Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-222138
PROSPECTUS
SUPPLEMENT
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(To
Prospectus dated January 4, 2018)
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Up
to $15,000,000
Vascular
Biogenics Ltd.
Ordinary
Shares
We
have entered into an Equity Distribution Agreement, dated May 17, 2019, or the Distribution Agreement, with Oppenheimer &
Co. Inc., or Oppenheimer, relating to our ordinary shares offered by this prospectus supplement. In accordance with the terms
of the Distribution Agreement, we may offer and sell our ordinary shares having an aggregate offering price of up to $15,000,000
from time to time through Oppenheimer acting as our agent and/or principal.
Our
ordinary shares are listed on the Nasdaq Global Market under the symbol “VBLT.” The closing price of our ordinary
shares on May 14, 2019 on the Nasdaq Global Market was $1.24.
Sales
of our ordinary shares, if any, under this prospectus supplement may be made in one or more sales, each deemed to be an “at
the market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities
Act. Oppenheimer, as sales agent, is not required to sell any specific amount, but will use commercially reasonable efforts to
sell on our behalf all of the shares requested to be sold by us, consistent with its normal trading and sales practices, on mutually
agreed terms between Oppenheimer and us. There is no arrangement for funds to be received in any escrow, trust or similar arrangement.
Oppenheimer
will be entitled to compensation at a fixed commission rate of up to 3.0 % of the gross sales price per share sold through it
as sales agent under the Distribution Agreement. In connection with the sale of our ordinary shares on our behalf, Oppenheimer
will be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation of Oppenheimer
will be deemed to be underwriting commissions. We have also agreed to provide rights of indemnification and contribution to Oppenheimer
with respect to certain liabilities, including liabilities under the Securities Act.
As
of the date of this prospectus supplement, the aggregate market value of our outstanding ordinary shares held by non-affiliates,
or public float, was approximately $61.5 million, based on 35,881,128 ordinary shares outstanding, of which 765,382 shares are
held by affiliates, and a price of $1.75 per share, which was the highest reported closing sale price of our ordinary shares as
quoted on the Nasdaq Global Market in the 60 days prior to May 14, 2019. During the 12 calendar months prior to, and including,
the date of this prospectus supplement, we have not sold any ordinary shares pursuant to General Instruction I.B.5. of Form F-3.
INVESTING
IN OUR ORDINARY SHARES INVOLVES A HIGH DEGREE OF RISK. BEFORE DECIDING WHETHER TO INVEST IN OUR ORDINARY SHARES, YOU SHOULD REVIEW
CAREFULLY THE RISKS AND UNCERTAINTIES DESCRIBED UNDER THE HEADING “RISK FACTORS” BEGINNING ON PAGE S-6 OF THIS
PROSPECTUS SUPPLEMENT AND PAGE 6 OF OUR ANNUAL REPORT ON FORM 20-F FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018, AS WELL AS THE
RISKS AND UNCERTAINTIES DESCRIBED IN THE OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the ordinary shares
being offered by this prospectus supplement or accompanying prospectus, or determined if this prospectus supplement or accompanying
prospectus is truthful or complete. Any representation to the contrary is a criminal offense
.
Oppenheimer
& Co.
The
date of this prospectus supplement is May 17, 2019.
TABLE
OF CONTENTS
PROSPECTUS SUPPLEMENT
PROSPECTUS
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement relates to the offering of our ordinary shares. Before buying any of the ordinary shares that we are offering,
we urge you to carefully read this prospectus supplement, together with the accompanying base prospectus and information incorporated
by reference as described under the heading “Where You Can Find More Information; Incorporation of Certain Information by
Reference” in this prospectus supplement, and any free writing prospectus or prospectus supplement that we have authorized
for use in connection with this offering. These documents contain important information that you should consider when making your
investment decision.
This
document is part of the registration statement that we filed with the Securities and Exchange Commission, or the SEC, using a
“shelf” registration process and consists of two parts. The first part, this prospectus supplement, describes the
terms of this offering of ordinary shares and also adds to and updates information contained in the documents incorporated by
reference into this prospectus supplement and the accompanying prospectus. The second part, the accompanying prospectus, including
the documents incorporated by reference therein, provides more general information. To the extent there is a conflict between
the information contained in this prospectus supplement, on the one hand, and the information contained in any document incorporated
by reference into this prospectus supplement that was filed with the SEC, before the date of this prospectus supplement, on the
other hand, you should rely on the information in this prospectus supplement. If any statement in one of these documents is inconsistent
with a statement in another document having a later date—for example, a document incorporated by reference into this prospectus
supplement—the statement in the document having the later date modifies or supersedes the earlier statement.
You
should rely only on the information contained in this prospectus supplement, any document incorporated by reference herein, or
any free writing prospectuses we may provide to you in connection with this offering. Neither we nor Oppenheimer has authorized
anyone to provide you with any different information. We take no responsibility for, and can provide no assurance as to the reliability
of, any other information that others may provide to you. The information contained in this prospectus supplement, and in the
documents incorporated by reference herein, is accurate only as of the date such information is presented. Our business, financial
condition, results of operations and future prospects may have changed since those respective dates.
We
further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any
document that is incorporated by reference herein were made solely for the benefit of the parties to such agreement, including,
in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation,
warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made.
Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state
of our affairs.
This
prospectus supplement does not constitute an offer to sell or the solicitation of an offer to buy any securities other than the
ordinary shares to which it relates, nor does this prospectus supplement constitute an offer to sell or the solicitation of an
offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.
Unless
otherwise indicated, information contained in or incorporated by reference into this prospectus supplement concerning our industry
and the markets in which we operate, including market opportunity, market position and competitive landscape, is based on information
from our management’s estimates, as well as from industry publications, surveys and studies conducted by third parties.
