Proxy Statement (definitive) (def 14a)

Date : 08/06/2019 @ 5:29PM
Source : Edgar (US Regulatory)
Stock : Oramed Pharmaceuticals Inc (ORMP)
Quote : 4.98  -0.12 (-2.35%) @ 4:59AM

Proxy Statement (definitive) (def 14a)

 

 

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

 

 

 

SCHEDULE 14A

 

 

 

(RULE 14a-101)

 

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

 

Filed by the Registrant

 

Filed by a Party other than the Registrant ☐

 

Check the Appropriate Box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

 

ORAMED PHARMACEUTICALS INC.

(Name of Registrant as Specified in Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

  No fee required
         
  Fee computed on table below per Exchange Act Rules 14a-6(1)(1) and 0-11.
     
    (1)   Title of each class of securities to which transaction applies:
         
    (2)   Aggregate number of securities to which transaction applies:
         
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
         
    (4)   Proposed maximum aggregate value of transaction:
         
    (5)   Total fee paid:
         

 

  Fee paid previously with preliminary materials:
     
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
     
    (1)   Amount Previously Paid:
         
    (2)   Form, Schedule or Registration Statement No.:
         
    (3)   Filing Party:
         
    (4)   Date Filed:
         

 

 

 

 

 

 

ORAMED PHARMACEUTICALS INC.
1185 Avenue of the Americas, Suite 228

New York, New York 10036

 

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 2019

 

 

 

To Our Stockholders:

 

You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Oramed Pharmaceuticals Inc. (the “Company,” “we,” “us,” or “our”). The Annual Meeting will be held at the offices of Sullivan & Worcester LLP, 1633 Broadway, New York, NY 10019, on August 29, 2019, at 4:00 p.m. (Eastern time), or at any adjournment or postponement thereof, for the purpose of considering and taking appropriate action with respect to the following:

 

1. To re-elect six directors of the Company to hold office until our next annual meeting of stockholders and until their respective successors shall be elected and qualified or until their earlier resignation or removal;

 

2. To approve the Company’s 2019 Stock Incentive Plan;

 

3. To ratify the appointment of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International Limited, as the independent registered public accounting firm of the Company for the 2019 fiscal year; and

 

4. To transact any other business as may properly come before the Annual Meeting or any adjournments thereof.

 

Our Board of Directors has fixed the close of business on July 26, 2019, as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournments or postponement thereof.

 

All stockholders are invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, please complete, date and sign the enclosed proxy card and return it in the enclosed envelope, as promptly as possible. If you attend the Annual Meeting, you may withdraw the proxy and vote in person. If you have any questions regarding the completion of the enclosed proxy card or would like directions to the Annual Meeting, please call 844-967-2633. You may also find directions at http://www.oramed.com/investors/governance-documents/annual-shareholder-meeting .

 

 

By Order of the Board of Directors,
   
  Nadav Kidron
  President, Chief Executive Officer and a Director

 

New York, New York

August 6, 2019

 

 

 

 

PROXY STATEMENT
OF
ORAMED PHARMACEUTICALS INC.

 

 

 

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 2019

 

 

 

The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of Oramed Pharmaceuticals Inc. (the “Company,” “we,” “us,” or “our”), for use at the Annual Meeting of Stockholders to be held on August 29, 2019, at 4:00 p.m. (Eastern time) (the “Annual Meeting”), or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at the offices of Sullivan & Worcester LLP, 1633 Broadway, New York, NY 10019. We intend to first mail this proxy statement and our annual report to stockholders (the “Annual Report”) for the fiscal year ended August 31, 2018 (“Fiscal 2018”), as well as the enclosed proxy card, on or about August 6, 2019, to all stockholders entitled to vote at the Annual Meeting.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The proxy statement, proxy card and Annual Report are also available at
http://www.oramed.com/investors/governance-documents/annual-shareholder-meeting.
Stockholders may also obtain additional paper or e-mail copies of these materials by writing to Oramed Pharmaceuticals Inc., 1185 Avenue of the Americas, Suite 228, New York, New York 10036, attention: Secretary, or by sending an e-mail to avi@oramed.com.

 

 

 

 

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND VOTING

 

Why am I receiving these materials?

 

We sent you this proxy statement and the Annual Report, as well as the enclosed proxy card, because our Board is soliciting your proxy to vote at the Annual Meeting. You are invited to attend the Annual Meeting to vote on the proposals described in this proxy statement. The Annual Meeting will be held on Thursday, August 29, 2019, at 4:00 p.m. (Eastern time) at the offices of Sullivan & Worcester LLP, 1633 Broadway, New York, NY 10019. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card.

 

Website addresses included in this proxy statement are textual references only, and the information in any website is not incorporated by reference into this proxy statement.

 

Who can vote at the Annual Meeting?

 

Only stockholders of record at the close of business on July 26, 2019, will be entitled to vote at the Annual Meeting.

 

Stockholder of Record: Shares Registered in Your Name

 

If as at the close of business on July 26, 2019, your shares were registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted.

 

Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Similar Organization

 

If as at the close of business on July 26, 2019, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account or its agent is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent.

   

What am I voting on?

 

The matters scheduled for a vote at the Annual Meeting are:

 

the re-election of six directors of the Company to hold office until our next annual meeting of stockholders and until their respective successors shall be elected and qualified or until their earlier resignation or removal;

 

the consideration and approval of the Company’s 2019 Stock Incentive Plan; and

 

the ratification of the appointment of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International Limited (the “Independent Auditors”), as the independent registered public accounting firm of the Company for the 2019 fiscal year.

 

Our Board unanimously recommends that you vote FOR all of the above proposals.

 

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How do I vote?

 

The procedures for voting are as follows:

 

Stockholder of Record: Shares Registered in Your Name

 

If you are a stockholder of record, you may vote in person at the Annual Meeting, or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person if you have already voted by proxy.

 

To vote in person, come to the Annual Meeting, where a ballot will be made available to you. Directions to attend the Annual Meeting where you may vote in person can be found at: http://www.oramed.com/investors/governance-documents/annual-shareholder-meeting .

 

To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us no less than 24 hours before the Annual Meeting, we will vote your shares as you direct. The chairman of the Annual Meeting may, at his or her discretion, decide to accept proxy cards even if received less than 24 hours before the Annual Meeting.

 

Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Similar Organization

 

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the proxy card to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker, bank or other agent, provided that your broker, bank or other agent makes telephone or Internet voting available. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker, bank or other agent included with these proxy materials, or contact your broker, bank or other agent to request a proxy form.

 

How many votes do I have?

 

You have one vote for each share of Common Stock you own as of the close of business on July 26, 2019.

 

What if I return a proxy card but do not make specific choices?

 

If you return a signed and dated proxy card without marking any voting selections, your shares will be voted “ FOR ” with respect to Proposals 1, 2 and 3. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

 

If your shares are held by your broker as your nominee (that is, in “street name”), you will need to obtain a proxy form from the institution that holds your shares and follow the instructions included on that form regarding how to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items, but not with respect to “non-discretionary” items. Discretionary items are proposals considered “routine” under applicable rules on which your broker may vote shares held in street name in the absence of your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shares will be treated as “broker non-votes.” Proposal 3 at the Annual Meeting is considered a discretionary item.

 

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Who is paying for this proxy solicitation?

 

We will pay for the entire cost of soliciting proxies. In addition to these mailed proxy materials, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

 

What does it mean if I receive more than one proxy card?

 

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

 

Can I change my vote after submitting my proxy?

 

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:

 

You may submit another properly completed proxy card with a later date;

 

You may send a written notice that you are revoking your proxy to our Secretary at 1185 Avenue of the Americas, Suite 228, New York, New York 10036; or

 

You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

 

If your shares are held by your broker, bank or other agent, you should follow the instructions provided by your broker, bank or other agent.

 

How are votes counted?

 

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “For,” “Against” and “Abstain” with respect to Proposals 1, 2 and 3.

 

How many votes are needed to approve each proposal?

 

The approvals of Proposals 1, 2 and 3 require the vote of a majority of the number of shares of Common Stock present, in person or represented by proxy at the Annual Meeting and entitled to vote thereat. Other than for the purpose of establishing a quorum, as discussed in the following paragraph, broker non-votes will not be counted as entitled to be voted and will therefore not affect the outcome of Proposals 1 and 2 (as noted above, because Proposal 3 is considered routine, there will not be broker non-votes with respect to that Proposal). With respect to all matters to be voted on, abstentions will have the same effect as a vote against such matters.

 

What is the quorum requirement?

 

The holders of at least one third (1/3) of the Common Stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at the Annual Meeting for the transaction of business. As of July 26, 2019, there were 17,383,359 shares of Common Stock outstanding and entitled to vote. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other agent) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the stockholders entitled to vote thereat, present in person or by proxy, have the power to adjourn the Annual Meeting, without notice other than announcement at the Annual Meeting. At such adjourned Annual Meeting at which the requisite amount of voting stock shall be represented, any business may be transacted which might have been transacted at the Annual Meeting as originally notified.

 

How can I find out the results of the voting at the Annual Meeting?

 

Preliminary voting results will be announced at the Annual Meeting. Final voting results will be reported in a current report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) within four business days after the Annual Meeting.

 

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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of July 26, 2019 by: (1) each person who is known by us to own beneficially more than 5% of our Common Stock; (2) each of our current directors and each director nominee (a “Director Nominee”); (3) each of our Named Executive Officers listed below under “Compensation of Executive Officers and Directors-Summary Compensation Table”; and (4) all of our directors and executive officers as a group. On such date, we had 17,383,359 shares of Common Stock outstanding.

 

As used in the table below and elsewhere in this form, the term “beneficial ownership” with respect to a security consists of sole or shared voting power, including the power to vote or direct the vote, and/or sole or shared investment power, including the power to dispose or direct the disposition, with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the 60 days following July 26, 2019. Inclusion of shares in the table does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, (1) each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of Common Stock listed as owned by that person or entity and (2) the address of each of the individuals named below is: c/o Oramed Pharmaceuticals Inc., 1185 Avenue of the Americas, Suite 228, New York, New York 10036.

 

 

Name and Address of Beneficial Owner

  Number of
Shares
    Percentage
of Shares
Beneficially
Owned
 
Regals Fund LP            
152 West 57th Street, 9th Floor            
New York, NY 10019     1,316,328 (1)     7.6 %
Hefei Tianhui Incubator of Technologies Co., Ltd. (“HTIT”)
No. 199 Fanhua Road
Economic and Technological Development Zone
Heifei, Anhui Province, P.R. China, 230601
    1,155,367 (2)     6.6 %
Altium Growth Fund, LP
551 Fifth Ave, 19th Floor
New York, NY 10176
    972,000 (3)     5.6 %

Sabby Volatility Warrant Master Fund, Ltd.

c/o Ogier Fiduciary Services (Cayman) Limited

89 Nexus Way, Camana Bay

Grand Cayman KY1-9007

Cayman Islands

    933,050 (4)     5.4 %
Nadav Kidron #+     2,584,310 (5)     14.9 %
Miriam Kidron #+     324,550 (6)     1.9 %
Joshua Hexter +     178,300 (7)     1.0 %
Aviad Friedman #     37,457 (8)     *  
Kevin Rakin #     51,940 (9)     *  
Leonard Sank #     580,452 (10)     3.3 %
David Slager #     1,333,207 (11)     7.7 %
Gao Xiaoming #     1,155,367 (12)     6.6 %
All current executive officers and directors, as a group (eight persons)     3,601,036 (13)     20.5 %

 

 

* Less than 1%
# Current Director
+ Named Executive Officer

 

(1) Regals Capital Management LP (“Regals Management”) is the investment manager of Regals Fund LP, the owner of record of these shares of Common Stock. Mr. David Slager is the managing member of the general partner of Regals Management. All investment decisions are made by Mr. Slager, and thus the power to vote or direct the votes of these shares of Common Stock, as well as the power to dispose or direct the disposition of such shares of Common Stock is held by Mr. Slager through Regals Management.

 

(2) Based solely on a Schedule 13D filed by HTIT on January 6, 2016. On November 30, 2015, we entered into a securities purchase agreement with HTIT pursuant to which, among other things, Nadav Kidron will serve as proxy and attorney in fact of HTIT, with full power of substitution, to cast on behalf of HTIT all votes that HTIT is entitled to cast with respect to 1,155,367 shares of Common Stock (the “Purchased Shares”), at any and all meetings of our stockholders, to consent or dissent to any action taken without a meeting and to vote all the Purchased Shares held by HTIT in any manner Mr. Kidron deems appropriate except for matters related to our activities in the People’s Republic of China, on which Mr. Kidron will consult with HTIT before taking any action as proxy.

 

(3) Includes 972,000 shares of Common Stock owned by Altium Growth Fund, LP (“Altium Growth”). Altium Capital Management, LP (“Altium Capital”) is the investment adviser of Altium Growth, and Altium Growth GP, LLC (“Altium GP”) is the general partner of Altium Growth. The foregoing is based solely on a Schedule 13G filed jointly by Altium Growth, Altium Capital and Altium GP on July 13, 2018.

  

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(4) Includes 933,050 shares of Common Stock owned by Sabby Volatility Warrant Master Fund, Ltd. (“Sabby Volatility”). Sabby Management, LLC (“Sabby Management”) is the investment manager of Sabby Volatility, and Hal Mintz (“Mr. Mintz”) is the manager of Sabby Management. The foregoing is based solely on a Schedule 13G filed jointly by Sabby Volatility, Sabby Management and Mr. Mintz on January 7, 2019.

 

(5) Includes 264,384 shares of Common Stock issuable upon the exercise of outstanding stock options and 89,636 shares of Common Stock underlying vested Restricted Stock Units (“RSUs”) that are issuable upon request. Also includes 1,155,367 shares of Common Stock held by HTIT, as further described in footnote (2) above, and 206,350 shares of Common Stock held by Xiaopeng Li, a former director. The voting of the shares of Common Stock held by Ms. Li is subject to a revocable proxy granted to Nadav Kidron. On November 21, 2016, following her first purchase of such shares, Ms. Li appointed Nadav Kidron as proxy and attorney in fact of Ms. Li, with full power of substitution, to cast on behalf of Ms. Li all votes that Ms. Li is entitled to cast with respect to the shares purchased at any and all meeting of the stockholders of the Company, to consent or dissent to any action taken without a meeting and to vote all the shares held by Ms. Li in any manner Mr. Kidron deems appropriate except for matters related to the Company’s activities in the Territory and when obvious that specific votes violate Ms. Li’s rights and interests, on which Mr. Kidron and Ms. Li will consult with each other in advance of the vote, and subsequently Mr. Kidron will vote according to Ms. Li’s instructions. The proxy will also apply to shares of the Company purchased by Ms. Li through open market transactions. Ms. Li may revoke the proxy in writing at any time.

 

(6) Includes 249,550 shares of Common Stock issuable upon the exercise of outstanding stock options and 75,000 shares of Common Stock underlying vested RSUs that are issuable upon request.

 

(7) Includes 108,300 shares of Common Stock issuable upon the exercise of outstanding stock options. Mr. Hexter resigned from his positions with us, effective November 15, 2018.

 

(8) Includes 15,266 shares of Common Stock issuable upon the exercise of outstanding stock options and 12,191 shares of Common Stock owned by Shikma A.M.R. Ltd. (“Shikma”), of which Mr. Friedman is the sole owner and chief executive officer. All investment decisions are made by Mr. Friedman, and thus the power to vote or direct the votes of these shares of Common Stock, as well as the power to dispose or direct the disposition of such shares of Common Stock is held by Mr. Friedman through Shikma.

 

(9) Includes 36,879 shares of Common Stock issuable upon the exercise of outstanding stock options.

 

(10) Includes: (a) 294,162 shares of Common Stock held by Mr. Sank; (b) 78,125 shares of Common Stock held by Mr. Sank’s spouse; (c) 69,276 shares of Common Stock issuable to Mr. Sank upon the exercise of outstanding stock options; and (d) 138,889 shares of Common Stock owned by a company wholly owned by a trust of which Mr. Sank is a trustee. Mr. Sank disclaims beneficial ownership of the securities referenced in (b) and (d) above.

 

(11) See footnote (1) above. Also Includes 16,879 shares of Common Stock issuable upon the exercise of outstanding stock options.

 

(12) Includes 1,155,367 shares of Common Stock held by HTIT. Mr. Gao is the chairman of HTIT.

