employment by or service to the Company or Affiliate or to interfere in any way with the right of the Company or Affiliate, to terminate such employment or service or to increase or decrease the compensation of the Israeli Participant.

 

12
 

  

15. Restrictions On Sale Of Options And Shares

 

15.1 Options

 

Options may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent.

 

15.2 Shares

 

Unless otherwise determined by the Administrator, prior to the Company’s IPO, the Shares may not be sold assigned, transferred, pledged, hypothecated or otherwise disposed of, except as stated below in this Section 15. Unless otherwise determined by the Administrator, any Underlying Shares issued upon exercise of Options, Granted under any of the tax tracks detailed in Section 11 above, will be held by the Trustee until the earlier to occur of a Merger, as detailed in Section 15.3 below, or an IPO.

 

15.3 Mergers

 

In the event of a Merger Transaction, then, subject to obtaining the applicable approvals of the Israeli Tax Authorities, the Board of Directors in its sole discretion, shall decide:

 

(A) if and how unvested Options shall be canceled, replaced or accelerated;

 

(B) if and how vested Options (including Options with respect to which the vesting period has been accelerated according to Section 15.3.(a) shall be exercised, replaced and/or sold by the Trustee or the Company (as the case may be) on the behalf of Israeli Participants; and

 

(C) how Underlying Shares issued upon exercise of the Options and held by the Trustee on behalf of Israeli Participants shall be replaced and/or sold by the Trustee on behalf of the Israeli Participant.

 

15.4 Acceleration Provision

 

The Administrator, in its sole discretion, may decide to add a provision in certain Grant Letters, according to which in case of a Merger, all or some of the unvested Options, shall automatically accelerate.

 

15.5 Lock Up

 

Notwithstanding the Holding Period, following the Company’s IPO, at the request of the underwriter, the Administrator may determine that the Underlying Shares issued pursuant to the exercise of Options may be subject to a lock-up period of up to180 days, or such longer period of time as may be recommended by the Company’s Board of Directors, during which time Participants shall not be allowed to sell Shares.

 

13
 

   

16. Voting

 

Until consummation of the Company’s IPO, Shares issued to a Participant or to the Trustee for the benefit of a Participant, shall be voted by an irrevocable proxy assigned to the CFO of the Company, who has been appointed by the Company’s Board of Directors as a representative (the “Representative”).

 

(A) The Company’s Board of Directors may, at its discretion, replace the Representative from time to time.

 

(B) Shares subject to proxy shall be voted by the Representative on any issue or resolution brought before the shareholders of the Company in accordance with instructions of the Board of Directors of the Company.

 

(C) Each Participant, upon execution of the irrevocable proxy specified above, undertakes to hold the Representative harmless from any and all claims related or connected to said proxy.

 

(D) The Representative shall be indemnified and held harmless by the Company against any cost or expense (including attorneys’ fees) reasonably incurred by the Representative, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of the Shares subject to proxy, unless arising out of the Representative’s own fraud or gross negligence, to the extent permitted by applicable law. In the event the Representative shall have indemnification by virtue of other functions or services he or she performs for the Company or Affiliate (whether by agreement, insurance policy or decision of the appropriate corporate body(ies) of the Company and/or Affiliate) , this indemnification shall be in addition to any such other indemnification.

 

17. Tax Matters

 

This Plan shall be governed by, and shall conform with and be interpreted so as to comply with, the requirements of the Ordinance and the Code, as applicable and any written approval from any relevant Tax Authorities. All tax consequences under any applicable law (other than stamp duty) which may arise from the Grant or Allocation of Options, from the exercise thereof or from the holding or sale of Underlying Shares (or other securities issued under the Plan) by or on behalf of the Participant, shall be borne solely by the Participant. The Participant shall indemnify the Company and/or Affiliate, as the case may be, and hold them harmless, against and from any liability for any such tax or any penalty, interest or indexing.

 

If the Company elects to Allocate Options according to the provisions of the Income Tax Track Without a Trustee (Section 11.3 of this Plan), and if prior to the exercise of any and/or all of these Options, such Israeli Participant ceases to be an employee, director, or officer of the Company or Affiliate, the Israeli Participant shall deposit with the Company a guarantee or other security as required by law, in order to ensure the payment of applicable taxes upon the Exercise of such Options.

 

14
 

 

18. Withholding Taxes

 

Whenever an amount with respect to withholding tax relating to Options Granted to a Participant and/or Underlying Shares issued upon the exercise thereof is due from the Participant and/or the Company and/or an Affiliate, the Company and/or an Affiliate shall have the right to demand from a Participant such amount sufficient to satisfy any applicable withholding tax requirements related thereto, and whenever Shares or any other non-cash assets are to be delivered pursuant to the exercise of an Option, or transferred thereafter, the Company and/or an Affiliate shall have the right to require the Participant to remit to the Company and/or to the Affiliate, or to the Trustee an amount in cash sufficient to satisfy any applicable withholding tax requirements related thereto. If such amount is not timely remitted, the Company and/or the Affiliate shall have the right to withhold or set-off (subject to Law) such Shares or any other non-cash assets pending payment by the Participant of such amounts.

 

With regard to Options Granted to Israeli Participants - until all taxes have been paid in accordance with Rule 7 of the Section 102 Rules, Options and/or Underlying Shares may not be sold, transferred, assigned, pledged, encumbered, or otherwise willfully hypothecated or disposed of, and no power of attorney or deed of transfer, whether for immediate or future use may be validly given. Notwithstanding the foregoing, the Options and/or Underlying Shares may be validly transferred in accordance with Section 20 below, provided that the transferee thereof shall be subject to the provisions of Section 102 and the Section 102 Rules as would have been applicable to the deceased Israeli Participant were he or she to have survived.

 

19. No Transfer Of Options

 

The Trustee shall not transfer Options to any third party, including a Participant, except in accordance with instructions received from the Administrator.

 

20. Transfer Of Rights Upon Death

 

No transfer of any right to an Option or Underlying Share issued upon the exercise thereof by will or by the laws of descent shall be effective to bind the Company unless the Company shall have been furnished with the following signed and notarized documents:

 

(A) A written request for such transfer and a copy of the legal documents creating and confirming the right of the person acting with respect to the Participant’s estate and of the transferee;

 

(B) A written consent by the transferee to pay any amounts in connection with the Options and Underlying Shares any payment due according to the provisions of the Plan and otherwise abide by all the terms of the Plan; and (C) any such other evidence as the Administrator may deem necessary to establish the right to the transfer of the Option or Underlying Share issued upon the exercise thereof and the validity of the transfer.

 

15
 

 

  (C) any such other evidence as the Administrator may deem necessary to establish the right to the transfer of the Option or Underlying Share issued upon the exercise thereof and the validity of the transfer.

 

21. No Right Of Others To Options

 

Subject to the provisions of the Plan, no person other than the Participant shall have any right with respect to Options Granted to the Participant’s under the Plan.

 

22. Expenses And Receipts

 

The expenses incurred in connection with the administration and implementation of the Plan (including any applicable stamp duty) shall be borne by the Company. Any proceeds received by the Company in connection with the exercise of any Option may be used for general corporate purposes.

 

23. Required Approvals

 

The Plan is subject to the receipt of all approvals required under the Ordinance, the Code and the Law.

 

24. Applicable Law

 

This Plan and all documents delivered or executed by the Company or Affiliate in connection herewith shall be governed by, and construed and administered in accordance with the Law.

 

25. Treatment Of Participants

 

There is no obligation for uniformity of treatment of Participants.

 

26. No Conflicts

 

In the event of any conflict between the terms of the Plan and the Grant Letter, the Plan shall prevail, unless the Grant Letter stated specifically that the conflicting provision in the Grant Letter shall prevail.

 

27. Participant Undertakings

 

By entering into this Plan, the Participant shall (1) agree and acknowledge that he or she have received and read the Plan and the Grant Letter; (2) undertake all the provisions set forth in: the Code, Section 3i, or Section 102 (including provisions regarding the applicable Tax Track that the Company has selected) as applicable, the Plan, the Grant Letter and the Trust Agreement (if applicable); and (3) if the Options are Granted under Section 102, the Israeli Participant shall undertake that subject to the provisions of Section 102 and the Rules, he or she shall not to sell or release the Underlying Shares from trust before the end of the Holding Period (if any).

 

16

 

 

Exhibit 10.7

 

Execution Copy

 

SUBSCRIPTION AGREEMENT

 

THIS SUBSCRIPTION AGREEMENT (this “ Agreement ”) is made as of the 6 th day of August 2013, by and among, Intec Pharma Ltd. , a company organized under the laws of the State of Israel (the “ Company ”) and each of the parties set out in Schedule A to this Agreement (each – a “Subscriber” and collectively, the “Subscribers” ). The Company and the Subscriber(s) are referred to collectively as the Parties ” and each as a “ Party ”.

 

W I T N E S S E T H :

 

WHEREAS, the Company is a public company organized under the laws of the State of Israel registered under number 513022780, whose securities are registered for trading on the Tel Aviv Stock Exchange (the “TASE” );

 

WHEREAS, the Company has an authorized share capital of NIS 4,000,000 divided into 400,000,000 Ordinary Shares of NIS 0.01 each (“ Ordinary Shares ”), 211,465,322 of which Ordinary Shares have been issued and are fully paid;

 

WHEREAS, the Company has issued such number of options that are convertible into such number Ordinary Shares of the Company as are set out in Section 9(f) below and Exhibit 9(f) (capitalization table) hereto;

 

WHEREAS, the Board of Directors of the Company has determined that it is in the best interests of the Company to raise equity financing, all on the terms and conditions more fully set out in this Agreement; and

 

WHEREAS, each of the Subscribers wishes to invest in the Company for the price, and all upon and subject to the terms and conditions hereinafter contained.

 

NOW, THEREFORE , in consideration of the mutual promises and covenants set forth herein, the Parties hereby agree as follows:

 

1.      Issue and Allotment of Shares and Warrants .

 

1.1      Subject to the terms and conditions hereof, upon the Closing the Company shall issue and allot to the Subscribers respectively and the Subscribers respectively shall purchase from the Company such number of Ordinary Shares of the Company as determined in accordance with Section 1.3 below (in respect of each such Subscriber respectively, the “ Subscription Shares ”) and such number of warrants to purchase Ordinary Shares as determined in accordance with Section 3 below (in respect of each such Subscriber respectively, the “Warrants” ), for the total price and upon and subject to the terms and conditions hereinafter contained, free and clear from any mortgages, charges, pledges, liens and encumbrances whatsoever, save for any lock-up period imposed by law or any other restriction that may be imposed by the Israel Securities Authority (" ISA ").

 

- 1 -
 

 

1.2      In consideration for the issue and allotment by the Company of the Subscription Shares and the Warrants to the Subscribers respectively, the Subscribers respectively shall pay to the Company such total sum as set out respectively in Schedule A hereto opposite such Subscriber’s name (in respect of each such Subscriber respectively, the “ Subscription Price ”), which shall be in the aggregate of at least Two Million Five Hundred Thousand United States Dollars (US$2,500,000) and not exceeding Four Million United States Dollars (US$4,000,000). Payments of the Subscription Price shall be made in New Israeli Shekels (" NIS ") or United States Dollars. If made in United States Dollars, conversion shall be calculated on the basis of the representative rate of 3.577 New Israel Shekels against 1 United States Dollar.

 

1.3      The total number of Subscription Shares to be sold by the Company to each Subscriber under this Agreement shall be determined and calculated in accordance with the following formula:

 

$[Such Subscriber's Subscription Price]

PPS

 

Where:

 

PPS = NIS 1.1155

 

2.       Closing of Sale and Purchase .

 

2.1       Closing . The closing in respect of all Subscribers, except Joinder Date Subscribers (as defined below) (the " Gabriel Closing Date ") shall occur on September 9, 2013 or such other date as mutually agreed upon by the Company and Gabriel Capital (as defined below); provided, that the Gabriel Closing Date shall not be earlier than three (3) business days after the Company receives the approval of the TASE as provided in Section 5.4 below. In the case of the Joinder Date Subscribers (as defined in Section 2.6 below) – the closing shall occur on September 30, 2013 ); provided, that the Joinder Closing Date shall not be earlier than three (3) business days after the Company receives the applicable approval of the TASE as provided in Section 5.4 below (the “ Joinder Closing Date ”). Subject to the closing conditions provided in Sections 6 and 7 below, (A) each of the Subscribers shall pay and transfer to the Company the Subscription Price attributable to such Subscriber and (B) the Company shall issue to the registration company of the Company (Mizrahi Tefahot Registration Company Ltd.) (the “ Registration Company ”) all the registration documents needed in order to deposit the Subscription Shares at each of the Subscribers securities bank account in Israel, respectively (each such closing with regard to each subscriber shall be referred to as a “ Closing ” and the date on which such Closing is completed, shall be referred to as “ Closing Date” ). To avoid doubt, each Subscriber's obligations hereunder including the payment of the Subscription Price to the Company before or on the relevant Closing Date, is an independent obligation not contingent upon the performance of the obligations of the other Subscribers, it being understood and agreed that the Gabriel Closing Date shall not occur if the Subscribers do not invest a minimum of Two Million Five Hundred Thousand United States Dollars (US$2,500,000) and that the Joinder Closing Date is conditioned upon the Closing taking place on the Gabriel Closing Date.

 

- 2 -
 

 

If the closing conditions are not fulfilled by the Gabriel Closing Date or the Joinder Closing Date, as the case may be, through no fault of the Subscribers, then the Subscribers may, at their sole option, extend the relevant Closing Date by up to an additional thirty (30) days, such option to be exercised by notice in writing signed by or on behalf of the Subscribers to the Company, and delivered to the Company, by not later than the original relevant Closing Date. If the closing conditions are not fulfilled by the Gabriel Closing Date or the Joinder Closing Date, as the case may be, through no fault of the Company, then the Company may, at its sole option, extend the relevant Closing Date by up to an additional thirty (30) days, such option to be exercised by notice in writing signed by or on behalf of the Company, and delivered to the Subscribers, by not later than the original relevant Closing Date.

 

2.2       Transactions at each Closing . Upon each Closing Date, the following transactions shall occur, which transactions shall be deemed to take place simultaneously and none of such transactions shall be deemed to have been completed or any document delivered until all such transactions have been completed and all required documents delivered:

 

(a) Each Subscriber shall pay its Subscription Price in NIS or United States Dollars to the Company by bank transfer to the following account or pursuant to other payment instructions reasonably acceptable to such Subscriber provided by the Company to the Subscribers at least three business days prior to the respective Closing Date:

 

Account Name: Intec Pharma Ltd

Account Number: 24690/09

Currency: NIS

Bank: Union Bank of Israel

Branch: 063 (main branch of Tel Aviv)

 

(b) The Company shall transfer to the Registration Company, with a copy to the Subscribers participating in the relevant Closing, as authenticated by the Company's lawyers, all the documents and information needed in order to deposit the Subscription Shares of the Subscribers at their accounts in Israel, or with a trustee (if so determined by the ISA in its approval) respectively which details shall be provided by each of the Subscribers to the Company prior or on the Closing Date;

 

(c) The Company shall deliver and/or procure the delivery to the Subscribers participating in the relevant Closing of:

 

(i)     copies of any and all notices filed or to be filed upon the signing hereof with the ISA and the TASE and immediately following the Closing (if and as applicable), as required by law or regulations in relation to the transactions contemplated by this Agreement, and (a) the approval of the TASE to the listing of the Subscription Shares on TASE, and (b) approval of the TASE, to the listing of the Warrant Shares (as defined below) on TASE; and

 

- 3 -
 

 

(ii)       a correct copy of the resolution of the Company’s Board of Directors approving of the execution, delivery and performance of this Agreement, including (a) the issuance of the Subscription Shares, (b) the issuance of the Warrants and, subject to the exercise of the applicable Warrant by such Subscriber, of the Warrant Shares, to such Subscriber and the reservation of Ordinary Shares issuable upon the exercise of the Warrant, (c) the issuance of the Additional Warrants (as defined below), subject to the TASE's approval, and, subject to the exercise of the applicable Additional Warrant by such Subscriber, of the Additional Warrant Shares, to such Subscriber and the reservation of Ordinary Shares issuable upon the exercise of the Additional Warrant, and (d) the agreements and transactions contemplated hereby.

 

(d) Gabriel Capital Management Ltd. (" Gabriel Management ") shall deliver to the Company prior to the Closing Date details of the allocation of the number of Warrant Shares and Additional Warrant Shares underlying the Warrants and Additional Warrants respectively to be granted and allocated as among the Subscribers, (except Company's Additional Subscribers (as defined below), as provided in Sections 3.1 and 4.1 below respectively.

 

2.3       Listing of Subscription Shares for Trading and Lock-Up . As all shares issued by a public company in Israel must be deposited and registered by a Registration Company, at the Closing the Company shall provide to the Registration Company all the documents and information needed in order to deposit the Subscription Shares of the Subscribers at their accounts respectively (to be an account with a member of the TASE) which details shall be provided by each of the Subscribers to the Company prior or on the Closing Date. Each of the Subscribers hereby acknowledges that the Company accepts no responsibility for compliance with such Subscriber’s lock-up period requirements. The Parties acknowledge and are aware that the Subscription Shares will be subject to restrictions on transfer according to the Securities Law, 1968. An extract from section 15C of the Israeli Securities Law, which contains the main provisions of said lock up restrictions, is provided in Schedule B hereto. Each of the Subscribers acknowledges that the contents of Schedule B are provided for informational purposes only and do not purport to be a comprehensive statement of the applicable law.

 

2.4      The Company shall promptly use its best efforts to obtain prior to the Gabriel Closing Date the (a) approval to the listing of the Subscription Shares on TASE, and (b) approval to the listing of the Warrant Shares on TASE.

 

2.5       Additional Gabriel Closing Date Subscribers. Gabriel Capital Management (GP) Ltd (" Gabriel Capital ") shall have the exclusive right to include one or more additional Subscribers in an aggregate Subscription Price of up to the difference between the aggregate Subscription Prices set forth on Schedule A on the date hereof and Four Million United States Dollars (US$ 4,000,000) within twelve (12) days following the date hereof. Such additional Subscribers, if any, along with any additional Subscribers included by the Company and Gabriel between the thirteenth (13th) and sixteenth (16th) day following the date hereof (as of the thirteenth day, on a “first come first serve” basis), shall execute a joinder to this Agreement, in the form provided in Schedule C hereto, by no later than August 22, 2013, pursuant to which such additional Subscribers shall become a party to this Agreement and shall, from such time, be considered Subscribers for all intents and purposes under this Agreement, investing on the Gabriel Closing Date.

 

- 4 -
 

 

2.6       Joinder Closing Subscribers. In the event that additional Subscribers included by Gabriel Capital and/or the Company pursuant to Section 2.5 do not undertake to invest an additional amount equal to the difference between the aggregate Subscription Prices set forth on Schedule A on the date hereof and Four Million United States Dollars (US$ 4,000,000, then Gabriel Capital and the Company shall have the right to include one or more additional Subscribers in an aggregate Subscription Price of up to the difference between such amount and the total sum utilized under Section 2.5 above, prior to September 9, 2013 on a “first come first serve” basis (each, an " Joinder Date Subscriber "). Each Joinder Date Subscriber, if any, shall execute a joinder to this Agreement, in the form provided in Schedule C hereto, by no later than September 9, 2013, pursuant to which such Joinder Date Subscriber shall become a party to this Agreement and shall, from such time, be considered a Subscriber for all intents and purposes under this Agreement, investing on the Joinder Closing Date. Moreover, the Company shall have the discretion to increase the total sum invested by Joinder Date Subscribers by up to One Million United States Dollars (US$ 1,000,000), so that the aggregate Subscription Price reaches up to Five Million United States Dollars (US$ 5,000,000).

 

The Subscribers included by the Company pursuant to Sections 2.5 and 2.6 are referred to herein as " Company's Additional Subscribers " and the Subscribers included by Gabriel Capital pursuant to Sections 2.5 and 2.6 are referred to herein as “ Gabriel Additional Subscribers ”.

 

3.      Terms of Warrant .

 

3.1       (A)     The Company hereby undertakes to issue, effective as of its Closing, Warrants to purchase from the Company an aggregate number of Ordinary Shares of the Company in an amount that is sixty percent (60%) of the aggregate number of Subscription Shares issued to all of the Subscribers under this Agreement that shall be allocated between the Subscribers as determined in accordance with Section 3.1(B) and (C) below respectively (in respect of each such Subscriber respectively, the “ Warrant Shares ”), and for a price per share, in the case of each such Subscriber, as determined in accordance with Section 3.2 below (in respect of each such Subscriber respectively, the “ Exercise Price ”). There shall be no fractional shares issued, and in the event that the aforesaid calculations result in any fraction that is 0.50 and up, then it shall be rounded-up to the nearest whole number.

 

The Company shall, at the Closing, sign and deliver to the Subscribers, the form of Certificates of Warrants, which shall be in the form attached hereto as Exhibit 3.1 .

 

(B)       The number of Warrant Shares underlying the Warrants to be granted and allocated among the Subscribers, (including Gabriel Additional Subscribers, but excluding Company's Additional Subscribers), shall be as determined by Gabriel Management and notified in writing to the Company by Gabriel Management on or prior to August 25, 2013, and which determination and allocation shall be binding upon the Parties.

 

- 5 -
 

 

(C)       The number of Warrant Shares underlying the Warrants to be granted and allocated among Company's Additional Subscribers, if any, shall be, in respect of each such Subscriber, equal to an amount that is sixty per cent (60%) of the number of Subscription Shares issued to such Subscriber under this Agreement.

 

3.2       The Exercise Price per share of the Warrant Shares shall be NIS 1.2828, as may be reduced pursuant to Section 8.2(a) below provided , however , that the number of Warrant Shares or the Exercise Price shall be proportionally adjusted for any Recapitalization Event or Merger Event (as such terms are defined below) occurring after the date of this Agreement and prior to the Warrant Closing Date as follows:

 

(i)      Adjustment for Share Splits and Reverse Splits . In the event the Company at any time while any of the Warrants are outstanding shall subdivide or combine its Ordinary Shares, the number of Ordinary Shares issuable upon exercise of a Subscriber's Warrant(s) shall be proportionately increased or decreased, as the case may be, and, for the avoidance of any doubt, the Exercise Price per share shall be proportionally adjusted.

 

For the avoidance of doubt, it is hereby clarified that any share fractions that may result as of a Share Split or Reverse Split will be sold by the Company at TASE, after accumulated to a reasonable amount to be sold at TASE, for a period of 30 days after the said adjustment. The net consideration, after the deduction of any sale expenses, commissions and levies, shall be paid to the Subscribers within fourteen (14) days as of the sale date as mentioned above. The Company will not issue checks in an amount less than NIS 30.

 

(ii)        Adjustment for Dividends . If the Company, at any time while this Warrant, or any portion hereof, remains outstanding and unexpired (the " Record Date "), shall distribute to the holders of Ordinary Shares a dividend, whether payable out of earnings or surplus legally available for dividends or by way of return of capital, then, immediately prior to the Record Date the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution (the " Adjusted Exercise Price "), but under no circumstances shall the Adjusted Exercise Price be lower than the face value of the Ordinary Shares.

 

It is hereby clarified that in the event: (i) the Subscriber(s) possesses a withholding tax exemption (the " Exemption "), the Exercise Price will be equal to the Adjusted Exercise Price; (ii) the Subscriber(s) does not possess an Exemption, the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution net of applicable tax.

 

- 6 -
 

 

The Company will notify immediately prior to the trade opening on the ex-dividend date, by way of an immediate report published on TASE site, of the Adjusted Exercise Price. For the avoidance of doubt, no change in the base price Ordinary Share will occur.

 

(iii)       Adjustment for Bonus Shares . In the event the Company at any time while any of the Warrants are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive bonus shares, the number of Warrant Shares exercisable upon exercise of the Warrants then outstanding shall be adjusted such that it shall be increased by a number of Warrant Shares equal to the number of shares that such Subscriber would have been entitled to receive in respect of the Warrant Shares for which the Warrants could have been exercised immediately prior to the ex-bonus shares date. If any adjustments are made pursuant to this Section 3.2(iii) the Subscribers will not be entitled to any Ordinary Share fractions.

 

The Company will notify immediately prior to the trade opening on the ex-bonus shares date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

(iv)       Adjustment for Rights Offering . In the event the Company at any time while any of the Warrants are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive rights to purchase Ordinary Shares upon any rights offering by the Company, the Exercise Price will not be adjusted, however, the number of Warrant Shares exercisable upon exercise of the Warrants then outstanding shall be adjusted to the bonus component in the rights offering as being expressed by a fraction, the numerator of which shall be the closing price of the Ordinary Shares as published by TASE on the last trading day immediately prior to the ex-rights date and the denominator of which shall be the ex-rights base price per share as shall be published by TASE. If any adjustments are made pursuant to this Section 3.2(iv) the Subscribers will not be entitled to any Ordinary Share fractions.

 

The Company will notify immediately prior to the trade opening on the ex-rights date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

(v)        Adjustment for Pro-Rata Distributions . In the event the Company, at any time while any of the Warrants are outstanding, distributes to holders of Ordinary Shares as a dividend any asset other than cash or the Company's securities (in each case, “ Distributed Property ”), then forty-five (45) days prior to the distribution of the Distributed Property, the Company shall issue a notice to the holders of the Warrants. Provided that the holders of the Warrants did not exercise the Warrants within the said forty-five (45) days period, such holders will not be entitled to receive the Distributed Property that such holders would have been entitled to receive in respect of the Warrant Shares for which the Warrants could have been exercised immediately prior to the record date of such distribution.

 

- 7 -
 

 

(vi)       Adjustment for Pro-Rata Distributions in Company Liquidation . In the event a resolution for liquidation of the Company will be made, at any time while any of the Warrants are outstanding, the Company shall publish an announcement in two daily widely distributed Hebrew newspapers, to state, inter alia , that each holder of the Warrants will be considered as if he had exercised the Warrants prior to the said resolution (without prior paying the Exercise Price) unless such holders of the Warrants will notify the Company thirty (30) days as of the said publication that they waive his right to exercise the Warrants. Provided that a holder of the Warrants did not notify the Company of the said waiver within the set time frame, then they will be entitled, pro-rata, to a dividend in cash that such holders would have been entitled to receive in respect of the Warrant Shares for which the Warrants could have been exercised immediately prior to the record date of such resolution for liquidation, deducting the Exercise Price of the said dividend, if any.

 

(vii)      Adjustment for Merger Event . In the event there shall be a Merger Event (as defined below) at any time while any of the Warrants are outstanding, then, subject to paragraph (viii) below and as a part of such Merger Event, lawful provision shall be made so that Subscriber(s) shall thereafter be entitled to receive, upon exercise of such Subscriber's Warrant(s), the number of Ordinary Shares or other securities or property of the successor corporation resulting from such Merger Event that would have been issuable if such Subscriber had exercised such Subscriber's Warrant(s) immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors with respect to all outstanding options and warrants issued by the Company) shall be made in the application of the provisions of the Warrant(s) with respect to the rights and interests of each Subscriber after the Merger Event to the end that the provisions of the Subscribers' Warrants (including adjustments of the Exercise Price and/or number of Ordinary Shares purchasable) shall be applicable in their entirety. Without limiting the foregoing and subject to paragraph (viii) below, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of the Subscribers' Warrants.

 

(viii)      For the avoidance of any doubt, if determined by the Company's Board of Directors in good faith that: (a) the implementation of the provisions of paragraph (vii) above may impose an undue burden on the Company in the execution of a Merger Event, or (b) if the terms of such implementation are not acceptable to the Subscribers or the Company - then the Subscribers shall have the right to execute a “cashless exercise” in respect of such outstanding Warrants and the provisions of Section 3.6 below shall apply, and the Company shall ensure that adequate provision is made in the documents constituting the Merger Event and reasonable notice provided to the Subscribers prior to the consummation of such Merger Event so that the Subscribers may implement the “cashless exercise” and participate accordingly. Warrants not exercised under this provision or not otherwise exercised prior to the consummation of the Merger Event, shall be void and null.

 

Recapitalization Event ” means all that was provided in sub-sections (i), (ii), (iii), (iv), (v) and (vi) of this Section 3.2, as the case may be, or any other recapitalization, reclassification or similar event resulting in a change of such Ordinary Shares into a different number of shares of the same class or any other class or classes of shares.

 

- 8 -
 

 

Merger Event ” means a merger or consolidation involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s Ordinary Shares are otherwise converted into or exchanged for shares of capital of another entity.

 

All the adjustments provisions stipulated in this Section 3.2 are subject to any changes or adjustments required to be made in such adjustment provisions for the purpose of obtaining the TASE's Approval for the registration of the Warrant Shares.

 

3.3       Each Subscriber’s Warrants can be exercised by such Subscriber, in its sole discretion, in whole or in part, at any time after the Closing Date and prior to the expiration of four (4) years from the Gabriel Closing Date (the “ Exercise Period ”) (and, if exercised in part, with the Company being obliged to issue replacement Warrant certificates for the balance of such Subscriber's Warrants still outstanding), but excluding the record date for (a) bonus shares distribution, (b) rights issuance, (c) dividend distribution, (d) stock split, (e) stock consolidation, or (f) capital reduction (each of the above “ Corporate Event ”). In case that the “Ex-Date” for a Corporate Event shall occur before the record date for such Corporate Event, the Warrants may not be exercised on the said “Ex-Date”.

 

For the purposes of this Section 3.3 and Sections 3.4, 3.5 and 3.6, the term “ Warrant Shares ” shall be those Warrant Shares as shall be the subject of the Exercise Notice.

 

3.4       Each Subscriber may exercise its Warrant(s) by giving written notice to the Company, in the form attached hereto as Schedule D, at any time during the Exercise Period (in the case of each such Subscriber, the “ Exercise Notice ”).

 

Unless otherwise agreed by the parties, the closing of each such Subscriber’s Warrants shall occur no later than three (3) trading days after the delivery of such Subscriber’s Exercise Notice (in the case of each such Subscriber, the “ Warrant Closing Date ”), at which time such Subscriber shall pay its Exercise Price to the Company by bank transfer in NIS, as provided in Section 2.2(a), and following such payment, the Company shall issue and allot its Warrant Shares and transfer to the Registration Company all the documents and information needed in order to deposit the Warrant Shares of such Subscriber at its account which details shall be provided by such Subscriber to the Company in the Exercise Notice.

 

3.5       The Company represents and warrants to the Subscriber respectively as of the Closing Date and as of the Warrant Closing Date of each Subscriber respectively, as follows:

 

(a)     Upon exercise of its Warrant, its Warrant Shares will be, when paid for as provided in this Agreement, duly authorized, validly issued and fully paid and shall be issued and allotted free and clear from any mortgages, charges, pledges, liens or encumbrances whatsoever, subject to any lock-up requirements as prescribed by law and Section 2.3 .

 

(b)     The Company is authorized to and shall issue and allot the Warrant Shares on the terms and subject to the conditions set out in this Agreement and has reserved and will continue to reserve until the termination of the Exercise Period, a sufficient amount of authorized and unissued Ordinary Shares as shall be required upon exercise of the Warrants.

 

- 9 -
 

 

3.6       Cashless Exercise . Notwithstanding the foregoing, in lieu of exercising a proportion of each of the Subscriber's Warrants as provided above, in whole or in part, such Subscriber may elect to receive Ordinary Shares equal to the value of its Warrants so exercised (or the portion thereof being canceled), by written notice of such election to the Company, at the principal office of the Company, in which event, the Company shall issue to such Subscriber, for no additional consideration except for the payment of the par value thereof or the minimum required by TASE at the time of exercise (currently NIS 0 . 10 per share), that number of Ordinary Shares computed using the following formula:

 

    Y (A - B)
X = —————
    A

 

X          equals the number of Ordinary Shares to be issued to such Subscriber;

 

Y          equals the number of Ordinary Shares which would otherwise have been purchasable under the portion of such Subscriber's Warrant being exercised, at the time of exercise pursuant to this formula (or the portion thereof being canceled);

 

A          shall equal the “Fair Value” of one share of the Company's Ordinary Shares. Fair Value shall mean in the event that such Subscriber's Warrant is exercised in accordance with the above formula: the price per share equal to the average of the closing sale prices for the Ordinary Shares of the Company as reported on the Tel-Aviv Stock Exchange or, should the Company’s shares be traded only on a different stock exchange, such stock exchange, for a consecutive period of ten (10) trading days immediately prior to the date of exercise (i.e. delivery of Exercise Notice); and

 

B          equals such Subscriber's Exercise Price in effect at the time of exercise pursuant to this formula.

 

4.      Grant of Additional Warrants .

 

4.1      (A) The Company undertakes to issue, subject to the satisfaction of the Additional Warrant Condition (defined below), effective as of October 1, 2014, additional warrants to purchase from the Company an aggregate number of Ordinary Shares of the Company in an amount that is twenty-five per cent (25%) of the aggregate number of Subscription Shares issued to all of the Subscribers under this Agreement that shall be allocated between the Subscribers as determined in accordance with Section 4.1(B) and (C) below respectively (in respect of each such Subscriber respectively, the “ Additional Warrant(s) ” and the “ Additional Warrant Shares ”, as the case may be), and for a price per share, in the case of each such

 

- 10 -
 

 

Subscriber, as determined in accordance with Section 3.2 above, as may be reduced pursuant to Section 8.2(b) below (in respect of each such Subscriber respectively, the “ Second Exercise Price ”). There shall be no fractional shares issued, and in the event that the aforesaid calculations result in any fraction that is 0.50 and up, then it shall be rounded-up to the nearest whole number.

 

For the purposes of this Section 4.1, the satisfaction of the “Additional Warrant Condition” shall mean the failure on the part of the Company, for whatever reason whatsoever, to have effected and consummated by September 30, 2014: (i) an initial public offering of the Company’s Ordinary Shares on the NASDAQ Stock Market in which it raised at least Twelve Million United States Dollars (US$12,000,000) or (ii) a merger with a company traded on the NASDAQ Stock Market which immediately following the closure of such merger held free and unencumbered cash and/or publically raised, prior to September 30, 2014, a cumulative amount of at least Twelve Million United States Dollars (US$12,000,000) (in either case, the " Dual Listing ").

 

Subject to the satisfaction or the imminent satisfaction of the Additional Warrant Condition, the Company shall, prior to or on October 1, 2014, sign and deliver to the Subscribers, the form of Certificates of Additional Warrants, in the form attached hereto as Exhibit 4.1 .

 

(B)       The number of Additional Warrant Shares underlying the Additional Warrants to be granted and allocated among the Subscribers, (including Gabriel Additional Subscribers, but excluding Company's Additional Subscribers), shall be as determined by Gabriel Management and notified in writing to the Company by Gabriel Management prior to the Closing Date and may be revised by Gabriel Management with a written notice to be provided to the Company by no later than August 10, 2014, and which determination and allocation shall be binding upon the Parties.

 

(C)       The number of Additional Warrant Shares underlying the Additional Warrants to be granted and allocated among Company's Additional Subscribers, if any, shall be, in respect of each such Subscriber, equal to an amount that is twenty-five per cent (25%) of the number of Subscription Shares issued to such Subscriber under this Agreement.

 

4.2      The number of Additional Warrant Shares or the Second Exercise Price shall be proportionally adjusted for any Recapitalization Event or Merger Event (as such terms are defined above) occurring after the date of this Agreement and prior to the Additional Warrant Closing Date in accordance with the provisions of Section 3.2 above, which provisions shall mutatis mutandis apply.

 

4.3      Each Subscriber’s Additional Warrants can be exercised by such Subscriber, in its sole discretion, in whole or in part, at any time after issuance and prior to September 30, 2016 (the “ Second Exercise Period ”) (and, if exercised in part, with the Company being obliged to issue replacement Additional Warrant certificates for the balance of such Subscriber's Additional Warrants still outstanding), but excluding the record date for a Corporate Event (as defined above). In case that the “Ex-Date” for a Corporate Event shall occur before the record date for such Corporate Event, the Additional Warrants may not be exercised on the said “Ex-Date”.

 

- 11 -
 

 

For the purposes of this Section 4.3 and Sections 4.4, 4.5 and 4.6, the term “ Additional Warrant Shares ” shall be those Additional Warrant Shares as shall be the subject of the Second Exercise Notice.

 

Should it become clear or more probable than not that the Additional Warrant Condition will be met, the Company shall use its best efforts, as from September 1, 2014, to obtain within thirty (30) days thereafter the approval to the listing of the Additional Warrant Shares on TASE and any other regulatory approvals as may be required. Should TASE or any other regulatory authority condition its approval to the listing of the Additional Warrant Shares upon any change or adjustment to the provisions of Section 3.2 above, then the Chairman of the Board of the Company and Gabriel Capital shall negotiate a solution, in good faith, that will give effect to the intent of the parties. Should the Company and Gabriel Capital be unable to reach an agreed-upon solution within a five (5) day period, an arbitrator will be appointed (if Gabriel Capital and the Company cannot agree on an arbitrator within 2 days) by the Chairman of the Israeli Bar Association and the Parties agree that such arbitrator will provide the solution, which will be final and binding upon the Parties, within five (5) days of his or her appointment It is understood and agreed that any change or adjustment to the form of the Certificates of Warrants (Exhibit 3.1) that was agreed upon by Gabriel Capital pursuant to Section 6.4 below shall be deemed as to have automatically amended the form of the Certificate of Additional Warrants (Exhibit 4.1) in an identical manner.

 

4.4      Each Subscriber may exercise its Additional Warrant(s) by giving written notice to the Company, in the form attached hereto as Schedule D, at any time during the Second Exercise Period (in the case of each such Subscriber, the “ Second Exercise Notice ”).

 

Unless otherwise agreed by the parties, the closing of each such Subscriber’s Additional Warrants shall occur no later than three (3) trading days after the delivery of such Subscriber’s Second Exercise Notice (in the case of each such Subscriber, the “ Additional Warrant Closing Date ”), at which time such Subscriber shall pay its Second Exercise Price to the Company by bank transfer in NIS, as provided in Section 2.2(a), and following such payment, the Company shall issue and allot its Additional Warrant Shares and transfer to the Registration Company all the documents and information needed in order to deposit the Additional Warrant Shares of such Subscriber at its account which details shall be provided by such Subscriber to the Company in the Second Exercise Notice. For the avoidance of any doubt, such Subscriber shall not be obliged pay its Second Exercise Price to the Company until the Company shall deliver to it the approval to the listing of the Additional Warrant Shares on TASE.

 

4.5      The Company represents and warrants to the Subscriber respectively as of the Closing Date and as of the Additional Warrant Closing Date of each Subscriber respectively, as follows:

 

- 12 -
 

 

(a)     Upon exercise of its Additional Warrant, its Additional Warrant Shares will be, when paid for as provided in this Agreement, duly authorized, validly issued and fully paid and shall be issued and allotted free and clear from any mortgages, charges, pledges, liens or encumbrances whatsoever, subject to any lock-up requirements as prescribed by law and Section 2.3 .

 

(b)     The Company is authorized to and shall issue and allot the Additional Warrant Shares on the terms and subject to the conditions set out in this Agreement and has reserved and will continue to reserve until the termination of the Second Exercise Period, a sufficient amount of authorized and unissued Ordinary Shares as shall be required upon exercise of the Additional Warrants.

 

4.6       Cashless Exercise . Notwithstanding the foregoing, in lieu of exercising a proportion of each of the Subscriber's Additional Warrants as provided above, in whole or in part, such Subscriber may elect to receive Ordinary Shares equal to the value of its Additional Warrants so exercised (or the portion thereof being canceled), by written notice of such election to the Company, at the principal office of the Company, in which event, the Company shall issue to such Subscriber, for no additional consideration except for the payment of the par value thereof or, the minimum required by TASE at the time of exercise (currently NIS 0 . 10 per share), that number of Ordinary Shares computed using the formula in accordance with the provisions of Section 3.6 above, which provisions shall mutatis mutandis apply.

 

5.      On-Going Reporting Obligations by the Subscribers . Each of the Subscribers shall, at all relevant times after the Closing, if and when required by law or regulations, duly and properly file or provide notices and/or procure the filing of any and all notices in relation to its purchases, sales and holdings in the Company as made or in existence from time to time.

 

6.      Conditions of Closing of the Subscribers . The obligations of each of the Subscribers respectively to purchase their Subscription Shares and to transfer the funds representing their Subscription Price to the Company at the Closing are contingent on and subject to the fulfillment at or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part, with respect to each such Subscriber, which waiver shall be at the sole discretion of such Subscriber:

 

6.1        Representations and Warranties . The representations and warranties made by the Company in this Agreement shall have been true and correct in all material aspects when made, and shall be true and correct in all material aspects as of the Closing as if made on the Closing Date.

 

6.2        Covenants . All covenants, agreements, and conditions contained in this Agreement to be performed or complied with by the Company prior to the Closing shall have been performed or complied with by the Company, prior to or at the Closing.

 

- 13 -
 

 

6.3       Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated at or prior to the Closing, and all documents to be delivered by the Company incident thereto and pursuant to Section 2 shall be reasonably satisfactory in form and substance to the Subscribers, and the Subscribers shall have received all such counterpart original and certified or other copies of such documents as it may reasonably request.

 

6.4       TASE Approval . The Company shall have received the TASE’s (a) approval to the listing of the Subscription Shares on TASE, and (b) approval to the listing of the Warrant Shares on TASE, it being understood and agreed, however, that should TASE condition its approvals to the listing of the Warrant Shares upon any change or adjustment to the provisions of Section 3.2 above, then such change or adjustment shall be subject to Gabriel Capital's approval, in writing, in order for this Closing condition to be met.

 

6.5       Corporate Approval . The Company shall have received all such corporate body approvals as necessary to enable it to enter into and perform this Agreement and the Company shall have delivered to the Subscribers a letter from its attorneys to that effect.

 

7.     Conditions of Closing of the Company . The obligations of the Company to issue and allot the Subscription Shares and to grant the Warrant(s) and Additional Warrants) to each of the Subscribers respectively are contingent on and subject to the fulfillment at or before the Closing of the following conditions precedent, any one or more of which may be waived in whole or in part by the Company, which waiver shall be at the sole discretion of the Company:

 

7.1       Payment of the Subscription Price. Such Subscriber shall have fully paid its Subscription Price, as and when due hereunder.

 

7.2       Proceedings and Documents . All corporate and other proceedings in connection with the transactions contemplated at the Closing, and all documents to be delivered by the Subscribers respectively incident thereto and pursuant to Section 2 shall be reasonably satisfactory in form and substance, and the Company shall have received all such counterpart original and certified or other copies of such documents as it may reasonably request.

 

7.3       TASE Approval . The Company shall have received the TASE’s (a) approval to the listing of the Subscription Shares on TASE, and (b) approval to the listing of the Warrant Shares on TASE.

 

7.4       Subscriber’s Corporate Approval . Each of the Subscribers respectively shall have received all such corporate body approvals as necessary to enable it to enter into and perform this Agreement.

 

7.5       Company’s Corporate Approval. The Company shall have received all such corporate body approvals as necessary to enable it to enter into and perform this Agreement .

 

7.6       Information Regarding Subscribers . Each Subscriber shall have provided the Company with a declaration, to the extent required by the TASE and/or ISA, regarding its identity, its place of incorporation, its line of business, its controlling shareholders (up to the level of an individual), whether there is any collaboration to apply following the Closing, between itself and any other Subscriber and/or any shareholder in the Company and the details of its bank account in Israel.

 

- 14 -
 

 

8.      Downside Protection

 

8.1      Until immediately following the earlier of (the “Protection Period” ): (i) the Dual Listing (as defined in Section 4.1), (ii) consummation of an “ M&A Event ” (as defined in Section 8.3), or (iii) the expiration of four (4) years after the Closing - the Subscriber will be entitled to a downside protection as provided below.

 

In any case of the occurrence of an M&A Event (as defined below) or an investment of new funds in the Company during the Protection Period (including, for the avoidance of doubt, (A) any issuance of shares in or as part of a public offering or in connection therewith, and (B) the transactions constituting the M&A Event), except for an Excluded Investment (as defined below), at a price per share in respect of such issuance or underlying such M&A Event (“ Downside Event ” and the “Investment/Exit Price Per Share” respectively) that is lower than NIS 1.3386 (the Protection Threshold Price ”), then the number of Subscription Shares to which each of the Subscribers is entitled to under this Agreement shall be adjusted and the total number of shares to be additionally issued to the Subscriber shall equal to and be calculated in accordance with the following formula (the “Protection Formula” ):

 

(X-Z)* Y -    V
Z

 

Where:

 

X = the Protection Threshold Price.

Z = the Investment/Exit Price Per Share.

Y = the number of Subscription Shares issued to each Subscriber upon the Closing minus Ordinary Shares sold by the Subscriber following the Closing and until the Downside Event.

V = the total number of shares additionally issued to such Subscriber under previous applications of this Section 8.1.

 

Should TASE or any other regulatory authority condition its approval to the listing of such additional shares, the provisions of the third paragraph of Section 4.3 shall apply, mutatis mutandis .

 

8.2        In the event of the application of Section 8.1:

 

(a)     the Exercise Price for each of the Warrants, still held by a Subscriber as of the triggering of this Section 8.1, shall be reduced by that percentage discount thereto as shall equal the same percentage discount that the Investment/Exit Price Per Share bears to the Protection Threshold Price, provided that in the event of the application of Section 8.1 in a second or subsequent occurrence, then, for the purposes of this paragraph (a), the "Protection Threshold Price" shall mean the Investment/Exit Price Per Share as shall have been applicable in the previous application of Section 8.1; and

 

- 15 -
 

 

(b)     the Second Exercise Price for each of the Additional Warrants, still held by a Subscriber as of the triggering of this Section 8.1, shall be reduced by that percentage discount thereto as shall equal the same percentage discount that the Investment/Exit Price Per Share bears to the Protection Threshold Price, provided that in the event of the application of Section 8.1 in a second or subsequent occurrence, then, for the purposes of this paragraph (b), the "Protection Threshold Price" shall mean the Investment/Exit Price Per Share as shall have been applicable in the previous applications of Section 8.1.

 

8.3      For the purposes of this Section 8, the term “ M&A Event ” shall mean a transaction or a series of related transactions which entails (i) the sale of all or substantially all of the Company's assets; (ii) the acquisition of the Company by, or the merger of the Company with, another entity, consolidation, reorganization, recapitalization, sale, assignment or disposal by the Company of all or substantially all of the shares of the Company (where the Company is not the surviving entity); and/or (iii) any other transaction or series of related transactions in which the shareholders of the Company prior to the closing of such transaction own, directly or indirectly, less than 50% (fifty percent) of the voting power of the Company or surviving entity.

 

8.4      For the purposes of this Section 8, the term “Excluded Investment” shall mean: (i) the exercise of any options or warrants outstanding as of the date hereof in accordance with their respective terms in effect as of the date hereof, and (ii) the exercise of any options or warrants granted to employees, directors or service providers of the Company.

 

For the avoidance of any doubt, the terms of this Section 8 shall also be adjusted for any Recapitalization Event or Merger Event as provided herein.

 

8.5      The provisions of this Section 8 shall apply only if an aggregate amount of Two Million Five Hundred Thousand US Dollars (US$ 2,500,000) are invested in the Company by the Subscribers (including Gabriel Additional Subscribers, but excluding Company's Additional Subscribers), at the Closings pursuant to this Agreement.

 

9.      Representations and Warranties of Company

 

The Company represents and warrants to each of the Subscribers as of the Gabriel Closing Date and the Joinder Closing Date, as the case may be, as follows:

 

(a)     The Subscription Shares will be, when paid for as provided in this Agreement and so issued, duly authorized, validly issued and fully paid and shall be issued and allotted as provided herein free and clear from any mortgages, charges, pledges, liens or encumbrances whatsoever, subject to any lock-up requirements as prescribed by law and Section 2.3 . The representations set out in Sections 3.5 and 4.5 above, with regard to the Warrant Shares and Additional Warrant Shares, are true and correct.

 

- 16 -
 

 

(b)     The Company is entitled to and shall issue and allot the Subscription Shares and grant the Warrants and Additional Warrants – in each case, on the terms and subject to the conditions set out in this Agreement.

 

(c)     The Company has taken all corporate and other actions necessary to enable it to enter into and perform this Agreement. The execution and delivery of this Agreement by the Company does not, and the performance by the Company of its obligations under this Agreement, will not, with or without the giving of notice or the lapse of time or both, (i) conflict with or violate the organizational documents of the Company or any of its subsidiaries, (ii) violate any law, statute, ordinance, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which any of its respective properties or assets is bound or affected, and (iii) conflict with or violate any license or contract or agreement or undertaking of the Company and/or any its subsidiaries with any third party or governmental authority or provide third parties the right to amend or terminate any material agreements. The Company is not in breach of any license or permit or material agreement and is not aware of any material issues that will prevent extension or renewal of such licenses and permits.

 

(d)     The Company has the capacity and authority to execute and deliver this Agreement, to perform hereunder and to consummate the transactions contemplated hereby without the necessity of any further act or consent of, or the provision of any notice to, any other person whomsoever, except as specifically provided herein. This Agreement and each and every other agreement, document and instrument to be executed, delivered and performed by or on behalf of the Company pursuant hereto have been duly executed and delivered by a duly authorised representative of the Company and constitutes or will, when executed and delivered, constitute the legal, valid and binding obligations enforceable against the Company in accordance with its terms.

 

(e)     The Company is a corporation duly organized and validly existing under the laws of the State of Israel. The Company is duly qualified to conduct its business and has the requisite corporate power and authority and any necessary governmental authority, franchise, license or permit to own, operate, lease and otherwise to hold and operate its assets and properties and to carry on its businesses as now being conducted and as currently contemplated to be conducted. The Articles of Association of the Company as in effect as of the date hereof are in the form as published by the Company's “Immediate Report” on “MAGNA” on June 6, 2012.

 

(f)     As of the date hereof, the registered share capital of the Company is NIS 4,000,000, which registered share capital is divided into 400,000,000 Ordinary Shares of NIS 0.01 each, of which 211,465,322 are issued and outstanding. In addition, as of the date hereof, the Company has issued (i) Series 1 Options (tradable) that are convertible into Ordinary Shares of the Company, (ii) Options (non-tradable) that are convertible into Ordinary Shares of the Company, and (iii) options to employees, consultants and directors (non-tradable) that are convertible into Ordinary Shares of the Company, as are set out in the capitalization table of the Company set out in Exhibit 9(f) hereto, and which, for each of the options referred to in sub-paragraphs (i), (ii) and (iii) above, details the total number of Ordinary Shares of the Company into which such options are convertible, their respective exercise prices and expiry dates, provided that with respect to the options under sub-paragraph (iii) above, there shall be no requirement to detail the exercise price or expiry date of each such option, but only the number of options, expressed in the aggregate.

 

- 17 -
 

 

None of the options, warrants or other convertible securities outstanding as of the date hereof and the Closing Date shall have any price protection or anti-dilution protection in accordance with their existing terms, other than adjustments in the nature of Recapitalization Events, as provided to the Company's existing warrant holders.

 

(g)     The Company is a public company whose securities are traded on the TASE. The Company is, and at all times has been, in all material respects, in compliance with all applicable regulatory requirements in making all filings required, and complying with all filing requirements stipulated by the Israeli Securities Law and the regulations promulgated thereunder (the “ Filings ”). Without derogating from the generality of the above, each Filing (i) includes all required information under applicable law, and (ii) does not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make statements therein, in light of the circumstances in which they were made, not misleading, except to the extent such statements have been modified or superseded by later Filings filed and publicly available prior to the date hereof.

 

(h)     From the date of the Company's quarterly reports as of March 31, 2013, through the date of this Agreement and the Gabriel Closing Date, the businesses of the Company and its subsidiaries have been conducted, in all material respects, in the ordinary course of business consistent with past practice and there has not been any event, development or state of circumstances involving any of the following and that has not been disclosed in an “Immediate Report” of the Company prior to the date hereof: (A) any event, development or state of circumstances that has had, individually or in the aggregate, a Material Adverse Effect, (B) any material amendment or modification of any material agreement or arrangement involving the Company, (C) any loans by the Company to its directors, officers, employees or consultants and/or (D) any interested party transactions. “Material Adverse Effect“ means such facts, circumstances, events, conditions, occurrences, actions, omissions or changes that, individually or in the aggregate, are reasonably expected to (i) result in a materially adverse effect on or to the business, financial condition or results of operations of the Company and its subsidiaries, taken as a whole or (ii) prevent, materially impede or materially delay the consummation by the Company of the transactions contemplated by this Agreement.

 

(i)     Except as expressly provided herein, no consent or authorization from any governmental authority, court or third party is required by the Company for the execution or performance of this Agreement.

 

(j)     Except as set out in the Filings: (A) no action, proceeding or governmental inquiry or investigation is pending or to the Company’s knowledge threatened against the Company, or against any of the Company's properties, or with regard to the Company’s business, before any court, arbitration board or tribunal or administrative or other governmental agency nor, to the Company’s knowledge, is there any basis for the success of the foregoing, which action, proceeding or governmental inquiry or investigation will have a material adverse effect on the Company; (B) the Company is not a party to or subject to the provisions of any order, writ, injunction, judgment or decree of any court or governmental agency or instrumentality, and (C) there is no action, suit, proceeding or investigation that the Company intends to initiate.

 

- 18 -
 

 

(k)     The information provided by the Company to the Subscribers contains public information concerning the Company and does not include any information that is or could be deemed to be "internal information", as such term is defined in the Israeli Securities Law.

 

10. Representations and Warranties of each of the Subscribers

 

Each of the Subscribers respectively represents and warrants to the Company as of the date hereof and as of the Closing Date as follows:

 

10.1       Such Subscriber has the capacity and authority to execute and deliver this Agreement, to perform hereunder and to consummate the transactions contemplated hereby without the necessity of any further act or consent of any other person whomsoever.

 

10.2       Such Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks relating to the acquisition of the shares in the Company.

 

10.3       Except as set out in Section 9 and in the Company’s publically available reports to the TASE, such Subscriber acknowledges that the Company has made no other representations and warranties to it .

 

10.4       The Subscribers acknowledge that they are familiar with the provisions of the Securities Law and the Securities Law Regulations (Details with regard to Sections 15A to 15C of the Law), 2000, and are committed to act in accordance with such provisions, regarding the restrictions in reselling of the Subscription Shares, the Warrant Shares and the Additional Warrant Shares.

 

10.5       The Subscribers acknowledge that the Company is obliged to publicize in an immediate notice to the TASE following the Closing, which shall contain, inter alia, details of their investment in the Company, their line of business and their controlling shareholders (up to the level of an individual), provided that any such notice shall be made after consulting with and receiving the approval of Gabriel Capital. Nothing in the foregoing shall be construed as restricting the Company from complying with applicable law.

 

- 19 -
 

 

11.        Registration Rights

 

The Company agrees and undertakes that it shall register and include the Subscription Shares, the Warrant Shares and Additional Warrant Shares that may be issued upon the exercise of the Warrants in its registration statement on Form F-1, F-3, or any comparable document, which is the Company's first registration statement filed with the US Securities and Exchange Commission in connection with the initial public offering of the Company's shares in the United States, and shall use commercially reasonable efforts to keep such registration statement continuously effective under the US Securities Act of 1933 (as amended, the “ Securities Act ”) until all securities covered by such registration statement have been sold, or may be sold without restrictions pursuant to Rule 144 or any other exemption from registration promulgated under the Securities Act. If such registered offering of the Company's shares is underwritten and the underwriter of such registered offering determines, or, if such registered offering of the Company's shares is not underwritten, the Company's board of directors determines, that marketing factors require a limitation of the number of Subscription Shares, Warrant Shares and Additional Warrant Shares to be underwritten or registered, as applicable, in such registered offering, then, the number of Subscription Shares, Warrant Shares and Additional Warrant Shares that may be included in the underwriting or other registration shall be reduced to such amount determined by the underwriters or the Company's board of directors as applicable, to be allocated first to the Company and then to the Subscribers, and the Subscribers shall receive, at Company's cost, customary demand registration rights with respect to the Shares, Warrant Shares and Additional Warrant Shares excluded from such registration statement. The Company further agrees that it shall not register the securities of any other shareholders of the Company in a registration statement prior to the registration of the Subscription Shares, Warrant Shares and Additional Warrant Shares as provided above. Each Subscriber hereby agrees to sign customary lock up agreements as may be requested by the underwriter of the Company's securities in the United States.

 

12. Legal Fees and Expenses . It is acknowledged and agreed that the Company shall pay to Gabriel Management upon the Gabriel Closing Date the sum of US$30,000 plus VAT, being part of the Subscribers' fees of and incidental to the preparation of this Agreement and the transactions contemplated hereunder. In all other respects, each of parties shall bear and pay its costs and disbursements of and incidental to the preparation of this Agreement and the transactions contemplated hereunder.

 

13. Miscellaneous

 

13.1        Termination. It is hereby acknowledged and agreed that each Subscriber shall be under no obligation to make payment of Subscription Price unless and until all the conditions set out in Section 6 above have been satisfied and/or waived by Gabriel Capital, at its sole discretion. In the event that the Gabriel Closing Date has not taken place by September 9, 2013 or such longer period as provided herein or as mutually agreed upon by the Company and Gabriel Capital, then this Agreement shall automatically terminate, and neither Party shall thereafter have any rights against the other arising hereunder, except in respect of any breach by a Party hereunder arising prior thereto.

 

13.2        Successors and Assigns; Assignment . Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the transferees, successors, assigns, heirs, executors, and administrators of the parties hereto.

 

- 20 -
 

 

13.3        Further Assurances . Each of the parties hereto shall perform such further acts and execute and deliver 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.

 

13.4        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 in the competent court for Tel Aviv-Jaffa district, and each of the parties hereby submits irrevocably to the jurisdiction of such court.

 

13.5        Entire Agreement; Amendment and Waiver . This Agreement and the Schedules attached hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof. The Company makes and has given no other warranties or representations, other than as expressly contained herein. 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), including, without limitation, with regard to any term of Section 8 (Downside Protection) only with the written consent of the Company and Gabriel Capital. The recitals hereto constitute an integral part of this Agreement.

 

By signing this Agreement, each of the Subscribers hereby acknowledge and agree that any term of this Agreement as shall be amended and/or waived in the manner provided above shall be final and binding on each of Subscribers and the Company, and none of the Subscribers shall have any right or claim against the Company or Gabriel Capital and/or its directors, shareholders, partners, representatives and/or affiliates for any loss or damages caused by, directly or indirectly, and/or arising from or referable to, such amendment and/or waiver of any term of this Agreement.

 

13.6        Notices.  All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be telecopied or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed to such party's address as set forth below or at such other address as the party shall have furnished to each other party in writing in accordance with this provision:

 

         if to the Company: Intec Pharma Ltd .
  12 Hartum St. Jerusalem, Israel
  Facsimile: +972-77-4710797
  Attention: Nir Sassi, CFO
   
         with a copy to: Pearl Cohen Zedek Latzer Baratz
  Facsimile: 03-6073778
  Attention:  Yael Baratz, Adv.
   
          if to the Subscribers:  as set out in Schedule A hereto.

 

- 21 -
 

 

            with a copy to: Ephraim Abramson & Co.
  Beit Hatayelet
  2 Beitar St, Jerusalem, Israel
  Fax 972-2-565-4001
  Attn: Harry Grynberg, Adv.

 

13.7        Severability . If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

 

13.8        Counterparts. This Agreement may be executed in any number of counterparts (including counterparts transmitted by fax or by electronic mail in PDF format), each of which shall be deemed an original and enforceable against the parties actually executing such counterpart, and all of which together shall constitute one and the same instrument.

 

[Remainder of Page Intentionally Left Blank]

 

[Signature Pages Follow]

 

- 22 -
 

 

[Signature Page – Subscription Agreement]

 

IN WITNESS WHEREOF , the parties have signed this Agreement as of the date first hereinabove set forth.

 

Intec Pharma ltd.   Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Delaware, USA, to be known as “ Gabriel Capital Fund (US), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.
   
By:  GIORA CARNI  
   
Signature:  
   
  /s/ Giora Carni    
  INTEC PHARMA LTD.    

    By:  
       
    Signature:

Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Israel, to be known as “ Gabriel Capital Fund (Israel), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.      
   
   
  By:  
     
  Signature:
       

 

     
By:      
     
Signature:    
       
     
     
       
By:     By:  
     
Signature:   Signature:
         
     
Gabriel Capital Management Ltd.    
     
By:      
     
Signature:    
       

 

 

- 23 -
 

 

[Signature Page – Subscription Agreement – Intec Pharma Ltd]

 

IN WITNESS WHEREOF , the parties have signed this Agreement as of the date first hereinabove set forth.

 

Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Delaware, USA, to be known as “ Gabriel Capital Fund (US), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.   Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Israel, to be known as “ Gabriel Capital Fund (Israel), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.
     
By:   By:
Director   Director
   
Signature:   Signature:
     
/s/ Gabriel Capital Management (GP) Ltd.   /s/ Gabriel Capital Management (GP) Ltd.
     
     
     
     
Gabriel Capital Management Ltd.    
     
By:    
Director    
     
Signature:    
     
/s/ Gabriel Capital Management (GP) Ltd.    
           

SCHEDULES AND EXHIBITS TO FOLLOW

 

 
 

 

[Signature Page – Subscription Agreement – Intec Pharma Ltd. – August [__], 2013]

 

IN WITNESS WHEREOF , the parties have signed this Agreement as of the date first hereinabove set forth.

 

Collace Service Ltd.    
     
By: Darren Toudic & Christopher Lees    
Director    
     
Signature:    
  /s/ Darren Toudic & Christopher Lees    

 

[ $250,000.00 ]

Amount of Subscription

 

SCHEDULES AND EXHIBITS TO FOLLOW

 

 
 

 

[Signature Page – Subscription Agreement – Intec Pharma Ltd]

 

IN WITNESS WHEREOF , the parties have signed this Agreement as of the date first hereinabove set forth.

 

Sterling Group International Inc.    
     
By:    
Director    
     
Signature:    
     
  /s/ Sterling Group International Inc.    

  

SCHEDULES AND EXHIBITS TO FOLLOW

 

 
 

 

SCHEDULE A - The Subscribers

 

          Number of     Notice
    Subscription     Subscription     Details
Name of Subscriber   Price     Shares     (address)
Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Delaware, USA, to be known as “Gabriel Capital Fund (US), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.*   USD 1,765,000       5,659,709     Technology Park, Building 1B, Malcha, Jerusalem 9651
Fax +972 2 649 0401
                     
Gabriel Capital Management (GP) Ltd. for and on behalf of a limited partnership in formation in the State of Israel, to be known as “Gabriel Capital Fund (Israel), L.P.” or such other name designated by Gabriel Capital Management (GP) Ltd.*   USD 235,000       753,559     Technology Park, Building 1B, Malcha, Jerusalem 9651
Fax +972 2 649 0401
                     
Sterling Group International Inc.   USD 250,000       801,659      
                     
Collace Services Ltd.   USD 250,000       801,659      
                     
Gabriel Capital Management Ltd and/or such   $ 0     $ 0      
persons and/or entities (who are not purchasing any Subscription Shares) as to whom Gabriel Capital Management Ltd shall notify the Company in writing by prior to the Closing, which other persons and/or entities shall be deemed to be "Subscribers" for the purposes of this Agreement and whom, without being required to sign this Agreement, shall be deemed to be third-party beneficiaries to this Agreement for all relevant purposes hereof and who, for the avoidance of any doubt, shall be entitled (and/or for whom Gabriel Capital Management Ltd shall be entitled) to enforce the rights of a "Subscriber" under this Agreement insofar as they relate to the Warrants and Warrant Shares.             [i.e. Will receive zero Subscription Shares, but will be granted Warrants]      

 

* Gabriel Capital may inform the Company of a different allocation between the two funds up to two days prior to Closing. Without derogating from any of Gabriel Capital’s and such funds’ rights, it is hereby clarified that either of the funds may also transfer shares and Warrants to the other fund following the Closing, subject to the applicable lock up restrictions.

 

- 24 -
 

 

SCHEDULE B

 

Lock Up Restrictions

 

Section 15C of the Securities Law, 5728-1968 provides as follows:

 

“15C . Restrictions on resale of securities

 

(a) Notwithstanding the provisions of section 15B(3), the following shall be regarded as offerings to the public:

 

(1) An offering in the course of trading on a stock exchange of securities which are listed for trading thereon, and which were allotted to the offeror by an issuer in an offer under section 15A(a)(1), (4) or (7), or in an offering made abroad not by way of a prospectus - if the period prescribed in the regulations from the date of the allotment has not elapsed, or if additional periods as prescribed in regulations have not yet elapsed and one of the following has occurred during each of the additional periods:

 

(a) The quantity of the offered securities exceeds the quantity prescribed in the regulations;

 

(b) The percentage of the issued and paid-up capital which is being offered by the corporation whose securities are being offered exceeds the percentage prescribed in the regulations;

 

The provisions of this paragraph shall also apply to securities purchased during the said period or additional periods, other than in accordance with a prospectus and not during the course of trading on a stock exchange, from the offeror or from a corporation under the control of the corporation whose shares are being offered. These provisions shall also apply to securities resulting from the realization or conversion of securities that were allotted as stated in this section. . .”

 

The periods referred to in section 15C above are as follows :

 

(i) Full lock up period – 6 months from the date of issuance.

 

(ii) Additional periods – 6 consecutive quarters.

 

(iii) Permitted sales on the stock exchange in the Additional periods – the amount sold in each Additional period is less than 1% of the issued and paid-up capital of the company or; the amount of securities offered in each day in such period is lower than the daily average trading turnover on the stock exchange of the security of the type offered in the period of 8 weeks preceding the date or offer.

 

- 25 -
 

 

SCHEDULE C

 

Joinder to Subscription Agreement Dated [______] [_] 2013

 

The undersigned hereby consents to and agrees to be bound by all the terms, covenants and provisions of the Subscription Agreement dated [______] [_], 2013 (the “ Agreement ”; all terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement) by and among Intec Pharma Ltd. and the Subscribers listed in Schedule A thereto.

 

All of the Subscription Shares, Warrants, Warrant Shares, Additional Warrants and Additional Warrant Shares purchased by the undersigned are and shall be subject to all of the rights, obligations, and restrictions described in the Agreement.

 

The undersigned acknowledges and agrees that upon execution and delivery of this Joinder to the Agreement, it shall be deemed a Subscriber for all intents and purposes of the Agreement.

 

Subscription Price                                           

 

The execution of this Joinder shall constitute, for all intents and purposes, its execution of the Agreement, including without limitation for the purpose of the representations and warrants of the Subscribers thereto.

 

Date:    

 

Signature:    

 

By:    

Name:    

Title :    

 

Address:    

   
   
   

 

The above is agreed to and confirmed by the undersigned:

 

_________________________

Intec Pharma Ltd.

By:

Title:

 

- 26 -
 

 

SCHEDULE C

 

Joinder to Subscription Agreement Dated August 6, 2013

 

The undersigned hereby consents to and agrees to be bound by all the terms, covenants and provisions of the Subscription Agreement dated August 6, 2013 (the “ Agreement ; all terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement) by and among Intec Pharma Ltd. and the Subscribers listed in Schedule A thereto.

 

All of the Subscription Shares, Warrants, Warrant Shares, Additional Warrants and Additional Warrant Shares purchased by the undersigned are and shall be subject to all of the rights, obligations, and restrictions described in the Agreement.

 

The undersigned acknowledges and agrees that upon execution and delivery of this Joinder to the Agreement, it shall be deemed a Subscriber for all intents and purposes of the Agreement.

 

Subscription Price             US$ 100,000

 

The execution of this Joinder shall constitute, for all intents and purposes, its execution of the Agreement, including without limitation for the purpose of the representations and warrants of the Subscribers thereto.

 

Date: 8/7/13  

 

     
Signature /s/ Joe Franco  
     
Name: Joe Franco  

  

Address:  
17 Gateway DR  
Great Neck NY 11021  
   

 

The above is agreed to and confirmed by the undersigned:

 

INTEC PHARMA LTD.

 

/s/ Zvi Joseph  
Intec Pharma Ltd.  
By: Zvi Joseph  
Title: Chairman  

 

- 27 -
 

 

SCHEDULE C

 

Joinder to Subscription Agreement Dated August 6, 2013

 

The undersigned hereby consents to and agrees to be bound by all the terms, covenants and provisions of the Subscription Agreement dated August 6, 2013 (the “ Agreement ”; all terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement) by and among Intec Pharma Ltd. and the Subscribers listed in Schedule A thereto.

 

All of the Subscription Shares, Warrants, Warrant Shares, Additional Warrants and Additional Warrant Shares purchased by the undersigned are and shall be subject to all of the rights, obligations, and restrictions described in the Agreement.

 

The undersigned acknowledges and agrees that upon execution and delivery of this Joinder to the Agreement, it shall be deemed a Subscriber for all intents and purposes of the Agreement.

 

Subscription Price                          US$ 2,000,000

 

The execution of this Joinder shall constitute, for all intents and purposes, its execution of the Agreement, including without limitation for the purpose of the representations and warrants of the Subscribers thereto.

 

Date: 18/8/2013  

 

Signature: /s/ Sphera Global Healthcare Master Fund  

 

Name of Subscriber: Sphera Global Healthcare Master Fund
  HFR HE Sphera Global Healthcare Master Trust  

  

Address:  
c/o Sphera Funds Mgmt.  
21 Ha’arba’ah St  4 th Floor  
Tel-Aviv, Israel  

 

The above is agreed to and confirmed by the undersigned:
 
INTEC PHARMA LTD.
 
/s/ Giora Carni  
Intec Pharma Ltd  
By: Giora Carni  
Title: CEO  

 

- 28 -
 

 

SCHEDULE C

 

Joinder to Subscription Agreement Dated August 6, 2013

 

The undersigned hereby consents to and agrees to be bound by all the terms, covenants and provisions of the Subscription Agreement dated August 6, 2013 (the “ Agreement ; all terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement) by and among lntec Pharma Ltd. and the Subscribers listed in Schedule A thereto.

 

All of the Subscription Shares, Warrants, Warrant Shares, Additional Warrants and Additional Warrant Shares purchased by the undersigned are and shall be subject to all of the rights, obligations, and restrictions described in the Agreement.

 

The undersigned acknowledges and agrees that upon execution and delivery of this Joinder to the Agreement, it shall be deemed a Subscriber for all intents and purposes of the Agreement.

 

Subscription Price               US$ 100,000

 

The execution of this Joinder shall constitute, for all intents and purposes, its execution of the Agreement, including without limitation for the purpose of the representations and warrants of the Subscribers thereto.

 

Date: August 6 th , 2013  

 

Signature: /s/ Steve Israel  

 

Name: Steve Israel

  

Address:  
 
 
 

 

The above is agreed to and confirmed by the undersigned:  
   
INTEC PHARMA LTD.  
   
/s/ Zvi Joseph  
Intec Pharma Ltd.  
By: Zvi Joseph  
Title: Chairman  

 

- 29 -
 

 

SCHEDULE C

 

Joinder to Subscription Agreement Dated August 6, 2013

 

The undersigned hereby consents to and agrees to be bound by all the terms, covenants and provisions of the Subscription Agreement dated August 6, 2013 (the " Agreement " ; all terms not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement) by and among Intec Pharma Ltd. and the Subscribers listed in Schedule A thereto.

 

All of the Subscription Shares, Warrants, Warrant Shares, Additional Warrants and Additional Warrant Shares purchased by the undersigned are and shall be subject to all of the rights, obligations, and restrictions described in the Agreement,

 

The undersigned acknowledges and agrees that upon execution and delivery of this Joinder to the Agreement, it shall be deemed a Subscriber for all intents and purposes of the Agreement.

 

Subscription Price          US$300,000

 

The execution of this Joinder shall constitute, for all intents and purposes, its execution of the Agreement, including without limitation for the purpose of the representations and warrants of the Subscribers thereto.

 

Date:   .8.13  

 

Signature: /s/ Yehuda Shimoni  

 

Name of Subscriber: Yehuda Shimoni

  

Address:  
57 Rothchild Blvd.  
Tel-Aviv 65785  
Isreal  

 
The above is agreed to and confirmed by the undersigned:
 
INTEC PHARMA LTD.
 
/s/ Zvi Joseph  
Intec Pharma Ltd.  
By: Zvi Joseph  
Title: Chairman

 

- 30 -
 

   

SCHEDULE D

 

Exercise Notice

  Re: Warrant

 

To:         Intec Pharma Ltd

 

[_______________a Subscriber] hereby elects to convert the Warrant in full/in part and purchase ___________ [number of] Ordinary Shares, NIS 0.01 each par value each of Intec Pharma Ltd . as determined pursuant to the terms of the Subscription Agreement dated the _______ day of _________ 2013 between Intec Pharma Ltd . and the Subscribers, and tenders herewith payment of the Exercise Price in full.

 

Please credit the following account with the Warrant Shares:

Account Name: [________]

Account Number: [____]

Bank: [____]

Branch : [____]

 

Capitalized terms that are not defined in this Exercise Notice shall have the meanings ascribed to them in the said Subscription Agreement.

 

   
  (Name)
   
   
  (Address)

 

- 31 -
 

 

SCHEDULE E

 

Second Exercise Notice

 

Re: Additional Warrant

 

To:         Intec Pharma Ltd .

 

[_______________a Subscriber] hereby elects to convert the Additional Warrant in full/in part and purchase ___________ [number of] Ordinary Shares, NIS 0.01 each par value each of Intec Pharma Ltd . as determined pursuant to the terms of the Subscription Agreement dated the _______ day of _________ 2013 between Intec Pharma Ltd . and the Subscribers, and tenders herewith payment of the Second Exercise Price in full.