 

(13) Includes 647,234 shares of Common Stock issuable upon the exercise of options beneficially owned by the referenced persons and 164,636 shares of Common Stock underlying vested RSUs that are issuable upon request.

 

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PROPOSAL 1:
RE-ELECTION OF DIRECTORS

 

The number of directors comprising our Board is currently set at seven and our Board is presently composed of seven members. One of our current Board members, David Slager, will not be nominated for re-election. Upon the recommendation of our Board and our independent directors, the Board has nominated for re-election the remaining current directors, who are listed below along with additional information about each of them. The number of directors comprising our Board following the Annual Meeting will be set at six. Vacancies on our Board may be filled by persons elected by a majority of our remaining directors. A director elected by our Board to fill a vacancy (including any vacancy created by an increase in the number of directors) shall serve until the next meeting of stockholders at which the election of directors is considered and until such director’s successor is elected and qualified or until such director’s earlier resignation or removal.

 

Each Director Nominee is currently a director of the Company. If re-elected at the Annual Meeting, each of the Director Nominees below would serve until our next Annual Meeting of Stockholders, and until his or her successor is elected and has qualified, or until such director’s earlier death, resignation or removal.

 

Vote Required

 

The affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and entitled to vote on Proposal 1 is required for the re-election of each Director Nominee.

 

The Board unanimously recommends that you vote “FOR” all of the nominees listed below.

 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

The name and age of each of the six Director Nominees and of our executive officers, his or her position with us and the period during which such person has served as a director or officer of the Company are set forth below.

 

Name   Age     Position   Serving Since  
Nadav Kidron     45     President, Chief Executive Officer and Director     2006  
Miriam Kidron     78     Chief Scientific Officer and Director     2006  
Avraham Gabay     34     Chief Financial Officer, Treasurer and Secretary     2019  
Mark Hasleton (1)     46     VP Business Development     2018  
Aviad Friedman     47     Director     2016  
Kevin Rakin     59     Chairman, Director     2016  
Leonard Sank     54     Director     2007  
Gao Xiaoming     58     Director     2019  

 

 

(1) Dr. Hasleton’s employment agreement with us has been terminated effective August 27, 2019.

 

Dr. Miriam Kidron is Mr. Nadav Kidron’s mother. There are no other directors or officers of the Company who are related by blood or marriage.

 

Biographical Summaries of Nominees for the Board and Executive Officers

 

The following is a brief account of the education and business experience during at least the past five years of each Director Nominee and of our executive officers who are not also directors, indicating the principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

 

Mr. Nadav Kidron was appointed President, Chief Executive Officer and a director in March 2006. He is also a director of Israel Advanced Technology Industries organization, and until 2016 was a director of Entera Bio Ltd. In 2009, he was a fellow at the Merage Foundation for U.S.-Israel Trade Programs for executives in the life sciences field. From 2003 to 2006, he was the managing director of the Institute of Advanced Jewish Studies at Bar Ilan University. From 2001 to 2003, he was a legal intern at Wine, Mishaiker & Ernstoff Law Offices in Jerusalem, Israel. Mr. Kidron holds an LL.B. and an International MBA from Bar Ilan University, Israel, and is a member of the Israel Bar Association.

 

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We believe that Mr. Kidron’s qualifications to serve on our Board include his familiarity with the Company as its founder, his experience in capital markets, as well as his knowledge and familiarity with corporate management.

 

Dr. Miriam Kidron was appointed Chief Scientific Officer and a director in March 2006. Dr. Kidron is a pharmacologist and a biochemist with a Ph.D. in biochemistry. From 1990 to 2007, Dr. Kidron was a senior researcher in the Diabetes Unit at Hadassah University Hospital in Jerusalem, Israel. During 2003 and 2004, Dr. Kidron served as a consultant to Emisphere Technologies Inc., a company that specializes in developing broad-based proprietary drug delivery platforms. Dr. Kidron was formerly a visiting professor at the Medical School at the University of Toronto (Canada), and is a member of the American, European and Israeli Diabetes Associations. Dr. Kidron is a recipient of the Bern Schlanger Award.

 

We believe that Dr. Kidron’s qualifications to serve on our Board include her expertise in the Company’s technology, as it is based on her research, as well as her experience and relevant education in the fields of pharmacology and diabetes.

 

Mr. Avraham Gabay was appointed Chief Financial Officer, Treasurer and Secretary effective June 2019. Prior to his appointment, from March 2015 until May 2019, Mr. Gabay served as a corporate controller at Orcam Technologies Ltd., a company which develops, manufactures and sells a wearable assistive technology device for people who are blind, visually impaired or have reading or other disabilities. From 2014 to 2015, Mr. Gabay provided economic services in the advisory department of KPMG Israel, a certified public accounting firm. From 2013 until 2014, Mr. Gabay worked in the tax department of the law firm, Gornitzky & Co. Mr. Gabay holds a bachelor’s degree in law and accounting from Tel-Aviv University and is a certified public accountant in Israel and a member of the Israeli Bar Association.

 

Dr. Mark Hasleton  was appointed  VP Business Development  effective November 2018. Prior to his appointment, Dr. Hasleton served in several leadership and pharmaceutical development roles. From 2010 to 2018, he served in Business Development and later as Senior Director of Portfolio - Global New Therapeutic Entities at Teva Pharmaceutical Industries Ltd (“Teva”). Prior to joining Teva, from 2007 to 2010, Dr. Hasleton was at Bristol Myers Squibb Co., in the United Kingdom (“UK”) and then in the European business as EMEA Business Operations Manager - Field Medical. Dr. Hasleton holds a PhD in molecular biology and cancer research from the Imperial College London, UK, a master of research in molecular biology from the University of Manchester, UK and a master of business administration from Tanaka Business School, Imperial College London, UK.

 

Mr. Aviad Friedman became a director in August 2016. Mr. Friedman is an international businessman. Since 2007, he has been Chief Executive Officer of Most Properties 1998 Ltd. and the Chairman of the Israel Association of Community Centers since 2013. Mr. Friedman was the first Director General of Israel’s Ministry of Diaspora Affairs and served as personal advisor to Prime Minister Ariel Sharon from 1996 to 1999. Mr. Friedman served as Chief Operating Officer of one of Israel’s premier newspapers, Ma’ariv from 2003 to 2007, and has more than 15 years of experience serving on boards of public and private companies including Maayan Ventures, Capital Point and Rosetta Green Ltd. Mr. Friedman additionally served as an investor and consultant at Rhythmia Medical Inc. from 2007, and was actively involved in the sale of the company to Boston Scientific in 2012. Mr. Friedman holds a bachelor’s degree and master’s degree with honors in Public Administration from Bar-Ilan University.

 

We believe that Mr. Friedman’s qualifications to serve on our Board include his experience in serving as a director of public and private companies as well as his knowledge and familiarity with corporate finance.

 

Mr. Kevin Rakin became a director in August 2016 and Chairman of the Board in July 2017. Mr. Rakin is a co-founder and partner at HighCape Partners, a growth equity life sciences fund where he has served since 2013. From June 2011 to November 2012, Mr. Rakin was the President of Regenerative Medicine at Shire plc (“Shire”), a leading specialty biopharmaceutical company. Prior to joining Shire, Mr. Rakin served as the Chairman and Chief Executive Officer of Advanced BioHealing, Inc. from 2007 until its acquisition by Shire for $750 million in June 2011. Mr. Rakin served on the board of Histogenics Corporation from 2012 to 2019, and currently serves on the board of a number of private companies. Mr. Rakin holds an MBA from Columbia University and received his graduate and undergraduate degrees in Commerce from the University of Cape Town, South Africa.

 

7

 

 

We believe that Mr. Rakin’s qualifications to serve on our Board include his extensive experience as an executive in the biotechnology industry, as well as his service in positions in various companies as a chief executive officer, chief financial officer and president and his involvement in public and private financings and mergers and acquisitions in the biotechnology industry.

 

Mr. Leonard Sank became a director in October 2007. Mr. Sank is a South African entrepreneur and businessman, whose interests lie in entrepreneurial endeavors and initiatives, with over 20 years’ experience of playing significant leadership roles in developing businesses. For the past eighteen years, Mr. Sank has served on the boards of a few businesses and local non-profit charity organizations in Cape Town, where he resides.

 

We believe that Mr. Sank’s qualifications to serve on our Board include his years of experience in development stage businesses, as well as his experience serving as a director of many entities.

 

Mr. Gao Xiaoming became a director in July 2019. Mr. Gao has more than 25 years’ experience in the bio-pharmaceutical field. Mr. Gao has experience in the registration, license-in, sales and promotion of pharmaceuticals and was involved in the introduction of Novo Nordisk (Denmark)’s insulin into China. Mr. Gao is proficient in the insulin industry. From 2005 to 2009, Mr. Gao led a team for the registration of imported Insulin-SciLin in China and obtained an Imported Drug License. Since 2007, Mr. Gao founded Hefei Tianmai Biotechnology Development Co., Ltd. and HTIT, which are committed to the research, development and commercialization of high-tech bio-pharmaceutical products.

 

We believe that Mr. Gao’s qualifications to serve on our Board include his years of experience in the bio-pharmaceutical industry as well as his experience and familiarity with the Eastern market.

 

Board of Directors

 

There are no agreements with respect to the election of directors. Each director is elected for a period of one year at our annual meeting of stockholders and serves until the next such meeting and until his or her successor is duly elected or until his or her earlier resignation or removal. The Board may also appoint additional directors. A director so chosen or appointed will hold office until the next annual meeting of stockholders and until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. The Board has determined that Leonard Sank, David Slager, Kevin Rakin, Aviad Friedman and Gao Xiaoming are independent as defined under the rules promulgated by The Nasdaq Capital Market LLC (“Nasdaq”). Other than Mr. Gao, none of the independent directors has any relationship with us besides serving on our Board. Mr. Gao is the chairman and one of the beneficial owners of HTIT, a stockholder holding more than 5% of our Common Stock, but does not otherwise have any relationship with us. The Board considered this relationship and determined that it would not interfere with Mr. Gao’s exercise of independent judgment in carrying out the responsibilities of a director.

 

We have determined that each of the directors is qualified to serve as a director of the Company based on a review of the experience, qualifications, attributes and skills of each director. In reaching this determination, we have considered a variety of criteria, including, among other things: character and integrity; ability to review critically, evaluate, question and discuss information provided, to exercise effective business judgment and to interact effectively with the other directors; and willingness and ability to commit the time necessary to perform the duties of a director.

 

Board Meeting Attendance

 

During Fiscal 2018, our Board held 7 meetings and took actions by written consent on one occasion. Ms. Xiaopeng Li, a former director, attended fewer than 75% of the aggregate of: (i) the total number of meetings of the Board (during the period for which such director served as a director); and (ii) the total number of meetings held by all committees of the Board on which such director served (during the period for which such director served on such committees). Board members are encouraged to attend our annual meetings of stockholders. At the annual meeting of stockholders held on August 28, 2018, four Board members were present.

 

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Committees

 

Audit Committee and Audit Committee Financial Expert

 

The members of our Audit Committee are Aviad Friedman, David Slager and Kevin Rakin. Following the Annual Meeting, we plan to reconstitute our Audit Committee. Our Board has determined that Aviad Friedman is an “audit committee financial expert” as set forth in Item 407(d)(5) of Regulation S-K and that all members of the Audit Committee are “independent” as defined by the rules of the SEC and the Nasdaq rules and regulations. The Audit Committee operates under a written charter that is posted on the “Investors” section of our website, www.oramed.com . The primary responsibilities of our Audit Committee include:

 

Overseeing the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company;

 

Appointing, compensating and retaining our registered independent public accounting firm;

 

Overseeing the work performed by any outside accounting firm;

 

Assisting the Board in fulfilling its responsibilities by reviewing: (i) the financial reports provided by us to the SEC, our stockholders or to the general public and (ii) our internal financial and accounting controls; and

 

Recommending, establishing and monitoring procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations.

 

Our Audit Committee met six times and took action by written consent on one occasion during Fiscal 2018.

 

Compensation Committee

 

The members of our Compensation Committee are Leonard Sank, Kevin Rakin and Aviad Friedman. The Board has determined that all of the members of the Compensation Committee are “independent” as defined by the rules of the SEC and Nasdaq rules and regulations. The Compensation Committee operates under a written charter that is posted on the “Investors” section of our website, www.oramed.com . The primary responsibilities of our Compensation Committee include:

 

Reviewing, negotiating and approving, or recommending for approval by our Board the salaries and incentive compensation of our executive officers;

 

Administering our equity based plans and making recommendations to our Board with respect to our incentive-compensation plans and equity-based plans; and

 

Making recommendations to our Board with respect to director compensation.

 

The Compensation Committee meets as often as it deems necessary, without the presence of any executive officer when approving compensation, except that the Company’s Chief Executive Officer, at the discretion of the Compensation Committee, may be present during the approval of, or deliberations with respect to, other executive officer compensation. The Compensation Committee may delegate any authority granted to it to one or more subcommittees of the Compensation Committee, in its sole discretion.

 

Our Compensation Committee met twice and took action by written consent on four occasions during Fiscal 2018.

 

Compensation Committee Interlocks and Insider Participation

 

During Fiscal 2018, Aviad Friedman, Kevin Rakin and Leonard Sank served as the members of our Compensation Committee. None of the members of our Compensation Committee is, or has been, an officer or employee of ours.

 

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During the last year, none of our Named Executive Officers served as: (1) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on the compensation committee; (2) a director of another entity, one of whose executive officers served on the compensation committee; or (3) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director on our Board.

 

Nominating Committee

 

The members of our Nominating Committee are Leonard Sank and Aviad Friedman. The Board has determined that all of the members of the Nominating Committee are “independent” as defined by the rules of the SEC and Nasdaq rules and regulations. The Nominating Committee operates under a written charter that is posted on the “Investors” section of our website, www.oramed.com . The primary responsibilities of our Nominating Committee include:

 

Overseeing the composition and size of the Board, developing qualification criteria for Board members and actively seeking, interviewing and screening individuals qualified to become Board members for recommendation to the Board;

 

Recommending the composition of the Board for each annual meeting of stockholders; and

 

Reviewing periodically with the Chairman of the Board and the Chief Executive Officer the succession plans relating to positions held by directors, and making recommendations to the Board with respect to the selection and development of individuals to occupy those positions.

 

Director Nominations

 

The Nominating Committee is responsible for developing and approving criteria, with Board approval, for candidates for Board membership. The Nominating Committee is responsible for overseeing the compensation and size of the Board, developing qualification criteria for Board members and actively seeking, interviewing and screening individuals qualified to become Board members for recommendation to the Board and for recommending the composition of the Board for each of the Company’s annual meetings. The Board as a whole is responsible for nominating individuals for election to the Board by the stockholders and for filling vacancies on the Board that may occur between annual meetings of the stockholders.

 

Nominees for director will be selected on the basis of their integrity, business acumen, knowledge of our business and industry, age, experience, diligence, conflicts of interest and the ability to act in the interests of all stockholders. No particular criteria will be a prerequisite or will be assigned a specific weight, nor does the Company have a diversity policy. The Company believes that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.

 

The Company has never received communications from stockholders nominating individuals for appointment to our Board. Therefore, we do not yet have a policy with regard to the consideration of any director candidates recommended by stockholders. In Fiscal 2018, we did not pay a fee to any third party to identify or evaluate, or assist in identifying or evaluating, potential nominees to our Board. All of the Director Nominees for election at the Annual Meeting are current members of our Board.

 

Code of Ethics

 

We have adopted a Code of Ethics and Business Conduct for our senior officers, directors and employees. A copy of the Code of Ethics and Business Conduct is located at our website at www.oramed.com. We intend to satisfy the disclosure requirement regarding any amendment to, or a waiver from, a provision of the Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer or controller, or persons performing similar functions and that relates to the Code of Ethics by posting such information on our website, www.oramed.com.

 

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Board Leadership Structure and Role in Risk Oversight

 

Mr. Nadav Kidron serves as our President and Chief Executive Officer and on our Board. Mr. Kevin Rakin serves as Chairman of our Board. We believe that this leadership structure is appropriate to our Company given the current size and operations of the Company.

 

The Board does not have a formal policy on whether the roles of Chairman and Chief Executive Officer should be combined or separated. The Board believes that the Company’s stockholders are best served by the Board having flexibility to consider the relevant facts and circumstances and determine, at the time of the Chairman’s election, the best leadership structure for the Company rather than by adhering to a formal standing policy on the subject.

 

In connection with the Board’s ongoing review of its leadership structure, the Board has determined that the position of Chairman should be held by a non employee of the Company. The Board believes that the current leadership structure, which separates the roles of Chief Executive Officer and Chairman, fosters effective governance and oversight of the Company. The Chairman is responsible for advising the Chief Executive Officer and presiding over meetings of the Board and consulting with the Chief Executive Officer on Board meeting agendas. The Chief Executive Officer is responsible for setting the Company’s strategy and leading the Company’s day to day performance. We believe this governance structure promotes balance between the authority of those who oversee our business and those who manage it on a day to day basis.

 

Our Board’s, including each of our committees’, as appropriate, role in risk oversight includes risk analysis and assessment in connection with each financial and business review, update and decision-making proposal and is an integral part of all Board deliberations. Each of our Board Committees is focused on specific risks within their areas of responsibility, but the Board believes that the overall enterprise risk management process is more properly overseen by all of the members of the Board. The Audit Committee is responsible for overseeing the management of financial and accounting risks. The Compensation Committee is responsible for overseeing the management of risks relating to executive compensation plans and arrangements. The Nominating Committee is responsible for overseeing the management of governance risks.

 

The Board’s role in our risk oversight is consistent with our leadership structure, with our President and Chief Executive Officer and other members of senior management having responsibility for assessing and managing our risk exposure, and the Board providing oversight in connection with those efforts.

 

Stockholder Communications

 

Although we have not adopted a formal process for stockholder communications with our Board, we believe stockholders should have the ability to communicate directly with the Board so that their views can be heard by the Board or individual directors, as applicable, and that appropriate and timely responses are provided to stockholders. All communications regarding general matters should be directed to the Secretary of the Company at the address below and should prominently indicate on the outside of the envelope that it is intended for the complete Board or for any particular director(s). If no designation is made, the communication will be forwarded to the entire Board. Stockholder communications to the Board should be sent to:

 

Corporate Secretary

Oramed Pharmaceuticals Inc.

1185 Avenue of the Americas, Suite 228

New York, New York 10036

 

Certain Relationships and Related Transactions

 

During Fiscal 2018, except for compensation arrangements described elsewhere in this proxy statement, we did not participate in any transaction, and we are not currently participating in any proposed transaction, or series of transactions, in which the amount involved exceeded the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years, and in which, to our knowledge, any of our directors, officers, 5% beneficial security holders, or any member of the immediate family of the foregoing persons had, or will have, a direct or indirect material interest.

 

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In April 2019, we, David M. Slager, a current member of the Board who is not being nominated for re-election, and Regals Capital LP entered into a letter agreement terminating the letter agreement among them dated February 5, 2013 (the “2013 Letter Agreement”), pursuant to which we had agreed not to (1) grant stock options with an exercise price of less than $6.00 per share or (2) grant stock options exercisable into more than 125,000 shares of our Common Stock without the consent of our three largest non-founding shareholders. As consideration for the termination of the 2013 Letter Agreement, the Board granted to Mr. Slager options to purchase an aggregate of 20,000 shares of our Common Stock at an exercise price equivalent to the closing price of the our Common Stock on the date of grant. The options vested immediately.

 

Our policy is to enter into transactions with related persons on terms that, on the whole, are no less favorable than those available from unaffiliated third parties. Based on our experience in the business sectors in which we operate and the terms of our transactions with unaffiliated third parties, we believe that all of the transactions described below met this policy standard at the time they occurred. All related person transactions are approved by our Board.

 

See “Compensation of Executive Officers and Directors-Director Compensation” for information as to compensation of our directors and executive officers.

 

REPORT OF THE AUDIT COMMITTEE

 

In the course of our oversight of the Company’s financial reporting process, we have: (1) reviewed and discussed with management the audited financial statements for Fiscal 2018; (2) discussed with the Independent Auditors the matters required to be discussed by the applicable requirements of the Public Company accounting Oversight Board and the SEC; (3) received the written disclosures and the letter from the Independent Auditors required by applicable requirements of the standards of the Public Company Accounting Oversight Board regarding the Independent Auditors’ communications with the Audit Committee concerning independence and discussed with the Independent Auditors the Independent Auditors’ independence; and (4) considered whether the provision of nonaudit services by the Independent Auditors is compatible with maintaining its independence and concluded that it is compatible at this time.

 

Based on the foregoing review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report for filing with the SEC.

 

  By the Audit Committee of the Board of
  Directors of Oramed Pharmaceuticals Inc.
   
  Aviad Friedman
  Kevin Rakin
  David Slager

 

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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

 

Compensation Discussion and Analysis

 

This section explains the policies and decisions that shape our executive compensation program, including its specific objectives and elements, as it relates to our Named Executive Officers. Our Named Executive Officers for Fiscal 2018 are those three individuals listed in the “Summary Compensation Table” below. The Compensation Committee believes that our executive compensation is appropriately designed to incentivize our Named Executive Officers to work for our long-term prosperity, is reasonable in comparison with the levels of compensation provided by comparable companies and reflects a reasonable cost. We believe our Named Executive Officers are critical to the achievement of our corporate goals, through which we can drive stockholder value.

 

The Compensation Committee of our Board is comprised solely of independent directors as defined by Nasdaq and non-employee directors as defined by Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Compensation Committee has the authority and responsibility to review and approve the compensation of our Chief Executive Officer and other executive officers. Other information concerning the structure, roles and responsibilities of our Compensation Committee is set forth in “Committees—Compensation Committee.”

 

Our executive compensation program and our Named Executive Officers’ compensation packages are designed around the following objectives:

 

attract, hire and retain talented and experienced executives;

 

motivate, reward and retain executives whose knowledge, skills and performance are critical to our success;

 

ensure fairness among the executive management team via recognizing the contributions of each executive to our success;

 

focus executive behavior on achievement of our corporate objectives and strategy; and

 

align the interests of management and stockholders by providing management with longer-term incentives through equity ownership.

 

The Compensation Committee reviews the allocation of compensation components regularly to ensure alignment with strategic and operating goals, competitive market practices and legislative changes. The Compensation Committee does not apply a specific formula to determine the allocation between cash and non-cash forms of compensation. Certain compensation components, such as base salaries, benefits and perquisites, are intended primarily to attract, hire and retain well-qualified executives. Other compensation elements, such as long-term incentive opportunities, are designed to motivate and reward performance. Long-term incentives are intended to reward Named Executive Officers for our long-term performance and executing our business strategy, and to strongly align Named Executive Officers’ interests with those of stockholders.

 

With respect to equity compensation, the Compensation Committee makes awards to executives under our Second Amended and Restated 2008 Stock Incentive Plan (the “Second 2008 Plan”). Executive compensation is paid or granted based on such matters as the Compensation Committee deems appropriate, including our financial and operating performance and the alignment of the interests of the executive officers and our stockholders.

 

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Elements of Compensation

 

Our executive officer compensation program is comprised of: (i) base salary or monthly compensation; (ii) discretionary bonus; (iii) long-term equity incentive compensation in the form of stock option and RSU grants; and (iv) benefits and perquisites.

 

In establishing overall executive compensation levels and making specific compensation decisions for our Named Executive Officers in Fiscal 2018, the Compensation Committee considered a number of criteria, including the executive’s position, scope of responsibilities, prior base salary and annual incentive awards and expected contribution.

 

Generally, our Compensation Committee reviews and, as appropriate, approves compensation arrangements for the Named Executive Officers from time to time but not less than once each year. The Compensation Committee also takes into consideration the Chief Executive Officer’s recommendations for executive compensation of the other Named Executive Officers. The Chief Executive Officer generally presents these recommendations at the time of our Compensation Committee’s review of executive compensation arrangements.

 

Base Salary

 

The Compensation Committee performs a review of base salaries and monthly compensation for our Named Executive Officers from time to time as appropriate. In determining salaries, the Compensation Committee members also take into consideration the scope of the Named Executive Officers’ responsibilities and independent third party market data, such as compensation surveys to industry, individual experience and performance and contribution to our clinical, regulatory, commercial and operational performance. None of the factors above has a dominant weight in determining the compensation of our Named Executive Officers, and our Compensation Committee considers the factors as a whole when considering such compensation. In addition, our Compensation Committee uses comparative data regarding compensation paid by peer companies in order to obtain a general understanding of current trends in compensation practices and ranges of amounts being awarded by other public companies, and not as part of an analysis or a formula.

 

In Fiscal 2018, for example, the Compensation Committee received consulting services from Aon Consulting, Inc. (“Aon”), through its Radford subdivision (part of Aon Hewitt) (“Radford”), with regard to management and Board compensation. The Compensation Committee engaged the consultant solely to collect and analyze data regarding management and Board compensation at other companies comparable to the Company. The consultant collected data regarding U.S. and Israeli practices, reviewed executive compensation against a market composite of peer proxy data and Radford survey data, determined the U.S. to Israeli discount and applied the discount to position specific U.S. data to arrive at Israeli market data.

 

We believe that a competitive base salary and monthly compensation is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward executives for their overall performance. Base salary and monthly compensation are established in part based on the individual experience, skills and expected contributions to our performance, as well as such executive’s performance during the prior year. Generally, we believe that executives’ base salaries should be targeted near the median of the range of salaries for executives in similar positions with similar responsibilities, experience and performance at comparable companies. Compensation adjustments are made occasionally based on changes in an executive’s level of responsibility, company progress or on changed local and specific executive employment market conditions.

 

In Fiscal 2018, our Compensation Committee increased the base salary of one of our Named Executive Officers by 15%, as it deemed this to be a reasonable rate based on, among other factors, such Named Executive Officer’s increased responsibilities, and in Fiscal 2017, our Compensation Committee increased the base salaries of our Named Executive Officers by 10% to 33% based on the report from Aon, as it determined salaries were not in line with market.

 

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Performance Based Bonus

 

Our Named Executive Officers are eligible to receive discretionary annual bonuses based upon performance. The amount of annual bonus to our Named Executive Officers is based on various factors, including, among others, the achievement of scientific and business goals and our financial and operational performance. The Compensation Committee takes into account the overall performance of the individuals, as well as the overall performance of the Company over the period being reviewed and the recommendation of management. For any given year, the compensation objectives vary, but relate generally to strategic factors such as developments in our clinical path, the execution of a license agreement for the commercialization of product candidates, the establishment of key strategic collaborations, the build-up of our pipeline and financial factors such as capital raising. Bonuses are awarded generally based on corporate performance, with adjustments made within a range for individual performance, at the discretion of the Compensation Committee. The Compensation Committee determines, on a discretionary basis, the size of the entire bonus pool and the amount of the actual award to each Named Executive Officer. The overall payment is also based on historic compensation of the Named Executive Officers.

 

We believe that annual bonuses payable based on the achievement of short-term corporate goals incentivize our Named Executive Officers to create stockholder value and attain short-term performance objectives.

 

Long-Term Equity Incentive Compensation

 

Long-term incentive compensation allows the Named Executive Officers to share in any appreciation in the value of our Common Stock. The Compensation Committee believes that stock participation aligns executive officers’ interests with those of our stockholders. Equity incentive awards are generally made at the commencement of employment and following a significant change in job responsibilities, or to meet other special retention or performance objectives. The amounts of the awards are designed to reward past performance and create incentives to meet long-term objectives. Awards are made at a level expected to be competitive within the biotechnology industry, as well as with Israeli-based companies. Awards are made on a discretionary basis and not pursuant to specific criteria set out in advance. In determining the amount of each grant, the Compensation Committee also takes into account the number of shares held by the executive prior to the grant. The vesting schedule for Named Executive Officers was based on monthly installments for periods of no longer than three years through the beginning of Fiscal 2017; however, following consultation with Aon during Fiscal 2017, the vesting schedule for Named Executive Officers was changed to generally provide for annual installments for new grants, though the Compensation Committee also utilizes quarterly vesting from time to time. As part of its Fiscal 2017 engagement described above, Aon provided consulting services to the Compensation Committee in Fiscal 2018 in connection with grants of stock options to our executive officers. Aon reviewed annual long-term incentive grants at peer companies, as well as such grants made by companies in the broader market, based on a blend of Black-Scholes valuations and grants as a percentage of the applicable company’s capitalization. Aon provided recommendations at various percentiles as well as for both the U.S. and Israeli local markets for the Compensation Committee’s consideration. Aon used both a U.S. and an Israeli peer group consisted of the following companies: Alcobra Ltd., BioLine Rx Ltd., Can-Fite BioPharma Ltd., Foamix Pharmaceuticals Ltd., Galmed Pharmaceuticals Ltd., Intec Pharma Ltd., Kamada Ltd., MediWound Ltd., Pluristem Therapeutics Inc., Protalix BioTherapeutics Inc., RedHill Biopharma Ltd. and Vascular Biogenics Ltd. The U.S. peer group consisted of the following companies: Actinium Pharmaceuticals Inc., Athersys Inc., Capricor Therapeutics Inc., Cara Therapeutics Inc., Catabasis Pharmaceuticals Inc., Cymabay Therapeutics Inc., Eiger BioPharmaceuticals Inc., Eleven Biotherapeutics Inc., Endocyte Inc., Genocea Biosciences Inc., GlycoMimetics Inc., GTx Inc., Kura Oncology Inc., Ocera Therapeutics Inc., Stemline Therapeutics Inc., Tracon Pharmaceuticals Inc. and vTv Therapeutics Inc. Following such consultation, we granted stock options that vest over a period of 4 years to certain of our executive officers. The Compensation Committee believes that time-based vesting encourages recipients to build stockholder value over a long period of time.

 

RSU awards provide our Named Executive Officers with the right to purchase shares of our Common Stock at a par value of $0.012, subject to continued employment with our company. In prior years, the Compensation Committee chose to grant RSU awards and not options because RSU awards, once vested, always have an immediate financial value to the holder thereof, unlike options where the exercise price might be above the current market price of the shares and therefore not have any intrinsic value to the holder thereof. In addition, because vested RSU awards always have financial value, as opposed to options, we were able to limit the number of securities issued to our Named Executive Officers and other employees, directors and consultants. RSUs generally vest over a period of no longer than two years. In June 2017, following consultation with Aon, the Compensation Committee chose to grant options instead of RSUs and in addition granted to the Chief Executive Officer options with a market condition of our share price reaching a certain target, in order to further strengthen the alignment of our Named Executive Officers’ interests with those of our stockholders, as part of our efforts to increase the Company’s market value. No RSUs were granted in Fiscal 2018.

 

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Benefits and Perquisites

 

Generally, benefits available to Named Executive Officers are available to all employees on similar terms and include welfare benefits, paid time-off, life and disability insurance and other customary or mandatory social benefits in Israel. We provide our Named Executive Officers with a phone and a company car, which are customary benefits in Israel to managers and officers.

 

We do not believe that the benefits and perquisites described above deviate materially from the customary practice for compensation of executive officers by other companies similar in size and stage of development in Israel. These benefits represent a relatively small portion of the executive officers’ total compensation.

 

In Fiscal 2018, the Company retained ORI - Organizational Resources International Ltd. (“ORI”) to prepare a cost analysis on the difference between the cost of living in Israel and New York. Based on the relocation cost analysis prepared by ORI, the Company pays for certain direct costs, related taxes and expenses incurred in connection with the relocation of our Chief Executive Officer to New York. During Fiscal 2018, such relocation expenses totaled approximately $430,000, and included mainly payments intended to reflect the difference in the cost of living between Israel and the United States, relocation expenses, accommodation allowances, education allowances, health insurance and related taxes.

 

Say-on-Pay Vote

 

Our stockholders approved, on an advisory basis, our executive compensation program at our 2018 annual meeting of stockholders held on August 28, 2018. We did not seek or receive any specific feedback from our stockholders concerning our executive compensation program during the past fiscal year. The Compensation Committee did not specifically rely on the results of the prior vote in making any compensation-related decisions during Fiscal 2018.

 

REPORT OF THE COMPENSATION COMMITTEE

 

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with our management and, based on such review and discussions, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Annual Report and in this proxy statement.