 

Please credit the following account with the Additional Warrant Shares:

Account Name: [________]

Account Number: [____]

Bank: [____]

Branch : [____]

 

Capitalized terms that are not defined in this Second Exercise Notice shall have the meanings ascribed to them in the said Subscription Agreement.

 

   
  (Name)
   
   
  (Address)

 

- 32 -
 

 

Exhibit 3.1

 

Certificates of Warrants

 

 
 

 

Certificate of Warrant

 

Pursuant to the Subscription Agreement executed by and between Intec Pharma Ltd. and _______, on August [__], 2013 (the " Agreement ", " Company " and " Subscriber ", respectively), you are hereby granted __________ options exercisable into _______ of the Company's ordinary shares par value NIS 0.01 each (" Ordinary Shares "), against the payment of the Exercise Price (as defined below).

 

1. Definitions

 

"Warrant Shares" - Ordinary Shares, which shall be equal in rights to the issued and outstanding ordinary shares of the Company, par value NIS 0.01 each. The Warrant Shares will be registered in the name of Mizrahi Tfahot Registration Company Ltd;

 

"Exercise Price" - NIS 1.2828 per share, as adjusted pursuant to the terms of this Certificate of Warrant and the Agreement;

 

"Date of Exercise" - The date on which the Company received a written notice from the Subscriber subject to the exercise provisions as detailed below;

 

"Date of Grant" - _____________, 2013;

 

"Options" - An option to purchase Warrant Shares against the payment of the Exercise Price.

 

2. Vesting

 

All Options shall be fully vested on the Date of Grant.

 

3. Exercise Period

 

The Options may be exercised over a period of four (4) years as of _____________, 2013 (" Exercise Period ") [4 YEARS FROM THE GABRIEL CLOSING DATE]. Any Options not exercised prior to the end of the Exercise Period will be cancelled and will not entitle their holder to any rights.

 

4. Exercise of Options

 

The Options can be exercised by the Subscriber, in its sole discretion, in whole or in part, at any time during the Exercise Period (subject to the provisions of Section 5.9 below). A written exercise notice will be submitted to the Company by the Subscriber. No later than three (3) days after the delivery of such exercise notice the Subscriber will pay the Exercise Price for the Warrant Shares that are the subject to the exercise notice by bank transfer in New Israeli Shekels and, following such payment, the Company will allot to the Subscriber the amount of Ordinary Shares as per the exercise notice free and clear from any mortgages, charges, pledges, liens or encumbrances whatsoever, will transfer to its registration company all the documents and information needed in order to deposit the Warrant Shares of such Subscriber at its account which details shall be provided by such Subscriber to the Company in the exercise notice and will submit all necessary reports to the Israeli Securities Authority and to the Tel Aviv Stock Exchange Ltd. (" TASE "). If the Options are exercised in part, the Company will issue replacement Certificate of Warrant for the balance of such Subscriber's Options still outstanding),

 

5. Adjustments

 

As of the Date of Grant of the Options and until the Options will be exercised or cancelled, the Company shall act as follows:

 

- 2 -
 

 

5.1. Adjustment for Share Splits and Reverse Splits. In the event the Company at any time while any of the Options are outstanding shall subdivide or combine its Ordinary Shares, the number of Ordinary Shares issuable upon exercise of a Subscriber's Options shall be proportionately increased or decreased, as the case may be, and, for the avoidance of any doubt, the Exercise Price shall be proportionally adjusted.

 

For the avoidance of doubt, it is hereby clarified that any share fractions that may result as of a share split or reverse split will be sold by the Company at TASE, after accumulated to a reasonable amount to be sold at TASE, for a period of 30 days after the said adjustment. The net consideration, after the deduction of any sale expenses, commissions and levies, shall be paid to the Subscribers within fourteen (14) days as of the sale date as mentioned above. The Company will not issue checks in an amount less than NIS 30.

 

5.2. Adjustment for Dividends . If the Company, at any time while the Options, or any portion thereof, remains outstanding and unexpired (the " Record Date "), shall distribute to the holders of Ordinary Shares a dividend, whether payable out of earnings or surplus legally available for dividends or by way of return of capital, then, immediately prior to the Record Date the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution (the " Adjusted Exercise Price "), but under no circumstances shall the Adjusted Exercise Price be lower than the face value of the Ordinary Shares.

 

It is hereby clarified that in the event: (i) the Subscriber(s) possesses a withholding tax exemption (the " Exemption "), the Exercise Price will be equal to the Adjusted Exercise Price; (ii) the Subscriber(s) does not possess an Exemption, the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution net of applicable tax.

 

The Company will notify immediately prior to the trade opening on the ex-dividend date, by way of an immediate report published on TASE site, of the Adjusted Exercise Price. For the avoidance of doubt, no change in the base price Ordinary Share will occur.

 

5.3. Adjustment for Bonus Shares . In the event the Company at any time while any of the Options are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive bonus shares, the number of Warrant Shares exercisable upon exercise of the Options then outstanding shall be adjusted such that it shall be increased by a number of Warrant Shares equal to the number of shares that such Subscriber would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the ex-bonus shares date. If any adjustments are made pursuant to this Section 5.3 the Subscribers will not be entitled to any Ordinary Share fractions.

 

The Company will notify immediately prior to the trade opening on the ex-bonus shares date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

5.4. Adjustment for Rights Offering . In the event the Company at any time while any of the Options are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive rights to purchase Ordinary Shares upon any rights offering by the Company, the Exercise Price will not be adjusted, however, the number of Warrant Shares exercisable upon exercise of the Options then outstanding shall be adjusted to the bonus component in the rights offering as being expressed by a fraction, the numerator of which shall be the closing price of the Ordinary Shares as published by TASE on the last trading day immediately prior to the ex-rights date and the denominator of which shall be the ex-rights base price per share as shall be published by TASE. If any adjustments are made pursuant to this Section 5.4 the Subscribers will not be entitled to any Ordinary Share fractions.

 

- 3 -
 

 

The Company will notify immediately prior to the trade opening on the ex-rights date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

5.5. Adjustment for Pro-Rata Distributions . In the event the Company, at any time while any of the Options are outstanding, distributes to holders of Ordinary Shares as a dividend any asset other than cash or the Company's securities (in each case, “ Distributed Property ”), then forty-five (45) days prior to the distribution of the Distributed Property, the Company shall issue a notice to the holders of the Options. Provided that the holders of the Options did not exercise the Options within the said forty-five (45) days period, such holders will not be entitled to receive the Distributed Property that such holders would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the record date of such distribution.

 

5.6. Adjustment for Pro-Rata Distributions in Company Liquidation . In the event a resolution for liquidation of the Company will be made, at any time while any of the Options are outstanding, the Company shall publish an announcement in two daily widely distributed Hebrew newspapers, to state, inter alia , that each holder of the Options will be considered as if he had exercised the Options prior to the said resolution (without prior paying the Exercise Price) unless such holders of the Options will notify the Company thirty (30) days as of the said publication that they waive his right to exercise the Options. Provided that a holder of the Options did not notify the Company of the said waiver within the set time frame, then they will be entitled, pro-rata, to a dividend in cash that such holders would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the record date of such resolution for liquidation, deducting the Exercise Price of the said dividend, if any.

 

5.7. Adjustment for Merger Event . In the event there shall be a Merger Event (as defined below) at any time while any of the Options are outstanding, then, subject to paragraph (viii) below and as a part of such Merger Event, lawful provision shall be made so that Subscriber(s) shall thereafter be entitled to receive, upon exercise of such Subscriber's Options, the number of Ordinary Shares or other securities or property of the successor corporation resulting from such Merger Event that would have been issuable if such Subscriber had exercised such Subscriber's Options immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors with respect to all outstanding options and warrants issued by the Company) shall be made in the application of the provisions of the Options with respect to the rights and interests of each Subscriber after the Merger Event to the end that the provisions of the Subscribers' Options (including adjustments of the Exercise Price and/or number of Ordinary Shares purchasable) shall be applicable in their entirety. Without limiting the foregoing and subject to paragraph (viii) below, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of the Subscribers' Options.

 

- 4 -
 

 

For the avoidance of any doubt, if determined by the Company's Board of Directors in good faith that: (a) the implementation of the provisions of paragraph (vii) above may impose an undue burden on the Company in the execution of a Merger Event, or (b) if the terms of such implementation are not acceptable to the Subscribers or the Company - then the Subscribers shall have the right to execute a “cashless exercise” in respect of such outstanding Options and the provisions of Section 3.6 to the Agreement shall apply, and the Company shall ensure that adequate provision is made in the documents constituting the Merger Event and reasonable notice provided to the Subscribers prior to the consummation of such Merger Event so that the Subscribers may implement the “cashless exercise” and participate accordingly. Options not exercised under this provision or not otherwise exercised prior to the consummation of the Merger Event, shall be void and null.

 

Recapitalization Event ” means all that was provided in sub-sections 5.1-5.6 of this Section 5, as the case may be, or any other recapitalization, reclassification or similar event resulting in a change of such Ordinary Shares into a different number of shares of the same class or any other class or classes of shares.

 

Merger Event ” means a merger or consolidation involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s Ordinary Shares are otherwise converted into or exchanged for shares of capital of another entity.

 

5.8. The contemplated adjustments under this Section 5 will not be subject to any amendments.

 

5.9. Subject to TASE Rules and Regulations with respect to the transition of the clearing to T+1 regarding shares and convertible securities, no Options will be exercised on the record date concerning (a) bonus shares distribution, (b) rights issuance, (c) dividend distribution, (d) stock split, (e) stock consolidation, or (f) capital reduction (each of the above “ Corporate Event ”). In case that the “Ex-Date” for a Corporate Event shall occur before the record date for such Corporate Event, the Options may not be exercised on the said “Ex-Date”.

 

6. Cashless Exercise

 

Notwithstanding the foregoing, in lieu of exercising a proportion of each of the Subscriber's Warrants as provided above, in whole or in part, such Subscriber may elect to receive Ordinary Shares equal to the value of its Warrants so exercised (or the portion thereof being canceled), by written notice of such election to the Company, at the principal office of the Company, in which event, the Company shall issue to such Subscriber, for no additional consideration except for the payment of the par value thereof or, the minimum required by TASE at the time of exercise (currently NIS 0 . 10 per share), that number of Ordinary Shares computed using the following formula:

 

    Y (A - B)
X = —————
    A

 

X equals the number of Ordinary Shares to be issued to such Subscriber;

 

Y equals the number of Ordinary Shares which would otherwise have been purchasable under the portion of such Subscriber's Warrant being exercised, at the time of exercise pursuant to this formula (or the portion thereof being canceled);

 

- 5 -
 

 

A shall equal the “Fair Value” of one share of the Company's Ordinary Shares. Fair Value shall mean in the event that such Subscriber's Warrant is exercised in accordance with the above formula: the price per share equal to the average of the closing sale prices for the Ordinary Shares of the Company as reported on the Tel-Aviv Stock Exchange or, should the Company’s shares be traded only on a different stock exchange, such stock exchange, for a consecutive period of ten (10) trading days immediately prior to the date of exercise (i.e. delivery of Exercise Notice); and

 

B equals such Subscriber's Exercise Price in effect at the time of exercise pursuant to this formula.

 

7. Protection

 

Without derogating from the terms of the Agreement and this Certificate of Warrant, the protections as specified in the Company's immediate report (ref. number: 2013-01-039597) with respect to the grant of options to Meitav Group and the Phoenix Group and as specified in the Company's prospectus with respect to published on February 10, 2010, shall apply, mutatis mutandis, to the grant of Options contemplated herein.

 

8. No Assignment

 

The Options are non transferable, non assignable, cannot be mortgaged, etc., except to an entity controlled by, controlling, or under common control with, the Subscriber or to the partners, members or shareholders of the Subscriber.

 

9. Restrictions

 

The Subscriber acknowledges that it is familiar with the provisions of the Securities Law 1968 and the Securities Law Regulations (Details with regard to Sections 15A to 15C of the Law), 2000, and is committed to act in accordance with such provisions, regarding restrictions on reselling the Warrant Shares.

 

10. Taxation

 

The Subscriber acknowledges that any tax liability with regards to the Options will be imposed solely on the Subscriber.

 

11. Options Registry

 

The Company shall keep a registry of the option holders and will record their names, addresses and the issued option amounts (the " Registry "). Any option holder is entitled to review the Registry at any reasonable time.

 

  Sincerely,
   
  Intec Pharma Ltd.

 

- 6 -
 

 

Exhibit 4.1

 

Certificates of Additional Warrants

 

 
 

 

Certificate of Warrant

 

Pursuant to the Subscription Agreement executed by and between Intec Pharma Ltd. and _______, on August____, 2013 (the " Agreement ", " Company " and " Subscriber ", respectively), you are hereby granted __________ options exercisable into _______ of the Company's ordinary shares par value NIS 0.01 each (" Ordinary Shares "), against the payment of the Exercise Price (as defined below).

 

1. Definitions

 

"Warrant Shares" - Ordinary Shares, which shall be equal in rights to the issued and outstanding ordinary shares of the Company, par value NIS 0.01 each. The Warrant Shares will be registered in the name of Mizrahi Tfahot Registration Company Ltd;

 

"Exercise Price" - NIS 1.2828 per share, as adjusted pursuant to the terms of this Certificate of Warrant and the Agreement;

 

"Date of Exercise" - The date on which the Company received a written notice from the Subscriber subject to the exercise provisions as detailed below;

 

"Date of Grant" - October 1, 2014;

 

"Options" - An option to purchase Warrant Shares against the payment of the Exercise Price.

 

2. Vesting

 

All Options shall be fully vested on the Date of Grant.

 

3. Exercise Period

 

The Options may be exercised at any time after October 1, 2014 and prior to September 30, 2016. Any Options not exercised prior to the end of the Exercise Period will be cancelled and will not entitle their holder to any rights.

 

4. Exercise of Options

 

The Options can be exercised by the Subscriber, in its sole discretion, in whole or in part, at any time during the Exercise Period (subject to the provisions of Section 5.9 below). A written exercise notice will be submitted to the Company by the Subscriber. No later than three (3) days after the delivery of such exercise notice the Subscriber will pay the Exercise Price for the Warrant Shares that are the subject to the exercise notice by bank transfer in New Israeli Shekels and, following such payment, the Company will allot to the Subscriber the amount of Ordinary Shares as per the exercise notice free and clear from any mortgages, charges, pledges, liens or encumbrances whatsoever, will transfer to its registration company all the documents and information needed in order to deposit the Warrant Shares of such Subscriber at its account which details shall be provided by such Subscriber to the Company in the exercise notice and will submit all necessary reports to the Israeli Securities Authority and to the Tel Aviv Stock Exchange Ltd. (" TASE "). If the Options are exercised in part, the Company will issue replacement Certificate of Warrant for the balance of such Subscriber's Options still outstanding),

 

5. Adjustments

 

As of the Date of Grant of the Options and until the Options will be exercised or cancelled, the Company shall act as follows:

 

- 2 -
 

 

5.1. Adjustment for Share Splits and Reverse Splits. In the event the Company at any time while any of the Options are outstanding shall subdivide or combine its Ordinary Shares, the number of Ordinary Shares issuable upon exercise of a Subscriber's Options shall be proportionately increased or decreased, as the case may be, and, for the avoidance of any doubt, the Exercise Price shall be proportionally adjusted.

 

For the avoidance of doubt, it is hereby clarified that any share fractions that may result as of a share split or reverse split will be sold by the Company at TASE, after accumulated to a reasonable amount to be sold at TASE, for a period of 30 days after the said adjustment. The net consideration, after the deduction of any sale expenses, commissions and levies, shall be paid to the Subscribers within fourteen (14) days as of the sale date as mentioned above. The Company will not issue checks in an amount less than NIS 30.

 

5.2. Adjustment for Dividends . If the Company, at any time while the Options, or any portion thereof, remains outstanding and unexpired (the " Record Date "), shall distribute to the holders of Ordinary Shares a dividend, whether payable out of earnings or surplus legally available for dividends or by way of return of capital, then, immediately prior to the Record Date the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution (the " Adjusted Exercise Price "), but under no circumstances shall the Adjusted Exercise Price be lower than the face value of the Ordinary Shares.

 

It is hereby clarified that in the event: (i) the Subscriber(s) possesses a withholding tax exemption (the " Exemption "), the Exercise Price will be equal to the Adjusted Exercise Price; (ii) the Subscriber(s) does not possess an Exemption, the Exercise Price shall be reduced by an amount equal to the NIS amount of the per-share distribution on the Record Date fixed for the purpose of such distribution net of applicable tax.

 

The Company will notify immediately prior to the trade opening on the ex-dividend date, by way of an immediate report published on TASE site, of the Adjusted Exercise Price. For the avoidance of doubt, no change in the base price Ordinary Share will occur.

 

5.3. Adjustment for Bonus Shares . In the event the Company at any time while any of the Options are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive bonus shares, the number of Warrant Shares exercisable upon exercise of the Options then outstanding shall be adjusted such that it shall be increased by a number of Warrant Shares equal to the number of shares that such Subscriber would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the ex-bonus shares date. If any adjustments are made pursuant to this Section 5.3 the Subscribers will not be entitled to any Ordinary Share fractions.

 

The Company will notify immediately prior to the trade opening on the ex-bonus shares date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

5.4. Adjustment for Rights Offering . In the event the Company at any time while any of the Options are outstanding makes, or fixes a record date for the determination of holders of shares entitled to receive rights to purchase Ordinary Shares upon any rights offering by the Company, the Exercise Price will not be adjusted, however, the number of Warrant Shares exercisable upon exercise of the Options then outstanding shall be adjusted to the bonus component in the rights offering as being expressed by a fraction, the numerator of which shall be the closing price of the Ordinary Shares as published by TASE on the last trading day immediately prior to the ex-rights date and the denominator of which shall be the ex-rights base price per share as shall be published by TASE. If any adjustments are made pursuant to this Section 5.4 the Subscribers will not be entitled to any Ordinary Share fractions.

 

- 3 -
 

 

The Company will notify immediately prior to the trade opening on the ex-rights date, by way of an immediate report published on TASE site, of the adjustment ratio.

 

5.5. Adjustment for Pro-Rata Distributions . In the event the Company, at any time while any of the Options are outstanding, distributes to holders of Ordinary Shares as a dividend any asset other than cash or the Company's securities (in each case, “ Distributed Property ”), then forty-five (45) days prior to the distribution of the Distributed Property, the Company shall issue a notice to the holders of the Options. Provided that the holders of the Options did not exercise the Options within the said forty-five (45) days period, such holders will not be entitled to receive the Distributed Property that such holders would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the record date of such distribution.

 

5.6. Adjustment for Pro-Rata Distributions in Company Liquidation . In the event a resolution for liquidation of the Company will be made, at any time while any of the Options are outstanding, the Company shall publish an announcement in two daily widely distributed Hebrew newspapers, to state, inter alia , that each holder of the Options will be considered as if he had exercised the Options prior to the said resolution (without prior paying the Exercise Price) unless such holders of the Options will notify the Company thirty (30) days as of the said publication that they waive his right to exercise the Options. Provided that a holder of the Options did not notify the Company of the said waiver within the set time frame, then they will be entitled, pro-rata, to a dividend in cash that such holders would have been entitled to receive in respect of the Warrant Shares for which the Options could have been exercised immediately prior to the record date of such resolution for liquidation, deducting the Exercise Price of the said dividend, if any.

 

5.7. Adjustment for Merger Event . In the event there shall be a Merger Event (as defined below) at any time while any of the Options are outstanding, then, subject to paragraph (viii) below and as a part of such Merger Event, lawful provision shall be made so that Subscriber(s) shall thereafter be entitled to receive, upon exercise of such Subscriber's Options, the number of Ordinary Shares or other securities or property of the successor corporation resulting from such Merger Event that would have been issuable if such Subscriber had exercised such Subscriber's Options immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors with respect to all outstanding options and warrants issued by the Company) shall be made in the application of the provisions of the Options with respect to the rights and interests of each Subscriber after the Merger Event to the end that the provisions of the Subscribers' Options (including adjustments of the Exercise Price and/or number of Ordinary Shares purchasable) shall be applicable in their entirety. Without limiting the foregoing and subject to paragraph (viii) below, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of the Subscribers' Options.

 

- 4 -
 

 

For the avoidance of any doubt, if determined by the Company's Board of Directors in good faith that: (a) the implementation of the provisions of paragraph (vii) above may impose an undue burden on the Company in the execution of a Merger Event, or (b) if the terms of such implementation are not acceptable to the Subscribers or the Company - then the Subscribers shall have the right to execute a “cashless exercise” in respect of such outstanding Options and the provisions of Section 3.6 to the Agreement shall apply, and the Company shall ensure that adequate provision is made in the documents constituting the Merger Event and reasonable notice provided to the Subscribers prior to the consummation of such Merger Event so that the Subscribers may implement the “cashless exercise” and participate accordingly. Options not exercised under this provision or not otherwise exercised prior to the consummation of the Merger Event, shall be void and null.

 

Recapitalization Event ” means all that was provided in sub-sections 5.1-5.6 of this Section 5, as the case may be, or any other recapitalization, reclassification or similar event resulting in a change of such Ordinary Shares into a different number of shares of the same class or any other class or classes of shares.

 

Merger Event ” means a merger or consolidation involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s Ordinary Shares are otherwise converted into or exchanged for shares of capital of another entity.

 

5.8. The contemplated adjustments under this Section 5 will not be subject to any amendments.

 

5.9. Subject to TASE Rules and Regulations with respect to the transition of the clearing to T+1 regarding shares and convertible securities, no Options will be exercised on the record date concerning (a) bonus shares distribution, (b) rights issuance, (c) dividend distribution, (d) stock split, (e) stock consolidation, or (f) capital reduction (each of the above “ Corporate Event ”). In case that the “Ex-Date” for a Corporate Event shall occur before the record date for such Corporate Event, the Options may not be exercised on the said “Ex-Date”.

 

6. Cashless Exercise

 

Notwithstanding the foregoing, in lieu of exercising a proportion of each of the Subscriber's Warrants as provided above, in whole or in part, such Subscriber may elect to receive Ordinary Shares equal to the value of its Warrants so exercised (or the portion thereof being canceled), by written notice of such election to the Company, at the principal office of the Company, in which event, the Company shall issue to such Subscriber, for no additional consideration except for the payment of the par value thereof or, the minimum required by TASE at the time of exercise (currently NIS 0 . 10 per share), that number of Ordinary Shares computed using the following formula:

 

    Y (A - B)
X = —————
    A

 

X equals the number of Ordinary Shares to be issued to such Subscriber;

 

Y equals the number of Ordinary Shares which would otherwise have been purchasable under the portion of such Subscriber's Warrant being exercised, at the time of exercise pursuant to this formula (or the portion thereof being canceled);

 

- 5 -
 

 

A shall equal the “Fair Value” of one share of the Company's Ordinary Shares. Fair Value shall mean in the event that such Subscriber's Warrant is exercised in accordance with the above formula: the price per share equal to the average of the closing sale prices for the Ordinary Shares of the Company as reported on the Tel-Aviv Stock Exchange or, should the Company’s shares be traded only on a different stock exchange, such stock exchange, for a consecutive period of ten (10) trading days immediately prior to the date of exercise (i.e. delivery of Exercise Notice); and

 

B equals such Subscriber's Exercise Price in effect at the time of exercise pursuant to this formula.

 

7. Protection

 

Without derogating from the terms of the Agreement and this Certificate of Warrant, the protections as specified in the Company's immediate report (ref. number: 2013-01-039597) with respect to the grant of options to Meitav Group and the Phoenix Group and as specified in the Company's prospectus with respect to published on February 10, 2010, shall apply, mutatis mutandis, to the grant of Options contemplated herein.

 

8. No Assignment

 

The Options are non transferable, non assignable, cannot be mortgaged, etc., except to an entity controlled by, controlling, or under common control with, the Subscriber or to the partners, members or shareholders of the Subscriber.

 

9. Restrictions

 

The Subscriber acknowledges that it is familiar with the provisions of the Securities Law 1968 and the Securities Law Regulations (Details with regard to Sections 15A to 15C of the Law), 2000, and is committed to act in accordance with such provisions, regarding restrictions on reselling the Warrant Shares.

 

10. Taxation

 

The Subscriber acknowledges that any tax liability with regards to the Options will be imposed solely on the Subscriber.

 

11. Options Registry

 

The Company shall keep a registry of the option holders and will record their names, addresses and the issued option amounts (the " Registry "). Any option holder is entitled to review the Registry at any reasonable time.

 

  Sincerely,
   
  Intec Pharma Ltd.

 

- 6 -
 

 

Exhibit 9(f)

 

Capitalization Table

 

                    Issued and Outstanding              
              Issued and     share capital including              
        Security     Outstanding share     the benefit rate derived     Exercise     Expiration  
Securities Holder     Security Name   Number     capital     from rights issuances     Price     Date  
Registration Co. of United Mizrahi Bank Ltd.   Ordinary shares     1117795       211,465,322       211,465,322              
Registration Co. of United Mizrahi Bank Ltd.   Options (series 1)*     1117803       15,679,380       16,411,607       1.2 NIS       09.02.2014  
S.G.S. Trust Ltd.   Non-Tradable Warrant for employees, consultants and service providers**     1117837       23,774,823       23,774,823              
Meitav Mutual Fund Management (1982) Ltd.   Non-Tradable Warrants for Institutions 2010*     1121292       322,850       337,927       1.38 NIS       21.10.2014  
Meitav Gemel Ltd.   Non-Tradable Warrants for Institutions 2010*     1121292       1,562,500       1,635,469       1.38 NIS       21.10.2014  
The Phoenix Holdings Ltd.   Non-Tradable Warrants for Institutions 2010*     1121292       3,298,330       3,452,362       1.38 NIS       21.10.2014  
Meitav Gemel Ltd.   Non-Tradable Warrants for Institutions 2013**     1127968       800,000       800,000       1.60 NIS       13.02.2015  
The Phoenix Holdings Ltd.- Nostro   Non-Tradable Warrants for Institutions 2013**     1127968       461,600       461,600       1.60 NIS       13.02.2015  
The Phoenix Holdings Ltd.- Gemel and Pension   Non-Tradable Warrants for Institutions 2013**     1127968       609,000       609,000       1.60 NIS       13.02.2015  
The Phoenix Holdings Ltd.- Participant   Non-Tradable Warrants for Institutions 2013**     1127968       2,749,400       2,749,400       1.60 NIS       13.02.2015  

 

(*)    Each of the options and warrants is convertible into 1.0467 Ordinary Shares.

 

(**)  Each of the options and warrants is convertible into one (1) Ordinary Share.

 

 

 

 

Exhibit 10.8

 

ADDENDUM & AMENDMENT

 

To that certain subscription agreement of august 6, 2013

By and between

I ntec p harma l td ., G abriel c apital m anagement ( gp ) l td ., Et al

 

T HIS A DDENDUM & A MENDMENT (this “ Addendum ”) is made and entered into as of this 20 th day of October, 2014 (the “ Effective Date ”) by and between I ntec p harma l td . (the “ Company ”) and G abriel C apital Management (GP) L td . (“ Gabriel Capital ”), and supplements and amends that certain Subscription Agreement of August 6, 2013 (the “ Agreement ”) between the Company, Gabriel Capital, and each of the parties set out in S chedule A and S chedule C to the Agreement (each, a “ Subscriber ,” and collectively, the “ Subscribers ”).

 

The Company and the Subscribers are also referred to herein collectively as the “ Parties ”, and each as a “ Party ”.

 

W hereas ,   the Company effected in September 2014 a rights offering for shareholders of the Company, pursuant to which shareholders were offered the opportunity to acquire additional shares of the Company at a price per share of NIS 0.60 (the “ Rights Offering ”), and whereas in October 2014 the Company issued shares at such price per share as a result of exercise of such rights (the “ Exercise of Rights ”); and
     
W hereas ,   there arose between the Parties certain differences of opinion with respect to the correct interpretation of certain provisions of the Agreement, and the correct manner of their application in connection with the Rights Offering and the Exercise of Rights; and
     
W hereas ,   pursuant to Section 13.5 to the Agreement, the authority to amend the Agreement is given to the Company and Gabriel Capital;

 

N ow , Therefore , in order to reconcile such differences and intending to finally settle and agree upon the correct application of the Agreement in connection with the Rights Offering and the Exercise of Rights, through a legally binding document, the Company and Gabriel Capital do hereby agree as follows:

 

1. INTERPRETATION

 

Capitalized terms used in this Addendum and not expressly defined herein shall have the respective meanings ascribed to them in the Agreement.

 

2. APPLICATION OF SECTIONS 3.2, 4 AND 8 TO THE AGREEMENT

 

2.1 Notwithstanding the Protection Formula set forth in Section 8.1 to the Agreement, the number of additional shares to which each Subscriber shall be entitled as downside protection in connection with the Rights Offering and the Exercise of Rights, in full satisfaction of its rights under said Section 8.1, shall be 105 (one hundred five) shares for each 100 (one hundred) Subscription Shares initially issued to and still held by such Subscriber as of October 1, 2014 (the “ Determining Date ”), and subject to the Subscriber’s proof of issuance and holdings as reasonably required by the Company. For example, in the event a Subscriber was initially issued 150 Subscription Shares, such Subscriber shall be entitled to receive additional 158 shares.

 

Intec Pharma » Addendum To Subscription Agmt v-7 Page 1 of 3
 

  

2.2 Notwithstanding the provisions of Sections 3.2(iv), 4.2 and 8.2 to the Agreement, the only adjustment to be made to the Warrants and the Additional Warrants in connection with the Rights Offering and the Exercise of Rights, other than the technical adjustment published by the Company on September 15, 2014, shall be the reduction of the Exercise Price and the Second Exercise Price for the Warrants and the Additional Warrants, respectively, to NIS 0.70 (seventy agorot) per share, as may be further reduced pursuant to Section 8. In the event of the application of Section 8.1 in a further or subsequent occurrence, then, solely for the purposes of Section 8.2, the “Investment/Exit Price” ( i.e. , the updated “Protection Threshold Price”) shall mean NIS 0.73 (seventy-three agorot) in respect of such further occurrence. For the avoidance of any doubt, the provisions of this Section 2.2 shall apply to all Warrants and Additional Warrants issued by the Company in connection with the Agreement ( i.e. both to Subscribers and other recipients of Warrants and Additional Warrants who did not purchase Subscription Shares but are deemed to be Subscribers for the purposes of the Agreement and to any other persons who may have received warrants similar to the Warrants granted to the Subscribers at or about the Closings under the Agreement).

 

2.3 The number of Additional Warrants to be granted pursuant to Section 4.1(A) to the Agreement shall be calculated on the basis of Subscription Shares actually issued to the Subscribers under the Agreement up to and including the final of the Closing Dates thereunder; i.e. , exclusive of any additional shares issued to them as downside protection in connection with the Rights Offering and the Exercise of Rights.

 

2.4 Notwithstanding anything to the contrary in this Addendum, any issuance of shares hereunder shall be subject to ( a) proof by the Subscriber of ownership of the original Subscription Shares, through the Determining Date in a form reasonably acceptable to the Company; and (b ) payment by the respective Subscriber to the Company of up to NIS 0.01 price-per-share as required in connection with such issuance under the rules of the TASE. Should TASE or any other regulatory authority condition its approval to the listing of such additional shares with a payment higher than NIS 0.01 per share or any other condition, the provisions of the third paragraph of Section 4.3 of the Agreement shall apply.

 

3. CONTINUING EFFECT OF AGREEMENT

 

Except as expressly set forth herein, the provisions of the Agreement shall remain unchanged and in full force and effect as provided therein.

 

4. BINDING NATURE; FINAL SETTLEMENT

 

4.1 This Addendum reflects a negotiated compromise and settlement between the Parties, and therefore: ( a ) shall not be deemed to constitute a precedent with respect to any future application of Sections 3 and 8 to the Agreement; and ( b ) shall not be construed as an admission, stipulation or agreement by any Party of any claim or argument of another Party raised in connection with the differences of opinion resolved hereby.

 

4.2 This Addendum constitutes an amendment to the Agreement made in accordance with the provisions of Section 13.5 thereto, and is therefore binding not only upon the Company and Gabriel Capital, but upon all Subscribers.

 

4.3 The Parties hereby acknowledge and agree that this Addendum is made and entered into by the Company in reliance on the finality and irrevocability of the Subscribers’ consent, given by Gabriel Capital’s execution hereof, to accept the arrangements set forth herein as full and final satisfaction of their rights under the Agreement in connection with the Rights Offering and the Exercise of Rights, and their irrevocable waiver hereby of any claim for rights, equity or compensation in connection with said Rights Offering and Exercise of Rights, beyond those set forth in Section 2 above.

 

~ Remainder of page intentionally left blank; signature page follows. ~

 

Intec Pharma » Addendum To Subscription Agmt v-7 Page 2 of 3
 

  

In Witness W hereof , the Company and Gabriel Capital, on behalf of all Parties, have set their signatures as of the Effective Date.

 

I ntec Pharma Ltd .   G abriel Capital M anagement (GP) L td .
         
         
         
         
         
         
         
  /s/ Giora Carni      
B y : Giora Carni     B y : /s/ Gabriel Capital Management (GP) Ltd.  
  (Printed Name & Title)     (Printed Name & Title)

 

Intec Pharma » Addendum To Subscription Agmt v-7 Page 3 of 3

 

Exhibit 10.9

 

 

 

March 29, 2013  
 
Nadav Navon, PhD, MBA
Intec Pharma
12 Hartom St, P.O.B 45219, Jerusalem 91450
Israel
 
Re: MJFF Research Grant 2013
 
Project Title: “Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP”
 
Dear Dr. Navon:
 
On behalf of the Board of Directors of The Michael J. Fox Foundation for Parkinson’s Research (MJFF), it is a pleasure to make this award in the amount of $704,479.25 to conduct the research described in your proposal, “Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP.”
 
This nine-month award is offered based on your representation that you have no overlapping grants or additional funding for this work. Please contact MJFF immediately if at any time during this period additional third-party funding is sought or received, or if circumstances arise prohibiting completion of your project on schedule. The terms and conditions governing this award are detailed in the attached agreement. Please read it carefully and contact us with any questions.
 
To accept this award, please sign the enclosed agreement (including appropriate institutional sign-off). Please scan the signed agreement and send electronically to AHARRIS@michaeljfox.org. We ask that you return a signed agreement no later than April 5, 2013. If you do not wish to accept finding, please notify MJFF as soon as possible.
 
The Michael J. Fox Foundation for Parkinson’s Research is enthusiastic about supporting your research and wishes you utmost success with this project and all your pursuits. Congratulations!
 
Sincerely,
 
/s/ Joanne Martz
Joanne Martz
Chief Financial and Administrative Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Grand Central Station • P.O. Box 4777 • New York, NY 10163-4777 • Tel. 212-509-0995 • Fax 212-509-2390 • www.michaeljfox.org

 

 
 

 

 

 

The Michael J. Fox Foundation for Parkinson’s Research
Award Terms and Conditions — MJFF Research Grant 2013
 
Principal Investigator(s): Nadav Navon, PhD, MBA
 
The Michael J. Fox Foundation for Parkinson’s Research (MJFF) is pleased to make you this award (the “Award”) to support the work described in your application, “Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP.” (the “Project”). In accepting this Award, you and your institution (collectively, “You” or “you”) agree to the following terms and conditions in this Agreement.
 
1.      Sources of Funds
 
This Award is made with the understanding that your Project currently has no additional sources of funding and does not overlap with any existing grants. You agree that you will neither solicit nor accept additional funding for this Project without prior written notice to MJFF. If there is overlap between this Award and another grant made to you by another third party, MJFF will renegotiate the budget of this Award with you (a copy of the final budget is provided with this Agreement as Appendix A) and reserves the right to provide less funding than identified in this Award or obtain a refund from you, so that funding from this Award does not overlap with another grant. If you receive additional funding for your Project without MJFF’s advance written consent, MJFF reserves the rights to withhold funding and require repayment of this Award if it is not satisfied, in its reasonable discretion, that the additional funding is for incremental research activity which does not overlap with this Award or conflict with your ability to perform the Project.
 
2.      Use of Funds
 
2.1      Funds awarded by MJFF are to be used solely for the Project and are conditioned on your meeting certain milestones and deliverables, which are attached  at Appendix B, timely delivery of expense and progress reports and participation in MJFF sponsored meetings at which your progress will be assessed. MJFF assessments are based on review of your progress at regular intervals, determination of the quality of the scientific research performed, and its continued high relevance to Parkinson’s disease (“MJFF Assessment Criteria”). In exchange, MJFF agrees to pay all direct costs for this Project, in addition to indirect costs with a limit of up to 10% of direct costs. For this Award, funds are allotted in the amount of $640,435.68 direct costs, and $64,043.57, indirect costs. Any unused funds at the end of the Award period, as detailed in a final expense report, must be returned to MJFF within one month from the submission of the expense report. You shall maintain complete and accurate books, records and accounts that, in reasonable detail, fairly reflect the use of the Award. MJFF shall have the right to review and audit such books, records and accounts at a mutually convenient time upon prior written notice to you.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Grand Central Station • P.O. Box 4777 • New York, NY 10163-4777 • Tel. 212-509-0995 • Fax 212-509-2390 • www.michaeljfox.org

 

 
 

 

 

 

2.2        The Award is to be used as budgeted and reflected in the milestones. Any alterations, amendments, or changes in the specific goals or budget of the Project will require the review and pre-approval of MJFF. Examples of such alterations or amendments include (but are not limited to): transfer of a Principal Investigator (“PI”) from one institution to another, adding or deleting a specific Project goal, budget reallocation, or modification of proposed workload and milestones. Please note that MJFF funds shall not be used for travel or equipment costs not approved in the budget as awarded (see Appendix A).

 

2.3        If you request a change to the Award, you must submit a written request for approval detailing the requested change and associated rationale in advance to a member of the MJFF research team. Failure to obtain prior approval for any changes in work timeline, milestones or budget may result in revocation of funding in whole or part. You agree that funds expended by you either not in accordance with the approved Project or prior to pre-approval of any material change to are both (i) recoverable by, and subject to restitution by you to, MJFF and (ii) may be cause for immediate termination of funding by MJFF.

 

3. Grant Timeline

 

3.1        MJFF expects that your Project will be completed according to the agreed timeline attached at Appendix B. Continued funding also is contingent on demonstrated progress and satisfactory assessment by MJFF. To this end, you are required to do the following:

 

(a) Provide written proof of Institutional Animal Care and Use Committee (“IACUC”) approval one month from date of award notification (March 29, 2013). Payment to begin work will not be issued without IACUC approval.

 

(b) Confirm in writing that all personnel (including technicians and post-doctoral fellows) have been hired by the third month of the project, or that any delay in hiring has not postponed progress on the work described. MJFF will contact awardees at the three-month mark of the Award for such confirmation. Failure to meet this requirement may result in withholding of further payment.

 

(c) Participate in regularly scheduled assessment meetings and/or teleconferences. Failure to participate in these assessments and to demonstrate satisfactory progress may result in withholding of future payments.

 

(i) The first assessment will be held at the six-month mark of your Award by teleconference to review initial progress.

 

(ii) An assessment meeting will be held at the completion of your Award; The individual awardee is required to attend assessment meetings in person, unless otherwise informed by MJFF.

 

(d) Complete progress and expense reports detailing your progress against milestones and your associated expenditures. These reports will be due before the assessment meeting at the completion of your award. When appropriate, additional reports may be requested before other assessment meetings and teleconferences. Templates will be provided to you to facilitate this reporting. These reports will be reviewed by MJFF against the MJFF Assessment Criteria; MJFF may thereafter provide you with suggestions, critique, and feedback .

 

 
 

 

 

 

(e) Participate openly in discussions regarding your Project with MJFF’s scientific and research staff, and advisors.

 

3.2        Failure to meet milestones, furnish scheduled deliverables, including any reports, satisfactorily meet MJFF Assessment Criteria or comply with this Agreement may serve as one or more bases for termination of funding by MJFF.

 

3.3        If at any time circumstances arise that prohibit completion of the Project on schedule, you are required to notify MJFF immediately. MJFF will consider granting ONE no-cost extension per project on a case by case basis. To apply for a no-cost extension, submit a letter detailing the request. The letter should include reasons for delays or changes, associated rationale, a timeline for continuing the work, and an expense report detailing remaining funds.

 

4. Payment Schedule

 

4.1        Subject to the foregoing conditions, MJFF intends to pay your Award on the installment schedule outlined in the Milestones Appendix B document.

 

4.2        MJFF reserves the right to change this schedule if necessary and will notify you and/or your administrator in writing in that event.

 

5. Confidentiality

 

5.1        MJFF treats all pre-proposals, applications, research projects, associated research information and underlying data (collectively, the “Confidential Information”) as confidential, using no less than reasonable care in protecting the Confidential Information from disclosure to third parties who do not participate in the application review and assessment processes. All Confidential Information will be used by MJFF for the purposes of reviews and assessments, and will be shared only in accordance with its Sharing Policy (see Section 7 below). Such obligations cover any information retained in the unaided memories of persons participating in reviews and assessments and may not be used without the permission of the disclosing party. Notwithstanding the foregoing, the obligations governing the disclosure and use of Confidential Information do not apply with respect to Confidential Information that:

 

(a) was generally known to the public at the time of disclosure;

 

(b) becomes generally known to the public through no unlawful or unauthorized act or omission, or violation of this Agreement, by any recipient of Confidential Information, ;

 

(c) was independently developed by any recipient prior to disclosure; or

 

(d) was disclosed to a recipient by a third party who has the right to make such disclosure.

 

 
 

 

 

 

5.2        Provided that subsections (a)-(d) above do not become applicable, if any recipient of Confidential Information is asked to produce any Confidential Information pursuant to a legal or governmental proceeding, such recipient shall give the applicant or other owner of such Confidential Information (the “Discloser”) as much prior notice of such request as is reasonably practicable, under the circumstances and shall use its reasonable efforts to assist the Discloser of such Confidential Information in defending Discloser’s rights (at Discloser’s cost), including objecting to such request, obtaining confidential treatment for Confidential Information, disclosing only that portion of the Confidential Information responsive to a judicial or governmental order, and providing Discloser with any copies of Confidential Information so disclosed.

 

6. Data Underlying Research Information to be Included with Progress Reports

 

With each progress report, you agree to provide MJFF, in a format prescribed by it, the data underlying your research information for each milestone (the “Data”). MJFF and its grant assessors will use the Data to assess your progress toward achieving the milestones.

 

7. Sharing Policy

 

7.1          As MJFF is a public charity, research conducted with funds from MJFF (“Research”) must be conducted in the public interest MJFF acknowledges that discoveries and related regulatory approvals made by researchers under its sponsorship are the property of those conducting and responsible for the Research and that unless otherwise agreed to by the parties, such researchers shall have the first opportunity to exploit the Research commercially or otherwise.

 

7.2 Notwithstanding the foregoing, you agree that MJFF:

 

(a) may retain the Data and that MJFF may, 90 or more days after expiration of the Award, make the Data available to MJFF employees, consultants, grant recipients and others affiliated with MJFF through a secure medium to advance scientific discovery. This subsection shall not prohibit MJFF from making the Data available before expiration of the grant to persons executing MJFF’s Confidential Disclosure Agreement for the purpose of assessing your progress toward achieving the milestones. If the Data ceases to be Confidential Information as described in subsections (a)-(d) of MJFF’s Confidentiality policy, then these restrictions on dissemination shall not apply;

 

(b) may, after reasonable consultation which will not be unreasonably denied, conditioned or delayed by you, publicly release a summary of findings of the research 90 or more days after expiration of the Award; and,

 

(c) may make all tools or reagents (i) funded by and (ii) that result from awarded projects (collectively, the “Results”) readily available to the community including MJFF for research purposes 90 or more days after expiration of the Award. You agree that you will cooperate and collaborate with MJFF and other researchers and share access to Results on fair and reasonable terms and conditions. By signing this Agreement, you and your institution are confirming that you are not aware of any requirements that would prohibit, delay, or restrict your ability to share your Results from this initiative, including requirements of third-party collaborators or companies with which you are affiliated.

 

 
 

 

 

 

(d) Notwithstanding the 90-day periods set forth in subsections (a)-(c) above, MJFF will consider a request by you to delay the availability of Data, a summary and/or the Results in order to complete any necessary intellectual property filings.

 

8. Liability

 

You acknowledge that MJFF is solely a passive grantor, and you hereby agree to indemnify, defend and hold MJFF, its directors, trustees, officers, employees, agents and consultants harmless in connection with all liability directly or indirectly arising out of the Project, including all associated costs, damages and expenses and reasonable attorney’s fees.

 

9. Use of MJFF Brand

 

You agree to abide by the following policy regarding use of MJFF’s name, logo, marks, trade dress, image, and likeness of Michael J. Fox, its founder (collectively, the “Brand”). MJFF prohibits any use of the MJFF Brand in any publicity efforts, notices, releases, statements or publications without its prior written approval. All use of the Brand including, without limitation, the name/image/likeness of Michael J. Fox shall be submitted in advance to MJFF for approval. Failure of MJFF to approve any proposed use of the Brand within five (5) business days of its receipt of any request for approval of a proposed use shall be deemed non-approval of the proposed use. You acknowledge that these terms are reasonable precautions to protect the MJFF Brand and its goodwill, both of which are extremely valuable assets of MJFF. Any goodwill resulting from an approved use of the MJFF Brand by you shall inure solely and exclusively to MJFF.

 

10. Publication

 

MJFF expects that information about the Results will be published as rapidly as possible in the open scientific literature, consistent with high standards of scientific excellence and rigor.

 

11. Recognition of Funder

 

Any publications resulting from this Award shall include acknowledgement of the funding provided by The Michael J. Fox Foundation for Parkinson’s Research. When publications result from work funded under this Award, you are required to update MJFF, even if such publications occur after the end of the Award.

 

12. Animal or Human Subjects and Compliance with Law

 

12.1        If your project involves the use of animals or human subjects, you must provide a letter of approval for such use from your institution’s regulatory assurance body prior to the initiation of funding.

 

 
 

 

 

 

12.2        You are solely responsible for complying with any and all applicable laws relating to the Project.

 

13. Miscellaneous

 

13.1        This Agreement including appendices constitutes the entire agreement of the parties related to its subject matter and supersedes all prior agreements, oral or written. This Agreement may not be modified, amended or waived except by written agreement of the parties.

 

13.2        All notices to MJFF required or permitted by this Agreement shall be sent by email to: aharris@michaeljfox.org, unless MJFF specifies a different person to you in writing.

 

13.3        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.

 

Accepted and agreed to by:

 

/s/ Joanne Martz 3/29/13
Joanne Martz  
Chief Financial and Administrative Officer, MJFF Date
   
/s/ Nadav Navon  
Nadav Navon, PhD, MBA Date 3/4/13
   
Intec Pharma Institutional Approval:  
Name: GIORA CARNI  
Title: CEO  
Ph: 922-2-5864657  
Email: GIORA@intecpharama.com  
Signature: /s/ Giora Carni Date 3.4.2013

 

 
 

 

The Michael J. Fox Foundation for Parkinson’s Research

MJFF Research Grant 2013

Appendix A - Overview

 

Name (Last, First) : Navon, Nadav

Project Title: Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP

 

Summary of Totals   Total Costs ($US)     Total Director Costs ($US)     Total Indirect Cost ($US)  
Total Administrative Costs (from Planning Phase)   $ 3,379.20     $ 3,072.00     $ 307.20  
Total Execution Phase (Months 4-12)   $ 701,100.05     $ 637,363.68     $ 63,736.37  
Total Execution Phase (Months 13-24)                        
Total Execution Phase (Months 25-36)                        
TOTAL PROJECT BUDGET   $ 704,479.25     $ 640,435.68     $ 64,043.57  

 

Note: Totals in the grey section above will pre-populate based on the completion of additional worksheets. Your completion of this section is not required.

 

Please specify how much each patient visit will cost (list any details factored into the costs      NA

 

Details   Costs in US $  
         
         
         
         
         
         
         
         
         
         
         
Cost per patient visit     0  

 

List the number of patient visits expected throughout the duration of the trial.        NA

 

    Year 1     Year 2     Year 3     Total  
Number of Patient Visits                             0  
Cost of Patient Visits Per Year     0       0       0       0  

 

 
 

 

The Michael J. Fox Foundation for Parkinson’s Research

MJFF Research Grant 2013

Appendix A - Planning Phase (Months 1-3)

 

Name (Last, First): Navon, Nadav

Project Title: Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP

 

Total Planning Phase Costs:   $ 3,379.20  
Direct Costs   $ 3,072.00  
Indirect Costs:   $ 307.20  

 

PERSONNEL

 

Name   Role   % Effort     Base Salary     Salary Requested     Fringe Benefits     Total Requested  
  Principal Investigator     2 %   $ 120,000.00     $ 2,400.00     $ 672.00     $ 3,072.00  
          0 %   $ -     $ -     $ -     $ -  
          0 %   $ -     $ -     $ -     $ -  
          0 %   $ -     $ -     $ -     $ -  
          0 %   $ -     $ -     $ -     $ -  
          0 %   $ -     $ -     $ -     $ -  
                                        $ 3,072.00  

 

Other ORB submission, database set up, etc
Description   Total Requested  
       
       
       
       
    $         
         
Direct Costs:   $ 3,072.00  
Indirect Costs (10%):   $ 307.20  
         
Total Expenditures:   $ 3,379.20  

 

 

 
 

 

The Michael J. Fox Foundation for Parkinson’s Research

MJFF Research Grant 2013

Appendix A - Execution Phase (Months 4-12)

 

Name (Last, First): Navon, Nadav

Project Title: Oral Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP

 

Total Grant Amount:   $ 701,100.04  
Total Direct Costs   $ 637,363.68  
Total Indirect Coots:   $ 63,736.37  

 

PERSONNEL    
Name   Role   % Effort     Base Salary     Salary Requested     Fringe Benefits     Total Requested   Fixed vs. Per Patient Costs
  Principal Investigator     8 %   $ 120,000.00     $ 9,600.00     $ 2,688.00     $ 12,288.00    
          0 %   $ -     $ -     $ -     $ -    
          0 %   $ -     $ -     $ -     $ -    
          0 %   $ -     $ -     $ -     $ -    
          0 %   $ -     $ -     $ -     $ -    
          0 %   $ -     $ -     $ -     $ -    
                                        $ 12,288.00    

 

SUPPLIES, DATA MGMT, PATTENT VISITS (please itemize)    
Item   Unit Cost     # Units     Total Requested   Fixed va. Per Patient Costs
Calvert Labs   $ 583,400.00     1     $ 583,400.00    
             
ANALYST RESEARCH LABORATORIES LTD   $ 41,675.68     1     $ 41,675.68    
                $ -    
            $ -    
            $ -    
                    $ 625,075.68    

Direct Costs:   $ 637,363.68    
Indirect Costs (10%):   $ 63,736.37    
           
Total Expenditures:   $ 701 ,100.04    

 

Total Fixed Costs        
Total Per Patient Costs        
Total Months 4-12 Costs        

 

 
 

 

 

 

Nadav Navon, PhD, MBA- MJFF Award Agreement

Appendix B - Project Payment Schedule & Milestones

 

The Michael J. Fox Foundation for Parkinson’s Research

Levodapa Delivery - MJFF Research Grant 2013

 

Principal Investigator: Nadav Navon, PhD;

Project Title: Toxicity Study in Goettingen Pigs with 30-Day Recovery (GLP)

 

Project Deliverables: To evaluate in Goettingen Pigs the toxicity of Accordion Pills, containing CD/LD vs. placebo control or Sinemet, when administered orally, by capsule, two or three times daily for 180 consecutive days, followed by one month of recovery. The study will include thorough, focused examination of the entire gastrointestinal tract at necropsy with particular attention to the presence of residual administered product-associated material. 

 

Description   Milestones
(required for next payment)
  Amount     Payment Timing
Months 0-3 Milestones  

•   Obtain IACUC permission and send copy to MJFF

•   Send final protocol to MJFF

•   Purchase 48 Goettingen Pigs

  $ 230,000     Payable within 30 days following full execution of Award
                 
Months 4-6 Milestones  

•   Begin experiment (4 groups of 12 pigs each, as per protocol)

•   Participate in follow-up call and communicate progress report to MJFF

  $ 230,000     Payments will be issued based on progress reports provided to MJFF by Awardee. Reports will indicate progress against milestones.
                 
Months 7-9 Milestones for Execution Phase  

•   Conclude study

•   Euthanize 3 animals/sex/group to assess presence of residual administered product associated material.

•   Send final report to MJFF

  $ 244,479.25     Payments will be issued based on progress reports provided to MJFF by Awardee. Reports will indicate progress against milestones.
                 
    Total Project:           $704,479.25

 

 

 

Exhibit 10.10

 

Unprotected Lease Agreement

Entered into and signed in Jerusalem on June 2, 2003

 

Between: R. M. P. A. Assets Ltd.
  P.C. 51-1808008
  whose address is P.O.B. 45079, Har Hotzvim, Jerusalem
  (the " Lessor ")
  of the first part;

 

And: Intec Pharmaceuticals (2000) Ltd.
  P.C. 513022780
  whose address for the purposes of this agreement is:
  9 Ahad HaAm Street, Tel Aviv 65251
  (the " Lessee ")
  of the second part;

 

Whereas the Lessor represents that it has signed a long-term lease agreement with the Israel Land Administration in respect of the land known as Lot No. 14 in Har Hotzvim B in Jerusalem –Zoning Plan 3760 A (the " Land "); and

 

Whereas the Lessor has built an industry and/or office building on the Land (all collectively: the " Building "); and

 

Whereas the Lessor wishes to let to the Lessee a certain part of the Building, situated on the first floor (4), spanning 170 sqm (gross), as marked on the floor plans attached hereto by the Lessor as Annex “A” to this contract, in the condition in which the Lessees have seen it (the " Property ") and two parking spaces in the Building’s car park. In any event, the gross area of the Property includes areas in respect of the Lessee’s relative share in the common property, if any, such as storage room, stairwell, bomb shelter, toilets, elevator shafts etc. (the " Area of the Property "); and

 

Whereas the Lessor represents that, to the best of its knowledge and subject to the representations of the Lessee, there is no impediment to the lease of parts of the aforesaid Building by the Lessee; and

 

Whereas the Lessee wishes to lease the Property from the Lessor in its condition (As Is), in an unprotected lease, and subject to the provisions of this contract below;

 

 
 

 

Wherefore the parties have agreed, represented and stipulated as follows:

 

Preamble and Annexes

 

1.

 

a. The preamble to this contract and the annexes hereto constitute an integral part hereof.

 

b. The headings of the sections are solely for purposes of convenience, do not constitute part of the contract and are not to be taken into consideration for interpretation purposes.

 

c. The plans attached to this contract are only schematic.

 

The Transaction

 

2. The Lessor lets the Property to the Lessee, and the Lessee leases the Property from the Lessor, on the terms and conditions specified in this contract below.

 

3. It is expressly agreed and represented that the Property is situated at a building, the construction of which was completed after August 20, 1968 and that the Lessee has not paid, nor was it required to pay, directly or indirectly, key money and/or any other premium for the Property or any part thereof, and that the Lessee shall not be deemed a protected tenant of the Property under this agreement and the provisions of the Tenant Protection Law (Consolidated Version), 5732-1972, including all of the amendments thereto, and any other law concerning tenant protection, including the regulations and orders thereunder, do not apply and shall not apply to the lease of the leased property.

 

4. Representations of the Lessee

 

a. The Lessee hereby represents that it has seen the leased property, has examined it and has found it in proper order and fit for use in its present condition (As Is) and fit for its needs and it hereby waives any and all claims in connection with the leased property or the condition thereof, with the exception of hidden flaws, if any.

 

b. The Lessee hereby represents that it has examined the location of the Property, the construction thereof and the potential usage thereof under law and under the Zoning Plan in general and for the purpose of its business and operation and it has found it fit for its purposes, and it hereby waives any claim with respect to unsuitability and/or in respect of use of the Property.

 

c. The Lessee represents that there is no legal impediment to is engagement in this agreement.

 

Term of the Lease

 

5.

a. The term of the lease under this agreement is for 36 months, commencing on June 2, 2003 and ending on June 1, 2006. Notwithstanding the aforesaid, the Lessee may terminate the term of the lease after 24 months, i.e., on June 1, 2005, provided that it shall have notified the Lessor thereof four months in advance.

 

2
 

 

b. Breach of this section shall constitute a fundamental breach of the contract.

 

Rent and Maintenance Fees

 

6.

a. In consideration for the fulfillment of all of the Lessor’s obligations under this agreement, and for lease of the Property, the Lessee shall pay the Lessor: in the first two years of the term of the lease, monthly rent in the amount of NIS 6,319 , as well as property maintenance and management fees in respect of the Property, in accordance with Annex F, in the amount of NIS 1,487 , as specified hereinbelow, and, in total, NIS 7,806 per month plus V.A.T. as required by law; and in the third year of the term of the lease, an amount of NIS 6,620 as rent and NIS 1,558 as management fee, and, in total, NIS 8,178 per month plus V.A.T.

 

The Lessee shall additionally pay an amount of NIS 262 per month plus V.A.T. for any attached parking space under the terms of this agreement.

 

(The rent, management fee and parking space payment shall be hereinafter referred to as: the “ Basic Rent ”).

 

The Basic Rent in the entire term of the lease shall be fully linked to the Consumer Price Index, as specified in Subsection (d) below.

 

In addition to payment of the rent, the Lessee shall also pay the Lessor the Value Added Tax in respect thereof, at the rate in effect from time to time, which shall be paid on the rent payment date - each and every payment.

 

A tax invoice shall be furnished to the Lessee by the Lessor within 14 days of the date on which payment was actually made.

 

b. The Basic Rent shall be paid by the Lessee to the Lessor as specified below:

 

(1) The rent shall be paid each month in advance and shall include the component of rent, management fee, parking spaces and V.A.T, as well as the Index linkage differentials, as provided in Section (e) below. The rent shall be paid via a standing bank order to an account specified by the Lessor, by the 20 th day of the month preceding the rental month.

 

(2) The Lessee undertakes to pay the rent throughout the entire term of the lease, even if it shall have left the Property and/or shall not have made any use and/or partial use thereof, unless the Lessor shall have consented thereto, and subject to the provisions of Section 11 (a) in respect of lease of the Property to an alternative lessee.

 

3
 

 

(3) For the avoidance of doubt it is hereby stressed that insofar as, for whatever reason, cheques are delivered, delivery of such cheques shall not constitute payment of the rent, and only actual clearance on the date stated in the cheque, with Index linkage differentials as stated in Subsection (e) hereunder, shall be deemed upon receipt thereof as consideration and as payment of the rent at the rate and in the amount actually cleared.

 

(4) Notwithstanding the aforesaid, it is agreed that for the months June to September 2003 (inclusive), the Lessee shall not be charged for the Basic Rent, and it is also agreed that for the months October and November 2003, the Lessee shall be charged for only half of the Basic Rent. The payment for the months October and November 2003 shall be made upon the signing hereof.

 

c. The Lessee may not push forward payment dates, other than according to the prior consent of the Lessor.

 

d. The rent shall be linked to the Consumer Price Index as specified below:

 

If it shall have emerged from the last Index published prior to the actual payment date of any rent payment (the “ New Index ”) that the New Index has increased compared with the Index of April 2003, which was published on May 15, 2003 , i.e. 101.9 points (the “ Basic Index ”), the rent shall increase accordingly, by the rate of increase of the New Index compared with the Basic Index.

 

If any Index is, for whatever reason, lower than the Basic Index, the aforesaid payment shall not decrease.

 

e. In this agreement, the “ Consumer Price Index ” or the “ Index ” shall mean – the Consumer Price Index including fruit and vegetables, which is determined by the Central Bureau of Statistics and Economic Research and includes the same index even if published by any other official body or institution, including any other official index to come in its stead, whether or not it is based on the same data on which the present index is based. If another index comes to be, and the Central Bureau of Statistics and Economic Research does not determine the proportion between the same and the replaced index, the accountants of the Lessor and Lessee shall determine the proportion between the same and the replaced index.

 

f. Every 3 months in the term of the lease, the Lessor shall make an adjustment of the rent according to the amount of increase to the Index as specified above (the “ Linkage Differentials ”), and shall inform the Lessee thereof, which shall immediately pay the Linkage Differentials to the Lessor. In the alternative, such Linkage Differentials shall be directly collected through the standing bank order, together with the monthly payment.

 

4
 

 

g. The Lessor reserves the right to transfer (in whole or in part) its rights and undertakings under this agreement to any third party, provided that the rights of the Lessee under this agreement are not prejudiced, and the Lessee undertakes to act in good faith and sign a management agreement or any other agreement with the transferee and/or with the Lessor, as the case may be, the principles of which agreement will be accordant with the principles specified in Annex F, including payment of the management and/or maintenance fees as stated in the annex or in this agreement.

 

General principles of management as stated in Annex “F”, which is attached hereto as an integral part hereof.

 

Without derogating from the generality of the aforesaid, the Lessee undertakes to cooperate with any such entity, in any form and manner, including a committee, if established, as in a condominium, whether or not a condominium exists.

 

h. Breach of this section shall constitute a fundamental breach of the agreement.

 

Arrears Interest

 

7.
a. Any amount due from the Lessee to the Lessor, including the one stated in paragraphs 6 above, which is not timely paid, shall bear, as of the third day of delinquency, in addition to linkage to the Consumer Price Index, arrears interests in respect of the delinquent amount, at the maximum rate (which does not include additional Index linkage) customary at Bank Leumi LeIsrael Ltd. for overdrafts in debit current accounts, plus 10%, with the interest compounding every month, as of the payment date stated in this agreement with respect to the delinquent amount until actual payment of the same.

 

Delinquency in rent payment as aforesaid in excess of 7 (seven) business days shall be deemed a fundamental breach of the contract. The charge for arrears interest shall be calculated as usually calculated by Bank Leumi LeIsrael Ltd.

 

b. Nothing in the provisions of Subsection (a) above shall be construed as granting the Lessee a right to any delinquency in the payment of rent under this contract.

 

c. The Lessor undertakes to receive rent and/or payments on account of debts when due, upon payment thereof by the Lessee.

 

5
 

 

Purpose of the Lease

 

8.
a. The Lessee undertakes to use the Property solely for the purpose of management of its office and business in the field of hi-tech industry and/or biotechnology and/or converging fields, and for this purpose alone, all subject to the provisions of Zoning Plan 3760 A.

 

The Lessee hereby undertakes to neither use nor allow use of the Property or any part thereof for any other purpose whatsoever other than the aforementioned purpose, and the Lessee may not engage at the Property in any other business and/or manufacture and/or sell and/or market at the Property products, consumer goods, merchandise or other services of any type whatsoever, other than the ones included within the purpose of the lease as specified below.

 

b. Without derogating from the aforesaid, it is hereby agreed that the responsibility for obtaining a business license and any other permit, including a police and/or Ministry of Health and/or municipal authority permit and any and all taxes and payments to be due to an authority and/or the government and/or any other entity in respect of obtaining the license, including business tax, signage tax, fees and licenses for the business and for the management thereof, which are required for operation of the business of the Lessee at the Property, shall be borne by the Lessee at its own expense. In any event, not obtaining the licenses and/or the payments shall bear no effect on the obligations of the Lessee under this agreement.

 

c. The Lessee may not change the purpose of the lease without receiving the Lessor’s prior written consent. If the Lessee wishes to change the purpose of the lease, it is required to address the Lessor in writing and specify the new purpose and the reasons for the change. The Lessor shall not be obligated to agree to a change in the purpose of the lease. If the Lessor refuses to agree to a change in the purpose of the lease, such shall not constitute a breach of this contract by the Lessor.

 

d. The Lessee undertakes to cooperate with any guard/doorman posted, if posted, on behalf of the Lessor and/or the Management Company as defined above in Section 6(g), and to adhere to all of their instructions, all subject to the details in Annex “F” in respect of the Building’s management principles.

 

e. Breach of this section shall constitute a fundamental breach of the contract.

 

6
 

 

Possession Handover, Use of the Property and Repairs

 

9.
a. Exclusive possession of the Property shall be handed over to the Lessee on June 2, 2003 (hereinafter and above: the “ Handover Date ”), provided that this contract shall have been signed and that rent shall have been paid to the Lessor as provided in Section 6 above, and provided that the Lessor shall have been provided with all of the collateral specified in this contract by the Lessee.

 

On the Handover Date, a punch list will be prepared by a representative of the Lessor in the presence of the Lessee and/or anyone on its behalf, for receipt of the Property by the Lessee by the Lessee signing the punch list, and a copy thereof shall remain in the hands of the Lessee.

 

As of such date, the Lessee shall be subject to all of the duties and obligations arising from this contract, including its liability for any damage caused by an act by the Lessee or anyone on its behalf and the term of the lease shall commence on the aforesaid date for all intents and purposes, whether the Lessee shall have arrived on such date to receive possession or not.

 

b. The Lessee shall compensate and indemnify the Lessor for any damage and/or expense incurred by the Lessor as a result of an act or omission by the Lessee, provided that prior notice is delivered to the Lessee in respect of the damage and/or expense, in order for the Lessee to be given the opportunity to rectify the same or defend itself against the person claiming their existence.

 

The provisions of this paragraph shall not apply to malfunctions at the Property which originate in ordinary wear and tear stemming from reasonable use of the Property.

 

c. The Lessee undertakes to manage its business at the Property and the surroundings thereof in such manner so as not to create any safety and/or health and/or other risk.

 

d. The Lessee undertakes to manage its business carefully and reasonably while coordinating activities with the maintenance person on behalf of the Lessor. The Lessee further undertakes, itself or through others, to unload and/or load merchandise of any type whatsoever only in the area specified by the aforesaid maintenance person.

 

e. The Lessee may not make any use of the sidewalks, roads and any other public area which is common to the Property, other than for the purpose for which such public areas are designated.

 

f. The Lessee undertakes to use the leased property appropriately and reasonably, to persevere in the preservation of the leased property and the proper upkeep thereof throughout the entire term of the lease, to repair by itself and at its own expense any flaw, malfunction or damage, except reasonable wear and tear, to be caused at the leased property during the term of the lease, by the Lessee and/or anyone on its behalf, including its employees, guests and invitees, and to return possession of the Property to the Lessor upon the end of the term of the lease, or after termination of the contract, or after expiration thereof by the Lessor, with the Property being clear of any person and object belonging to the Lessor and with it being in good and proper condition, as handed over to the Lessee, except ordinary and reasonable wear and tear, and with it being fit for use, and to perform, at its own expense, any repair required for the purpose of compliance with its aforesaid obligations, no later than the date on which the Lessor is entitled to the return of the Property as aforesaid.

 

7
 

 

g. If the Lessee fails to perform repairs as aforesaid in this section, as the Lessor shall notify it and/or fails, in the Lessor’s opinion, to properly perform them, the Lessor may enter the Property and perform maintenance work and these repairs, whether itself or through others, in the Lessee’s stead and at its expense, without derogating from all of the other rights and remedies conferred upon the Lessor under this agreement, all if the Lessee shall not have performed such repairs as aforesaid, within 14 days of the day on which the Lessor shall have notified it in writing of its intention to enter the Property for the purpose of performing the repairs as aforesaid.

 

h. The Lessee undertakes not to perform any structural changes and/or additions at the Property without receiving the Lessor’s prior written consent thereto and subject to obtainment of a lawful permit and license, if such permit/license is required. The Lessor shall not object to such changes except on reasonable grounds. It is agreed that if the area of the Property increases in consequence of the changes and/or additions, the Lessee shall pay additional rent in the same proportion as the rent.

 

Without prejudice to the rights of the Lessor under this section, the Lessee must, immediately upon receipt of the Lessor’s demand therefor, remove, at its own expense, any such additions or changes (which shall not have received the Lessor’s prior approval as aforesaid and/or changes which shall have received its approval upon the end of the lease and prior to returning the Property to the Lessor, except if permission shall have been given to leave the change) and the Lessor shall also have the right to do so at the expense of the Lessee. Changes which are not easily removable and/or the removal of which shall aesthetically or structurally damage the Property, shall remain as they are at the Lessor’s consent and shall be transferred to its ownership for no consideration, upon the end of the contract and/or the term of the lease.

 

Special provisions with respect to fit-out of the Property to the Lessee upon commencement of the lease shall be as specified in Annex B.

 

8
 

 

i. The Lessee undertakes not to cease using the Property for a period exceeding 90 days, other than if it gives the Lessor prior notice thereof. If the Lessee ceases to use the Property as aforesaid, other than for reasons of force majeure , it shall be deemed as having waived its rights under this contract, but this shall not derogate from the obligations of the Lessee under this contract, including with respect to payment of rent to the Lessor and with respect to any other payment borne by the Lessee under the provisions hereof.

 

j. The Lessee may not install a sign at the Property, but only subject to the explicit written approval of the Lessor in advance, in respect of the form of the signage, its content and its location, and in accordance with the provisions of any law, including a permit from the municipal authority.

 

It is clarified that subject to the aforesaid, the Lessor shall not have an objection in principle to signage containing the names of companies whose products are sold on the Property, provided that in any such case, prior written consent is received from the Lessor and/or the Management Company as defined in Section 6(g) above.

 

The Lessor may remove, at the expense of the Lessee, any sign installed thereby in violation of the provisions of this section.

 

In addition and in the alternative, the Lessor may determine a common form of signage.

 

k. The employees of the Lessor and its agents may enter the Property at any time during usual working hours, provided that the same is done after prior coordination with the Lessee and that the visit is accompanied by a representative of the Lessee, all for purposes of inspection and performance of repairs, while protecting the rights of the Lessee under this agreement.

 

l. Breach of this section shall be deemed a fundamental breach of this contract.

 

Levies and Payments

 

10.
a. The Lessee undertakes that, as of the Property’s Handover Date as provided in Section 9(a) above, it shall pay any and all taxes of any type, fees, municipal taxes ( arnona ), levies and other payments imposed and to be imposed in the future, during the term of the lease, which relate to the term of the lease under the provisions of any law, on the lessee of a property as distinguished from the owner thereof, and which relate to the Property and/or the business managed therein, directly and on the lawful date on which such are payable to the various authorities.

 

9
 

 

Furthermore, the Lessee shall directly bear any and all expenses of any type whatsoever which are involved in the Property’s maintenance, including its share in the common property, as defined in the area of the Property, and, without derogating from the generality of the aforesaid, expenses due to municipal tax ( arnona ), any levy or tax imposed on the lessee of a property as distinguished from the owner thereof, water, electricity, electricity for the air conditioning system, telephone, sewage and gas.

 

It shall also see to registration of all of the separate meters in respect of the Property within 14 days of the Handover Date, and to registration of its name at the aforementioned offices as lessee and as solely responsible for payments.

 

b. Without derogating from the generality of the aforesaid, and only insofar as any of the aforementioned payments is not actually paid by the Lessee to a third party entity, as the case may be, the Lessor may obligate the Lessee to pay the aforesaid levies and payments, in whole or in part, directly thereto, as per its choice and in accordance with a written prior notice to be sent to the Lessee. It is hereby agreed that municipal tax ( arnona ) payments paid to the Lessor (insofar as not directly paid to the municipality by the Lessee), shall be as customary in the area for each leased sqm, and that the Lessee shall have no claim against the Lessor if the Lessor actually pays the municipal authority an amount lesser than such, to be included in the general amount in respect of the Building, if included.

 

It is further agreed that if the municipal authority sends the Lessor a demand for payment differentials in respect of the Property, the Lessee will pay the payments according to the demand, and will have no claim against the same.

 

c. The Lessee undertakes to present to the Lessor, from time to time and provided that it shall have given a written demand 7 days in advance, according to the Lessor’s demand, all of the receipts and/or confirmations certifying that all of the payments payable thereby under this contract have indeed been paid thereby, and, upon the end of the term of the lease, to transfer thereto the original bills and/or receipts and/or clear photocopies of such documents. The Lessee undertakes to present to the Lessor receipts and/or confirmations attesting to payments that were made which relate to the term of the lease.

 

d. Insofar as, for whatever reason, either of the parties pays any payment under this contract, which the other party is obligated to pay, the other party shall have to return to the paying party any such amount paid thereby immediately upon the second party’s first demand in a letter of notice to the party for whom payment was made, with Index linkage differentials and arrears interest at the rate set forth in Section 7(a) above, within seven days of the date of demand thereby and until actual payment of the same by the second party .

 

10
 

 

e. Breach of this section shall be deemed a fundamental breach of the contract.

 

Transfer of Rights

 

11.

a. The Lessee may transfer and/or endorse its rights under this contract to another person and/or entity and to lease or hand over to another or to other and to permit and/or grant any right to another or to others to use the Property or any part thereof, to share with someone possession of the leased property or use thereof and/or of any part thereof in any form and manner, all whether with or without consideration. The aforesaid shall be carried out after receipt of the Lessor’s consent. For this purpose, the Lessor undertakes not to unreasonably withhold its consent.

 

b. The Lessor, on its part, may transfer its rights and obligations under this contract to any entity and/or person without need for the Lessee’s consent, provided that the Lessee’s rights under this contract are not prejudiced.

 

c. Breach of this section shall be deemed a fundamental breach of the contract.

 

Insurance

 

12. The Lessee hereby undertakes to insure, at its own expense, the contents of the leased property and the business and activity of the Lessee at the leased property, at full value, with the insurance values being updated from time to time, as necessary, and against all known, standard and customary risks, with an authorized reputable insurance company.