 

  Compensation Committee Members:
   
  Aviad Friedman
  Kevin Rakin
  Leonard Sank

 

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Summary Compensation Table

 

The following table sets forth the compensation earned during the fiscal years ended August 31, 2018, 2017 and 2016 by our Named Executive Officers, which for Fiscal 2018 consisted of our President and Chief Executive Officer, our Chief Scientific Officer and our Chief Operating Officer and Vice President of Business Development:

 

Name and Principal Position  

Year (1)

   

Salary
($) (2)

   

Bonus
($) (2)(3)

   

Stock
Awards
($) (4)

   

Option Awards
($) (5)

   

All Other Compensation ($) (2)(6)

    Total
($)
 
Nadav Kidron     2018       436,310       148,795             522,569       442,326       1,550,000  
President and Chief Executive Officer and     2017       399,804       123,000             585,150       45,579       1,153,533  
director (7)     2016       273,086       195,729                   17,366       486,181  
                                                         
Miriam Kidron     2018       273,595       46,614             253,204       13,643       587,056  
Chief Scientific     2017       254,765       50,000       581,932       359,224       12,775       1,258,696  
Officer and director (8)     2016       203,378       136,583                   13,191       353,152  
                                                         
Joshua Hexter     2018       161,002       26,895             269,196       50,505       507,598  
Chief Operating Officer and     2017       148,499       33,000       463,400             46,408       691,307  
VP Business Development (9)     2016       132,306       86,974                   42,014       261,294  

 

 

(1) The information is provided for each fiscal year, which begins on September 1 and ends on August 31.

 

(2) Amounts paid for Salary, Bonus and All Other Compensation were originally denominated in New Israeli Shekels (“NIS”), and were translated into U.S. Dollars at the then current exchange rate for each payment.

 

(3) Bonuses were granted at the discretion of the Compensation Committee.

 

(4) For RSU awards, the amounts reflect the grant date fair value, as calculated pursuant to FASB ASC Topic 718. The assumptions used to determine the fair value of the RSU awards are set forth in Note 8 to our audited consolidated financial statements included in the Annual Report. Our Named Executive Officers will not realize the value of these awards in cash unless and until the awards vest and the underlying shares are issued and subsequently sold.

 

(5) The amounts reflect the grant date fair value, as calculated pursuant to FASB ASC Topic 718, of these option awards. The assumptions used to determine the fair value of the option awards are set forth in Note 8 to our audited consolidated financial statements included in the Annual Report. Our Named Executive Officers will not realize the value of these awards in cash unless and until these awards are exercised and the underlying shares subsequently sold.

 

(6) See “All Other Compensation Table” below.

 

(7) Mr. Kidron receives certain compensation from Oramed Ltd. through KNRY, Ltd., an Israeli entity owned by Dr. Miriam Kidron (“KNRY”). See “— Employment and Consulting Agreements” below.

 

(8) Dr. Kidron receives compensation from Oramed Ltd. through KNRY. See “— Employment and Consulting Agreements” below.

 

(9) Mr. Hexter resigned from his positions with us, effective November 15, 2018.

 

17

 

 

All Other Compensation Table

 

The “All Other Compensation” amounts set forth in the Summary Compensation Table above consist of the following:

 

Name   Year     Automobile- Related Expenses
($)
    Manager’s Insurance*
($)
    Education Fund*
($)
    Relocation Expenses**
($)
    Total
($)
 
Nadav Kidron     2018       12,596                   429,730       442,326  
      2017       28,098                   17,481       45,579  
      2016       17,366                         17,366  
                                                 
Miriam Kidron     2018       13,643                         13,643  
      2017       12,775                         12,775  
      2016       13,191                         13,191  
                                                 
Joshua Hexter     2018       13,909       24,623       11,973             50,505  
      2017       12,910       22,513       10,985             46,408  
      2016       12,660       19,585       9,769             42,014  

 

 
* Manager’s insurance and education funds are customary benefits provided to employees based in Israel. Manager’s insurance is a combination of severance savings (in accordance with Israeli law), defined contribution tax-qualified pension savings and disability insurance premiums. An education fund is a savings fund of pre-tax contributions to be used after a specified period of time for educational or other permitted purposes.

 

** Relocation expenses represents additional compensation in Fiscal 2018 and Fiscal 2017, for the period during which Mr. Kidron was in the United States. These expenses mainly include relocation expenses, supplemental living expenses, accommodation allowances, education allowances, health insurance and related costs.

 

Employment and Consulting Agreements

 

On July 1, 2008, Oramed Ltd. entered into a consulting agreement with KNRY, whereby Mr. Nadav Kidron, through KNRY, provides services as President and Chief Executive Officer of both the Company and Oramed Ltd. (the “Nadav Kidron Consulting Agreement”). Additionally, on July 1, 2008, Oramed Ltd. entered into a consulting agreement with KNRY whereby Dr. Miriam Kidron, through KNRY, provides services as Chief Scientific Officer of both the Company and Oramed Ltd. (the “Miriam Kidron Consulting Agreement”). We refer to the Miriam Kidron Consulting Agreement and Nadav Kidron Consulting Agreement collectively as the Consulting Agreements.

 

The Consulting Agreements are both terminable by either party upon 140 days prior written notice. The Consulting Agreements, as amended, provide that KNRY will be reimbursed for reasonable expenses incurred in connection with performance of the Consulting Agreements and that Nadav Kidron receives a monthly consulting fee of NIS 127,570, and Miriam Kidron receives a monthly consulting fee of NIS 80,454. Pursuant to the Consulting Agreements, KNRY, Nadav Kidron and Miriam Kidron each agree that during the term of the Consulting Agreements and for a 12 month period thereafter, none of them will compete with Oramed Ltd. nor solicit employees of Oramed Ltd.

 

We, through Oramed Ltd., had an employment agreement with Joshua Hexter as of April 14, 2013, pursuant to which Mr. Hexter was appointed as Chief Operating Officer and VP Business Development of the Company and Oramed Ltd. In accordance with the employment agreement, as amended, Mr. Hexter’s gross monthly salary was NIS 51,625. In addition, Mr. Hexter was provided with a cellular phone and a company car pursuant to the terms of his agreement. Effective November 15, 2018, Mr. Hexter resigned as our COO and VP Business Development.

 

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We, through Oramed Ltd., entered into an employment agreement with Mark Hasleton as of November 6, 2018, pursuant to which Dr. Hasleton was appointed as VP Business Development of the Company and Oramed Ltd., effective November 15, 2018. In accordance with the employment agreement, Dr. Hasleton’s current gross monthly salary is NIS 38,000. In addition, Dr. Hasleton is provided with a cellular phone and a company car pursuant to the terms of his agreement. On July 23, 2019, we terminated this employment agreement, effective as of August 27, 2019.

 

We, through Oramed Ltd., have entered into an employment agreement with Avraham Gabay as of June 1, 2019, pursuant to which Mr. Gabay was appointed as Chief Financial Officer, Treasurer and Secretary of the Company and Oramed Ltd., effective June 1, 2019. In accordance with the employment agreement, Mr. Gabay’s current gross monthly salary is NIS 35,000. In addition, Mr. Gabay is provided with a cellular phone and a company car pursuant to the terms of his agreement.

 

We have entered into indemnification agreements with our directors and officers pursuant to which we agreed to indemnify each director and officer for any liability he or she may incur by reason of the fact that he or she serves as our director or officer, to the maximum extent permitted by law.

 

Potential Payments upon Termination or Change-in-Control

 

We have no plans or arrangements in respect of remuneration received or that may be received by our Named Executive Officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change-in-control) or a change of responsibilities following a change-in-control.

 

Pension, Retirement or Similar Benefit Plans

 

We have no arrangements or plans under which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options, RSUs or restricted shares at the discretion of our Compensation Committee in the future.

 

Grants of Plan-Based Awards

 

The following table shows grants of plan-based equity awards made to our Named Executive Officers during Fiscal 2018:

 

Name   Grant Date  

Options Awards: Number of
Securities
Underlying
Options

(#)

   

Grant Date Fair Value of Stock Awards

($)

 
Nadav Kidron (1)   1/31/2018     97,000       522,569  
Miriam Kidron (2)   1/31/2018     47,000       253,204  
Joshua Hexter (3)   4/8/2018     30,000       137,933  
Joshua Hexter (3)   5/3/2018     30,000       131,262  

 

 

(1) These options were granted under our Second 2008 Plan and vest in 4 equal installments of 24,250 on each of January 1, 2019, January 1, 2020, January 1, 2021 and January 1, 2022.

 

(2) These options were granted under our Second 2008 Plan and vest in 4 equal installments of 11,750 on each of January 1, 2019, January 1, 2020, January 1, 2021 and January 1, 2022.

 

(3) These options were granted under our Second 2008 Plan and vest in 16 equal installments of 1,875 on the last day of each quarter commencing June 30, 2018.

 

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Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth information concerning stock options and stock awards held by our Named Executive Officers as of August 31, 2018.

 

    Option Awards   Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
    Option
Exercise
Price
($)
    Option
Expiration
Date
 

 

 

Number of shares that have not vested (#)

   

 

 

Market value of shares that have not vested ($)

 
Nadav Kidron     72,000 (1)     -       5.88     4/20/20                
      72,000 (2)     -       4.08     8/8/22                
      47,134 (3)     -       12.45     4/9/24                
      49,000 (4)     98,000 (4)     7.77     6/30/27                
              97,000 (5)                            
                                  0 (8)(9)     0  
                                             
Miriam Kidron     72,000 (1)     -       5.88     4/20/20                
      72,000 (2)     -       4.08     8/8/22                
      47,134 (3)     -       12.45     4/9/24                
      23,333 (6)     46,666 (6)     7.77     6/30/27                
              47,000 (7)                            
                                  0 (10)     0  
                                             
Joshua Hexter     100,800 (11)     -       7.88     4/14/23                
      1,875 (12)     28,125 (12)     7.05     4/8/28                
      1,875 (13)     28,125 (13)     6.70     5/3/28                
                                  0 (14)     0  

 

 

(1) On April 21, 2010, 72,000 options were granted to each of Nadav Kidron and Miriam Kidron under the Second 2008 Plan at an exercise price of $5.88 per share; 9,000 of such options vested immediately on the date of grant and the remainder vested in twenty-one equal monthly installments, commencing on May 31, 2010. The options have an expiration date of April 20, 2020.

 

(2) On August 8, 2012, 72,000 options were granted to each of Nadav Kidron and Miriam Kidron under the Second 2008 Plan at an exercise price of $4.08 per share; 21,000 of such options vested immediately on the date of grant and the remainder vested in seventeen equal monthly installments, commencing on August 31, 2012. The options have an expiration date of August 8, 2022.

 

(3) On April 9, 2014, 47,134 options were granted to each of Nadav Kidron and Miriam Kidron under the Second 2008 Plan at an exercise price of $12.45 per share; 15,710 of such options vested on April 30, 2014 and the remainder vested in eight equal monthly installments, commencing on May 31, 2014. The options have an expiration date of April 9, 2024.

 

(4) On June 30, 2017, 147,000 options were granted to Nadav Kidron under the Second 2008 Plan at an exercise price of $7.77 per share; 49,000 of such options vested on December 31, 2017 and 49,000 vest on December 31, 2019, subject to the Company share price reaching the target of $12.5 per share. The remaining 49,000 of such options did not vest because the vesting conditions were not met as of December 31, 2018.  The options expire on June 30, 2027.

 

20

 

 

(5) On January 31, 2018, 97,000 options were granted to Nadav Kidron under the Second 2008 Plan at an exercise price of $8.14 per share; 24,250 of such options vested on January 1, 2019 and the remainder vest in 3 equal installments of 24,250 on each of January 1, 2020, January 1, 2021 and January 1, 2022. The options expire on January 31, 2028.

 

(6) On June 30, 2017, 69,000 options were granted to Miriam Kidron under the Second 2008 Plan at an exercise price of $7.77 per share; 23,000 of such options vested on December 31, 2017, 23,333 of such options vested on December 31, 2018 and the remaining 23,333  options vest on December 31, 2019. The options have an expiration date of June 30, 2027.

 

(7) On January 31, 2018, 47,000 options were granted to Miriam Kidron under the Second 2008 Plan at an exercise price of $8.14 per share; 11,750 of such options vested on January 1, 2019 and the remainder vest in 3 equal installments of 11,750 on each of January 1, 2020, January 1, 2021 and January 1, 2022. The options expire on January 31, 2028.

 

(8) On November 13, 2014, 9,788 RSUs, representing a right to receive shares of the Company’s Common Stock, were granted to Nadav Kidron. The RSUs vested in two equal installments, each of 4,894 shares, on November 30 and December 31, 2014. The shares of Common Stock underlying the RSUs will be issued upon request of the grantee.

 

(9) On February 23, 2015, 79,848 RSUs, representing a right to receive shares of the Company’s Common Stock, were granted to Nadav Kidron. The RSUs vested in 23 installments consisting of one installment of 6,654 shares on February 28, 2015 and 22 equal monthly installments of 3,327 shares each, commencing March 31, 2015. The shares of Common Stock underlying the RSUs will be issued upon request of the grantee.

 

(10) On June 30, 2017, 75,000 RSUs, representing a right to receive shares of the Company’s Common Stock, were granted to Miriam Kidron. The RSUs vested immediately, have an exercise price of $0.012 per share of Common Stock and expire on June 30, 2027.

 

(11) On April 14, 2013, 100,800 options were granted to Joshua Hexter under the Second 2008 Plan at an exercise price of $7.88 per share; the options vested in 35 consecutive equal installments during a 3-year period commencing on May 31, 2013, and two installments of 1,400 each, that were vested on April 30, 2013 and April 14, 2016, and expire on April 14, 2023.

 

(12) On April 8, 2018, 30,000 options were granted to Joshua Hexter under the Second 2008 Plan at an exercise price of $7.05 per share; 3,750 of the options vested in two installments of 1,875 on each of June 30, 2018 and September 30, 2018 and expire on April 8, 2028. The remainder of the options were forfeited by the grantee as of November 15, 2018.

 

(13) On May 3, 2018, 30,000 options were granted to Joshua Hexter under the Second 2008 Plan at an exercise price of $6.70 per share; 3,750 of the options vested in two installments of 1,875 on each of June 30, 2018 and September 30, 2018 and expire on May 3, 2028. The remainder of the options were forfeited by the grantee as of November 15, 2018.

 

(14) On November 1, 2016, 70,000 RSUs, representing a right to receive shares of the Company’s Common Stock, were granted to Joshua Hexter. The RSUs vested in 19 installments, consisting of one installment of 9,000 shares on November 1, 2016, 18 equal monthly installments of 1,500 shares each, commencing November 30, 2016, and 17,000 shares on each of April 30, 2017 and 2018.

 

21

 

 

Options Exercised and Stock Vested

 

The following table sets forth information with respect to the Named Executive Officers concerning the vesting of RSUs during Fiscal 2018. No options were exercised by the Named Executive Officers in Fiscal 2018.

 

    Stock Awards  
Name   Number of Shares Acquired on Vesting
(#)
    Value Realized on Vesting
($)
 
Joshua Hexter     29,000       214,710  

 

Equity Compensation Plan Information

 

The following table sets forth additional information with respect to our equity compensation plans (consisting solely of the Second 2008 Plan) as of August 31, 2018:

 

 

Plan category

  Number of
securities to
be issued
upon
exercise of
outstanding
options, RSUs
and rights
(a)
    Weight-
average
exercise
price of
outstanding
options, RSUs
and rights
(b)
    Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
(excluding
securities
reflected in
column (a))
(c)
 
Equity compensation plans approved by security holders     948,420     $ 5.70       473,330  
Equity compensation plans not approved by security holders    

     

     

 
Total     948,420     $ 5.70       473,330  

 

Our Board maintains the Second 2008 Plan in order to attract and retain quality personnel. The Second 2008 Plan provides for the grant of stock options, restricted stock, RSUs and stock appreciation rights, collectively referred to as “awards.” Stock options granted under the Second 2008 Plan may be either incentive stock options (“ISOs”) under the provisions of Section 422 of the U.S. Internal Revenue Code (the “Code”) or non-qualified stock options. Under the Second 2008 Plan, 2,400,000 shares were reserved for the grant of awards, which may be issued at the discretion of our Board from time to time. The Second 2008 Plan permits awards to be based on performance-based criteria, which historically allowed us to maximize our ability to pay deductible compensation for U.S. federal income tax purposes. As of August 31, 2018, options with respect to 2,089,848 shares had been granted, of which 35,074 had been forfeited, 169,974 had been exercised and 620,680 had expired. As of August 31, 2018, 525,824 RSUs had been granted, of which 164,636 had vested and the shares of Common Stock underlying those RSUs will be issued upon request of the grantee and 33,248 had been forfeited. Other than in the case of certain options, the shares underlying an award granted under the Second 2008 Plan may become available for future grant under the Second 2008 Plan if the award is forfeited, canceled or expired.