 

Without derogating from the generality of the aforesaid, the Lessee hereby undertakes to purchase the following insurance policies:

 

a. Employers’ liability insurance –

 

Insurance of the Lessee’s liability to its employees under the Tort Ordinance (New Version) and/or under any other law due to death and/or bodily harm (including brain or mental damage) to any employee as a result of an accident or illness while and as a result of his work, with a liability cap no lesser than $1,500,000 per claim and $5,000,000 in the aggregate for the term of the insurance.

 

b. Third party liability insurance –

 

Insurance of the Lessee’s liability to the Lessor and to any third party, under the Tort Ordinance (New Version) and/or under any other law in an amount no lesser than $500,000 (five hundred thousand dollars) per claim and in the aggregate for the term of the insurance.

 

11
 

 

c. Property insurance –

 

Insurance of the contents of the leased property, the equipment used in the Lessee’s work and the equipment serving the leased property and located outside the leased property, including any repair, change, renovation and addition to the leased property, made and/or to be made by the Lessee and/or therefor, of any type whatsoever, with full reinstatement value, and no less than the price of replacement thereof with new and similar property, including their installation, and including explosion, earthquake, storm, gale, flood, water damage, damage by aircraft, damage by accident, strikes, riots, willful damage and burglary.

 

The said insurance shall also insure the full value of the Lessee’s work.

 

d. Insurance for loss of profits of the Lessee –

 

The Lessee may not recover from the Lessor any claim related to loss of profits, whether or not it may be proved.

 

13.
a. Without derogating from the generality of the aforesaid, the Lessee hereby undertakes to bear the management fee payments according to the provisions of Annex F, which also include payments for the following insurance policies, to be taken out by the Lessor:

 

1. Insurance of the Building, including the attachments thereto, against loss or damage as a result of risks of fire, smoke, lightning, explosion, earthquake, riots, strikes, willful damage, terror damage, storm, gale, flood, other natural disasters, damage by aircraft, damage by accident, burglary and against any additional risk which, in the opinion of the Lessor, is required, in amounts or unlimited in amount, as determined by the Lessor per its discretion, provided that the amount of insurance is no less that the reinstatement value of the Building and the attachments thereto. Such insurance shall include a clause concerning waiver of the subrogation right against the lessees and/or tenants in the Building due to damage caused thereby to the Building, with the exception of damage caused thereby with malicious intent.

 

For the purpose of the provisions of this section, the term “Building” shall include all of the systems constituting an inseparable part of the Building and will explicitly not include the contents of the leased properties and any addition, repair, change, improvement or extension carried out in the leased properties by the lessees or for them.

 

12
 

 

2. Third party liability insurance, which insures the liability of the Lessor and Lessee to any third party under the laws of the State of Israel, with a liability cap no lesser than $2,000,000 per claim and in the aggregate for the term of insurance, in the public areas which do not constitute a part of the leased areas.

 

The policy shall include a “cross liability” clause, under which the mutual liability of the individuals of the insured and the Lessee will be covered.

 

3. Insurance for loss of rent and/or consequential loss and loss of profits of the Lessor, at full value, as a result of loss or damage to the Building and/or to the leased property as a result of the risks specified in Section 12.a.1 above for the period required for reinstatement or replacement of the Building.

 

4. Any other insurance which the Lessor deems necessary, including third party insurance in addition to the aforesaid in Section 12(b) above, which pertains to destruction and/or damage and/or loss and/or liability in connection with the Building, its management and its operation.

 

b. The Lessee will present to the Lessor per its demand all of the insurance policies issued thereto in accordance with Section 12 above, within 60 days after the signing hereof at the Property and shall furnish copies thereof thereto, as a preliminary condition for receipt of possession of the Property thereby or for opening of the business thereby (as applicable) and shall also present to the Lessor, on an ongoing basis, any new policy to be issued thereto or any amendment to a policy previously presented thereby to the Lessor. Per the reasonable demand of the Lessor, the Lessee shall have to add and/or update and/or amend the insurance policies to the Lessor’s satisfaction in order for such to meet the criteria set forth in this section above.

 

c. It is hereby expressly agreed and stated that the Lessor shall bear no liability of any type whatsoever to the Lessee for any damage caused to the Property or to the contents thereof or to a third party for any reason whatsoever, whether the reason for the damage or malfunction are known or unknown, except as a result of negligence and/or the liability of the Lessor.

 

d. The Lessee undertakes to cause an explicit condition to be added to the insurance policies, whereby the insurer expressly waives any subrogation right or other right under law to recover from the Lessor and/or from anyone on behalf thereof by a claim of subrogation or recovery or indemnification due to direct or indirect damage as specified above, if any such damage is caused.

 

13
 

 

Without derogating from the aforesaid, the Lessee further undertakes to cause the name of the Lessor to be added to the insurance policies as a beneficiary and an express condition to be added whereby the insurer is also liable to the Lessor in the same manner in which it is liable to the insured (the Lessee), with respect to third party claims due to direct or indirect damage as specified above, if any such damage is caused, including a “cross liability” clause governing the mutual liability of the individuals of the insured.

 

e. The Lessor shall properly comply with all of the terms and conditions of the policies mentioned in this section above, to timely pay the insurance fees and to see to the renewal of the policies and their being in full force and effect throughout the entire term of the lease and the additional term of lease, if any.

 

f. The Lessee undertakes to see to it that for all policies on its behalf and in its name a “policy addendum” is issued whereby revocation and/or change for the worse thereof in any respect pertaining to the leased property and/or the Lessor and/or the Lessor is contingent upon written notice by registered mail to be delivered to the Lessor by the insurer at least 30 days prior to the date of such change and/or revocation.

 

g. Effectuating the insurance policies as aforesaid shall in no manner diminish and/or derogate from the undertakings of the Lessee under this contract nor shall it release it from its duty to compensate any person for any damage caused to his person or to his property, directly or indirectly, as a result of the use of the Property.

 

For the avoidance of doubt it is clarified that the Lessor’s involvement in respect of the effectuation of the various insurance policies by the Lessee, including the types of insurance and/or the setting of minimum liability caps, does not impose any liability on the Lessor with respect to the insurance coverage, its force and effect or its suitability.

 

h. The Lessee undertakes to indemnify the Lessor if the Lessor is charged with any payment due to damage caused at the Property, of any type whatsoever, which does not stem from the act, omission or negligence or liability of the Lessor, but stems from the liability of the Lessee.

 

Vacating

 

14. The Lessee undertakes to vacate the Property immediately upon the end of the term of the lease, or in the event of termination of the contract for whatever reason or upon expiration thereof by the Lessor, all as the case may be, and to return to the Lessor exclusive possession of the Property, it being clear of any person and object and it being in good and proper condition, as received thereby and subject to reasonable wear and tear.

 

The Lessee further undertakes to provide the Lessor on demand with confirmations from any and all pertinent entities whereby all of its obligations as stated in this contract have been paid, including municipal and other taxes, water, electricity, air conditioning electricity, telephone, gas, etc.

 

14
 

 

15. For any day of delinquency in the vacation of the Property (except the first 7 days of delinquency on which the usual rent will be collected without delinquency fees and thereafter according to the provisions of this section), as aforesaid, and in any event where the Lessee must vacate the Property under any law and/or agreement, the Lessee undertakes to pay the Lessor an amount in New Shekels equal to 3 times the last rent including V.A.T. and any other component, if added, divided by the number of days in the last month and linked under the terms and conditions hereof and multiplied by the number of days of delinquency in the vacation of the Property and estimated as damages that are fixed, agreed and estimated in advance, without prejudice to the Lessor’s right to claim, demand and receive injunctions and/or specific performance and/or any other remedy against the Lessee including rent under this agreement which is due thereto under any law.

 

Breach and Remedies

 

16.
a. The parties hereby agree that if this contract and/or any of the terms and conditions hereof are fundamentally breached, the injured party will be entitled to terminate this agreement and demand from the Lessee (insofar as it is the injuring party) to return exclusive and clear possession of the Property, and the Lessee undertakes to comply with such demand within 60 days.

 

Without derogating from the aforesaid, each of the events specified below shall be deemed as conferring upon the injured party the right to discontinue the lease hereunder. Insofar as the injuring party is the Lessee, the Lessor may demand that the Lessee immediately vacate the Property and recover from the Lessee in any legal way available thereto, including by way of realization of the collateral noted in Section 17, in order to cover all of the Lessor’s damage, and including removal of the Lessee, its equipment, employees and representatives from the Property, and these events follow:

 

1. The Lessee shall have abandoned the Property for a period exceeding 90 days, subject to the provisions of Section 9 above.

 

2. A judicial closedown order shall have been issued in respect of the Lessee’s business at the Property and the order shall not have been revoked within 60 days of the issuance thereof.

 

3. An attachment shall have been imposed on the rights of the Lessee under this contract and such attachment shall not have been revoked within 120 days as of the day on which the Lessee shall have learned of the imposition of attachment.

 

15
 

 

4. A bankruptcy and/or liquidation petition shall have been filed against the Lessee or by the Lessee or an order for receipt of assets in bankruptcy and/or a liquidation order shall have been issued against it and/or a temporary or permanent receiver of all or some of its assets and/or a trustee in bankruptcy and/or a liquidator shall have been appointed thereto and such petition and/or order and/or appointment shall not have been revoked within 60 days of the day on which the Lessee shall have learned thereof.

 

b. In the event of termination of the contract due to a fundamental breach thereof and a failure to remedy the same after written notice thereof being given and discontinuance of the lease consequently thereto, the breaching party undertakes to pay the injured party preestimated liquidated damages in the amount of $10,000 (ten thousand U.S. dollars) with no proof of damage to the Lessor being necessary and without prejudice to any other and/or additional legal and/or contractual right available to the Lessor.

 

c. In the event of a fundamental breach of the contract by the Lessee, the Lessor may accelerate payment of the entire remaining balance of rent, management fee and parking space payment until the end of the term, provided that the breach shall not have been rectified also 7 days after the Lessor shall have notified the Lessee thereof, without prejudice to any legal or other right to remedies under law and under this agreement.

 

d. Noncompliance with the undertakings of the management company under this agreement lasting more than 90 days shall constitute a fundamental breach of this agreement by the Lessor.

 

Collateral

 

17. To secure compliance with all of the Lessee’s undertakings under this contract, the Lessee undertakes to provide the Lessor on the date of the signing hereof with the following collateral:

 

a. An autonomous bank guarantee to the order of the Lessor in the amount of 3 (three) months of lease including V.A.T and any other addition (insofar as added). The guarantee shall be linked to the agreement’s index and to any condition and/or addition stated in this agreement or the extensions thereof as they shall be. The guarantee shall be in force and effect until one month from the date of expiration of this agreement or the extensions or addendums thereof, as applicable, and restoration of the Property to the condition stated in this agreement.

 

16
 

 

Stamp Duty

 

18. Stamp duty expenses of this contract and the copies hereof, if stamped, shall be paid by the Lessee.

 

General

 

19.

a. This contract revokes the MOU signed between the parties, if any, and/or any other paper and representation with respect to which negotiations were conducted, and supersedes it for all intents and purposes related to the Property and/or any other understanding whether oral or written during the negotiations until the signing date.

 

b. The parties grant exclusive jurisdiction to the competent court at the city of Jerusalem.

 

Notices

 

20.

a. The addresses of the parties hereof are as specified in the preamble.

After commencement of the term of the lease, the Lessee’s address for the purposes of this contract shall be at the Property.

 

b. Any notice sent to any of the parties by registered mail shall be deemed to have arrived at its destination and duly delivered at the end of 72 hours as of the time of dispatch thereof.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Yair Hadar   /s/ Zvi Joseph
The Lessor   The Lessee

 

17
 

 

Date: April 21, 2004

 

Addendum to Agreement

Signed in Jerusalem on April 21, 2004

 

Between: R. M. P. A. Assets Ltd. (the " Lessor ")
   
And: Intec Pharmaceuticals (2000) Ltd. (the " Lessee ")

 

It has been agreed as follows:

 

1. As of May 1, 2004, the area of the lease shall increase by an additional 200 sqm (gross) (the “ Additional Leased Property ”).

 

2. The rent for the additional area shall be NIS 38.25 per one gross sqm plus a management fee in the amount of NIS 9 per one gross sqm.

 

3. Lawful V.A.T. shall be added to the aforesaid prices.

 

4. The aforesaid prices shall be linked to increases in the Consumer Price Index (basis published on March 15, 2004) and shall be increased by 5% after 24 months.

 

5. No rent and management fee shall be paid for the first two months.

 

6. The lease agreement and all of the periods therein are hereby extended, such that they last for no less than 20 months from the payment commencement date in respect of the new leased property.

 

7. The following conditions shall apply with respect to an 46 sqm-area:

 

a. For the first 3 months of lease - no rent shall be paid.

 

b. For the 12 months thereafter - 50% of the rent and management fee specified in Sections 2-4 of this addendum shall be paid.

 

c. Thereafter, rent shall be paid according to the provisions of Sections 2-4 of this addendum.

 

8. The bank guarantee shall be increased in accordance with the rent increment under this addendum to the agreement.

 

9. Payment terms are hereby modified both with respect to the old leased property and with respect to the new one, such that the payment date will be each quarter in advance, rather than as stated in the agreement.

 

 
 

 

10. The Lessor shall, at its own expense, separate the leased property from the remaining vacant area by plaster walls, and shall also perform any change or fit-out required thereto in order to allow for new entrance or entrances into the area remaining in the Lessor’s possession, and the Lessee shall bear no cost or obligation in consequence thereof.

 

11. The Lessor shall perform electricity work for separation of all of the connections in the new leased property (lighting, power, fan coils and so forth) from the present distribution board and shall connect them through a separate distribution board to a central distribution board of the building or another main board including a secondary meter for consumption measurement and security switches as required. For the avoidance of doubt, all of the current costs of any type (electricity, air conditioning electricity, chiller electricity and so forth) shall be borne by the Lessee whether paid to the Israel Electric Corporation or to the Lessor or another entity according to the secondary meter. The separation stated in the first part of this section only refers to the actual separation work. Separations shall be carried out in coordination with professionals on behalf of the Lessor insofar as required until May 15, 2004. In respect thereof, the Lessee shall contribute an amount of NIS 750 plus V.A.T. per month for a period of 12 months commencing on the day of completion of the separation work on behalf of the Lessor.

 

12. All of the other terms and conditions of the lease agreement of June 2, 2003, insofar as unchanged by this agreement, shall remain unchanged and shall also apply to the Additional Leased Property.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Zvi Joseph   /s/ Yair Hadar
The Lessee   The Lessor

 

2
 

 

Date: _____________________

 

Addendum to Agreement

Signed in Jerusalem on January 1, 2006

 

Between: R. M. P. A. Assets Ltd. (the " Lessor ")
   
And: Intec Pharma Ltd. (the " Lessee ")

 

It has been agreed as follows:

 

1. As of January 1, 2006, the area of the lease shall increase by an additional 669 sqm (gross) (the “ Additional Leased Property ”), in accordance with the attached floor plan.

 

2. The rent for the additional area shall be NIS 38.25 per one gross sqm plus a management fee in the amount of NIS 9 per one gross sqm.

 

3. The Lessee shall commence the aforesaid rent and management fee payments on January 1, 2006.

 

4. Lawful V.A.T. shall be added to the aforesaid prices.

 

5. The aforesaid prices shall be linked to increases in the Consumer Price Index (basis published on March 15, 2004) and shall be increased by 5% as of January 1, 2007.

 

6. The lease agreement and all of the periods therein are hereby extended, such that they last for no less than until December 31, 2008.

 

7. The bank guarantee shall be increased in accordance with the rent increment under this addendum to the agreement.

 

8. The Lessee shall, at its own expense, separate the leased property from the remaining presently vacant area by plaster walls, and shall also perform any change or fit-out work required thereto at its own expense, and the Lessor shall bear no cost or obligation in consequence thereof.

 

9. The Lessee shall perform electricity work for connection of all of the connections in the new leased property (lighting, power, fan coils and so forth) from the present distribution board (approx. 630 ampere) and shall also connect it to all of the areas of the previous leased properties, such that only one direct connection to the Israel Electric Corporation remains. The Lessee shall disconnect the connection of the area which shall not be under its possession and shall also connect thereto the 30-ton chiller cooling unit, which, as of the signing of this document shall be exclusively used by the Lessor. The Lessor shall bear the responsibility for disconnecting and reconnecting other parts which are not used by the Lessee.

 

 
 

 

10. The Lessee may perform fit-out work according to the attached floor plan which is approved by the Lessor’s signature.

 

11. The Lessee may, at its own expense, add air conditioning and ventilation systems on the roof, but only after a suitable plan, including conduits etc., is approved by the Lessor.

 

12. It is agreed that the Lessee shall have the option to extend the lease for an additional period of two years subject to a written notice by September 30, 2008. In such additional period, all of the payments payable by the Lessee shall increase by 5%.

 

13. All of the other terms and conditions of the lease agreement of June 2, 2003, insofar as unchanged by this agreement, shall remain unchanged and shall also apply to the Additional Leased Property.

 

14. The parties shall sign, as soon as possible, a lease agreement for all of the areas leased by the Lessee, with all of them having a tariff, linkage conditions and price increases and the lease dates shall be in accordance with the provisions of this addendum.

 

15. The Lessee shall return the areas used thereby under this agreement and under the additional existing lease agreements with the Lessee, in their condition after performance of changes in the leased property for the specific needs of the Lessee. It is hereby clarified that the Lessee shall not be obligated to restore the leased property to its condition when received, and shall also not be charged with any expenses, whether direct or indirect, due to the area’s restoration to its previous condition.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Zvi Joseph   /s/ Yair Hadar
The Lessee   The Lessor

 

2
 

 

Date: December 15, 2009

 

Addendum to Unprotected Lease Agreement of June 2, 2006

 

Between: R. M. P. A. Assets Ltd.
  (the " Lessor ")
   
And: Intec Pharma Ltd.
  (the " Lessees ")

 

Whereas the Lessees are leasing premises from the Lessor at R.M.P.A. House, spanning 1,039 (gross), under an agreement of June 2, 2003, including all of the addendums thereto; and

 

Whereas the Lessees wish to extend the term of the lease for three additional years as of January 1, 2010 and until December 31, 2012; and

 

Whereas the Lessor is willing to extend the lease for an additional three-year period as of January 1, 2010 and until December 31, 2012;

 

Wherefore the parties have agreed as follows:

 

1. The term of the lease shall be extended for three additional years as of January 1, 2010 and until December 31, 2012.

 

2. Payments due to the contract shall increase by 5% as of January 1, 2010, beyond the last payment made and the linkage differentials.

 

3. The bank guarantee shall increase according to the increase in rent under this addendum to the agreement.

 

4. The Lessee shall have a right of refusal in respect of additional areas comprising approx. 450 sqm on the floor of the leased property which are adjacent to the leased property for a one-year period at market prices. The Lessor shall give the Lessee a 10-day notice prior to signing a lease agreement in respect of such area, within which the Lessee shall give notice of the exercise/non-exercise of such right.

 

5. It is clarified that the original contract, with all of the terms and conditions and annexes thereof, is also effective for this extension period and nothing in this extension agreement shall derogate from any undertaking and/or debt of any of the parties which derives and/or is attributed to the original contract.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Yair Hadar
The Lessee   The Lessor

 

 
 

 

Date: January 18, 2011

 

Addendum to Agreement

of June 2, 2006

 

Between: R. M. P. A. Assets Ltd. (the " Lessor ")
   
And: Intec Pharma Ltd. (the " Lessees ")

 

It has been agreed as follows:

 

1. As of January 15, 2011, an additional area on Floor B of the Building, the estimated area of which is approx. 600-700 sqm (gross) shall be added to the leased property (the “ Additional Leased Property ”), according to the attached floor plan. It is clarified that the precise area of the Additional Leased Property shall be measured after performance of the actual division and shall be calculated by adding 24% to the total area of the Additional Leased Property (including walls). This area will be added to the area of the presently leased property of 1,039 sqm and to parking spaces and a storage room which are leased by the Lessee.

 

2. The price of rent and management fee and the linkage conditions for the Additional Leased Property shall be identical to the price of rent and management fee and linkage conditions applicable to the other lease areas of the Lessee, but the provisions specified in this document shall additionally apply thereto.

 

3. The Lessee is given a grace period, such that the rent for the Additional Leased Property will only be paid as of August 1, 2011 forth.

 

4. Notwithstanding the aforesaid, the Lessee shall be liable for municipal tax ( arnona ) charges in respect of the Additional Leased Property as of January 15, 2011.

 

5. The Lessee shall commence payment of management fees in respect of the Additional Leased Property as of April 1, 2011.

 

6. Lawful V.A.T. shall be added to the aforesaid prices.

 

7. The lease agreement and all of the periods therein are hereby extended, both in respect of the existing leased Property and in respect of the Additional Leased Property, such that they last for no less than until December 31, 2015.

 

8. Notwithstanding the aforesaid, it is agreed that the Lessee shall have a right to discontinue the lease and vacate the Additional Leased Property alone under this agreement on March 3, 2011, provided that it gives written notice thereof to the Lessor at least 7 days before the end of the lease. Insofar as the Lessee exercises this right, it shall pay the Lessor a one-time payment for the period of actual use in the amount of NIS 30,000 plus V.A.T. and the full municipal tax ( arnona ) for the Additional Leased Property under this addendum for the entire period in which the leased property was in its possession.

 

 
 

 

9. The bank guarantee shall be increased according to the rent increment under this addendum to the agreement.

 

10. The Lessee may perform fit-out according to a floor plan to be submitted by the Lessee and approved by the Lessor.

 

11. The Lessee may add, at its own expense, air conditioning and ventilation systems on the roof adjacent to the Building, but only after a suitable plan, including conduits, is approved by the Lessor.

 

12. The Lessor shall not unreasonably withhold its consent to the aforesaid in Sections 10 and 11 above.

 

13. As of January 1, 2014, the rent, parking space payments and management fee payable by the Lessee will be increased by 5% in respect of the leased property and the Additional Leased Property.

 

14. All of the other terms and conditions of the lease agreement of June 2, 2003, including its addendums and extensions as being from time to time, insofar as unchanged by this document, shall remain unchanged and shall also apply to the additional area.

 

15. The parties shall sign, as soon as possible, a lease agreement for all of the areas leased by the Lessee.

 

16. At the end of the term of the lease, the Lessee shall return all of the areas used thereby as they are after the performance of changes in the leased property by the Lessee (even if such will have been fit-out for the specific needs of the Lessee), but in a condition fit for immediate use, subject to reasonable wear and tear.

 

It is hereby clarified that the Lessee will not be obligated to restore the leased property to its previous condition at the time of receipt of possession thereof from the Lessor.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Yair Hadar
The Lessee   The Lessor

 

2

 

Exhibit 10.11

 

Agreement

 

Made and executed in Tel Aviv, on August 1, 2008

 

Between: Intec Pharma Ltd. C.N. 513022780
  Of 12 Hartom St., Jerusalem
  (the “ Company ”)
  On the one part

 

And Between: Giora Carni, I.D. 008396855
  Of 10 King Koresh St., Tel Aviv
  (the “ Executive ”)
  On the other part

 

Whereas The agreement by virtue of which the Executive is serving as the Company’s manager dated July 31, 2006 has expired (the “ Former Employment Agreement ”), and is null and void, other than as specified in the Company’s side letter to the Executive attached hereto as Annex A (the “ Side Letter ”); and

 

Whereas The Company wishes to continue to employ the Executive as its manager, under different employment terms as set forth in this Agreement below.

 

Now therefore, the parties hereby declare and agree as follows:

 

1. Preamble, Annexes and Headings

 

1.1. The preamble to this Agreement and its annexes constitute an integral part hereof.

 

1.2. Headings in this Agreement are for convenience only and are not to be used in interpreting the Agreement.

 

1.3. Annexes :

 

1.3.1. Annex A – Side Letter ;

 

1.3.2. Annex B – Confidentiality Agreement ;

 

1.3.3. Annex C – Annex pursuant to the terms of Section 14 of the Severance Pay Law .

 

 
 

 

2. Substance of the Agreement

 

The Executive will be employed by the Company for the term of this Agreement, as the Company’s Chief Executive Officer, and will directly manage the field of research and development, regulatory affairs, quality control, medical studies and business development. The Executive shall be subordinate to the Chairman of the Board, Mr. Zvika Joseph. The Executive will be responsible for recruitment and termination of employees, managing budgets and work plans in his areas of responsibility. The Executive’s terms of employment shall be only as specified herein.

 

3. Personal Agreement

 

3.1. This Agreement is a personal and special agreement regulating the relationship between Executive and the Company.

 

3.2. The Executive declares and confirms that by signing this Agreement, he waives any claim and/or demand toward the Company, the cause of action of which emerged prior to the execution of this Agreement, including any cause of action deriving from the Former Employment Agreement, other that as expressly specified in the Side Letter.

 

4. Employment Terms of the Executive

 

4.1. Monthly Salary

 

4.1.1. The Executive shall be entitled to a gross monthly salary of 40,000 Shekels.

 

4.1.2. The Executive's position is of those certain managerial positions that require a special degree of personal trust. In addition, his working hours cannot be supervised. Therefore, his employment shall not be subject to the provisions of the Law of Working Hours and Rest, 5711-1951, and the Executive, after having reviewed the nature of the position and its demands, and the monthly salary, finds this provision to be fair and reasonable in the circumstances and declares that he is compensated for working additional hours, to the extent required.

 

4.2. One-Time Bonus

 

The Executive shall be entitled to a one-time bonus equal, in an amount in Shekels that equals US $ 50,000, subject to the following conditions:

 

4.2.1. US $ 25,000 upon execution.

 

 
 

 

4.2.2. US $ 25,000 if the Company completes a capital raising in an aggregate amount of at least US $ 10,000,000, during the period commencing on the date of execution hereof and ending upon the termination date of the Agreement, whether due to expiration of its term and/or cancellation of the Agreement for any reason whatsoever (the “ Payment Qualification Condition ”). Such payment shall be made, to the extent that the Payment Qualification Condition shall have been fulfilled, within 30 days of the closing date of the financing round within which the aforesaid Payment Qualification Condition was fulfilled. For the avoidance of doubt it shall be clarified, that if the Payment Qualification Condition shall not have been fulfilled at the date of termination and/or cancellation of the Agreement for any reason whatsoever, the Executive shall not be entitled to any payment under this Section 4.2.2.

 

4.3. Issuance of options that are exercisable subject to the engagement in a Material Agreement

 

4.3.1. The Executive shall be entitled, on a one-time basis, to a grant from the Company of 4,747 options to purchase Ordinary Shares of the Company, NIS 0.01 par value each (the “ Ordinary Shares ”) (reflecting, as at the date of execution hereof and assuming the full conversion thereof, 2.5% of the Company’s share capital on a Fully Diluted Basis, immediately after the issuance thereof,). Such options shall become fully vested only if and on the date of execution of a Material Agreement between the Company and a third party within the term of this Agreement (prior to its termination and/or cancellation for any reason whatsoever) or within 12 months of the termination and/or cancellation of this Agreement for any reason whatsoever (the “ Vesting Condition ”). Such options shall be issued on the name of a trustee and shall be subject to the Company’s option plan. Subject to the fulfillment of the Vesting Condition and commencing as of such date, such options shall be exercisable at an exercise price of NIS 0.01 per Ordinary Share, pursuant to the schedule set forth in the Company’s option plan.

 

4.3.2. Anti-dilution protection: In respect of the options to be issued under Section 4.3.1 above, their share (2.5%) in the Company’s issued share capital on a Fully Diluted Basis (assuming their conversion in full) shall not be diluted, until the earlier of the following events, upon the occurrence of which the anti-dilution protection shall be cancelled (hereafter in this sub-section only the “ Qualifying Date ”): (a) the date of termination and/or cancellation of this Agreement for any reason whatsoever; or (b) an aggregate capital raising of US $ 4.5* million in investments in the Company’s equity that shall be consummated commencing as of the date of execution of this Agreement. To the extent necessary, the Executive shall be issued additional options for Ordinary Shares in each additional capital raise until the Qualifying Date, in order to reflect, assuming the full conversion of the options into Ordinary Shares, such holding percentage (2.5% of the issued capital on a Fully Diluted Basis) as of the Qualifying Date. The additional options issuable under this Section 4.3.2 shall be subject to the same terms specified in Section 4.3.1 above, including, without limitation, the Vesting Condition and the fact that they shall be subject to the Company’s option plan.

 

 
 

 

* Including conversion and attribution to loan balances equity under the convertible bonds issued by the Company.

 

4.3.3. For the avoidance of doubt it is clarified, that to the extent that the Vesting Condition shall not have been fulfilled in respect of the options issuable under Sections 4.3.1 and 4.3.2 [i.e., no Material Agreement shall have been executed between the Company and a third party within the term of this Agreement (prior to its termination and/or cancellation for any reason whatsoever) or within 12 months of the termination and/or cancellation of this Agreement for any reason whatsoever], then all of the options issued under Sections 4.3.1 and 4.3.2 shall expire and shall be deemed null and void, and shall not confer upon the Executive any right whatsoever.

 

4.3.4. Taxes payable in respect of the grant of options and/or for the issuance of the shares resulting from the exercise of the options, to the extent issued, as applicable, shall be borne by the Executive.

 

4.3.5. For the avoidance of doubt it is clarified, that this is a one-time benefit, applying only to the first time that a Material Agreement shall be executed within the term of this Agreement (prior to its termination and/or cancellation for any reason whatsoever) or within 12 months of the termination and/or cancellation of this Agreement for any reason whatsoever, and that in the event that afterwards an additional Material Agreement shall be executed, the Executive shall not be entitled to an additional issuance of options.

 

4.3.6. In this Agreement above and below :

 

A “ Material Agreement ” is:

 

(i) an agreement with a corporation or other entity, (ii) which enters into a transaction with the Company (or any other entity designated for this transaction by the Company) in connection with its core business, (iii) the agreement was approved by the affirmative vote of a majority of the board of directors of the Company.

 

 
 

 

Fully Diluted Basis ” means:

 

The issued and outstanding share capital of the Company assuming the Executive was issued the shares to which he is entitled under the Side Letter and as specified therein, and assuming that the following shall be fully converted pursuant to their terms: (a) the full number of options issuable under the option plan to employees, officers, directors and consultants of the Company; and (b) all outstanding warrants convertible into shares issued by the Company to third parties;

 

4.4. Issuance of options that are exercisable subject to the continued employment of the Executive beyond the term of this Agreement

 

4.4.1. Immediately upon this Agreement entering into effect, the Executive shall be granted, on a one-time basis, 4,747 options to purchase Ordinary Shares (reflecting, as at the date of execution hereof, assuming the full exercise thereof, 2.5% of the Company’s share capital on a Fully Diluted Basis) in consideration for an exercise price of NIS 0.01 per Ordinary Share, divided into installments, subject to the vesting terms and within the exercise periods, as detailed below:

 

(i) 2,374 options (in this Section 4.4: the “ First Installment ”) shall become exercisable commencing upon the lapse of 12 calendar months of the date upon which this Agreement shall enter into effect (in the sub-section: the “ First Vesting Period ”), and ending upon the lapse of 84 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the First Vesting Period, the Executive shall be entitled to exercise the First Installment within 24 months of the date of termination of the Agreement.

 

(ii) 2,373 options (in this Section 4.4: the “ Second Installment ”) shall become exercisable commencing upon the lapse of 24 calendar months of the date upon which this Agreement shall enter into effect (in the sub-section: the “ Second Vesting Period ”), and ending upon the lapse of 84 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Second Vesting Period, the Executive shall be entitled to exercise the Second Installment within 24 months of the date of termination of the Agreement.

 

4.4.2. The options granted under Section 4.4.1 above, shall be issued in the name of a trustee and shall be subject to the Company’s option plan.

 

4.4.3. In any event of termination and/or cancellation of this Agreement for any reason whatsoever, all of the options which have not vested under the First or Second Vesting Periods, as applicable, as specified in Section 4.4.1 above, shall expire and shall be deemed null and void. In addition, options which have vested as aforesaid, but were not exercised within the period determined for their exercise, shall expire and shall be deemed null and void.

 

 
 

 

4.4.4. It is agreed, that in the event of an issuance of the Company’s securities to the public and/or of a sale of all or substantially all of the Company’s securities and/or assets taking place prior to the expiration of the vesting periods of the First Installment and/or the Second Installment, respectively (in this Section 4.4.4, a “ Qualifying Event ”), the Executive’s right to exercise the First Installment and/or Second Installment, respectively, shall be accelerated such that the Executive shall be entitled to fully exercise the First Installment and the Second Installment into Ordinary Shares, at the consummation date of the Qualifying Event.

 

(It shall be clarified, that in respect of a public issuance, the term “consummation” shall mean the registration of securities for trade on a securities exchange).

 

4.5. It is clarified that the options granted under this Section 4.4.1 shall not be conferred the anti-dilution protection defined in this Agreement.

 

4.6. Taxes payable in respect of the grant of options and/or for the issuance of the shares resulting from the exercise of the options, to the extent issued, as applicable, shall be borne by the Executive.

 

4.7. The Executive undertakes that in the event of a Qualifying Event, the Executive shall exercise all of the options granted to him under this Agreement, to the extent they are exercisable at such time (i.e., that the vesting conditions were fulfilled and the vesting periods in respect thereof have lapsed and/or accelerated, as aforesaid), at the date of consummation of the Qualifying Event. If the options granted to the Executive under any provision of this Agreement shall not be exercisable at such time due to facts that the conditions were not fulfilled and the vesting periods have not lapsed, the options shall fully expire and the Executive shall have no claim and/or demand in respect thereof.

 

4.8. Buy Back Mechanism

 

In the event that no Qualifying Event shall have transpired by September 1, 2010, the Company shall be obligated, at the Executive’s request, to purchase shares issued to him, to the extent issued (as a result of conversion of options) and/or to compensate him for the expiration of options issued to him that have not yet been fully or partially exercised according to this Agreement. The purchase price of the shares and/or the compensation for the options, for the purpose of performing this Section, shall be determined by an agreed evaluator, the identity of whom shall be determined by both parties, provided that such evaluator shall be a reputed investment bank having experience in the pharmaceutical field. In the event that that no agreement shall be achieved in respect of the appointment of an evaluator within 45 days of the Executive’s application to the Company, then each party shall be entitled to apply to the President of the Israel Bar Association such that he or she shall appoint an evaluator as aforesaid.

 

 
 

 

4.9. Social Benefits

 

4.9.1. The Company shall contribute, at its expense, to the Executive’s managers’ insurance, those sums it is obligated to contribute under law (8.33% for severance pay and 5% are for annuity payments, and up to 2.5% for disability insurance at the rate required by the insurance company according to the Executive’s age and health condition), under the terms customary at the Company.

 

4.9.2. The Executive shall contribute to the managers’ insurance the rate prescribed by law (5%) of the basic compensation. For the avoidance of doubt it shall be clarified, that the social contributions shall be made out of the monthly salary.

 

4.9.3. It is hereby agreed that upon termination of employment under this Agreement for any reason whatsoever, the Company shall release all amounts accrued in the insurance policy on account of the Company’s and Executive’s contributions. It is hereby agreed that in the event that the Executive’s employment shall be terminated under circumstances defined in Section 16 or Section 17 of the Severance Pay Law – the Executive shall not be entitled to any severance pay.

 

4.9.4. It is hereby unequivocally agreed and it is clear and understood that the sums accrued in the iinsurance policy on account of the Company’s contributions shall be in lieu and in full and final substitution of any severance pay the Executive shall be or become entitled to under any applicable Israeli law. This Section is made in accordance with Section 14 of the Severance Pay Law (the “ Law ”), and the General Approval of the Minister of Interior of 1998 .

 

4.10. Vacation, Recreation and Sick Pay

 

4.10.1. The Executive shall be entitled to an annual paid vacation of 22 working days.

 

4.10.2. The Executive shall use such annual leave at such times and periods as shall be agreed upon in advance between the Executive and the Company’s Chairman.

 

 
 

 

4.10.3. The Executive shall be entitled to recreation pay in accordance with the law.

 

4.11. Car Maintenance, Telephone and Parking

 

4.11.1. The Company shall make available to the Executive a cellular phone for his work requirements and shall bear the expenses associated with its maintenance. The tax cost for the cellular phone gross-up shall be borne by the Company, in deduction of use fees as prescribed by law.

 

4.11.2. The Company shall make available to the Executive a parking space at its offices, for no consideration.

 

4.11.3. The Company shall make available to the Executive a car.

 

4.11.4. The Company shall pay the Executive full car maintenance including a gross-up of the car’s value.

 

5. Confidentiality and Non-Competition

 

The Confidentiality, Property and Non-Competition Agreement attached as Annex B to this Agreement, and that was attached as Annex A to the Executive’s Former Employment Agreement, shall remain in effect.

 

6. Term of the Agreement

 

6.1. The term of this Agreement shall commence upon the date of its execution by all parties and shall remain in effect for a period of one year with an option for extension thereof for additional one-year periods only at each extension. Should the parties to this Agreement agree on the extension of the Agreement for an additional year, the terms of this Agreement shall remain in effect.

 

6.2. Notwithstanding the foregoing, it is hereby agreed that the Company shall be entitled to terminate this Agreement forthwith in circumstances that prevent the Executive from fulfilling his duties under this Agreement.

 

6.3. Notwithstanding the forgoing, the Company shall be entitled to terminated this Agreement at any time, without prior notice and without derogating from any remedy to which the Company is entitled by virtue of any law and/or agreement, upon the occurrence of one or more of the following events:

 

6.3.1. The Executive breached a fundamental term of this Agreement.

 

 
 

 

6.3.2. The Executive transgressed or was convicted for an offence involving moral turpitude.

 

6.3.3. The Executive committed an action constituting an evident breach of fiduciary duty toward the Company, or an action that knowingly impaired the Company’s goodwill.

 

6.3.4. The Executive is incapable of fulfilling his position for a period exceeding ninety (90) continuous days. Return to work for periods that are shorter than 15 days, shall not interrupt such 90-day continuum.

 

7. Miscellaneous

 

7.1. The validity of this Agreement is conditional upon the receipt of the approval of the Company’s general meeting for its terms.

 

7.2. Any change, supplement or amendment of this Agreement shall not be binding and shall have no force and effect, unless made in writing and executed by the parties hereto.

 

7.3. It is hereby agreed, that the sole and exclusive place of jurisdiction in any matter relating to or deriving from this Agreement shall be the competent court in Tel-Aviv.

 

7.4. The addresses of the parties to this Agreement shall be as set forth in the preamble hereof. Any notice shall be sent be registered mail to the other party to the aforesaid address, shall be deemed to have been received two days after its delivery to the post office, and if delivered personally or by fax, at the time of its delivery.

 

7.5. This Agreement expresses and satisfies the rights and obligations of the parties in respect of the matters contemplated thereby, and replaces and cancels any representation, agreement, negotiation, promise, undertaking, memorandum of understandings, or any other document that prevailed or was exchanged between the parties, in writing or orally, on such matters prior to the execution of the Agreement, including, without limitation the generality of the foregoing, the Former Employment Agreement.

 

7.6. No delay or failure of either party in exercising any right, power or remedy by a party to the Agreement shall be deemed a waiver. Partial exercise of any rights, power or remedy by a party to the Agreement shall not be deemed an exhaustion thereof, or a waiver of any part not so exercised.

 

 
 

 

In witness whereof, the parties have executed this Agreement :

 

/s/ Zvi Joseph   /s/ Giora Carni
Intec Pharma Ltd.   Giora Carni

 

 
 

 

Annex A

Jerusalem, August 1, 2008

 

To  
Mr. Giora Carni By personal delivery

 

Re: Side Letter to Employment Agreement dated August     2008 (the “Employment Agreement”)

 

Dear Giora,

 

We hereby respectfully put in writing the agreements between us regarding the provisions of the second paragraph of Section 4 of the Agreement entered between the Company and yourself on July 31, 2006, and which expired (the “ Former Agreement ”), as follows:

 

1. The fact that the Former Agreement has ended and its provisions were fully cancelled and/or replaced in the Employment Agreement shall not derogate from the Company’s undertaking to grant to you, on a one-time basis, at such time as shall be demanded by you in writing from the Company, such number of shares of the Company that reflect, immediately after their issuance, 2.5% of the Company’s share capital on a Fully Diluted Basis (as such term is defined below).

 

In respect of the shares that shall be issued to you as aforesaid, their share in the Company’s issued share capital on a Fully Diluted Basis shall not be diluted, until the earlier of the following events (upon the occurrence of which the anti-dilution protection shall be cancelled) (the “ Qualifying Date ”): (a) the date of termination and/or cancellation of this Employment Agreement for any reason whatsoever; or (b) an aggregate capital raising of US $ 4.5* million in investments in the Company’s equity that shall be consummated commencing as of the date of execution of the Employment Agreement. To the extent necessary, you shall be issued additional options in each additional capital raise until the Qualifying Date, in order to reflect such holding percentage (2.5%).

 

* Including conversion and attribution to loan balances equity under the convertible bonds issued by the Company.

 

Fully Diluted Basis ” means:

 

The issued and outstanding share capital of the Company assuming that the following shall be fully converted pursuant to their terms: (a) the full number of options issuable under the option plan to employees, officers, directors and consultants of the Company; and (b) all outstanding warrants convertible into shares issued by the Company to third parties;

 

 
 

 

2. For the avoidance of doubt it is clarified and agreed, that the provisions of Section 1 above are intended to supplement the provisions of the Employment Agreement and other than as set forth in Section 1 above, all other provisions of the Former Agreement are null and void and you waive any claim and/or demand toward the Company, the cause of action of which emerged prior to the execution date of the Employment Agreement, including, without limitation, any cause of action deriving from the Former Agreement.

 

  Sincerely,
   
  Intec Pharma Ltd.

 

I, the undersigned, Giora Carni I.D. 008396855, agree to all of the foregoing.

 

/s/ Giora Carni  
Giora Carni  

 

 
 

 

Annex B

 

5. Secrecy and Nondisclosure/ Non-Competition/ Intellectual Property assignment of rights–Secrecy and Nondisclosure

 

5.1. The Employee shall treat as secret and confid ential all of the pro cesses, methods, formulas, procedures, techniques, software, designs, data, drawings and other information which are not of public knowledge or record pertaining to the Company's Business (existing, potential and future), including without limitation, all business information relating to customers and suppliers and products of which the Employee becomes aware during and as a result of his employment or association with the Company, and Employee shall not disclose, use, publish, or in any other manner reveal, directly or indirectly, at any time during or after the term of this Agreement, any such processes, methods, formulas, procedures, techniques, software, designs, data, drawings and other information pertaining to the Company's existing or future Business or products. The Employee may disclose or use such information, if at all, only with the prior express written consent of the Company.

 

5.2. The Employee hereby undertakes to return, upon request, to the Company, all written materials, records, documents, computer software and/or hardware or any other material which belongs to the Company and that might be in his possession, and if requested by the Company to do so, will execute a written statement confirming compliance with the above said.

 

5.3. The Employee acknowledges that all of the secrets, information, or documents aforementioned, are essential commercial and proprietary information of the Company which is not public information and cannot easily be discovered by others, whose confidentiality provides the Company a commercial advantage over its competitors, and the Company is taking reasonable measures to safeguard its confidentiality.

 

5.4. The Employee's undertakings pursuant to this clause shall remain in force after the termination of Employee's employment under this Agreement.

 

 
 

 

6. Non-Competition

 

6.1. Employee agrees that during the term of this Agreement and for a period of one (1) year after he ceases to be employed by the Company he will not, directly or indirectly, for his own account or as an employee, officer, director, partner, joint venturer, shareholder, investor, consultant or otherwise (except as an investor in a corporation whose stock is publicly traded and in which Employee holds less than 5% of the outstanding shares) and without the prior written consent of the Company, interest himself in or engage in any business or enterprise, anywhere in the world, that directly competes with the Business of the Company, that exists now or in the future or is based on similar technology to the technology that was developed by the Company.

 

6.2. Employee agrees that during a period of six months from termination of this Agreement, he shall not employ directly or indirectly any individual employed by the Company during the six-month period, which preceded such date of termination.

 

6.3. Employee acknowledges that the restricted period of time and geographical area specified under Sections 2.1 and 2.2 hereof are reasonable, in view of the nature of the business in which the Company is engaged and Employee's knowledge of the Business.

 

6.4. The Employee declares that his obligations under this section, which are reasonable and proportional - do not prevent the employee from developing his general knowledge and professional expertise in the area of his business, with regard to those who are not customers and employees of the Company and without usurping its trade secrets.

 

7. Intellectual Property assignment of rights

 

7.1. For purposes of this Appendix, the following definitions shall apply:

 

"Inventions" shall mean:

 

A.          All inventions, improvements, modifications, and enhancements whether or not patentable, made by the Employee during or in the course of employment, or which relate, directly or indirectly to the business of the Company, or which were made using the Company' equipment, and

 

B.          All inventions, improvements, modifications and enhancements made by the Employee, during a period of twelve (12) months (or such lesser maximum period permitted by law) after any termination of the Employee's employment, which relate, directly or indirectly, to the business of the Company at the time they were so made.

 

"Work Product" shall mean all documentation, software, hardware, firmware, creative works, artworks, know-how and information created, in whole or in part, by the Employee during the Employee's employment by the Company, whether or not copyrightable or otherwise protectable, excluding Inventions.

 

 
 

 

"Trade Secrets" shall mean "Commercial Secrets" as defined in the Law of Commercial Wrongs, 1999, and all documentation, software, hardware, firmware, customer lists, know-how and other information of any kind or nature relating to the past, present or future business of the Company or any plans therefor, or relating to the past, present or future business of a third party or plans therefor (including but not limited to any items and information in any form determined by law as trade secrets) that are disclosed to the Employee, which the Company does not disclose to third parties without restrictions on use or further disclosure.

 

7.2. Without derogating from any other provision of the law:

 

A.          The Employee shall promptly disclose to the Company all Inventions and keep accurate records relating to the conception and reduction to practice of all Inventions. Such records shall be the sole and exclusive property of the Company, and the Employee shall surrender possession of such records to the Company upon any termination of the Employee's relationship with the Company.

 

B.          The Employee hereby assigns to the Company, without additional consideration to the Employee, the entire right, title and interest in and to the Inventions and Work Product and in and to all proprietary and any and all intellectual property rights therein or based thereon. The Employee shall execute all such assignments, oaths, declarations and other documents as may be prepared by the Company to effect the foregoing.

 

C.          During the term of this Agreement, and thereafter, the Employee shall provide the Company with all information, documentation, and assistance the Company may reasonably request to perfect, enforce, or defend its proprietary rights in or based on the Inventions, Work Product and/or Trade Secrets. The Company, in its sole discretion, shall determine the extent of the proprietary rights, if any, to be protected in or based on the Inventions and/or Work Product. All such information, documentation, and assistance shall be provided to the Company by the Employee at no additional expense to the Company, except for out-of-pocket expenses which the Employee incurred at the Company' request.

 

D.          During the term of this Agreement, and thereafter, the Employee shall treat Inventions and Work Product as Confidential Inthmation under this Agreement and shall nor disclose them to others without the prior written permission of the Company, or use such Inventions and/or Work Product for any purpose, other than for the performance of services for the Company.

 

 
 

 

7.3. Remedies.     The Employee acknowledges that a breach of the covenants contained in this Agreement and this Appendix B would result in substantial injury and damage to the Company for which there is no adequate remedy at law. Therefore, in the event of an actual or threatened breach of such covenants by the Employee, the Company shall be entitled, in addition to all other rights, remedies and damages that may be available to the Company at law or in equity, to a preliminary restraining order and an injunction, or any other available equitable remedy, to restrain the violation or attempted violation of this Agreement by the Employee or by any other person or entity acting for her benefit or on her behalf. In the event there is any action to enforce the terms of such restrictive covenants, the prevailing party, in addition to any other remedy, shall be entitled to recover reasonable attorney's fees and all other reasonable costs associated with any such action both on the trial and appellate level and in any creditor's proceedings. In the event that a court of competent jurisdiction determines by final non-appealable judgment that the scope, time period, or geographical limitations of any of the restrictive covenants specifically set forth herein are too broad to be capable of enforcement, said court is authorized, and the parties hereto stipulate that such court shall, modify said restrictive covenants and enforce such provisions as to scope, time, and geographical areas as the court deems equitable, just and appropriate considering the intent of the parties hereto.

 

/s/ Giora Carni  
Giora Carni  

 

 
 

 

Annex C

General Approval (Combined Version) Regarding Employers’ Contributions to

Pension Funds and Insurance Funds in lieu of Severance Pay

Under the Severance Pay Law, 5723-1963

[Updated as of February 28, 2001]

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 1 (the “Law”), I hereby confirm, that contributions made by an employer for his employee, commencing as of the date of publication of this approval, to a comprehensive pension in a provident fund for annuity that is not an insurance fund within the meaning of such term in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 2 (a “Pension Fund”) or to a managers’ insurance that includes the possibility of an annuity or a combination of payments to an annuity plan and to a non-annuity plan within such insurance fund (an “Insurance Fund), including combined contributions made by the employer to a Pension Fund and to an Insurance Fund, whether or not the Insurance Fund includes an annuity plan (the “Employer's Contributions”), shall be payable in lieu of severance pay due to such employee in respect of the salary from which such contributions were made and the period they were made for (the “Exempt Salary”); provided, however, that all of the following conditions have been fulfilled:

 

(1) The Employer's Contributions -

 

(a) To the Pension Fund, are at a rate of no less than 14 1/3% of the Exempt Salary, or 12% of the Exempt Salary, if in addition thereto, the employer makes supplementary severance pay contributions for his employee to a provident fund for severance pay or to an Insurance Fund in the employee's name, at a rate of 2 1/3% of the Exempt Salary. In the event that the employer has not contributed such 2 1/3% in addition to said 12%, his contributions shall only replace 72% of the employee's severance pay;

 

(b)     To the Insurance Fund are at a rate of no less than one of the following:

 

(1) 13 1/3% of the Exempt Salary, if in addition thereto, the employer makes contributions for his employee for securing monthly income in the event of disability to a plan approved by the Commissioner of the Capital Market, Insurance and Savings at the Ministry of Finance, at the rate required to secure at least 75% of the Exempt Salary or a rate of 2 1/2% of the Exempt Salary, whichever is lower (“Disability Insurance Contributions”); or

 

(2) 11% of the Exempt Salary, if the employer also made Disability Insurance Contributions, and in such case the Employer's Contributions shall only replace 72% of the Employee's severance pay; In the event that the employer has made, in addition to the foregoing, supplementary severance pay contributions to a provident fund for severance pay or to an Insurance Fund in the employee's name at a rate of 2 1/3% of the Exempt Salary, the Employer's Contributions shall replace 100% of the employee's severance pay.

 

 

1 Statues 5723, p. 136.
2 Regulations 5724, p. 1302.

 

 
 

 

(2) By no later than three months of the commencement date of the Employer's Contributions, a written agreement is executed between the employer and the employee that includes:

 

(a) The employee’s consent to the arrangement pursuant to this approval in a form specifying the Employer's Contributions, and the Pension Fund and Insurance Fund, as applicable; such agreement shall also include the form of this approval;

 

(b) 3 The employer’s advance waiver of any right he may have to a refund of monies from his contributions, unless the employee’s right to severance pay has been revoked by virtue of Sections 16 or 17 of the Law, and to the extent so revoked, or the employee has withdrawn monies from the Pension Fund or Insurance Fund other than by reason of an Entitling Event; in such regard "Entitling Event" means death, disability or retirement at or after the age of 60 or more

 

(c) This approval shall not derogate from the employee's right to severance pay under any law, collective agreement, expansion order or employment contract, in respect of salary over and above the Exempt Salary.

 

  Eli Yishai
   
  Minister of Labor and Social Welfare

 

Signature of employee:    
     
Date: August 1, 2008   Signature: /s/ Giora Carni  

 

 

3 Amendment: Official Gazette 4803, 5760 (September 19, 1999).

 

 
 

 

Agreement

 

Made and executed in Jerusalem, on October 12, 2010

 

Between: Intec Pharma Ltd. C.N. 513022780

Of 12 Hartum St., Jerusalem

(the “ Company ”)

On the one part

 

And Between: Giora Carni, I.D. 008396855

Of 10 King Hakoresh St. Tel Aviv

(the “ Executive ”)

On the other part

 

Whereas The Executive has been serving as manager of the Company pursuant to an Employment Agreement dated August 1, 2008, attached hereto with its exhibits as Exhibit A (the “ August 2008 Agreement ”); and

 

Whereas The parties with that all rights conferred upon the Executive under the August 2008 Agreement shall continue in force and effect and that all of the terms of the August 2008 Agreement shall continue to govern the parties relationship for three additional years commencing as of August 1, 2010, other than to the extent they were express modified in this Agreement.

 

NOW THEREFORE , the parties hereto hereby declare, condition and agree as follows:

 

1. The preamble to this agreement and its exhibits constitutes an integral part hereof.

 

2. It is agreed that the Executive shall continue to hold office as the Company’s Chief Executive Officer under terms identical to those set forth in the August 2008 Agreement, together with its exhibits, other than as specified in this agreement, without change to the Executive’s salary.

 

3. Section 4.8 of the August 2008 Agreement has expired and shall no longer apply to the parties’ relationship.

 

4. Section 4.3 of the August 2008 Agreement is in force and effect provided it shall not be supplemented by an additional section of similar language in this Agreement, The result is that the options granted to the Executive under Section 4.3 of the August 2008 Agreement are in force and effect but this Agreement does not confer upon the Executive additional options the excusable subject to the engagement in a Material Agreement.

 

5. The Executive shall be entitled to a one-time bonus of a gross amount of NIS 100,000 for his performance up to the execution of this Agreement, including the success of the public offering [the original term in Hebrew is “the Issuance”, we assume the author means the IPO] and the general conduct of the Company. Such bonus shall be paid to the Executive at a time to be determined by him in a 30-day advance notice to the Company.

 

 
 
6. The rights conferred upon the Executive pursuant to Section 4.4 of the August 2008 Agreement (which continue in force), shall be supplemented by the following additional provisions for the additional employment period contemplated by this Agreement:

 

Issuance of options excusable subject to the continued employment of the Executive beyond the term of the Agreement

 

6.1. Immediately upon the date on which this Agrement shall enter into effect, the Executive shall be granted, on a one-time basis, 4,031,571 options to purchase ordinary shares for an exercise price to be determined pursuant to the higher of average rate of the Company’s share on the stock exchange in the thirty trading days prior to the date of approval of the resolution by the Audit Committee and Board of Directors of the Company (i.e. August 29, 2010) or pursuant to the price per share on the stock exchange at the date of the Company’s first public offering, and all – divided to installment, subject to the vesting terms and in the framework of the vesting periods as set forth below:

 

(i) 671,929 options (in this Section, the “ First Installment ”) shall become exercisable commencing upon the lapse of 6 calendar months of the date upon which this Agreement shall enter into effect (the “ First Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the First Vesting Period, the Executive shall be entitled to exercise the First Installment according to the provisions of the option plan and its exhibits.

 

(ii) 671,929 options (in this Section, the “ Second Installment ”) shall become exercisable commencing upon the lapse of 12 calendar months of the date upon which this Agreement shall enter into effect (the “ Second Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Second Vesting Period, the Executive shall be entitled to exercise the Second Installment according to the provisions of the option plan and its exhibits.

 

(iii) 671,929 options (in this Section, the “ Third Installment ”) shall be exercisable commencing upon the lapse of 18 calendar months of the date upon which this Agreement shall enter into effect (the “ Third Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Third Vesting Period, the Executive shall be entitled to exercise the Third Installment according to the provisions of the option plan and its exhibits.
 
 

 

(iv) 671,929 options (in this Section, the “ Fourth Installment ”) shall be exercisable commencing upon the lapse of 24 calendar months of the date upon which this Agreement shall enter into effect (the “ Fourth Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Fourth Vesting Period, the Executive shall be entitled to exercise the Fourth Installment according to the provisions of the option plan and its exhibits.

 

(v) 671,929 options (in this Section, the “ Fifth Installment ”) shall be exercisable commencing upon the lapse of 30 calendar months of the date upon which this Agreement shall enter into effect (the “ Fifth Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Fifth Vesting Period, the Executive shall be entitled to exercise the Fifth Installment according to the provisions of the option plan and its exhibits.

 

(vi) 671,929 options (in this Section, the “ Sixth Installment ”) shall be exercisable commencing upon the lapse of 36 calendar months of the date upon which this Agreement shall enter into effect (the “ Sixth Vesting Period ”), and ending upon 72 calendar months of their date of grant. In the event that the Agreement shall be terminated after the lapse of the Sixth Vesting Period, the Executive shall be entitled to exercise the Sixth Installment according to the provisions of the option plan and its exhibits.

 

6.2. The options granted under this Section 6 shall be issued on the name of a trustee in a capital gains rout and shall be subject to the Company’s option plan and its exhibits complying with the requirements of Section 102 of the Income Tax Ordinance.

 

6.3. In any event of termination and/or cancellation of this Agreement for any reason whatsoever, all of the options which have not vested under the Vesting Periods (the First, Second, Third, Fourth, Fifth or Sixth, as the case may be), as specified in this Section 6, shall be deemed null and void.

 

6.4. It is agreed, that in the event of a public issuance of the Company’s securities on the NASDAQ and/or a sale of all or substantially all of the Company’s securities and/or assets taking place prior to the expiration of the vesting periods in respect of the First Installment and/or Second Installment and/or Third Installment and/or Fourth Installment and/or Fifth Installment and/or Sixth Installment (in this Section 4.4.4, a “ Qualifying Event ”), the Executive’s right to exercise the First Installment and/or Second Installment and/or Third Installment and/or Fourth Installment and/or Fifth Installment and/or Sixth Installment shall be accelerated, respectively, such that the Executive shall be entitled to fully exercise the First Installment and/or Second Installment and/or Third Installment and/or Fourth Installment and/or Fifth Installment and/or Sixth Installment into Ordinary Shares, at the consummation date of the Qualifying Event.

 

 
 
6.5. The Executive undertakes that in the event of a Qualifying Event, the Executive shall exercise all of the options granted to him under this Agreement, to the extent they are exercisable at such time (i.e., that the vesting terms were fulfilled and the vesting periods in respect thereof have lapsed and/or accelerated, as aforesaid), at the date of consummation for the Qualifying Event. If the options granted to the Executive under any of the provisions of this Agreement shall not be exercisable at such time due to the non-fulfillment of the terms and the vesting period shall not have lapsed, the options shall fully expire and the Executive shall have no claim and/or demand in respect thereof.

 

6.6. Taxes payable for the grant of the options and/or for the issuance of the shares as a result of exercising the options, to the extent issued, shall be borne by the Executive.

 

7. This Agreement (together with the August 2008 Agreement, as modified above) shall enter into effect as of August 1, 2010 and shall continue for a period of three years (i.e. up to July 31, 2013).

 

IN WITNESS WHEREOF, the parties have executed this Agreement :

 

/s/ Zvi Joseph   /s/ Giora Carni
Intec Pharma Ltd.   Giora Carni

 

 

 
 

 

 

Translated from Hebrew

Addendum to Agreement

Entered into and signed in Jerusalem on October 21, 2013

 

Between: Intec Pharma Ltd., Public Company 513022780

of 12 Hartom Street, Jerusalem

(the " Company ")

of the first part;

 

And: Giora Carni, I.D. 008396855

of 10 HaMelech Koresh Street, Tel Aviv

(" Mr. Carni ")

of the second part;

 

Whereas in July 2006, the Company entered into an employment agreement with Mr. Carni, whereby Mr. Carni would be employed for a two-year period commencing on August 2, 2006. On August 1, 2008, and later on October 12, 2010, the employment agreement was renewed and updated, such that the new agreement would be extended for a three-year period as of August 1, 2010. On November 21, 2011, on November 28, 2011 and on June 6, 2012, the Company’s audit committee, board of directors and shareholders meeting, respectively, approved an amendment to the employment agreement (all shall hereinafter collectively be referred to as the “ Original Agreement ”); and

 

Whereas the parties intend to update the terms and conditions of the Original Agreement, all as specified in this addendum to the agreement hereinbelow;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this addendum to the agreement and the annexes hereto constitute an integral part hereof.

 

2. All of the terms and conditions of the Original Agreement (with the exception of terms and conditions expressly modified in this addendum to the agreement) shall remain in force and effect.

 

3. The terms and conditions of the engagement which are contemplated in the addendum are as follows:

 

3.1. Term of engagement : the term of engagement is indefinite.

 

3.2. Update of gross monthly salary : the monthly salary shall increase and amount to NIS 45,000.

 

 
 

  

3.3. Options :

 

3.3.1. Mr. Carni will be allotted, on a one-time basis, 1,000,000 contingent options for the purchase of 1,000,000 Company shares of par value NIS 0.0.1 each, against an exercise price equal to the average of the share’s closing prices in the 30-day period preceding the board of directors’ resolution on the allotment (the “ Contingent Options ”). The Contingent Options are in keeping with the provisions of the Company’s Option Plan for Employees, Officers, Directors and Consultants of 2005. The Contingent Options shall fully vest and be available for exercise immediately after a Material Agreement becomes effective.

 

For this purpose, a “ Material Agreement ” shall mean an agreement satisfying the following cumulative conditions: (a) an agreement shall have been signed with a company or an entity, (b) in a transaction with the Company (or with another entity designated by the Company for the purpose of such engagement) in connection with the Company’s core business, (c) the agreement shall have been approved by a majority of the votes of the Company’s board of directors as a material agreement for the Company, and (d) the agreement significantly increases the Company’s value for a reasonable duration of time.

 

3.3.2. The Contingent Options shall remain in force and effect for a period of up to 72 calendar months as of the granting date thereof. The Contingent Options shall expire at the end of 90 days as of the date of termination of Mr. Carni’s employment, and they shall be deemed null and void and non-exercisable, if, by such time, entitlement to exercise the same shall not have arisen and the same shall not have been exercised by Mr. Carni.

 

3.3.3. Furthermore, 1,787,463 options, which were granted to Mr. Carni on September 9, 2008 and 757,986 options, which were granted to Mr. Carni on September 9, 2009, shall be extended until the termination of Mr. Carni’s employment and shall be exercisable insofar as a Material Agreement is signed during Mr. Carni’s term of employment.

 

3.3.4. It is clarified that the exercise period of the options as aforesaid in this Section 3.3.3 shall not exceed Mr. Carni’s term of employment with the Company plus the prior notice period as specified below. Mr. Carni hereby waives the right granted to him to exercise the options (insofar as the same vest as a result of a Material Agreement entering into effect) after the date of termination of his employment for a 12-month period.

 

3.4. Termination of engagement : the Company and Mr. Carni may terminate the engagement by a written prior notice of 6 months in advance.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Nir Sassi   /s/ Giora Carni
Intec Pharma Ltd   Giora Carni

 

2

 

Exhibit 10.12

 

Agreement

 

Entered into in Jerusalem on June 1, 2009

 

Between

 

Intec Pharma Ltd.

P.C. 513022780

of 12 Hartom St., Jerusalem, PO Box 45219

(the “ Company ”)

of the first part;

 

And between

 

Zeev Weiss, I.D. 057245581

of 27/17 Hamitzpe St., Shoham, PO Box 2785

(“ Zeev ”)

of the second part;

 

Whereas the Company engages in the field of drug enhancement; and

 

Whereas the Company approached Zeev in order to continue to receive professional services from Zeev, in the framework of which he acts as deputy CEO of the Company, and Zeev granted the request and wishes to continue to act as deputy CEO of the Company, all as defined in this Agreement; and

 

Whereas Zeev has provided professional services and acted as deputy CEO since September 20, 2006;

 

Wherefore, the Parties have agreed, represented and stipulated as follows:

 

1. Preamble, Annexes and Section Headings

 

1.1. The preamble to this Agreement and the annexes hereto constitute an integral part hereof and the Parties undertake and are engaging according thereto.

 

1.2. The section headings are for convenience purposes only and shall not be used for interpretation of this Agreement.

 

2. Term of the Agreement

 

This Agreement is for a period of 36 months from September 20, 2008 [the date of expiration of the previous agreement]. Each party will be entitled to terminate this Agreement at any time by written notice to the other party of 60 days.

 

3. Nature and Scope of the Position

 

Zeev will act as deputy CEO and as an officer of the Company and will be responsible for the business aspects of the Company, such as the Company’s business model, its business strategy, examination and consummation of additional business avenues to increase the Company’s value, business development and cooperation with other companies, raising capital for the Company, receipt of government incentives in Israel and worldwide etc. Zeev shall report directly to the Company’s CEO.

 

 
 

  

It is clarified that Zeev will have other occupations, in the field of life sciences and in other fields, over and above his activity at the Company, and the estimated scope of his activity with the Company will be approx. 90 monthly hours. In the event that the scope of his activity will be different, the consideration due to him as specified in this Agreement will be changed accordingly. Zeev will deliver to the Company, each month, a specification of the number of hours he engaged in the Company’s affairs.

 

4. Zeev’s Representations and Undertakings

 

Zeev represents and undertakes that:

 

4.1. He has the knowledge, ability, experience, skills and proficiency required for the purpose of performance of his duties.

 

4.2. There is no legal and/or contractual impediment to his engagement in this Agreement, to fulfilment of his undertakings or fulfillment of the position assigned to him according to this Agreement.

 

4.3. He has not been indicted for and/or convicted of any criminal offense, including an offense involving moral turpitude, no criminal case has ever been opened against him at the Israel Police, and to the best of his knowledge no investigation is currently being conducted against him.

 

4.4. Perform his duties honestly, with dedication, loyalty and proficiency and use his best efforts to promote the Company.

 

4.5. In the framework of his position he will work under the CEO and the board of directors of the Company, and will comply with their instructions in relation to his work and/or his position, including but without derogating, instructions and/or directions in relation to work procedures, performance of resolutions of the Company’s board of directors, and any other instruction of the CEO and board of directors of the Company.

 

4.6. He will not commit on the Company’s behalf and will not use its name, over and above the authorities conferred on him according to this Agreement and/or authorities that shall be explicitly defined by the Company’s management.

 

4.7. He will keep confidential all of the terms and details of this Agreement, unless required \pursuant to any law.

 

5. Insurance and Indemnification

 

The Company’s officers’ policy shall be extended to include and cover Zeev’s activity in connection with the Company, and Zeev will be granted indemnification in respect of his activity as aforesaid at the accepted scope for officers of the Company.

 

2
 

  

6. The consideration and the manner of payment thereof

 

6.1. In consideration for 90 monthly hours that he shall dedicate to the Company’s business according to this Agreement, the Company shall pay Zeev NIS 30,000 (thirty thousand) per month, plus V.A.T as required by law (the “Consideration”).

 

6.2. The Consideration shall be paid to Zeev by the Company once a month, in respect of the previous month, within 7 days from the date of receipt of a lawful tax invoice that shall be delivered to the Company’s offices within 7 days from the end of the month for which the payment is requested. The Company shall withhold at source funds as required by law, unless an exemption from withholding at source is presented thereto.

 

6.3. The Company shall provide Zeev with a Ford Focus or similar car and shall bear all of the fixed and variable maintenance expenses, including licenses, insurance, fuel, repairs etc. The car shall remain the Company’s property, and shall be returned thereto by Zeev upon expiration of the Agreement.

 

6.4. In the framework of overseas travel on behalf of and for the Company, Zeev will be entitled to flight expenses and accommodation overseas, which shall be covered and paid by the Company. The Company shall take out an insurance policy and medical insurance for Zeev for the period of his overseas travel.

 

6.5. The Company shall provide Zeev with a mobile phone and pay him reimbursement of expenses in the sum of NIS 400 per month for calls on the mobile phone.

 

6.6. If the scope of Zeev’s activity shall exceed 90 monthly hours, he will be entitled to additional consideration of NIS 290 (plus V.A.T as required by law) per hour, although the additional charge will be made in respect of units of 10 hours actually worked and less than 10 hours’ work will not entitle him to additional consideration (i.e. if Zeev works 98 hours he will not receive an increment and if he works 105 hours he will receive an increment only for 10 hours etc.).

 

6.7. In addition to the aforesaid, Zeev will be entitled to bonuses and options as specified in Annexes A and B to this Agreement.

 

6.8. It is clarified that lawful V.A.T, insofar as applicable, shall be added to any payment to Zeev according to this Agreement and the annexes hereto.

 

6.9. This Agreement absolutely determines the relationship between the Parties, their mutual obligations and rights. Zeev will not be entitled to any payment and/or right and/or benefit from the Company that is not explicitly mentioned in this Agreement.

 

6.10. Commencing from the execution of this Agreement, there neither is nor will be any employment relationship between Zeev and the Company. The Company shall not owe Zeev in respect of provision of the services any liability owed by an employer to an employee, and Zeev shall be deemed as an independent contractor for all intents and purposes.

 

3
 

  

6.11. For the avoidance of doubt, it is clarified that any and all mandatory payments, including payments of income tax and national insurance in respect of services that have been and shall be provided by Zeev will be paid directly by Zeev and it is he who bears personal and sole liability for payment thereof.

 

6.12. If, despite the Parties’ declared intentions, it is determined that an employment relationship exists between the Company and Zeev, the Parties agree that in lieu of the Consideration stated in Section 6.1 above, the Company shall owe Zeev 65% of the sum of the Consideration stated in Section 6.1 above.

 

6.13. Zeev shall compensate and/or indemnify the Company for any expense and/or damage and/or payment that the Company shall incur due to non-fulfillment of one or more of his undertakings in Section 6.10, including legal expenses that the Company shall bear, and Zeev agrees in advance that any claim of his which contradicts this document shall be summarily dismissed with and/or without prejudice.

 

7. Confidentiality

 

Without derogating from Annex B , the confidentiality undertaking attached hereto as an integral part hereof, during the term of the agreement and for 4 years thereafter, Zeev undertakes to keep confidential any confidential information that shall reach him from the Company, not to transfer or make use of information that is in his possession and which relates, directly and/or indirectly, to the Company’s business, to its list of customers, the scope and/or nature of its business activity, and not to deliver such information other than to anyone who the Company shall have determined is authorized to receive the same.

 

Zeev further undertakes to keep fully confidential and not to disclose, reveal or deliver, whether during or after the term of the Agreement, to any person or body, secrets pertaining to know-how and/or information relating to the services and/or engagements made between the Company and/or between Zeev and between any one of them and any third party, other than to anyone who the Company shall have determined is authorized to receive the same.

 

8. Intellectual property

 

Without derogating from Annex B , attached hereto, any privileged information, including any creation, concept, invention, improvement, idea, process, know-how, conclusions, copyright, patent, invention, refinement, design, development and any other intellectual property right etc. – that is developed or invented by Zeev, alone or together with others, during or in connection with his work at the Company, will be the sole property of the Company, and Zeev will have no right to ownership and/or royalties and/or consideration and/or any other right in connection with such information.

 

The provisions of this section shall survive the end of the term of this Agreement, for whatever reason, or termination hereof, indefinitely.

 

4
 

  

9. General

 

9.1. It is represented that this Agreement and the annexes hereto include everything that has been agreed between the Parties. Any modification of this Agreement and the annexes hereto shall be made in writing and signed by both Parties only. No modification otherwise made shall be valid.

 

9.2. Failure to exercise a right according to this Agreement shall not be deemed as a waiver thereof.

 

9.3. The Parties’ addresses for purposes of this Agreement are as specified in the preamble to this Agreement. Any notice that is sent by registered mail by one party to the other shall be deemed as having been delivered to its destination 72 hours after dispatch thereof from the post office, and if hand delivered, upon delivery thereof.

 

In witness whereof, the Parties have hereto set their hands

 

/s/ Giora Carni   /s/ Zeev Weiss
Intec Pharma Ltd   Zeev Weiss

 

5
 

 

Annex A

 

1. a. On the date that the Agreement takes effect, Zeev shall be allotted 5232 options of the Company (which reflect 1.875% of the Company’s shares on a fully diluted basis – i.e. 1.875% of the sum total of the shares, securities convertible into shares, undertakings and options allotted by the Company assuming that they will all be converted). [According to a key of 0.625% options per year – the same as the agreement that was in effect until September 2008, according to 3 years, the previous agreement being for two years]. 1162 options will be exercisable from June 1, 2009.

 

b. In addition to the aforesaid, Zeev will be allotted, on a one-time basis, on the date on which the Agreement takes effect, 5580 options of the Company (which reflect 2% of the Company’s shares on a fully diluted basis – i.e. 2% of the sum total of the shares, securities convertible into shares, undertakings and options allotted by the Company assuming that they will all be converted). The said options will fully vest only if a material agreement is signed between the Company and a third party, if the date of execution of the material agreement is during the term of this Agreement and if it is signed in the period of up to 12 months after expiration of the term of this Agreement.

 

If no material agreement is signed between the Company and a third party as aforesaid in the term of the Agreement or within 12 months after expiration thereof, all of the options allotted according to Section 1.b shall expire and be deemed null and void.

 

The exercise of the options allotted to Zeev according to Section 1.b is contingent upon Zeev working at a scope of approx. 90 hours per month on average and more during the term of the Agreement, although it is clarified that this restriction shall not apply in the 12-month period after expiration of the Agreement.

 

2. The options mentioned in Section 1.a above which cannot be exercised immediately (4070) will be exercisable in 8 equal quarterly installments. The first installment will be exercisable on September 1, 2009, and will subsequently be exercisable once every 3 months (in this section: “ Quarter ”), provided that Zeev will be employed by the Company. In the event of termination of Zeev’s activity in the course of a certain Quarter (one of the three-month periods as aforesaid), he will be entitled to exercise the next installment as if he worked at the Company until the end of the Quarter during which the prior notice period ended.

 

3. Without derogating from the aforesaid, all of the options that shall be allotted to Zeev according to this Agreement will be subject to the following conditions:

 

3.1. The exercise price for receipt of a share will be NIS 0.01. The vesting of the options (Zeev’s entitlement to exercise options) will be as specified in this annex.

 

6
 

  

3.2. In cases in which the Company (in this annex the term company includes a subsidiary of the Company and/or an affiliate of the Company) is issued and/or sold and/or control of the Company is transferred and/or a majority of its assets are sold and/or the Company’s business is merged with another company (including a “reverse acquisition” in which the Company’s shareholders will hold the majority of the shares of the merged company) and/or the Company’s business or part thereof is transferred to a subsidiary or sister company (spin off) and/or a license is granted for all or a majority of the Company’s assets – Zeev’s right to exercise the options will be accelerated and he will be entitled to exercise all of the options allotted to him immediately, even if their exercise date as stated in Section 2 above shall not yet have arrived.

 

3.3. The options will be allotted in the framework of an option plan on a capital track which meets the requirements of Section 102 of the Income Tax Ordinance on a trustee track.

 

4. The entire section is revoked.

 

5. The entire section is revoked.

 

6. The entire section is revoked.

 

7. The Company shall consider granting a bonus of up to 3 monthly payments a year to Zeev (in accordance with the average payments made to him during the period until the decision) in view of excellent performance, meeting assignments which can create material value for the Company such as development of new applications for the technology. In any event, the same will be subject to the sole discretion of the Company’s competent organs, during the term of the Agreement.

 

8. It is clarified that with respect to Section 1.b above, “term of the Agreement” means the period in which Zeev worked at the Company, plus the 60-day period in which any party may terminate the Agreement, while if the Company asks Zeev not to work in the said 60-day period, or to work at a reduced scope, it shall be assumed for the purpose of the said sections that he worked the greater of the following two alternatives: (a) the actual scope of the work in the said 60-day period (b) the average that Zeev worked in the three months prior to the giving of the notice.

 

Intec Pharma Ltd. (the “Company”)

 

Personal – confidential

To the addressee only

Date: June 1, 2009

 

Zeev Weiss

I.D. 057245581

 

Dear Zeev,

 

Re: Notice of the allotment / granting of options

in accordance with Section 102 of the Income Tax Ordinance (New Version)

 

The board of directors of Intec Pharma Ltd., P.C. 513022780 (the “ Company ”) has decided to grant you the right to purchase shares of the Company under special conditions (“ Options ”), in accordance with the agreement signed between you and the Company on June 1, 2009 (the “ Agreement ”).

 

7
 

 

1. The main terms and conditions of the Options that it was decided to grant you are specified below :

 

1.1. Number of options : you are hereby granted 10812 options for the purchase of ordinary shares of the Company.

 

1.2. Exercise price : equal in NIS (on the exercise date) to NIS 0.01 per share.

 

1.3. Effective date : June 1, 2009

 

1.4. Entitlement to exercise the Options : the vesting will be as specified below:

 

From the effective date, 1162 options may be exercised.

 

From September 1, 2009 – 509 options may be exercised.

 

From December 1, 2009 – 509 options may be exercised.

 

From March 1, 2010 – 509 options may be exercised.

 

From June 1, 2010 – 509 options may be exercised.

 

From September 1, 2010 – 509 options may be exercised.

 

From December 1, 2010 – 509 options may be exercised.

 

From March 1, 2011 – 509 options may be exercised.

 

From June 1, 2011 – 507 options may be exercised.

 

5580 options will vest upon the execution of a material agreement between the Company and a third party, as stated in Section 1.b of Annex A to the Agreement.

 

1.5. The tax track – a trustee capital plan pursuant to Section 102.

 

1.6. The Company shall notify trustee Guy Bachar – Trust Company and any other body required by law of the allotment of the Options to you in accordance with the Agreement and the annexes thereto and this letter of grant. The Company has received all of the approvals required by law, its incorporation documents and its option plan for the purpose of granting the Options according to the Agreement and this letter.

 

2. Manner of exercise:

 

Upon arrival of an exercise date or acceleration date, you may notify the Company that you wish to exercise a certain number of options (according to your choice, but no more than the maximum vested quantity). The shares shall be allotted to you within 7 days from the date of provision of the notice plus the exercise price (NIS 0.01 per share).

 

8
 

 

3. Immediate exercise:

 

In any case mentioned in the option plan or in Section 3.2 of Annex A to the Agreement, all of the exercise dates listed above will be brought forward and the total quantity of options determined above (plus the adjustments and additions to which you will be entitled) shall immediately become exercisable (the “Acceleration Date”). In such a case, the options will be exercisable from the Acceleration Date until 10 years after the effective date. Options not exercised by the end of this period shall expire.

 

4. Holding in trust:

 

In order to secure fulfillment of the tax laws, and to ensure exhaustion of the purchase right proceedings according to the plan, the Options granted to you according to this letter shall be held in trust by a trustee to be approved for such purpose by the Income Tax Commissioner. In addition, in the event that you choose not to receive or sell the shares at the time of exercise of the options, these shares will also be held in the same trust.

 

5. Transfer of shares:

 

In the event that you decide that you wish to sell or transfer the Company’s shares which are received after exercise of the Options to any entity, in whole or in part, whether for or without consideration, you will be entitled to do so provided that so long as the Company is a private company, the transfer of the shares is subject to a right of first refusal conferred on the Company’s other shareholders.

 

6. Period of the option:

 

The Options may be exercised until the tenth anniversary of the effective date. Options not exercised by the end of this period shall automatically be cancelled.

 

7. Taxation:

 

Any tax that applies in respect of the exercise of the Options for shares and/or in respect of the sale thereof shall be borne by you alone, and in the case of death, heaven forbid, by the heirs, without the Company bearing the same, either directly or indirectly. The applicable tax will be deducted on the date of the liability from the sale proceeds by the trustee or by the Company, as the case may be. Your (or your heirs’, in the case of death, heaven forbid) tax liability will be determined pursuant to the provisions of Section 102 of the Income Tax Ordinance and the Income Tax Rules or pursuant to any other law that shall replace them.

 

9
 

 

8. Option plan:

 

The Company’s option plan shall apply to you subject to the changes specified in the Agreement and the annexes thereto and in this letter, and in any case in which the Agreement and the annexes thereto and/or this letter contain terms that are more favorable to you relative to the Company’s option plan, the provisions of the Agreement and the annexes thereto or of this letter shall prevail over the provisions of the Company’s option plan. It is agreed that it will not be possible to prejudice or derogate from your rights or the rights attached to the Options or the shares for which they shall be exercised without your consent.

 

Sincerely,

/s/ Giora Carni

Intec Pharma Ltd.

 

I hereby agree to the aforesaid:

/s/ Zeev Weiss  
Zeev Weiss  

 

10
 

 

Translated from Hebrew

 

Amendment to Agreement

Entered into and signed in __________ on _________, 2012

 

Between: Intec Pharma Ltd., Private Company 513022780

of 12 Hartom Street, Jerusalem

(the " Company ")

of the first part;

 

And: Ze’ev Weiss, I.D. 057245581

of 27/17 HaMitzpé Street, P.O.B. 2785 Shoham

(" Ze’ev ")

of the second part;

 

Whereas Ze’ev serves as the Company’s Deputy CEO under an employment agreement of October 21, 2007 (the “ October 2007 Agreement ”), which was renewed on June 1, 2009 (the “ June 2009 Agreement ”; both agreements, including their annexes, are attached hereto as Annex A and Annex B , respectively); and

 

Whereas the parties intend to amend the June 2009 Agreement.

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this amendment to the agreement and the annexes hereto constitute an integral part hereof.

 

2. All of the terms and conditions of the October 2007 Agreement and all of the terms and conditions of the June 2009 Agreement, including the warrants allotted under such agreements, which shall remain in effect subject to the terms and conditions of the Company’s option plan, including in the Prior Notice period as hereinafter defined, with the exception of terms and conditions expressly modified in this amendment to the agreement, shall remain in force and effect.

 

3. Section 2 of the June 2009 Agreement shall be deleted and replaced with the following language:

 

“2. Term of the Agreement

 

2.1 This agreement shall become effective as of April 1, 2011.

 

2.2 Each party may terminate this agreement at any time and for whatever reason, by prior notice of 180 days, in advance and in writing (the “ Prior Notice ”). It is agreed by and between the parties that insofar as Ze’ev is not required by the Company to come to work during the Prior Notice period, monthly consideration will be paid to him in an amount equal to the average consideration paid to him during the 6 months preceding the giving of Prior Notice as aforesaid.

 

 
 

 

2.3 Notwithstanding the aforesaid, it is hereby agreed that the Company may terminate this agreement at any time, Prior Notice not being required and without derogating from any remedy to which the Company is entitled under any law and/or agreement, upon occurrence of one or more of the following events:

 

2.3.1 Breach of a fundamental condition of the conditions hereof.

 

2.3.2 Conviction of a criminal offence involving moral turpitude.

 

2.3.3 Performance of an act that constitutes an outright breach of trust against the Company, or an act that knowingly harmed the Company’s reputation”.

 

4. In Section 3 of the June 2009 Agreement. “Nature and Scope of Position”, the second paragraph shall be deleted and replaced with the following language:

 

“It is clarified that Ze’ev shall have other occupations, in the field of life sciences and other fields, beyond his activity at the Company, but he will dedicate the majority of his time and energy to his activity at the Company. Ze’ev shall provide the Company with a monthly specification of the number of hours during which he was engaged in the Company’s affairs”.

 

5. Section 6.1 of the June 2009 Agreement shall be deleted and replaced with the following language:

 

“In consideration for the professional services that Ze’ev shall provide the Company as stated in the June 2009 Agreement, the Company shall pay Ze’ev NIS 315 for each hour of work up to a monthly cap of 200 hours of work. The aforesaid fee shall be linked to the Consumer Price index of April 2012 and shall be updated once every calendar quarter”.

 

6. Section 6.6 of the June 2009 Agreement shall be deleted.

 

7. Section 6.14 shall be added to the June 2009 Agreement in the following language:

 

“6.14.1 Ze’ev shall be entitled to receive a bonus from the Company, subject to the following conditions:

 

a. The Company shall sign a Material Commercialization Agreement with a third party in respect of one of its products. A “ Material Commercialization Agreement ” is an agreement, the engagement in which shall have been lawfully approved by the appropriate organs of the Company under any law, which agreement shall have been defined by the Company’s board of directors as a material commercialization agreement and which satisfies the following conditions: (1) an agreement with a company or entity; (2) which enters into an agreement with the Company in connection with the Company’s core business; (2) the agreement was approved by a majority of votes of the Company’s board of directors; and (4) the agreement significantly increases the Company’s value.

 

2
 

 

b. Ze’ev is employed (including in the Prior Notice period) by the Company on the date of signing of the Material Commercialization Agreement,

 

c. Ze’ev will be entitled to a bonus at the rate of 2% of the consideration actually received by the Company up to an aggregate amount received by the Company of U.S. $15 million.

 

It is clarified that Ze’ev shall not be entitled to an additional bonus, in respect of amounts exceeding U.S. $15 million, which are paid, if and insofar as paid, to the Company.

 

Payment of the tax amount deriving from receipt of the bonus, insofar a given, shall be fully borne by Ze’ev”.

 

8. Section 6.15 shall be added to the June 2009 Agreement in the following language:

 

“6.15 Shortly after the approval of this addendum and receipt of the approvals required under any law, Ze’ev shall be granted, on a one-time basis, 2,000,000 options for the purchase of 2,000,000 ordinary shares of the Company of par value NIS 0.01 each, against payment of an exercise price to be determined as the higher of: (a) the average price of the Company’s share on Tel Aviv Stock Exchange Ltd. (“ TASE ”) in the thirty trading days preceding the date of approval of the resolution by the audit committee and the board of directors of the Company (i.e. NIS 0.94); (b) the price of the share on the date of the Company’s initial public offering on TASE (i.e. NIS 0.952).

 

The grant of such options is in keeping with the provisions of the Company’s option plan and the annexes thereto. Furthermore, the options shall be allotted in the name of a trustee in a capital track and shall be subject to the Company’s option plan and the annexes thereto, which meets the requirements of Section 102 of the Income Tax Ordinance. The aforesaid options shall vest over a 4-year period.

 

The aforesaid options shall vest in portions, subject to the vesting conditions and within the exercise period as specified below:

 

1. 1,000,000 options (hereinafter in this section: the “ First Portion ”) will be exercisable as of April 1, 2014 (hereinafter in this subsection: the “ First Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the First Vesting Period, Ze’ev will be entitled to exercise the First Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

2. 125,000 options (hereinafter in this section: the “ Second Portion ”) will be exercisable as of July 1, 2014 (hereinafter in this subsection: the “ Second Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Second Vesting Period, Ze’ev will be entitled to exercise the Second Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

3
 

 

3. 125,000 options (hereinafter in this section: the “ Third Portion ”) will be exercisable as of October 1, 2014 (hereinafter in this subsection: the “ Third Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Third Vesting Period, Ze’ev will be entitled to exercise the Third Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

4. 125,000 options (hereinafter in this section: the “ Fourth Portion ”) will be exercisable as of January 1, 2015 (hereinafter in this subsection: the “ Fourth Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Fourth Vesting Period, Ze’ev will be entitled to exercise the Fourth Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

5. 125,000 options (hereinafter in this section: the “ Fifth Portion ”) will be exercisable as of April 1, 2015 (hereinafter in this subsection: the “ Fifth Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Fifth Vesting Period, Ze’ev will be entitled to exercise the Fifth Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

6. 125,000 options (hereinafter in this section: the “ Sixth Portion ”) will be exercisable as of July 1, 2015 (hereinafter in this subsection: the “ Sixth Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Sixth Vesting Period, Ze’ev will be entitled to exercise the Sixth Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

7. 125,000 options (hereinafter in this section: the “ Seventh Portion ”) will be exercisable as of October 1, 2015 (hereinafter in this subsection: the “ Seventh Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Seventh Vesting Period, Ze’ev will be entitled to exercise the Seventh Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

8. 125,000 options (hereinafter in this section: the “ Eighth Portion ”) will be exercisable as of January 1, 2016 (hereinafter in this subsection: the “ Eighth Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Eighth Vesting Period, Ze’ev will be entitled to exercise the Eighth Portion in accordance with the provisions of the Company’s option plan and the annexes thereto.

 

4
 

 

9. 125,000 options (hereinafter in this section: the “ Ninth Portion ”) will be exercisable as of April 1, 2016 (hereinafter in this subsection: the “ Ninth Vesting Period ”), and until the end of 72 calendar months as of the granting date thereof. Insofar as the agreement ends after the elapse of the Ninth Vesting Period, Ze’ev will be entitled to exercise the Ninth Portion in accordance with the provisions of the Company’s option plans and the annexes thereto.

 

It is agreed that case, prior to the end of the vesting period, an event occurs of the sale of all or most of the Company’s securities and/or assets and/or a public offering of the Company’s securities is made on NASDAQ and/or the Company merges with another Company (hereinafter, collectively and severally: an “ Entitling Event ”), the date of establishment of Ze’ev’s entitlement to exercise all of the options not yet fully vested/matured for ordinary shares, shall be accelerated at the closing date of the Entitling Event.

 

Payment of the tax amount required due to the grant of the options and/or the allotment of the shares at exercise of the options, insofar as allotted, shall be fully borne by Ze’ev”.

 

9. In Section 1B of Annex A to the June 2009 Agreement, “in the Prior Notice period” shall replace “in the period of up to 12 months after the end of the term of this agreement”.

 

10. Section 8 of Annex A to the June 2009 Agreement shall be deleted.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Zvi Joseph and Giora Carni   /s/ Ze’ev Weiss
Intec Pharma Ltd   Ze’ev Weiss

 

5
 

  

Translated from Hebrew

 

Addendum to Agreement

Entered into and signed in Jerusalem on November 11, 2013

 

Between: Intec Pharma Ltd., Public Company 513022780

of 12 Hartom Street, Jerusalem

(the " Company ")

of the first part;

 

And: Ze’ev Weiss, I.D. 057245581

of 27/17 HaMitzpé Street, P.O.B. 2785 Shoham

(" Mr. Weiss ")

of the second part;

 

Whereas in January and February 2008 the Company’s board of directors and general meeting of shareholders approved an agreement with Mr. Weiss dated October 21, 2007, whereby Mr. Weiss provides professional services as of September 20, 2006 and for a period of 24 months as of the date of signing thereof. On June 1, 2009, the services provision agreement with Mr. Weiss was renewed for a 36-month period commencing on September 20, 2008 (the agreement was updated by the Company’s board of directors on September 9, 2009). On March 22, 2012 and on March 28, 2012, the Company’s audit committee and board of directors, respectively, approved the extension of the agreement indefinitely (all shall be hereinafter collectively referred to as the “ Original Agreement ”); and

 

Whereas on November 11, 2013 the Company’s board of directors approved the appointment of Mr. Weiss as Co-CEO of the Company; and

 

Whereas the parties intend to update the terms and conditions of the Original Agreement, all as specified in this addendum to the agreement hereinbelow;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this addendum to the agreement and the annexes hereto, if and insofar as attached, constitute an integral part hereof.

 

2. All of the terms and conditions of the Original Agreement, which are in effect as of the date of the entering into effect of the provisions of this addendum to the agreement (with the exception of terms and conditions expressly modified in this addendum to the agreement), shall remain in force and effect.

 

3. The terms and conditions of the engagement which are contemplated in the addendum:

 

3.1. Cash bonus : the cash bonus of U.S. $300,000, which Mr. Weiss would be entitled to under the provisions of the Original Agreement, shall be cancelled.

 

 
 

 

3.2. Options : Mr. Weiss will be allotted, on a one-time basis, 750,000 contingent options for the purchase of 750,000 Company shares of par value NIS 0.0.1 each, against an exercise price equal to the average of the share’s closing prices in the 30-day period preceding the board of directors’ resolution on the allotment (the “ Contingent Options ”). The Contingent Options shall fully vest and be available for exercise immediately after a Material Agreement becomes effective. The Contingent Options shall remain in force and effect for a period of up to 72 calendar months as of the granting date thereof. The Contingent Options shall expire at the end of 90 days as of the date of termination of Mr. Weiss’s employment, and they shall be deemed null and void and non-exercisable, if, by such time, entitlement to exercise the same shall not have arisen and the same shall not have been exercised by Mr. Weiss.

 

For this purpose, a “ Material Agreement ” shall mean an agreement satisfying the following cumulative conditions: (a) an agreement shall have been signed with a company or an entity, (b) in a transaction with the Company (or with another entity designated by the Company for the purpose of such engagement) in connection with the Company’s core business, (c) the agreement shall have been approved by a majority of the votes of the Company’s board of directors as a material agreement for the Company, and (d) the agreement significantly increases the Company’s value for a reasonable duration of time.

 

4. The provisions of this addendum to the agreement are in effect as of the date of receipt of any and all approvals required under any law.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni and Nir Sassi   /s/ Ze’ev Weiss
Intec Pharma Ltd   Ze’ev Weiss

 

2

 

Exhibit 10.13

 

Employment Agreement

 

Entered into and executed in Jerusalem on November 25 , 2013

 

Between

 

Intec Pharma Ltd. Private Company 513022780

of 12 Hartom st. P.O. Box 45219

Jerusalem 91450

 

( the " Company ")

 

of the first part                 

 

And

 

Name of Employee: Liat Flaishon

I.D.: 022263591

Address: 22 Rosen, Ramat Gan

 

(the " Employee ")

 

of the second part                 

 

Whereas The Employee has expressed his will to be employed by the Company in the office of a VP Business Development and Medical Affairs (the " Office "), and under the other terms specified in this Agreement below; and

 

Whereas The Employee declares that he has the ability, qualifications, credibility and experience required for the fulfillment of the Office in which he will serve in the Company; and

 

Whereas The Employee will be exposed to knowledge and information pertaining to the Company or related thereto, to the property, business and affairs thereof, the customers thereof, the suppliers thereof, the persons and entities who have been or are in contact with the Company, including, but without derogating from the generality of the aforesaid – methods, processes, prices, calculations, human resources management and setting compensation, conditions of agreements in which the Company is engaged, and other documents of the Company; and

 

Whereas The Company and the Employee desire to regulate the terms of employment of the Employee, all as specified in this Agreement below;

 

Now therefore, it had been declared, stipulated and agreed between the parties as follows:

 

[signature]

 

 
 

 

1. The Substance Agreement

 

1.1. This Agreement regulates the relations between the Company and the Employee, and exclusively determines the terms of engagement of the Employee with the Company.

 

1.2. The headings of the clauses in this Agreement are for purposes of the parties' convenience only and may not be used for interpretation of the Agreement or the terms hereof.

 

2. Employee Representations

 

The Employee represents to the Company as follows:

 

2.1. He has the knowledge, ability, experience, qualifications and skills required for the performance of the Office according to the provisions of this Agreement and the instructions of the Company from time to time.

 

2.2. He is not engaged in any other commitment or agreements which prevent him from being bound by this Agreement, and if that is not the case – he will compensate and indemnify the Company for any expense incurred thereto thereby.

 

2.3. He was not indicted nor convicted in any criminal offence, including an infamous crime, no criminal file was ever initiated against him at the Israeli police, and to the best of his knowledge, no interrogation is currently being conducted against him.

 

2.4. He will keep in confidence all of the terms and details of this Agreement.

 

2.5. He is aware that a trial period of three months has been defined (the " Trial Period ") during which the Employee's position will be defined as a Director Business Development and Medical Affairs, during which the Company shall examine the Employee's suitability for the position of VP Business Development and Medical Affairs and to the Company and his compliance with his representations and undertakings as specified herein.

 

3. The Employee's Undertakings

 

The Employee undertakes the following towards the Company:

 

3.1. The Employee will be employed by the Company in a full time position as shall be required and according to the instructions of the Company's management, in the position of a VP Business Development and Medical Affairs.

 

3.2. To fulfill his Office honestly, devotedly, loyally and skillfully and to do all that is within his capacity for the promotion of the Company.

 

2
 

 

3.3. Subject to the Company's requirements from time to time, the Employee undertakes to dedicate all of the time and attention required, his qualifications, knowledge and experience for fulfillment of the Office solely for the Company's benefit and interests.

 

3.4. That he will be subject, within his Office, to the Company's CEO, and will comply with his instructions pertaining to his work and/or position, including, but without derogation, instructions and/or directions regarding work procedures and any other instruction of the Company's management.

 

3.5. That he shall not commit and/or guarantee and/or represent in the name of the Company and will not impose any liability thereon, and will not use the name thereof, beyond the authorities conferred upon him according to this Agreement and/or authorities which will be explicitly defined by the Company's management.

 

3.6. Not to engage in any other occupation, other than with the Company's advance written consent and subject to the terms of the consent, if granted.

 

3.7. During the term of his employment and within the fulfillment of his Office, the Employee shall act within the framework of the Company's procedures, discipline rules, articles of association and arrangements, as shall be determined by the Company from time to time.

 

3.8. The Employee will not be entitled to receive, in relation to the performance of his Office, any consideration or benefit, from any entity whatsoever, including customers or suppliers of the Company. Any amount and benefit, or the equivalent thereof, which the Employee shall receive contrarily to the aforesaid, will belong to the Company and the Employee undertakes to return them to the Company upon the first request.

 

3.9. To notify the Company immediately and with no delay of any issue in respect of which he has a personal interest and/or which may create a conflict of interests with the Office.

 

4. The salary and benefits

 

4.1. During the Trial Period, the Employee will be entitled to a monthly salary of NIS 36,000 gross. After the end of the Trial Period, his salary will be increased so that in consideration for fulfillment of his Office according to this Agreement during the period which shall follow the end of the Trial Period, the Employee will be entitled to a monthly salary of NIS 38,000 gross (the " Monthly Salary ").

 

4.2. The Monthly Salary will include all of the cost of living adjustments and salary increases paid to employees in Israel, until and including the date of execution of this Agreement. The Monthly Salary shall be increased from time to time by the amount of the new cost of living adjustments or the new salary increases which shall be paid to all of the employees in Israel after the date of execution of this Agreement by virtue of expansion orders of general collective bargaining agreements regarding cost of living adjustments or salary increases.

 

3
 

 

4.3. The Monthly Salary shall be paid to the Employee after any amounts which the Company is obligated and/or entitled to deduct according to any law and/or this Agreement, no later than the 10 th day of the calendar month following the month for which the salary is paid.

 

4.4. The Employee shall be entitled to an annual leave which will be calculated according to a tenure of 4 years and will be updated according to the Annual Leave Law, 5711-1951, sick pay, recuperation pay and severance pay, according and subject to the provisions of any law.

 

4.5. For avoidance of doubt, it shall be clarified that the Employee's days of leave may not be accumulated and will be used on days agreed upon between him and the Company. Their redemption, if permitted by law, will be permitted only after the Employee's termination of work.

 

4.6. It is agreed that the Company shall be entitled to deduct from the salary and/or from any payment which the Employee shall be able to receive from the Company, if any, according to law and/or according to the provisions of this Agreement, any amount which the Employee shall owe the Company according to the agreements made and/or that shall be made between them in writing and/or orally and/or which the Company shall be entitled to deduct according to the Employee's instructions and/or the provisions of this Agreement.

 

4.7. The provisions of this Section above constitute an instruction and undertaking according to the Salary Protection Law, 5718-1958 as well.

 

4.8. The Employee hereby represents that he knows and agrees that within the capacity of his position, which requires a special level of personal trust, he is not included in the employees to whom the Work and Rest Hours Law, 5711-1951 applies, and he will not be entitled to claim or receive any payments or additions due to his working overtime. Alternatively it is agreed that the salary also includes payment for working overtime, as mandated by the Office.

 

5. Managers' Insurance, Study Fund, Other Benefits

 

5.1. During the period of application of this Agreement, and subject to directives which will be set forth from time to time by the Income Tax Commission and according to the permitted ceiling for deduction, the Company will contribute to the Employee's credit, the contributions according to Section 14 of the Severance Pay Law, 5723-1963, and the Approval of the Minister of Labor and Social Affairs in an order dated June 30, 1998, which was given according to Section 14 as aforesaid, including all amendments thereto, and which is attached to this Agreement as Annex A , to management insurance or to a pension fund.

 

4
 

 

5.2. The Company undertakes, commencing from the date of execution of this Agreement, to contribute an amount in NIS which is equal to 7.5% of the Monthly Salary to a study fund, which will be paid directly to a study fund. The Employee will deduct an additional amount which is equal to 2.5% of the Monthly Salary as aforesaid. The Employee hereby agrees that the Company will deduct the said amount from his salary.

 

5.3. It is hereby agreed that upon termination of employment according to this Agreement, the Company will release to the Employee all of the amounts accrued in his name in the insurance policy and which were contributed from his Salary. In addition, subject to the Employee's compliance with the provisions of this Agreement, the Company shall release to the Employee also all of the amounts which were accrued in an insurance policy and which were contributed by the Company. The contributions on account of severance pay will be released according to the Employee's entitlement or absence thereof to severance pay according to law or according to this Agreement.

 

5.4. For avoidance of doubt, in case that the Employee shall be dismissed under circumstances as defined in Section 16 and/or Section 17 of the Severance Pay Law and/or in case that the work relation between the Employee and the Company shall be terminated under circumstances of a severe discipline violation, breach of employment contract, betrayal of trust, an infamous crime as well as upon the occurrence of the events specified in Section 7.5 below, he will not be entitled to severance pay and advance notice.

 

5.5. It is hereby agreed, unequivocally that the amounts accrued in the insurance policy on account of the Company's participation (i.e. 8.33% of any payment of a gross Monthly Salary) will be in lieu and as a final and full substitution to any severance pay which the Employee will be or will become entitled to according to any law which shall apply. This Section is according to Section 14 of the Severance Pay Law, 5723-1963, and the Approval of the Minister of Labor and Social Affairs in an order dated June 30, 1998, which was given according to Section 14 as aforesaid, including the amendments thereto, and which is attached to this Agreement as Annex A .

 

5.6. It is agreed that the provisions of Sections 4 and 5 above exhausts all of the Employee's entitlements from the Company for fulfilling his Office as provided in this Agreement and the Employee will have no claim against the Company and/or any demand in addition to that.

 

5
 

 

6. Car and Cellular Phone

 

6.1. The Company shall provide the Employee with a private Grade 2 car and will bear all of the expenses involved in the use of the car (licensing, insurance, repairs and so forth) (the " Car "). Replacing the Car with a new one shall be done according to the Company's discretion. The tax in respect of the use value which shall apply will be deducted from the Employee's Monthly Salary according to law.

 

6.2. The Employee will ensure proper maintenance of the Car and will use the Car reasonably and with care. The use and servicing of the Car will be according to the instructions and procedures of the Company as shall be in effect from time to time.

 

6.3. The Employee represents that it has been made clear to him that he is personally responsible for the payment of the deductable amount in case of an accident and/or stealing the car and is also responsible for the payment of any traffic fines and/or parking tickets and/or other fines and reports, which will be imposed in respect of the Car in the name of the Company or in the name of the Employee, all as shall be determined from time to time by the Company. If an employee does not act as specified in this Section, the Company shall endorse the reports and/or fines as aforesaid in the name Employee's name. For avoidance of doubt it shall be clarified, that the Employee's liability according to the provisions of this Section will apply also if the fact of the fines and/or reports in respect of the Car will become known to the Company after the Employee had left the Company, and that if the Employee will not act as specified in this Section, the Company will endorse the fines and/or reports as aforesaid, to the name of the Employee.

 

6.4. Should the Employee not pay the deductable amount and/or the fines as aforesaid, the Company will be entitled to pay the amount of the deductable and/or the amounts of the fines and the Employee hereby gives the Company an irrevocable instruction to deduct such amounts from any amount which he will be entitled to from the Company.

 

6.5. The Company shall provide the Employee, for the purpose of fulfilling his Office, a cellular phone. The Employee will be entitled to use the cellular phone for the purposes of the work and within his Office. The Company shall bear all of the fixed and current expenses incurred in respect of the cellular phone, up to an amount of NIS 300 per month. Tax in respect of the use value which will apply shall be deducted from the Employee's Monthly Salary according to law.

 

7. The Agreement Term

 

7.1. This Agreement is for an unlimited period which will begin on December 15, 2013 (the " Agreement Term ") and subject to the following.

 

6
 

 

7.2. As aforesaid in this Agreement and without derogating from the provisions of Section 7.1 above, the period commencing on the Agreement commencement date and ending three months thereafter, will be the Trial Period. During the Trial Period, the Company shall examine the suitability of the Employee for the position and his compliance with his representations and commitments as specified in this Agreement.

 

7.3. Cancelled.

 

7.4. After the Trial Period, each party will be entitled to terminate the Agreement by an advance notice according to law.

 

7.5. During the entire Agreement Term, the Company shall be entitled to terminate the Agreement immediately, with no advance notice, upon the occurrence of one or more of the following events:

 

7.5.1. If the Employee shall be convicted in a criminal offence, except for a technical offence or one of strict liability, or if an indictment shall be filed against him in a criminal offence which is a felony or criminal act.

 

7.5.2. If the Employee breached his fiduciary duty towards the Company and/or will not act and/or operate with loyalty and/or credibly and/or honestly towards the Company and/or therefor.

 

7.5.3. The Company found out that the Employee's representations in Section 2 of this Agreement and/or his undertakings, as specified in Section 3 above are untrue and/or incorrect and/or are invalid;

 

7.5.4. The Company found out that he Employee had breached any of the provisions of Sections 8-9 below;

 

7.5.5. The Employee breached the Agreement and did not correct the breach, even though he had received a 30 day notice or a shorter notice, according to the urgency of the matter and/or committed a severe disciplinary offence in circumstances which entitle the employer to dismissal without severance pay.

 

7.6. For avoidance of doubt it is agreed, that in each of the cases specified in paragraph 7.5 above, the dismissal shall enter effect immediately, without requiring the provision of advance notice or payment in respect thereof.

 

7.7. Upon the termination of the Employee's work at the Company for any reason, the Employee shall transfer his Office in a full and orderly fashion to any person that the Company shall instruct him, and will deliver to the Company all of the documents, information, equipment and material which he received as the Company's employee or that had been prepared by him in respect to his work at the Company.

 

7
 

 

8. Confidentiality

 

8.1. The Employee hereby undertakes to keep in confidence and not to disclose, show, deliver, whether during his employment term or thereafter, with no limitation on time, to any person or body, in Israel or worldwide, trade, professional, business and other secrets of the Company, or knowledge and/or information pertaining to the Company or related directly or indirectly to the Company, its property, business and interests, its customers, suppliers, the persons or entities who were or are in contact with the Company, including, but without derogating from the generality of the aforesaid – creation, concept, invention, copyright, patent, fabrication, design and any intellectual property right, improvement, idea, process, knowledge, conclusions, human resources management and salary determination, terms of agreements in which the Company is engaged, and documents of the Company – all whether the said secrets and/or knowledge and/or information reached him directly or indirectly, within his work and/or during his work and/or in the process of his work and/or as a result of his employment and/or due to his Office and whether they reached him directly or indirectly, in any other manner whatsoever. The Employee hereby confirms that the secrets and/or knowledge and/or information as aforesaid are the Company's exclusive property and that he has no and will have no claims of any type whatsoever in respect thereto or deriving therefrom.

 

8.2. The Employee hereby undertakes not to make use of any kind, in Israel and worldwide, of the secrets and/or knowledge and/or information specified in Section 8.1 above, except if – and only to the extent such is necessary – for the purpose of performing his office at the Company. The Employee undertakes thereby not to utilize the said secrets and/or knowledge and/or information in Israel and/or abroad, for his purposes that are personal and/or for his work in another workplace, without limitation of time and place.

 

9. Intellectual Property

 

Without derogating from the undertaking annex attached to this Agreement, any confidential information, including a creation, concept, invention, improvement, idea, process, knowledge, conclusions, copyright, patent, fabrication, perfection, design, development and any other intellectual property right and so forth – which had been developed or invented by the Employee, alone or in cooperation with others, while or during or in relation to his work at the Company, will be the Company's exclusive property, and the Employee will have no right of ownership and/or royalties and/or consideration and/or any other right in respect of such information. Any implementation, analysis, commercialization, marketing, sale and/or any other use of such analysis and/or invention, will be according to the Company's sole and absolute discretion. It shall be clarified that the consideration paid to the Employee according to this Agreement includes also consideration for possible inventions which had been developed or invented by the Employee, alone or in cooperation with others, within or during or following or in respect of his work at the Company and the Employee will not be entitled to any additional or separate consideration in case of an invention which he had reached.

 

8
 

 

The Employee will be estopped and barred from making claims against the provisions of this Section 9 above, both claims resulting from the Israeli law and claims resulting from any foreign law, and will be prevented from approaching any foreign tribunal and/or judicial and/or administrative instance. It is agreed that any dispute between the Employee and the Company in respect of the provisions of this Section 9 above, including claims resulting from any foreign law, will be decided exclusively by the competent courts at the Central District of Israel and only by them. Any dispute between the Employee and the Company will be subject only to the Israeli law.

 

The provisions of this Section will apply also after the end of the term of this Agreement, for any reason, or following the expiration of this Agreement, all with no limitation on time and place.

 

10. Remedies in case of breach of the Confidentiality and Intellectual Property Provisions

 

10.1. The Employee agrees that the breach of the provisions of Sections 8 and/or 9 above will be deemed as a fundamental breach of this Agreement and will deny the Employee of his right to payments from the Company, including: severance pay; advance notice payment as well as other social benefits, all subject to the provisions of any law.

 

10.2. The Employee knows and understands that upon the breach of Sections 8 and/or 9 above by the Employee, the Company shall petition to the court for an injunctive relief against the Employee and/or anyone on his behalf and/or against any third party related to the Employee's acts and/or omissions, as well as with a monetary tort claim against them in respect of the damage which will be caused to the Company, without derogating from any other remedy to which the Company will be entitled by virtue of this Agreement and/or according to any law.

 

10.3. Without derogating from the aforesaid, the Employee irrevocably and conclusively waives any right to the remedy of an injunction and/or mandatory injunction against the employer and any claim and/or demand of the Employee will be solely for monetary remedy.

 

11. Exclusivity and Non Competition

 

The Employee undertakes not to engage, work, participate and/or consult, directly or indirectly, whether himself or through others, whether as a hired employee, independent or freelancer, or in any other manner, in a business, position, work or any other occupation which competes and/or might compete with the Company's business, both during the Employment Term as defined above and during a period of additional 12 months from the date of termination of the employment term for any reason whatsoever.

 

9
 

 

12. Miscellaneous

 

12.1. It is agreed that the provisions of this Agreement exhaust the agreements between the parties, and any promise, undertaking, consent, memorandum of understanding, representation made between the parties, if made prior to the execution thereof, whether in writing or orally, are hereby null and void, and have no evidential use against the Company.

 

12.2. Any change in the terms and provisions of this Agreement requires another written document which will be executed by the parties to this Agreement.

 

12.3. The parties agree that the sole and exclusive jurisdiction, in all matters related to the rights deriving from and/or related to this Agreement, will be of the competent courts in the Central District.

 

12.4. In case that it shall be decided that any provision or provisions of this Agreement is/are unenforceable or have no effect whatsoever, such will not affect or prejudice the legality, validity and enforceability of the remaining provisions of the Agreement which are not related to or deriving from the invalid charge.

 

12.5. Any delay in the enforcement proceedings of any right according to this Agreement and according to any law will not be deemed as a waiver of such right or any other right and will not prevent the possibility of claiming remedies due to the breach of the right, including the enforcement thereof at a later date.

 

12.6. The parties undertake to fulfill all of their undertakings in this Agreement with loyalty, in good faith and based on trust relations.

 

12.7. The parties' addresses are as specified in the preamble to this Agreement. Any notice provided by one party to the other, will be deemed as having been received within 3 business days from the date of delivery thereof by registered mail, or upon its delivery by a messenger, whichever is earlier.

 

13. After the Trial Period

 

Subject to and without derogating from the provisions of Section 2.5 above, upon the successful completion of the Trial Period and subject to the approval of the Company's board of directors, the Employee's office definition will be changed to VP Business Development and Medical Affairs who reports directly to the CEO. In addition and subject to the board approval, options will be granted in accordance with the Company's compensation policy. Subject to the continued employment of the Employee after the Trial Period, the remaining engagement terms with the Employee will remain unchanged.

 

In Witness whereto the parties have hereto set their hands :

 

/s/ Zeev Weiss and Nir Sassi   /s/ Liat Flaishon
The Company   The Employee

 

10
 

 

Annex A

 

General Approval (Combined Version) Regarding Employers’ Contributions to

Pension Funds and Insurance Funds in lieu of Severance Pay

Under the Severance Pay Law, 5723-1963

[Updated as of February 28, 2001]

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 1 (the “Law”), I hereby confirm, that contributions made by an employer for his employee, commencing as of the date of publication of this approval, to a comprehensive pension in a provident fund for annuity that is not an insurance fund within the meaning of such term in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 2 (a “Pension Fund”) or to a managers’ insurance that includes the possibility of an annuity or a combination of payments to an annuity plan and to a non-annuity plan within such insurance fund (an “Insurance Fund), including combined contributions made by the employer to a Pension Fund and to an Insurance Fund, whether or not the Insurance Fund includes an annuity plan (the “Employer's Contributions”), shall be payable in lieu of severance pay due to such employee in respect of the salary from which such contributions were made and the period they were made for (the “Exempt Salary”); provided, however, that all of the following conditions have been fulfilled:

 

(1) The Employer's Contributions -

 

(a) To the Pension Fund, are at a rate of no less than 14 1/3% of the Exempt Salary, or 12% of the Exempt Salary, if in addition thereto, the employer makes supplementary severance pay contributions for his employee to a provident fund for severance pay or to an Insurance Fund in the employee's name, at a rate of 2 1/3% of the Exempt Salary. In the event that the employer has not contributed such 2 1/3% in addition to said 12%, his contributions shall only replace 72% of the employee's severance pay;

 

(b) To the Insurance Fund are at a rate of no less than one of the following:

 

(1) 13 1/3% of the Exempt Salary, if in addition thereto, the employer makes contributions for his employee for securing monthly income in the event of disability to a plan approved by the Commissioner of the Capital Market, Insurance and Savings at the Ministry of Finance, at the rate required to secure at least 75% of the Exempt Salary or a rate of 2 1/2% of the Exempt Salary, whichever is lower (“Disability Insurance Contributions”); or

 

 

1 Statues 5723, p. 136.
2 Regulations 5724, p. 1302.

 

11
 

 

(2) 11% of the Exempt Salary, if the employer also made Disability Insurance Contributions, and in such case the Employer's Contributions shall only replace 72% of the Employee's severance pay; In the event that the employer has made, in addition to the foregoing, supplementary severance pay contributions to a provident fund for severance pay or to an Insurance Fund in the employee's name at a rate of 2 1/3% of the Exempt Salary, the Employer's Contributions shall replace 100% of the employee's severance pay.

 

(2) By no later than three months of the commencement date of the Employer's Contributions, a written agreement is executed between the employer and the employee that includes:

 

(a) The employee’s consent to the arrangement pursuant to this approval in a form specifying the Employer's Contributions, and the Pension Fund and Insurance Fund, as applicable; such agreement shall also include the form of this approval;

 

(b) 3 The employer’s advance waiver of any right he may have to a refund of monies from his contributions, unless the employee’s right to severance pay has been revoked by virtue of Sections 16 or 17 of the Law, and to the extent so revoked, or the employee has withdrawn monies from the Pension Fund or Insurance Fund other than by reason of an Entitling Event; in such regard "Entitling Event" means death, disability or retirement at or after the age of 60 or more

 

(c) This approval shall not derogate from the employee's right to severance pay under any law, collective agreement, expansion order or employment contract, in respect of salary over and above the Exempt Salary.

 

  Eliyahu Yishai
   
  Minister of Labor and Social Affairs

 

Signature of employee:

 

  [Signature]  
     
Date: November 25, 2013 Signature: /s/ Liat Flaishon  

 

 

3 Amendment: Official Gazette 4803, 5760 (September 19, 1999).

 

12
 

 

Annex B

 

Letter of Undertaking for confidentiality/non competition/endorsement of intellectual property rights

 

Made and executed on November 25, 2013

 

Between Liat Flaishon I.D. 02226959-1 (the " Employee ")

 

and Intec Pharma Ltd. Company Number 513022780 from Jerusalem, 12 Hartom st. (the " Company ")

 

1. Confidentiality

 

Without derogating from the definition of "Confidential Information" in the employment agreement to which this Letter of Undertaking for Confidentiality/Non Competition/Endorsement of Intellectual Property Rights (" This Agreement ") is an annex (the " Employment Agreement "), " Confidential Information " includes research and development pertaining to existing or future products, inventions, hardware, computer software, databases, chart, technique, drawing, idea, process, manufacturing method, formula, procedure, business plan, clients, financial information, marketing plans and any trade secret (whether patentable or not), improvements and knowledge pertaining to the aforesaid, and any information or data related or pertaining to the technology, products or services of the Company or of companies affiliated thereto (existing, potential or future), or pertaining to the business of the Company or of companies affiliated thereto (existing, potential or future) in any other manner, including any business information pertaining to clients and suppliers, whether tangible or not, and any other trade secret, as defined in the Law of Commercial Torts, 5759-1999, of the Company or of a company affiliated thereto. The aforesaid will not apply to information which had been made public domain by the Company or in any other legal manner.

 

1.1. The Employee shall maintain the confidentiality and secrecy of any Confidential Information as defined above, which had reached the Employee's knowledge during the provision of the services or the engagement with the Company or an affiliated company thereof or as a result therefrom, and the Employee will not disclose, use, publish or otherwise expose, directly or indirectly, Confidential Information as aforesaid at any time during or after the expiration of the term of his employment by the Company, with no limitation of time and place, without the explicit approval of a competent representative of the Company in advance and in writing.

 

1.2. Any Confidential Information, whether it is in written material, documents, computer software and/or hardware, electronic media, magnetic media, servers or in any other form or manner (all hereinafter: the " Documents ") including notebooks, notes, memos, records, diagrams, drawings, bulletins, formulas, reports, computer programs, other information of any type whatsoever which reached the Employee's possession or which was prepared by the Employee or by others, is the Company's or an affiliated company's exclusive property, as the case may be. The Employee hereby undertakes to return to the Company Documents as aforesaid or any other material which belongs to the Company that is in his possession (a) if he was requested to do so by the Company or (b) upon the termination of the Employee's employment by the Company, whichever is earlier, and if he was requested to do so by the Company, to sign a written statement in which he will confirm that he has carried out the aforesaid.

 

13
 

 

1.3. It is clear and understood by the Employee that all of the confidential information is material business information which is the property of the Company or of companies affiliated thereto, or of third parties to whom the Company or the affiliated companies thereto have a duty of confidentially, which is not public domain and which may not easily be discovered by others, whose confidentiality provides the Company or affiliated companies thereof, a commercial advantage over their competitors, and that the Company takes reasonable measures to maintain the confidentiality thereof.

 

1.4. The Employee's undertakings according to this Agreement are towards the Company and any parent company, subsidiaries, affiliated companies and anyone which shall replace it according to law, as in effect from time to time.

 

1.5. The Employee's undertakings pursuant to this Section, will remain in effect after termination of the Employee's employment, according to the Employment Agreement.

 

2. Non Competition

 

2.1. The Employee agrees that during the term of the Employment Agreement and for twelve months following termination thereof, for any reason whatsoever, he will not engage, be involved or affiliated in any manner, or employed, directly or indirectly, alone or together with others, for himself or as an agent, broker, manager, licensor, employee, officer, director, partner, member of a joint venture, shareholder, investor, consultant or otherwise, and without the Company's prior written notice, in any business or venture, anywhere in the world, which engages in any activity within which (a) there are products or services which compete with products or services of the Company, or with products or services of the Company's affiliated companies pertaining to the Company's business, as they were upon the termination of the Employees' employment (b) there are information, processes, technology or equipment in which the Company has a proprietary right, or in which a company affiliated to the Company has a proprietary right, and which are related to the Company's business which exist currently or will exist in the future, or which are based on technology similar to that which was developed by the Company. The aforesaid will not apply to (a) holding securities in any company whose shares are traded in public on the stock exchange which received international acknowledgement, provided that such holding will not exceed 1% of the issued share capital of a public company as aforesaid, and the Employee does not fulfill an active office in a public company as aforesaid as a director, employee, consultant (including independent consultant) or any other active position, or (b) non-commercial activities which constitute de minimis .

 

14
 

 

2.2. The Employee agrees, that for the period of the Employee's employment by the Company and for a period of 24 months from the date of termination of his employment, for any reason whatsoever, the Employee will not solicit or encourage, directly or indirectly, himself or within a business in which the Employee is an employee, officer, director, shareholder, consultant or contractor, for any purpose and at any place, a person who was employed by the Company or an affiliated company thereof, to terminate their employment with the Company or a company affiliated thereto, as the case may be.

 

2.3. The Employee agrees that for two years from the date of termination of engagement in the Employment Agreement, he will not employ, directly or indirectly, a person who was employed by the Company or a company affiliated thereto, during the two years which preceded the engagement termination date, as aforesaid.

 

3. Endorsement of Intellectual Property Rights

 

3.1. For the purposes of this Annex, the following definitions shall apply:

 

" Inventions " mean, inter alia , any invention, discovery, idea, improvement, change, betterment, document, software, hardware, firmware, creation, form, mask works, work, chart, original creation, formulas, techniques, methods, systems, processes, compositions of material, databases, knowledge, information and trade secrets, which were created, invented, discovered, developed, composed or processed by the Employee during his employment or twelve (12) months thereafter (or the maximal period permitted by law if its shorter), in whole or in part, or that the Employee's efforts contributed to the creation thereof, independently or in cooperation with others, whether patentable or protectable by virtue of copyrights or another protection or not, and:

 

(a) Which are related, directly or indirectly to the Company's business, as defined in the Employment Agreement, including a platform for gastric drug retention or which were created while using the Company's equipment; or

 

(b) Which are related to existing research and development or in respect of which it can be proven that they are being planned, pertaining to the Company's business, or research and development as aforesaid of the Company's affiliated company; or

 

(c) Which are developed, in whole or in part, during the Company's working hours, or by using equipment, supply, facilities or confidential information of the Company or of a company affiliated thereto.

 

15
 

 

" Trade Secrets " mean "trade secrets" as defined in the Law of Commercial Torts, 5759-1999, and any record, software, hardware, form, client list, knowledge and information of any type or nature, pertaining to the Company's business, in the past, present or future, or any plans in respect thereof, or pertaining to the business of a third party, in the past, present or future, or to any plans in respect thereof (including any object or information in any form whatsoever in respect of which it had been provided in law that is a trade secret) which reached the Employee's knowledge, which the Company does not disclose to third parties with no restrictions on use or restrictions on the disclosure to other third parties.

 

3.2. Without derogating from any other provision of law:

 

a. The Employee will put into writing, and will expose before the Company or a company affiliated thereto, together with explanations, any invention and will conduct accurate records regarding the contemplation of any invention and implementation of the idea. Such records will be the Company's exclusive property, and the Employee will deliver possession in the records to the Company, upon the termination of his engagement with the Company.

 

b. The Employee hereby assigns to the Company or to the affiliated companies thereof, with no additional consideration to the Employee, the full and exclusive rights, ownership, possession and title in the Inventions, and in all of the proprietary and intellectual property rights therein, and in the proprietary and intellectual property rights deriving therefrom or based thereon, both in Israel and abroad. The Employee will sign any assignment, statement or other document which will be prepared by the Company for giving effect to the aforesaid. The Employee hereby confirms and will confirm in the future the exclusive intellectual property rights of the Company and of affiliated companies thereof, in Israel and abroad, in all of the Inventions.

 

c. During the Employment Agreement term and thereafter, the Employee shall provide the Company with any reasonable information, document and assistance which the Company shall require in order to prepare, perform and complete the registration of the proprietary rights, intellectual property and his patent in the Inventions and the trade secrets and the rights as aforesaid deriving from the invention and in the trade secrets or which are based thereon, to protect them or enforce them, in any jurisdiction according to the Company's discretion. The Company, according to its sole discretion, will determine the scope of the rights as aforesaid in the inventions and trade secrets or deriving therefrom, if there shall be such, which must be protected. Such assistance includes the preparation of documents, drawings and other data, and the signing of right assignment documents, applications and other forms. Any such information, document and assistance will be provided to the Company by the Employee with no additional cost for the Company, except for out-of-pocket cash expenses actually incurred by the Employee upon the Company's request.

 

16
 

 

d. During the Employment Agreement term and thereafter, the Employee will maintain the secrecy and confidentiality of the Inventions as if they were Confidential Information pursuant to this Agreement, will not expose them to others without obtaining prior written permission from the Company and will not use such Inventions for any purpose whatsoever, except for the purpose of performance of services for the Company.

 

4. Remedies

 

It is clear to and understood by the Employee that the breach of the undertakings included in this Agreement or any part thereof, shall cause the Company or affiliated companies thereof severe and irreversible damage. In view of the aforesaid, the Employee agrees that in case of such breach or anticipated breach, the Company, the Company's affiliated company or anyone to whom the Company or an affiliated company thereof had assigned their rights to, will be entitled, without prejudice to any rights, and in addition to other rights, remedies and compensation available thereto by law or equity, to a preliminary or perpetual injunction, or any other possible equitable remedy, in order to prevent or remove the breach or the attempted breach of this Agreement by the Employee or by any person or entity acting for him or on his behalf. In case that proceedings had been initiated for enforcement of the terms of the restrictions in the Agreement as aforesaid, the lawfully winning party will be entitled, in addition to any other remedy, to the restitution of any reasonable amount in respect of legal fees and other expenses which were involved in the measures initiated, both in the trial court and in the court of appeals, and in any bankruptcy proceeding. In case that a competent court shall decide in a final decision that is no longer appealable, that the scope, duration of time or geographic boundaries specifically determined in any of the restrictions set forth in the Agreement are too extensive for enforceability, the said court will be authorized, and the parties to this Agreement agree and determine hereby, that such court will amend the terms of the restrictions as aforesaid and will enforce the terms according to the scope, duration of time and geographic boundaries which it will deem just and appropriate, while taking the parties' intention into account.

 

5. Confirmations and Representations

 

The Employee hereby represents and confirms the following:

 

5.1. The Employee's undertakings for non competition and confidentiality according to this Agreement are fair, reasonable and proportionate and were intended to protect secrets and confidential information of the Company and affiliated companies thereof, which are the essence of the Company's protectable business and commercial advantages in which significant capital has been invested.

 

17
 

 

5.2. Breach of his aforesaid undertakings – will be contrary to the special fiduciary and loyalty relations between the parties as employee and employer, to proper commerce practices, and to the duty of good faith and fairness between the parties, it will prejudice the Company's business, and will constitute a fundamental breach of This Agreement and of the Employment Agreement.

 

5.3. It is clear to and understood by the Employee, that the limited time period and the geographic area as specified in this Agreement are reasonable in view of the nature of the Company's business and the knowledge of the Employee pertaining to the Company's business.

 

5.4. The Employee represents that his undertakings pursuant to this Section, which are reasonable and proportionate – do not prevent him from developing the general knowledge and professional expertise in the field of his occupation, in respect to parties who are not customers or employees of the Company, and without stealing the Company's secrets.

 

5.5. The Company will be entitled to assign the undertakings of the Employee thereto in this Agreement. The Employee will not be entitled to assign or to transfer to another his duties pursuant to this Agreement without the Company's prior written approval. This Agreement binds the Employee's heirs, permitted assignees and anyone who shall come in his lieu according to law.

 

/s/ Liat Flaishon   /s/ Zeev Weiss and Nir Sassi
The Employee   Intec Pharma Ltd.

 

 

18
 

 

Annex C

 

Procedure for prohibition of abuse of inside information

 

Preamble

 

This procedure is designated for officers at Intec Pharma Ltd. (the " Company "), including directors, CEO, VP's and other senior officers directly subject to the CEO as well as for the Company's employees.

 

Prohibited use of Inside Information exposes both the user and the Company to civil and criminal sanctions and is liable to cause the Company significant financial and reputational damage. Therefore, this procedure is designated to clarify what is permitted and prohibited in this field and to present the "do's" and "don'ts".

 

Basic Terms

 

Inside Information definition

 

The Securities Law, 5728-1968 (the " Law ") sets forth a prohibition of the use of Inside Information in a company whose securities have been offered to the public pursuant to a prospectus or are traded on the stock exchange and are in the hands of the public, including a subsidiary 4 and an affiliated company 5 of the same company. Such prohibition is one of the cornerstones of Securities laws and it is based on the aspiration to create a capital market in which fair and equal competition occurs.

 

Inside Information is defined in the law as "information about development in the company, a change in its condition, anticipated development or change, or other information about the company which is not known to the public and which had it become known to the public, it could have caused significant change in the price of a security of the company or in the price of another security, of which a security of the company is an underlying asset" 6 .

 

The aforesaid definition does not set forth a closed list of types of information which are included therein, and therefore, extensive room for interpretation by the courts remains in this context. Following is a non exhaustive list of examples for Inside Information:

 

· Engagement of the Company in a material transaction. In this matter, the materiality of the transaction will be examined, inter alia , according to its immediate and/or future financial scope.

 

 

4 Section 1 of the Law determines that a "Subsidiary" is: " accompany in which another company holds fifty percent or more of the par value of the issued share capital thereof or of the voting power therein or is entitled to appoint half or more of the managers or the general manager thereof:

5 Section 1 of the Law determines that an "Affiliated Company" is: "an associated company as well as a company, in which another company who is not its parent company, invested an amount which is equal to twenty five percent or more of the equity of the other company, whether in shares or otherwise, except for a loan which is given in the normal course of business".

6 Section 52A of the Law.

 

19
 

 

· Cancellation of a material transaction.

 

· Grant or receipt of a merger offer.

 

· Purchase or sale of a material asset of the Company.

 

· Initiation of legal proceedings with potential material effect on the Company or a decision in such proceedings.

 

· Financial data, financial results, projections or profits in the Company or in a subsidiary or in an associated company.

 

· Retirement or replacement of senior officers at the Company.

 

· Decision regarding dividend distribution.

 

· Any material decision of the Company's management or board of directors.

 

· Other material business information.

 

It shall be emphasized that procedures pertaining to the issues specified as aforesaid, might be deemed as "Inside Information", for example the existence of negotiations regarding a material engagement or the purchase of a material asset, financial statements draft, a material resolution proposal submitted to the Company's board of directors and so forth.

 

Inside Information shall be deemed as such which had been published to the public only after distributed among the investing public and absorbed thereby. The Law determines that information is not deemed as Inside Information if the ISA or the stock exchange received a report regarding the information and the ISA or the stock exchange published it, or it had been otherwise published in the accepted manner for bringing such information to the public's knowledge, and a trade day at the stock exchange had elapsed, after the publication date as aforesaid; should the ISA or stock exchange fail to publish the information within four days from the date on which it was reported, the information shall cease being Inside Information upon the expiration of such period" 7 .

 

It shall be stated that in the decision from October 6, 2011, the Securities Authority (the " ISA ") decided that in the opinion of the ISA staff "information is not deemed as information which is unknown to the public (and therefore it is not deemed as "Inside Information") if 30 trade minutes had elapsed from the date on which the information was released to the public on the distribution system of the ISA (the Magna)". It was further stated, that during the 30 minutes in which the information is released on the Magna system, it can be examined by the public and be expressed in the security price on the stock exchange" 8 .

 

 

7 Section 52F(a) of the Law.

8 The ISA's staff position in respect of a preliminary directive application of the Trust Investment Funds Managers Union (Registered Association) dated October 6, 2011.

 

20
 

 

The ISA further determined in that decision that the existence of the presumption described above does not deny the possibility to prove the public knowledge in respect of the information in another manner as well. For example, if a material claim was filed against the Company and the fact of the filing thereof had been published in the press before the complaint had been served to the Company, and in any case before the Company had reported to the public regarding the filing of such claim, the Company will be entitled to claim that the information which was included in the journalistic publication, is public information which does not constitute "Inside Information".

 

The possible effect of the information on the Company's security price is a forward-looking hypothetic examination. The examination as aforesaid is done on the date of actual performance of use of the Inside Information and before the Inside Information had been released to the public.

 

Insiders at the Company

 

The Law determines that an insider in a company is 9 -

 

1. A Director;

2. CEO;

3. A shareholder holding 10 five percent or more of the par value of the issued share capital or of the voting power at the Company or who is entitled to appoint one or more directors at the Company (a " Key Shareholder at the Company ");

4. Another person whose status or position at the Company or his relations therewith gave him access to Inside Information on the date which use of Inside Information was done or within the six months which preceded such date;

5. A spouse, sibling, parent, parent of a parent, descendant, or descendant of the spouse, or the spouse of any of these (" Family Member ") of any of those listed in Sections 1-4 above;

6. A corporation controlled 11 by one of those listed in Sections 1-5 above.

 

 

9 Section 52A of the Law.

10 Section 52A of the Law stipulates that "holding" is: "whether alone or with others, whether directly or indirectly, through a trustee, a trust company or a transfer agent or in any other manner; when holding is by a company – also by a subsidiary by implication, and when holding by an individual, an individual and his family members living with him, or that the livelihood of one is upon the other, will be deemed as one person:

11 Section 1 of the Law determines that "control" is: "the ability to direct the activity of a corporation, except for the ability deriving solely from the fulfillment of a position of director or another position in the corporation, and a person is presumed as controlling a corporation if he holds half or more of a certain type of the means of control in the corporation". Section 1 of the Law determines that a "Means of Control" is: "(1) the voting right at a company's general meeting or an equivalent entity of another corporation; (2) the right to appoint directors of the corporation or his general manager".

 

21
 

 

Use of Inside Information

 

The Law defines as use of Inside Information, both the direct action pertaining to the performance of a transaction 12 in a security of the Company while the maker of the transaction or the Company are in possession of Inside Information, and the indirect transaction pertaining to the delivery to another of Inside Information or an opinion on a security of the Company, by anyone who holds Inside Information, while he knows or there are reasonable grounds to assume that such other will use the Inside Information or the opinion delivered thereto.

 

The Law stipulates in this context a presumption according to which "should a key insider at a company purchase securities of the company in which he serves as a key insider or other securities of which the company's securities are an underlying asset, within three months from the date on which he sold such securities or he sold such securities within three months from the date on which he bought such securities, it shall serve as prima facie evidence that he had used the Inside Information which is in his possession, unless he shall prove that he had no Inside Information in his possession at the time of sale or purchase, or that in the circumstances of the matter he probably had no Inside Information in his possession at the time" 13 .

 

The Law determines that a key insider in a company is –

 

1. A director, CEO, deputy CEO, VP, comptroller and internal auditor and anyone fulfilling such a position, even if the title of the position is different as well as an individual who is a key shareholder at the Company;

 

2. A Family Member of any of those listed in Section 1 above;

 

3. A corporation controlled by one of those listed in Sections 1-2 above.

 

Criminal Liability

 

The Law determines that an insider at a company who uses Inside Information which is in his possession, is liable for five years of imprisonment or a maximal fine of approx. one million NIS. Within the Improvement of Enforcement Proceedings in the ISA Law, 5771-2011 (the " Improvement of Enforcement Proceedings Law ") a more severe maximal fine was set forth, in respect of a corporation, of approx. five million NIS.

 

The Law determines that anyone who uses Inside Information which had reached his possession, directly or indirectly from an insider at the Company, is liable for two years of imprisonment or a maximal fine of approx. NIS 200,000. Within the Improvement of Enforcement Proceedings Law a more severe fine was set forth, in respect of a corporation, in the amount of approx. one million NIS.

 

 

12 Section 52A of the Law determines that a "transaction" is: "the sale, purchase or exchange of a security, signing a security or an undertaking for the performance of each of those, whether the person is acting for his own benefit or acting to the benefit of another, and even if he acts through an agent or a trustee".

13 Section 52E of the Law.

 

22
 

 

It shall be stated that the law allows a company in whose security a transaction was made while using Inside Information, to claim the profit deriving from such transaction from such person. Namely, the amount of the difference between the price of the security in which the transaction was done and its price soon after the Inside Information became known to the public 14 .

 

Also, the use by a person of Inside Information, could constitute breach of a fiduciary duty or a contractual duty, and in such case, create tortious or contractual liability.

 

Administrative Proceeding

 

The Improvement of Enforcement Proceedings Law set forth a mechanism of administrative enforcement, which was intended to make the provisions of the Law more efficient, inter alia . A seventh supplement was added to the Law, in which a list of administrative offences according to their severity is detailed in three parts, while the intensity of the punishment is adapted to the level of the breach severity. In this framework it was determined that for breach of the use of Inside Information it will be possible to initiate an administrative proceeding. Breach of the use of Insider Information was classified as a very severe breach in respect of which it will be possible to impose on an individual breaching party a maximal monetary sanction of approx. one million NIS and on a breaching party which is a corporation, a maximal monetary sanction of approx. five million NIS.

 

Defenses

 

The defenses stipulated in the Law 15 were designated to release from criminal and civil liability in a case which the performer of the transaction acted with no connection to the Inside Information or when the Inside Information was not underlying the performance of the transaction. The burden to prove the defenses as aforesaid lies on the shoulders of the defendant and the level of proof thereof is according to the balance of probabilities.

 

The aforesaid defenses are divided into defenses granted to specific entities acting by virtue of the authority given to them within their position or with no connection to the Inside Information (such as office holders, agents, trustees etc.), defenses granted due to the existence of a legitimate purpose for the performance of the transaction (such as a transaction which is a good faith performance of an underwriting contract) and perimeter defense (such as a transaction outside the stock exchange with a person who also had possession of the Inside Information).

 

"Do's" and "Don’ts"

 

General Provisions

 

· As a general rule, use of Inside Information will only be done for the purpose for which it was created or delivered.

 

 

14 Section 52H of the Law.

15 Section 52G

 

23
 

 

· The delivery of Inside Information must be restricted only to entities in the Company required thereto for the fulfillment of their position or to the extent such is relevant externally, such as auditors, legal counsels, parties to the transaction etc. For example, the finance personnel at the Company will not discuss the Company's financial results for as long as such constitute "Inside Information" with an entity who is not part of the Company's management or the Company's finance department.

 

· To the extent possible, Inside Information delivered or created in writing must be marked with a sign such as "Sensitive Information", "Confidential – Internal" etc.

 

· External entities being exposed within their position to Inside Information of the Company, must be informed regarding the sensitive nature of such Inside Information. It shall be emphasized that such informing is not required in case of disclosure to the attorneys and/or auditors of the Company.

 

· Third parties with whom the Company engages and who might be exposed to Inside Information, intentionally or unintentionally, must sign confidentiality agreements which include also specific reference to the prohibition on the use of Inside Information.

 

· Proper data protection measures must be used in order to prevent and/or restrict access to computers and/or databases of the Company on which Inside Information is stored (mainly, but not only, desktops or laptops which are used by key insiders at the Company and/or the finance department staff).

 

· The provision of "hints", "indications" etc. must be avoided, regarding potential effect of Inside Information without the provision of such information. General statements such as "very good things are happening at the Company" or "after we release the financial statements the share will fly", could constitute Inside Information the use of which is prohibited.

 

· In general, it is preferable that the conduct vis-à-vis investors, analysts and capital market entities, within which Inside Information could be exposed, will only be done by officers who had been appointed therefor by the Company's CEO.

 

· The provision of Inside Information in a selective or arbitrary manner must be avoided.

 

· "Inside Information" is not limited strictly to information pertaining to the Company directly. Information pertaining to other traded companies, such as information regarding an anticipated collapse of the Company's competing company, could constitute Inside Information the use of which is prohibited.

 

Financial Statements

 

· As a general rule, the period from the initial formulation of the Company's quarterly and/or annual financial statements and until the release thereof, is an especially sensitive period, especially in all matters pertaining to the concern of using Inside Information.

 

24
 

 

· According to the aforesaid, anyone who had been exposed to the Company's draft financial statements, including his Family Members as defined above, are mandated to avoid the performance of a transaction in the Company's securities and/or the derivatives thereof, for so long as the financial statements have not been released as aforesaid at the public.

 

· For the sake of good order, it is recommended that the employees and Insiders at the Company will avoid the performance of transactions with the Company's securities during the period from the date of release of its quarterly financial statements and until the lapse of two business days from the date on which such statements had been released, and within the period from the date of release of its annual financial statements and until the lapse of three business days from the date on which such statements had been released.

 

Repurchase of securities

 

· As a general rule, and subject to the provisions of law, any company may perform repurchase of the securities which had been issued thereby, without the approval of a court and subject to the distribution rules.

 

· However, repurchase of securities which might, in itself, be carried out for legitimate financial reasons, is liable sometimes to raise suspicion of violation of the prohibition of use of Inside Information.

 

· The law determines that a corporation will not bear liability for a transaction in securities which was made by the corporation while the corporation or the employee thereof had Inside Information pertaining to the transaction, if the corporation proved that the employee or director who performed the transaction had no such Inside Information and that there is a reasonable explanation for the performance of the transaction 16 .

 

· In a position statement dated July 26, 2010, the ISA set forth a safe harbor defense in the repurchase of securities by a corporation 17 . Such defense will be available to the Company if several conditions, as stipulated in the position statement as aforesaid will be fulfilled. In a nutshell it may be said that if the repurchase is being carried out under a mechanism of "automatic pilot", the safe harbor defense shall be established.

 

In further detail:

 

o The Company must form a written repurchase plan which will set forth parameters of quantity, price and date for performance of the securities purchase;

 

o The Company must set forth an irrevocability provision of the plan so that the Company cannot interfere and amend or withhold or affect the performance of the purchases after adoption of the plan;

 

 

16 Section 52G(b) of the Law.

17 Legal position number 198-19: Safe Harbor defense in the repurchase of the securities by the corporation dated July 26, 2010.

 

25
 

 

o A commencement date for the plan will be set forth, which will be after the lapse of one trade day from the release date of the first financial statement after adoption of the plan, in order to allow the investing public to absorb the information contained in the financial statement prior to the commencement of the plan;

 

o The repurchase will be carried out through an independent external entity (member of the stock exchange);

 

o A maximal bar for repurchases per day shall be set forth.

 

It shall be clarified that it is possible to carry out repurchase of securities also without compliance with the safe harbor defense, however in such case, there shall be exposure of the Company and those acting on its behalf. Also, the safe harbor defense will not apply to the purchases of individuals, including interested parties and officers of the Company, who purchase securities of the Company for themselves. Namely, insiders in the Company will not be able to defend against a claim of making a transaction while using Inside Information, based on the claim that they had directed a member of the stock exchange in advance to buy and sell securities of the Company under certain conditions.

 

I confirm that I have read the aforesaid procedure and that its meaning is clear to and understood by me.

 

/s/ Liat Flaishon  
Liat Flaishon  

 

26

 

Exhibit 10.14

 

INTEC PHARMA LTD.

 

EMPLOYMENT AGREEMENT

 

With Nadav Navon

 

AGREEMENT entered into as of    between Nadav Navon, residing at 7 Socholovsky Zvi St., Rechovot, Israel (the “ Employee ”), and Intec Pharma Ltd., an Israeli company with offices located at 10 Hertom St. Har Ha’hozvim, Jerusalem, Israel (the “ Company ”).

 

WITNESSETH:

 

WHEREAS, the Company is in the business of drug delivery gastric retentive platform (the “ Business ”); and

 

WHEREAS, the Company desires to employ Employee, and the Employee desires to be employed in the Company as Analytical Lab Manager.

 

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

 

1. Contents of Agreements/Definitions

 

The preamble and the exhibits to this agreement (the “ Agreement ”) constitute an integral part hereof and are hereby incorporated by reference.

 

2 . Employment and Duties

 

2.1           As of the Effective Date (as defined in Section 3 hereto), the Company employs Employee and Employee accepts employment with the Company as Analytical Lab Manager upon the terms and conditions set forth herein (the “ Position ”). The Employee shall report regularly to the Company’s VP R&D, and/or to any other officer of the Company, under the Company’s sole discretion. Notwithstanding the above, the Company may change the Employee’s Position as it may deem fit and such action shall not be considered a material adverse change in the Employee’s employment conditions.

 

2.2           Employee shall devote all necessary time and attention to the Business of the Company and shall perform his duties diligently and promptly for the benefit of the Company.

 

2.3           Employee shall work five days a week, Sunday to Thursday, unless otherwise required by the Company, upon its sole discretion.

 

2.4           During his engagement hereunder, Employee shall not, without the prior written consent of the Company, undertake or accept any other paid or unpaid employment or occupation or engage in or be associated with (other than through an investment in a corporation which is financial in its nature and in which Employee holds less than 5% of the outstanding shares), directly or indirectly, any other businesses, duties or pursuits except for de minimis non-commercial or non-business activities.

 

3. Term and Termination of Employment

 

3.1        Employee’s employment under this Agreement shall commence on    6 (the “ Effective Date ”) and shall end on the earliest of (i) the death or disability (as defined herein) of Employee; (ii) termination by either party.

 

 
 

 

3.2           Either party may terminate this Agreement without cause, as hereinafter defined, by providing thirty (30) days prior written notice (the “ Notice Period ”). During the Notice Period Employee shall continue his services unless otherwise instructed, and shall cooperate with the Company and use his best efforts to assist the integration into the Company organization of the person or persons who will assume the Employee’s responsibilities. Notwithstanding the above, during a period of 3 months following the Effective Date (the: “ Trail Period ”), the Notice Period shall be fourteen (14) days.

 

3.3           At any time, the Company shall be entitled to immediately terminate Employee’s employment hereunder for ‘cause’ (as set forth in Section 4.1 below) by providing notice thereof to Employee.

 

4. Provisions Concerning the Term of Employment

 

4.1           For the purpose of this Agreement, “ cause ” shall exist if Employee (i) breaches any of the terms of Sections 2.1, 7, 8, 9 and 10 or; (ii) engages in willful misconduct or acts in bad faith with respect to the Company in connection with and related to the employment hereunder; (iii) is convicted of a felony or is held liable by a court of competent jurisdiction for fraud against the Company; (iv) fails to reasonably comply with the instructions of the Company given to the Employee in good faith and relating to the performance of Employee’s duties under his Position; or (v) is dismissed under the circumstances defined in Section 16 and/or Section 17 of the Severance Pay Law, 1963 (hereinafter: “ The Severance Pay Law ”); provided that, with respect to clauses (i) and (iv), if Employee has cured any such condition (that is reasonably susceptible to cure) within 10 business days (“ Grace Period ”) of the advance notice (as defined herein), then “ cause ” shall be deemed not to exist. For purposes of this Section 4, “ advance notice ” shall constitute a written notice delivered to Employee that sets forth with particularity the facts and circumstances relied on by the Company as the basis for cause.

 

4.2           For the purposes of this Agreement “ disability ” shall mean any physical or mental illness or injury as a result of which Employee remains absent from work for a period of two (2) successive months, or an aggregate of two (2) months in any twelve month period. Disability shall occur upon the end of such two (2) month period.

 

5. Compensation

 

5.1 5.1.1 During the term hereof, and subject to the performance of the services required to be performed hereunder by Employee, the Company shall pay to Employee for all services rendered by Employee under this Agreement, a salary, payable not less often than monthly and in accordance with the Company’s normal and reasonable payroll practices, a monthly gross amount equal to NIS 22,000 (the “ Gross Salary ”). Notwithstanding the above, during the Trial period, the Gross Salary shall be equal to NIS 20,000.

 

  5.1.2     An amount equal to 10% of the Gross Salary of the Employee, shall be considered as a special compensation for the Employee’s obligation not to compete with the Company, as defined in Section 8 herein (hereinafter: “ The Special Compensation ”).