 

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Director Compensation

 

The following table provides information regarding compensation earned by, awarded or paid to each person for serving as a director who is not an executive officer during Fiscal 2018:

 

Name of Director   Fees
Earned or
Paid in
Cash
($)
    Stock
Awards
(3) ($)
   

Option Awards
(4) ($)

    All Other Compensation
($)
    Total
($)
 
Nadav Kidron (1)     -            -            -            -           -  
Miriam Kidron (1)     -       -       -       -       -  
Leonard Sank     20,000       -       -       -       20,000  
Xiaopeng Li (2)     20,000       -       -       -       20,000  
Aviad Friedman     20,000       -       -       -       20,000  
Kevin Rakin     20,000       -       -       -       20,000  
David Slager     20,000       -       -       -       20,000  

 

 

(1) Please refer to the Summary Compensation Table for executive compensation with respect to the named individual.

 

(2)

Ms. Li resigned from her positions with us, effective June 25, 2019.

 

(3) As of August 31, 2018, our non-employee directors then in office held options to purchase shares of our Common Stock as follows:

 

Name of Director   Aggregate Number
of Shares
Underlying
Stock
Awards
 
Leonard Sank     74,867  
David Slager     22,470  
Aviad Friedman     20,857  
Kevin Rakin     62,470  
Xiaopeng Li (2)     29,026  

 

(4) The amounts reflect the grant date fair value, as calculated pursuant to FASB ASC Topic 718, of these option awards. The assumptions used to determine the fair value of the option awards are set forth in Note 8 to our audited consolidated financial statements included in the Annual Report. Our directors will not realize the value of these awards in cash unless and until these awards are exercised and the underlying shares subsequently sold.

 

Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board. Each independent director is entitled to receive as remuneration for his or her service as a member of the Board a sum equal to $20,000 per annum, to be paid quarterly after the close of each quarter. Our executive officers did not receive additional compensation for service as directors. The Board may award special remuneration to any director undertaking any special services on behalf of us other than services ordinarily required of a director.

 

Other than as described above, we have no present formal plan for compensating our directors for their service in their capacity as directors. Other than indicated above, no director received and/or accrued any compensation for his services as a director, including committee participation and/or special assignments during Fiscal 2018.

 

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PROPOSAL 2:
2019 STOCK INCENTIVE PLAN

 

At the Annual Meeting, the Company’s stockholders will be asked to approve our 2019 Stock Incentive Plan (the “2019 Plan”), which will allow for the issuance of 1,000,000 shares of Common Stock. The 2019 Plan will allow us to make awards until August 5, 2029, unless sooner terminated. As of July 26, 2019, there were 219,172 shares available for future grant under the Second 2008 Plan, options to acquire 1,519,148 shares of Common Stock were outstanding under the Second 2008 Plan and other types of awards with respect to 355,132 shares of Common Stock were outstanding under the Second 2008 Plan. Awards issued under the Second 2008 Plan will remain outstanding and will be governed by that plan. If approved by our stockholders, it is anticipated that new awards will generally be made under the 2019 Plan. The material features of the 2019 Plan described below are substantially similar to those of our Second 2008 Plan. The Company has become aware of a shareholder derivative claim and putative class action alleging, among other things, that the Second 2008 Plan may have terminated in 2018. As of the date of this proxy statement, the defendants have not been served with a complaint regarding these claims. However, the Company disputes these claims and believes that the Second 2008 Plan does not terminate until 2026 and any suggestion to the contrary is not well-founded. For the sake of clarity and out of an abundance of caution, however, this proxy statement seeks approval of the adoption of the 2019 Plan.

 

Our Board, the Compensation Committee and management believe that the effective use of stock-based long-term incentive compensation is vital to our ability to achieve strong performance in the future. The 2019 Plan will allow us to continue to maintain the key policies and practices adopted by our management and Board to align employee and stockholder interests. In addition, our future success depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel. We believe that the 2019 Plan is essential to permit our management to continue to provide long-term, equity-based incentives to present and future key employees, consultants and directors.

 

Material Features of the 2019 Plan

 

The following description of certain material features of the 2019 Plan is intended to be a summary only. This summary is qualified in its entirety by the full text of the 2019 Plan that is attached hereto as Appendix A .

 

Shares Available . The maximum number of shares authorized for issuance under the 2019 Plan will be 1,000,000 shares of Common Stock. Other than in the case of options intended to qualify as ISOs for U.S. federal income tax purposes, the shares underlying any awards that are forfeited, canceled or expired (whether voluntarily or involuntarily) under the 2019 Plan will be added back to the shares authorized for issuance under the 2019 Plan. Shares that actually have been issued under the 2019 Plan pursuant to an award will not be available for future issuance under the 2019 Plan, except that if unvested shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their fair market value at the time of repurchase, such shares shall become available for future grant under the 2019 Plan. To the extent not prohibited by the listing requirements of Nasdaq and applicable law, shares surrendered upon exercise or purchase of award (including pursuant to a net exercise) or to satisfy tax withholding obligations will be added back to the shares authorized for issuance under the 2019 Plan, unless otherwise determined by the administrator.  In no event will ISOs be issued under the 2019 Plan with respect to more than 1,000,000 shares, adjusted as described below.

 

Types of Awards . The 2019 Plan permits the issuance of equity-based awards, including options (including stock options that qualify under Section 102 of the Israeli Income Tax Ordinance (New Version) 1961 (the “Tax Ordinance”), stock options that qualify under Section 3(i) of the Tax Ordinance and stock options that qualify as ISOs for U.S. federal income tax purposes), stock appreciation rights, restricted stock and RSUs.

 

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Plan Administration . The 2019 Plan will be administered by the Board or the Compensation Committee. The administrator of the 2019 Plan has the power and authority to: select the employees, directors and consultants to whom awards will be granted from time to time; determine whether and to what extent awards are granted under the 2019 Plan; determine the number of shares or the amount of other consideration to be covered by each award granted thereunder, the exercise price or purchase price of each option or other award, the duration of each award and the times at which each award will become exercisable; approve forms of award agreements for use under the 2019 Plan; approve the time or times when options or other awards vest, which may be based on performance criteria and may include any vesting acceleration or waiver of forfeiture restrictions and any restriction or limitation regarding any award or shares related thereto based in each case on such factors as the administrator, in its sole discretion, determines; subject to certain limitations, amend the terms of any outstanding award under the 2019 Plan; construe and interpret the terms of the 2019 Plan and awards, including without limitation, any notice of award or award agreement, granted pursuant to the 2019 Plan; grant awards to employees, directors and consultants employed outside the United States on such terms and conditions different from those specified in the 2019 Plan as may, in the judgment of the administrator, be necessary or desirable to further the purpose of the 2019 Plan; designate awards as ISOs or non-qualified stock options, or as 102 options (whether through a trustee or not) or 3(i) options subject to the limitations under the Israeli Tax Authorities or any other applicable law and to determine the type and route of Trustee 102 options; determine the fair market value of the shares in accordance with the provisions of the 2019 Plan; and take all such other action and make all such other determinations and interpretations, not inconsistent with the terms of the 2019 Plan, as the administrator deems appropriate. Except in the case of options, stock appreciation rights and performance-based compensation (as discussed further below), the Board may delegate to officers of the Company, as defined in Section 16 of the Exchange Act, the authority to grant awards to consultants and employees, other than our directors or officers, provided that the Board may limit such authority from time to time.

 

Eligibility and Limitations on Grants . All employees, directors and consultants of the Company or a subsidiary of the Company are eligible to participate in the 2019 Plan subject to the discretion of the administrator. Approximately 10 employees and directors are currently eligible to participate in the 2019 Plan. The number of consultants eligible to participate in the 2019 Plan fluctuates from time to time. Awards other than ISOs may be granted to employees, directors and consultants. ISOs may be granted only to employees of the Company or certain subsidiaries of the Company. The maximum number of shares of Common Stock with respect to which options and stock appreciation rights, and restricted stock and RSUs to the extent such awards are performance-based, may be granted to any grantee in any calendar year is 400,000 shares, subject to adjustment as discussed below.

 

Performance-Based Compensation . Certain awards of restricted stock or RSUs under the 2019 Plan may vest contingent on the satisfaction of performance goals (“performance-based compensation”).

 

The 2019 Plan permits the Compensation Committee to condition vesting on the satisfaction of any one or more of the following performance criteria: (1) increase in share price, (2) earnings per share, (3) total stockholder return, (4) operating margin, (5) gross margin, (6) return on equity, (7) return on assets, (8) return on investment, (9) operating income, (10) net operating income, (11) pre-tax profit, (12) cash flow, (13) revenue, (14) expenses, (15) earnings before interest, taxes and depreciation, (16) economic value added, (17) market share, (18) satisfactory completion of clinical trials or scientific benchmarks and (19) receipt of regulatory approvals. These criteria may be applied to the Company or any subsidiary as a whole, or with respect to a division, operating unit or business segment of the Company or a subsidiary, or any combination of the foregoing. The Compensation Committee must select the particular performance criteria before 25% of the applicable performance period has elapsed (or within 90 days of the date of award), if earlier.  The Compensation Committee may make adjustments as necessary to the performance criteria to eliminate the effect on the stated performance goals of unplanned acquisitions or dispositions, changes in foreign exchange rates, discrete tax items identified by the Compensation Committee, changes in accounting standards and variances to planned annual incentive compensation expense.

 

Stock Options . The administrator may award ISOs, non-qualified stock options, stock options that qualify under Section 102 or Section 3(i) of the Tax Ordinance. The exercise price of stock options awarded under the 2019 Plan may not be less (and in the case of certain ISO grants must be more) than the fair market value per share of the Common Stock on the date of the option grant. The administrator will determine at what times and under what conditions options may be exercised, subject to certain provisions in the case of options granted to Israeli grantees.

 

To qualify as ISOs, stock options must meet additional U.S. federal income tax requirements under the Code, including a $100,000 limit on the value of shares subject to ISOs that first become exercisable in any one calendar year, a term of 10 years and a shorter term and higher minimum exercise price in the case of certain large stockholders.

 

Stock Appreciation Rights . The administrator may award a stock appreciation right independently of a stock option.  The base appreciation amount of stock appreciation rights awarded under the 2019 Plan may not be less than the fair market value per share of the Common Stock on the date of grant of the stock appreciation right. The maximum number of shares of Common Stock with respect to which stock appreciation rights may be granted to any grantee in any calendar year is 400,000 shares, subject to adjustment as discussed below.

 

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Restricted Stock and RSUs . The administrator may award shares of restricted stock or RSUs to grantees subject to such conditions and restrictions as the administrator may determine. RSUs are similar to restricted stock except that no shares are actually awarded to the grantee on the grant date. No monetary payment, other than for applicable taxes, is due by the grantee in connection with the grant of restricted stock or issuance of shares in connection with an RSU, except that the grantee must pay the Company the par value of the restricted stock or the shares of Common Stock underlying the RSU. The maximum number of shares of Common Stock with respect to which restricted stock and RSUs may be granted to any grantee in any calendar year is 400,000 shares, subject to adjustment as discussed below.

 

Tax Withholding . Grantees of awards made or outstanding under the 2019 Plan are responsible for the payment of any federal, state or local taxes that the Company is required by law to withhold, including, without limitation, obligations incident to the receipt of shares upon any option exercise or vesting of other awards.

 

Change of Control Provisions . Unless otherwise set forth in the award agreement, in the event of a “change in control” as defined in the 2019 Plan, the administrator may, in its sole discretion, provide for the (1) termination of an award upon the consummation of the change in control, but only if such award has vested and been paid out or the holder has been permitted to exercise the option in full for a period of not less than 30 days prior to the change in control, (2) acceleration of all or any portion of an award, (3) payment of an amount (in cash or, in the discretion of the administrator, in the form of consideration paid to shareholders of the Company in connection with such change in control) in exchange for the cancellation of an award and/or (4) issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted hereunder in a manner complying with applicable regulations.

 

Capitalization Changes . The total number of shares available for award under the 2019 Plan, and the annual limit on the number of shares that may be awarded to any grantee in a calendar year, are subject to adjustment pursuant to the terms of the 2019 Plan in the case of certain changes in the capital structure of the Company including, such as stock splits, reverse stock splits, stock dividends, combination or reclassifications of shares or similar transactions.

 

Term . No awards may be granted under the 2019 Plan after the 10-year anniversary of the date that the 2019 Plan was approved by the Board, or August 5, 2029.

 

Amendments . The Board may amend, suspend or terminate the 2019 Plan at any time, subject to the approval of the Company’s stockholders to the extent such approval is required by applicable laws. Generally, under Nasdaq rules and provisions of the Code in the case of Incentive Stock Options, all material amendments to the 2019 Plan will be subject to approval by our stockholders including, but not limited to: (1) an increase in the number of shares to be issued under the 2019 Plan; (2) an increase in benefits to grantees under the 2019 Plan including any material change to (i) permit a repricing (or decrease in exercise price) of outstanding stock options and SARs or (ii) reduce the price of stock options, SARs and other awards intended to provide the benefit of appreciation in the value of Common Stock subsequent to grant; (3) an extension of the duration of the 2019 Plan; (4) an expansion of the class of grantees eligible to participate in the 2019 Plan; and (5) any expansion in the types of awards provided under the 2019 Plan. Otherwise, the Board may amend or discontinue the 2019 Plan at any time, provided that no such amendment may adversely affect the rights under any outstanding award without the holder’s consent.

 

Effective Date of the 2019 Plan.  On August 5, 2019, the Board approved the 2019 Plan, subject to stockholder approval. The 2019 Plan will become effective on the date it is approved by the stockholders.

 

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New Plan Benefits

 

If the 2019 Plan is approved, the number of options that will be received by or allocated to the Company’s employees, directors and consultants will be determined by the Compensation Committee and is not determinable at this time. For information regarding awards made to our Named Executive Officers under the Second 2008 Plan outstanding as of August 31, 2018, see “Compensation of Executive Officers and Directors — Outstanding Equity Awards at Fiscal Year-End.” For information regarding awards made to our directors under the Second 2008 Plan outstanding as of August 31, 2018, and for a description of our compensation program for non-employee directors, see “Compensation of Executive Officers and Directors — Director Compensation.” Since August 31, 2018, we have granted a total of 423,146 options under the Second 2008 Plan as follows: 196,500 options to Mr. Nadav Kidron with an exercise price of $3.16 per share; 104,000 options to Dr. Miriam Kidron with an exercise price of $3.16 per share; 37,000 options to Ms. Hilla Eisenberg with an exercise price of $3.16 per share; 22,500 options to Dr. Mark Hasleton with an exercise price of $3.16 per share; 10,000 options to Mr. Kevin Rakin with an exercise price of $4.17 per share; 20,000 options to Mr. David Slager with an exercise price of $4.13 per share; and 33,146 options to Mr. Avraham Gabay with an exercise price of $3.55 per share.

 

U.S. Tax Aspects

 

The following is a summary of the principal U.S. federal income tax consequences of certain transactions under the 2019 Plan. It does not describe all federal tax consequences under the 2019 Plan nor does it describe state, local or foreign tax consequences.

 

ISOs . ISOs are intended to qualify for treatment as such under Section 422 of the Code. An ISO does not result in taxable income to the optionee or a deduction to us at the time it is granted or exercised, provided that no disposition is made by the optionee of the shares acquired pursuant to the option within two years after the date of grant of the option nor within one year after the date of issuance of shares to the optionee (referred to as the “ISO holding period”). However, the difference between the fair market value of the shares on the date of exercise and the exercise price will be an item of tax preference includible in “alternative minimum taxable income” of the optionee. Upon disposition of the shares after the expiration of the ISO holding period, the optionee will generally recognize long term capital gain or loss based on the difference between the disposition proceeds and the exercise price paid for the shares. If the shares are disposed of prior to the expiration of the ISO holding period (referred to as a “disqualifying disposition”), the optionee generally will recognize ordinary income, and we will have a corresponding deduction, in the year of the disposition, equal to the excess of the fair market value of the shares on the date of exercise of the option (or the sale price of the shares sold, if less) over the exercise price. Any additional gain or loss realized on the disposition will be capital gain or loss.