 

5.1.3     The Company will pay the Employee the Gross Salary until the 9 th of each month, for the previous month.

 

5.1.4     In addition, in accordance with the Company’s policy, once a year the parties will conduct a salary review for the Employee, during which the Company shall evaluate the Employee’s performance and shall decide (according to the performance of the Employee and the development of the Company) whether to increase his salary, and, if so, in what amount. Nothing in this clause shall be construed as the Company’s commitment to increase the Employee’s salary at any time.

 

- 2 -
 

 

5.2           Insurance Policy: The Company and the Employee will obtain and maintain an insurance policy for the exclusive benefit of the Employee, as follows: The Company shall continue to insure the Employee under his existing pension fund (the “ Keren Pensia ”), under which the Company shall contribute 6% of an amount equal to 2 (two) times the average wage in Israel (the “ Maximum Amount ”) as compensatory payments, and 8.33% of the Maximum Amount in lieu of severance pay (i.e. 6% of the Maximum Amount to the Keren Pensia + an additional 2.33% of the Maximum Amount towards a ‘Kupat Gemel’). The Employee shall contribute in respect of such Keren Pensia a monthly amount equal to five and one half percent (5.5%) of the Maximum Amount.

 

In addition, the Company shall obtain and maintain a manager’s insurance policy for the exclusive benefit of the Employee in the customary form with respect to which the Company shall be the beneficiary (the “ Bituach Menahalim ”). The Company shall contribute to such Bituach Menahalim a monthly amount equal to thirteen and one third percent (13.33%) of an amount equal to the difference between the Maximum Amount and the Gross Salary (the “ Exceeding Amount ”), out of which 8.33% are designated for severance payments and 5% are designated for compensatory payments. The Employee shall contribute in respect of such Bituach Menahalim a monthly amount equal to five percent (5%) of the Exceeding Amount as compensatory payments. The Employee hereby instructs the Company to transfer to the Keren Pusia and the Bituach Menahalim all amounts on account of both the Company’s and Employee’s Contributions in respect of such plans.

 

5.3           It is hereby agreed that upon termination of employment under this Agreement, the Company shall release to the Employee all amounts accrued in the Keren Pencia and the Bituach Menahalim on account of both the Company’s and Employee’s Contributions. It is hereby agreed that if the Employee is dismissed under the circumstances defined in Section 16 and/or Section 17 of the Severance Pay Law - the Employee shall not be entitled to any Severance Pay.

 

It is hereby clearly agreed and understood that the amounts accrued in the Keren Pensia and the Bituach Menahalim on account of the Company’s Contribution shall be in lieu and in full and final substitution of any severance pay the Employee shall be or become entitled to under any applicable Israeli law. This section is in accordance with Section 14 of the Severance Pay Law, and the General Approval of the Labor Minister, dated June 30, 1998, issued in accordance to the said Section 14, a copy of which is attached hereby as Appendix A

 

5.4          In addition, the Company shall obtain Disability Insurance (“ Ovdan Kosher Avoda ”), which may be included within the Bituach Menahalim, for the exclusive benefit of the Employee and shall contribute therefore an amount not exceeding two and a half percent (2.5%) of each monthly Gross Salary Payment, or such amount required to enable the payment of at least 75% of the Gross Salary.

 

5.5       The Company and the Employee shall open and maintain a Keren Hishtalmut Fund for the exclusive benefit of the employee (the “ Fund ”). The Company shall contribute to such Fund an amount equal to seven and a half percent (7.5%) and the Employee shall contribute to such Fund an amount equal to two and a half percent (2.5%) of each monthly Gross Salary payment. The Employee hereby instructs the Company to transfer to the Fund the amount of the Employee’s and the Company’s contribution from each monthly Gross Salary payment.

 

For the removal of doubt it is hereby clarified, that is the event of termination of Employee’s employment under this Agreement for any reason other than a termination for cause (as defined above) Employee shall be entitled to all sums accumulated in the Fund. In the event of termination for cause (as defined above) Employee shall not be entitled to any of Company’s contributions to the Fund made during this Agreement.

 

- 3 -
 

  

5.6           The Employe will be entitled to use a leased company car (the: “ Company Car ”), The Company Car type shall be of Reno-Megan (group 2). The Company will cover all the operating expenses of the Company Car (excluding parking expenses and/or fines), and the Employee shall bare any and all taxes applicable to Employee in connection with the Company Car. Payments of the Company Car’s expenses by the Company under this paragraph are in lieu of traveling expenses to and from work as required by the Extension Order.

 

Employee shall take good care of such Company Car and ensure that the provisions of the insurance Policy and Company’s rules relating to Company Car are strictly, lawfully and carefully observed. Employee is aware that in order to provide Employee with the Company Car the Company shall lease the Company Car from a leasing company, and Employee undertakes to strictly comply with the provisions of the leasing agreement.

 

Employee shall return Company Car (together with its keys and any other equipment supplied and/or installed therein by Company) to Company’s principal office upon, termination of Employee’s employment with Company. Employee shall have no rights of lien with respect to Company Car and/or any other equipment relating thereto as above mentioned.

 

5.7           Company shall provide Employee with, and pay for the use of, a cellular phone for Employee’s use in the course of performing Employee’s obligations under Employee’s Position, up to an aggregate amount of NIS 300 per month (the “ Cellular Phone ”). Employee shall bear any and all taxes applicable to Employee in connection with the Cellular Phone and/or the use thereof. Employee shall return the Cellular Phone to Company’s principal office upon termination of Employee’s employment with Company. Employee shall have no rights of lien with respect to the Cellular Phone.

 

5.8           Subject to an adoption of an Employee stock option plan by the Company, Employee shall be granted options to purchase shares of the Company. The option shall be subject to the terms of the Company’s Employee Stock Option Plan, and the option agreement to be entered into between the Company and the Employee, following the adoption of an Employee Stock Option Plan by the Company.

 

5.9 The Agreed Alternative Payment - in Case_of a Claim for Overtime Payments

 

5.9.1           Employee agrees and acknowledges that due to his position in the Company, the Hours of Work and Rest Law, 1951 (hereinafter: “ the Hours of Work and Rest Law ”) does not apply on him. Therefore, the Employee shall not be entitled to claim or receive payments or any additional pay for overtime working hours, shifts, or work performed on Saturday or holidays.

 

5.9.2           The Employee undertakes, by signing this Agreement, that he will not sue, and/or demand, and/or claim that he is entitled to any additional payment to his Monthly Gross Salary due to overtime, above his Monthly Gross Salary which includes all the consideration which the Employee is entitled to receive for overtime.

 

5.9.3           Therefore, if notwithstanding the agreement of the parties and the Employee’s informed undertaking under this Agreement, it will be decided by a competent court, or any other competent tribunal, either due to Employee’s application or any other source, that the Hours of Work and Rest Law applies to the Employee, and that therefore the Employee is entitled to compensation, or any other additional payments due to overtime – then the parties hereto agree that the salary, which the Employee was entitled to, was 75% (Seventy-five percent) of the Monthly Gross Salary which was paid to the Employee under this Agreement. (hereinafter the “ Agreed Alternative Payment ”).

 

5.9.4           The Employee will be obligated to return the Company, on the day of the claim and/or demand which contradicts this Agreement, in which it will be claimed that the Working Hours and Rest Law applies to him, and/or that he was entitled to Overtime Payments – all additional payments that the Employee received from the Company over the Agreed Alternative Payment as defined above (the “ Excess Amount ”).

 

- 4 -
 

 

5.9.5       Each Excess Amount that the Employee will be obligated to return to the Company as mentioned above - shall bear interest and shall be linked to the Cost of Living Index on the Employee’s pay day – as compared to the Index on the day such amount will be returned to the Company.

 

5.9.6      The Company shall be entitled to set off such Excess Amounts against all amounts that the Employee shall be entitled to under this Agreement, or under the decision of the Court or of any other competent tribunal as mentioned above, which shall not derogate from any other right of the Company to receive from the Employee the rest of the amounts it is entitled to.

 

6. Taxation

 

6.1           To the extent applicable, the Company may deduct from the compensation payable to Employee under this Agreement any and all taxes and charges (including health tax) applicable to Employee as may now be in effect or which may hereafter be enacted or required by law, and make the appropriate payments on behalf of Employee to the income tax authorities, the Institute of National Insurance and any other relevant authority. Employee shall respectively pay all taxes and payments as required or shall be required by any applicable law. Employee shall notify the Company of any change in Employee’s place of residence or status, which may affect Employee’s tax liability anywhere in the world.

 

6.2          The Employee acknowledges that some of the benefits granted to Employee under this Agreement may be treated by the authorities as additional compensation to Employee, and therefore Employee agrees that, in such event Employee shall pay all taxes, national insurance contributions, and other payments required to be paid to the authorities in connection therewith

 

7. Secrecy and Nondisclosure

 

7.1           The Employee shall treat as secret and confidential all of the processes, methods, formulas, procedures, techniques, software, designs, data, drawings and other information which are not of public knowledge or record pertaining to the Company’s Business (existing, potential and future), including without limitation, all business information relating to customers and suppliers and products of which the Employee becomes aware during and as a result of his employment or association with the Company, and Employee shall not disclose, use, publish, or in any other manner reveal, directly or indirectly, at any time during or after the term of this Agreement, any such processes, methods, formulas, procedures, techniques, software, designs, data, drawings and other information pertaining to the Company’s existing or future Business or products The Employee may disclose or use such information, if at all, only with the prior express written consent of the Company.

 

7.2           The Employee hereby undertakes to return, upon request, to the Company, all written materials, records, documents, computer software and/or hardware or any other material which belongs to the Company and that might be in his possession, and if requested by the Company to do so, will execute a written statement confirming compliance with the above said.

 

7.3           The Employee acknowledges that all of the secrets, information, or documents aforementioned in Sub-Sections 7.1 and 7.2 above, are essential commercial and proprietary information of the Company which is not public information and cannot easily be discovered by others, whose confidentiality provides the Company a commercial advantage over its competitors, and the Company is taking reasonable measures to safeguard its confidentiality.

 

7.4          The Employee’s undertakings pursuant to this clause shall remain in force after the termination of Employee’s employment under this Agreement.

 

- 5 -
 

  

8. Non - Competition

 

8.1          Employee agrees that during the term of this Agreement and for a period of one (1) year after he ceases to be employed by the Company he will not, directly or indirectly, for his own account or as an employee, officer, director, partner, joint venturer. shareholder, investor, consultant or otherwise (except as an investor in a corporation whose stock is publicly traded and in which Employee holds less than 5% of the outstanding shares) and without the prior written consent of the Company, interest himself in or engage in any business or enterprise, anywhere in the world, that directly competes with the Business of the Company, that exists now or in the future or is based on similar technology to the technology that was developed by the Company.

 

8.2          Employee agrees that during a period of six months from termination of this Agreement, he shall not employ directly or indirectly any individual employed by the Company during the six-month period, which preceded such date of termination.

 

8.3          Employee acknowledges that the restricted period of time and geographical area specified under Sections 8.1 and 8.2 hereof are reasonable, in view of the nature of the business in which the Company is engaged and Employee’s knowledge of the Business.

 

8.4         Notwithstanding anything contained in Section 8.3 to the contrary, if the period of time or the geographical area specified under Sections 8.1 or 8.2 hereof should be determined to be unreasonable in any judicial proceeding, then the period of time and area of the restriction shall be reduced so that this Agreement maybe enforced in such area and during such period of time as shall be determined to be reasonable by such judicial proceeding.

 

8.5          If the Employee shall breach any of his obligations under this Section 8 - The Employee will be obligated to return the Company, immediately, the Special Compensation, as defined above. Such Special Compensation thus returned to the Company:

 

8.5.1          Shall bear interest, and shall be linked to the Cost of Living Index on the Employee’s pay day– as compared to the Index on the day such amount will be returned to the Company.

 

8.5.2          Shall not derogate from any other right of the Company to receive from the Employee the rest of the amount it is entitled to.

 

8.6          The Employee declares and acknowledges that:

 

8.6.1          His obligations of protecting the confidentiality and non-competition provisions included in this Agreement are fair, reasonable, and proportional, especially in light of the special compensation he receives under this Agreement which is designed to protect the Company’s secrets and its confidential information, which constitute the essence of its protected business and commercial advantage in which significant capital investments were made.

 

8.62         Breach of an obligation under this Section - shall contradict the nature of the special trust and relationship of loyalty between the parties, the fair and proper business practices, the duty of good faith and fairness between the parties, shall harm the Company, and shall constitute a material breach of this Agreement and the trade secrets, confidential connections, confidential information, and other privileged interests of the Company.

 

8.6.3          The Employee declares that his obligations under this section, which are reasonable and proportional - do not prevent the employee from developing his general knowledge and professional expertise in the area of his business, with regard to those who are not customers and employees of the Company and without usurping its trade secrets.

 

- 6 -
 

 

9.          Development Rights

 

The Employee agrees and declares that, all proprietary information including but not limited to copyrights, trade secrets and know-how, patents and other rights in connection therewith developed by or with the contribution of Employee’s efforts during his employment by the Company shall be the sole property of the Company, and the Employee shall execute all documents necessary to assign any patents to the Company and otherwise transfer such proprietary rights to the Company. In Addition, Employee agrees to be bound by the terms and conditions of the Intellectual Property assignment of rights stated in Appendix B hereto, incorporated by reference as part of this Agreement.

 

10.          Employee Representations and Acknowledgments

 

The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or breach of any agreement or other instrument to which he is a party or by which he is bound, including without limitation, any confidentiality or non-competition agreement, (ii) do not require the consent of any person or entity, and (iii) shall not utilize during the term of his employment any proprietary information of any third party, including prior employers of the Employee.

 

11.          Vacation, Illness, Dmey Havra’ah

 

11.1         Employee shall be entitled to such number of paid vacation days during each year of his employment, as provided by Israeli Labor Law.

 

11.2         Employee shall be entitled to such number of working days of paid illness vacation during each year of his employment, as provided by Israeli Labor Law, or more, in accordance with Company Policy.

 

11.3         The employee shall be entitled to “ Dmey Havra’ah ”in accordance with any applicable law.

 

12.          Benefit

 

Except as otherwise herein expressly Provided, this Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including, without limitation, any subsidiary or affiliated entity and shall inure to the benefit of, and be binding upon, Employee, his heirs, executors, administrators and legal representatives, Notwithstanding the foregoing, the obligations of Employee hereunder shall not be assignable or delegable.

 

13.          Entire Agreement

 

This Agreement constitutes the entire understanding and agreement between the parties hereto, supersedes any and all prior discussions, agreements and correspondence with regard to the subject matter hereof, and may not be amended, modified or supplemented in any respect, except by a subsequent writing executed by both parties hereto.

 

14.          Notices

 

All notices, requests and other communications to any party hereunder shall be given or made in writing and telecopied, mailed (by registered or certified mail) or delivered by hand to the respective party at the address set forth in the caption of this Agreement or to such other address (or telecopier number) as such party may hereafter specify for the purpose of notice to the other party hereto. Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified herein and the appropriate answerback is received or (ii) if given by any other means, when delivered at the address specified herein.

 

- 7 -
 

 

15.          Affiliated Companies

 

For the purpose of Sections 7 and 8 above, the term “ Company ” shall include also the Company’s Parent company, Company’s subsidiary or any company controlled or owned by the Company’s parent company.

 

16. Applicable Law

 

16 .1         This Agreement shall not derogate from any Applicable Law, Extension Order, or Collective Agreement.

 

16.2         This Agreement shall be governed by, and construed and enforced in accordance with, the laws of Israel without giving effect to principles of conflicts of law and the courts of Israel, District of Tel Aviv, shall have exclusive jurisdiction over the parties hereto and subject matter hereof.

 

IN WITNESS WHEREOF , the parties have executed this Agreement as of the date first appearing above.

 

/s/ Efi Cohen Arazi   /s/ Nadav Navon
INTEC PHARMA LTD.   EMPLOYEE

 

- 8 -
 

 

 

APPENDIX A

 

General Approval (Combined Version) Regarding Employers’ Contributions to

Pension Funds and Insurance Funds in lieu of Severance Pay

Under the Severance Pay Law, 5723-1963

[Updated as of February 28, 2001]

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 1 (the “Law”), I hereby confirm, that contributions made by an employer for his employee, commencing as of the date of publication of this approval, to a comprehensive pension in a provident fund for annuity that is not an insurance fund within the meaning of such term in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 2 (a “Pension Fund”) or to a managers’ insurance that includes the possibility of an annuity or a combination of payments to an annuity plan and to a non-annuity plan within such insurance fund (an “Insurance Fund), including combined contributions made by the employer to a Pension Fund and to an Insurance Fund, whether or not the Insurance Fund includes an annuity plan (the “Employer's Contributions”), shall be payable in lieu of severance pay due to such employee in respect of the salary from which such contributions were made and the period they were made for (the “Exempt Salary”); provided, however, that all of the following conditions have been fulfilled:

 

(1) The Employer's Contributions -

 

(a) To the Pension Fund, are at a rate of no less than 14 1/3% of the Exempt Salary, or 12% of the Exempt Salary, if in addition thereto, the employer makes supplementary severance pay contributions for his employee to a provident fund for severance pay or to an Insurance Fund in the employee's name, at a rate of 2 1/3% of the Exempt Salary. In the event that the employer has not contributed such 2 1/3% in addition to said 12%, his contributions shall only replace 72% of the employee's severance pay;

 

(b) To the Insurance Fund are at a rate of no less than one of the following:

 

(1) 13 1/3% of the Exempt Salary, if in addition thereto, the employer makes contributions for his employee for securing monthly income in the event of disability to a plan approved by the Commissioner of the Capital Market, Insurance and Savings at the Ministry of Finance, at the rate required to secure at least 75% of the Exempt Salary or a rate of 2 1/2% of the Exempt Salary, whichever is lower (“Disability Insurance Contributions”); or

 

 

1 Statues 5723, p. 136.
2 Regulations 5724 , p. 1302.

 

- 9 -
 

 

(2) 11% of the Exempt Salary, if the employer also made Disability Insurance Contributions, and in such case the Employer's Contributions shall only replace 72% of the Employee's severance pay; In the event that the employer has made, in addition to the foregoing, supplementary severance pay contributions to a provident fund for severance pay or to an Insurance Fund in the employee's name at a rate of 2 1/3% of the Exempt Salary, the Employer's Contributions shall replace 100% of the employee's severance pay.

 

(2) By no later than three months of the commencement date of the Employer's Contributions, a written agreement is executed between the employer and the employee that includes:

 

(a) The employee’s consent to the arrangement pursuant to this approval in a form specifying the Employer's Contributions, and the Pension Fund and Insurance Fund, as applicable; such agreement shall also include the form of this approval;

 

(b) 3 The employer’s advance waiver of any right he may have to a refund of monies from his contributions, unless the employee’s right to severance pay has been revoked by virtue of Sections 16 or 17 of the Law, and to the extent so revoked, or the employee has withdrawn monies from the Pension Fund or Insurance Fund other than by reason of an Entitling Event; in such regard "Entitling Event" means death, disability or retirement at or after the age of 60 or more

 

(c) This approval shall not derogate from the employee's right to severance pay under any law, collective agreement, expansion order or employment contract, in respect of salary over and above the Exempt Salary.

 

  Eliyahu Yishai
   
  Minister of Labor and Social
  Affairs

 

Signature of employee:

 

        [signature]  
           
Date:     Signature: /s/ Nadav Navon  

 

 

3 Amendment: Official Gazette 4803, 5760 (September 19, 1999).

 

- 10 -
 

 

APPENDIX B

 

Intellectual Property assignments of rights

 

1.         For purposes of this Appendix, the following definitions shall apply:

 

Inventions ” shall mean:

 

A.          All inventions, improvements, modifications, and enhancements whether or not patentable, made by the Employee during or in the course of employment, or which relate, directly or indirectly to the business of the Company, or which were made using the Company’ equipment, and

 

B.          All inventions, improvements, modifications and enhancements made by the Employee, during a period of twelve (12) months (or such lesser maximum period permitted by law) after any termination of the Employee’s employment, which relate, directly or indirectly, to the business of the Company at the time they were so made.

 

Work Product ” shall mean all documentation, software, hardware, firmware, creative works, artworks, know-how and information created, in whole or in part, by the Employee during the Employee’s employment by the Company, whether or not copyrightable or otherwise protectable, excluding Inventions.

 

Trade Secrets ” shall mean “ Commercial Secrets as defined in the Law of Commercial Wrongs, 1999, and all documentation, software, hardware, firmware, customer lists, know-how and other information of any kind or nature relating to the past, present or future business of the Company or any plans therefor, or relating to the past, present or future business of a third party or plans therefor (including but not limited to any items and information in any form determined by law as trade secrets) that are disclosed to the Employee, which the Company does not disclose to third parties without restrictions on use or further disclosure.

 

2.         Without derogating from any other provision of the law:

 

A.          The Employee shall promptly disclose to the Company all Inventions and keep accurate records relating to the conception and reduction to practice of all Inventions. Such records shall be the sole and exclusive property of the Company, and the Employee shall surrender possession of such records to the Company upon any termination of the Employee’s relationship with the Company.

 

B.          The Employee hereby assigns to the Company, without additional consideration to the Employee, the entire right, title and interest in and to the Inventions and Work Product and in and to all proprietary and any and all intellectual property rights therein or based thereon. The Employee shall execute all such assignments, oaths, declarations and other documents as may be prepared by the Company to effect the foregoing.

 

C.          During the term of this Agreement, and thereafter, the Employee shall provide the Company with all information, documentation, and assistance the Company may reasonably request to perfect, enforce, or defend its proprietary rights in or based on the Inventions, Work Product and/or Trade Secrets. The Company, in its sole discretion, shall determine the extent of the proprietary rights, if any, to be protected in or based on the Inventions and/or Work Product. All such information, documentation, and assistance shall be provided to the Company by the Employee at no additional expense to the Company, except for out-of-pocket expenses which the Employee incurred at the Company’s request.

 

- 11 -
 

  

D.          During the term of this Agreement, and thereafter, the Employee shall treat Inventions and Work Product as Confidential Information under this Agreement and shall not disclose them to others without the prior written permission of the Company, or use such Inventions and/or Work Product for any purpose, other than for the performance of services for the Company.

 

3.          Remedies .          The Employee acknowledges that a breach of the covenants contained in this Agreement and this Appendix B would result in substantial injury and damage to the Company for which there is no adequate remedy at law. Therefore, in the event of an actual or threatened breach of such covenants by the Employee, the Company shall be entitled, in addition to all other rights, remedies and damages that may be available to the Company at law or in equity, to a preliminary restraining order and an injunction, or any other available equitable remedy, to restrain the violation or attempted violation of this Agreement by the Employee or by any other person or entity acting for his benefit or on his behalf. In the event there is any action to enforce the terms of such restrictive covenants, the prevailing party, in addition to any other remedy, shall be entitled to recover reasonable attorney’s fees and all other reasonable costs associated with any such action both on the trial and appellate level and in any creditor’s proceedings. In the event that a court of competent jurisdiction determines by final non-appealable judgment that the scope, time period, or geographical limitations of any of the restrictive covenants specifically set forth herein are too broad to be capable of enforcement, said court is authorized, and the parties hereto stipulate that such court shall, modify said restrictive covenants and enforce such provisions as to scope, time, and geographical areas as the court deems equitable, just and appropriate considering the intent of the parties hereto.

 

- 12 -
 

 

Translated from Hebrew

 

Annex to Employment Agreement

Entered into and signed in Jerusalem on May 29, 2011

 

Between: Intec Pharma Ltd., Company 513022780
  of 12 Hartom Street, Jerusalem
  (the " Company ")
  of the first part;
   
And: Nadav Navon
  of 7 Sochovolsky Street, Rehovot
  (the " Employee ")
  of the second part;

 

Whereas the Employee serves as the Company’s R&D Manager under an employment agreement dated January 15, 2006, which is attached hereto, with the annexes thereto, as Annex A (the “ Agreement ”); and

 

Whereas the parties’ intention in respect of this document is to amend the terms and conditions of the Agreement as specified below;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this annex and the annexes hereto constitute an integral part hereof.

 

2. All of the rights and obligations specified in the Agreement shall continue to remain in force and effect and all of the terms and conditions of the Agreement shall continue to apply between the parties, other than if and insofar as expressly modified in this annex to the Agreement.

 

3. The following vesting conditions, shall apply, subject to receipt of the approvals required under any law, to the options granted to the Employee on October 13, 2010,:

 

a) In events in which the Company is sold to a third party and/or control is transferred from the present shareholders of the Company to a third party and/or its main assets are sold to a third party and/or the Company’s business is merged with another company (including a “reverse acquisition” in which the shareholders of the Company hold the majority of shares of the merged company) and/or a license is granted in respect of all of the Company’s assets or its main assets and/or transactions the nature of which is like the transactions specified above (the “ Acquisition Event ”), then – the vesting dates will be accelerated such that the Employee may exercise, immediately and upon occurrence of the Acquisition Event, all of the options allotted to him, even if such options shall not have vested yet under the terms of the Agreement.

 

 
 

 

b) Insofar as the Employee is dismissed for a reason that is not included in Section 4.1 of the Agreement, the vesting dates of a relative part of the options allotted to him will be accelerated, even if the same have not yet vested. The relative part will be calculated as the ratio between the number of days between the granting date and the dismissal date and the time between the granting date and the original vesting date.

 

4. In addition to the salary specified in the Agreement, the Employee shall be entitled to receive a bonus from the Company, in respect of engagement in a Commercialization Agreement, subject to the following conditions:

 

a. The Employee is employed by the Company on the date of signing of the Commercialization Agreement and on the date of performance thereof, as defined hereunder.

 

b. The Company signs a Commercialization Agreement with a third party in respect of at least one of its products.

 

In this annex, a “ Commercialization Agreement ” is an agreement, engagement in which shall have been lawfully approved by the appropriate organs of the Company under any law, and for the signing and consummation of which the Company receives monetary compensation, the net aggregate sum of which, during the Employee’s term of employment with the Company, shall be no lesser than U.S. $10,000,000 (ten million U.S. dollars).

 

c. The bonus rate shall be 1.5% of the consideration actually received by the Company up to an aggregate amount received by the Company of U.S. $66.7 million.

 

It is clarified that the Employee shall not be entitled to an additional bonus in respect of amounts exceeding U.S. $66.7 million which are paid, if and insofar as they are paid, to the Company.

 

The aforesaid relative rate shall be paid to the Employee on a current basis within 60 days of the date of actual receipt of the amounts by the Company.

 

d. For the avoidance of doubt, insofar as the Employee discontinues his employment with the Company for any reason whatsoever, the Company shall not be obligated to pay any part of the bonus in respect of payments received subsequently to the termination of the Employee’s employment with the Company.

 

e. The Employee shall exclusively bear payment of any tax deriving from receipt of the bonus under applicable law. Payment of such tax shall be withheld by the Company, unless the Employee provides a certificate of exemption from tax withholding.

 

f. The amount of the bonus, its rate, the manner in which it is determined and the payment date thereof shall be exclusively determined by the Company, as per its sole and absolute discretion.

 

 
 

 

g. The Employee agrees that any claim, suit or demand stemming from the bonus or bonuses described above shall be examined, insofar as the Company consents to such examination request, by a certified accountant, who shall be appointed by the Company per the Company’s sole and absolute discretion, and the results of his examination shall be final and conclusive. The Employee shall bear the full fee of the accountant, if the examination is conducted as per his request.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Nadav Navon
Intec Pharma Ltd.   Nadav Navon

 

 
 

 

Translated from Hebrew

 

Addendum to Employment Agreement

Entered into and signed in Jerusalem on March __, 2012

 

Between: Intec Pharma Ltd., Company 513022780
  of 12 Hartom Street, Jerusalem
  (the " Company ")
  of the first part;
   
And: Nadav Navon 24009011, I.D. 022152177
  of 7 Sochovolsky Street, Rehovot
  (the " Employee ")
  of the second part;

 

Whereas the Employee serves as manager of the R&D Department under an employment agreement dated January 15, 2006, which is attached hereto, the annexes thereto, as Annex A (the “ Agreement ”); and

 

Whereas the parties intend for all of the rights granted to the Employee under the Agreement to remain in force and effect and for all of the terms and conditions of the Agreement to continue to apply between the parties, other than if and insofar as expressly modified in this annex;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this addendum and the annexes hereto constitute an integral part hereof.

 

2. The monthly salary of the VP R&D shall be updated to NIS 37,000 per month as of March 1, 2012.

 

3. Section 7.4 of the Agreement shall be replaced with the following language:

 

“Each party may terminate this agreement at any time by a written prior notice of 90 days to the other party”.

 

4. All of the other provisions of the Agreement shall remain in force and effect.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Nadav Navon
Intec Pharma Ltd.   Nadav Navon

 

 
 

 

Translated from Hebrew

 

Amendment to Agreement

Entered into and signed in Jerusalem on October 21, 2013

 

Between: Intec Pharma Ltd., Company 513022780
  of 12 Hartom Street, Jerusalem
  (the " Company ")
  of the first part;
   
And: Nadav Navon, I.D. 24009011
  of 20 Eliezer Ben Yehuda Street, Rehovot
  (" VP R&D & Operations ")
  of the second part;

 

Whereas Mr. Nadav Navon serves as the Company’s VP R&D & Operations under an employment agreement dated March 28, 2012, which is an update of the previous employment agreement (the “ March 2012 Update ”) of May 29, 2011 (the “ May 2011 Update ”), which is an update of his previous employment agreement with the Company dated January 15, 2006 (the “ January 2006 Agreement ”); and

 

Whereas the parties intend to amend the January 2006 Agreement and the May 2011 Update and the March 2012 Update, as approved by the Company’s compensation committee and board of directors, all as specified in this amendment to the agreement and subject to approval by the Company’s shareholders;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. General

 

1.1. The preamble to this amendment to the agreement and the annexes hereto constitute an integral part hereof.

 

1.2. The headings in this amendment to the agreement are added solely for the sake of convenience and no use shall be made thereof for interpretation purposes.

 

2. Salary and Social Benefits

 

Update of gross monthly salary : the monthly salary shall increase and amount to NIS 44,000.

 

3. Cash Bonus

 

The cash bonus of $1,000,000, to which the VP R&D & Operations would be entitled due to the execution of a material agreement, is cancelled.

 

 
 

 

4. Options

 

(1) The VP R&D & Operations will be allotted 500,000 options for the purchase of 500,000 Company shares of par value NIS 0.0.1 each, against an exercise price equal to the average of the share’s closing prices in the 30-day period preceding the board of directors’ resolution. Options that shall vest over time shall become exercisable according to the terms and conditions of the Option Plan. Options that shall vest over time shall be effective for a period of up to 72 calendar months as of the granting date thereof. Options that shall vest over time shall expire at the end of 90 days as of the date of termination of employment of the VP R&D & Operations, and shall be deemed null and void and non-exercisable, if, by such time, entitlement to exercise the same shall not have arisen and the same shall not have been exercised by the VP R&D & Operations;

 

(2) The VP R&D & Operations will be allotted, on a one-time basis, 2,860,000 contingent options for the purchase of 2,860,000 Company shares of par value NIS 0.0.1 each, against an exercise price equal to the average of the share’s closing prices in the 30-day period preceding the board of directors’ resolution on the allotment (the “ Contingent Options ”). The Contingent Options are in keeping with the provisions of the Company’s Option Plan for Employees, Officers, Directors and Consultants of 2005. The Contingent Options shall fully vest and be available for exercise immediately after a Material Agreement becomes effective.

 

For this purpose, a “ Material Agreement ” shall mean an agreement satisfying the following cumulative conditions: (a) an agreement shall have been signed with a company or an entity, (b) in a transaction with the Company (or with another entity designated by the Company for the purpose of such engagement) in connection with the Company’s core business, (c) the agreement shall have been approved by a majority of the votes of the Company’s board of directors as a material agreement for the Company, and (d) the agreement significantly increases the Company’s value for a reasonable duration of time.

 

The Contingent Options shall remain in force and effect for a period of up to 72 calendar months as of the granting date thereof. The Contingent Options shall expire at the end of 90 days as of the date of termination of employment of the VP R&D & Operations, and shall be deemed null and void and non-exercisable, if, by such time, entitlement to exercise the same shall not have arisen and the same shall not have been exercised by the VP R&D & Operations.

 

5. Termination of engagement

 

The Company and the VP R&D & Operations may terminate the employment agreement by a written prior notice of 3 months.

 

2
 

 

6. Miscellaneous

 

6.1. All of the terms and conditions of the January 2006 Agreement and the May 2011 Update and the March 2012 Update, unless specifically amended in this amendment to the agreement, shall remain in force and effect and shall bind the parties.

 

6.2. This amendment to the agreement shall be deemed, for all intents and purposes, as an integral part of the January 2006 Agreement and the May 2011 Update and the March 2012 Update, and they shall constitute the full agreement of the parties to the agreement in respect of the subject-matter at hand, which prevails over any and all previous agreements and undertakings, both written and oral, between the parties to the agreement in respect of the subject-matter at hand.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Nadav Navon
Intec Pharma Ltd.   Nadav Navon

 

3

 

Exhibit 10.15

 

Employment Agreement

 

Entered into and executed in Jerusalem on December 31 , 2014

 

Between

 

Intec Pharma Ltd., Public Company 513022780

of 12 Hartom St., P.O. Box 45219

Jerusalem 91450

 

( the " Company ")

 

of the first part

 

And

 

Name of Employee: Oren Mohar

I.D.: 028051282

Address: 84 Gia, Moshav Gia

 

(the " Employee ")

 

of the second part

 

Whereas The Company has expressed its will to employ the Employee and the Employee has expressed his will to be employed by the Company in the office of a Chief Financial Officer (the " Office "), and under the other terms specified in this Agreement below; and

 

Whereas The Employee declares that he has the ability, qualifications, skills and experience required for the fulfillment of the Office in which he will serve in the Company; and

 

Whereas The Employee will be exposed to knowledge and information pertaining to the Company or related thereto, to the property, business and affairs thereof, the customers thereof, the suppliers thereof, the persons and entities who have been or are in contact with the Company, including, but without derogating from the generality of the aforesaid – methods, processes, prices, calculations, human resources management and setting compensation, conditions of agreements in which the Company is engaged, and other documents of the Company; and

 

Whereas The Company and the Employee desire to regulate the terms of employment of the Employee, all as specified in this Agreement below;

 

 
 

 

Now therefore, it had been declared, stipulated and agreed between the parties as follows:

 

1. The Substance of the Agreement

 

1.1. This Agreement regulates the relations between the Company and the Employee, and exclusively determines the terms of engagement of the Employee with the Company.

 

1.2. The headings of the clauses in this Agreement are for purposes of the parties' convenience only and may not be used for interpretation of the Agreement or the terms hereof.

 

2. Employee’s Representations

 

The Employee represents to the Company as follows:

 

2.1. He has the knowledge, ability, experience, qualifications and skills required for the performance of the Office according to the provisions of this Agreement and the instructions of the Company from time to time.

 

2.2. He is not engaged in any other commitment or agreements which prevent him from being bound by this Agreement, except for an advance notice period to his current employer.

 

2.3. He was neither indicted nor convicted of any criminal offense (apart from traffic offenses of no moral turpitude), including an offense of moral turpitude, no criminal file was ever opened against him by the Israel police, and to the best of his knowledge, no interrogation is currently being conducted against him.

 

2.4. He will keep in confidence all of the terms and details of this Agreement.

 

2.5. This Agreement is personal and specific, regulating the relations between the Company and the Employee and exclusively sets forth the terms of employment of the Employee by the Company, and no non-mandatory law, nor any general and/or specific collective bargaining agreements including the annexes related thereto, other agreements made from time to time between employers and the General Federation of Labor or the New General Federation of Labor, nor agreements between the Company and any other of its employees, shall apply to the Employee and the terms of his employment with the Company.

 

2.6. The Employee represents and warrants, that there is no restriction by an agreement or otherwise against his engagement in this Agreement and/or against his employment with the Company pursuant to the terms of this Agreement, and that he is entitled to engage in this Agreement and assume all of the obligations hereunder.

 

2
 

 

3. Employee's Undertakings

 

The Employee undertakes the following towards the Company:

 

3.1. The Employee will be employed by the Company in a full time position as shall be required and according to the instructions of the Company's management, in the position of a CFO (Chief Financial Officer).

 

3.2. The Employee represents that he is aware that his position at the Company is a position which requires a special degree of personal trust, and undertakes that throughout his term of employment with the Company as aforesaid, he will treat it with honesty, devotion, skill and loyalty and do everything in his power to promote the Company's goals and business and safeguard its interests.

 

3.3. The Employee represents that he is not a party to any obligation or agreement contrary to the provisions of this Agreement, including all implications thereof, including with his previous employers, and that within his employment with the Company he will not use information contrary to the provisions of any agreement or undertaking.

 

3.4. Subject to the Company's requirements from time to time, the Employee undertakes to dedicate all of the time and attention required, his qualifications, knowledge and experience for fulfillment of the Office solely for the Company's benefit and interests. The Employee will have to be available to the Company to the extent required by the work conditions and the needs of the Office.

 

3.5. That he will be reporting, within his Office, to the Company's CEO, and will comply with his instructions pertaining to his work and/or Office, including but not limited to, instructions and/or directions regarding work procedures, carrying out resolutions of the Company's board and any other instruction of the Company's CEO.

 

3.6. That he shall neither make any representation nor any statement nor shall he provide any undertaking and/or consent and/or waiver and/or guarantee in the name of the Company nor will he impose any liability thereon, nor will he use the name thereof, exceeding as necessary in his capacity as a CFO and the authorities conferred upon him according to this Agreement and/or authorities which will be explicitly defined by the Company's management.

 

3.7. Not to engage in any other occupation, whether with another employer or independently, in any form whatsoever, and/or fulfill any other office in any entity or in person, whether for or without compensation, directly or indirectly, except for giving lectures provided that it does not interfere with the normal course of work, unless the Company's advance written consent had been given thereto and subject to the terms of the consent, if granted. The Company may instruct the Employee at any time, to cease the occupation in such issues, due to possible interference with the course of work, according to its discretion, provided that it shall give the Employee advance notice thereof.

 

3
 

 

3.8. During the term of his employment and within the fulfillment of his Office, the Employee shall act within the framework of the Company's procedures, discipline rules, articles of association and arrangements, as shall be determined by the Company from time to time.

 

3.9. The Employee will not be entitled to receive, in relation to the performance of his Office, any consideration or benefit, from any entity whatsoever, including customers or suppliers of the Company. Any amount and benefit, or the equivalent thereof, which the Employee shall receive contrarily to the aforesaid, will belong to the Company and the Employee undertakes to return them to the Company upon the first request.

 

3.10. To notify the Company immediately and with no delay of any issue in respect of which he has a personal interest and/or which may create a conflict of interests with the Office.

 

3.11. The Employee undertakes, that during the term of his employment with the Company, and after termination thereof, he will not assist any civil action which will be filed against the Company and/or entities related thereto, unless his assistance is mandated by law, and he also undertakes to assist the Company, upon its request, in any reasonable manner, with any claim and/or other proceeding in which the Company shall be involved. The aforesaid does not derogate from his rights as an employee to demand and/or sue the Company regarding rights to which he will be entitled, if and to the extent he shall be so entitled.

 

4. Salary and benefits

 

4.1. During his term of employment, the Employee will be entitled to a monthly salary of NIS 45,000 gross (the " Monthly Salary "). The Monthly Salary will be linked to the Consumer Price Index known on the date of execution of this Agreement and will be updated once every calendar quarter.

 

4.2. The Monthly Salary shall be paid to the Employee no later than the tenth day of each month, for the preceding month, and after any amounts which the Company is obligated and/or entitled to deduct according to any law and/or this Agreement, have been deducted.

 

4.3. The Company and the Employee will hold a compensation discussion for the updating of the Employee's compensation once a year. In addition, the Company and the Employee will hold a discussion regarding performance based bonuses, once a year, subject to the provisions of the Company's compensation policy.

 

4
 

 

4.4. Leave: The Employee will be entitled to 24 days of leave a year. The leave timing will be coordinated by agreement between the parties. It is clarified that the Employee's leave days are accruable, such leave accrual not to exceed twice the Employee's annual leave day quota. In the event that the Employee shall have reached the leave day ceiling and the Company requests that he not take more leave, and the Employee therefore requests to redeem the additional leave days – then the aforesaid additional leave days will be redeemed through the Employee's Salary.

 

4.5. Sick leave: The Employee will be entitled to a number of paid sick leave days a year as set forth in the law, according to the Company's procedures. It is clarified that the Employee will be entitled to full payment for sick leave days, from the first sick day, subject to the presentation of a medical certificate.

 

4.6. Recuperation pay: the Employee will be entitled to recuperation pay as set forth in the law, whereby for the first year, the Employee is entitled to 7 recuperation days.

 

4.7. Severance pay: the Employee will be entitled to severance pay according to and subject to the provisions set forth in any law.

 

4.8. It is agreed that the Company shall be entitled to deduct from the Salary and/or from any payment which the Employee shall be able to receive from the Company, any amount which the Employee shall owe the Company, subject to a decision of a judicial instance.

 

4.9. The provisions of Section 4.7 above constitute an instruction and undertaking according to the Salary Protection Law , 5718-1958 as well.

 

4.10. Overtime: The Employee hereby represents that he knows and agrees that within the capacity of his Office, which requires a special degree of personal trust and work during overtime, on the weekly rest day and during holidays, he is not included in the employees to whom the Work and Rest Hours Law, 5711-1951 applies. Alternatively, and subject to the actual performance of such overtime, the parties agree that the Monthly Salary includes payment for working overtime as mandated by the Employee's Office and he will not be entitled to claim or receive any payments or additions due to his working overtime.

 

In any event which the Employee shall sue the Company for work that he had worked during holiday and/or overtime, the gross Salary shall be retroactively reduced by the claim amount, so that the entire amounts paid to the Employee for his work during a certain month will not exceed the Monthly Salary.

 

5
 

 

4.11. Apart from the payments in respect of which the parties have explicitly agreed otherwise in writing, then all of the payments of any type which the Employee shall receive from the Company, including the Salary and other benefits and payments of any type whatsoever as specified in this Agreement, will be gross and the taxes, levies and national insurance fees which must be deducted according to law, will be withheld therefrom.

 

4.12. During the term of his employment, the Employee will receive no payment or other benefit from any third party who is in direct or indirect contact with the Company and/or who is related in any manner to the Employee's employment with the Company. Breach of this provision will constitute a fundamental breach of the Agreement. In addition, and without derogating from any other remedy, the amount and/or benefit received by the Employee will be attributed to the Company, and the Company will be entitled to deduct this amount or the value of the benefit from any and all amounts due to the Employee therefrom.

 

4.13. It is clarified, for avoidance of any doubt, that the provisions of the Agreement hereinbefore and hereinafter, are subject to the Company's current compensation policy, as published on the MAGNA and MAYA websites (the " Compensation Policy ").

 

5. Managers' Insurance, Study Fund, Other Benefits

 

5.1. During the period of application of this Agreement, and subject to directives which will be set forth from time to time by the Income Tax Commission, the Company will contribute to the Employee's credit in respect of his full Salary as specified in Section 4.1 above, to a managers' insurance or a pension fund, at a rate of 13.33% of the Employee's Salary, out of which 5% for provident payments and 8.33% on account of severance pay, and 5% will be deducted from the Employee's salary for provident payment and will be transferred to a managers' insurance plan or a pension fund. Amounts exceeding the ceilings set from time to time by the Income Tax Commission, will be remitted while deducting tax or will be paid directly in the Employee's Salary (at the Employee’s choice).

 

5.2. The Company will secure insurance for loss of working capacity, which may be included within the insurance policy, to the benefit of the Employee, and will bear insurance at a rate not exceeding 2.5% of each payment of the gross Monthly Salary, or the rate required for securing 75% of the gross Monthly Salary, whichever is lower.

 

5.3. The Company undertakes, commencing from the date of execution of this Agreement, to contribute an amount in NIS which is equal to 7.5% of the Monthly Salary to a study fund, which will be paid directly to a study fund. The Employee will deduct an additional amount which is equal to 2.5% of the Monthly Salary as aforesaid. The Employee hereby agrees that the Company will deduct the said amount from his Salary. Amounts exceeding the ceilings set from time to time by the Income Tax Commission will be remitted while deducting tax or will be paid directly in the Employee's Salary (at the Employee's choice).

 

6
 

 

5.4. It is hereby agreed that upon termination of employment according to this Agreement, the Company will release to the Employee all of the amounts accrued in his name in the insurance policy, the pension fund and the study fund and which were contributed from his Salary. In addition, the Company shall release to the Employee also all of the amounts which were accrued in an insurance policy and which were contributed by the Company, except in the event of a fundamental breach of this Agreement. The contributions on account of severance pay will be released, both in the event of dismissal or resignation of the Employee, according to Section 14 of the Severance Pay Law.

 

5.5. For the avoidance of doubt, in the event that the Employee shall be dismissed under circumstances which shall be ruled by a court as defined in Section 16 and/or Section 17 of the Severance Pay Law and/or in the event that the work relations between the Employee and the Company shall be terminated under circumstances which shall be ruled by a court to constitute a severe disciplinary violation, a fundamental breach of employment contract, betrayal of trust, an offense of moral turpitude as well as upon the occurrence of the events specified in Section 7.4 below, he will not be entitled to severance pay and advance notice.

 

5.6. It is hereby agreed, unequivocally that the amounts accrued in the insurance policy on account of the Company's participation (i.e. 8.33% of any payment of a gross Monthly Salary) will be in lieu and as a final and full substitution to any severance pay which the Employee will be or will become entitled to according to any law which shall apply. This Section is according to Section 14 of the Severance Pay Law, 5723-1963, and the Approval of the Minister of Labor and Social Affairs in an order dated June 30, 1998, which was given according to Section 14 as aforesaid, including the amendments thereto, and which is attached to this Agreement as Annex B .

 

5.7. It is agreed that the provisions of Sections 4 and 5 above and in Section 6 below, exhausts all of the Employee's entitlements from the Company for fulfilling his Office as provided in this Agreement and the Employee will have no claim against the Company and/or any demand in addition to that.

 

6. Car and Cellular Phone

 

6.1. The Company shall provide the Employee with a private car of a car group approved for VP's rank according to the Compensation Policy as of the date of this Agreement, or equivalent in value and cost, according to the Employee's choice and will bear all of the expenses involved in the use of the car (licensing, insurance, repairs, deductible, toll road and so forth) (the " Car ") including the gross-up of the tax required by law. Replacing the Car with a new one shall be done according to the Company's discretion. Alternatively, in the event that the Employee will decide in the future that he is not interested in a Company car as aforesaid, he will receive in his Salary a monthly supplement (" Car Maintenance and Travel ") equivalent to the cost of the Car for the Company (including the cost of leasing and gross-up) as well as the cost of the expenses for car maintenance as specified above. This supplement will be updated in the beginning of every year according to the cost for the Company.

 

7
 

 

6.2. The Employee will ensure proper maintenance of the Car and will use the Car reasonably and with care. The use and servicing of the Car will be according to the instructions and procedures of the Company as shall be in effect from time to time.

 

6.3. The Employee represents that it has been made clear to him that he is personally responsible for the payment of the deductible in case of an accident and/or theft of the car, in the event that it is proven, in the opinion of the insurance company, that the same is the Employee’s fault, and he will also be responsible for the payment of any traffic fines and/or parking tickets and/or other fines and reports, which will be imposed in respect of the Car in the name of the Company or in the name of the Employee, all as shall be determined from time to time by the Company. If an employee does not act as specified in this Section, the Company shall endorse the reports and/or fines as aforesaid in the Employee's name. For avoidance of doubt it shall be clarified, that the Employee's liability according to the provisions of this Section will apply also if the fact of the fines and/or reports in respect of the Car will become known to the Company after the Employee had left the Company, and that if the Employee will not act as specified in this Section, the Company will endorse the fines and/or reports as aforesaid, to the name of the Employee.

 

6.4. In the event that the Employee shall elect to appeal against or be trialed in respect of fines, the Employee will bear any payment imposed on him. In addition, the Employee may negotiate with the leasing company, in order to try and reduce the payment amount. In the event that the Employee did not reach any agreements with the leasing company within reasonable time, and will fail to pay the deductible as specified in Section 6.3 above and/or the fines as aforesaid, the Company will be entitled to pay the amount of the deductible and/or the amounts of the fines and the Employee hereby gives the Company an irrevocable instruction to deduct such amounts from any amount which he will be entitled to from the Company.

 

6.5. The Company shall provide the Employee, for the purpose of fulfilling his Office, a cellular phone. The Employee will be entitled to use the cellular phone for work purposes and within his Office as well as for reasonable private use. The Company shall bear all of the fixed and current expenses incurred in respect of the cellular phone. Tax in respect of the use value which will apply shall be deducted from the Employee's Monthly Salary according to law.

 

8
 

 

7. The Term of the Agreement

 

7.1. This Agreement is for an indefinite period of time, commencing on January 1, 2015 (the " Agreement Term " and the " Office Commencement Date ", respectively) and is subject to the following.

 

7.2. Each party may terminate this Agreement at any time and for any reason by providing an advance written notice of ninety (90) days in advance.

 

7.3. The Company retains the right not to use the advance notice period, in whole or in part. The Company may disconnect the employment relations with the Employee on any date prior to the expiration of the advance notice period as aforesaid, and pay the Employee redemption of compensation in respect of the part of the advance notice period during which it waived the employment of the Employee; the redemption will be done based on the Salary and the Company's contributions and the Employee's right for social and related benefits, other benefits as specified in Section 6 and exercise of the options to which the Employee is entitled will not be prejudiced.

 

7.4. Throughout the entire Agreement Term, the Company shall be entitled to terminate the Agreement immediately, with no advance notice, following a conclusive ruling by a court that one or more of the following events had occurred:

 

7.4.1. If the Employee shall be convicted in a criminal offense, except for traffic offenses and/or a technical offense or one of strict liability.

 

7.4.2. If the Employee breached his fiduciary duty towards the Company and/or will not act and/or operate with loyalty and/or credibly and/or honestly towards the Company.

 

7.4.3. The Company found out that the Employee's representations in Section 2 of this Agreement and/or his undertakings, as specified in Section 3 above are untrue and/or inaccurate and/or are invalid;

 

7.4.4. The Company found out that he Employee had breached any of the provisions of Sections 9-10 below;

 

7.4.5. The Employee fundamentally breached the Agreement and did not remedy the breach, even though he had received a 30 day notice or a shorter notice, according to the urgency of the matter and/or committed a severe disciplinary offense in circumstances which entitle the employer to dismissal without severance pay.

 

9
 

 

7.5. The provisions of Section 7.4 above may not derogate from any remedy to which the Company will be entitled by virtue of any law and/or agreement.

 

7.6. For the avoidance of doubt it is agreed, that in each of the events specified in paragraph 7.4 above, the dismissal shall enter effect immediately, without requiring the provision of an advance notice or payment in respect thereof.

 

7.7. Upon the termination of the Employee's work at the Company for any reason, the Employee shall transfer his Office in a full and orderly fashion to any person that the Company shall instruct him, and will deliver to the Company all of the documents, information, equipment and material which he received as the Company's employee or that had been prepared by him in respect to his work at the Company.

 

8. Options for Purchase of Shares

 

8.1. Subject to the resolution of the Company's board of directors and/or the committees thereof with respect to Company options and benefits, in their sole discretion, and subject to the terms of the Company's option plan and the option grant agreement which were approved and/or will be approved for this matter from time to time by the Company's board of directors, in its sole discretion, which will include the conditions pertaining to the options, including the date and price of exercise, the lock-up and release thereof and all of the other conditions and provisions pertaining to the options, the Employee will be entitled to receive options for the purchase of shares under conditions, in amounts and on the dates specified in Annex C to this Agreement.

 

8.2. Any tax liability pertaining to the options (including pertaining to the grant, exercise, sale of the options or the underlying shares obtained upon the exercise thereof) will be exclusively imposed on the Employee, but the Company shall adjust the option conditions to the provisions of the income tax laws, so that the Employee shall be able to postpone the tax payment to the option exercise date.

 

9. Confidentiality

 

9.1. The Employee hereby undertakes to keep in confidence and not to disclose, show, deliver, whether during his term of employment or thereafter, for indefinite time, to any person or body, in Israel or worldwide, trade, professional, business and other secrets of the Company, or knowledge and/or information pertaining to the Company or related directly or indirectly to the Company, its property, business and interests, its customers, suppliers, the persons or entities who were or are in contact with the Company, including, but without derogating from the generality of the aforesaid – creation, concept, innovation, copyright, patent, invention, design and any intellectual property right, improvement, idea, process, knowledge, conclusions, human resources management and salary determination, terms of agreements in which the Company is engaged, and documents of the Company – all whether the said secrets and/or knowledge and/or information reached him directly or indirectly, within his work and/or during his work and/or in the process of his work and/or as a result of his employment and/or due to his Office and whether they reached him directly or indirectly, in any other manner whatsoever. The Employee hereby confirms that the secrets and/or knowledge and/or information as aforesaid are the Company's exclusive property and that he has no and will have no claims of any type whatsoever in respect thereto or deriving therefrom.

 

10
 

 

9.2. The Employee hereby undertakes not to make use of any kind, in Israel and worldwide, of the secrets and/or knowledge and/or information specified in Section 9.1 above, except if – and only to the extent such is necessary – for the purpose of performing his Office at the Company. The Employee undertakes thereby not to utilize the said secrets and/or knowledge and/or information in Israel and/or abroad, for his personal purposes and/or for his work in another workplace, without limitation of time and place.

 

10. Intellectual Property

 

10.1. Without derogating from the undertaking annex attached to this Agreement, any confidential information, including a creation, concept, innovation, improvement, idea, process, knowledge, conclusions, copyright, patent, invention, perfection, design, development and any other intellectual property right and so forth – which had been developed or invented by the Employee, alone or in cooperation with others, while or during or in relation to his work at the Company, will be the Company's exclusive property, and the Employee will have no right of ownership and/or royalties and/or consideration and/or any other right in respect of such information. Any implementation, analysis, commercialization, marketing, sale and/or any other use of such analysis and/or invention, will be according to the Company's sole and absolute discretion. It shall be clarified that the consideration paid to the Employee according to this Agreement includes also consideration for possible inventions which had been developed or invented by the Employee, alone or in cooperation with others, within or during or following or in respect of his work at the Company and the Employee will not be entitled to any additional or separate consideration in case of an invention which he had reached.

 

10.2. The Employee will be estopped and barred from making claims against the provisions of this Section 10, both claims resulting from the Israeli law and claims resulting from any foreign law, and will be prevented from approaching any foreign tribunal and/or judicial and/or administrative instance. It is agreed that any dispute between the Employee and the Company in respect of the provisions of this Section 10, including claims resulting from any foreign law, will be decided exclusively by the competent courts at the Central District of Israel and only by them. Any dispute between the Employee and the Company will be subject only to the Israeli law.

 

11
 

 

10.3. The provisions of this Section will apply also after the end of the term of this Agreement, for any reason, or following the expiration of this Agreement, all with no limitation on time and place.

 

11. Remedies in the event of breach of the Confidentiality and Intellectual Property Provisions

 

11.1. The Employee agrees that the breach of the provisions of Sections 9 and/or 10 above will be deemed as a fundamental breach of this Agreement and will deny the Employee of his right to payments from the Company, including: severance pay and advance notice payment.

 

11.2. The Employee knows and understands that upon the breach of Sections 9 and/or 10 above by the Employee, the Company shall petition to the court for an injunctive relief against the Employee and/or anyone on his behalf and/or against any third party related to the Employee's acts and/or omissions, as well as with a monetary tort claim against them in respect of the damage which will be caused to the Company, without derogating from any other remedy to which the Company will be entitled by virtue of this Agreement and/or according to any law.

 

11.3. Without derogating from the aforesaid, the Employee irrevocably and conclusively waives any right to the remedy of an injunction and/or mandatory injunction against the employer and any claim and/or demand of the Employee will be solely for monetary remedy.

 

12. Exclusivity and Non-Competition

 

12.1. Without derogating from the provisions of Annex A attached hereto, the Employee undertakes not to engage with the Company's customers for 12 months from the date of termination of the term of employment for any reason whatsoever, unless he had received the Company's advance written consent therefor.

 

12.2. The Employee undertakes not to engage, work, participate and/or consult, directly or indirectly, whether himself or through others, whether as a hired employee, independent or freelancer, or in any other manner, in a business, position, work or any other occupation which competes and/or might compete with the Company's business, both during the term of employment as defined above and during a period of additional 12 months from the date of termination of the term of employment for any reason whatsoever, unless he had received the Company's advance written consent therefor.

 

12
 

 

13. Miscellaneous

 

13.1. It is agreed that the provisions of this Agreement exhaust the agreements between the parties, and any promise, undertaking, consent, memorandum of understanding, representation made between the parties, if made prior to the execution hereof, whether in writing or orally, are hereby null and void, and have no evidential use against the Company.

 

13.2. Any change in the terms and provisions of this Agreement requires another written document which will be executed by the parties to this Agreement.

 

13.3. The parties agree that sole and exclusive jurisdiction on all matters relating to the rights deriving from and/or related to this Agreement, shall lie with the competent courts and/or tribunals in the Central District.

 

13.4. In the event that any provision or provisions of this Agreement shall be ruled unenforceable or completely invalid, such will not affect or prejudice the legality, validity and enforceability of the remaining provisions of the Agreement which are not related to and/or deriving from the invalid obligation.

 

13.5. Any delay in the enforcement proceedings of any right according to this Agreement and according to any law will not be deemed as a waiver of such right or any other right and will not prevent the possibility of claiming remedies due to the breach of the right, including the enforcement thereof at a later date.

 

13.6. The parties undertake to fulfill all of their undertakings in this Agreement with loyalty, in good faith and based on trust relations.

 

13.7. The parties' addresses are as specified in the preamble to this Agreement. Any notice provided by one party to the other, will be deemed as having been received within 3 business days from the date of dispatch thereof by registered mail, or upon its delivery by a courier, whichever is earlier.

 

13.8. The engagement in this Agreement including the annexes hereto is subject to the receipt of approval of the competent organs at the Company.

 

In witness whereof, the parties have hereto set their hands :

 

/s/ Zeev Weiss   /s/ Oren Mohar
The Company   The Employee

 

13
 

 

Annex A

 

Letter of Undertaking for confidentiality/non competition/endorsement of intellectual property rights

 

Made and executed on December 31, 201 4

 

Between Oren Mohar I.D. 028051282 (the “ Employee ”)

 

and Intec Pharma Ltd. Company Number 513022780 from Jerusalem, 12 Hartom st. (the “ Company ”)

 

1. Confidentiality

 

Without derogating from the definition of “Confidential Information” in the employment agreement to which this Letter of Undertaking for Confidentiality/Non Competition/Endorsement of Intellectual Property Rights (“ This Agreement ”) is an annex (the “ Employment Agreement ”), “ Confidential Information ” includes research and development pertaining to existing or future products, inventions, hardware, computer software, databases, chart, technique, drawing, idea, process, manufacturing method, formula, procedure, business plan, clients, financial information, marketing plans and any trade secret (whether patentable or not), improvements and knowledge pertaining to the aforesaid, and any information or data related or pertaining to the technology, products or services of the Company or of companies affiliated thereto (existing, potential or future), or pertaining to the business of the Company or of companies affiliated thereto (existing, potential or future) in any other manner, including any business information pertaining to clients and suppliers, whether tangible or not, and any other trade secret, as defined in the Law of Commercial Torts, 5759-1999, of the Company or of a company affiliated thereto. The aforesaid will not apply to information which had been made public domain by the Company or in any other legal manner.

 

1.1. The Employee shall maintain the confidentiality and secrecy of any Confidential Information as defined above, which had reached the Employee’s knowledge during the provision of the services or the engagement with the Company or an affiliated company thereof or as a result therefrom, and the Employee will not disclose, use, publish or otherwise expose, directly or indirectly, Confidential Information as aforesaid at any time during or after the expiration of the term of his employment by the Company, with no limitation of time and place, without the explicit approval of a competent representative of the Company in advance and in writing.

 

14
 

 

1.2. Any Confidential Information, whether it is in written material, documents, computer software and/or hardware, electronic media, magnetic media, servers or in any other form or manner (all hereinafter: the “ Documents ”) including notebooks, notes, memos, records, diagrams, drawings, bulletins, formulas, reports, computer programs, other information of any type whatsoever which reached the Employee’s possession or which was prepared by the Employee or by others, is the Company’s or an affiliated company’s exclusive property, as the case may be. The Employee hereby undertakes to return to the Company Documents as aforesaid or any other material which belongs to the Company that is in his possession (a) if he was requested to do so by the Company or (b) upon the termination of the Employee’s employment by the Company, whichever is earlier, and if he was requested to do so by the Company, to sign a written statement in which he will confirm that he has carried out the aforesaid.

 

1.3. It is clear and understood by the Employee that all of the confidential information is material business information which is the property of the Company or of companies affiliated thereto, or of third parties to whom the Company or the affiliated companies thereto have a duty of confidentially, which is not public domain and which may not easily be discovered by others, whose confidentiality provides the Company or affiliated companies thereof, a commercial advantage over their competitors, and that the Company takes reasonable measures to maintain the confidentiality thereof.

 

1.4. The Employee’s undertakings according to this Agreement are towards the Company and any parent company, subsidiaries, affiliated companies and anyone which shall replace it according to law, as in effect from time to time.

 

1.5. The Employee’s undertakings pursuant to this Section, will remain in effect after termination of the Employee’s employment, according to the Employment Agreement.

 

2. Non Competition

 

2.1. The Employee agrees that during the term of the Employment Agreement and for twelve months following termination thereof, for any reason whatsoever, he will not engage, be involved or affiliated in any manner, or employed, directly or indirectly, alone or together with others, for himself or as an agent, broker, manager, licensor, employee, officer, director, partner, member of a joint venture, shareholder, investor, consultant or otherwise, and without the Company’s prior written notice, in any business or venture, anywhere in the world, which engages in any activity within which (a) there are products or services which compete with products or services of the Company, or with products or services of the Company’s affiliated companies pertaining to the Company’s business, as they were upon the termination of the Employees’ employment (b) there are information, processes, technology or equipment in which the Company has a proprietary right, or in which a company affiliated to the Company has a proprietary right, and which are related to the Company’s business which exist currently or will exist in the future, or which are based on technology similar to that which was developed by the Company. The aforesaid will not apply to (a) holding securities in any company whose shares are traded in public on the stock exchange which received international acknowledgement, provided that such holding will not exceed 1% of the issued share capital of a public company as aforesaid, and the Employee does not fulfill an active office in a public company as aforesaid as a director, employee, consultant (including independent consultant) or any other active position, or (b) non-commercial activities which constitute de minimis .

 

15
 

 

2.2. The Employee agrees, that for the period of the Employee’s employment by the Company and for a period of 24 months from the date of termination of his employment, for any reason whatsoever, the Employee will not solicit or encourage, directly or indirectly, himself or within a business in which the Employee is an employee, officer, director, shareholder, consultant or contractor, for any purpose and at any place, a person who was employed by the Company or an affiliated company thereof, to terminate their employment with the Company or a company affiliated thereto, as the case may be.

 

2.3. The Employee agrees that for two years from the date of termination of engagement in the Employment Agreement, he will not employ, directly or indirectly, a person who was employed by the Company or a company affiliated thereto, during the two years which preceded the engagement termination date, as aforesaid.

 

3. Endorsement of Intellectual Property Rights

 

3.1. For the purposes of this Annex, the following definitions shall apply:

 

Inventions ” mean, inter alia , any invention, discovery, idea, improvement, change, betterment, document, software, hardware, firmware, creation, form, mask works, work, chart, original creation, formulas, techniques, methods, systems, processes, compositions of material, databases, knowledge, information and trade secrets, which were created, invented, discovered, developed, composed or processed by the Employee during his employment or twelve (12) months thereafter (or the maximal period permitted by law if its shorter), in whole or in part, or that the Employee’s efforts contributed to the creation thereof, independently or in cooperation with others, whether patentable or protectable by virtue of copyrights or another protection or not, and:

 

(a) Which are related, directly or indirectly to the Company’s business, as defined in the Employment Agreement, including a platform for gastric drug retention or which were created while using the Company’s equipment; or

 

(b) Which are related to existing research and development or in respect of which it can be proven that they are being planned, pertaining to the Company’s business, or research and development as aforesaid of the Company’s affiliated company; or

 

16
 

 

(c) Which are developed, in whole or in part, during the Company’s working hours, or by using equipment, supply, facilities or confidential information of the Company or of a company affiliated thereto.

 

Trade Secrets ” mean “trade secrets” as defined in the Law of Commercial Torts, 5759-1999, and any record, software, hardware, form, client list, knowledge and information of any type or nature, pertaining to the Company’s business, in the past, present or future, or any plans in respect thereof, or pertaining to the business of a third party, in the past, present or future, or to any plans in respect thereof (including any object or information in any form whatsoever in respect of which it had been provided in law that is a trade secret) which reached the Employee’s knowledge, which the Company does not disclose to third parties with no restrictions on use or restrictions on the disclosure to other third parties.

 

3.2. Without derogating from any other provision of law:

 

a. The Employee will put into writing, and will expose before the Company or a company affiliated thereto, together with explanations, any invention and will conduct accurate records regarding the contemplation of any invention and implementation of the idea. Such records will be the Company’s exclusive property, and the Employee will deliver possession in the records to the Company, upon the termination of his engagement with the Company.

 

b. The Employee hereby assigns to the Company or to the affiliated companies thereof, with no additional consideration to the Employee, the full and exclusive rights, ownership, possession and title in the Inventions, and in all of the proprietary and intellectual property rights therein, and in the proprietary and intellectual property rights deriving therefrom or based thereon, both in Israel and abroad. The Employee will sign any assignment, statement or other document which will be prepared by the Company for giving effect to the aforesaid. The Employee hereby confirms and will confirm in the future the exclusive intellectual property rights of the Company and of affiliated companies thereof, in Israel and abroad, in all of the Inventions.

 

c. During the Employment Agreement term and thereafter, the Employee shall provide the Company with any reasonable information, document and assistance which the Company shall require in order to prepare, perform and complete the registration of the proprietary rights, intellectual property and his patent in the Inventions and the trade secrets and the rights as aforesaid deriving from the invention and in the trade secrets or which are based thereon, to protect them or enforce them, in any jurisdiction according to the Company’s discretion. The Company, according to its sole discretion, will determine the scope of the rights as aforesaid in the inventions and trade secrets or deriving therefrom, if there shall be such, which must be protected. Such assistance includes the preparation of documents, drawings and other data, and the signing of right assignment documents, applications and other forms. Any such information, document and assistance will be provided to the Company by the Employee with no additional cost for the Company, except for out-of-pocket cash expenses actually incurred by the Employee upon the Company’s request.

 

17
 

 

d. During the Employment Agreement term and thereafter, the Employee will maintain the secrecy and confidentiality of the Inventions as if they were Confidential Information pursuant to this Agreement, will not expose them to others without obtaining prior written permission from the Company and will not use such Inventions for any purpose whatsoever, except for the purpose of performance of services for the Company.

 

4. Remedies

 

It is clear to and understood by the Employee that the breach of the undertakings included in this Agreement or any part thereof, shall cause the Company or affiliated companies thereof severe and irreversible damage. In view of the aforesaid, the Employee agrees that in case of such breach or anticipated breach, the Company, the Company’s affiliated company or anyone to whom the Company or an affiliated company thereof had assigned their rights to, will be entitled, without prejudice to any rights, and in addition to other rights, remedies and compensation available thereto by law or equity, to a preliminary or perpetual injunction, or any other possible equitable remedy, in order to prevent or remove the breach or the attempted breach of this Agreement by the Employee or by any person or entity acting for him or on his behalf. In case that proceedings had been initiated for enforcement of the terms of the restrictions in the Agreement as aforesaid, the lawfully winning party will be entitled, in addition to any other remedy, to the restitution of any reasonable amount in respect of legal fees and other expenses which were involved in the measures initiated, both in the trial court and in the court of appeals, and in any bankruptcy proceeding. In case that a competent court shall decide in a final decision that is no longer appealable, that the scope, duration of time or geographic boundaries specifically determined in any of the restrictions set forth in the Agreement are too extensive for enforceability, the said court will be authorized, and the parties to this Agreement agree and determine hereby, that such court will amend the terms of the restrictions as aforesaid and will enforce the terms according to the scope, duration of time and geographic boundaries which it will deem just and appropriate, while taking the parties’ intention into account.

 

5. Confirmations and Representations

 

The Employee hereby represents and confirms the following:

 

5.1. The Employee’s undertakings for non competition and confidentiality according to this Agreement are fair, reasonable and proportionate and were intended to protect secrets and confidential information of the Company and affiliated companies thereof, which are the essence of the Company’s protectable business and commercial advantages in which significant capital has been invested.

 

18
 

 

5.2. Breach of his aforesaid undertakings – will be contrary to the special fiduciary and loyalty relations between the parties as employee and employer, to proper commerce practices, and to the duty of good faith and fairness between the parties, it will prejudice the Company’s business, and will constitute a fundamental breach of This Agreement and of the Employment Agreement.

 

5.3. It is clear to and understood by the Employee, that the limited time period and the geographic area as specified in this Agreement are reasonable in view of the nature of the Company’s business and the knowledge of the Employee pertaining to the Company’s business.

 

5.4. The Employee represents that his undertakings pursuant to this Section, which are reasonable and proportionate – do not prevent him from developing the general knowledge and professional expertise in the field of his occupation, in respect to parties who are not customers or employees of the Company, and without stealing the Company’s secrets.

 

5.5. The Company will be entitled to assign the undertakings of the Employee thereto in this Agreement. The Employee will not be entitled to assign or to transfer to another his duties pursuant to this Agreement without the Company’s prior written approval. This Agreement binds the Employee’s heirs, permitted assignees and anyone who shall come in his lieu according to law.

 

/s/ Oren Mohar   /s/ Zeev Weiss
     
The Employee   Intec Pharma Ltd.

 

19
 

 

Annex B

 

General Approval (Combined Version) Regarding Employers’ Contributions to

Pension Funds and Insurance Funds in lieu of Severance Pay

Under the Severance Pay Law, 5723-1963

[Updated as of February 28, 2001]

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 1 (the “Law”), I hereby confirm, that contributions made by an employer for his employee, commencing as of the date of publication of this approval, to a comprehensive pension in a provident fund for annuity that is not an insurance fund within the meaning of such term in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 2 (a “Pension Fund”) or to a managers’ insurance that includes the possibility of an annuity or a combination of payments to an annuity plan and to a non-annuity plan within such insurance fund (an “Insurance Fund), including combined contributions made by the employer to a Pension Fund and to an Insurance Fund, whether or not the Insurance Fund includes an annuity plan (the “Employer's Contributions”), shall be payable in lieu of severance pay due to such employee in respect of the salary from which such contributions were made and the period they were made for (the “Exempt Salary”); provided, however, that all of the following conditions have been fulfilled:

 

(1) The Employer's Contributions -

 

(a) To the Pension Fund, are at a rate of no less than 14 1/3% of the Exempt Salary, or 12% of the Exempt Salary, if in addition thereto, the employer makes supplementary severance pay contributions for his employee to a provident fund for severance pay or to an Insurance Fund in the employee's name, at a rate of 2 1/3% of the Exempt Salary. In the event that the employer has not contributed such 2 1/3% in addition to said 12%, his contributions shall only replace 72% of the employee's severance pay;

 

(b) To the Insurance Fund are at a rate of no less than one of the following:

 

(1) 13 1/3% of the Exempt Salary, if in addition thereto, the employer makes contributions for his employee for securing monthly income in the event of disability to a plan approved by the Commissioner of the Capital Market, Insurance and Savings at the Ministry of Finance, at the rate required to secure at least 75% of the Exempt Salary or a rate of 2 1/2% of the Exempt Salary, whichever is lower (“Disability Insurance Contributions”); or

 

 

1 Statues 5723, p. 136.
2 Regulations 5724, p. 1302.

 

20
 

 

(2) 11% of the Exempt Salary, if the employer also made Disability Insurance Contributions, and in such case the Employer's Contributions shall only replace 72% of the Employee's severance pay; In the event that the employer has made, in addition to the foregoing, supplementary severance pay contributions to a provident fund for severance pay or to an Insurance Fund in the employee's name at a rate of 2 1/3% of the Exempt Salary, the Employer's Contributions shall replace 100% of the employee's severance pay.

 

(2) By no later than three months of the commencement date of the Employer's Contributions, a written agreement is executed between the employer and the employee that includes:

 

(a) The employee’s consent to the arrangement pursuant to this approval in a form specifying the Employer's Contributions, and the Pension Fund and Insurance Fund, as applicable; such agreement shall also include the form of this approval;

 

(b) 3 The employer’s advance waiver of any right he may have to a refund of monies from his contributions, unless the employee’s right to severance pay has been revoked by virtue of Sections 16 or 17 of the Law, and to the extent so revoked, or the employee has withdrawn monies from the Pension Fund or Insurance Fund other than by reason of an Entitling Event; in such regard "Entitling Event" means death, disability or retirement at or after the age of 60 or more

 

(c) This approval shall not derogate from the employee's right to severance pay under any law, collective agreement, expansion order or employment contract, in respect of salary over and above the Exempt Salary.