 

Non-Qualified Stock Options.  Options that are not ISOs (designated as such at grant or options that would otherwise have qualified (but in fact fail to qualify) as ISOs, because the aggregate fair market value of shares with respect to which such options are first exercisable by an individual in any calendar year exceeds $100,000, for example) are considered to be “non-qualified” stock options.

 

A non-qualified stock option ordinarily will not result in income to the optionee or deduction to us at the time of grant. The optionee will recognize compensation income at the time of exercise of a non-qualified stock option in an amount equal to the excess of the then fair market value of the shares over the exercise price per share. Compensation income of optionees will be subject to withholding taxes (if the optionee is an employee), and a deduction will be allowable to us in an amount equal to the optionee’s compensation income.

 

An optionee’s initial basis in shares so acquired will be the amount paid on exercise of the non-qualified stock option plus the amount of any corresponding compensation income. Any gain or loss as a result of a subsequent disposition of the shares so acquired will be capital gain or loss (short-term or long-term, as applicable).

 

Stock Appreciation Rights . A recipient realizes no income upon the grant of a stock appreciation right, but upon its exercise recognizes compensation income in an amount equal to the cash or cash equivalent that he or she receives at that time. If the recipient receives our shares upon exercise of the stock appreciation right, he or she recognizes compensation income equal to the fair market value of the shares received (or, if the shares are subject to a substantial risk of forfeiture at the exercise date, at the date or dates on which the risk expires, unless he or she elects to be taxed currently), which is measured by the difference between the base appreciation amount set forth in the related agreement and the fair market value of our shares at the time the stock appreciation right is exercised. We are entitled to a tax deduction in the amount of compensation income recognized. When the shares are subsequently sold, the recipient generally will recognize capital gain or loss (short-term or long-term, as applicable) equal to the difference between the amount realized upon the sale of the shares and his or her tax basis (generally the fair market value of the shares when acquired plus any amount paid).

 

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Stock Grants.  With respect to stock grants that are made without any restrictions, the grantee must generally recognize compensation income equal to the excess of the fair market value of shares received over the amount paid (if any). We generally will be entitled to a deduction in an amount equal to the compensation income recognized by the grantee.

 

If a stock grant award is subject to restrictions, the grantee generally will not recognize income at the time of the award, but will instead recognize compensation income equal to the excess of the fair market value of the shares received over the amount paid (if any) when restrictions on transferability or that otherwise constitute a substantial risk of forfeiture lapse. A grantee may elect (by filing a so-called Section 83(b) election with the Internal Revenue Service within 30 days of the receipt of the shares) to be taxed at the time of the receipt of the shares, rather than upon the lapse of restrictions on transferability or substantial risk of forfeiture, but if the grantee subsequently forfeits such shares, the grantee would not be entitled to any tax deduction for the amount of previously recognized compensation income. He or she will be entitled to a capital loss for the amount paid, if any, for the shares. We generally will be entitled to a deduction in an amount equal to the compensation income recognized by the grantee.

 

When the shares are subsequently sold, the recipient generally will recognize capital gain or loss (short-term or long-term, as applicable) equal to the difference between the amount realized upon the sale of the shares and his or her tax basis (generally the amount paid plus any compensation income recognized).

 

RSUs.  The grantee recognizes no income until the issuance of the shares at vesting. At that time, the grantee must generally recognize compensation income equal to the fair market value of the shares received less the amount paid (if any). We generally will be entitled to a deduction in an amount equal to the compensation income recognized by the grantee.

 

When the shares are subsequently sold, the grantee generally will recognize capital gain or loss (short-term or long-term, as applicable) equal to the difference between the amount realized upon the sale of the shares and his or her tax basis (generally the amount paid plus any compensation income recognized).

 

Limitation on the Company’s Deductions . Historically, and as a result of Section 162(m) of the Code, the Company’s deduction for certain equity awards was limited to the extent that the Chief Executive Officer and the three other most highly compensated executive officers, but not including our principal financial officer received compensation in excess of $1 million a year (other than performance-based compensation that otherwise met the requirements of Section 162(m) of the Code). In the case of options and stock appreciation rights, the performance-based exception was satisfied if, in addition to other requirements, the plan under which the option or stock appreciation rights are granted was approved by stockholders, the grants were made by a committee of outside directors and the amount of compensation a person can receive was based solely on an increase in the value of the stock after grant. Other forms of equity awards were eligible for the performance-based exception as a result of the prior shareholder approval of the Second 2008 Plan, provided the Compensation Committee satisfied the applicable requirements such as using performance goals included in the Second 2008 Plan and taking certain actions on a timely basis.

 

The Tax Cuts and Jobs Act of 2017 (the “TCJA”) modified the group of individuals to whom payments of compensation in excess of $1,000,000 is not deductible to generally include the principal executive officer, the principal financial officer and the three other most highly compensated executive officers, and provided that each person covered by Section 162(m) of the Code for a particular year after 2016 will remain subject to this limit in subsequent years, even if not included in that group for the year. It also eliminated the performance-based exemption from Section 162(m) of the Code. As a result, it is expected that certain of our compensation arrangements will result in non-deductible compensation when the total exceeds $1,000,000, except certain historical awards that meet transition rules for continued deductibility under the TCJA.

 

Nevertheless, the deductibility of compensation is but one of the critical factors in the design and implementation of any compensation arrangement, and our Board and Compensation Committee reserve the right to pay non-deductible compensation when appropriate.

 

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Israeli Tax Aspects

 

The following is a summary of the Israeli income tax consequences of certain transactions under the 2019 Plan with regard to the granting of awards, including, stock options, restricted stock and restricted stock units (the “Stock Awards”) to Israeli Stock Award holders. It is general and does not purport to be comprehensive. Generally, the 2019 Plan provides for the granting of Stock Awards to employees, directors and consultants under either Section 102 or Section 3(i) of the Tax Ordinance. The Stock Awards granted under the 2019 Plan to employees and office holders, who are not controlling shareholders (as defined in the Tax Ordinance) are subject to the “capital gains tax route” under Section 102 of the Tax Ordinance (the “Capital Gains Tax Route”) and the Stock Awards granted to participants in the 2019 Plan who do not qualify to receive Stock Awards under the Capital Gains Tax Route, including consultants, service providers and controlling shareholders, are subject to Section 3(i) of the Tax Ordinance.

 

Stock Awards.  The Capital Gains Tax Route generally provides, in connection with Stock Awards, for a reduced tax rate of 25% on gains realized upon the sale of its underlying shares, subject to the fulfillment of certain procedures and conditions including the deposit of such Stock Awards (or shares issued upon their exercise) for a requisite period of time with a trustee approved by the Israeli Tax Authority (currently, 24 months from the date of grant). Notwithstanding the above, in any event where the exercise price of the underlying shares subject to the Stock Awards is less than the fair market value of the underlying shares at the time of grant of the Stock Awards (calculated as the average value of a company’s shares on the 30 trading days preceding the date of grant), such amount will be deemed ordinary income of the Stock Award holder, taxed at the applicable marginal tax rate (up to 50% in 2019, that is, up to a 47% marginal tax rate plus a 3% surtax, if applicable) together with health insurance and social security insurance payments, on the date of sale of the underlying shares and/or the date of the release of such underlying shares from trust. In the event the requirements of Section 102 of the Tax Ordinance for the allocation of Stock Awards according to the Capital Gains Tax Route are not met, the benefit attributed to the Stock Award holder as a result of the grant of such Stock Awards will be taxed as ordinary work income at applicable marginal income tax rates (together with health insurance and social security insurance payments). For as long as restricted stock or shares issued upon exercise of Stock Awards are registered in the name of the trustee, the voting rights with respect to such shares will remain with the trustee. Under the Capital Gains Tax Route, a company, or its Israeli subsidiary, as the case may be, is generally not entitled to recognize a deduction for Israeli tax purposes on the gain recognized by the Stock Award holder upon sale of the shares underlying the Stock Awards (except for such amount that will be deemed ordinary income of the Stock Award holder as explained above, provided that such subsidiary reimburses the expenses of the issuing corporation with respect to the grant of Stock Awards to Israeli grantees). The Israeli subsidiary of the Company will be required to withhold applicable tax (and social security and national health insurance charges, if applicable) at the source on behalf of the Stock Award holder and may be required to pay social security and national health insurance charges.

 

Generally, with respect to a holder of a 3(i) Stock Award that is not registered for trade, the taxable event shall take place on the date of exercise of the Stock Award into shares, and the income will be classified as regular employment or work income subject to marginal tax rates (if the holder is an individual) or corporate tax rates (if the holder is a corporation).

 

Equity Compensation Plan Information

 

For information regarding awards made under the Second 2008 Plan outstanding as of August 31, 2018, see “Compensation of Executive Officers and Directors — Equity Compensation Plan Information.”

 

Vote Required

 

The affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and entitled to vote on Proposal 2 is required to approve the 2019 Plan.

 

The Board unanimously recommends that you vote “ FOR ” the 2019 Plan.

 

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PROPOSAL 3:
RATIFICATION OF AUDITORS

 

At the Annual Meeting, the stockholders will be asked to ratify the reappointment of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International Limited, as our independent registered public accounting firm for the 2019 fiscal year. The Independent Auditors serve as the auditor of our controlled subsidiary, as well. The Independent Auditors have no other relationship with us or with any of our affiliates, except as auditors and tax consultants. A representative of the Independent Auditors will not be present at the Annual Meeting.

 

The aggregate fees billed by Kesselman & Kesselman, independent registered public accounting firm, and member firm of PricewaterhouseCoopers International Limited, for services rendered to us during the fiscal years ended August 31, 2018 and 2017:

 

Summary:   2018     2017  
Audit Fees (1)   $ 111,000     $ 109,000  
Audit-Related Fees            
Tax Fees (2)     9,000       4,000  
All Other Fees            
Total Fees   $ 120,000     $ 113,000  

 

 
(1) Amount represents fees paid for professional services for the audit of our consolidated annual financial statements, review of our interim condensed consolidated financial statements included in quarterly reports, and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

 

(2) Represents fees paid for tax consulting services.

 

SEC rules require that before Independent Auditors are engaged by us to render any auditing or permitted non-audit related service, the engagement be: (1) pre-approved by our Audit Committee; or (2) entered into pursuant to pre-approval policies and procedures established by the Audit Committee, provided the policies and procedures are detailed as to the particular service, the Audit Committee is informed of each service, and such policies and procedures do not include delegation of the Audit Committee’s responsibilities to management.

 

The Audit Committee pre-approves all services provided by our Independent Auditors. All of the above services and fees were reviewed and approved by the Audit Committee before the services were rendered.

 

Vote Required

 

The affirmative vote of the holders of a majority of shares of Common Stock present, in person or by proxy, and entitled to vote on Proposal 3 is required for the ratification of the appointment of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International Limited, as our independent registered public accounting firm for the 2019 fiscal year.

 

The Board unanimously recommends that you vote “ FOR ” ratification of the appointment of the Independent Auditors.

   

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OTHER BUSINESS

 

We do not know of any matters that are to be presented for action at the Annual Meeting other than those set forth in the accompanying Notice of Annual Meeting of Stockholders. If any other business is properly brought before the Annual Meeting, the persons named in the enclosed form of proxy will vote the shares represented by proxies in accordance with their best judgment on such matters.

 

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING

 

Proposals of stockholders intended to be included in the Company’s proxy statement and form of proxy for use in connection with the Company’s 2020 Annual Meeting of Stockholders must be received by the Company’s Secretary at the Company’s principal executive offices at 1185 Avenue of the Americas, Suite 228, New York, New York 10036, no later than April 8, 2020, and must otherwise satisfy the procedures prescribed by Rule 14a-8 under the Exchange Act. It is suggested that any such proposals be submitted by certified mail, return receipt requested.

 

Pursuant to Rule 14a-4 under the Exchange Act, stockholder proxies obtained by our Board in connection with our 2020 Annual Meeting of Stockholders will confer on the named proxies discretionary authority to vote on any matters presented at such annual meeting which were not included in the Company’s proxy statement in connection with such annual meeting unless notice of the matter to be presented at such annual meeting is provided to the Company’s Secretary by June 22, 2020.

 

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

 

Some brokers, banks and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement or Annual Report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you call or write us at the address shown on the first page of this proxy statement. If you want to receive separate copies of our Annual Report and any proxy statement in the future or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your broker, bank or other nominee record holders, or you may contact us at the address shown on the first page of this proxy statement or by phone at 844-967-2633.

 

 

By Order of the Board of Directors,
   
  /s/ Nadav Kidron
  Nadav Kidron
  President, Chief Executive Officer and Director

 

New York, New York
August 6, 2019

 

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Appendix A

 

2019 Stock Incentive Plan

 

1. Purposes of the Plan . The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2. Definitions . The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.

 

(a) “ 3(i) Option ” means an Award (other than Restricted Stock) granted under Section 3(i).

 

(b) “ 102 Option ” means an Award (other than a SAR, a RSU or any other Award settled in cash) granted under Section 102.

 

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

 

(d) “ Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(e) “ Applicable Laws ” means the legal requirements relating to the Plan and the Awards under applicable provisions of U.S. federal securities laws, state corporate and securities laws, the Code, U.S. state and local tax laws, the rules of any applicable stock exchange or national market system, applicable laws of Israel, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

 

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

 

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

 

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

 

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

 

(j) “ Change in Control ” means the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets, or stock, or over fifty percent (50%) of the voting stock to any “person” or “group” (as such terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), or any person or group is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than fifty percent (50%) of the total voting power of the voting stock of the Company, including by way of merger, consolidation or otherwise.

 

(k) “ Code ” means the U.S. Internal Revenue Code of 1986, as amended.

 

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(l) “ Committee ” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(m) “ Common Stock ” means the common stock of the Company.

 

(n) ” Company ” means Oramed Pharmaceuticals Inc., a Delaware corporation, or any successor entity that adopts the Plan in connection with a merger, consolidation or similar transaction.

 

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

 

(p) “ Continuing Directors ” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

(q) “ Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws, unless otherwise affirmatively required under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity or any successor in any capacity of Employee, Director or Consultant or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-qualified Stock Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.

 

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

 

(s) “ Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability policy in place, “ Disability ” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(t) “ Employee ” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.

 

(u) “ Exchange Act ” means the U.S. Securities Exchange Act of 1934, as amended.

 

(v) “ Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

 

(i) If the Common Stock is listed on one or more established stock exchanges or a national market system, including without limitation the New York Stock Exchange, NYSE American and Nasdaq Stock Market, the Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in the Wall Street Journal or such other source as the Administrator deems reliable;

 

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(ii) If the Common Stock is regularly quoted on an automated quotation system (including, without limitation, the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in the Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii) In the absence of an established market for the Common Stock of the type described in clauses (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

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

 

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

 

(y) “ Israeli Employee ” means Employees, office holders of the Company or a Related Company (“Nosei Misra” – as such term is defined in the Israeli Companies Law 1999), and Directors (excluding those who are considered a “Controlling Shareholder” pursuant to Section 32(9) of the Tax Ordinance or otherwise excluded by the Tax Ordinance).

 

(z) “ Israeli Grantee ” means Grantees who are residents of the State of Israel or those who are deemed to be residents of the State of Israel for the payment of tax (whether such Grantee is entitled to the tax benefits under Section 102 or not).

 

(aa) “ ITA ” means Israeli Tax Authorities.

 

(bb) “ Non-Employee ” means Consultants or any other person who is not an Israeli Employee.

 

(cc) “ Non-qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option, a 3(i) Option or a 102 Option.

 

(dd) “ Non-Trustee 102 Option ” means a 102 Option granted pursuant to Section 102(c) of the Tax Ordinance and not held in trust by the Trustee.

 

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

 

(ff) “ Option ” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

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

 

(hh) “ Performance-Based Compensation ” means an Award that includes as a vesting condition the satisfaction of performance criteria established by the Administrator.

 

(ii) “ Plan ” means this 2019 Stock Incentive Plan, as amended and in effect from time to time.

 

(jj) “ Related Entity ” means any Parent or Subsidiary of the Company. With respect to Israeli Grantees of 102 Options, the definition shall further include any entity permitted under Section 102(a) of the Tax Ordinance.

 

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

 

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(ll) “ Restricted Stock Units ” or “ RSUs ” means an Award that may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares, or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

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

 

(nn) “ SAR ” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

 

(oo) “ Section 3(i) ” means Section 3(i) of the Tax Ordinance, as may be amended from time to time.