 

  Eliyahu Yishai
   
  Minister of Labor and Social
Affairs

 

Signature of employee:

 

        [signature]  
           
Date:     Signature: /s/ Oren Mohar  

 

 

3 Amendment: Official Gazette 4803, 5760 (September 19, 1999).

 

21
 

 

Annex C

 

Allocation of options to an Employee pursuant to Section 8.1 of an Employment Agreement

 

Entered into and executed on December 31, 2014

 

Between Oren Mohar I.D.28051282 (the " Employee ")

 

and Intec Pharma Ltd. Public Company 513022780 of Jerusalem, 12 Hartom St. (the " Company ")

according to an employment agreement dated December 31, 2014

(the " Employment Agreement ")

 

1. The Options Granted :

 

The Employee will be granted 3,000,000 options of the Company, pursuant to the provisions of the Company's option plan for Employees, officers, directors and consultants from 2005 (the " Option Plan ") which will be vested as follows:

 

1.1. 1,000,000 options for the purchase of 1,000,000 shares of the Company of NIS 0.01 par value each (" Ordinary Shares "), which will vest over 4 years, 50% of the time based options will vest upon the expiration of two years following the date of allocation thereof and the remaining 50% will vest in portions of 6.25% in the end of each quarter during two additional years, and will be exercisable against the exercise price which will be equal to the average price of the Company's share on TASE during the thirty trading days which preceded the date of approval of the decision by the Company's board of directors.

 

1.2. 600,000 options, which will be fully vested immediately following the taking effect of a material agreement, as defined in the Company's compensation policy, and will be exercisable against the exercise price as specified in Section 1.1. above.

 

1.3. 1,400,000 options for the purchase of Ordinary Shares of the Company against the exercise price, as specified in this Section below, whose vesting is contingent upon the Company's carrying out an issuance overseas during his term of employment:

 

I. The options in respect of such overseas issuance will be fully vested immediately upon the completion of the issuance process, namely the receipt of the proceeds from the issuance and the entrance thereof into the Company's account, but no earlier than upon the expiration of 1 month from the Employee's Office Commencement Date as defined in the Employment Agreement. The options in respect of an overseas issuance will remain in effect for a period of up to 72 calendar months from the date of grant thereof.

 

22
 

 

II. In the event that within 18 months from the Employee's Office Commencement Date (as defined in the Employment Agreement), the Company shall not carry out an issuance overseas, but will execute a material agreement, 400,000 options out of the 1,400,000 options as specified in Section 1.3 above will be vested, in addition to the 600,000 contingent options as specified in Section 1.2 above.

 

III. In the event that the Company shall carry out an issuance overseas, after execution of a material agreement as specified in Subsection II above, after the expiration of 18 months from the Employee's Office Commencement Date (as defined in the Employment Agreement), the Employee will be entitled to exercise the 1,000,000 options remaining out of the 1,400,000 as specified in Section 1.3 above.

 

The exercise price regarding the 1,400,000 options specified in Section 1.3 will be as follows:

 

I. The exercise price will be equal to the average price of the Company's share on TASE during the thirty trading days preceding the date of approval of the decision regarding the allocation by the Company's board of directors, as specified in Section 1.1. above.

 

II. Subject to the obtainment of all of the required approvals, including the approval of the tax authorities, if and to the extent necessary, in the event that the Company shall execute a material agreement, prior to the performance of an issuance overseas, the exercise price will be the higher of the thirty day average of the share price on TASE preceding the Company's board approval of the option allocation and the price equal to the average price of the Company's share on TASE during the thirty trading days following the execution date of a material agreement. In the absence of such transaction, the exercise price will be equal to the average price of the Company's share on TASE during the thirty trading days preceding the date of approval of the allocation resolution by the Company's board of directors, as specified in the previous Section.

 

The options shall expire upon the lapse of 90 days from the Employee's engagement termination date, and will be deemed null and void and non-exercisable if until such period the entitlement for exercise thereof has not yet arisen or that they had not been exercised by the Employee, all according to the provisions of the Option Plan.

 

2. The Term of Entitlement

 

2.1. In the event of termination of the Employee's work, for any reason, which will apply during one of the vesting dates, as specified above, the Employee will not be entitled to exercise the next portion.

 

23
 

 

2.2. Notwithstanding the aforesaid in Section 2.1 above, the Employee will be entitled to exercise the next portion if there are 3 months remaining until the expiration of the vesting date of the current portion, including the advance notice period.

 

3. The Exercise Date

 

3.1. The Employee will be entitled to exercise the Options, in whole or in part, at the exercise price, at any time after the vesting date of the relevant portion, until the option Expiration Date, as defined in Section 3.2 below, subject to the conditions for entitlement to options and the other provisions of this Annex.

 

3.2. The Employee will be entitled to exercise the options, subject to Section 3.1 above, until the sixth year from the date of commencement of his employment at the Company, on 1st of January, 2015 (the " Expiration Date ").

 

Options not exercised until the end of this period, will be automatically nullified.

 

3.3. Notwithstanding the aforesaid, should the Employee's employment be terminated under the circumstances specified in one of the events set forth in Section 7.4 of the Employment Agreement, the options shall expire, whether vested or not, immediately upon the notice of termination of employment and will not be exercisable.

 

4. Option Plan

 

4.1. The options will be allocated according to the Plan which was filed to the Income Tax and will be allocated through the capital track (with a trustee) of Section 102 of the Income Tax Ordinance (the said Section 102 and the regulations and rules promulgated thereunder will be jointly referred to below as the " Provisions of Section 102 ").

 

4.2. According to the provisions of Section 102, options will be allocated to the trustee for the offeree and the trustee will act with respect to the options and the underlying shares according to the Provisions of Section 102 and in accordance with the trust provisions and option exercise and underlying shares sale procedure, as were specified and/or will be specified between the Company and the trustee.

 

4.3. In order to ensure the performance of the tax laws, and in order to ensure the exhaustion of the purchase rights proceedings according to the Plan, the options granted to the Employee will be held in trust by a trustee and the trustee will act with regard to the options and the underlying shares according to the Provisions of Section 102 and in accordance with the trust provisions and the option exercise and underlying shares sale procedures as were specified and/or will be specified between the Company and the trustee. In the event that the Employee will elect not to receive or sell the shares upon the exercise of the options, these shares shall also be held in the same trust.

 

24
 

 

4.4. According to the aforesaid, the Company will notify the trustee and any other entity require by law, of the option allocation to the Employee according to the Agreement and the Annexes thereto. The Company has obtained all of the approvals required by law, its incorporation documents and its Option Plan in order to grant options pursuant to this Annex.

 

4.5. Notwithstanding the aforesaid, the Company's Option Plan will apply to the Employee subject to the modifications specified in the Agreement and Annexes thereto, and in any event that there are conditions in favor of the Employee in the Agreement and the Annexes thereof compared to the Company's Option Plan, the provisions of the Agreement and the Annexes thereto shall prevail, notwithstanding the provisions of the Company's Option Plan. It is agreed that it will not be possible to prejudice or derogate from the Employee's rights or from the rights attached to the options or to the underlying shares thereof without the Employee's consent.

 

5. Notice of Exercise

 

5.1. Exercise of the options will be done on one of the exercise dates through the provision of a written notice (in the language attached as Annex C1 to the Employment Agreement), by the Employee to the Company, regarding his intention to exercise the options which he is entitled to exercise until that date, in whole or in part and together with the exercise price (the " Notice ").

 

5.2. The Company will not allocate shares to the Employee prior to the completion of the full exercise price of the options which the Employee seeks to exercise, as specified in this Annex and subject to the TASE directives.

 

5.3. The shares will be allocated to the Employee within 7 days from the date of provision of the notice.

 

6. No Transfer

 

6.1. The options may not be transferred, assigned, pledged etc., except by virtue of a will or the inheritance law. The Employee's rights in the underlying shares are non-transferable unless according to the Option Plan.

 

7. Prevention or Restriction of Transactions in Options

 

7.1. The sale of the underlying shares will be subject to the lock-up rules, as applicable from time to time, set forth in the TASE Rules and Regulations promulgated thereunder and/or in the Securities Law, 5728-1968, and the Regulations promulgated thereunder, including the Securities Regulations (Details regarding Sections 15A to 15C of the Law), 5760-2000.

 

25
 

 

7.2. The options, the underlying shares and any (non-monetary) right in respect thereof will be locked-up for a period of two years from the date of allocation of the options according to the Provisions of Section 102.

 

8. Taxation

 

8.1. Any tax liability related to the options, the exercise of the options into shares and/or regarding their sale, will be exclusively imposed on the Employee, and in case of death, god forbid, on the heirs, without the Company bearing such directly and/or indirectly. The tax which will apply will be deducted on the liability date from the proceeds of the sale by the trustee or by the Company, as applicable. The tax liability of the Employee (or the heirs, in case of death, god forbid), will be set according to the Provisions of Section 102 of the Income Tax Ordinance and the tax rules or according to any other law which will replace the same.

 

9. Miscellaneous

 

9.1. The options contemplated in this Annex are not negotiable and will not be listed for trading on TASE. The Employee may not assign, pledge, mortgage or give any third party any right pertaining to the options or any of the option portions.

 

9.2. It is clarified that the options granted pursuant to this Annex are not salary components for all intents and purposes and the Company will not be obligated to perform in respect thereof any payment or contribution by law or agreement (including payment of severance pay).

 

In witness whereof the parties have hereto set their hands :

 

/s/ Zeev Weiss   /s/ Oren Mohar
The Company   The Employee

 

26

 

 

Exhibit 10.16

 

INTEC PHARMA LTD.

 

EMPLOYMENT AGREEMENT

 

with

 

ZVI JOSEPH

 

AGREEMENT entered into as of 1 day of November 2004 between Zvi Joseph, residing at 13 Menachem Begin St. Yehud, Israel (the “Employee”), and Intec Pharma Ltd., an Israeli company with offices locate at 10 Hartom St. Jerusalem, Israel (the “Company”).

 

WITNESSETH:

 

WHEREAS, the Company is in the business of drug delivery gastric retentive platform (the “Business”) ; and

 

WHEREAS, the Company desires to employ Employee. and the Employee desires to be employed by the Company as the Company’s CEO and as the chairman of the Board of Directors of the Company; and

 

WHEREAS, from June, 2000 through the 30 day of October, 2004 certain services were provided to the Company by Alpha Beta Investments and Entrepreneurship Ltd. ( “Alpha Beta” ) through Mr. Zvi Joseph who was an employee of Alpha Beta during such time period (hereinafter the “Alpha Beta Employment Period” ); and

 

WHEREAS, Alpha Beta, as Mr. Joseph’s employer, covered and paid for all of the rights and amounts due to Mr. Joseph as provided for under applicable law, for the entire Alpha Beta Employment Period; and

 

WHEREAS, the Employee declares and authorizes that with regard to the Alpha Beta Employment Period, which as stated above terminated on the 30 day of October, 2004, a full and complete accounting of all amounts due to Mr. Joseph was calculated and Mr. Joseph received full payment for all amounts due to him under applicable law for the entire Alpha Beta Employment Period; and

 

WHEREAS, Employee declares and authorizes that he is aware and agrees that he does not have and will not have any claims, demands and/or actions against the Company or anybody acting on its behalf in connection with his employment by Alpha Beta during the Alpha Beta Employment Period, and that the Alpha Beta Employment Period will not be taken into account when calculating the period of his employment with the Company for any and all purposes, including, but not limited to, calculating his seniority with the Company in connection with his salary and/or severance pay and/or his eligibility for other social or fringe benefits;

 

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

 

1. Contents of Agreement/Definitions

 

The preamble and the exhibits to this Agreement constitute an integral part hereof and are hereby incorporated by reference.

 

 
 

 

2. Employment and Duties

 

2.1         With effect from the Effective Date (as defined in Section 3 hereto), the Company employs Employee and Employee accepts employment with the Company as the Company’s CEO, until December 31, 2005, and as active chairman of the Board of Directors of the Company upon the terms and conditions set forth herein. The Employee shall report regularly to the Company’s Board of Directors.

 

2.2         The Employee shall be employed on a part time basis at a 75% position and shall perform his duties diligently and promptly for the benefit of the Company.

 

2.3         During the Employee’s engagement hereunder, the Employee may, in his free time, engage in other employments or occupations, so long as such other activities do not interfere with any of the Employee’s duties hereunder, and/or would not violate section 8 hereunder.”

 

3. Term and Termination of Employment

 

3.1         Employee’s employment under this Agreement shall commence on the I day of November, 2004 (the “ Effective Date ”) and shall end on the earliest of: (i) the death or disability (as defined herein) of Employee; (iii) termination by either party.

 

3.2         Without derogating from the terms set forth herein, either party may terminate this agreement without cause, as hereinafter defined, by providing three (3) months prior written notice (the “ Notice Period ”). During the Notice Period Employee shall continue his services unless otherwise instructed, and shall cooperate with the Company and use his best efforts to assist the integration into the Company organization of the person or persons who will assume the Employee’s responsibilities.

 

3.3         At any time, the Company shall be entitled to immediately terminate Employee’s employment hereunder for ‘cause’ (as set forth in Section 4.1 below) by providing notice thereof to Employee.

 

4. Provisions Concerning the Term of Employment

 

4.1         For the purpose of this Agreement, “ cause ” shall exist if Employee (i) breaches any of the terms of Sections 2.1, 7, 8, 9 and 10 or; (ii) engages in willful misconduct or acts in bad faith with respect to the Company in connection with and related to the employment hereunder; (iii) is convicted of a felony deemed to be a competent court as a flagrant offence or is held liable by a court of competent jurisdiction for fraud against the Company; (iv) fails to comply with the instructions of the Company or its Board of Directors given in good faith; or (v) is dismissed under the circumstances defined in Section 16 and/or Section 17 of the Severance Pay Law, 1963 (hereinafter: “ The Severance Pay Law ”); provided that, with respect to clauses (i) and (iv), if Employee has cured any such condition (that is reasonably susceptible to cure) within 10 business days (“ Grace Period ”) of the Notice (as defined herein), then “cause” shall be deemed not to exist. For purposes of this Section 4, “ Notice ” shall constitute a written notice delivered to Employee that sets forth with particularity the facts and circumstances relied on by the Company as the basis for cause.

 

4.2         For the purposes of this Agreement, “disability” shall mean any physical or mental illness or injury as a result of which Employee remains absent from work for a period of two (2) successive months, or an aggregate of two (2) months in any twelve month period. Disability shall occur upon the end of such two (2) month period.

 

 
 

 

5. Compensation

 

5.1 5.1.1     During the term hereof, the Company shall pay to Employee for all services rendered by Employee under this Agreement, a salary, payable not less often than monthly and in accordance with the Company’s normal and reasonable payroll practices, a monthly gross amount equal to N1S 30,000 (the “ Gross Salary ”).

 

5.1.2     An amount equal to 10% of the Gross Salary of the Employee, shall be considered as a special compensation for the Employee’s obligation not to compete with the Company, as defined in Section 8 herein (hereinafter: “ The Special Compensation ”).

 

5.1.3     The Company will pay the Employee the Gross Salary until the 9 th of each month, for the previous month.

 

5.2         The Company and the Employee will obtain and maintain Managers Insurance (“ Bituach Menahalim ”) according to the Company’s sole discretion and the Company will inform the Employee in writing the type of such Bituach Menahalim, for the exclusive benefit of the Employee in the customary form with respect to which the Company shall be the beneficiary. The Company shall contribute an amount equal to thirteen and one third percent (13.33%) of each monthly Gross Salary payment (out of which 8.33% are designated for severance payments and 5% are designated for premium payments - “ Company Contribution ”) and the Employee shall contribute five percent (5%) of the monthly Gross Salary payment (“ Employee’s Contribution ”) toward the premiums payable in respect of such insurance (the “ Insurance Policy ”). The Employee hereby instructs the Company to transfer to the insurance Company the amount of the Employee’s and the Company’s Contribution from each monthly Gross Salary payment, on account of the Insurance Policy. The contribution under this Paragraph shall be paid after the lapse of three months of employment, and shall be retroactive from the first month.

 

5.3         It is hereby agreed that upon termination of employment under this Agreement, the Company shall release to the Employee all amounts accrued in the Insurance Policy on account of both the Company’s and Employee’s Contributions. It is hereby agreed that if the Employee is dismissed under the circumstances defined in Section 16 and/or Section 17 of the Severance Pay Law - the Employee shall not be entitled to any Severance Pay.

 

It is hereby clearly agreed and understood that the amounts accrued in the Insurance Policy on account of the Company’s Contribution [i.e.13.33% of each monthly Gross Salary payment] shall be in lieu and in full and final substitution of any severance pay the Employee shall be or become entitled to under any applicable Israeli law. This section is in accordance with Section 14 of the Severance Pay Law, and the General Approval of the Labor Minister, dated June 30, 1998, issued in accordance to the said Section 14, a copy of which is attached hereby as Appendix A .

 

5.4         The Company shall obtain Disability Insurance (“ Ovdan Kosher Avoda ”), which may be included within the Insurance Policy, for the exclusive benefit of the Employee and shall contribute therefor an amount not exceeding two and a half percent (2.5%) of each monthly Gross Salary Payment, or such amount required to enable the payment of at least 75% of the Gross Salary.

 

5.5         The Company and the Employee shall open and maintain a Keren Hishtalmut Fund as of the Effective Date (the “ Fund ”). The Company shall contribute to such Fund an amount equal to seven and a half percent (7.5%) and the Employee shall contribute to such Fund an amount equal to two and a half percent (2.5%) of each monthly Gross Salary payment. The Employee hereby instructs the Company to transfer to the Fund the amount of the Employee’s and the Company’s contribution from each monthly Gross Salary payment.

 

- 3 -
 

 

5.6         The Employee will be entitled to either (i) use a leased Company car (the “ Car ”). The Company will cover all the operating expenses of the Car (excluding parking expenses), and will deduct tax from the “ Shovi Rechev as required by Law from the Gross Salary. Payments of the Car’s expenses by the Company under this paragraph are in lieu of traveling expenses to and from work as required by the Extension Order; or (ii) be reimbursed by the Company for Employee’s operating car expenses, including car insurance, car maintenance, and fuel, upon presentation by Employee of proper documentation (hereinafter: the “ Car Expenses ”). The Car Expenses will not form part of Employee’s social benefits and will not be taken into account for the purpose of calculating differentials of any kind. Employee acknowledges that the reimbursement of the Employee’s Car Expenses by the Company under this paragraph is in lieu of traveling expenses to and from work as required by the Extension Order.

 

The Employee shall (a) make only reasonable use of the Company Car, (b) abide by any requirements under applicable law in respect of the use of the Company Car, (c) shall carry out timely maintenance, (d) shall keep the Company Car properly, (e) to the best of Employee’s ability, shall refrain from causing damage to the Company Car, and (f) shall treat the Company Car in the same manner as a careful owner would look after one’s own property

 

5.7         The Company shall provide Employee with, and pay for the use of, a cellular phone for Employee’s use in the course of performing his obligations under his position (the “ Cellular Phone ”). Employee shall bear any and all taxes applicable to him in connection with the Cellular Phone and/or the use thereof.

 

5.8 Options.

 

5.8.1      The Employee shall be granted options to purchase up to 1,212 ordinary shares of the Company, par value MS 0.01, at a price per share of NIS 0.01(the “Shares”) representing 2% of the issued and outstanding share capital of the Company on a fully diluted basis as of the date hereof, (the “Option” ). The Option shall be subject to the following vesting schedule:

 

(i) up to 606 Shares, representing 1% of the issued and outstanding share capital of the Company on a fully diluted basis as of the date hereof. may be exercised in whole or in part at any time after the lapse of the first 12 months following the Effective Date (i.e., November 1, 2005) and for the period of 72 months thereafter.

 

(ii) up to 606 Shares, representing 1% of the issued and outstanding share capital of the Company on a fully diluted basis as of the date hereof, may be exercised in whole or in part at any time after the lapse of the first 24 month following the Effective Date (i.e., November 1, 2006) and for a period of 84 months thereafter.

 

Any part of the Option that was not exercised within the above exercise periods shall expire and be considered null and void.

 

Notwithstanding the above said, in the event that this Agreement is terminated lawfully, for any reason and by either party, prior to the lapse of the first 24 month following the Effective Date. the Option shall immediately expire and be considered null with respect to such part of Option that was not vested prior to such termination. In addition, in such event, The Employee shall be entitled to exercise any part of the Option that was already vested, if any, within 12 months following such termination. Upon the lapse of the 12 months period the Option shall expire in full and be considered null.

 

Notwithstanding the foregoing and for as long as this agreement is in effect, the Option may be exercised in whole or in part upon an IPO or M&A event, as defined herein. In the event that the Option was not exercised upon such IPO or M&A event, the Option shall immediately expire and be considered null.

 

 
 

 

5.8.2      In addition, upon the execution by the Company of a second Strategic Agreement as defined herein, provided however that such execution shall have occurred within two years following the Effective Date, The Employee will receive options to purchase up to 1,816 ordinary shares of the Company, representing 3% of the Company’s issued and outstanding share capital as of the date hereof on a fully diluted basis, at a price per share of NIS 0.01.

 

For the purpose of this Section, “A Strategic Agreement” shall mean an agreement with a corporation or other entity, which enters into a transaction with the Company in connection with its core business, which was approved by the affirmative vote of a majority of the Board of Directors of the Company

 

5.9 Bonuses

 

5.9.1      During the term of this Agreement, the Employee shall be entitled to receive an annual bonus in an amount equal to 5% (five percent) of the Profit of the Company (the “ Revenue Performance Bonus ”). The Revenue Performance Bonus shall be payable to the Employee within 30 (thirty) days, following the approval of the financial statements of the Company by the Company’s Board of Directors, for each Calendar Year, commencing at the first year in which the Company achieves Profit. For the purposes of this Section: a ‘Profit’ means — the annual net profit of the Company, in accordance with the Company’s annual audited financial statements for the preceding year, net expenses.

 

5.9.2      Additionally, upon the occurrence of an “IPO or M&A Event”(as defined below) during the term of this Agreement, the Employee shall be eligible for a sale bonus in an amount equal to 5% (five percent) of the total cash consideration paid to the Company and its shareholders with respect to such “IPO or M&A Event”,(the “ Sale Bonus ”) whether such consideration was paid in cash or in kind. The Sale Bonus shall be payable to the Employee within 30 (thirty) days following the receipt of such consideration. For the purposes of this Section an “IPO or M&A Event” shall mean any of the following: (i) the closing of a firmly underwritten public offering of shares of Ordinary Shares (“IPO”); (ii) except in the ordinary course of business, the sale, assignment, license, lease, or other disposal of (whether in one transaction or a series of transactions) of a substantial portion of the Company’s assets (including any shareholdings in any other entity and a substantial portion of its intellectual property) to any person or entity unless the Company’s shareholders of record as constituted immediately prior to such acquisition will, immediately after such acquisition (by virtue of securities issued as consideration for the Company’s acquisition or otherwise) hold a majority of the voting power of the acquiring entity; or (iii) a sale of shares of the Company or a merger or consolidation of the Company as a result of which the Company’s shareholders do not retain a majority of the voting power in the surviving corporation (each of the events detailed in sub- sections (ii)-(iii) shall be considered as a “M&A”);

 

5.9.3      During the term of this Agreement, the Employee shall receive a cash bonus in an amount equal to two (2) % percent of any actual consideration paid to the Company as a result of an executed Strategic Agreement. The total amount of such bonus shall be taking into account any one time payment and/or royalty payments due to the Company within the Term pursuant to the Strategic Agreement. The Company shall pay said cash bonus to the Employee within 30 days of receipt of the consideration.

 

5.9.4      Upon the Closing of an Investment Transaction as defined herein the Employee will receive a one time bonus in an amount equal to US $50,000 (the “ Investment Bonus ”). The Investment Bonus shall be paid to the Employee within 30 days from the actual payment of the investment amount to the Company.

 

 
 

 

For the purpose of this Section, an “Investment Transaction” shall mean, a transaction in which a third party, including current shareholders of the Company, will invest an amount exceeding US $ 5,000,000 (5 Million) in the Company, based on Company’s pre-money valuation of no less than US $15,000,000.

 

It is hereby clearly agreed and understood that any Revenue Performance Bonus and/or Sale Bonus paid to the Employee, if and to the extent paid, shall not form part of the Employee’s Gross Salary and/or the Employee’s social benefits, and will not be taken into account for the purpose of calculating differentials of any kind.

 

5.10 The Agreed Alternative Payment - in the event of a Claim for Overtime Payments

 

5.10.1    Employee agrees and acknowledges that due to his position in the Company, the Hours of Work and Rest Law, 1951 (hereinafter: “ the Hours of Work and Rest Law ”) does not apply on him. Therefore, the Employee shall not be entitled to claim or receive payments or any additional pay for overtime working hours, shifts, or work performed on Saturday or holidays.

 

5.10.2    The Employee undertakes, by signing this Agreement, that he will not sue, and/or demand, and/or claim that he is entitled to any additional payment to his Monthly Gross Salary due to overtime, above his Monthly Gross Salary which includes all the consideration which the Employee is entitled to receive for overtime.

 

5.10.3    Therefore, if notwithstanding the agreement of the parties and the Employee’s informed undertaking under this Agreement, it will be decided by a competent court, or any other competent tribunal, either due to Employee’s application or any other source, that the Hours of Work and Rest Law applies to the Employee, and that therefore the Employee is entitled to compensation, or any other additional payments due to overtime – then the parties hereto agree that the salary, which the Employee was entitled to, was 75% (Seventy-five percent) of the Monthly Gross Salary which was paid to the Employee under this Agreement. (hereinafter the “ Agreed Alternative Payment ”).

 

5.10.4    The Employee will be obligated to return the Company, on the day of the claim and/or demand which contradicts this Agreement, in which it will be claimed that the Working Hours and Rest Law applies to him, and/or that he was entitled to Overtime Payments – all additional payments that the Employee received from the Company over the Agreed Alternative Payment as defined above (the “ Excess Amount ”).

 

5.10.5    Each Excess Amount that the Employee will be obligated to return to the Company as mentioned above - shall bear interest and shall be linked to the Cost of Living Index on the Employee’s pay day – as compared to the Index on the day such amount will be returned to the Company.

 

5.10.6    The Company shall be entitled to set off such Excess Amounts against all amounts that the Employee shall be entitled to under this Agreement, or under the decision of the Court or of any other competent tribunal as mentioned above, which shall not derogate from any other right of the Company to receive from the Employee the rest of the amounts it is entitled to.

 

6. Taxation

 

6.1         To the extent applicable, the Company may deduct from the compensation payable to Employee under this Agreement any and all taxes and charges (including health tax) applicable to Employee as may now be in effect or which may hereafter be enacted or required by law, and make the appropriate payments on behalf of Employee to the income tax authorities, the Institute of National Insurance and any other relevant authority. Employee shall respectively pay all taxes and payments as required or shall be required by any applicable law. Employee shall notify the Company of any change in Employee’s place of residence or status, which may affect Employee’s tax liability anywhere in the world.

 

 
 

 

6.2         The Employee acknowledges that some of the benefits granted to Employee under this Agreement may be treated by the authorities as additional compensation to Employee, and therefore Employee agrees that, in such event Employee shall pay all taxes, national insurance contributions, and other payments required to be paid to the authorities in connection therewith

 

7. Secrecy and Nondisclosure

 

7.1         The Employee shall treat as secret and confidential all of the processes, methods, formulas, procedures, techniques, software, designs, data, drawings and other information which are not of public knowledge or record pertaining to the Company’s Business (existing, potential and future), including without limitation, all business information relating to customers and suppliers and products of which the Employee becomes aware during and as a result of his employment or association with the Company, and Employee shall not disclose, use, publish, or in any other manner reveal, directly or indirectly, at any time during or after the term of this Agreement, any such processes, methods, formulas, procedures, techniques, software, designs, data, drawings and other information pertaining to the Company’s existing or future Business or products. The Employee may disclose or use such information, if at all, only with the prior express written consent of the Company.

 

7.2         The Employee hereby undertakes to return, upon request, to the Company, all written materials, records, documents, computer software and/or hardware or any other material which belongs to the Company and that might be in his possession, and if requested by the Company to do so, will execute a written statement confirming compliance with the above said.

 

7.3         The Employee acknowledges that all of the secrets, information, or documents aforementioned in Sub-Sections 7.1 and 7.2 above, are essential commercial and proprietary information of the Company which is not public information and cannot easily be discovered by others, whose confidentiality provides the Company a commercial advantage over its competitors, and the Company is taking reasonable measures to safeguard its confidentiality.

 

7.4         The Employee’s undertakings pursuant to this clause shall remain in force after the termination of Employee’s employment under this Agreement unless such information as aforementioned has become generally known to the public or is independently acquired by Employee without the use of Confidential Information or if required to disclose the information pursuant to law.

 

8. Non-Competition

 

8.1          Employee agrees that during the term of this Agreement and for a period of one (1)year after he ceases to be employed by the Company he will not, directly or indirectly, for his own account or as an employee, officer, director, partner, joint venturer, shareholder, investor, consultant or otherwise (except as an investor in a corporation whose stock is publicly traded and in which Employee holds less than 5% of the outstanding shares) and without the prior written consent of the Company. engage in any business or enterprise, anywhere in the world, that directly competes with the Business of the Company, that exists now or in the future or is based on similar technology to the technology that was developed by the Company.

 

8.2         Employee agrees that during a period of six months from termination of this Agreement, he shall not employ directly or indirectly any individual employed by the Company during the six-month period, which preceded such date of termination.

 

 
 

 

8.3         Employee acknowledges that the restricted period of time and geographical area specified under Sections 8.1 and 8.2 hereof are reasonable, in view of the nature of the business in which the Company is engaged and Employee’s knowledge of the Business.

 

8.4         Notwithstanding anything contained in Section 8.3 to the contrary, if the period of time or the geographical area specified under Sections 8.1 or 8.2 hereof should be determined to be unreasonable in any judicial proceeding, then the period of time and area of the restriction shall be reduced so that this Agreement may be enforced in such area and during such period of time as shall be determined to be reasonable by such judicial proceeding.

 

8.5         If the Employee shall breach any of his obligations under this Section 8 - The Employee will be obligated to return the Company, immediately, the Special Compensation, as defined above. Such Special Compensation thus returned to the Company:

 

8.5.1      Shall bear interest, and shall be linked to the Cost of Living Index on the Employee’s pay day– as compared to the Index on the day such amount will be returned to the Company.

 

8.5.2      Shall not derogate from any other right of the Company to receive from the Employee the rest of the amounts it is entitled to.

 

8.6 The Employee declares and acknowledges that:

 

8.6.1      His obligations of protecting the confidentiality and non-competition provisions included in this agreement are fair, reasonable, and proportional, especially in light of the special compensation he receives under this Agreement which is designed to protect the Company’s secrets and its confidential information, which constitute the essence of its protected business and commercial advantage in which significant capital investments were made.

 

8.6.2      Breach of an obligation under this Section - shall contradict the nature of the special trust and relationship of loyalty between the parties, the fair and proper business practices, the duty of good faith and fairness between the parties, shall harm the Company, and shall constitute a material breach of this Agreement and the trade secrets, confidential connections, confidential information, and other privileged interests of the Company.

 

8.6.3      The Employee declares that his obligations under this section, which are reasonable and proportional - do not prevent the employee from developing his general knowledge and professional expertise in the area of his business, with regard to those who are not customers and employees of the Company and without usurping its trade secrets.

 

9. Development Rights

 

The Employee agrees and declares that all proprietary information including but not limited to copyrights, trade secrets and know-how, patents and other rights in connection therewith developed by or with the contribution of Employee’s efforts during his employment by the Company shall be the sole property of the Company, and the Employee shall execute all documents necessary to assign any patents to the Company and otherwise transfer such proprietary rights to the Company.

In Addition, Employee agrees to be bound by the terms and conditions of the Intellectual Property assignment of rights stated in Appendix B hereto, incorporated by reference as part of this Agreement.

 

10. Employee Representations and Acknowledgments

 

The Employee represents and warrants to the Company that the execution and delivery of this Agreement and the fulfillment of the terms hereof (i) will not constitute a default under or breach of any agreement or other instrument to which he is a party or by which he is bound, including without limitation, any confidentiality or non-competition agreement, (ii) do not require the consent of any person or entity, and (iii) shall not utilize during the term of his employment any proprietary information of any third party, including prior employers of the Employee.

 

 
 

 

11. Vacation, Illness, Dmey Havra’ah and Reserve Duty

 

11.1        Employee shall be entitled to thirty (30) paid vacation days during each year of his employment. Employee shall be obliged to take at least 5-paid vacation days during each year of his employment, as prescribed by law. Statutory Vacation time may be accumulated for no more than two years after which Employee shall forfeit any unused vacation remaining at the end of such two-year period. Accumulated Statutory vacation time shall be redeemed only in the event of the termination of employment.

 

11.2        Employee shall be entitled to such number of working days of paid illness vacation during each year of his employment, as provided by Israeli Labor Law, or more, in accordance with Company policy.

 

11.3        The employee shall be entitled to “Dmey Havra’ah” in accordance with any applicable law.

 

12. Benefit

 

12.1        Except as otherwise herein expressly provided, this Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, including, without limitation, any subsidiary or affiliated entity and shall inure to the benefit of, and be binding upon, Employee, his heirs, executors, administrators and legal representatives. Notwithstanding the foregoing, the obligations of Employee hereunder shall not be assignable or delegable.

 

12.2        The parties hereby agree that at the sole discretion of the Employee, Employee shall be entitled to provide his services to the Company through any entity (the “Entity”) which is, directly or indirectly, wholly owned and controlled by Employee, provided that : (i) Employee shall promptly notify the Company of such decision, (ii) this agreement shall become immediately terminated including, without limitation, termination of the employment relationship between the Company and the Employee, and the Employee shall execute a waiver and release undertaking pursuant to which the Employee shall release the Company from any and all obligations towards him arising out of or in connection with his employment with the Company and/or the termination of his employment with the Company, (iii) the Company and the Entity will enter into a services agreement (the “Services Agreement”) pursuant to which the Entity will undertake to become fully obligated to perform all of the obligations of Employee hereunder in accordance with the terms and provisions of this Agreement, mutatis mutandis, and to indemnify and hold the Company harmless in respect of any loss, liability, deficiency, damage, cost, or expense (including reasonable legal fees and expenses), as and when incurred, by any of the Company against any claim by Employee with respect to the existence of an employment relationship between the Employee and the Company following termination of this Agreement, and for any expenses incurred by the Company arising out of such a claim, (iv) following execution of the Services Agreement, the Entity shall be entitled to receive from the Company all benefit due to the Employee under this Agreement, including without limitation, payment of any bonuses (if applicable), such that the costs to be actually borne by the Company in connection with the engagement of the Entity under the Services Agreement shall be equal to the costs to be actually borne by the Company in connection with the engagement of the Employee under this Agreement (v) the Employee shall continue to comply with the provisions of Sections 7 and 8 hereto; and (iv) the Services Agreement shall remain in effect so long as the Entity remains fully owned and controlled by Employee.

 

 
 

 

13. Entire Agreement

 

This Agreement constitutes the entire understanding and agreement between the parties hereto, supersedes any and all prior discussions, agreements and correspondence with regard to the subject matter hereof, and may not be amended, modified or supplemented in any respect, except by a subsequent writing executed by both parties hereto.

 

14. Notices

 

All notices, requests and other communications to any party hereunder shall be given or made in writing and telecopied, mailed (by registered or certified mail) or delivered by hand to the respective party at the address set forth in the caption of this Agreement or to such other address (or telecopier number) as such party may hereafter specify for the purpose of notice to the other party hereto. Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified herein and the appropriate answerback is received or (ii) if given by any other means, when delivered at the address specified herein.

 

15. Affiliated Companies

 

For the purpose of Sections 7 and 8 above, the term “ Company ” shall include also the Company’s parent company, Company’s subsidiary or any company controlled or owned by the Company’s parent company.

 

16. Applicable Law

 

16.1         This Agreement shall not derogate from any Applicable Law, Extension Order, or Collective Agreement.

 

16.2         This Agreement shall be governed by, and construed and enforced in accordance with, the laws of Israel without giving effect to principles of conflicts of law and the courts of Israel, Distric of Tel Aviv, shall have exclusive jurisdiction over the parties hereto and subject matter hereof.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first appearing above.

 

INTEC PHARMA

         LTD.

 

    /s/ Zvi Joseph
INTEC PHARMA LTD.   EMPLOYEE

 

 
 

 

Annex A

 

General Approval (Combined Version) Regarding Employers’ Contributions to
Pension Funds and Insurance Funds in lieu of Severance Pay
Under the Severance Pay Law, 5723-1963
[Updated as of February 28, 2001]

 

By virtue of my power under Section 14 of the Severance Pay Law, 5723-1963 1 (the “Law”), I hereby confirm, that contributions made by an employer for his employee, commencing as of the date of publication of this approval, to a comprehensive pension in a provident fund for annuity that is not an insurance fund within the meaning of such term in the Income Tax Regulations (Rules for the Approval and Management of Provident Funds), 5724-1964 2 (a “Pension Fund”) or to a managers’ insurance that includes the possibility of an annuity or a combination of payments to an annuity plan and to a non-annuity plan within such insurance fund (an “Insurance Fund), including combined contributions made by the employer to a Pension Fund and to an Insurance Fund, whether or not the Insurance Fund includes an annuity plan (the “Employer’s Contributions”), shall be payable in lieu of severance pay due to such employee in respect of the salary from which such contributions were made and the period they were made for (the “Exempt Salary”); provided, however, that all of the following conditions have been fulfilled:

 

(1) The Employer’s Contributions -

 

(a) To the Pension Fund, are at a rate of no less than 14 1/3% of the Exempt Salary, or 12% of the Exempt Salary, if in addition thereto, the employer makes supplementary severance pay contributions for his employee to a provident fund for severance pay or to an Insurance Fund in the employee’s name, at a rate of 2 1/3% of the Exempt Salary. In the event that the employer has not contributed such 2 1/3% in addition to said 12%, his contributions shall only replace 72% of the employee’s severance pay;

 

(b) To the Insurance Fund are at a rate of no less than one of the following:

 

(1) 13 1/3% of the Exempt Salary, if in addition thereto, the employer makes contributions for his employee for securing monthly income in the event of disability to a plan approved by the Commissioner of the Capital Market, Insurance and Savings at the Ministry of Finance, at the rate required to secure at least 75% of the Exempt Salary or a rate of 2 1/2% of the Exempt Salary, whichever is lower (“Disability Insurance Contributions”); or

 

(2) 11% of the Exempt Salary, if the employer also made Disability Insurance Contributions, and in such case the Employer’s Contributions shall only replace 72% of the Employee’s severance pay; In the event that the employer has made, in addition to the foregoing, supplementary severance pay contributions to a provident fund for severance pay or to an Insurance Fund in the employee’s name at a rate of 2 1/3% of the Exempt Salary, the Employer’s Contributions shall replace 100% of the employee’s severance pay.

 

 

1 Statues 5723, p. 136.
2 Regulations 5724, p. 1302.

 

1
 

 

(2) By no later than three months of the commencement date of the Employer’s Contributions, a written agreement is executed between the employer and the employee that includes:

 

(a) The employee’s consent to the arrangement pursuant to this approval in a form specifying the Employer’s Contributions, and the Pension Fund and Insurance Fund, as applicable; such agreement shall also include the form of this approval;

 

(b) 3 The employer’s advance waiver of any right he may have to a refund of monies from his contributions, unless the employee’s right to severance pay has been revoked by virtue of Sections 16 or 17 of the Law, and to the extent so revoked, or the employee has withdrawn monies from the Pension Fund or Insurance Fund other than by reason of an Entitling Event; in such regard “Entitling Event” means death, disability or retirement at or after the age of 60 or more

 

(c) This approval shall not derogate from the employee’s right to severance pay under any law, collective agreement, expansion order or employment contract, in respect of salary over and above the Exempt Salary.

 

  Eliyahu Yishai
   
  Minister of Labor and Social Affairs

 

Signature of employee:    
     
Date:     Signature: /s/ Zvi Joseph  
         

 

 

3 Amendment: Official Gazette 4803, 5760 (September 19, 1999).

 

2
 

 

APPENDIX B

 

Intellectual Property assignment of rights

 

1. For purposes of this Appendix, the following definitions shall apply:

 

Inventions ” shall mean:

 

A.           All inventions, improvements, modifications, and enhancements whether or not patentable, made by the Employee during or in the course of employment, or which relate, directly or indirectly to the business of the Company, or which were made using the Company’ equipment and

 

B.           All inventions, improvements, modifications and enhancements made by the Employee, during a period of twelve (12) months (or such lesser maximum period permitted by law) after any termination of the Employee’s employment, which relate, directly or indirectly, to the business of the Company at the time they were so made.

 

Work Product ” shall mean all documentation, software, hardware, firmware, creative works, artworks, know-how and information created, in whole or in part, by the Employee during the Employee’s employment by the Company, whether or not copyrightable or otherwise protectable, excluding Inventions.

 

Trade Secrets ” shall mean “Commercial Secrets” as defined in the Law of Commercial Wrongs, 1999, and all documentation, software, hardware, firmware, customer lists, know-how and other information of any kind or nature relating to the past, present or future business of the Company or any plans therefor, or relating to the past, present or future business of a third party or plans therefor (including but not limited to any items and information in any form determined by law as trade secrets) that are disclosed to the Employee, which the Company does not disclose to third parties without restrictions on use or further disclosure.

 

2. Without derogating from any other provision of the law:

 

A.           The Employee shall promptly disclose to the Company all Inventions and keep accurate records relating to the conception and reduction to practice of all Inventions. Such records shall be the sole and exclusive property of the Company, and the Employee shall surrender possession of such records to the Company upon any termination of the Employee’s relationship with the Company.

 

B.           The Employee hereby assigns to the Company, without additional consideration to the Employee, the entire right, title and interest in and to the Inventions and Work Product and in and to all proprietary and any and all intellectual property rights therein or based thereon. The Employee shall execute all such assignments, oaths, declarations and other documents as may be prepared by the Company to effect the foregoing.

 

C.           During the term of this Agreement, and thereafter, the Employee shall provide the Company with all information, documentation, and assistance the Company may reasonably request to perfect, enforce, or defend its proprietary rights in or based on the Inventions, Work Product and/or Trade Secrets. The Company, in its sole discretion, shall determine the extent of the proprietary rights, if any, to be protected in or based on the Inventions and/or Work Product. All such information, documentation, and assistance shall be provided to the Company by the Employee at no additional expense to the Company, except for out-of-pocket expenses which the Employee incurred at the Company’ request.

 

D.           During the term of this Agreement, and thereafter, the Employee shall treat Inventions and Work Product as Confidential Information under this Agreement and shall not disclose them to others without the prior written permission of the Company, or use such Inventions and/or Work Product for any purpose, other than for the performance of services for the Company.

 

 
 

 

3.            Remedies.    The Employee acknowledges that a breach of the covenants contained in this Agreement and this Appendix A would result in substantial injury and damage to the Company for which there is no adequate remedy at law. Therefore, in the event of an actual or threatened breach of such covenants by the Employee, the Company shall be entitled, in addition to all other rights, remedies and damages that may be available to the Company at law or in equity, to a preliminary restraining order and an injunction, or any other available equitable remedy, to restrain the violation or attempted violation of this Agreement by the Employee or by any other person or entity acting for her benefit or on her behalf. In the event there is any action to enforce the terms of such restrictive covenants, the prevailing party, in addition to any other remedy, shall be entitled to recover reasonable attorney’s fees and all other reasonable costs associated with any such action both on the trial and appellate level and in any creditor’s proceedings. In the event that a court of competent jurisdiction determines by final non-appealable judgment that the scope, time period, or geographical limitations of any of the restrictive covenants specifically set forth herein are too broad to be capable of enforcement, said court is authorized, and the parties hereto stipulate that such court shall, modify said restrictive covenants and enforce such provisions as to scope, time, and geographical areas as the court deems equitable, just and appropriate considering the intent of the parties hereto.

 

 
 

 

Translated from Hebrew

 

Addendum to Employment Agreement

that was Entered into and signed in Jerusalem on November 1, 2004

 

Between: Intec Pharma Ltd.  
  ( the “Company”)  
    of the first part;
     
And: Mr. Zvi Yosef  
  (“Mr. Yosef”)  
    of the second part;
     
Whereas Mr. Yosef is employed by the Company by virtue of an employment agreement of November 1, 2004 (hereinafter referred to as the “Employment Agreement” or the “Agreement”);
   
Whereas the Company and Mr. Yosef wish to alter some of the employment terms stated in the Employment Agreement, as agreed below;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The period of the Agreement – sections 3.1 and 3.2 shall be replaced by the following sections:

 

1.1 Subject to the provisions of section 3.3 below, the employment period pursuant to this Agreement shall be unlimited and each party may terminate this Agreement on six months’ written notice (hereinafter referred to as the “ Notice Period ”). In the Notice Period, Mr. Yosef shall continue his ordinary and routine work for the Company (unless the Company instructs him otherwise), Mr. Yosef shall fully cooperate with the Company and shall make best efforts to bring about a swift and successful handover to whomever replaces him in his position.

 

2. The scope of the position

 

2.1. The provisions of section 5.1.1 of the Employment Agreement shall be altered as follows: instead of a monthly salary of NIS 30,000, a monthly salary of NIS 35,000 shall be noted.

 

3. Instead of section 5.8.2 of the Employment Agreement, a new section 5.8.2 shall be inserted as follows:

 

The Company is hereby allotting Mr. Yosef, on a one-time basis, 2,893 (and in words – two thousand eight hundred and ninety three) options to purchase ordinary shares of the Company of a par value of NIS 0.01 each (hereinafter referred to as “Ordinary Shares”) in addition to the 1,816 (one thousand eight hundred and sixteen) options already granted to Mr. Yosef in accordance with section 5.8.2 of the original agreement the validity of which has expired and is hereby extended, and together amounting to 4,709 (four thousand seven hundred and nine) reflecting, as at the execution of this Addendum, assuming their full conversion, 1.5% (one and a half percent) of the Company’s share capital, on full dilution, immediately after the allotment. All the aforesaid options (4,709) shall be fully vested only insofar as a “material agreement” (as defined below) is executed between the Company and a third party within the period of this Agreement (prior to its conclusion and/or termination for any reason) but within 18 months from the conclusion of the Employment Agreement and/or its termination for any reason (hereinafter referred to as the “Vesting Condition”). The aforesaid options shall be allotted in the name of a trustee and shall be subject to the Company’s option plan. Subject to fulfillment of the Vesting Condition and the provisions of the law and from such time on, the aforesaid options shall be exercisable at an exercise price of NIS 0.01 per ordinary share, in accordance with the timetables stated in the Company’s option plan.

 

 
 

 

In this section, “material agreement” means an agreement that fulfills the following aggregate conditions: (1) an agreement with a company or entity, (2) which is entering into a transaction with the Company (or with another entity designated by the Company for the purpose of such engagement) in connection with the Company’s core business, (3) the agreement has been approved by a majority of votes of the Company’s board of directors as an agreement that is material to the Company, and (4) the agreement significantly increases the Company’s value.

 

For the avoidance of doubt, it is expressed that in relation to the options granted pursuant to this section, insofar as the Vesting Condition is not fulfilled (i.e. a material agreement is not executed between the Company and a third party, and within the period of the Employment Agreement (prior to its conclusion and/or termination for any reason) or within 18 months of its conclusion and/or termination for any reason, all the options allotted pursuant to this section shall expire and be deemed null and void, and shall not vest Mr. Yosef with any right.

 

4. Section 5.9.1 of the Employment Agreement is hereby cancelled forthwith and shall no longer be of any force.

 

5. Section 5.9.1 of the Agreement (in relation to the receipt of consideration amounting to 5% of the value of the M&A or IPO transaction) shall be replaced by the following section:

 

In addition, the Company is hereby allotting to Mr. Yosef 4,709 (four thousand seven hundred and nine) options to purchase ordinary shares of the Company of a par value of NIS 0.01 reflecting, as at the execution of this Addendum, assuming their full conversion, 1.5% (one and a half percent) of the Company’s share capital, on full dilution, immediately after the allotment. The aforesaid options shall be fully vested immediately after completion of the “ M&A or IPO transaction” (as defined below) of the Company (hereinafter referred to as the “Vesting Condition”).

 

The aforesaid options shall be allotted in the name of a trustee and shall be subject to the Company’s option plan. Subject to fulfillment of the Vesting Condition and the provisions of the law, from such time on the aforesaid options may be exercised at an exercise price of NIS 0.01 per ordinary share, in accordance with the timetables stated in the Company’s option plan.

 

2
 

 

In this section, M&A or IPO transaction” means completion of each of the following transactions: (1) an IPO of the Company’s Ordinary Shares, (2) the sale, assignment, rental, grant of a license or any other transaction that is not in the Company’s ordinary course of business (in one transaction or in several transactions) of a material part of the Company’s assets (including any holding of shares and securities in other entities) to any entity or third party, except if at the time of the transaction’s execution as aforesaid the Company’s shareholders hold a majority of the voting rights in the entity purchasing the rights and/or assets from the Company as aforesaid, or (3) the sale of the Company’s shares or the Company’s merger (including and without derogation, a reverse merger, merger into a public company or publicly-traded shell company and the like) or consolidation of the Company as a result of which the Company’s shareholders prior to the transaction’s execution do not hold a majority of the voting rights in the entity surviving the transaction as aforesaid.

 

6. Section 5.9.3 of the Employment Agreement is hereby cancelled forthwith and shall no longer be valid.

 

In witness whereof the parties have hereunto set their hands on October 20, 1009

 

/s/ Giora Carni   /s/ Zvi Yosef
Intec Pharma Ltd.   Zvi Yosef

 

3
 

 

Translated from Hebrew

 

Addendum to Agreement

Entered into and signed in Jerusalem on July 28, 2011

 

Between: Intec Pharma Ltd., Company No. 513022780
  of 12 Hartom Street, Jerusalem
  (the “Company” )
    of the first part;
     
And: Zvi Yosef, I.D. 022152177
  of 10 Menachem Begin Street, Yehud
  (the “Manager” )
     
    of the second part;
     
Whereas the Manager serves as chairman of the Company’s board of directors under an employment agreement of November 1, 2004, which, together with its annexes, is annexed to this Agreement as Annex A (hereinafter referred to as the “Agreement”);
   
Whereas the parties intend that all the rights given to the Manager under the Agreement shall remain in force, and that all the terms and conditions of the Agreement shall continue to apply to the parties for an additional two years, save if and insofar as expressly altered in this Addendum.

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this Addendum and the annexes hereto constitute an integral part hereof.

 

2. It is agreed between the parties that the Manager shall continue serving as chairman of the Company’s board of directors on terms and conditions identical to those of the Agreement and its annexes, save as expressly provided in this Addendum, such being for an additional two years commencing on May 1, 2011 (hereinafter referred to as the “Extended Employment Period”).

 

3. The Manager’s monthly salary in the Extended Employment Period shall be NIS 40,000 a month linked to the index known on the date of this Addendum’s execution. The update shall take place at the beginning of each quarter.

 

4. The Manager shall be entitled to a one-time bonus of NIS 150,000 for his performance prior to the execution of this this Agreement. This bonus shall be paid to the Manager on the date stated by him, in 30 days’ written notice to the Company.

 

5. In addition, options shall be granted to the Manager as follows:

 

 
 

 

Allotment of options the exercise of which is conditional upon the Manager’s continued employment

 

5.1. Immediately after the entry into force of this Addendum, the Manager shall be granted, on a one-time basis, 1,041,350 (one million and forty one thousand three hundred and fifty) options to purchase ordinary shares against an exercise price determined in accordance with the average price of the Company’s share on the stock exchange in the 30 trading days preceding the date of the resolution’s approval by the Company’s audit committee and board of directors (that is to say, NIS 1.6222). The said options shall vest in eight equal lots over a period of two years, subject to the vesting terms and conditions and in the framework of the exercise period as detailed below:

 

(i) 130,168 options (hereinafter in this section referred to as the “First Lot”) may be exercised as of the end of three calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “First Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the First Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the First Lot in accordance with the provisions of the option plan and its annexes.

 

(ii) 130,168 options (hereinafter in this section referred to as the “Second Lot”) may be exercised as of the end of six calendar months from the date on which this Agreement enters into force (hereinafter referred to as the “Second Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Second Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Second Lot in accordance with the provisions of the option plan and its annexes.

 

(iii) 130,168 options (hereinafter in this section referred to as the “Third Lot”) may be exercised as of the end of nine calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Third Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Third Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Third Lot in accordance with the provisions of the option plan and its annexes.

 

(iv) 130,168 options (hereinafter in this section referred to as the “Fourth Lot”) may be exercised as of the end of 12 calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Fourth Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Fourth Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Fourth Lot in accordance with the provisions of the option plan and its annexes.

 

2
 

 

(v) 130,168 options (hereinafter in this section referred to as the “Fifth Lot”) may be exercised as of the end of 15 calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Fifth Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Fifth Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Fifth Lot in accordance with the provisions of the option plan and its annexes.

 

(vi) 130,168 options (hereinafter in this section referred to as the “Sixth Lot”) may be exercised as of the end of 18 calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Sixth Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Sixth Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Sixth Lot in accordance with the provisions of the option plan and its annexes.

 

(vii) 130,168 options (hereinafter in this section referred to as the “Seventh Lot”) may be exercised as of the end of 21 calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Seventh Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Seventh Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Seventh Lot in accordance with the provisions of the option plan and its annexes.

 

(viii) 130,168 options (hereinafter in this section referred to as the “Eighth Lot”) may be exercised as of the end of 24 calendar months from the date on which this this Agreement enters into force (hereinafter referred to as the “Eighth Vesting Period”), until the end of 72 calendar months from the date on which they are granted. In the event that after the end of the Eighth Vesting Period the Extended Employment Period comes to an end, the Manager shall be entitled to exercise the Eighth Lot in accordance with the provisions of the option plan and its annexes.

 

3
 

 

5.2. The options granted pursuant to this section 5 shall be allotted in the name of a trustee on a capital track and shall be subject to the Company’s option plan and its annexes, which comply with the requirements of section 102 of the Income Tax Ordinance.

 

5.3. In the event that the Manager’s employment with the Company is terminated for any reason, all the options in respect of which the vesting periods detailed in this section 5 have not passed shall expire, and they shall be deemed null and void.

 

5.4. It is agreed that if, before the end of the vesting periods, in relation to the First Lot and/or the Second Lot and/or the Third Lot and/or the Fourth Lot and/or the Fifth Lot and/or the Sixth lot and/or the Seventh Lot and/or the Eighth Lot, respectively, an event of sale occurs of all or mot of the securities and/or securities of the Company are issued to the public on NASDAQ and/or the Company’s assets and/or the Company are merged with another company (hereinafter jointly and severally referred to as “Entitling Event”), the vesting date of the Manager’s entitlement to exercise all the options that have not yet fully vested into ordinary shares, on the date of the Entitling Event’s occurrence, shall be accelerated.

 

6. In addition, the following options shall be granted to the Manager:

 

Allotment of options the exercise of which is conditional upon entry into a material agreement (as defined below)

 

6.1. Immediately after the entry into force of this Addendum, the Manager shall be granted, on a one-time basis, 2,082,700 (two million eighty two thousand and seven hundred) options to purchase ordinary shares against an exercise price determined in accordance with the average price of the Company’s share on the stock exchange in the 30 trading days preceding the date of the resolution’s approval by the Company’s audit committee and board of directors (that is to say, NIS 1.6222). The said options shall be fully vested immediately after the entry into force of a material agreement (hereinafter referred to as the “Vesting Condition”). The options shall remain valid for a period of up to 72 calendar months from the date on which they are granted (hereinafter referred to as the “Exercise Period”).

 

6.2. In this section 6, “material agreement” means an agreement that fulfills the following aggregate conditions: (a) an agreement with a company or entity, (b) which is entering into a transaction with the Company (or with another entity designated by the Company for the purpose of this engagement) in connection with the Company’s core business, (c) the agreement has been approved by a majority of votes on the Company’s board of directors as an agreement that is material to the Company, and (d) the agreement significantly increases the Company’s value.

 

6.3. The options granted pursuant to this section 6 shall be allotted in the name of a trustee on the capital track and shall be subject to the Company’s option plan and its annexes that comply with the requirements of section 102 of the Income Tax Ordinance.

 

4
 

 

6.4. The options under this section 6 shall expire at the end of 18 calendar months from the date of termination of the Manager’s employment with the Company, and shall be deemed null and void and not capable if exercise if by this period entitlement to exercise them has not vested and they have not been exercised by the Manager.

 

7. Payment of the tax payable in respect of the options’ grant and/or in respect of the shares’ allotment on exercise of the options, insofar as allotted, shall be borne exclusively by the Manager.

 

8. All the other provisions of the agreement shall remain valid.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni   /s/ Zvi Yosef
Intec Pharma Ltd.   Zvi Yosef

 

5
 

 

Translated from Hebrew

 

Addendum to Agreement

Entered into and signed in Jerusalem on October 21, 2013

 

Between: Intec Pharma Ltd., Company No. 513022780
  of 12 Hartom Street, Jerusalem
  (the “Company”)
    of the first part;
     
And: Zvika Yosef, I.D. 022152177
  of 10 Menachem Begin Street, Yehud
  (“Mr. Yosef”)
    of the second part;
     
Whereas Mr. Yosef contracted with the Company in an employment agreement of November 1, 2004 and in the addendum to this agreement of October 20, 2009. On July 28, 2011, the Company’s general meeting approved an update to the employment agreement as aforesaid. On May 28, 2013, the Company’s general meeting approved extending the validity of Mr. Yosef’s employment agreement until December 31, 2013, or until the approval of a new employment agreement for Mr. Yosef, whichever is earlier (hereinafter jointly referred to as the “Original Agreement”);
   
Whereas the parties intend updating the terms and conditions of the Original Agreement, all as provided below in this Addendum;

 

Wherefore the parties have represented, stipulated and agreed as follows:

 

1. The preamble to this Addendum and the annexes hereto, if any, constitute an integral part hereof.

 

2. All of the terms and conditions of the Original Agreement that were in force on the date of the entry into force of the provisions of this Addendum (with the exception of the terms and conditions expressly modified in this Addendum) shall remain in force.

 

3. The terms and conditions of the engagement contemplated in the Addendum are as follows:

 

3.1. Period of engagement : the period of engagement is for three years from the date of approval of the update of the terms and conditions of the Original Agreement by the shareholders’ general meeting, which was given on October 21, 2013.

 

3.2. Monthly salary : the monthly salary shall be NIS 45,000, linked to the consumer price index.

   

 
 

 

3.3. Options : Mr. Yosef shall be allotted, on a one-time basis: (1) 300,000 immediate options for the purchase of 300,000 shares of a par value NIS 0.01 each of the Company, against an exercise price equal to the share’s average closing prices in the 30 day period preceding the board of directors’ resolution on the allotment (hereinafter referred to as the “Immediate Options”). The Immediate Options shall fully vest immediately after approval of the update of the employment terms and conditions by the shareholders’ general meeting (which was given on October 21, 2013). The options shall be valid for a period of 72 hours calendar months from the date on which they are granted. The options shall expire at the end of 90 days from the date of his employment’s termination; (2) 1,000,000 options to purchase 1,000,000 shares of a par value of NIS 0.01 each of the Company, against an exercise price equal to the share’s average closing prices in the 30 day period preceding the board of directors’ resolution on the allotment. xxx The options shall vest in three annual lots. The options shall be valid for a period of up to 72 calendar months from the date on which they are granted. The options shall expire at the end of 90 days from the date of termination of Mr. Yosef’s employment, and shall be deemed null and void and incapable of exercise if by such period entitlement to exercise them has not vested and they have not been exercised by Mr. Yosef; (3) 700,000 contingent options for the purchase of 700,000 shares of a par value of NIS 0.01 each of the Company, against an exercise price equal to the share’s average closing prices in the 30 day period preceding the board of directors’ resolution on their allotment (hereinafter referred to as the “Contingent Options”). The Contingent Options shall fully vest immediately after the entry into force of a material agreement. The Contingent Options shall remain valid for a period of 72 calendar months from the date on which they are granted. The options shall expire at the end of 18 months from the date of termination of Mr. Yosef’s employment, and shall be deemed null and void and incapable of exercise if by this period entitlement to exercise them has not vested and they have not been exercised by Mr. Yosef.

 

In such regard, a “material agreement” shall mean an agreement satisfying the following cumulative conditions: (a) an agreement has been executed with a company or entity, (b) which is entering into a transaction with the Company (or another entity designated by the Company for the purpose of this engagement) in connection with the Company’s core business, (c) the agreement has been approved by a majority of votes of the Company’s board of directors as an agreement that is material to the Company, and (d) the agreement significantly increases the Company’s value for a reasonable duration of time.

 

In addition, 683,807 options granted to Mr. Yosef on November 1, 2004, 1,089,347 options granted to Mr. Yosef on October 20, 2009 and 2,082,700 options granted to Mr. Yosef on July 28, 2011 shall be extended for the period of the employment agreement and shall be valid for a period of not less than 18 months from the date of termination of the engagement with Mr. Yosef. The options as aforesaid in this sub-section may be exercised insofar as a material agreement is executed during the period of his employment and in a period of not more than 18 months from the date of termination of Mr. Yosef’s employment agreement.

 

2
 

 

3.4. Termination of engagement : the Company and Mr. Yosef may terminate the employment agreement on written notice of six months.

 

4. The provisions of this Addendum are in force on the date of receiving all the approvals required by law.

 

In witness whereof the parties have hereunto set their hands

 

/s/ Giora Carni and Nir Sassi   /s/ Zvika Yosef
Intec Pharma Ltd.   Zvika Yosef

 

3

 

Exhibit 10.17

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

AMENDMENT TO JOINT VENTURE FOR R&D AGREEMENT

 

This amendment to Joint Venture for R&D Agreement (this “ Amendment ”) is entered into as of March 12, 2015, by and between Yissum Research and Development Company of the Hebrew University of Jerusalem Ltd. (“ Yissum ”) and Intec Pharma Ltd. (“ Company ”) (each to be referred to as a “ Party ” and together as the “ Parties ”).

 

WHEREAS, the Parties entered into a Joint Venture for R&D Agreement on June 1, 2000, which was extended and amended on October 5, 2004 and July 13, 2005 (the agreement and its amendments shall be referred together in this Amendment as the “ Agreement ”); and

 

WHEREAS, in connection with the pending grant of a sublicense by the Company to “[***]” , the Parties wish to amend the Agreement as set forth herein, to become effective only with respect to such sublicense to be granted to “[***]” , as of the date such sublicense agreement is executed with “[***]” ;

 

NOW, THEREFORE , the Parties hereto, intending to be legally bound, hereby agree as follows:

 

Except as specifically defined herein, all terms used in this Amendment shall have the meaning ascribed to them in the Agreement.

 

1. Amendment

 

Effective as of the date of this Amendment, the Agreement shall be amended as follows:

 

1.1 Section 2 of Appendix E of the Agreement shall be amended to read as follows:

 

“The Company will pay Yissum Sublicense Fees during the Royalty Term at a rate of 15% of all Sublicense Consideration.”

 

1.2 The following definitions will be added to Appendix E of the Agreement:

 

Royalty Term ” means, on a country-by-country basis, a period of 15 years from the date of the First Commercial Sale in each country.

 

Sublicense Consideration ” shall mean any proceeds or consideration or benefit of any kind whatsoever that the Company or its Affiliate receives from a Sublicensee to the extent that such is a direct result of the grant of a Sublicense or an option to obtain such Sublicense, other than research and development funding that is actually used to cover the actual cost for research and development of a Product performed under the Sublicense agreement.

 

1.3 The term “ Distributor ” and all references thereto (including within the Net Sales definition) shall be deleted.

 

1.4 The term “ Product ” shall be amended to read as follows:

 

“Product” shall mean any product, process or service, the development, manufacture or sale of which exploits, comprises, contains, incorporates, is related to, or based on any of the patents and/or patent applications set forth in Exhibit 1.4 attached hereto.

 

1.5 The Parties acknowledge and agree that (i) the patent applications and patents set forth on Exhibit 1.5(a) are solely owned by Yissum and are subject to an exclusive license by Yissum to the Company pursuant to the Agreement; and (ii) the Company is the sole and exclusive owner of the patents and/or patent applications set forth in Exhibit 1.5(b) and all inventions disclosed or claimed in such patents and patent applications (collectively, “ Intec Technology ”) and Yissum acknowledges that it has no ownership right or interest in or claim with respect to such Intec Technology apart from the right to receive Royalties and Sublicense Fees as provided in the Agreement.

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.6 Section 6(f) of the Agreement shall be amended to read as follows:

 

“Any Sublicensee may sublicense the rights granted to such Sublicensee by the Company through multiple tiers without notice to or consent of Yissum, provided that such Sublicensee is “[***]”.”

 

1.7 The following Section 15(f) shall be added to the Agreement:

 

“15(f). In the event that the Agreement is terminated for any reason whatsoever, then, at the request of “[***]”, if it is not then in material default of the applicable Sublicense, Yissum shall enter into a new license agreement with “[***]” on substantially the same terms as “[***]”, provided, however, that such terms shall be amended, if necessary, to the extent required to ensure that such new agreement does not impose any obligations or liabilities on Yissum which are not included in or are greater in scope than Yissum’s obligations or liabilities under this Agreement”

 

1.8 Yissum acknowledges and agrees that, notwithstanding the provisions of Section 6(e), Section 6(f) and Section 11(f) of the Agreement, “[***]” nor a Sub-sublicensee of “[***]” shall be required to enter into any direct undertaking or agreement of any kind with Yissum.

 

2. Effectiveness of Amended Agreement

 

The Agreement, as amended hereby, shall continue in full force and effect as originally constituted and is hereby ratified and affirmed by the Parties.

 

IN WITNESS WHEREOF, the parties have caused this Third Amendment to be executed by their duly authorized representatives as of the date first written above.

 

Yissum Research and Development   Intec Pharma Ltd.
Company of the Hebrew University    
of Jerusalem Ltd.    
     
By: /s/ Yaacov Michlin and Shoshi Keynan   By: /s/ Zeev Weiss
         
Name:

Yaacov Michlin – CEO and

Shoshi Keynan – VP Licensing, Pharmaceuticals

  Name: Zeev Weiss
         
Title:     Title:  

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Exhibit 1.4

 

1.Patent Yissum Research Development Company of the Hebrew University of Jerusalem Gastroretentive
Controlled Release Pharmaceutical Dosage Forms -(Client Case:IN-1-IL) - (0047465)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   149853   1634914   20/11/2000   149853   01/04/2007   20/11/2018
Patent Cooperation Treaty   PCT/IL00/00774   1635077   20/11/2000   WO 01/37812   31/05/2001    
Australia   16477/01   1635101   20/11/2000   783062   05/01/2006   20/11/2015
Canada   2,392,361   1635119   20/11/2000   2,392,361   19/01/2010   20/11/2015
Japan   2001-539427   1635127   20/11/2000   4679020   10/02/2011   10/02/2015
United  States of America   10/157,325   1635143   20/11/2000   6,685,962   03/02/2004   03/08/2015
South Africa   200204268   1635150   20/11/2000   2002/4268   26/11/2003   20/11/2015
European Patent Office   00978993.4   1635168   20/11/2000   1235557   27/07/2005    
France   00978993.4   1635572   20/11/2000   1235557   27/07/2005   30/11/2015
Germany   00978993.4   1635580   20/11/2000   60021604   27/07/2005   30/11/2015
Spain   00978993.4   1635598   20/11/2000   1235557   27/07/2005   30/11/2015
Switzerland   00978993.4   1635606   20/11/2000   EP1235557   27/07/2005   30/11/2015
Ireland   00978993.4   1635630   20/11/2000   1235557   27/07/2005   30/11/2015
Italy   00978993.4   1635648   20/11/2000   1235557   27/07/2005   30/11/2015
United Kingdom   00978993.4   1635655   20/11/2000   1235557   27/07/2005   30/11/2015

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

2.Patent Intec Pharma Ltd.
Method and Apparatus for Forming Delivery Devices for Oral Intake of an Agent -(Client Case:IN-3-USP) -(0047512)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   60/759,554   1636661   18/01/2006            
Patent Cooperation Treaty   IL2007/000070   1724418   18/01/2007   WO2007/083309   26/07/2007    
European Patent Office   07700757.3   1853217   18/01/2007   1981465   22/10/2008   31/01/2015
Canada   2,637,655   1853225   18/01/2007           18/01/2015
Israel   192896   1853233   18/01/2007   192896   28/09/2013   18/01/2017
Japan   2008-550909   1853241   18/01/2007   5399715   01/11/2013   01/11/2016
United States of America   12/087,888   1853258   18/01/2007   8,298,574   30/10/2012   30/04/2016
United States of America   13/613,718   2181500   18/01/2007   8,753,678   17/06/2014   17/12/2017
United States of America   13/800,471   2214433   18/01/2007   8,609,136   17/12/2013   17/06/2017
Japan   2013-054912   2216375   18/01/2007   2013-129669   04/07/2013    
Israel   226561   2228767   18/01/2007            
Israel   226563   2229192   18/01/2007            
Israel   226564   2229205   18/01/2007            
United                        
States of America   14/305,600   2275337   18/01/2007  

US-2014-

0360132

  11/12/2014    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.Patent Intec Pharma Ltd.
A Gastro-Retentive System for the Delivery of Macromolecules -(Client Case:IN-4-USP) -(0047513)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   60/773,316   1636679   15/02/2006            
Patent Cooperation Treaty   IL2007/000212   1731967   15/02/2007   WO 2007/093999   23/08/2007    
European Patent Office   07713260.3   1859727   15/02/2007   1991210   19/11/2008   28/02/2015
Canada   2,642,479   1859735   15/02/2007   2,642,479   19/08/2014   15/02/2015
Israel   193450   1859743   15/02/2007            
United States of
America
  12/223,965   1859750   15/02/2007  

US-2009-

0304768

  10/12/2009    

 

4.Patent Intec Pharma Ltd.
Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   208708   2051008   17/04/2009            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.Patent Intec Pharma Ltd.
Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   12/937,955   2144590   17/04/2009   8,771,730   08/07/2014   08/01/2018
Patent Cooperation Treaty   PCT/IB2009/005691   2153336   17/04/2009   WO 2009/144558        
Canada   2,721,493   2153341   17/04/2009           17/04/2015
China   200980120103.9   2153353   17/04/2009   CN102149369A   10/08/2011    
European Patent Office   09754186.6   2153363   17/04/2009   2276473   26/01/2011   30/04/2015
India   7638/DELNP/2010   2153372   17/04/2009            
Japan   2011-504573   2153395   17/04/2009            
Japan       2330464                
Republic of Korea   10-2010-7025481   2153405   17/04/2009            
South Africa   2010/07797   2153411   17/04/2009   2010/07797   27/07/2011   17/04/2015
Hong Kong   11113197.1   2153823   17/04/2009   1158545   20/07/2012   17/04/2018
United States of America   14/322,436   2286884   17/04/2009  

US-2014-

0314842

  23/10/2014    
United States of America   14/322,460   2286894   17/04/2009  

US-2015-

0010624

  08/01/2015    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5.Patent Intec Pharma Ltd.
ZALEPLON GASTRORETENTIVE DRUG DELIVERY SYSTEM -(Client Case:IN-8-IL) -(060811)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   213376   2127779   19/10/2009            
Patent Cooperation Treaty   PCT/IB2009/007731   2153230   19/10/2009   WO 2010/064139        
China   200980153943.5   2153258   19/10/2009   CN102300463A   28/12/2011   19/10/2014
European Patent Office   09830077.5   2153268   19/10/2009   2378883   26/10/2011   31/10/2014
India   5067/DELNP/2011   2153278   19/10/2009            
South Africa   2011/04620   2153314   19/10/2009   2011/04620   28/03/2012   19/10/2015
United States of America   13/132,899   2153326   19/10/2009  

US-2012-

0021051

  26/01/2012    
Japan   2014-231788   2320509   19/10/2009            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

6.Patent Intec Pharma Ltd.
Accordion pill comprising levodopa for an improved treatment of Parkinson’s Disease symptoms -(Client Case:IN-11-USP) -(060810)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   61/408,985   2153012   01/11/2010            

Patent Cooperation Treaty

  PCT/IB2011/002888   2153034   01/11/2011   WO 2012/059815   10/05/2012    
Canada   2,815,959   2222633   01/11/2011           01/11/2015
European Patent Office   11805936.9   2222641   01/11/2011   2635272   11/09/2013   30/11/2015
India   4158/DELNP/2013   2222652   01/11/2011            
Israel   226000   2222662   01/11/2011            
United States of America   13/882,768   2222675   01/11/2011  

US-2014-

0017303

  16/01/2014    

 

7.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

8.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

9.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

10.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Exhibit 1.5 (a)

 

1.Patent Yissum Research Development Company of the Hebrew University of Jerusalem Gastroretentive Controlled Release Pharmaceutical Dosage Forms -(Client Case:IN-1-IL) - (0047465)  

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   149853   1634914   20/11/2000   149853   01/04/2007   20/11/2018
Patent Cooperation Treaty   PCT/IL00/00774   1635077   20/11/2000   WO 01/37812   31/05/2001    
Australia   16477/01   1635101   20/11/2000   783062   05/01/2006   20/11/2015
Canada   2,392,361   1635119   20/11/2000   2,392,361   19/01/2010   20/11/2015
Japan   2001-539427   1635127   20/11/2000   4679020   10/02/2011   10/02/2015
United States of America   10/157,325   1635143   20/11/2000   6,685,962   03/02/2004   03/08/2015
South Africa   200204268   1635150   20/11/2000   2002/4268   26/11/2003   20/11/2015
European Patent Office   00978993.4   1635168   20/11/2000   1235557   27/07/2005    
France   00978993.4   1635572   20/11/2000   1235557   27/07/2005   30/11/2015
Germany   00978993.4   1635580   20/11/2000   60021604   27/07/2005   30/11/2015
Spain   00978993.4   1635598   20/11/2000   1235557   27/07/2005   30/11/2015
Switzerland   00978993.4   1635606   20/11/2000   EP1235557   27/07/2005   30/11/2015
Ireland   00978993.4   1635630   20/11/2000   1235557   27/07/2005   30/11/2015
Italy   00978993.4   1635648   20/11/2000   1235557   27/07/2005   30/11/2015
United Kingdom   00978993.4   1635655   20/11/2000   1235557   27/07/2005   30/11/2015

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Exhibit 1.5 (b)

 

2.Patent Intec Pharma Ltd.
Method and Apparatus for Forming Delivery Devices for Oral Intake of an Agent -(Client Case:IN-3-USP) -(0047512)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United  States of  America   60/759,554   1636661   18/01/2006            
Patent Cooperation Treaty   IL2007/000070   1724418   18/01/2007   WO2007/083309   26/07/2007    
European Patent Office   07700757.3   1853217   18/01/2007   1981465   22/10/2008   31/01/2015
Canada   2,637,655   1853225   18/01/2007           18/01/2015
Israel   192896   1853233   18/01/2007   192896   28/09/2013   18/01/2017
Japan   2008-550909   1853241   18/01/2007   5399715   01/11/2013   01/11/2016
United States of America   12/087,888   1853258   18/01/2007   8,298,574   30/10/2012   30/04/2016
United States of  America   13/613,718   2181500   18/01/2007   8,753,678   17/06/2014   17/12/2017
United States of America   13/800,471   2214433   18/01/2007   8,609,136   17/12/2013   17/06/2017
Japan   2013-054912   2216375   18/01/2007   2013-129669   04/07/2013    
Israel   226561   2228767   18/01/2007            
Israel   226563   2229192   18/01/2007            
Israel   226564   2229205   18/01/2007            
United States of America   14/305,600   2275337   18/01/2007  

US-2014-0360132

11/12/2014    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.Patent Intec Pharma Ltd.
A Gastro-Retentive System for the Delivery of Macromolecules -(Client Case:IN-4-USP) -(0047513)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   60/773,316   1636679   15/02/2006            
Patent Cooperation Treaty   IL2007/000212   1731967   15/02/2007   WO2007/093999   23/08/2007    
European Patent Office   07713260.3   1859727   15/02/2007   1991210   19/11/2008   28/02/2015
Canada   2,642,479   1859735   15/02/2007   2,642,479   19/08/2014   15/02/2015
Israel   193450   1859743   15/02/2007            
United States of America   12/223,965   1859750   15/02/2007  

US-2009-0304768

  10/12/2009    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.Patent Intec Pharma Ltd.
Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   208708   2051008   17/04/2009            
United States of America   12/937,955   2144590   17/04/2009   8,771,730   08/07/2014   08/01/2018
Patent Cooperation Treaty   PCT/IB2009/005691   2153336   17/04/2009   WO2009/144558        
Canada   2,721,493   2153341   17/04/2009           17/04/2015
China   200980120103.9   2153353   17/04/2009   CN102149369A   10/08/2011    
European Patent Office   09754186.6   2153363   17/04/2009   2276473   26/01/2011   30/04/2015
India   7638/DELNP/2010   2153372   17/04/2009            
Japan   2011-504573   2153395   17/04/2009            
Japan       2330464                
Republic of Korea   10-2010-7025481   2153405   17/04/2009            
South Africa   2010/07797   2153411   17/04/2009   2010/07797   27/07/2011   17/04/2015
Hong Kong   11113197.1   2153823   17/04/2009   1158545   20/07/2012   17/04/2018
United States of  America   14/322,436   2286884   17/04/2009  

US-2014-0314842

  23/10/2014    

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.Patent Intec Pharma Ltd.
Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   14/322,460   2286894   17/04/2009  

US-2015-0010624

  08/01/2015    

 

5.Patent Intec Pharma Ltd.
ZALEPLON GASTRORETENTIVE DRUG DELIVERY SYSTEM -(Client Case:IN-8-IL) -(060811)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
Israel   213376   2127779   19/10/2009            

Patent Cooperation Treaty

  PCT/IB2009/007731   2153230   19/10/2009   WO2010/064139        
China   200980153943.5   2153258   19/10/2009   CN102300463A   28/12/2011   19/10/2014
European Patent Office   09830077.5   2153268   19/10/2009   2378883   26/10/2011   31/10/2014
India   5067/DELNP/2011   2153278   19/10/2009            
South Africa   2011/04620   2153314   19/10/2009   2011/04620   28/03/2012   19/10/2015

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5.Patent Intec Pharma Ltd.
ZALEPLON GASTRORETENTIVE DRUG DELIVERY SYSTEM -(Client Case:IN-8-IL) -(060811)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   13/132,899   2153326   19/10/2009  

US-2012-0021051

  26/01/2012    
Japan   2014-231788   2320509   19/10/2009            

 

6.Patent Intec Pharma Ltd.
Accordion pill comprising levodopa for an improved treatment of Parkinson’s Disease symptoms -(Client Case:IN-11-USP) -(060810)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   61/408,985   2153012   01/11/2010            
Patent Cooperation Treaty   PCT/IB2011/002888   2153034   01/11/2011   WO2012/059815   10/05/2012    
Canada   2,815,959   2222633   01/11/2011           01/11/2015
European Patent Office   11805936.9   2222641   01/11/2011   2635272   11/09/2013   30/11/2015
India   4158/DELNP/2013   2222652   01/11/2011            
Israel   226000   2222662   01/11/2011            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

6.Patent Intec Pharma Ltd.
Accordion pill comprising levodopa for an improved treatment of Parkinson’s Disease symptoms -(Client Case:IN-11-USP) -(060810)
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
United States of America   13/882,768   2222675   01/11/2011  

US-2014-

0017303

  16/01/2014    

 

7.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

8.Patent Intec Pharma Ltd.

“[***]”

 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

  

9.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

10.Patent Intec Pharma Ltd.
“[***]”
 

 

Country   App. No.   Our 
Ref.
  Filed   Patent No./ 
Publication No.
  Grant Date/ 
Pub. Date
  Next Renewal
“[***]”   “[***]”   “[***]”   “[***]”            

 

 

 

 

Exhibit 10.18

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

RESEARCH,

 

OPTION

 

AND

 

LICENSE AGREEMENT

 

BETWEEN

 

INTEC PHARMA LTD.

 

AND

 

“[***]”

 

April 15, 2015

 

 
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

TABLE OF CONTENTS

 

1. DEFINITIONS 1
     
2. RESEARCH 13
     
  2.1 Research Period 13
  2.2 Rights Granted During Research Period 13
  2.3 Pre-Commercialization Activities During Research Period 14
  2.4 Option Exercise 16
  2.5 Right to Negotiate for Additional Indications 16
  2.6 Sublicenses 17
     
3. COMMERCIAL PERIOD 17
     
  3.1 Commercial Period 17
  3.2 Rights Granted During Commercial Period 17
  3.3 Pre-Commercialization Activities and Regulatory Activities During Commercial Period 17
  3.4 Commercialization Activities During the Commercial Period 22
  3.5 No Implied Obligations 22
     
4. PAYMENTS 22
     
  4.1 Upfront Fee 22
  4.2 License Fee 22
  4.3 Research Period Milestones 23
  4.4 Commercial Period Milestones 23
  4.5 Payment of Royalties; Royalty Rate; Accounting and Records 24
     
5. CONFIDENTIALITY; PUBLICITY; PUBLICATION 27
     
  5.1 Confidentiality 27
  5.2 Publicity 28
  5.3 Publications and Presentations 28
  5.4 Prior Approved Publication 29
     
6. INTELLECTUAL PROPERTY RIGHTS 29
     
  6.1 Intec Pharma Ownership 29
  6.2 “[***]” Ownership 29
  6.3 Joint Technology 30
  6.4 Agreement “[***]” Technology 30
  6.5 Patent Coordinators 31
  6.6 No Other Rights 31

 

i
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

7. FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS 31
     
  7.1 Patent Filing, Prosecution and Maintenance 31
  7.2 Legal Actions 33
     
8. TERM AND TERMINATION; ADDITIONAL OBLIGATIONS 35
     
  8.1 Term 35
  8.2 Termination 35
  8.3 Consequences of Termination 38
  8.4 Surviving Provisions 39
     
9. REPRESENTATIONS AND WARRANTIES; COVENANTS 40
     
  9.1 Mutual Representations and Warranties 40
  9.2 Additional Representations, Warranties and Covenants of Intec Pharma 40
  9.3 Limitation on Representations and Warranties of Intec Pharma 43
  9.4 Exclusivity 43
     
10. INDEMNIFICATION AND INSURANCE 44
     
  10.1 Indemnification by “[***]” 44
  10.2 Indemnification by Intec Pharma 44
  10.3 Conditions to Indemnification 44
  10.4 Warranty Disclaimer 45
  10.5 Limited Liability 45
  10.6 Insurance 46
     
11. MISCELLANEOUS 46
     
  11.1 Notices 46
  11.2 Governing Law; Jurisdiction; Dispute Resolution 47
  11.3 Binding Effect; Non-Exclusive Remedies 48
  11.4 Headings 48
  11.5 Counterparts 48
  11.6 Amendment; Waiver 48
  11.7 No Third Party Beneficiaries 49
  11.8 Purposes and Scope 49
  11.9 Assignment and Successors 49
  11.10 Force Majeure 49
  11.11 Interpretation 49
  11.12 Integration; Severability 50
  11.13 Further Assurances 50

 

ii
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

List of Exhibits and Schedules

 

Exhibit A Research Plan
   
Exhibit B Intec Pharma Patent Rights

 

iii
 

   

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

RESEARCH, OPTION AND LICENSE AGREEMENT

 

This RESEARCH, OPTION AND LICENSE AGREEMENT (this “ Agreement ”) is entered into as of April 15, 2015 (the “ Effective Date ”) by and between INTEC PHARMA LTD., with offices located at 12 Hartom St., P.O.B 45219, Jerusalem 91450 (“ Intec Pharma ”) and “[***]” with offices located at “[***]”, Massachusetts, “[***]” USA “[***]”. Each of Intec Pharma and “[***]” is sometimes referred to individually herein as a “ Party ” and collectively as the “ Parties .”

 

WHEREAS, Intec Pharma has developed or Controls certain technology and proprietary materials for the administration of pharmaceutical products through the Accordion Pill System (defined below);

 

WHEREAS, “[***]” is engaged in the research, development and commercialization of human therapeutics and diagnostics, and is currently commercializing a human therapeutic product containing “[***]” under the brand name “[***]”;

 

WHEREAS, “[***]” desires to engage Intec Pharma to use its formulation technology, including the Accordion Pill System, to develop a new gastro-retentive, delayed or extended release formulation of “[***]” with a once daily dosing schedule “[***]”; and

 

WHEREAS, Intec Pharma desires to grant to “[***]” an option to obtain an exclusive, worldwide license to conduct Pre-Commercialization Activities for, Manufacture and Commercialize Collaboration Products that incorporates Intec Pharma’s technology and proprietary materials for delayed or extended release administration of pharmaceutical products for diagnosis, treatment and prevention of “[***]” , with an option to negotiate the expansion of the Field for additional indications, and “[***]” desires to evaluate and perform initial development work with respect to such products prior to determining whether it will exercise such option;

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the Parties hereto, intending to be legally bound, hereby agree as follows:

 

1.          DEFINITIONS

 

1.1         “ Abbreviated New Drug Application ” or “ ANDA ” means an Abbreviated New Drug Application filed with the FDA pursuant to § 505(j) of the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 355(j)).

 

1.2         “ Accordion Pill System ” means Intec Pharma’s gastro-retentive, delayed or extended-release drug delivery system, as it exists as of the Effective Date and throughout the Term, including (a) such drug delivery system’s components, parameters, features and characteristics, concepts and mechanisms, (b) “[***]” and (c) release mechanisms and manufacturing processes of such drug delivery system.

 

1
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.3         “ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means (a) ownership of more than fifty percent (50%) of the shares of stock entitled to vote for the election of directors in the case of a corporation, or more than fifty percent (50%) of the equity interests in the case of any other type of legal entity; (b) status as a general partner in any partnership; or (c) any other arrangement whereby a Person controls or has the right to control the board of directors of a corporation or equivalent governing body of an entity other than a corporation.

 

1.4         “ Agreement “[***]” Know-How ” means any Know-How to the extent that it relates to a Product, including without limitation any formulation of a Product, and that is developed, conceived or, in the case of patentable Know-How, Invented in the course of activities conducted by a Party or both Parties or any of its or their Affiliates (or any Third Party acting on any of their behalf) pursuant to this Agreement (including the Research Plan). For clarity, any Know-How that meets the definition of General Accordion Pill Know-How shall not constitute Agreement “[***]” Know-How.

 

1.5         “ Agreement “[***]”Patent Rights ” means any Patent Rights that claim any Agreement “[***]” Know-How.

 

1.6         “ Agreement “[***]” Technology ” means, collectively, Agreement “[***]” Know-How and Agreement “[***]” Patent Rights.

 

1.7         “ Annual Net Sales ” means, with respect to any Calendar Year, the aggregate amount of the Net Sales for such Calendar Year.

 

1.8         “ Applicable Laws ” means any federal, state, local, national and supra-national laws, statutes, rules and regulations, including any rules, regulations or requirements of Regulatory Authorities, national securities exchanges or securities listing organizations, that are in effect from time to time during the Term and applicable to a particular activity hereunder.

 

1.9          “[***]” Know-How ” means any Know-How that is Controlled by “[***]” on the Effective Date or during the Term and that relates to any Product, but excluding (i) “[***]” ’s interest in any Joint Know-How and (ii) any Agreement “[***]” Know-How.

 

1.10          “[***]” Patent Rights ” means any Patent Rights that are Controlled by “[***]” on the Effective Date or during the Term and that relate to any Product, but excluding (i) “[***]” ’s interest in any Joint Patent Rights and (ii) any Agreement “[***]” Patent Rights.

 

1.11          “[***]” Technology ” means, collectively, the “[***]” Know-How and “[***]” Patent Rights.

 

1.12         “ Business Day ” means a day on which banking institutions in both Boston, Massachusetts and Tel Aviv, Israel are open for business.

 

2
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.13         “ Calendar Quarter ” means the period beginning on the Effective Date and ending on the last day of the calendar quarter in which the Effective Date falls, and thereafter each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31.

 

1.14         “ Calendar Year ” means each successive period of twelve (12) months commencing on January 1 and ending on December 31.

 

1.15         “ Clinical Trial ” means a clinical study of a Product prior to receipt of Regulatory Approval that involves the administration of such Product to humans.

 

1.16         “ Collaboration Product ” means any Product in a gastro-retentive, delayed or extended release formulation that is Covered by, or that incorporates or makes use of, any Intec Pharma Technology.

 

1.17         “ Commercialization ” or “ Commercialize ” means any and all activities directed to the offering for sale and sale of a Product, both before and after Regulatory Approval has been obtained, including activities related to marketing, promoting, distributing, importing, selling and offering to sell such Product or conducting post-marketing human clinical studies for any indication with respect to which Regulatory Approval has been received or for a use that is the subject of an investigator-initiated study program, and interacting with Regulatory Authorities regarding the foregoing. When used as a verb, “Commercializing” means to engage in Commercialization and “Commercialized” has a corresponding meaning.

 

1.18         “ Confidential Information ” means, (a) all information that is confidential or proprietary to the disclosing Party (whether or not reduced to writing or other tangible medium of expression, and whether or not patented, patentable, capable of trade secret protection or protected as an unpublished or published work under the United States Copyright Act of 1976, as amended), including all Know-How, unpublished patent applications (including any unpublished applications for continuation, extension, re-issue or renewal patents), inventor certificates, trade secrets, methods of production and other proprietary or confidential information of the disclosing Party; and (b) any Third Party confidential or proprietary information in the possession of the disclosing Party that is provided to the receiving Party. Confidential Information may be disclosed in written, oral, electronic or any other form. Confidential Information which is orally disclosed to or visually observed by the receiving party shall constitute Confidential Information if (x) it would be apparent to a reasonable person, familiar with the disclosing party’s business and the industry in which it operates, that such information is of a confidential or proprietary nature the maintenance of which is important to the disclosing party, or (y) the disclosing party, within thirty (30) days after such disclosure, delivers to the receiving party a written document or documents describing such information and referencing the place and date of such oral or visual disclosure. The terms of this Agreement (including any term sheet or prior drafts related hereto) will be treated as Confidential Information of both Parties, with both Parties deemed to be the receiving Party of such Confidential Information. Notwithstanding anything to the contrary, “Confidential Information” shall not include any information that (i) is or becomes generally available to the public other than through any disclosure by the receiving Party in violation of Section 5.1 (Confidentiality), (ii) can be demonstrated by documentation or other competent proof to have been in the receiving Party’s possession prior to disclosure by the disclosing Party without any obligation of confidentiality with respect to such information, (iii) becomes available to the receiving Party on a non-confidential basis from a source not known by the receiving Party to be under any obligation of confidentiality to the disclosing Party with respect to such information or (iv) can be demonstrated by documentation or other competent proof to have been independently developed by the receiving Party without reliance on or reference to the Confidential Information of the disclosing Party.

   

3
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.19         “ Control ” or “ Controlled ” means, with respect to Know-How and Patent Rights, the possession by a Party of the right (other than the licenses granted pursuant to this Agreement which, as between the Parties, shall be subject to the provisions of Sections 2.2.3 (Retained Rights) and 3.2.3 (Retained Rights), as applicable) to grant a license or sublicense to such Know-How or Patent Rights as provided herein without violating the terms of any agreement with any Third Party and without violating any Applicable Laws; provided , however , that with respect to any Know-How or Patent Rights that are owned by a Third Party and Controlled under the terms of a license or other agreement, a Party will be deemed to Control such Know-How or Patent Rights only to the extent that the applicable agreement permits such Control.

 

1.20         “ Cover ,” “ Covering ” or “ Covers ” means, as to a product and Patent Rights, that, in the absence of a license granted under, or ownership of, such Patent Rights, the making, using, selling, offering for sale or importation of such product would infringe such Patent Rights or, as to a pending claim included in such Patent Rights, the making, using, selling, offering for sale or importation of such product would infringe such Patent Rights if such pending claim were to issue in an issued patent without modification.

 

1.21         “ Drug Approval Application ” means, with respect to each Product in a particular regulatory jurisdiction, an application for Regulatory Approval for such Product in such country or region, including: (a) an NDA; (b) a counterpart of an NDA in any country or region in the Territory; and (c) all supplements and amendments to any of the foregoing.

 

1.22         “ EMA ” means the European Medicines Agency or any successor agency or authority thereto.

 

1.23         “ European Commission ” means the European Commission or any successor agency that is responsible for granting marketing approvals authorizing the sale of pharmaceuticals in the EU.

 

1.24         “ European Union ” or “ EU ” means the organization of member states of the European Union, as it may be constituted from time to time during the Term.

 

1.25         “ Exclusivity Field ” means the diagnosis, treatment or prevention in humans of any disease or medical indication.

 

4
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.26         “ FDA ” means the United States Food and Drug Administration or any successor agency or authority thereto.

 

1.27         “ FDCA ” means the United States Federal Food, Drug, and Cosmetic Act, as amended.

 

1.28         “ Field ” means the diagnosis, treatment or prevention of “[***]” , and any additional indications added to the Field pursuant to Section 2.5 (Right to Negotiate for Additional Indications), in any form, and any and all signs and symptoms thereof.

 

1.29         “ First Commercial Sale ” means, with respect to a Collaboration Product in a country in the Territory, the first sale, transfer or disposition for value to an end user of such Collaboration Product in such country following receipt of Regulatory Approval in such country; provided , however , that any sale to an Affiliate or sublicensee will not constitute a First Commercial Sale unless the Affiliate or sublicensee is the last entity in the distribution chain of the Collaboration Product and; provided further , that any sale on a cost reimbursement basis for use in a Clinical Trial or other distribution for use in a Clinical Trial will not constitute a First Commercial Sale.

 

1.30         “ First Commercial Sale In Europe ” means, with respect to a Collaboration Product, the completion of the First Commercial Sale of such Collaboration Product in the third (3rd) Major European Market.

 

1.31         “ Force Majeure ” means any occurrence that (a) prevents or substantially interferes with the performance by a Party of any of its obligations hereunder; and (b) occurs by reason of any act of God, flood, fire, explosion, earthquake, strike, lockout, labor dispute, casualty or accident, war, revolution, civil commotion, act of terrorism, blockage or embargo, or any injunction, law, order, proclamation, regulation, ordinance, demand or requirement of any government or of any subdivision, authority or representative of any such government, or other cause that is beyond the reasonable control of such Party.

 

1.32         “ GCP ” means the then-current Good Clinical Practice Standards promulgated or endorsed by the FDA or, in the case of foreign jurisdictions, comparable regulatory standards promulgated or endorsed by the applicable Regulatory Authority, including those procedures expressed in or contemplated by any Regulatory Filings, applicable to the design, conduct, performance, monitoring, auditing, recording, analysis and reporting of Clinical Trials including the United States regulations set forth under Title 21 of the United States Code of Federal Regulations, parts 11, 50, 54, 56, 312 and 314, as may be amended from time to time.

 

1.33         “ General Accordion Pill Know-How ” means Know-How that relates to the Accordion Pill System as generally applied to products and compounds other than Products, and that is developed, conceived or, in the case of patentable Know-How, Invented in the course of activities conducted, by a Party or both Parties or any of its or their Affiliates (or any Third Party acting on any of their behalf) pursuant to this Agreement (including the Research Plan).

 

1.34         “ General Accordion Pill Patent Rights ” means any Patent Rights that claim any General Accordion Pill Know-How.

 

5
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.35         “ General Accordion Pill Technology ” means, collectively, General Accordion Pill Know-How and General Accordion Pill Patent Rights.

 

1.36         “ GLP ” means the then-current Good Laboratory Practice Standards promulgated or endorsed by the FDA or, in the case of foreign jurisdictions, comparable regulatory standards promulgated or endorsed by the applicable Regulatory Authority, including those procedures expressed in or contemplated by any Regulatory Filings.

 

1.37         “ GMP ” means then-current Good Manufacturing Practices that apply to the manufacture of active pharmaceutical ingredients and/or pharmaceutical products, including the United States regulations set forth under Title 21 of the United States Code of Federal Regulations, parts 210, 211 and 600-680, as may be amended from time to time, as well as all applicable guidance published by the FDA from time to time.

 

1.38         “ IND ” means (a) an Investigational New Drug Application as defined in the FDCA and regulations promulgated thereunder, or any successor application or procedure required to initiate clinical testing of a Product in humans in the United States; or (b) any comparable filing that is required to initiate clinical testing of a Product in humans in any other regulatory jurisdiction in the Territory, in each case, including all supplements and amendments thereto.

 

1.39         “ Intec Pharma Know-How ” means any proprietary Know-How relating to the Accordion Pill System that is Controlled by Intec Pharma on the Effective Date or during the Term, including General Accordion Pill Know-How but excluding (a) Intec Pharma’s interest in any Joint Know-How and (b) any Agreement “[***]” Know-How.

 

1.40         “ Intec Pharma Patent Rights ” means any Patent Rights relating to the Accordion Pill System that are Controlled by Intec Pharma on the Effective Date or during the Term, including the Patent Rights set forth in Exhibit B and General Accordion Pill Patent Rights, but excluding (a) Intec Pharma’s interest in any Joint Patent Rights and (b) any Agreement “[***]” Patent Rights.

 

1.41         “ Intec Pharma Technology ” means, collectively, the Intec Pharma Know-How and Intec Pharma Patent Rights.

 

1.42         “ Invented ” means the act of invention by inventors, as determined in accordance with the patent laws of the United States, irrespective of where the act of invention occurs.

 

1.43         “ Joint Know-How ” means any Know-How that is developed, conceived or, in the case of patentable Know-How, Invented jointly by Intec Pharma or any of its Affiliates (or a Third Party acting on any of their behalf) and “[***]” or any of its Affiliates (or a Third Party acting on any of their behalf) in the course of activities conducted pursuant to this Agreement (including the Research Plan), but excluding the following: (i) any Agreement “[***]” Know-How; and (ii) any General Accordion Pill Know-How.

 

1.44         “ Joint Patent Rights ” means any Patent Rights that claim any Joint Know-How.

 

6
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.45         “ Joint Technology ” means, collectively, Joint Know-How and Joint Patent Rights.

 

1.46         “ Know-How ” means all inventions, discoveries, data, information (including scientific, technical or regulatory information), processes, methods, techniques, materials, technology, prototypes, results, analyses, laboratory, pre-clinical and clinical data, or other know-how, whether or not patentable, including pharmacology, toxicology, drug stability, manufacturing and formulation methodologies and techniques, clinical and non-clinical safety and efficacy studies, marketing studies, absorption, distribution, metabolism and excretion studies.

 

1.47         “ LIBOR Rate ” means, for any applicable interest period, the rate per annum equal to the one-month average of the British Bankers Association LIBOR Rate (“ BBA LIBOR ”), as published by Reuters (or, if Reuters does not publish quotations of BBA LIBOR, another commercially available source providing quotations of BBA LIBOR as selected by agreement of the Parties). If such rate is not available at such time for any reason, then the rate for that interest period will be determined by such alternate method as reasonably selected by agreement of the Parties.

 

1.48         “ MAA ” means a Marketing Authorization Application submitted to the EMA pursuant to the centralized approval procedure to obtain European Commission approval for the marketing of a pharmaceutical product in the European Union.

 

1.49         “ Major European Markets ” means France, Germany, Italy, Spain and the United Kingdom.

 

1.50         “ Manufacture ” means all operations involved in the manufacture, receipt, incoming inspections, storage and handling of materials, manufacture, processing, purification, formulation, packaging, labeling, warehousing, quality control testing (including in-process release and stability testing), shipping and release of a Product for clinical and commercial supply. When used as a verb, “Manufacturing” means to engage in Manufacture and “Manufactured” has a corresponding meaning.

 

1.51          “[***]” .

 

1.52          “[***]” .

 

1.53         “ Net Sales ” means, with respect to a Collaboration Product in a country in the Territory, (1) the gross amount invoiced for sales of such Collaboration Product in such country by “[***]” or any of its Affiliates or Sublicensees to Third Parties (“ Gross Sales ”), and (2) the total amount received (whether characterized as royalty, profit share or otherwise) by “[***]” or any of its Affiliates from a Third Party distributor with respect to sales of such Collaboration Product in such country by such distributor pursuant to distributor agreements under which such distributor pays to “[***]” a share of its sales of Collaboration Product, less the following deductions, in each case (A) without duplication, (B) where applicable with respect to the Gross Sales invoiced, (C) as incurred in the ordinary course of business in type and amount consistent with good industry practice and (D) except with respect to the uncollectible amounts on any previously sold Collaboration Product described in clause (b) below and the pharmaceutical excise taxes described in clause (d) below, as determined in accordance with, and as recorded in revenues under, United States Generally Accepted Accounting Principles (“ U.S. GAAP ”):

 

7
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

  

(a)         sales returns and allowances actually paid, granted or accrued on the Collaboration Product, including trade, quantity, prompt pay and cash discounts and any other adjustments, including those granted on account of price adjustments or billing errors;

 

(b)         credits or allowances given or made for rejection or return of, and for uncollectible amounts on, a previously sold Collaboration Product or for rebates or retroactive price reductions (including Medicare, Medicaid, managed care and similar types of rebates and chargebacks), provided that any amount subsequently recovered will be treated as Net Sales;

 

(c)         to the extent not already deducted or excluded from the Gross Sales invoiced, taxes, duties or other governmental charges levied on or measured by the billing amount for the Collaboration Product, as adjusted for rebates and refunds, which, for the avoidance of doubt, shall not include any tax, duty, or other charge imposed on or measured by net income (however denominated), or any franchise taxes, branch profits taxes, or similar tax;

 

(d)         pharmaceutical excise taxes (such as those imposed by the United States Patient Protection and Affordable Care Act of 2010 (Pub. L. No. 111-48) and other comparable laws);

 

(e)         charges for freight and insurance directly related to the distribution of the Collaboration Product, to the extent not already deducted or excluded from the Gross Sales invoiced, for sales of the Collaboration Product by “[***]” or its Affiliates or permitted Sublicensees to Third Parties in the Territory to the extent same are separately itemized on invoices and actually paid as evidenced by invoices or other appropriate supporting documentation;

 

(f)         credits for allowances given or made for wastage replacement for the Collaboration Product;

 

(g)         customary wholesaler and distributor administration fees; and

 

(h)         other similar or customary deductions taken in the ordinary course of business or in accordance with U.S. GAAP.

 

Net Sales shall be determined in accordance with U.S. GAAP, except to the extent noted above in clause (D) of the first paragraph of this Section 1.53. Net Sales shall not be imputed to transfers of Collaboration Product for use in any clinical trial, for bona fide charitable purposes, for compassionate use, for indigent patient programs or as free Collaboration Product samples, so long as such transfers of Collaboration Product for charitable purposes, compassionate use, indigent patient programs or as samples are consistent with “[***]” ’s practices with respect to products similar in nature to Collaboration Products.

 

8
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Notwithstanding the foregoing, in the event a Collaboration Product is sold as a component of a Combination Product in any country in the Territory in any Calendar Quarter, Net Sales shall be calculated by multiplying the Net Sales of the Combination Product in such country during such Calendar Quarter (calculated by applying the formula set forth above as if it applied to sales of such Combination Product in such country) by the fraction A/(A+B), where A is the average Net Sales per unit sold of the Collaboration Product when sold separately in such country during such Calendar Quarter (calculated by determining the Net Sales of the Collaboration Product in such country during such Calendar Quarter in accordance with the formula set forth above and dividing such Net Sales by the number of units of the Collaboration Product sold in such country during such Calendar Quarter) and B is the average Net Sales per unit sold of the other active component(s) included in the Combination Product when sold separately in such country during such Calendar Quarter (calculated by determining the Net Sales of such other active component(s) in such country during such Calendar Quarter by applying the formula set forth above as if it applied to sales of such other active component(s) and dividing such Net Sales by the number of units of such other active component(s) sold in such country during such Calendar Quarter). For purposes of calculating the average Net Sales per unit sold of a Collaboration Product and other active component(s) of a Combination Product in accordance with the above described equation, any of the deductions described in clauses (a) through (h) above that apply to such Combination Product shall be allocated among sales of the Collaboration Product and sales of the other active component(s) included in such Combination Product as follows: (1) deductions that are attributable solely to the Collaboration Product or one of the other active component(s) shall be allocated solely to Net Sales of the Collaboration Product or such other active component, as applicable, and (2) all other deductions shall be allocated among sales of the Collaboration Product and sales of the other active component(s) in proportion to “[***]” ’s reasonable good faith estimate of the fair market value of the Collaboration Product and the other active component(s). In the event that no separate sales of either (a) the Collaboration Product or (b) any other active component(s) included in a Combination Product, or both ((a) and (b)), are made by “[***]” or its Affiliates, distributors or Third Party transferees during a Calendar Quarter in which such Combination Product is sold in a country, the average Net Sales per unit sold in the above described equation shall be replaced with the most recent list price of the Collaboration Product and each of the other active component(s) of the Combination Product in such country, if applicable, or, if either such Collaboration Product or such other active component(s), or both, have never been sold separately in such country, with “[***]” ’s reasonable good faith estimate of the fair market value of the Collaboration Product and each of the other active component(s) included in such Combination Product. For purposes of this Section 1.53, “ Combination Product ” shall mean (x) any single product in finished form containing as active ingredients both (A) a Collaboration Product and (B) one or more other pharmaceutically active compounds or substances that are not used to implement any Intec Pharma Technology or Agreement “[***]” Technology (for example, components of the Accordion Pill System are not considered other pharmaceutically active compounds or substances); (y) any sale of a Collaboration Product with another product(s) for a single invoice price; or (z) any sale of a Collaboration Product as part of a bundle with other product(s) or service(s) (i.e., where a Collaboration Product and such other product(s) or services are sold for a single invoice price or where a discount, rebate or other amount that reduces the price of a Collaboration Product is provided in exchange for (or otherwise conditioned upon) the purchase of such other product(s) or services), to the extent not described in clause (x) or (y).

 

9
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.54         “ New Drug Application ” or “ NDA ” means a New Drug Application filed with the FDA, as described in 21 C.F.R. § 314.

 

1.55         “ Patent Rights ” means any and all (a) patents; (b) pending patent applications, including all provisional applications, substitutions, continuations, continuations-in-part, divisions and renewals, and all patents granted thereon; (c) all patents-of-addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including supplementary protection certificates or the equivalent thereof; (d) inventor’s certificates; (e) any other form of government-issued right substantially similar to any of the foregoing; and (f) all United States and foreign counterparts of any of the foregoing.

 

1.56         “ Person ” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization, including a government or political subdivision, department or agency of a government.

 

1.57         “ Phase 1 Clinical Trial ” means, as to a particular Product, a Clinical Trial conducted in any country that would satisfy the requirements of 21 CFR 312.21(a) or a counterpart of such regulation in any regulatory jurisdiction in the Territory.

 

1.58         “ Pre-Commercialization Activities ” means, with respect to each Product, all preclinical and clinical activities designed to obtain Regulatory Approval of such Product, its Manufacture and its Commercialization, up to and including the obtaining of Regulatory Approval of such Product, including regulatory toxicology studies, statistical analysis and report writing, Clinical Trial design and operations, preparing and filing Drug Approval Applications, and all regulatory affairs related to the foregoing.

 

1.59         “ Product ” means any product that contains “[***]” , “[***]” or “[***]” or any prodrug, anannlog, salt or derivative of “[***]” , “[***]” or “[***]” . .

 

1.60         “ Regulatory Approval ” means, with respect to any regulatory jurisdiction in the Territory, any approval (including pricing and reimbursement approval and schedule classifications), product and establishment license, registration or authorization of any Regulatory Authority required to market and/or sell a Product in such regulatory jurisdiction, including (a) approval of an NDA or ANDA for such Product by the FDA, and (b) approval of an MAA for such Product by the EMA.

 

1.61         “ Regulatory Authority ” means any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity with authority over the distribution, importation, exportation, Manufacture, production, use, storage, transport, clinical testing or sale of a Product.

 

10
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.62         “ Regulatory Exclusivity Period ” means, with respect to a Collaboration Product in any country in the Territory, a period of exclusivity (other than exclusivity with respect to a Patent Right) granted or afforded by Applicable Laws or by a Regulatory Authority in such country that confers exclusive marketing rights with respect to such Collaboration Product in such country. Where such exclusive marketing rights only relate to a specific indication, the applicable Regulatory Exclusivity Period shall only be deemed to apply to such Collaboration Product in such indication.

 

1.63         “ Regulatory Filings ” means, collectively: (a) all INDs, NDAs, applications for designation as an “Orphan Product(s)” under the Orphan Drug Act, for “Fast Track” status under Section 506 of the FDCA (21 U.S.C. § 356) or for a Special Protocol Assessment under Section 505(b)(4)(B) and (C) of the FDCA (21 U.S.C. § 355(b)(4)(B)) and all other similar filings (including counterparts of any of the foregoing in any regulatory jurisdiction in the Territory); (b) all supplements and amendments to any of the foregoing; and (c) all data and other information contained in, and correspondence relating to, any of the foregoing.

 

1.64         “ Research Plan ” means the written plan for the formulation and pre-clinical and clinical Pre-Commercialization Activities for Collaboration Products during the Research Period, which plan is attached hereto as Exhibit A , as such written plan may be amended, modified or updated in accordance with Section 2.3.1 (Research Plan).

 

1.65         “ Royalty Term ” means, with respect to each Collaboration Product in each country in the Territory, the period beginning on the date of First Commercial Sale of such Collaboration Product in such country and ending on the later of (a) expiration of the last to expire Valid Claim of (i) the Intec Pharma Patent Rights that Cover such Collaboration Product in such country or (ii) any Agreement “[***]” Patent Rights or Joint Patent Rights that Cover such Collaboration Product in such country (but solely to the extent that such Agreement “[***]” Patent Rights claim any Know-How or other intellectual property developed, conceived or, in the case of patentable Know-How, Invented by Intec Pharma or its Affiliates), and (b) the expiration of the Regulatory Exclusivity Period with respect to such Collaboration Product in such country.

 

1.66         “ Sublicensee ” means any Third Party to whom “[***]” sublicenses any of its rights under this Agreement, but excluding any Third Party distributor. For clarity, “Sublicensee” shall not include any Affiliate of “[***]” to whom “[***]” sublicenses any of its rights under this Agreement.

 

1.67         “ sNDA ” means a Supplemental New Drug Application, as defined in the FDCA and applicable regulations promulgated thereunder.

 

1.68         “ Territory ” means worldwide.

 

1.69         “ Third Party ” means a Person other than Intec Pharma and “[***]” and their respective Affiliates.

 

11
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.70         “ Valid Claim ” means (a) a claim of an issued and unexpired Patent Right, which claim has not been permanently revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction, which is not appealable or has not been appealed within the time allowed for appeal, and which has not been abandoned, disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise ( i.e. , only to the extent the subject matter is disclaimed or is sought to be deleted or amended through reissue); or (b) a bona fide claim of a pending patent application included in the Patent Rights that has not been (i) cancelled, withdrawn or abandoned without being refiled in another application in the applicable jurisdiction or (ii) finally rejected by an administrative agency action from which no appeal can be taken or that has not been appealed within the time allowed for appeal, provided that any patent application pending for more than five (5) years from the earliest date on which such patent application claims priority (excluding any time during which such application is in interference or opposition or similar proceedings, or the decision of an examiner with respect to such application is being appealed) shall not be considered to have any Valid Claim for purposes of this Agreement from and after such five (5) year date unless and until a patent issues from such patent application.

 

1.71          Additional Definitions . Each of the following definitions is found in the body of this Agreement as indicated below:

 

  Section
Agreement Preamble
Annual Royalty Cap 4.5.1(b)
BBA LIBOR 1.47
“[***]” Preamble
“[***]” Indemnitees 10.2
Claim 10.1
Clinical Collaboration Product Supply 3.3.5
Combination Product 1.53
Commercial Period 3.1
Commercial Period Milestone Event 4.4.1
Commercial Period Milestone Payment 4.4.1
Commercial Supply Agreement 3.3.6(b)
“[***]” Preamble
Effective Date Preamble
Failure of PART B Deliverables 2.3.2(b)
Field Expansion 2.5
FCPA 9.2.15
Gross Sales 1.53
Indemnified Party 10.3
Indemnifying Party 10.3
Infringement 7.2.1
Infringement Notice 7.2.1
Insolvency Event 8.2.4

 

12
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Intec Pharma Preamble
Intec Pharma Indemnitees 10.1
Intec Pharma-Owned Technology 9.2.12
License Fee 4.2
Losses 10.1
Manufacturing Know-How 3.3.7
Option 2.4.2
Option Exercise Date 2.4.2
Option Exercise Notice 2.4.2
Option Exercise Period 2.4.1
PART A Deliverables 2.3.2(a)
PART B Deliverables 2.3.2(b)
PART B Election Notice 2.3.2(a)
Party/Parties Preamble
Patent Coordinator 6.5
Phase 1 Clinical Trial Materials 2.3.2(b)
Phase 1 Materials Acceptance Date 2.3.2(b)
Pre-Commercialization Collaboration Notice 3.3.2
Pre-Commercialization Plan 3.3.2
Research Period 2.1
Research Period Milestone Event 4.3.1
Research Period Milestone Payment 4.3.1
Sunshine Act 9.2.15
Technology Transfer 3.3.7
Term 8.1
U.S. GAAP 1.53
UK Bribery Act 9.2.15

 

2.       RESEARCH

 

2.1          Research Period . For purposes of this Agreement, “ Research Period ” means the period beginning on the Effective Date and ending on the earlier of: (a) the termination of this Agreement in accordance with Section 2.3.2(a) (Performance of the Research), Section 2.3.2(b) (Performance of the Research) or Article 8 (Term and Termination; Additional Obligations); or (b) the Phase 1 Materials Acceptance Date.

 

2.2          Rights Granted During Research Period .

 

2.2.1          License to “[***]” . Subject to the terms and conditions of this Agreement, Intec Pharma hereby grants to “[***]” an exclusive, fully paid, worldwide license during the Option Exercise Period, with the right to grant sublicenses through multiple tiers, under the Intec Pharma Technology and Intec Pharma’s interest in the Joint Technology for the sole purposes of conducting a Phase 1 Clinical Trial, evaluating whether or not to exercise the Option and performing activities in furtherance of the foregoing.

 

13
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

2.2.2          License to Intec Pharma . Subject to the terms and conditions of this Agreement, “[***]” hereby grants to Intec Pharma a non-exclusive, royalty-free, fully paid, worldwide license during the Research Period, with the right to grant sublicenses through multiple tiers (subject to “[***]” ’s prior written consent), under the “[***]” Technology, the Agreement “[***]” Technology and “[***]” ’s interest in the Joint Technology for the sole purpose of conducting the activities set forth in the Research Plan.

 

2.2.3          Retained Rights . No rights, other than those expressly set forth in this Section 2.2, are granted to either Party during the Research Period hereunder, and no additional rights shall be deemed granted to either Party during the Research Period by implication, estoppel or otherwise. All rights not expressly granted by either Party to the other hereunder are reserved.

 

2.3          Pre-Commercialization Activities During Research Period .

 

2.3.1          Research Plan . During the Research Period, Intec Pharma shall use commercially reasonable efforts to perform the activities set forth in the Research Plan in accordance with the terms and conditions set forth in this Agreement and Applicable Law. “[***]” and Intec Pharma may agree in writing to amend the Research Plan at any time during the Research Period to amend, add or remove research activities relating to the Collaboration Products.

 

2.3.2          Performance of the Research .

 

(a)         Promptly following the Effective Date, Intec Pharma shall perform the activities set forth in PART A of the Research Plan, which include activities related to initial bench-scale research and development of Collaboration Products. Promptly following completion of the activities set forth in PART A of the Research Plan, Intec Pharma shall deliver to “[***]” the deliverables specified in PART A of the Research Plan (the “ PART A Deliverables ”), which PART A Deliverables shall comply with the requirements and specifications set forth in the Research Plan. Within ninety (90) days after receipt of the PART A Deliverables, “[***]” shall notify Intec Pharma in writing if it desires to proceed with PART B of the Research Plan (a “ PART B Election Notice ”). If “[***]” does not deliver a PART B Election Notice to Intec Pharma within ninety (90) days after receipt of the PART A Deliverables, then this Agreement shall automatically terminate on the end of such ninety (90) day period, and “[***]” shall reimburse Intec Pharma’s out-of-pocket costs incurred in the performance of the Research Plan in accordance with Section 8.3.3 (Termination by “[***]” during the Research Period), provided that, if “[***]” notifies Intec Pharma within such ninety (90) day period of its decision not to deliver a PART B Election Notice, then “[***]” shall have no obligation to reimburse Intec Pharma for any out-of-pocket costs incurred by Intec Pharma after the date of such notification.

 

14
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(b)         If “[***]” delivers a PART B Election Notice to Intec Pharma within ninety (90) days after receipt of the PART A Deliverables, then Intec Pharma shall promptly commence and perform the activities set forth in PART B of the Research Plan, which includes activities related to the Pre-Commercialization Activities and Manufacture of GMP-compliant clinical batches of Collaboration Product (the “ Phase 1 Clinical Trial Materials ”). Promptly following completion of the activities set forth in PART B of the Research Plan, Intec Pharma shall deliver the Phase 1 Clinical Trial Materials to the clinical site(s) designated by “[***]” and shall deliver any other deliverables specified in PART B of the Research Plan to “[***]” or its designee, as applicable (collectively, the “ PART B Deliverables ”), which PART B Deliverables shall comply with the requirements and specifications set forth in the Research Plan. Following receipt of the PART B Deliverables, “[***]” shall inspect the Phase 1 Clinical Trial Materials to determine, in its sole discretion, whether such Phase 1 Clinical Trial Materials are suitable for use in humans in connection with a Phase 1 Clinical Trial of the applicable Collaboration Product as determined in accordance with “[***]” ’s quality control acceptance criteria and otherwise satisfy the criteria and specifications set forth in the Research Plan, and shall notify Intec Pharma of its determination in writing within 60 (sixty) days from receipt of the PART B Deliverables. If such notice states that such Phase 1 Clinical Trial Materials are suitable for use in humans in connection with a Phase 1 Clinical Trial of the applicable Collaboration Product and otherwise satisfy the criteria and specifications set forth in the Research Plan, the date on which Intec Pharma receives such notice shall be deemed to be the “ Phase 1 Materials Acceptance Date .” If such notice states that such Phase 1 Clinical Trial Materials are not suitable for use in humans in connection with a Phase 1 Clinical Trial of the applicable Collaboration Product or are otherwise not in conformity with the criteria and specifications set forth in the Research Plan (“ Failure of PART B Deliverables ”), “[***]” may elect to either immediately terminate this Agreement upon written notice to Intec Pharma or to have Intec Pharma repeat the activities set forth in PART B of the Research Plan one more time, at no additional cost to “[***]” .

 

(c)         Subject to “[***]” ’s obligations under Article 4 (Payments), Intec Pharma shall be solely responsible for all aspects of, including all costs associated with, the Manufacture of all clinical supplies of Collaboration Products necessary for the Parties to perform the activities set forth in the Research Plan. Intec Pharma shall undertake all such Manufacturing activities in accordance with GMP (for Phase 1 Clinical Trial Materials) and Applicable Laws.

 

2.3.3          Reports of Research Activities . Within fifteen (15) days following the end of each Calendar Quarter during the Research Period, Intec Pharma shall deliver to “[***]” a report on the Pre-Commercialization Activities undertaken by Intec Pharma in accordance with the Research Plan during such Calendar Quarter, which report shall include a reasonably detailed summary of (a) all Joint Know-How and Agreement “[***]” Know-How resulting from such activities; and (b) the Pre-Commercialization Activities undertaken during the prior Calendar Quarter and in process as of the date of the report.

 

15
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

2.4          Option Exercise .

 

2.4.1          Option Exercise Period . For purposes of this Agreement, “ Option Exercise Period ” means the period (including the Research Period) beginning on the Effective Date and ending on the earliest of: (a) termination of this Agreement in accordance with Section 2.3.2(a) (Performance of the Research), Section 2.3.2(b) (Performance of the Research) or Article 8 (Term and Termination; Additional Obligations); or (b) the date that is twenty four (24) months after the Phase 1 Materials Acceptance Date, provided that, if the FDA or EMA places a clinical hold on a Phase 1 Clinical Trial using the applicable Phase 1 Clinical Trial Materials during such twenty four (24) month period, then such twenty four (24) month period shall be extended by a period of time equal to the duration of such clinical hold; or (c) the exercise of the Option by “[***]” pursuant to, and in accordance with, Section 2.4.2 (Option).

 

2.4.2          Option . Subject to the terms and conditions of this Agreement, “[***]” shall have the exclusive right and option, in its sole discretion, to obtain an exclusive license in the Territory under the Intec Pharma Technology and under Intec Pharma’s interest in the Joint Technology as set forth in Section 3.2.1 (Licenses to “[***]” ) (the “ Option ”). “[***]” may exercise the Option by delivering written notice thereof to Intec Pharma (the “ Option Exercise Notice ”) at any time during the Option Exercise Period and by paying Intec Pharma the License Fee within ninety (90) days thereof. On the date that Intec Pharma has received both the Option Exercise Notice and License Fee (the “ Option Exercise Date ”), the provisions of Article 3 (Commercial Period) (including the license granted in Section 3.2.1 (Licenses to “[***]” ) shall automatically take effect and shall continue to apply for the remainder of the Term.

 

2.4.3          Effect of Failure to Exercise Option . If “[***]” does not deliver an Option Exercise Notice to Intec Pharma prior to the end of the Option Exercise Period, the Option shall expire and this Agreement shall automatically terminate upon the expiration of the Option Exercise Period. If “[***]” delivers an Option Exercise Notice to Intec Pharma prior to the end of the Option Exercise Period, but does not pay the License Fee to Intec Pharma within ninety (90) days of such delivery in accordance with Section 2.4.2 (Option), the Option shall expire and this Agreement shall automatically terminate upon the expiration of such ninety (90) day period.

 

2.5          Right to Negotiate for Additional Indications . If, at any time during the Term, “[***]” determines that it desires to expand the Field to include additional indications (a “ Field Expansion ”), then to the extent Intec Pharma is not precluded contractually from doing so, the Parties shall negotiate the terms and conditions of such Field Expansion in good faith. In the event that the Parties mutually agree in writing to a Field Expansion, the definition of “Field” under Section 1.28 shall automatically be amended to include the applicable additional indications, with no further action by the Parties. For clarity, “[***]” may request a Field Expansion an unlimited number of times during the Term, and the Parties’ obligations to negotiate the terms and conditions of such Field Expansion in good faith under this Section 2.5 shall apply in each case.

 

16
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

2.6          Sublicenses . Any sublicense from Intec Pharma to a sublicensee or from “[***]” to a Sublicensee shall only be granted pursuant to a written agreement, which shall be in compliance and not inconsistent with and shall be subject and subordinate to the terms and conditions of this Agreement. The sublicensing Party shall furnish the other Party with a fully executed copy of any such sublicense agreement, promptly after its execution, provided that, without derogating from Intec Pharma’s rights under Section 4.5.2 (Records; Audit Rights), the sublicensing Party may redact any Confidential Information from such copy. Each such sublicense agreement shall contain all provisions necessary to ensure the sublicensing Party’s ability to perform its obligations under this Agreement.

 

3.          COMMERCIAL PERIOD

 

3.1          Commercial Period . For purposes of this Agreement, “ Commercial Period ” means the period beginning on the Option Exercise Date and ending on the last day of the Term.

 

3.2          Rights Granted During Commercial Period .

 

3.2.1          Licenses to “[***]” . Effective only in the event of “[***]” ’s exercise of the Option in accordance with Section 2.4.2 (Option) and the terms and conditions of this Agreement, Intec Pharma hereby grants to “[***]” an exclusive (even as to Intec Pharma), worldwide, royalty-bearing license with the right to grant sublicenses through multiple tiers, under the Intec Pharma Technology and Intec Pharma’s interest in the Joint Technology to conduct Pre-Commercialization Activities for, Manufacture and Commercialize Collaboration Products in the Field in the Territory.

 

3.2.2          License to Intec Pharma . Subject to the Parties’ mutual agreement upon a Pre-Commercialization Plan pursuant to Section 3.3.2 (Pre-Commercialization Collaboration) and the terms and conditions of this Agreement, “[***]” hereby grants to Intec Pharma a nonexclusive, royalty-free, fully paid, worldwide license during the Commercial Period, with the right to grant sublicenses through multiple tiers (subject to “[***]” ’s prior written consent), under the “[***]” Technology, the Agreement “[***]” Technology and “[***]” s interest in the Joint Technology for the sole purpose of conducting the activities set forth in the Pre-Commercialization Plan.

 

3.2.3          Retained Rights . No rights, other than those expressly set forth in this Section 3.2, are granted to either Party during the Commercial Period hereunder, and no additional rights shall be deemed granted to either Party during the Commercial Period by implication, estoppel or otherwise. All rights not expressly granted by either Party to the other hereunder are reserved.

 

3.3          Pre-Commercialization Activities and Regulatory Activities During Commercial Period .

 

3.3.1          Pre-Commercialization Activities . Subject to the terms of Section 2.3 (Pre-Commercialization Activities During Research Period) and Section 3.3.2 (Pre-Commercialization Collaboration), “[***]” shall be solely responsible for all aspects of, including all costs associated with, the Pre-Commercialization Activities for the Collaboration Products in the Field in the Territory during the Commercial Period, including conducting Clinical Trials for the purpose of obtaining Regulatory Approval for Collaboration Products in the Field in the Territory.

 

17
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.3.2          Pre-Commercialization Collaboration . Upon “[***]” ’s written request to Intec Pharma on or after the Option Exercise Date, which request shall be in “[***]” ’s sole discretion, (the “ Pre-Commercialization Collaboration Notice ”), the Parties will discuss and seek to mutually agree upon a pre-commercialization plan pursuant to which Intec Pharma would perform certain Pre-Commercialization Activities with respect to the Collaboration Products, including the Manufacture and supply of Collaboration Products for use by “[***]” in Clinical Trials (the “ Pre-Commercialization Plan ”). Such Pre-Commercialization Plan shall include a budget covering all Pre-Commercialization Activities set forth therein. If the Parties mutually agree upon a Pre-Commercialization Plan, then Intec Pharma shall conduct all of the Pre-Commercialization Activities set forth therein in accordance with the Pre-Commercialization Plan. For clarity, (a) “[***]” shall have no obligation to collaborate with Intec Pharma during the Commercial Period with respect to any Pre-Commercialization Activities, unless and until (i) “[***]” , in its sole discretion, chooses to deliver to Intec Pharma a Pre-Commercialization Collaboration Notice and (ii) the Parties mutually agree upon the Pre-Commercialization Plan, and (b) Intec Pharma shall have no obligations with respect to the Pre-Commercialization Activities during the Commercial Period, unless and until (i) Intec Pharma receives the Pre-Commercialization Collaboration Notice from “[***]” and (ii) the Parties mutually agree upon the Pre-Commercialization Plan.

 

3.3.3          Pre-Commercialization Reports . If the Parties mutually agree upon a Pre-Commercialization Plan in accordance with Section 3.3.2 (Pre-Commercialization Collaboration), then during the period beginning on the date that the Pre-Commercialization Plan is mutually agreed upon by the Parties and ending upon completion of all activities contemplated by such Pre-Commercialization Plan, Intec Pharma shall, within fifteen (15) days following the end of each Calendar Quarter, provide a written report to “[***]” regarding the Pre-Commercialization Activities undertaken by Intec Pharma during such Calendar Quarter in accordance with the Pre-Commercialization Plan.

 

3.3.4          Regulatory Affairs .

 

(a)          “[***]” shall have the exclusive right and responsibility to prepare and implement plans and strategies for seeking Regulatory Approval for Collaboration Products in the Field in the Territory, and shall own and be responsible for preparing, seeking, submitting and maintaining all Regulatory Filings and Regulatory Approvals for Collaboration Products in the Field in the Territory. “[***]” shall hold and manage the safety database for all Collaboration Products and will have global responsibility for all adverse event collection and reporting. At “[***]” s request, Intec Pharma shall cooperate with “[***]” in preparation of Regulatory Filings for the purpose of obtaining Regulatory Approval (including the preparation of the CMC portion of any Regulatory Filing) for Collaboration Products in the Field in the Territory, and “[***]” shall reimburse Intec Pharma for reasonable costs incurred in connection with such cooperation.

 

18
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

  

(b)          “[***]” shall promptly inform Intec Pharma of any intended or actual inspection, written enquiry and/or visit to its facilities by a Regulatory Authority in connection with any Collaboration Product, unless “[***]” has reason to believe that such inspection, enquiry and/or visit is not related to the Accordion Pill System as contained in any Collaboration Product, and promptly communicate to Intec Pharma copies of any correspondence from the Regulatory Authority relating thereto. “[***]” will use reasonable endeavors to ensure that Intec Pharma may have a representative present during any such inspection. “[***]” shall provide Intec Pharma with at least fifteen (15) Business Days advance notice of any material meeting with a Regulatory Authority which is for the purpose of obtaining Regulatory Approval for any Collaboration Product. “[***]” shall provide Intec Pharma drafts of any material documents or correspondence pertaining to any Collaboration Product prepared for submission to the Regulatory Authority, including with respect to safety concerns and SUSAR referred to below, solely to the extent that such documents or correspondence relate to the Accordion Pill System as contained in such Collaboration Product, sufficiently in advance of submission so that Intec Pharma may review and comment on the substance of such material documents or correspondence. “[***]” shall promptly provide copies of any material documents or other correspondence received from the Regulatory Authority pertaining to Collaboration Products, unless such documents or correspondence are not related to the Accordion Pill System as contained in any Collaboration Product. “[***]” agrees to report to Intec Pharma any information from any source, including, without limitation, employees, distributors, agents, customers, user facilities, individuals, or medical or scientific literature, whether published or unpublished, that reasonably suggests that there may be a safety concern with respect to the Accordion Pill System as contained in a Collaboration Product, including a probability that the Accordion Pill System as contained in a Collaboration Product has caused or contributed to a death, or an event defined as “SUSAR” (Suspected Unexpected Serious Adverse Reactions), as promptly as possible and in any event simultaneously with any report of such information to a Regulatory Authority, and not later than fifteen (15) calendar days following receipt of information of such event. In addition, “[***]” shall, within fifteen (15) days following the end of each Calendar Quarter, provide a written report to Intec Pharma regarding the activities undertaken by “[***]” during such Calendar Quarter in accordance with this Section 3.3.4.

  

19
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(c)         If Intec Pharma is Manufacturing any Collaboration Products under this Agreement, Intec Pharma shall promptly inform “[***]” of any intended or actual inspection, written enquiry and/or visit to its facilities by a Regulatory Authority in connection with any Collaboration Product, and promptly communicate to “[***]” copies of any correspondence from the Regulatory Authority relating thereto. Intec Pharma will use reasonable endeavors to ensure that “[***]” may have a representative present during any portions of such inspection relating to a Collaboration Product. Intec Pharma shall promptly provide copies of any material documents or other correspondence received from any Regulatory Authority pertaining to the manufacturing and safety of Accordion Pill System or any Collaboration Product. Intec Pharma agrees to report to “[***]” any information from any source, including, without limitation, employees, distributors, agents, customers, user facilities, individuals, or medical or scientific literature, whether published or unpublished, that reasonably suggests that there may be a safety concern with respect to the Accordion Pill System or any Collaboration Product, including a probability that the Accordion Pill System or any Collaboration Product has caused or contributed to a death, or an event defined as SUSAR, as promptly as possible and in any event no later than (i) one (1) Business Day following receipt of information of such event, if such event is a fatal event, or (ii) two (2) Business Days following receipt of information of such event, if such event is not a fatal event, in each case ((i) and (ii)), not to exceed four (4) calendar days; provided , however , that if any such information is subject to any confidentiality obligations of Intec Pharma towards Third Parties, Intec Pharma shall provide redacted information with respect to the Accordion Pill System to “[***]” without exposing information that Intec Pharma is legally or contractually precluded from disclosing and, in the event that “[***]” requests any additional information that Intec Pharma is legally or contractually precluded from disclosing, Intec Pharma shall use reasonable efforts to seek a waiver of such confidentiality obligations so that Intec Pharma may disclose such additional information to “[***]” .

 

(d)         At any time during the Term, “[***]” shall have the right, on thirty (30) days’ advance written notice to Intec Pharma and during normal business hours, to inspect the manufacturing facilities of Intec Pharma and to audit Intec Pharma’s applicable books and records in order to confirm compliance with Applicable Laws and with the terms and conditions of this Agreement. Intec Pharma shall respond in writing to “[***]” regarding any material items of concern identified by “[***]” during such inspections or audits within thirty (30) days of “[***]” ’s notice of the outcome of the audit or inspection and shall develop a plan, reasonably satisfactory to “[***]” , to remedy any items of noncompliance within ninety (90) days of notice thereof (or more promptly if that can be accomplished in a commercially reasonable manner), and shall remedy such items of noncompliance as set forth in such plan. Notwithstanding anything to the contrary, this Section 3.3.4(d) shall not apply during any period in which Intec Pharma is not Manufacturing supplies of Collaboration Products.

 

3.3.5          Clinical Supply . “[***]” shall have the right, in its sole discretion, to Manufacture or authorize a Third Party to Manufacture supplies of Collaboration Products for use in Clinical Trials or to contract with Intec Pharma for such Manufacture. In the event that “[***]” requests Intec Pharma to Manufacture and supply Collaboration Products for use in Clinical Trials or for other regulatory purposes (“ Clinical Collaboration Product Supply ”), “[***]” and Intec Pharma shall negotiate in good faith the terms and conditions, including pricing terms, upon which Intec Pharma will Manufacture and supply Clinical Collaboration Product Supply.

 

20
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.3.6          Commercial Supply .

 

(a)          Responsibility for Commercial Supply . Except as set forth in Section 3.3.6(b) (Commercial Supply by Intec Pharma) or otherwise agreed to by the Parties in the Pre-Commercialization Plan or a Commercial Supply Agreement, “[***]” shall be solely responsible for all aspects of, including all costs associated with and the selection of contract manufacturers responsible for, the Manufacture of all commercial supply of the Collaboration Products.

 

(b)          Commercial Supply by Intec Pharma . “[***]” agrees to consider in good faith the engagement of Intec Pharma as a Manufacturer of commercial supply of the Collaboration Products. If “[***]” determines to engage a Third Party to Manufacture Commercial Supply of Collaboration Products, it shall so notify Intec Pharma and such engagement shall be subject to such Third Party executing a confidentiality agreement with “[***]” with non-disclosure and non-use terms and conditions that are reasonable and standard for such agreements in the commercial pharmaceutical manufacturing industry, provided that the confidentiality period shall not be less than 10 years and the non-use terms shall be the most restrictive terms permitted under Applicable Law. Upon Intec Pharma’s written request to “[***]” made within thirty (30) days after notice from “[***]” pursuant to the preceding sentence, and for a period of twelve (12) months from such written request (unless the Parties enter into a manufacturing and supply agreement for Collaboration Products or “[***]” terminates such period in its sole discretion prior to the end of such period), the Parties shall use diligent efforts to negotiate in good faith an agreement for the Manufacture of commercial supply of Collaboration Products by Intec Pharma on terms (including pricing terms) customary in the pharmaceutical industry with respect to Manufacture and supply of like products for commercial use, which terms shall, at “[***]” ’s election, reflect a toll manufacturing arrangement (the “ Commercial Supply Agreement ”). Notwithstanding anything to the contrary, “[***]” shall have no obligation to enter into a Commercial Supply Agreement with Intec Pharma. For the avoidance of doubt, “[***]” shall have the sole right, in its sole discretion, to determine the identity and location of all Manufacturers and Manufacturing facilities with respect to commercial supply of the Collaboration Products.

 

3.3.7          Transfer of Manufacturing File . At any time upon “[***]” ’s request during the Commercial Period, Intec Pharma shall transfer to “[***]” or its designee a complete and final manufacturing file containing all Intec Pharma Know-How and any Agreement “[***]” Know-How and Joint Know-How in Intec Pharma’s possession that is necessary or useful to enable the Manufacture of Collaboration Products by “[***]” or its designee (such Intec Pharma Know-How, the “Manufacturing File,” and such transfer, the “Technology Transfer”). The Manufacturing File may not be altered without Intec Pharma's prior written consent. “[***]” will reimburse Intec Pharma for its reasonable out-of-pocket costs incurred in connection with the Technology Transfer. The Technology Transfer shall be conducted pursuant to a mutually-agreed Technology Transfer plan developed by the Parties for the purpose of ensuring the complete and timely transfer of the Manufacturing File; provided that, if the Parties are unable to agree on the terms of such Technology Transfer plan, “[***]” shall be entitled to determine the terms of such Technology Transfer plan, subject to compliance with any applicable rules or requirements of the OCS provided to “[***]” in writing by Intec Pharma. Intec Pharma’s responsibilities under such Technology Transfer plan shall include (a) the provision of copies or samples of relevant documentation, materials and other embodiments of the Manufacturing File to “[***]” or its designee, and (b) the provision of reasonable access during normal business hours to Intec Pharma’s qualified technical personnel to consult with “[***]” or its designee with respect to the Manufacturing File. Intec Pharma shall use commercially reasonable efforts to conduct the Technology Transfer in a manner conducive to the successful Manufacture of clinical and commercial supplies of the Collaboration Products.

 

21
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.4          Commercialization Activities During the Commercial Period . “[***]” shall be responsible for all aspects of, including all costs associated with, the Commercialization of the Collaboration Products in the Field in the Territory, including the conduct of all pre-marketing, marketing, promotion, sales, distribution, import and export activities (including securing reimbursement, sales and marketing and conducting any post-marketing trials or post-marketing safety surveillance or maintaining databases), pricing and branding. “[***]” shall, and shall cause its Affiliates and permitted Sublicensees to, undertake all such Commercialization activities in accordance with Applicable Laws.

 

3.5          No Implied Obligations . For clarity, nothing in this Agreement shall create any obligation on the part of “[***]” to conduct Pre-Commercialization Activities for, seek Regulatory Approval of, Manufacture or Commercialize any Product (including any Collaboration Product) in any country in the Territory. “[***]” shall conduct any activities related to the Pre-Commercialization Activities, Regulatory Approval, Manufacture and Commercialization of the Products (including the Collaboration Products) at its sole election and in its sole discretion. Any decision by “[***]” (a) not to pursue the Pre-Commercialization Activities, Regulatory Approval, Manufacture or Commercialization of any Product (including any Collaboration Product), or (b) to pursue the Pre-Commercialization Activities, Regulatory Approval, Manufacture or Commercialization of any Product (including any Collaboration Product) in collaboration with a Third Party, shall not constitute a breach of this Agreement. For the avoidance of doubt, the foregoing provision shall not be construed as diminishing “[***]” ’s obligations or expanding “[***]” ’s rights as expressly set forth in this Agreement.

 

4.          PAYMENTS

 

4.1          Upfront Fee . “[***]” shall pay to Intec Pharma an upfront fee of $250,000 within fifteen (15) days after the Effective Date, which fee shall be irrevocable, non-refundable and non-creditable toward any other payments due to Intec Pharma hereunder.

 

4.2          License Fee. If “[***]” exercises the Option, “[***]” shall pay to Intec Pharma a fee of $8,000,000 (the “ License Fee ”) within ninety (90) days of delivering to Intec Pharma the Option Exercise Notice which fee shall be irrevocable, non-refundable and non-creditable toward any other payments due to Intec Pharma hereunder.

 

22
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.3          Research Period Milestones.

 

4.3.1          Research Period Milestone Payments . “[***]” shall pay to Intec Pharma the applicable milestone payment (each a “ Research Period Milestone Payment ”) set forth opposite the corresponding milestone event (each a “ Research Period Milestone Event ”) within thirty (30) days after the first occurrence of such Research Period Milestone Event by Intec Pharma, which fees shall be irrevocable, non-refundable and non-creditable toward any other payments due to Intec Pharma hereunder:

 

        Research Period  
        Milestone  
    Research Period Milestone Event   Payment  
           
1   “[***]”   $ “[***]”  
             
2   “[***]”   $ “[***]”  

 

4.3.2          Determination that Research Period Milestone Events have Occurred . Intec Pharma shall provide “[***]” with prompt written notice upon the first occurrence of a Research Period Milestone Event but, in any event, no later than thirty (30) days after the occurrence of such Research Period Milestone Event. Each Research Period Milestone Payment will be paid only once, upon the first achievement by a Collaboration Product to reach the applicable milestone. For the avoidance of doubt, the later achievement by the same or a different Collaboration Product to reach a milestone for which payment has already been made shall not result in any payment becoming due.

 

4.4          Commercial Period Milestones .

 

4.4.1          Commercial Period Milestone Payments . If “[***]” exercises the Option pursuant to Section 2.4.2 (Option), then, subject to the terms and conditions of this Agreement, “[***]” shall pay to Intec Pharma the applicable milestone payments (each a “ Commercial Period Milestone Payment ”) set forth opposite the corresponding milestone event (each a “ Commercial Period Milestone Event ”) within thirty (30) days after the first achievement of such Commercial Period Milestone Event by “[***]” or its Affiliates or permitted Sublicensees, which fees shall be irrevocable, non-refundable and non-creditable toward any other payments due to Intec Pharma hereunder:

 

        Commercial  
        Period Milestone  
    Commercial Period Milestone Event   Payment  
             
1   “[***]”   $ “[***]”  

 

23
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

    Commercial Period Milestone Event   Commercial
Period Milestone
Payment
 
           
2   “[***]”   $ “[***]”  
             
3   “[***]”   $ “[***]”  
             
4   “[***]”   $ “[***]”  
             
5   “[***]”   $ “[***]”  

 

4.4.2        Determination that Commercial Period Milestone Events have Occurred . “[***]” shall provide Intec Pharma with prompt written notice upon the first occurrence of a Commercial Period Milestone Event but, in any event, no later than thirty (30) days after the occurrence of such Commercial Period Milestone Event. Each Commercial Period Milestone Payment will be paid only once, upon the first achievement by a Collaboration Product to reach the applicable milestone. For the avoidance of doubt, the later achievement by the same or a different Collaboration Product to reach a milestone for which payment has already been made shall not result in any payment becoming due.

 

4.5          Payment of Royalties; Royalty Rate; Accounting and Records .

 

4.5.1        Payment of Royalties .

 

(a)          Royalty Rate . If “[***]” exercises the Option pursuant to Section 2.4.2 (Option), then, subject to the terms and conditions of this Agreement, “[***]” shall pay Intec Pharma, on a country-by-country and Collaboration Product-by-Collaboration Product basis, a “[***]” percent ( “[***]” %) royalty on Annual Net Sales of all Collaboration Products in each Calendar Year (or partial Calendar Year for the year in which the First Commercial Sale occurs and any partial year resulting from the end of the Royalty Term) commencing with the First Commercial Sale of any Collaboration Product in any country in the Territory and ending upon the last day of the last Royalty Term for all Collaboration Products.

 

(b)          Royalty Cap . In no event shall the amount of royalties owing to Intec Pharma under Section 4.5.1(a) (Royalty Rate) exceed (i) a total sum of $25,000,000 in any Calendar Year (the “ Annual Royalty Cap ”) or (ii) a total sum of $100,000,000 over the course of this Agreement. For clarity, any amount in excess of the Annual Royalty Cap that would otherwise be payable to Intec Pharma in a given Calendar Year under Section 4.5.1(a) (Royalty Rate) shall not be carried forward for payment in any subsequent Calendar Year.

 

(c)          Royalty Stacking . The amount of royalties owing to Intec Pharma under Section 4.5.1(a) (Royalty Rate) for any Collaboration Product shall be reduced by “[***]” percent ( “[***]” %) of the amount of royalties paid by “[***]” or any of its Affiliates to any Third Party in consideration for the license of Patent Rights or Know-How that “[***]” in good faith, based on the advice of counsel, believes must be obtained in order to practice any Intec Pharma Technology in connection with any Collaboration Product without infringing or misappropriating Patent Rights or other intellectual property rights of Third Parties.

 

24
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(d)          Limit on Royalty Reductions . In no event shall the royalties owed under Section 4.5.1(a) (Royalty Rate), with respect to a Collaboration Product in a country be reduced by operation of Section 4.5.1(c) (Royalty Stacking), by more than “[***]” percent ( “[***]” %) of what would otherwise be owed to Intec Pharma under Section 4.5.1(a) (Royalty Rate); provided , however , that if any amount payable to a Third Party and otherwise permitted to be offset against the royalties due to Intec Pharma with respect to a Collaboration Product pursuant to Section 4.5.1(c) (Royalty Stacking) cannot be offset against such royalties due to the provisions of this Section 4.5.1(d), such unused amount may be carried forward and offset against royalties due with respect to such Collaboration Product in future royalty periods.

 

(e)          Fully Paid-Up, Royalty-Free License . Following the expiration of the Royalty Term for any Collaboration Product in any country, no further royalties shall be payable under Section 4.5.1(a) (Royalty Rate) in respect of sales of such Collaboration Product in such country and, thereafter, the licenses granted to “[***]” under Section 3.2.1 (Licenses to “[***]” ) with respect to such Collaboration Product in such country shall automatically become fully paid-up, perpetual, irrevocable, royalty-free, non-exclusive, sublicensable licenses.

 

(f)          Payment Dates and Reports . Commencing with the first Calendar Quarter in which the First Commercial Sale of a Collaboration Product occurs with respect to payments owed under Section 4.5.1(a) (Royalty Rate), “[***]” shall deliver to Intec Pharma, within sixty (60) days after the end of each Calendar Quarter, a report showing, with respect to the relevant Calendar Quarter: (a) the gross sales and Net Sales of each Collaboration Product by type of Collaboration Product and country in the Territory; (b) the quantity of each type of Collaboration Product sold; (c) the total amount of deductions from gross sales to determine Net Sales; (d) the applicable royalty rate for each Collaboration Product in each country in the Territory after applying any reductions set forth above; and (e) a calculation of the amount of royalty due to Intec Pharma under Section 4.5.1(a) (Royalty Rate). Payments under Section 4.5.1(a) (Royalty Rate) shall be made by “[***]” within sixty (60) days after the end of each Calendar Quarter.

 

4.5.2          Records; Audit Rights . “[***]” shall, and shall cause its Affiliates and permitted Sublicensees to, keep and maintain for three (3) years from the date of each payment under Section 4.5.1(a) (Royalty Rate) complete and accurate records of gross sales and Net Sales of each Collaboration Product by “[***]” , its Affiliates and its permitted Sublicensees, in sufficient detail to allow the payments owing under Section 4.5.1(a) (Royalty Rate) to be determined accurately. Intec Pharma shall have the right for a period of three (3) years after receiving any such payment to appoint, at its expense, an independent certified public accountant reasonably acceptable to “[***]” , to audit the relevant records of “[***]” , its Affiliates and its permitted Sublicensees in order to verify that the amount of such payment was correctly determined. “[***]” , its Affiliates and its permitted Sublicensees shall each make its records available for audit by such independent certified public accountant during regular business hours at such place or places where such records are customarily kept, upon thirty (30) days written notice from Intec Pharma. Such audit right shall not be exercised by Intec Pharma more than once in any Calendar Year. All records made available for audit shall be deemed to be Confidential Information of “[***]” . If such independent certified public accountant correctly concludes that there was an underpayment by “[***]” hereunder, “[***]” shall promptly (but in any event no later than forty-five (45) days after Intec Pharma’s receipt of the report so concluding) make payment to Intec Pharma of any shortfall. Intec Pharma shall bear the full cost of such audit unless such audit discloses an underreporting by “[***]” or its Affiliates or permitted Sublicensees of five percent (5%) of the aggregate amount of royalties payable in any Calendar Year, in which case “[***]” shall reimburse Intec Pharma for all costs incurred by Intec Pharma in connection with such audit.