 

(pp) “ Section 102 ” means Section 102 of the Tax Ordinance, as may be amended from time to time.

 

(qq) “ Share ” means a share of the Common Stock.

 

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

 

(ss) “ Tax Ordinance ” means the Israeli Income Tax Ordinance [New Version], 1961 (including as amended pursuant to Amendment 132 thereto) and to the extent not specifically indicated hereunder also the rules, regulations and orders or procedures promulgated thereunder from time to time, as amended or replaced from time to time.

 

(tt) “ Trustee ” means any individual appointed by the Company to serve as trustee and approved by the ITA, in accordance with the provisions of Section 102(a) of the Tax Ordinance and the regulations promulgated thereunder.

 

(uu) “ Trustee 102 Option ” means a 102 Option granted pursuant to Section 102(b) of the Tax Ordinance and held in trust by the Trustee for the benefit of an Israeli Grantee.

 

3. Stock Subject to the Plan .

 

(a) Subject to the provisions of Section 12 below, the maximum aggregate number of Shares that may be issued pursuant to all Awards (including Incentive Stock Options) under the Plan is 1,000,000 Shares. The Shares to be issued pursuant to Awards may be authorized, but unissued, or reacquired Common Stock. Notwithstanding Section 3(b), Incentive Stock Options on no more than 1,000,000 Shares, adjusted pursuant to the provisions of Section 12 below, may be granted.

 

(b) Any Shares covered by an Award (or portion of an Award) that is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares that may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lower of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan. To the extent not prohibited by the listing requirements of the principal established stock exchange or national market system on which the Common Stock is traded and Applicable Law, any Shares covered by an Award that are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares that may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

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4. Administration of the Plan .

 

(a) Plan Administrator .

 

(i) General . With respect to grants of Awards to Directors, Employees or Consultants, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Any such Committee shall be constituted to permit such grants and related transactions to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. Further, with respect to Consultants and Employees (who are neither Directors or Officers), the Board may authorize one or more Officers to grant Awards to such persons and may limit such authority as the Board determines from time to time.

 

(ii) Administration With Respect to Directors who are not Employees . Notwithstanding the above, with respect to grants of Awards to Directors who are not Employees, the Board shall have the exclusive power to select such Directors to participate in the Plan and to determine the number of Non-qualified Stock Options, SARs or shares of Restricted Stock or Restricted Stock Units or other benefits under the Plan to be so awarded. If the Board appoints a Committee to administer the Plan, it may delegate to the Committee administration of all other aspects of the Awards made to such Directors who are not Employees.

 

(iii) Administration With Respect to Israeli Grantees . With respect to grants of Awards to Israeli Grantees, the Plan shall be administered by (A) the Board or (B) a Committee or one or more Officers designated by the Board, which Committee or Officers shall be constituted or appointed in such a manner as to satisfy the ITA and the Applicable Laws applicable to Awards for Israeli Grantees. Once appointed, such Committee or Officer shall continue to serve until otherwise directed by the Board.

 

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

 

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

 

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

 

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

 

(iii) to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder, the exercise price or purchase price of each Option or other Award, the duration of each Award and the times at which each Award shall become exercisable;

 

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

 

(v) to determine the terms and conditions of any Award granted hereunder, including but not limited to: the exercise price, the time or times when Options may be exercised or other Awards vest (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions and any restriction or limitation regarding any Award or Shares related thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

 

(vi) to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent; provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non-qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee. The reduction of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan shall not be subject to stockholder approval and canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award shall not be subject to stockholder approval and shall be at the discretion of the Administrator;;

 

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

 

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(viii) to grant Awards to Employees, Directors and Consultants employed outside the U.S. on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan;

 

(ix) to designate Awards as Incentive Stock Options or Non-qualified Stock Options, or as 102 Options (whether through a trustee or not) or 3(i) Options subject to the limitations under the ITA or any other Applicable Law and to determine the type and route of the Trustee 102 Options;

 

(x) to determine the Fair Market Value of the Shares in accordance with the provisions of the Plan; and

 

(xi) to take all such other action and make all such other determinations and interpretations, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

(c) Extent and Effect of Administrator’s Determinations . The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided, however, that the Administrator may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

 

(d) Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, the Administrator shall be defended and indemnified by the Company to the extent permitted by law against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within fifteen (15) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5. Eligibility . Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time; provided, however, that Awards to Israeli Grantees under Section 102 or Section 3(i) of the Tax Ordinance shall be subject to Section 22 below.

 

6. Types, Terms, Conditions and Limitations of Awards .

 

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

 

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(b) Designation of Award . Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-qualified Stock Option and with respect to Israeli Grantees may be further designated as 102 Options or 3(i) Options under the Tax Ordinance subject to the qualifications described in Section 22 below. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options that become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.

 

(c) Conditions of Award . Subject to the terms of the Plan, the Administrator shall determine the provisions, terms and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares or other consideration) upon settlement of the Award, payment contingencies and satisfaction of any performance criteria.

 

(d) Additional Conditions for Performance-Based Awards . The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, (xvii) market share, (xviii) satisfactory completion of clinical trials or scientific benchmarks and (xix) receipt of regulatory approvals. Such criteria shall be established before twenty-five percent (25%) of the applicable performance period has elapsed (or within ninety (90) days of a grant date, if earlier). The performance criteria may be applicable to the Company, Related Entities, and/or any individual business units of the Company or any Related Entity.

 

The extent to which performance criteria are met will be determined solely and in writing by the Administrator and partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.

 

The Administrator shall make adjustments as necessary to eliminate the effect on the stated performance criteria of unplanned acquisitions or dispositions, changes in foreign exchange rates, discrete tax items identified by the Administrator, changes in accounting standards and variances to planned annual incentive compensation expense.

 

(e) Date of Grant . The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Grantee within a reasonable time after the date of such grant. Notwithstanding anything in the Plan to the contrary, if any Award under this Plan is made to a person subject to taxation in the U.S., the date of grant of such Award shall be the date when the Company completes the corporate action necessary to create the legally binding right constituting the Award.

 

(f) Individual Limitations on Awards .

 

(i) Individual Limit for Options and SARs . The maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be 400,000 Shares. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 12 below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base appreciation amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 

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(ii) Individual Limit for Restricted Stock and Restricted Stock Units . For awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be 400,000 Shares. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 12 below.

 

(iii) Deferral . If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

 

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

 

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

 

(i) Transferability of Awards . Incentive Stock Options or Awards to Israeli Grantees may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator. Notwithstanding the foregoing, the Grantee (other than an Israeli Grantee) may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

7. Award Exercise Price, Base Appreciation Amount or Purchase Price, Consideration and Taxes .

 

(a) Exercise Price, Base Appreciation Amount or Purchase Price . The exercise price, base appreciation amount or purchase price, if any and as applicable, for an Award shall be as follows:

 

(i) In the case of an Incentive Stock Option

 

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

 

(2) granted to any Employee other than an Employee described in the preceding clause (i)(1), the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii) In the case of Options, SARs and any other Award intended to deliver as a benefit appreciation in the value per Share over the value per Share on the date of grant, the exercise price, base appreciation amount or such similar amount shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

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

 

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

 

(i) cash;

 

(ii) check;

 

(iii) surrender of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require that have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

(iv) with respect to Options, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (1) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and any required withholding provided in Section 7(c) below and (2) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

 

(v) with respect to Non-qualified Stock Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (1) the number of Shares as to which the Option is being exercised multiplied by (2) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares) and, at the election of the Grantee, less (3) such number of Shares as is equal to the withholding obligation (if any) provided in Section 7(c) below; or

 

(vi) any combination of the foregoing methods of payment.

 

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

 

(c) Taxes . No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the applicable tax withholding obligations incident to the exercise or vesting of an Award.

 

8. Exercise of Award .

 

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

 

(i) Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement; provided, however, that the standard vesting schedule for Israeli Grantees shall be as set forth in Section 22.

 

(ii) An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company (or its delegee) in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b).

 

(b) No Rights as Stockholder . The holder of an Option shall have none of the rights of a stockholder with respect to the Shares subject to the Option until such Shares are transferred to the holder (or the Trustee, if applicable) upon the exercise of the Option.

 

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(c) Conditions Upon Issuance of Shares .

 

(i) Legal Compliance . Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and delivery of such Shares or consideration in lieu of Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws or other Applicable Laws.

 

(ii) Investment Representations . As a condition to the exercise of an Award, the Company may require the person exercising such Award to make such representations and warranties that, in the opinion of the Company, are required to ensure that such exercise, or a subsequent sale or disposition of any Shares obtained upon such exercise, does not contravene any Applicable Law, including inter alia , representations and warranties at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

(iii) Restrictions . Unless otherwise set forth in an Award Agreement, Shares issued to a Grantee or the Trustee, as applicable, shall be subject to such restrictions as required by the appropriate securities law and in the event that the Company’s Shares shall be registered for trading in any public market, Grantee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period) as will be requested by the Company or its underwriters, and the Grantee by executing an Award Agreement unconditionally agrees and accepts any such limitations and undertakes to further execute any agreement as may be requested by the Company or its underwriters from time to time.

 

(d) No Fractional Shares . Only whole Shares may be issued pursuant to the exercise of an Option or other Award, and to the extent that an Option or other Award covers less than one (1) Share, it is non exercisable.

 

9. Termination, Death, Disability of Grantee .

 

(a) Exercise of Award Following Termination of Continuous Service . In the event of termination of a Grantee’s Continuous Service for any reason other than Cause, Disability or death, such Grantee may, but only within three (3) months from the date of such termination (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(b) Termination of Continuous Service for Cause . In the event of termination of a Grantee’s Continuous Service for Cause, the unvested portion of the Grantee’s Award and, to the extent not previously exercised, the vested portion of the Grantee’s Award, shall terminate.

 

(c) Disability of Grantee . In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within twelve (12) months from the date of such termination (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

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(d) Death of Grantee . In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the post-termination exercise periods following the Grantee’s termination of Continuous Service specified in this Section 9 the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination or such other portion of the Grantee’s Award as may be determined by the Administrator, within twelve (12) months from the date of death (or such longer or shorter period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

10. Restricted Stock .

 

(a) General . Restricted Stock Awards may be granted upon such terms and conditions as the Administrator shall determine, including with no restrictions.

 

(b) Purchase Price . No monetary payment (other than payments made for applicable taxes) shall be required as a condition of receiving Shares pursuant to a grant of Restricted Stock. Notwithstanding the foregoing, the Grantee shall furnish consideration in the form of cash having a value not less than the par value of the Shares subject to an award of Restricted Stock. The Board, in its sole discretion, shall determine procedures from time to time for payment of such par value by the Grantee or for collection of such amount from the Grantee by the Company. However, the Company shall have the full authority in its discretion to determine at any time that said par value shall not be paid and that the Company shall take any action to ensure that it meets any requirement of Applicable Laws regarding issuance of Shares for consideration that is lower than the par value of such Shares.

 

(c) Vesting and Restrictions on Transfer . Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to exercise conditions as described herein, as shall be established by the Administrator and set forth in the applicable Award Agreement evidencing such Award. During any restriction period in which Shares acquired pursuant to an award of Restricted Stock remain subject to exercise conditions, such Shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of unless otherwise provided in the Plan or any Award Agreement. Upon request by the Company, each Grantee shall execute any agreement evidencing such transfer restrictions prior to the receipt of Shares hereunder and the Company may place appropriate legends evidencing any such transfer restrictions on the relevant share certificates.

 

(d) Voting Rights; Dividends and Distributions . Except as provided in this Section 10 and in any Award Agreement, during any restriction period applicable to Shares subject to an award of Restricted Stock, the Grantee shall have all of the rights of a shareholder of the Company holding Shares, including the right to receive all dividends and other distributions paid with respect to such Shares. However, in the event of a dividend or distribution paid in Shares or other property or any other adjustment made upon a change in the capital structure of the Company as described in Sections 12 and 13 below, any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Grantee is entitled by reason of the Grantee’s award of Restricted Stock shall be immediately subject to the same exercise conditions as the Shares subject to the award of Restricted Stock with respect to which such dividends or distributions were paid or adjustments were made.

 

(e) Termination of Continuous Service . Unless otherwise provided by the Administrator, in the event of termination of Continuous Service of a Grantee for any reason, whether voluntary or involuntary (including the Grantee’s death or disability), the Grantee shall forfeit to the Company any Shares acquired by the Grantee pursuant to an Award of Restricted Stock that remain subject to exercise or transfer conditions as of the date of such termination.

 

11. Restricted Stock Units .

 

(a) General . Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant under the Plan Restricted Stock Units. A RSU is a right to receive a Share of the Company, under certain terms and conditions, for a consideration of no more than the underlying Share’s par value. Upon the lapse of any applicable conditions (for example, a vesting period) of a RSU, such RSU shall automatically vest into a Share of the Company (subject to adjustments under Sections 12 and 13 herein) and the Grantee shall pay to the Company its par value. The Board, in its sole discretion, shall determine procedures from time to time for payment of such par value by the Grantee or for collection of such amount from the Grantee by the Company. However, the Company shall have the full authority in its discretion to determine at any time that said nominal value shall not be paid and that the Company shall capitalize applicable profits or take any other action to ensure that it meets any requirement of applicable laws regarding issuance of Shares for consideration that is lower than the nominal value of such Shares.

 

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(b) Termination of Continuous Service . Unless determined otherwise by the Administrator, in the event of termination of Continuous Service of a Grantee, all RSUs theretofore granted to such Grantee that are not vested on the termination date shall terminate immediately and have no legal effect.

 

12. Adjustments Upon Changes in Capitalization . Subject to any required action by the stockholders of the Company, the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan, the exercise price, base appreciation amount or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Shares or similar transaction affecting the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award. Adjustments shall be made by the Administrator, whose determination in that respect shall be final, conclusive and binding.

 

13. Adjustments Upon Change in Control .

 

(a) Unless otherwise set forth in the Award Agreement, in the event of a Change in Control after the effective date of the Plan, the Administrator or the Board may, in its sole discretion, provide for the (i) termination of an Award upon the consummation of the Change in Control, but only if such Award has vested and been paid out or the Grantee has been permitted to exercise the Option in full for a period of not less than thirty (30) days prior to the Change in Control, (ii) acceleration of all or any portion of an Award, (iii) payment of an amount (in cash or, in the discretion of the Administrator or the Board, in the form of consideration paid to shareholders of the Company in connection with such Change in Control) in exchange for the cancellation of an Award, which, in the case of Options and SARs, shall equal the excess, if any, of the Fair Market Value of the Shares subject to such Options or SARs over the aggregate exercise price or base appreciation amount of such Option or SAR, and/or (iv) issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted hereunder in a manner complying with Treasury Regulation Section 1.409A-1(b)(5)(v)(D), Treasury Regulation Section 1.424-1 or any applicable successor provisions.

 

(b) In the event of any adjustment in the number of Shares covered by any Award, any fractional Shares resulting from such adjustment shall be disregarded and each such Award shall cover only the number of full Shares resulting from such adjustment.

 

(c) All adjustments pursuant to this Section 13 shall be made by the Administrator, and its determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.

 

14. Effective Date and Term of Plan . The Plan shall become effective upon its adoption by the Board and shall continue in effect for a term of ten (10) years unless sooner terminated. Subject to Section 19 below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective. In the case of Israeli Grantees, 102 Options will be granted only after the lapse of at least thirty (30) days following the date in which the Plan and the relevant forms will be submitted to the tax authorities.

 

15. Amendment, Suspension or Termination of the Plan .

 

(a) The Board or the Administrator may from time to time amend, suspend or terminate in whole or in part, and if suspended or terminated, may reinstate, any or all of the provisions of the Plan; provided, however, that no amendment of the Plan shall be made without the approval of the Company’s stockholders to the extent such approval is required under Section 19 or if such amendment would lessen the stockholder approval requirements of Section 4(b).

 

A- 12

 

 

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

 

(c) No amendment, alteration, suspension or termination of the Plan (except as provided herein) shall adversely affect any rights under Awards already granted to a Grantee, unless mutually agreed otherwise between the Grantee and the Administrator, which agreement must be in writing or electronic format and signed by the Grantee and the Company.

 

(d) To the extent applicable, it is intended that the Plan and all Awards hereunder comply with the requirements of Section 409A of the Code, and the Plan and all Award Agreements shall be interpreted and applied by the Administrator in a manner consistent with this intent in order to avoid the imposition of any additional tax under Section 409A of the Code. In the event that any provision of the Plan or an Award Agreement is determined by the Administrator to not comply with the applicable requirements of Section 409A of the Code, the Administrator shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Administrator deems necessary to comply with such requirements, provided that no such action shall adversely affect any outstanding Award without the consent of the affected Grantee. Notwithstanding the foregoing or anything elsewhere in the Plan or an Award Agreement to the contrary, if a Grantee is a “specified employee” as defined in Section 409A of the Code at the time of termination of Continuous Service with respect to an Award, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A of the Code in respect of Awards that are deferred compensation for purposes of such Section 409A, the commencement of any payments or benefits under the Award shall be deferred until the date that is one day following six (6) months following the Grantee’s separation from service (or such other period as required to comply with Section 409A).

 

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

 

17. Liability of the Company .

 

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

 

(b) Grants Exceeding Allotted Shares . If the Shares covered by an Award exceed, as of the date of grant, the number of Shares that may be issued under the Plan without additional shareholder approval, such Award shall be void with respect to such excess awarded Shares, unless shareholder approval of an amendment sufficiently increasing the number of Shares subject to the Plan is timely obtained in accordance with the Plan.

 

18. No Effect on Terms of Employment/Consulting Relationship or Retirement Plans .

 

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

 

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

 

A- 13

 

 

19. Stockholder Approval .

 

(a) Incentive Stock Options . Awards of Incentive Stock Options shall only be made under the Plan if the stockholders of the Company approve the Plan within twelve (12) months before or after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-qualified Stock Options.

 

(b) Amendments . Without approval of the Company’s stockholders there shall be no: (i) increase in the number of shares to be issued under the Plan, except as permitted in Section 12; (ii) extension of the duration of the Plan; (iii) expansion of the class of Grantees eligible to participate in the Plan; (iv) expansion in the types of Awards provided under the Plan; or (v) other change in the Plan that requires stockholder approval under Applicable Law.

 

20. Unfunded Obligation . Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, that the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

21. Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

 

22. Israeli Grantees .  This Section shall apply only to Israeli Grantees and is intended to enable the Company to grant Awards under the Plan pursuant and subject to Section 102 and Section 3(i) of the Tax Ordinance. Accordingly, the Plan is designated to comply with the Tax Ordinance and the rules, regulations and orders or procedures promulgated thereunder from time to time, as amended or replaced from time to time, and shall be submitted to the ITA as required thereunder.

 

In any case of contradiction, whether explicit or implied, between the provisions of this Section 22 and the Plan, the provisions set out in this Section 22 shall prevail unless the Administrator decides otherwise to ensure compliance with the Tax Ordinance and other Applicable Laws.

 

(a) Eligibility . 102 Options may be granted only to Israeli Employees. Non-Employees may only be granted 3(i) Options. The grant of an Award hereunder shall neither entitle the Grantee to participate nor disqualify the Israeli Grantee from participating in any other grant of Awards pursuant to the Plan or any other option or stock plan of the Company or any Related Company.

 

(b) Grant of Awards in Trust .

 

(i) Grants Made Under Section 102 .

 

(1) The Company may designate 102 Options as Trustee 102 Options or Non-Trustee 102 Options. The designation of Non-Trustee 102 Options and Trustee 102 Options shall be subject to the terms and conditions set forth in Section 102 of the Tax Ordinance and the regulations promulgated thereunder.

 

A- 14

 

 

(ii) Grant of Trustee 102 Options .

 

(1) The grant of the Trustee 102 Options shall be made under the Plan and shall be conditional upon the approval of the Plan by the ITA. Trustee 102 Options may be granted at any time after the passage of thirty (30) days following the delivery by the Company to the ITA of a notice pertaining to the appointment of the Trustee and the adoption of the Plan, unless otherwise determined by the ITA. 102 Options, which shall be granted pursuant to Section 102, and/or any Shares issued upon exercise or vesting of such Awards, as the case may be, and/or other Shares received subsequently following any realization of rights, shall be issued to the Trustee. Each Israeli Grantee in respect of whom a Trustee 102 Option is granted and held in trust by the Trustee shall be referred to as a “beneficial optionee” hereunder.

 

(2) Trustee 102 Options may either be classified as Capital Gain Options or Ordinary Income Options:

 

a. Trustee 102 Options elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) shall be referred to herein as “Capital Gain Options” or “CGO.”

 

b. Trustee 102 Options elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(l) shall be referred to herein as “Ordinary Income Options” or “OIO.”

 

(3) The Company’s election of the type of Trustee 102 Options as CGO or OIO granted to Employees (the “Election”) shall be appropriately filed with the ITA thirty (30) days before the date of grant of a Trustee 102 Option, unless otherwise determined by the ITA. Such Election shall become effective beginning the first date of grant of a Trustee 102 Option under this Plan and shall remain in effect until the end of the year following the year during which the Company first granted Trustee 102 Options. The Election shall obligate the Company to grant only the type of Trustee 102 Option it has elected, and shall apply to all Israeli Grantees who were granted Trustee 102 Options during the period indicated herein or therein, all in accordance with the provisions of Section 102(g) of the Tax Ordinance. Notwithstanding, such Election shall not prevent the Company from granting Non-Trustee 102 Options simultaneously.

 

(4) All Trustee 102 Options must be held in trust by and issued on the name of the Trustee, as described below.

 

(5) With respect to Trustee 102 Options, the provisions of the Plan and/or an Award Agreement shall be subject to the provisions of Section 102 and the ITA’s permit, and the said provisions and permit shall be deemed an integral part of this Section 22 and of the Award Agreement for the respective Grantees thereof. Any provision of Section 102 and/or the said permit that is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Award Agreement, shall be considered binding upon the Company and the Israeli Grantee.

 

(iii) Issuance to Trustee .

 

(1) All Trustee 102 Options granted under the Plan and/or any Shares allocated or issued upon exercise or vesting of such Trustee 102 Options, as the case may be, and/or other and all rights deriving from or in connection therewith, including, without limitation, in accordance with Section 12 above or any bonus Shares or stock dividends issued in connection therewith shall be granted by the Company to the Trustee, and the Trustee shall hold each such Trustee 102 Option and the Shares issued upon exercise or vesting thereof, as the case may be, in trust for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”) for the benefit of the Grantees in respect of whom such Trustee 102 Option was granted. If applicable, all certificates representing Shares issued to the Trustee under the Plan shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Shares are released from the Trust as herein provided.

 

(2) In the event the requirements for Trustee 102 Options are not met for any reason whatsoever, then the Trustee 102 Options may be treated as Non-Trustee 102 Options, all in accordance with the provisions of Section 102 and regulations promulgated thereunder.

 

A- 15

 

 

(3) With respect to any Trustee 102 Option, subject to the provisions of Section 102 and any rules or regulations or orders or procedures promulgated thereunder, an Israeli Grantee shall not be entitled to sell or release from Trust the Trustee 102 Option, the Shares received upon the exercise or vesting of such Option, as the case may be, and/or any right deriving from or in connection therewith, including, without limitation, in accordance with Section 13 above or any bonus Shares or stock dividends issued in connection therewith, until the later of: (i) the lapse of the Holding Period required under Section 102 and (ii) the vesting of such 102 Options set forth in the respective Award Agreement (such later date being hereinafter referred to as the “Release Date”). Notwithstanding the foregoing, if such sale or release occurs during the Holding period, the provisions of Section 102 and the rules or regulations promulgated thereunder shall apply and any expenses and/or tax consequences therefrom shall be borne by the Israeli Grantee.

 

(4) Subject to the terms hereof, at any time after the Release Date with respect to any Trustee 102 Options or Shares the following shall apply:

 

a. Trustee 102 Options granted, and/or Shares or rights issued to the Trustee shall continue to be held by the Trustee, on behalf of the beneficial optionee. From and after the Release Date, upon the written request of any beneficial optionee, the Trustee shall release from the Trust the Trustee 102 Options granted, and/or the Shares or rights issued, on behalf of such beneficial optionee, by executing and delivering to the Company such instrument(s) as the Company may require, giving due notice of such release to such beneficial optionee; provided, however, that the Trustee shall not so release any such Trustee 102 Options and/or Shares and/or rights to such beneficial optionee unless the latter, prior to or concurrently with such release, provides the Trustee with evidence, satisfactory in form and substance to the Trustee, that all taxes, if any, required to be paid upon such release have, in fact, been paid.

 

b. Alternatively, from and after the Release Date, upon the written instructions of the beneficial optionee to sell any Shares and rights issued upon exercise of Trustee 102 Options, the Trustee or the Company, as the case may be, shall use its best efforts to effect such sale and shall transfer such Shares to the purchaser thereof concurrently with the receipt, or after having made suitable arrangements to secure the payment, of the purchase price in such transactions. The Trustee or the Company, as the case may be, shall withhold from such proceeds any and all taxes required to be paid in respect of such sale, shall remit the amount so withheld to the appropriate tax authorities and shall pay the balance thereof directly to the beneficial optionee, reporting to such beneficial optionee and to the Company the amount so withheld and paid to said authorities.

 

c. Notwithstanding the foregoing, in the event the underwriters of securities of the Company impose restrictions on the transferability of the Shares during a lock-up period, the beneficial optionee shall not be entitled to release from Trust the Trustee 102 Options granted and/or the Shares issued and/or to instruct the Trustee to effect a sale of same, for as long as the restrictions are in effect. In the event the Trustee 102 Options granted and/or the Shares issued have been released from trust the restrictions imposed on the transferability of same shall nevertheless apply to said optionee’s Trustee 102 Options held by the Grantee and/or Shares in the same manner. Consequently, the Israeli Grantee shall sign any documents required in order to effect the restrictions, for as long as the restrictions are in effect.

 

d. Upon receipt of the Award, the Israeli Grantee will sign an undertaking to release the Trustee from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Award or Share or rights granted to same thereunder. The Trustee may establish additional terms and conditions in connection with Awards held in trust by the Trustee.

 

(iv) Grant of Non-Trustee 102 Options .

 

(1) Awards granted pursuant to this subsection are intended to constitute Non-Trustee 102 Options and shall be subject to the general terms and conditions of the Plan and this Section 22, except for provisions of the Plan applying to Trustee 102 Option or Awards under a different tax law or regulation.

 

A- 16

 

 

(2) With respect to Non-Trustee 102 Options, if the Grantee ceases to be employed by or of service to the Company or a Related Company, the Grantee shall be required to extend to the Company a security or guarantee for the payment of tax due at the time of sale of Shares or other rights, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

 

(v) Grants Made Under Section 3(i) . Awards granted pursuant to this subsection are intended to constitute 3(i) Options and shall be subject to the general terms and conditions of the Plan and Section 22 thereof, except for said provisions of the Plan applying to Awards under a different tax law or regulation. The Administrator may choose to deposit the 3(i) Options granted pursuant to Section 3(i) of the Tax Ordinance with a trustee. In such event, said trustee shall hold such 3(i) Options in trust, until exercised by the Grantee, pursuant to the Company’s instructions from time to time. If determined by the Administrator, the trustee shall be responsible for withholding any taxes to which a Grantee become liable upon the exercise of such 3(i) Options.

 

(c) Award Agreement . Without derogating from the powers of the Administrator under the Plan, the Administrator shall adopt the form of Award Agreement for Israeli Grantees in form acceptable by the ITA and in compliance with the Tax Ordinance. The Award Agreement shall further indicate the type of Award (102, 3(i), Trustee, Non-Trustee etc.) granted thereunder.

 

(d) Vesting . Without derogating from the terms of any Award Agreement or the discretionary authority of the Administrator, the standard vesting for Awards to Israeli Grantees shall be as follows:

 

(i) Twenty five percent (25%) of the Awards granted under each Award Agreement shall vest on the end of the first year of Continuous Service following the vesting commencement date determined by the Administrator and if not specified the date of the grant of an Option (the “First Anniversary”); and

 

(ii) The remaining seventy five percent (75%) of the Awards shall vest on a quarterly basis over a period of three (3) years commencing as of the First Anniversary in twelve (12) equal portions subject to Continuous Service of the Grantee.

 

(e) With respect to all Shares (in contrast to unexercised Options) allocated or issued upon the exercise of Awards by the Israeli Grantee, the Grantee or the Trustee, as the case may be, shall be entitled to receive dividends in accordance with the quantity of such Shares, subject however to any applicable taxation on distribution of dividends.

 

(f) Without derogating from anything in the Plan, to the extent permitted by Applicable Laws, any tax consequences attributable to the Israeli Grantee arising from the grant, vesting or exercise of any Award, from the payment for Shares covered thereby or from any other event or act (of the Company, a Related Company, the Trustee or the Grantee) hereunder shall be borne solely by the Grantee. The Company and/or or a Related Company and/or the Trustee shall withhold taxes according to the requirements under the Applicable Laws, rules and regulations, including withholding taxes at the source. Furthermore, to the extent permitted by Applicable Law, the Grantee shall agree to indemnify the Company and/or a Related Company and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Grantee. The Administrator and/or the Trustee shall not be required to release any Share certificate to a Grantee until all required payments have been fully made.

 

(g) The Plan, to the extent applicable to Israeli Grantees, shall be governed by and construed and enforced in accordance with the laws of the State of Israel applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of Tel-Aviv, Israel shall have sole jurisdiction in any matters pertaining to Israeli Grantees.

 

A- 17

 

 

ORAMED PHARMACEUTICALS INC.

 

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 2019

 

PROXY CARD

 

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

 

The undersigned hereby appoints Nadav Kidron, President and Chief Executive Officer, and Avraham Gabay, Chief Financial Officer, and each of them, attorneys, agents and proxies of the undersigned, with full power of substitution to each of them, to represent and to vote on behalf of the undersigned all the shares of Common Stock in Oramed Pharmaceuticals Inc. (the “Company”) which the undersigned is entitled to vote at the Annual Meeting of Stockholders (the “Meeting”) to be held at the offices of Sullivan & Worcester LLP, 1633 Broadway, New York, NY 10019, on August 29, 2019 at 4:00 p.m. (Eastern time), and at any adjournments or postponements thereof, upon the following matters, which are more fully described in the Notice of Annual Meeting of Stockholders and Proxy Statement relating to the Meeting.

 

This Proxy Card, when properly executed, will be voted in the manner directed herein by the undersigned. If no direction is made with respect to any matter, this Proxy Card will be voted “FOR” Proposals 1, 2 and 3. Any and all proxies heretofore given by the undersigned are hereby revoked.

 

(Continued and to be signed on the reverse side)

 

 

 

 

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE “FOR” PROPOSALS 1,2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ☒.

 

Proposal 1 : To re-elect the following directors of the Company to hold office until our next annual meeting of stockholders and until their respective successors shall be elected and qualified or until their earlier resignation or removal:

 

1.1.

  Miriam Kidron   ☐    For   ☐    Against   ☐    Abstain
1.2.   Nadav Kidron   ☐    For   ☐    Against   ☐    Abstain
1.3.   Aviad Friedman   ☐    For   ☐    Against   ☐    Abstain
1.4.   Kevin Rakin   ☐    For   ☐    Against   ☐    Abstain
1.5.   Leonard Sank   ☐    For   ☐    Against   ☐    Abstain
1.6.   Gao Xiaoming   ☐    For   ☐    Against   ☐    Abstain

  

Proposal 2 : To approve the Company’s 2019 Stock Incentive Plan.

 

For

  Against   Abstain

 

Proposal 3 : To ratify the appointment of Kesselman & Kesselman, certified public accountants in Israel, a member of PricewaterhouseCoopers International Limited, as the independent registered public accounting firm of the Company for the fiscal year ending August 31, 2019.

 

For

  Against   Abstain

 

MARK HERE IF YOU PLAN TO ATTEND THE MEETING ☐

 

In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the Meeting or any adjournment or postponement thereof.

 

The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement of the Company relating to the Meeting.

 

_____________________ Date: ___________, 2019
Signature of Stockholder

 

_____________________ Date: ___________, 2019
Signature of Stockholder

 

PLEASE RETURN THE SIGNED PROXY CARD IN THE ACCOMPANYING REPLY ENVELOPE AS SOON AS POSSIBLE TO ENSURE THAT IT IS RECEIVED BEFORE THE ANNUAL MEETING OF STOCKHOLDERS.

 

Please sign exactly as your name or names appear on this Proxy Card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.

 

 

 

 

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