 

25
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.5.3          Late Payments . Any payment under this Agreement, including underpayments discovered during an audit, that is past due shall bear interest at a rate equal to the thirty (30) day U.S. dollar LIBOR rate effective for the date that payment was due, as reported by The Wall Street Journal (New York edition), plus one percent (1%) per annum calculated on the number of the days from the due date until such payment is paid in full or, if less, the maximum interest rate permitted by Applicable Laws. Any such payment shall, when made, be accompanied by, and credited first to, all interest so accrued.

 

4.5.4          Taxes . It is understood and agreed between the Parties that any payments made by “[***]” under this Agreement are inclusive of any value added or similar tax imposed upon such payments. In addition, in the event any payments made by “[***]” pursuant to this Agreement become subject to withholding taxes under the laws or regulations of any jurisdiction or court, agency, department, authority or other instrumentality of any national, state, county, city or other political subdivision, “[***]” shall deduct and withhold the amount of such taxes for the account of Intec Pharma to the extent required by Applicable Laws; such amounts payable to Intec Pharma shall be reduced by the amount of taxes deducted and withheld; and “[***]” shall pay the amounts of such taxes to the proper governmental authority in a timely manner and promptly transmit to Intec Pharma an official tax certificate or other evidence of such tax obligations together with proof of payment from the relevant governmental authority of all amounts deducted and withheld sufficient to enable Intec Pharma to claim such payment of taxes. Any such withholding taxes required under Applicable Laws to be paid or withheld shall be an expense of, and borne solely by, Intec Pharma. “[***]” will provide Intec Pharma with reasonable assistance to enable Intec Pharma to recover such taxes as permitted by Applicable Laws. Should any payment required to be made to Intec Pharma in accordance with the provisions of this Agreement be subject to withholding of any taxes assessable upon Intec Pharma by “[***]” or its Affiliates or Sublicensees, “[***]” shall inform Intec Pharma of such withholding requirement in advance of the first payment to be made by “[***]” or anyone on its behalf to Intec Pharma hereunder, so as to allow Intec Pharma to obtain and provide “[***]” with an appropriate certificate of exemption, if available. No withholding shall be made if an exemption is timely obtained, and for as long as such exemption is valid.

 

26
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.5.5          Foreign Currency Exchange . All payments to be made by “[***]” to Intec Pharma under this Agreement shall be made in U.S. Dollars and may be paid by check made to the order of Intec Pharma or by bank wire transfer in immediately available funds to such bank account as may be designated in writing by Intec Pharma from time to time. Whenever, for purposes of calculating the payments due under Section 4.5.1(a) (Royalty Rate), conversion from foreign currency will be required, all amounts will first be calculated in the currency of sale and then converted into U.S. Dollars by applying the rate of exchange generally used by “[***]” for financial reporting purposes.

 

4.5.6          Blocked Currency . In each country in the Territory where the local currency cannot be converted to U.S. Dollars and removed from the country, payments due under Section 4.5.1(a) (Royalty Rate) shall continue to be accrued in such country and Net Sales in such country shall continue to be reported. Intec Pharma can then choose to receive payment in local currency by deposit in a local bank or other depository designed in writing by Intec Pharma.

 

5.          CONFIDENTIALITY; PUBLICITY; PUBLICATION.

 

5.1          Confidentiality .

 

5.1.1          Confidentiality Obligations . Intec Pharma and “[***]” each recognizes that the other Party’s Confidential Information constitutes highly valuable assets of such other Party. Intec Pharma and “[***]” each agrees that, subject to Section 5.1.2 (Limited Disclosure), it will not disclose, and will cause its Affiliates and permitted sublicensees not to disclose, any Confidential Information of the other Party, and it will not use, and will cause its Affiliates and permitted sublicensees not to use, any Confidential Information of the other Party except as expressly permitted under this Agreement, provided that such obligations shall apply during the Term and for an additional five (5) years thereafter.

 

5.1.2          Limited Disclosure . Intec Pharma and “[***]” each agrees that disclosure or transfer of its Confidential Information may be made by the other Party to any employee, consultant or Affiliate of such other Party or Third Party subcontractor engaged by such other Party to enable such other Party to exercise its rights or to carry out its responsibilities under this Agreement, provided that any such disclosure or transfer shall only be made to Persons who are bound by written obligations as described in Section 5.1.3 (Employees and Consultants). In addition, Intec Pharma and “[***]” each agrees that the other Party may disclose its Confidential Information (a) to such other Party’s sublicensees as expressly permitted under this Agreement; (b) on a need-to-know basis to such other Party’s legal and financial advisors; (c) as reasonably necessary in connection with an actual or potential permitted sublicense of such other Party’s rights hereunder; (d) to any Third Party that is or may be engaged by a Party to perform services in connection with the Research Plan or the Commercialization or Manufacture of Collaboration Products in accordance with the terms of this Agreement as necessary to enable such Third Party to perform such services under customary obligations of confidentiality; and (e) for any other purpose with the other Party’s consent. In addition, each Party agrees that the other Party may disclose such Party’s Confidential Information (i) as reasonably necessary to file, prosecute or maintain Patent Rights, or to file, prosecute or defend litigation related to Patent Rights, in accordance with this Agreement; or (ii) as required by Applicable Laws, provided that, in the case of any disclosure under this clause (ii), the disclosing Party shall (1) if practicable, provide the other Party with reasonable advance notice of, and an opportunity to comment on, any such required disclosure and (2) if requested by the other Party, cooperate in all reasonable respects with the other Party’s efforts to obtain confidential treatment or a protective order with respect to any such disclosure, at the other Party’s expense. Each Party may disclose to potential acquirers and investors or to underwriters, placement agents or advisers in any such transaction, in each case, pursuant to obligations of confidentiality no less stringent than those set forth in this Article 5, the financial terms of this Agreement. With respect to any disclosure of this Agreement by Intec Pharma under this Section 5.1.2, Intec Pharma shall redact the definitions of the Product and the Field prior to such disclosure, unless required otherwise under Applicable Laws.

 

27
 

   

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5.1.3          Employees and Consultants . Intec Pharma and “[***]” each hereby represents that all of its employees and consultants, and all of the employees and consultants of its Affiliates, who have access to Confidential Information of the other Party are or will, prior to their access, be bound by written obligations to maintain such Confidential Information in confidence. Each Party agrees to use, and to cause its Affiliates to use, reasonable efforts to enforce such obligations and to prohibit its employees and consultants from using such information except as expressly permitted under this Agreement. Each Party will be liable to the other for any disclosure or misuse by its employees and consultants of Confidential Information of the other Party.

 

5.2          Publicity . Neither Party shall issue a press or news release or make any similar public announcement related to this Agreement, or publish or make any public presentation related to this Agreement or its activities hereunder, without the prior written consent of the other Party, unless required by Applicable Laws, in which case the disclosing Party shall (a) provide the other Party with reasonable advance notice of, and an opportunity to comment on, any such required public announcement and (b) reasonably consider all comments provided by the other Party. Without limiting the foregoing, unless required by Applicable Laws, Intec Pharma shall not, without “[***]” ’s prior written consent, make any press or news release or other public announcement that directly or indirectly identifies “[***]” , the Product, the Agreement “[***]” Technology or any specific activities conducted under the Research Plan.

 

5.3          Publications and Presentations . In the event “[***]” wishes to make a publication or public presentation related to this Agreement, “[***]” shall deliver to Intec Pharma a copy of the proposed written publication or an outline of the proposed oral presentation at least thirty (30) days (or, in the case of consulting or Third Party research agreements, such shorter period as required by the consulting or other research agreement) prior to submission for publication or presentation. Intec Pharma shall have the right to delay such proposed publication or presentation for up to sixty (60) days (or, in the case of consulting or Third Party research agreements, such shorter period as required by the consulting or other research agreement) in order to file patent applications protecting Intec Pharma’s rights in any information included in such proposed publication or presentation to the extent such filings are consistent with Section 7.1.1   (Intec Pharma Prosecution Rights), and Intec Pharma shall have the right to request the removal or redaction of any of its Confidential Information in any such proposed publication or presentation. Intec Pharma shall not make any publication or public presentation related to this Agreement or any activities hereunder, except for such publications or public presentations that (a) relate solely to the general applicability of the Accordion Pill System and (b) do not directly or indirectly identify “[***]” , the Product, the Agreement “[***]” Technology or any specific activities conducted under the Research Plan.

 

28
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5.4          Prior Approved Publication . Notwithstanding Sections 5.2 (Publicity) and 5.3 (Publications and Presentations), either Party may include in a public disclosure or in a scientific or medical publication or presentation, without prior delivery to or approval by the other Party, any information which has previously been included in a public disclosure or scientific or medical publication that has been approved pursuant to Section 5.2 (Publicity) or reviewed pursuant to Section 5.3 (Publications and Presentations) or published or publicly disclosed by the other Party. A Party relying on this Section 5.4 shall bear the burden of establishing that information has previously been included in a public disclosure or scientific or medical publication that has been approved pursuant to Section 5.2 (Publicity) or approved by the other Party pursuant to Section 5.3 (Publications and Presentations) or published or publicly disclosed by the other Party.

 

6.          INTELLECTUAL PROPERTY RIGHTS

 

6.1          Intec Pharma Ownership . Intec Pharma shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to (a) any and all Know - How that is developed, conceived or, in the case of patentable Know-How, Invented solely by Intec Pharma or any of its Affiliates (or a Third Party acting on any of their behalf) in the course of activities conducted pursuant to this Agreement (including the Research Plan), (b) any and all Patent Rights that claim the foregoing Know-How and (c) any and all General Accordion Pill Technology, excluding, in each case ((a) and (b)), any Agreement “[***]” Technology. “[***]” agrees to cooperate with Intec Pharma to execute assignment documents and other documents necessary to effectuate the intent of this Section 6.1. For the avoidance of doubt, Intec Pharma shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to all Patent Rights and Know-How of Intec Pharma existing as of the Effective Date. Except for the license grants expressly set forth in this Agreement, nothing herein shall grant “[***]” any right, title or interest in or to any Patent Rights or Know-How of Intec Pharma existing as of the Effective Date.

 

6.2          “[***]” Ownership . “[***]” shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to (a) any and all Know-How that is developed, conceived or, in the case of patentable Know-How, Invented solely by “[***]” or any of its Affiliates (or a Third Party acting on any of their behalf) in the course of activities conducted pursuant to this Agreement (including the Research Plan), (b) any and all Patent Rights that claim the foregoing Know-How and (c) any and all Agreement “[***]” Technology, excluding, in each case ((a) and (b)), any General Accordion Pill Technology. Intec Pharma agrees to cooperate with “[***]” to execute assignment documents and other documents necessary to effectuate the intent of this Section 6.2. For the avoidance of doubt, “[***]” shall have sole and exclusive ownership of all right, title and interest on a worldwide basis in and to all Patent Rights and Know-How of “[***]” existing as of the Effective Date. Except for the license grants expressly set forth in this Agreement, nothing herein shall grant Intec Pharma any right, title or interest in or to any Patent Rights or Know-How of “[***]” existing as of the Effective Date.

 

29
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

6.3          Joint Technology . Each Party shall promptly notify the Patent Coordinators in writing of any Joint Know-How arising out of such Party’s performance of activities pursuant to this Agreement. Each Party shall have joint ownership of all right, title and interest on a worldwide basis in and to any and all Joint Technology. The Parties will cooperate to execute assignment documents and other documents necessary to effectuate the intent of the foregoing. Subject to the rights and licenses granted to, and the obligations of, each Party under this Agreement (including the obligations of Intec Pharma under Section 9.4 (Exclusivity)), each Party is entitled to practice the Joint Technology for all purposes on a worldwide basis and to license its interest in the Joint Technology without consent of and without a duty of accounting to the other Party. Each Party will grant, and hereby does grant, all permissions, consents and waivers with respect to, and licenses under, the Joint Technology, throughout the world, necessary to provide the other Party with such rights of use and exploitation of the Joint Technology, and will execute documents as necessary to effectuate the intent of the foregoing.

 

6.4          Agreement “[***]” Technology . Intec Pharma shall promptly notify the Patent Coordinators in writing of any Agreement “[***]” Know-How arising out of Intec Pharma’s performance of activities pursuant to this Agreement. “[***]” shall have sole and exclusive ownership of, and Intec Pharma shall and hereby does assign to “[***]” , all right, title and interest on a worldwide basis in and to any and all Agreement “[***]” Technology. Intec Pharma will provide all cooperation which “[***]” reasonably determines is necessary to effectuate the intent of this Section 6.4, including executing and delivering further assignments, consents, releases and other commercially reasonable documentation, and providing good faith testimony by affidavit, declaration, deposition, in-person or other proper means and otherwise assisting “[***]” in support of any effort by “[***]” to establish, perfect, defend or enforce its rights in such Agreement “[***]” Technology through filing and prosecution of Agreement “[***]” Patent Rights, applications to extend patent term, interferences, oppositions, reexaminations, Inter Partes reviews, post grant reviews, regulatory proceedings, litigation or other means. Intec Pharma will obtain the cooperation of the individual inventors of any inventions disclosed in any Agreement “[***]” Patent Rights, including (a) obtaining signatures of such inventors on any patent applications or other documentation reasonably necessary to obtain patent protection for such inventions and (b) procuring (at “[***]” ’s expense) such inventors’ good faith testimony by affidavit, declaration, deposition in-person or other proper means in support of “[***]” ’s efforts in establishing, perfecting, defending or enforcing patent rights to such inventions. To the extent Intec Pharma does not execute any assignment of the Agreement “[***]” Technology reasonably requested by “[***]” within thirty (30) business days of the delivery of such assignment to Intec Pharma, then Intec Pharma hereby irrevocably appoints “[***]” as its attorney-in-fact with the right, authority and ability to execute and enter into such assignment on behalf of Intec Pharma. Intec Pharma stipulates and agrees that such appointment is a right coupled with an interest and will survive the unavailability of Intec Pharma at any future time.

 

30
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

6.5          Patent Coordinators . No later than thirty (30) days after the Effective Date, “[***]” and Intec Pharma shall, by written notice to the other Party, each appoint a patent coordinator reasonably acceptable to the other Party (each, a “ Patent Coordinator ”) to serve as such Party’s primary liaison with the other Party on matters relating to patent filing, prosecution, maintenance and enforcement. Each Party may replace its Patent Coordinator at any time by notice in writing to the other Party.

 

6.6          No Other Rights . Except as expressly set forth in this Agreement, neither Party shall have any right, title or interest in or to, or any right to exploit or practice, the Know-How or Patent Rights of the other Party.

 

7.           FILING, PROSECUTION AND MAINTENANCE OF PATENT RIGHTS

 

7.1          Patent Filing, Prosecution and Maintenance .

 

7.1.1          Intec Pharma Prosecution Rights . As between the Parties, Intec Pharma, acting in good faith, at its sole expense and acting through patent counsel or agents of its choice, shall be solely responsible for the preparation, filing, prosecution and maintenance of the Intec Pharma Patent Rights. At Intec Pharma’s request, “[***]” shall cooperate with and assist Intec Pharma in all reasonable respects, in connection with Intec Pharma’s preparation, filing, prosecution (including review and comments regarding responses to office actions and/or official actions from worldwide patent offices) and maintenance of the Intec Pharma Patent Rights. Intec Pharma shall provide “[***]” with copies of all patent applications filed hereunder for any Intec Pharma Patent Rights that claim or Cover a Product, and other material submissions and correspondence with relevant patent offices, in sufficient time to allow for review and comment by “[***]” and provide “[***]” and its patent counsel with an opportunity to consult with Intec Pharma and its patent counsel regarding the filing and contents of any such patent application, submission or response. Intec Pharma shall consider in good faith and implement where possible the reasonable comments made by “[***]” with respect to any such patent application, submission or response.

 

7.1.2          “[***]” Prosecution Rights . “[***]” , at its sole expense and acting through patent counsel or agents of its choice, shall be solely responsible for the preparation, filing, prosecution and maintenance of the “[***]” Patent Rights and Agreement “[***]” Patent Rights. At “[***]” ’s request, Intec Pharma shall cooperate with and assist “[***]” in all reasonable respects, in connection with “[***]” ’s preparation, filing, prosecution (including review and comments regarding responses to office actions and/or official actions from worldwide patent offices) and maintenance of the “[***]” Patent Rights and Agreement “[***]” Patent Rights. “[***]” shall provide Intec Pharma with copies of all patent applications filed hereunder for any Agreement “[***]” Patent Rights, and other material submissions and correspondence with relevant patent offices, in sufficient time to allow for review and comment by Intec Pharma and provide Intec Pharma and its patent counsel with an opportunity to consult with “[***]” and its patent counsel regarding the filing and contents of any such patent application, submission or response. “[***]” shall consider in good faith and implement where possible the reasonable comments made by Intec Pharma with respect to any such patent application, submission or response.

  

31
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

7.1.3          Prosecution of Joint Patent Rights . The Patent Coordinators shall determine which Party shall be responsible for the preparation, filing, prosecution, maintenance and enforcement of the Joint Patent Rights. Each Party shall bear fifty percent (50%) of the costs incurred by the prosecuting Party with respect to the preparation, filing, prosecution and maintenance of the Joint Patent Rights; provided however , that if either Party elects not to pay its share of such costs with respect to any Joint Patent Right in one or more countries, such Party shall so notify the other Party and the other Party shall have the right to prepare, file, prosecute and maintain such Joint Patent Right in such countries at its sole cost and expense. If a Party elects to prepare, file, prosecute and maintain a Joint Patent Right in such countries at its sole cost and expense in accordance with the immediately preceding sentence, then the other Party shall cooperate with such Party to transfer all patent activities relating to such Joint Patent Right in such countries to such Party (to the extent that such Party is not already in control of such activities), including by executing and filing of appropriate instruments to facilitate the transition of such patent activities, and shall assign all of its rights, title and interests in, to and under such Joint Patent Right to such Party. Upon assignment pursuant to the immediately preceding sentence, the assigned Patent Right shall cease to be a Joint Patent Right in such countries for purposes of this Agreement and shall be deemed to be a “[***]” Patent Right (if “[***]” is the assignee) or an Intec Pharma Patent Right (if Intec Pharma is the assignee).

 

7.1.4          Coordination of Patent Filings . The Parties, through the Patent Coordinators, shall coordinate as reasonably necessary or useful to achieve the greatest degree of patent coverage and to avoid creating potential issues in prosecution of the Agreement “[***]” Patent Rights, the applicable Intec Pharma Patent Rights (including the General Accordion Pill Patent Rights), the Joint Patent Rights and the “[***]” Patent Rights, including coordinating simultaneous filing dates to minimize creating prior art issues. For clarity, in the event that the Parties desire to prosecute any Patent Rights that claim Know-How that is both (a) generally applicable to pharmaceutical products and compounds and (b) specifically applicable to a Product, then the Parties shall coordinate through the Patent Coordinators to submit two separate filings covering the claims in each of clause (a) and clause (b) in a manner to ensure the greatest opportunity to have both patent applications filed and patents issued therefrom. The Patent Rights and underlying Know-How described in clause (a) shall constitute General Accordion Pill Patent Rights and General Accordion Pill Know-How, respectively, if such Patent Rights and underlying Know-How fall within the definitions of General Accordion Pill Patent Rights or General Accordion Pill Know-How, and the Patent Rights and underlying Know-How described in clause (b) shall constitute Agreement “[***]” Patent Rights and Agreement “[***]” Know-How, respectively, if such Patent Rights and underlying Know-How fall within the definitions of Agreement “[***]” Patent Rights or Agreement “[***]” Know-How.

 

32
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

7.2          Legal Actions .

 

7.2.1        Notice . In the event either Party becomes aware of any suspected infringement, unauthorized use or misappropriation of any Joint Technology, Intec Pharma Technology, “[***]” Technology or Agreement “[***]” Technology (each, an “ Infringement ”), such Party shall promptly notify the other Party and provide such other Party with all details and evidence of such Infringement of which it is aware (each, an “ Infringement Notice ”).

 

7.2.2        Third Party Infringement of Joint Technology . Unless otherwise determined by the Parties, in the event of an Infringement of Joint Technology, “[***]” shall have the sole right and option, but not the obligation, to address such Infringement by taking reasonable steps, which may include the institution of legal proceedings or other action, provided that, if “[***]” decides to bring an action to address such Infringement and such Infringement does not involve a Product, the Parties would jointly determine the strategy and course of action against such Infringement of Joint Technology, with “[***]” having final decision-making authority with respect to such strategy and course of action. All costs, including attorneys’ fees, relating to such legal proceedings or other action shall be borne by “[***]” .

 

7.2.3        Third Party Infringement of Intec Pharma Technology .

 

(a)          Right to Enforce During Option Exercise Period . Unless otherwise determined by the Parties, in the event that the Parties first become aware of an Infringement of Intec Pharma Technology during the Option Exercise Period, Intec Pharma shall have the sole right and option, but not the obligation, to address such Infringement by taking reasonable steps, which may include the institution of legal proceedings or other action. All costs, including attorneys’ fees, relating to such legal proceedings or other action shall be borne by Intec Pharma.

 

(b)          Right to Enforce During Commercial Period .

 

(i)         If, during the Commercial Period, the Parties first become aware of an Infringement of Intec Pharma Technology by infringers that are manufacturing or commercializing any Product, then, unless otherwise determined by the Parties, “[***]” shall have the first right and option, but not the obligation, to address any such Infringement by taking reasonable steps, which may include the institution of legal proceedings or other action. All costs, including attorneys’ fees, relating to such legal proceedings or other action shall be borne by “[***]” . If “[***]” does not take or initiate commercially reasonable steps to eliminate the Infringement within one hundred twenty (120) days from any Infringement Notice, then Intec Pharma shall have the right and option, but not the obligation, to do so at its own expense.

 

(ii)         If, during the Commercial Period, the Parties first become aware of an Infringement of Intec Pharma Technology by infringers that are not manufacturing or commercializing any Product, then, unless otherwise determined by the Parties, Intec Pharma shall have the sole right and option, but not the obligation, to address such Infringement by taking reasonable steps, which may include the institution of legal proceedings or other action. All costs, including attorneys’ fees, relating to such legal proceedings or other action shall be borne by Intec Pharma.

 

33
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

7.2.4        Third Party Infringement of “[***]” Technology or Agreement “[***]” Technology . In the event of an Infringement of “[***]” Technology or Agreement “[***]” Technology, “[***]” shall have the sole right and option, but not the obligation, to address such Infringement by taking reasonable steps, which may include the institution of legal proceedings or other action. All costs, including attorneys’ fees, relating to such legal proceedings or other action shall be borne by “[***]” .

 

7.2.5        Enforcement Procedures .

 

(a)          No Settlement . Neither Party shall settle any Infringement claim or proceeding under Section 7.2.2 (Third Party Infringement of Joint Technology) or Section 7.2.3 (Third Party Infringement of Intec Pharma Technology) without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed, provided that Intec Pharma may settle any Infringement claim or proceeding instituted by Intec Pharma under Section 7.2.3 (Third Party Infringement of Intec Pharma Technology) without the prior written consent of “[***]” unless either (a) such Infringement claim or proceeding is against an infringer that is manufacturing or commercializing any Product or (b) the settlement would admit the invalidity or unenforceability of any Intec Pharma Patent Right.

 

(b)          Right to Representation . Each Party shall have the right to participate and be represented by counsel that it selects, in any legal proceedings or other action instituted under Section 7.2.2 (Third Party Infringement of Joint Technology), Section 7.2.3(b)(i) (Third Party Infringement of Intec Pharma Technology) or Section 7.2.4 (Third Party Infringement of “[***]” Technology or Agreement “[***]” Technology) (solely with respect to Third Party Infringement of Agreement “[***]” Technology) by the other Party. If a Party with the right to initiate legal proceedings with respect to an Infringement under Section 7.2.2 (Third Party Infringement of Joint Technology) or Section 7.2.3(b)(i) (Third Party Infringement of Intec Pharma Technology) lacks standing to do so and the other Party has standing to initiate such legal proceedings, then the Party with the right to initiate legal proceedings under Section 7.2.2 (Third Party Infringement of Joint Technology) or Section 7.2.3(b)(i) (Third Party Infringement of Intec Pharma Technology) may name the other Party as plaintiff in such legal proceedings or may require the other Party to initiate such legal proceedings at the expense of the Party with the right to initiate legal proceedings under Section 7.2.2 (Third Party Infringement of Joint Technology) or Section 7.2.3(b) (i) (Third Party Infringement of Intec Pharma Technology).

 

(c)          Allocation of Proceeds . Any amounts recovered by either Party pursuant to actions under Section 7.2.2 (Third Party Infringement of Joint Technology) or Section 7.2.3(b)(i) (Third Party Infringement of Intec Pharma Technology) with respect to an Infringement, whether by settlement or judgment, shall first be used to reimburse each Party for its reasonable legal fees incurred in connection with such action, including attorneys’ fees and disbursements, court costs and other litigation expenses (or, if such amounts are insufficient to fully reimburse such legal fees, pro rata in proportion to such fees incurred by each Party); any of the remaining amount that is based on sales of a product shall be treated as if it were Net Sales of “[***]” , with Intec Pharma receiving a royalty on such remaining amount pursuant to the terms of Section 4.5 (Payment of Royalties; Royalty Rate; Accounting and Records) and the balance being retained by the Party bringing the action.

 

34
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(d)          Cooperation . In any action, suit or proceeding instituted under this Section 7.2, the Parties shall cooperate with and assist each other in all reasonable respects. Upon the request of the Party instituting such action, suit or proceeding, the other Party shall join such action, suit or proceeding and shall be represented using counsel of its own choice, at the requesting Party’s expense.

 

7.2.6          Defense of Claims . In the event that any action, suit or proceeding is brought against either Party, or any Affiliate or sublicensee of either Party, alleging infringement, unauthorized use or misappropriation of the Patent Rights or other intellectual property of a Third Party by reason of the Pre-Commercialization Activities, Manufacture or Commercialization of any Collaboration Product in the Field in the Territory, such Party shall notify the other Party within five (5) days of the earlier of (a) receipt of service of process in such action, suit or proceeding; or (b) the date such Party becomes aware that such action, suit or proceeding has been instituted, and the Parties shall meet as soon as possible to discuss the overall strategy for defense of such matter. Subject to Article 10 (Indemnification and Insurance), each Party shall have the right to defend against actions brought against such Party. The Party against whom no action was brought or any of its Affiliates shall have the right to appoint separate counsel at its own expense in any such action, suit or proceeding, and the Parties shall cooperate with each other in all reasonable respects in any such action, suit or proceeding. Each Party shall promptly furnish the other Party with a copy of each communication relating to the alleged Infringement that is received by such Party, including all documents filed in any litigation. In no event shall either Party settle or otherwise resolve any such action, suit or proceeding brought against the other Party or any of its Affiliates or sublicensees without the other Party’s prior written consent. Notwithstanding the foregoing, if a Party seeks recovery in respect of such action, suit or proceeding pursuant to Article 10 (Indemnification), then the terms of Section 10.3 (Conditions to Indemnification) shall apply to the defense of such action, suit or proceeding.

 

8.          TERM AND TERMINATION; ADDITIONAL OBLIGATIONS

 

8.1          Term . This Agreement shall commence on the Effective Date and, unless earlier terminated pursuant to Section 8.2 (Termination), shall continue in full force and effect until the expiration of the Royalty Term in all countries of the Territory (the “ Term ”); provided however , that the provisions of Article 3 (Commercial Period) shall not become effective until the Option Exercise Date.

 

8.2          Termination .

 

8.2.1          Termination During Research Period; Termination for Failure to Exercise Option . This Agreement shall terminate automatically as set forth in Section 2.3.2(a) (Performance of the Research) if “[***]” does not deliver a PART B Election Notice to Intec Pharma within the time period set forth in Section 2.3.2(a) (Performance of the Research). “[***]” shall have the right to immediately terminate this Agreement as set forth in Section 2.3.2(b) (Performance of the Research) upon written notice to Intec Pharma for any Failure of PART B Deliverables. This Agreement shall terminate automatically as set forth in Section 2.4.3 (Effect of Failure to Exercise Option) if “[***]” does not deliver an Option Exercise Notice to Intec Pharma within the Option Exercise Period.

 

35
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

8.2.2        Termination by “[***]” for Convenience . After the earlier of (a) receipt of the PART A Deliverables or (b) “[***]” from the Effective Date, “[***]” may terminate this Agreement for any or for no reason by providing written notice to Intec Pharma not less than sixty (60) days prior to the date of such termination.

 

8.2.3        Termination for Cause . Except as set forth herein, either Party may terminate this Agreement, effective immediately upon written notice to the other Party, for (a) any failure by the other Party to make any payment required hereunder that is not cured within forty-five (45) days after the non-breaching Party first gives written notice to the other Party of such breach and its intent to terminate this Agreement if such breach is not cured within such forty-five (45)-day period or (b) any material breach by the other Party of any other term of this Agreement (including, without limitation, the terms of Section 9.4 (Exclusivity)) that remains uncured ninety (90) days after the non-breaching Party first gives written notice to the other Party of such breach and its intent to terminate this Agreement if such breach is not cured within such ninety (90)-day period; provided however , that in the event the other Party disputes the existence of such breach and initiates dispute resolution proceedings in accordance with Section 11.2.3 (Dispute Resolution), then such forty five (45)-day or ninety (90)-day cure period, as applicable, shall be tolled during pendency of such dispute resolution proceedings. Any act or omission by a Sublicensee with respect to activities under this Agreement that would have constituted a material breach of Article 5 (Confidentiality; Publicity; Publication) or Article 6 (Intellectual Property Rights) of this Agreement by “[***]” had it been the act or omission of “[***]” , shall constitute a material breach of this Agreement, subject to the cure, dispute and termination rights set forth in this Section 8.2.3 with respect to material breach of this Agreement.

 

8.2.4        Termination for Insolvency . In the event that Intec Pharma makes an assignment for the benefit of creditors, appoints or suffers appointment of a receiver or trustee over all or substantially all of its property, files a petition under any bankruptcy or insolvency act or has any such petition filed against it which is not discharged within sixty (60) days of the filing thereof (each, an “ Insolvency Event ”), then “[***]” may terminate this Agreement effective immediately upon written notice to Intec Pharma. In the event of any termination by “[***]” pursuant to this Section 8.2.4:

 

(a)         All rights and licenses now or hereafter granted by Intec Pharma to “[***]” under or pursuant to this Agreement, including, for the avoidance of doubt, the licenses granted pursuant to Section 2.2.1 (License to “[***]” ) and Section 3.2.1 (Licenses to “[***]” ), are, for all purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to “intellectual property” as defined in the Bankruptcy Code. Upon the occurrence of any Insolvency Event with respect to Intec Pharma, Intec Pharma agrees that “[***]” , as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. Intec Pharma shall, during the term of this Agreement, create and maintain current copies or, if not amenable to copying, detailed descriptions or other appropriate embodiments, to the extent feasible, of all intellectual property licensed under this Agreement. Each Party acknowledges and agrees that “embodiments” of intellectual property within the meaning of Section 365(n) include, without limitation, laboratory notebooks, cell lines, product samples and inventory, research studies and data, all Regulatory Filings and Regulatory Approvals and rights of reference therein, the Intec Pharma Technology, the Joint Technology, the Agreement “[***]” Technology, and all information related to the Intec Pharma Technology, the Joint Technology and the Agreement “[***]” Technology. If (i) a case under the Bankruptcy Code is commenced by or against Intec Pharma, (ii) this Agreement is rejected as provided in the Bankruptcy Code, and (iii) “[***]” elects to retain its rights hereunder as provided in Section 365(n) of the Bankruptcy Code, Intec Pharma (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall:

 

36
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(i)          provide to “[***]” all such intellectual property (including all embodiments thereof) held by Intec Pharma and such successors and assigns, or otherwise available to them, immediately upon “[***]” ’s written request. Whenever Intec Pharma or any of its successors or assigns provides to “[***]” any of the intellectual property licensed hereunder (or any embodiment thereof) pursuant to this Section 8.2.4(a)(i), “[***]” shall have the right to perform Intec Pharma’s obligations hereunder with respect to such intellectual property, but neither such provision nor such performance by “[***]” shall release Intec Pharma from liability resulting from rejection of the license or the failure to perform such obligations; and

 

(ii)         not interfere with “[***]” ’s rights under this Agreement, or any agreement supplemental hereto, to such intellectual property (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity, to the extent provided in Section 365(n) of the Bankruptcy Code.

 

(b)          All rights, powers and remedies of “[***]” provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including the Bankruptcy Code) in the event of the commencement of a case under the Bankruptcy Code with respect to Intec Pharma. The Parties agree that they intend the following rights to extend to the maximum extent permitted by law, and to be enforceable under Bankruptcy Code Section 365(n):

 

(i)          the right of access to any intellectual property (including all embodiments thereof) of Intec Pharma, or any Third Party with whom Intec Pharma contracts to perform an obligation of Intec Pharma under this Agreement, and, in the case of any such Third Party, which is necessary for the Manufacture, use, sale, import or export of Products; and

 

(ii)         the right to contract directly with any Third Party to complete the contracted work.

 

37
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

8.3          Consequences of Termination .

 

8.3.1       Termination During Research Period; Termination for Failure to Exercise Option . Without limiting any other legal or equitable remedies that either Party may have, if this Agreement is terminated pursuant to Section 8.2.1 (Termination During Research Period; Termination for Failure to Exercise Option), then (a) each Party hereby grants to the other Party a non-exclusive, royalty-free, fully paid, perpetual, irrevocable, worldwide license, with the right to grant sublicenses through multiple tiers, under the Joint Technology to research, develop, manufacture, formulate, test, supply, offer for sale, sell or commercialize any product, subject to the provisions of Section 9.4 (Exclusivity) and (b) each Party shall promptly return or destroy all Confidential Information of the other Party in such Party or its Affiliates’ possession.

 

8.3.2       Termination by “[***]” for Convenience; Termination for Cause . Without limiting any other legal or equitable remedies that either Party may have, if this Agreement is terminated by “[***]” pursuant to Section 8.2.2 (Termination by “[***]” for Convenience) or by either Party pursuant to Section 8.2.3 (Termination for Cause), then:

 

(a)          all license grants in this Agreement from either Party to the other shall immediately terminate, except for those licenses that have become perpetual licenses on or prior to the date of such termination in accordance with Section 4.5.1(e) (Fully Paid-Up, Royalty-Free License);

 

(b)          each Party shall promptly return or destroy all Confidential Information of the other Party in such Party or its Affiliates’ possession;

 

(c)          each Party shall promptly pay any amounts owed to the other Party as of the effective date of such termination; and

 

(d)          solely in the event that this Agreement is terminated by “[***]” pursuant to Section 8.2.3 (Termination for Cause) or Section 8.2.4 (Termination for Insolvency), Intec Pharma hereby grants to “[***]” a non-exclusive, royalty-bearing, perpetual, irrevocable, worldwide license, with the right to grant sublicenses through multiple tiers, under the Intec Pharma Technology and Intec Pharma’s interest in the Joint Technology to conduct Pre-Commercialization Activities for, Manufacture and Commercialize any Product. The consideration payable to Intec Pharma on account of such non-exclusive license shall be 100% of the consideration payable under Article 4 (Payments) in the event that this Agreement is terminated by “[***]” pursuant to Section 8.2.4 (Termination for Insolvency), and 50% of the consideration payable under Article 4 (Payments) in the event that this Agreement is terminated by “[***]” pursuant to Section 8.2.3 (Termination for Cause).

 

(e)          solely in the event that this Agreement is terminated by “[***]” pursuant to Section 8.2.2 (Termination by “[***]” for Convenience), “[***]” hereby grants to the Intec Pharma a non-exclusive, royalty-free, fully paid, perpetual, irrevocable, worldwide license, with the right to grant sublicenses through multiple tiers, under the Joint Technology to research, develop, manufacture, formulate, test, supply, offer for sale, sell or commercialize any product, subject to the provisions of Section 9.4 (Exclusivity).

 

38
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

  

(f)          solely in the event that this Agreement is terminated by Intec Pharma pursuant to Section 8.2.3 (Termination for Cause), “[***]” hereby grants to Intec Pharma a non-exclusive, royalty-free, fully paid, perpetual, irrevocable, worldwide license, with the right to grant sublicenses through multiple tiers, under the Joint Technology to research, develop, manufacture, formulate, test, supply, offer for sale, sell or commercialize any product subject to the provisions of Section 9.4 (Exclusivity).

 

8.3.3       Termination by “[***]” during the Research Period . Without limitation of any of the foregoing, if “[***]” terminates this Agreement after completion of PART A of the Research Plan, but prior to completion of PART B of the Research Plan for any reason other than for cause in accordance with Section 8.2.3 (Termination for Cause), then, “[***]” shall reimburse all reasonable out-of-pocket costs incurred (including non-cancellable obligations) by Intec Pharma in performance of PART B of the Research Plan through the date that “[***]” notifies Intec Pharma of its intent to terminate this Agreement, provided , however , that “[***]” shall have no obligation to reimburse Intec Pharma for any such out-of-pocket costs that exceed $ “[***]” .

 

8.3.4       Survival of Sublicenses . In the event of termination of the license granted to “[***]” hereunder for any reason, any existing Sublicensee of “[***]” that is not then in material breach of its sublicense agreement shall be able to retain its license and become a direct licensee of Intec Pharma of the same scope in any such sublicense, if such Sublicensee provides to Intec Pharma written acknowledgment of its acceptance of the following terms: (a) Intec Pharma’s obligations to such Sublicensee shall be no greater than Intec Pharma’s obligations to “[***]” under this Agreement and (b) such Sublicensee shall pay to Intec Pharma the higher of: (i) any consideration it would have paid to “[***]” under the sublicense agreement entered into by “[***]” and such Sublicensee, or (ii) the consideration payable by “[***]” to Intec Pharma hereunder.

 

8.4          Surviving Provisions . Termination or expiration of this Agreement for any reason shall be without prejudice to:

 

(a)          survival of rights specifically stated in this Agreement to survive, including as set forth in this Section 8.4;

 

 

39
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

(b)          the rights and obligations of the Parties provided in Article 1 (Definitions), Section 2.2.3 (Retained Rights), Section 2.6 (Sublicenses) (solely with respect to the survival of any sublicense agreements), Section 3.2.3 (Retained Rights), Section 3.5 (No Implied Obligations), Section 4.5.1(e) (Fully Paid-Up, Royalty-Free License) (solely to the extent that “[***]” has already been granted a perpetual license thereunder), Section 4.5.2 (Records; Audit Rights), Section 4.5.3 (Late Payments) through Section 4.5.6 (Blocked Currency) (in each case, solely with respect to any payments due and payable as of the effective date of termination), Article 5 (Confidentiality; Publicity; Publication), Section 6.1 (Intec Pharma Technology) through Section 6.4 (Agreement “[***]” Technology), Section 6.6 (No Other Rights), Article 7 (Filing, Prosecution and Maintenance of Patent Rights), Section 8.2.4 (Termination for Insolvency) (if applicable), Section 8.3 (Consequences of Termination), this Section 8.4 (Surviving Provisions), Section 9.4 (Exclusivity), Section 10.1 (Indemnification by “[***]” ) through Section 10.3 (Conditions to Indemnification) (in each case, solely as to activities arising during the Term or as to any activities conducted in the course of a Party’s exercise of a license surviving the Term), Section 10.4 (Warranty Disclaimer), Section 10.5 (Limited Liability), Section 10.6 (Insurance) and Article 11 (Miscellaneous), including all other Sections or Articles referenced in any such Section or Article, all of which shall survive such termination except as provided in this Article 8; or

 

(c)          any other rights or remedies provided at law or in equity which either Party may otherwise have.

 

9.           REPRESENTATIONS AND WARRANTIES; COVENANTS

 

9.1          Mutual Representations and Warranties . “[***]” and Intec Pharma each represents and warrants to the other, as of the Effective Date, as follows:

 

9.1.1     Organization . It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver and perform this Agreement.

 

9.1.2     Authorization . The execution and delivery of this Agreement and the performance by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action and will not violate (a) such Party’s certificate of incorporation or bylaws; (b) any agreement, instrument or contractual obligation to which such Party is bound in any material respect; (c) any requirement of any Applicable Law; or (d) any order, writ, judgment, injunction, decree, determination or award of any court or governmental agency presently in effect applicable to such Party.

 

9.1.3     Binding Agreement . This Agreement is a legal, valid and binding obligation of such Party enforceable against it in accordance with its terms and conditions.

 

9.1.4     No Inconsistent Obligation . It is not under any obligation, contractual or otherwise, to any Person that conflicts with or is inconsistent in any respect with the terms of this Agreement or that would impede the diligent and complete fulfillment of its obligations hereunder.

 

9.2          Additional Representations, Warranties and Covenants of Intec Pharma . Intec Pharma further represents, warrants and covenants to “[***]” , as of the Effective Date, as follows:

 

9.2.1    Intec Pharma is the sole and exclusive owner of, or has a valid right to use, the Intec Pharma Technology in existence on the Effective Date;

 

40
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

9.2.2    to Intec Pharma’s knowledge, the Intec Pharma Patent Rights that are necessary to conduct Pre-Commercialization Activities for, Manufacture and Commercialize the Collaboration Products in the Territory are existing, valid and enforceable;

 

9.2.3    the list of inventors of each Intec Pharma Patent Right specified in the applicable patent or patent application is true, correct and complete;

 

9.2.4    there are no claims, judgments or settlements against Intec Pharma pending or, to Intec Pharma’s knowledge, threatened that invalidate or seek to invalidate the Intec Pharma Patent Rights;

 

9.2.5    to Intec Pharma’s knowledge, no claim or litigation has been brought or threatened by any Third Party alleging, and Intec Pharma is not aware of any reasonable basis for a claim alleging that the Intec Pharma Patent Rights are invalid or unenforceable;

 

9.2.6    Intec Pharma has not previously assigned, transferred, conveyed or otherwise encumbered its right, title and interest in the Intec Pharma Technology in any manner inconsistent with the terms of this Agreement;

 

9.2.7    Intec Pharma has not previously used the Intec Pharma Technology to formulate any Product;

 

9.2.8    there are no complaints filed in court or, to Intec Pharma’s knowledge, otherwise threatened, in each case pending relating to the Intec Pharma Technology which, if decided in a manner adverse to Intec Pharma, would materially affect Intec Pharma’s ability to practice the Intec Pharma Technology as contemplated by this Agreement;

 

9.2.9    there are no judgments or settlements, or pending settlement discussions, involving Intec Pharma or its Affiliate or to which they are a party, which would materially affect Intec Pharma’s ability to practice the Intec Pharma Technology as contemplated by this Agreement;

 

9.2.10   to Intec Pharma’s knowledge, the conception, development and reduction to practice of the Intec Pharma Technology used by Intec Pharma to formulate pharmaceutical products, as it exists on the Effective Date, have not constituted or involved misappropriation of Third Party Know-How;

 

9.2.11   to Intec Pharma’s knowledge without conducting a freedom to operate search, the Intec Pharma Technology used by Intec Pharma to formulate pharmaceutical products, as practiced by Intec Pharma on the Effective Date, does not infringe any Third Party Patent Rights;

 

9.2.12   Intec Pharma has obtained from all inventors of Intec Pharma Technology owned or purported to be owned by Intec Pharma (“ Intec Pharma-Owned Technology ”) valid and enforceable agreements assigning to Intec Pharma each such inventor’s entire right, title and

 

41
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

interest in and to all such Intec Pharma-Owned Technology expressly waiving any rights such inventors may have had to compensation or royalties in respect of any inventions arising as consequence of service to Intec Pharma, including but not limited to service inventions under Section 134 of the Israeli Patents Law. Intec Pharma covenants that it shall obtain valid and enforceable agreements and waivers as set forth in this Section 9.2.12 from all Persons involved in any activities hereunder that may lead to the creation or development of any Intec Pharma-Owned Technology, Joint Technology or Agreement “[***]” Technology (other than Persons acting on behalf of “[***]” ). Intec Pharma shall be responsible for and shall pay any and all compensation or royalties owed to Persons in respect of any inventions arising as consequence of service to Intec Pharma, including but not limited to service inventions under Section 134 of the Israeli Patents Law;

 

9.2.13    no funding, facilities, assets or resources of any government or government-affiliated entity or any university, college, hospital, other educational institution or research center or Third Parties was used or will be used in the development of any Intec Pharma-Owned Technology, Joint Technology or Agreement “[***]” Technology, in a manner that would contradict, limit or otherwise adversely affect the rights granted to “[***]” hereunder or provide basis for third party claims against “[***]” . No current or former employee, consultant or independent contractor of Intec Pharma that was or will be involved in, or that contributed to or will contribute to, the creation or development of any Intec Pharma-Owned Technology, or that will be involved in any activities hereunder that may lead to the creation or development of any Joint Technology or Agreement “[***]” Technology, has performed or will perform services for a government, university, college, hospital or other educational institution or research center concurrently with such employee’s, consultant’s or independent contractor’s performance of services for Intec Pharma, in a manner that would contradict, limit or otherwise adversely affect the rights granted to “[***]” hereunder or provide basis for third party claims against “[***]” . Intec Pharma covenants that it shall not use any funding, facilities, assets or resources of any government or government-affiliated entity, university, college, hospital, other educational institution or research center or Third Parties in connection with activities hereunder; and

 

9.2.14    neither Intec Pharma nor any of its Affiliates or personnel has been debarred or is subject to conviction by the FDA pursuant to Section 306 of the FD&C Act (or subject to a similar sanction of any other Regulatory Authority). Intec Pharma shall not use, in any capacity in connection with the performance of its obligations under this Agreement, any Person that has been debarred pursuant to Section 306 of the FD&C Act, or that is the subject of a conviction described in such section. Intec Pharma agrees to inform “[***]” in writing immediately if it or if it becomes aware that any Person that is performing activities pursuant to this Agreement is debarred or is subject to debarment or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of the Intec Pharma’s knowledge, is threatened, relating to the debarment or conviction of Intec Pharma or any Person or entity used in any capacity by Intec Pharma or any of its Affiliates in connection with the performance of its obligations under this Agreement.

 

42
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

9.2.15    Intec Pharma and its Affiliates shall, and shall cause its Affiliates and its subcontractors and distributors to, in all respects comply with all Applicable Law in the course of performing obligations under this Agreement, including to the extent applicable, the Foreign Corrupt Practices Act of 1977, as amended (“ FCPA ”) and the UK Bribery Act 2010, Chapter 23, as amended (“ UK Bribery Act ”); the FD&C Act; the Public Health Service Act, as amended; the Prescription Drug Marketing Act of 1987, as amended; Federal Health Care Program Anti-Kickback Law (42 U.S.C. §§ 1320a-7b), as amended; the Health Insurance Portability and Accountability Act of 1996, as amended; the FDA Guidance for Industry-Supported Scientific and Educational Activities; and all federal, state and local “fraud and abuse,” consumer protection and false claims statutes and regulations, including the Medicare and State Health Programs Anti-Fraud and Abuse Amendments of the Social Security Act and the “Safe Harbor Regulations” found at 42 C.F.R. §1001.952 et seq.; the Office of the Inspector General’s Compliance Guidance Program, the Pharmaceutical Research and Manufacturers of America Code on Interactions with Healthcare Professionals, as hereafter amended from time to time; the standards set forth by the Accreditation Council for Continuing Medical Education relating to educating the medical community in the Territory; 42 U.S.C. 1320a-7h and its implementing regulations (also known as the National Physician Payment Transparency Program and the Open Payments Program) (“ Sunshine Act ”); and all foreign equivalents in the Territory of any of the foregoing; provided that with respect to the Sunshine Act, each Party shall be responsible for reporting relating to payments or other transfers of value actually made by such Party, and each Party shall use commercially reasonable efforts to cooperate with the other Party to coordinate such disclosure. Intec Pharma and its Affiliates shall promptly notify “[***]” in writing with respect to any material non-compliance with any Applicable Law relating to this Agreement or its obligations hereunder.

 

9.3          Limitation on Representations and Warranties of Intec Pharma . Other than as expressly set forth in Section 9.2 (Additional Representations and Covenants of Intec Pharma), Intec Pharma makes no representation or warranty that the use of the Intec Pharma Technology as contemplated herein, or that making, having made, using, selling or importing of any Collaboration Product will not infringe any patent or other proprietary right of any Third Party.

 

9.4          Exclusivity . During the period beginning on the Effective Date and ending on (a) if “[***]” does not exercise the Option, the date that is “[***]” after the end of the Option Exercise Period; or (b) if “[***]” exercises the Option, the later of (i) the “[***]” or (ii) the last day of the Term, Intec Pharma and its Affiliates shall not, directly or indirectly, and shall not collaborate with, license or otherwise authorize any Third Party to, research, develop, manufacture, formulate, test, supply, offer for sale, sell or commercialize any Product in the Exclusivity Field. If Intec Pharma breaches this Section 9.4, then, in addition to any other remedies available in equity or at law, Intec Pharma shall assign, and hereby does assign, to “[***]” , any and all Know-How, including all pre-clinical and clinical data and regulatory filings, and Patent Rights that are developed, conceived or Invented by Intec Pharma, any Third Party or any Affiliate of Intec Pharma or Third Party, in the course of performing the activities that constitute a breach of this Section 9.4, and Intec Pharma shall execute assignment

 

43
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

documents and other documents necessary to perfect any and all of “[***]” ’s rights, title and interests in and to such Intec Pharma Technology.

 

10.          INDEMNIFICATION AND INSURANCE

 

10.1        Indemnification by “[***]” . “[***]” shall indemnify, defend and hold harmless Intec Pharma, its Affiliates, their respective directors, officers, employees and agents, and their respective successors, heirs and assigns (collectively, the “ Intec Pharma Indemnitees ”), from and against all costs, fees, damage, loss, liability, expense or judgment (including attorneys’ fees and expenses of litigation if assessed against the indemnified Party by a court of competent jurisdiction) (collectively “ Losses ”) incurred by or imposed upon the Intec Pharma Indemnitees, or any of them, as a direct result of any claim, demand or action brought by a Third Party (collectively, a “ Claim ”) arising out of or resulting from, directly or indirectly, (a) any material breach of, or inaccuracy in, any representation or warranty made by “[***]” in this Agreement, or any breach or violation of any covenant or agreement of “[***]” , its Affiliates or permitted Sublicensees in or pursuant to this Agreement or any permitted sublicense; (b) the Pre-Commercialization Activities, Manufacture or Commercialization by “[***]” or any of its Affiliates, Sublicensees, distributors or agents of any Collaboration Product; (c) the gross negligence or willful misconduct by or of “[***]” , its Affiliates, and their respective directors, officers, employees and agents, except: (i) with respect to any Claim or Losses that result from a breach of this Agreement by, or the gross negligence or willful misconduct of, Intec Pharma Indemnitees, or (ii) with respect to Losses or Claims attributable to bodily injuries that have been determined to result solely from the Accordion Pill System contained in any Collaboration Product.

 

10.2        Indemnification by Intec Pharma . Intec Pharma shall indemnify, hold harmless, and defend “[***]” , its Affiliates and their respective directors, officers, employees and agents, and their respective successors, heirs and assigns (collectively, the “ “[***]” Indemnitees ”) from and against any and all Losses arising out of or resulting from, directly or indirectly, (a) any material breach of, or inaccuracy in, any representation or warranty made by Intec Pharma in this Agreement, or any breach or violation of any covenant or agreement of Intec Pharma in or pursuant to this Agreement; (b) the Pre-Commercialization Activities or Manufacture by Intec Pharma or any of its Affiliates, sublicensees, distributors or agents of any Collaboration Product; or (c) the gross negligence or willful misconduct by or of Intec Pharma, its Affiliates, and their respective directors, officers, employees and agents, except: (i) with respect to any Claim or Losses that result from a breach of this Agreement by, or the gross negligence or willful misconduct of, “[***]” Indemnitees, or (ii) with respect to Losses or Claims attributable to bodily injuries that have been determined to result solely from components other than the Accordion Pill System contained in any Collaboration Product.

 

10.3        Conditions to Indemnification . A Person seeking recovery under this Article 10 (the “ Indemnified Party ”) in respect of a Claim shall give prompt notice of such Claim to the other Party (the “ Indemnifying Party ”) and, provided that the Indemnifying Party is not contesting its obligation under this Article 10, shall permit the Indemnifying Party to control any litigation relating to such Claim and the disposition of such Claim, provided that the Indemnifying Party shall (a) act reasonably and in good faith with respect to all matters relating to the settlement or disposition of such Claim as the settlement or disposition relates to such Indemnified Party and (b) not settle or otherwise resolve such Claim without the prior written consent of such Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). Each Indemnified Party shall cooperate with the Indemnifying Party in its defense of any such Claim in all reasonable respects and shall have the right to be present in person or through counsel at all legal proceedings with respect to such Claim.

 

44
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

10.4        Warranty Disclaimer . EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. NOTHING CONTAINED IN THIS AGREEMENT SHALL BE CONSTRUED AS A WARRANTY, EITHER EXPRESS OR IMPLIED, ON THE PART OF EITHER PARTY THAT (A) THE PRE-COMMERCIALIZATION ACTIVITIES WILL YIELD A COLLABORATION PRODUCT OR OTHERWISE BE SUCCESSFUL OR MEET ITS GOALS, TIME LINES OR BUDGETS, OR (B) THE OUTCOME OF THE PRE-COMMERCIALIZATION ACTIVITIES WILL BE COMMERCIALLY EXPLOITABLE IN ANY RESPECT.

 

10.5        Limited Liability .

 

(a)          NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY OF ITS AFFILIATES FOR (I) ANY SPECIAL, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST PROFITS OR LOST REVENUES, OR (II) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES, WHETHER UNDER ANY CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY), IN EACH CASE (I) AND (II), EXCEPT AS A RESULT OF SUCH PARTY’S BREACH OF ARTICLE 5 (CONFIDENTIALITY; PUBLICITY; PUBLICATION), OR, IN THE CASE OF INTEC PHARMA AS THE BREACHING PARTY, SECTION 9.4 (EXCLUSIVITY) OR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 9.2.13. FOR CLARITY, NOTHING IN THIS SECTION 10.5(a) IS INTENDED TO LIMIT OR RESTRICT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS, WITH RESPECT TO THIRD PARTY CLAIMS ONLY, AS SET FORTH IN SECTION 10.1 (INDEMNIFICATION BY “[***]” ) OR SECTION 10.2 (INDEMNIFICATION BY INTEC PHARMA).

 

(b)          NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT WITH RESPECT TO THE INTENTIONAL MISCONDUCT OR FRAUD OF INTEC PHARMA INDEMNITEES, INTEC PHARMA’S LIABILITY FOR DIRECT DAMAGES TO “[***]” SHALL NOT EXCEED THE AGGREGATE AMOUNTS RECEIVED BY INTEC PHARMA UNDER THIS AGREEMENT. FOR CLARITY, NOTHING IN THIS SECTION 10.5(b) IS INTENDED TO LIMIT OR RESTRICT INTEC PHARMA’S INDEMNIFICATION OBLIGATIONS, WITH RESPECT TO THIRD PARTY CLAIMS ONLY, AS SET FORTH IN SECTION 10.2 (INDEMNIFICATION BY INTEC PHARMA).

 

45
 

  

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

10.6      Insurance . Without derogating from “[***]” ’s liability under this Agreement or under Applicable Law, “[***]” shall, at its own expense, maintain insurance policies (including but not limited to, Clinical Trials Insurance, Comprehensive General liability including Product liability insurance) that is reasonably adequate to fulfill any potential obligation to Intec Pharma consistent with industry standards, during the period that any Product is being tested in clinical trials prior to commercial sale and during the period that any Product is being commercially distributed or sold. Such insurance shall be in reasonable amounts and on reasonable terms in the circumstances, having regard, in particular, to the nature of the Products, and shall be subscribed for from a reputable insurance company. Such insurance policies shall include Intec Pharma as an additional insured during the Term. “[***]” will be obliged to notify Intec Pharma in writing at least thirty (30) days in advance of the expiry or cancellation of the policy or policies. “[***]” hereby undertakes to comply with all obligations imposed upon it under such policies and in particular, without limiting the generality of the foregoing, to pay in full and punctually all premiums and other payments for which it is liable pursuant to such policy or policies. Upon Intec Pharma’s request, “[***]” shall provide Intec Pharma with written evidence of such insurances. “[***]” shall maintain, at its own expense, liability insurances as set forth in this section, beyond the expiration or termination of this Agreement as long as a Collaboration Product is being commercially distributed or sold by “[***]” , its Affiliates or Sublicensees, and thereafter as required by Applicable Law. To avoid any doubt, only “[***]” will bear all deductibles and premiums for such policies. Notwithstanding anything to the contrary, “[***]” may self-insure to the extent that it self-insures for other products to satisfy all or a portion of its obligations under this Section 10.6.

 

11.       MISCELLANEOUS

 

11.1        Notices .   All notices and communications shall be in writing and delivered personally or by internationally-recognized overnight express courier providing evidence of delivery or mailed via certified mail, return receipt requested, addressed as follows, or to such other address as may be designated from time to time:

 

If to Intec Pharma: Intec Pharma Ltd.
  12 Hartom St., P.O.B 45219, Jerusalem 91450
  ISRAEL
  Tel: 972-2-586-4657
  Fax: 972-2-586-9176
  Attention: Mr. Zeev Weiss, CEO

 

46
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

With a copy to (which will not constitute notice):

Horn & Co. Law Offices

Amot Investments Tower, 2 Weizmann St., 24 th Floor

Tel-Aviv 6423902

ISRAEL

Tel: 972-3-6378200

Fax: 972-3-6378201

Attention: Adv. Yuval Horn

 

If to “[***]” : “[***]”
  “[***]” MA “[***]”
  USA
  “[***]”
  “[***]”
   
With copies to: and
   
  Ropes & Gray LLP
  Prudential Tower
  800 Boylston Street
  Boston, MA 02199-3600
  USA
  Attention: Marc Rubenstein
  Tel: (617) 951-7826
  Fax: (617) 235-0706

 

Except as otherwise expressly provided in this Agreement or mutually agreed in writing, any notice, communication or document (excluding payment) required to be given or made shall be deemed given or made and effective upon actual receipt or, if earlier, (a) three (3) Business Days after deposit with an internationally-recognized overnight express courier with charges prepaid; or (b) five (5) Business Days after mailed by certified, registered or regular mail, postage prepaid, in each case addressed to a Party at its address stated above or to such other address as such Party may designate by written notice given in accordance with this Section 11.1.

 

11.2       Governing Law; Jurisdiction; Dispute Resolution .

 

11.2.1     Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the application of principles of conflicts of law.

 

11.2.2     Jurisdiction . Subject to Section 11.2.3 (Dispute Resolution), each Party (a) irrevocably submits to the exclusive jurisdiction of the federal and state courts of the State of New York, with respect to actions or proceedings arising in whole or in part out of, related to, based upon or in connection with this Agreement or the subject matter hereof; (b) agrees that all claims in respect of such actions or proceedings may be heard and determined only in any such court; and (c) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each Party waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of the other Party with respect thereto.

 

47
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

11.2.3     Dispute Resolution . In the event of a dispute arising out of or relating to this Agreement, either Party shall provide written notice of the dispute to the other Party, in which event the dispute shall be referred to the executive officers designated below or their successors, for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. Said designated officers are initially as follows:

 

For Intec Pharma: Mr. Zeev Weiss, CEO (or Intec Pharma’s
  designee)
   
For “[***]” : “[***]”
   
  or his/her designee

 

In the event the designated executive officers do not resolve such dispute within the allotted thirty (30) days, either Party may, after the expiration of the thirty (30) day period, seek to resolve the dispute through the courts in accordance with Section 11.2.2 (Jurisdiction).

 

11.3        Binding Effect; Non-Exclusive Remedies . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors and permitted assigns. Except as otherwise explicitly set forth herein, all rights, powers and remedies of each Party provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity.

 

11.4        Headings . Section and subsection headings are inserted for convenience of reference only and do not form a part of this Agreement.

 

11.5        Counterparts . This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and both of which, together, shall constitute a single agreement. An executed signature page of this Agreement delivered by facsimile transmission shall be as effective as an original executed signature page.

 

11.6        Amendment; Waiver . This Agreement may be amended, modified, superseded or canceled, and any of the terms of this Agreement may be waived, only by a written instrument executed by each Party or, in the case of waiver, by the Party or Parties waiving compliance. The delay or failure of either Party at any time or times to require performance of any provisions shall in no manner affect the rights at a later time to enforce the same. No waiver by either Party of any condition or of the breach of any term contained in this Agreement, whether by conduct, or otherwise, in any one or more instances, shall be deemed to be, or considered as, a further or continuing waiver of any such condition or of the breach of such term or any other term of this Agreement.

 

48
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

11.7        No Third Party Beneficiaries .  Except as set forth in Sections 10.1 (Indemnification by “[***]” ) and 10.2 (Indemnification by Intec Pharma), no Third Party (including employees of either Party) shall have or acquire any rights by reason of this Agreement.

 

11.8        Purposes and Scope . Nothing in this Agreement shall be construed (a) to create or imply a general partnership between the Parties; (b) to make either Party the agent of the other for any purpose; (c) to alter, amend, supersede or vitiate any other arrangements between the Parties with respect to any subject matters not covered hereunder; (d) to give either Party the right to bind the other; (e) to create any duties or obligations between the Parties except as expressly set forth herein; or (f) to grant any direct or implied licenses or any other right other than as expressly set forth herein.

 

11.9        Assignment and Successors . Neither this Agreement nor any obligation of a Party hereunder may be assigned by either Party without the consent of the other which shall not be unreasonably withheld, except that each Party may assign this Agreement and the rights, obligations and interests of such Party, without the consent of the other Party, (i) in whole or in part, to any of its Affiliates, or (ii) in whole, but not in part, to any purchaser of all of its assets or all of its assets to which this Agreement relates or shares representing a majority of its common stock voting rights or to any successor corporation resulting from any merger, consolidation, share exchange or other similar transaction.

 

11.10      Force Majeure . Neither Intec Pharma nor “[***]” shall be liable for failure of or delay in performing obligations set forth in this Agreement, and neither shall be deemed in breach of its obligations, if such failure or delay is due to a Force Majeure. In event of such Force Majeure, the Party affected shall use reasonable efforts to cure or overcome the same and resume performance of its obligations hereunder.

 

11.11      Interpretation . The Parties hereto acknowledge and agree that: (a) each Party and its counsel reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to each Party and not in a favor of or against either Party, regardless of which Party was generally responsible for the preparation of this Agreement. In addition, unless a context otherwise requires, wherever used, (i) the singular shall include the plural, the plural the singular; (ii) the use of any gender shall be applicable to all genders; (iii) the word “or” is used in the inclusive sense (and/or); (iv) the word “including” is used without limitation and shall mean “including without limitation”; (v) all amounts set forth in this Agreement are expressed in United States Dollars; and (vi) the terms “ “[***]” ” and “Intec Pharma” shall be deemed to include such Party’s respective current and future Affiliates.

 

49
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

11.12      Integration; Severability . This Agreement sets forth the entire agreement with respect to the subject matter hereof and supersedes all other agreements and understandings between the Parties with respect to such subject matter. If any provision of this Agreement is or becomes invalid or illegal or is ruled invalid or illegal by any court of competent jurisdiction or is deemed unenforceable, it is the intention of the Parties that (a) the remainder of the Agreement shall not be affected and (b) the Parties shall substitute, by mutual agreement in good faith, valid provisions for such invalid, illegal or unenforceable provisions, which valid provisions accomplish, as nearly as possible, the original intention of the Parties with respect thereto.

 

11.13      Further Assurances . Each of “[***]” and Intec Pharma agrees to duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including, without limitation, the filing of such additional assignments, agreements, documents and instruments, as the other Party may at any time and from time to time reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes of, or to better assure and confirm unto such other Party its rights and remedies under, this Agreement.

 

[Remainder of page intentionally left blank.]

 

50
 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

 

    INTEC PHARMA LTD.
       
    By: /s/ Zeev Weiss
       
    Name: Zeev Weiss
       
    Title: CEO

 

    “[***]”  

 

    By:  
       
    Name:  
       
    Title:  

 

[ Signature page to Research, Option and License Agreement ]

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Exhibit A

 

Research Plan

 

“[***]”

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

Exhibit B

 

Intec Pharma Patents

 

1.Patent Yissum Research Development Company of the Hebrew University of Jerusalem Gastroretentive Controlled Release Pharmaceutical Dosage Forms -(Client Case:IN-1-IL) - (0047465)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
Israel 149853 1634914 20/11/2000 149853 01/04/2007 20/11/2018

Patent

Cooperation Treaty

PCT/IL00/00774 1635077 20/11/2000 WO 01/37812 31/05/2001  
Australia 16477/01 1635101 20/11/2000 783062 05/01/2006 20/11/2015
Canada 2,392,361 1635119 20/11/2000 2,392,361 19/01/2010 20/11/2015
Japan 2001-539427 1635127 20/11/2000 4679020 10/02/2011 10/02/2015

United

States of

America

10/157,325 1635143 20/11/2000 6,685,962 03/02/2004 03/08/2015
South Africa 200204268 1635150 20/11/2000 2002/4268 26/11/2003 20/11/2015

European

Patent

Office

00978993.4 1635168 20/11/2000 1235557 27/07/2005  
France 00978993.4 1635572 20/11/2000 1235557 27/07/2005 30/11/2015
Germany 00978993.4 1635580 20/11/2000 60021604 27/07/2005 30/11/2015
Spain 00978993.4 1635598 20/11/2000 1235557 27/07/2005 30/11/2015
Switzerland 00978993.4 1635606 20/11/2000 EP1235557 27/07/2005 30/11/2015
Ireland 00978993.4 1635630 20/11/2000 1235557 27/07/2005 30/11/2015
Italy 00978993.4 1635648 20/11/2000 1235557 27/07/2005 30/11/2015

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

1.Patent Yissum Research Development Company of the Hebrew University of Jerusalem Gastroretentive Controlled Release Pharmaceutical Dosage Forms -(Client Case:IN-1-IL) - (0047465)

 

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
United Kingdom 00978993.4 1635655 20/11/2000 1235557 27/07/2005 30/11/2015

 

2.Patent Intec Pharma Ltd.
  Method and Apparatus for Forming Delivery Devices for Oral Intake of an Agent -(Client Case:IN-3-USP) - (0047512)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

United

States of

America

60/759,554 1636661 18/01/2006      

Patent

Cooperation Treaty

IL2007/000070 1724418 18/01/2007 WO2007/083309 26/07/2007  

European

Patent

Office

07700757.3 1853217 18/01/2007 1981465 22/10/2008 31/01/2015
Canada 2,637,655 1853225 18/01/2007     18/01/2015
Israel 192896 1853233 18/01/2007 192896 28/09/2013 18/01/2017
Japan 2008-550909 1853241 18/01/2007 5399715 01/11/2013 01/11/2016

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

 

United

States of

America

12/087,888 1853258 18/01/2007 8,298,574 30/10/2012 30/04/2016

United

States of

America

13/613,718 2181500 18/01/2007 8,753,678 17/06/2014 17/12/2017

United

States of

America

13/800,471 2214433 18/01/2007 8,609,136 17/12/2013 17/06/2017
Japan 2013-054912 2216375 18/01/2007 2013-129669 04/07/2013  
Israel 226561 2228767 18/01/2007      
Israel 226563 2229192 18/01/2007      
Israel 226564 2229205 18/01/2007      

United

States of

America

14/305,600 2275337 18/01/2007 US-2014-0360132 11/12/2014  

 

3.Patent Intec Pharma Ltd.
  A Gastro-Retentive System for the Delivery of Macromolecules -(Client Case:IN-4-USP) -(0047513)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

United

States of

America

60/773,316 1636679 15/02/2006      

Patent

Cooperation Treaty

IL2007/000212 1731967 15/02/2007 WO 2007/093999 23/08/2007  

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

3.Patent Intec Pharma Ltd.
  A Gastro-Retentive System for the Delivery of Macromolecules -(Client Case:IN-4-USP) -(0047513)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

European

Patent

Office

07713260.3 1859727 15/02/2007 1991210 19/11/2008 28/02/2015
Canada 2,642,479 1859735 15/02/2007 2,642,479 19/08/2014 15/02/2015
Israel 193450 1859743 15/02/2007      

United

States of

America

12/223,965 1859750 15/02/2007 US-2009-0304768 10/12/2009  

 

4.Patent Intec Pharma Ltd.
  Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
Israel 208708 2051008 17/04/2009      

United

States of

America

12/937,955 2144590 17/04/2009 8,771,730 08/07/2014 08/01/2018

Patent

Cooperation Treaty

PCT/IB2009/005691 2153336 17/04/2009 WO 2009/144558    
Canada 2,721,493 2153341 17/04/2009     17/04/2015
China 200980120103.9 2153353 17/04/2009 CN102149369A 10/08/2011  

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

4.Patent Intec Pharma Ltd.
  Carbidopa/Lipodopa Gastroretentive Drug Delivery -(Client Case:IN-7-IL) -(060812)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

European

Patent

Office

09754186.6 2153363 17/04/2009 2276473 26/01/2011 30/04/2015
India 7638/DELNP/2010 2153372 17/04/2009      
Japan 2011-504573 2153395 17/04/2009      
Japan   2330464        
Republic of Korea 10-2010-7025481 2153405 17/04/2009      
South Africa 2010/07797 2153411 17/04/2009 2010/07797 27/07/2011 17/04/2015
Hong Kong 11113197.1 2153823 17/04/2009 1158545 20/07/2012 17/04/2018

United

States of

America

14/322,436 2286884 17/04/2009 US-2014-0314842 23/10/2014  

United

States of

America

14/322,460 2286894 17/04/2009 US-2015-0010624 08/01/2015  

 

5.Patent Intec Pharma Ltd.
  ZALEPLON GASTRORETENTIVE DRUG DELIVERY SYSTEM -(Client Case:IN-8-IL) -(060811)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
Israel 213376 2127779 19/10/2009      

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

5.Patent Intec Pharma Ltd.
  ZALEPLON GASTRORETENTIVE DRUG DELIVERY SYSTEM -(Client Case:IN-8-IL) -(060811)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

Patent

Cooperation Treaty

PCT/IB2009/007731 2153230 19/10/2009 WO 2010/064139    
China 200980153943.5 2153258 19/10/2009 CN102300463A 28/12/2011 19/10/2014

European

Patent

Office

09830077.5 2153268 19/10/2009 2378883 26/10/2011 31/10/2014
India 5067/DELNP/2011 2153278 19/10/2009      
South Africa 2011/04620 2153314 19/10/2009 2011/04620 28/03/2012 19/10/2015

United

States of

America

13/132,899 2153326 19/10/2009 US-2012-0021051 26/01/2012  
Japan 2014-231788 2320509 19/10/2009      

 

6.Patent Intec Pharma Ltd.
  Accordion pill comprising levodopa for an improved treatment of Parkinson`s Disease symptoms -(Client Case:IN-11-USP) -(060810)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

United

States of

America

61/408,985 2153012 01/11/2010      

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

6.Patent Intec Pharma Ltd.
  Accordion pill comprising levodopa for an improved treatment of Parkinson`s Disease symptoms -(Client Case:IN-11-USP) -(060810)

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal

Patent

Cooperation Treaty

PCT/IB2011/002888 2153034 01/11/2011 WO 2012/059815 10/05/2012  
Canada 2,815,959 2222633 01/11/2011     01/11/2015

European

Patent

Office

11805936.9 2222641 01/11/2011 2635272 11/09/2013 30/11/2015
India 4158/DELNP/2013 2222652 01/11/2011      
Israel 226000 2222662 01/11/2011      

United

States of

America

13/882,768 2222675 01/11/2011 US-2014-0017303 16/01/2014  

 

7.Patent Intec Pharma Ltd.
  “[***]”

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
“[***]” “[***]” “[***]” “[***]”      

 

 
 

 

NOTE: PORTIONS OF THIS EXHIBIT ARE THE SUBJECT OF A CONFIDENTIAL TREATMENT REQUEST BY THE REGISTRANT TO THE SECURITIES AND EXCHANGE COMMISSION (“COMMISSION”). SUCH PORTIONS HAVE BEEN REDACTED AND FILED SEPARATELY WITH THE COMMISSION AND ARE MARKED WITH A “[***]” IN PLACE OF THE REDACTED LANGUAGE.

 

8.Patent Intec Pharma Ltd.
  “[***]”

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
“[***]” “[***]” “[***]” “[***]”      

 

9.Patent Intec Pharma Ltd.
  “[***]”

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
“[***]” “[***]” “[***]” “[***]”      

 

10.Patent Intec Pharma Ltd.
  “[***]”

 

Country App. No. Our Ref. Filed

Patent No./

Publication No.

Grant Date/

Pub. Date

Next Renewal
“[***]” “[***]” “[***]” “[***]”      

 

 

 Exhibit 23.1

   

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

We hereby consent to the use in this Registration Statement on Form F-1 of Intec Pharma Ltd. of our report dated March 30, 2015 relating to the financial statements of Intec Pharma Ltd, which appears in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tel-Aviv, Israel /s/ Kesselman & Kesselman
June 9, 2015 Certified Public Accountants (Isr.)
  A member firm of PricewaterhouseCoopers International Limited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Kesselman & Kesselman, Trade Tower, 25 Hamered Street, Tel-Aviv 6812508, Israel,

                                        P.O Box 50005 Tel-Aviv 6150001 Telephone: +972 -3- 7954555, Fax:+972 -3- 7954556, www.pwc.com/il