Management estimates are derived from publicly available information, our knowledge of our industry, and assumptions based on
such information and knowledge, which we believe to be reasonable. In addition, while we believe that information contained in
the industry publications, surveys and studies has been obtained from reliable sources, the accuracy and completeness of such
information is not guaranteed, and we have not independently verified any of the data contained in these third-party sources.
This
prospectus supplement, including the documents incorporated by reference herein, includes statements that are based on various
assumptions and estimates that are subject to numerous known and unknown risks and uncertainties. Some of these risks and uncertainties
are described in the section entitled “Risk Factors” beginning on page S-6 of this prospectus supplement and page
6 of our Annual Report on Form 20-F for the fiscal year ended December 31, 2018, or our Annual Report, as well as the other documents
we file with the SEC. These and other important factors could cause our future results to be materially different from the results
expected as a result of, or implied by, these assumptions and estimates. You should read the information contained in, or incorporated
by reference into, this prospectus supplement completely and with the understanding that future results may be materially different
from and worse than what we expect. See the information included under the heading “Special Note Regarding Forward-Looking
Information.”
This
prospectus supplement does not contain all of the information included in the registration statement of which this prospectus
supplement is a part. For a more complete understanding of this offering of ordinary shares, you should refer to the registration
statement, including its exhibits. The registration statement containing this prospectus, including the exhibits to the registration
statement, provides additional information about us and the ordinary shares offered pursuant to this prospectus supplement. The
registration statement, including the exhibits, can be read on the SEC’s website or at the SEC’s offices mentioned
under the heading “Where You Can Find More Information; Incorporation of Certain Information by Reference.”
All
references in this prospectus supplement or the accompanying prospectus to “Vascular Biogenics,” “VBL Therapeutics,”
“VBL,” the “Company,” “we,” “us,” or “our” mean Vascular Biogenics
Ltd., unless we state otherwise or the context otherwise requires.
PROSPECTUS
SUPPLEMENT SUMMARY
This
prospectus supplement summary discusses the key aspects of the offering and highlights certain information appearing elsewhere
in this prospectus supplement and the accompanying prospectus and in the documents we incorporate by reference herein. However,
as this is a summary, it does not contain all of the information you should consider before deciding to invest in our ordinary
shares. You are encouraged to carefully read this entire prospectus supplement, and the accompanying prospectus, including the
information provided under the headings (i) “Risk Factors” in this prospectus supplement and in our Annual Report
as well as in the other documents we file with the SEC, and (ii) “Operating and Financial Review and Prospects”, as
well as our financial statements and the related notes thereto and the other documents incorporated by reference in this prospectus
supplement and the accompanying prospectus.
Overview
We
are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of first-in-class treatments
for cancer. Our program is based on our proprietary Vascular Targeting System, or VTS, platform technology, which utilizes genetically
targeted therapy to destroy newly formed, or angiogenic, blood vessels, and which we believe will allow us to develop product
candidates for multiple oncology indications.
Our
lead product candidate, VB-111 (ofranergene obadenovec), is a gene-based biologic that we are developing for solid tumor indications,
and which we have advanced to programs for recurrent glioblastoma, or rGBM, an aggressive form of brain cancer, ovarian cancer
and thyroid cancer. We have obtained fast track designation for VB-111 in the United States for prolongation of survival in patients
with glioblastoma that has recurred following treatment with standard chemotherapy and radiation. We have also received orphan
drug designation for GBM in both the United States and Europe. VB-111 has also received an orphan designation for the treatment
of ovarian cancer by the European Medicines Agency. In September 2015, we reported complete results from our Phase 2 trial of
VB-111 in rGBM, demonstrating a statistically-significant benefit in overall survival and favorable response rate in patients
treated with VB-111 in combination with bevacizumab. Our pivotal Phase 3 GLOBE study in rGBM began in August 2015 and was comparing
a combination of VB-111 and bevacizumab to bevacizumab alone. The study, which enrolled a total of 256 patients in the US, Canada
and Israel was conducted under a special protocol assessment, or SPA, agreement with the U.S. Food and Drug Administration, or
FDA, with full endorsement by the Canadian Brain Tumor Consortium (CBTC). On March 8, 2018, we announced top-line results from
the GLOBE study, which showed that the study did not meet its pre-specified primary endpoint of overall survival (OS). No new
safety concerns associated with VB-111 have been identified in the GLOBE study. In November 2018, full data from the GLOBE trial
were presented at the 2018 Society for Neuro-Oncology Annual Meeting. Analyses pointed to the regimen in GLOBE trial as the potential
reason for its negative outcome, indicating that priming with VB-111 without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic
mechanism of VB-111 in rGBM. We do not think that results of the GLOBE study in rGBM will necessarily have implications on the
prospects for VB-111 in other regimens or tumor types. Accordingly, following independent MRI analyses at UCLA which validated
the overall clinical and survival benefit of VB-111 among patients who were primed with VB-111 in our prior Phase 2 study in rGBM,
a new investigator-sponsored Phase 2 trial evaluating VB-111 in rGBM patients is expected to be launched in the second quarter
of 2019. Our OVAL phase 3 potential registration study of VB-111 in platinum resistant ovarian cancer was launched in December
2017 and is conducted in collaboration with the GOG Foundation, Inc., a leading organization for research excellence in the field
of gynecologic malignancies. An interim analysis in the OVAL study is expected in year-end 2019. In addition, a collaborative
Phase 2 study evaluating VB-111 in combination with a checkpoint-inhibitor in gastrointestinal tumors is expected to be launched
in the second half of 2019.
We
also have been conducting a program targeting anti-inflammatory diseases, based on the use of our Lecinoxoid platform technology.
Lecinoxoids are a novel class of small molecules we developed that are structurally and functionally similar to naturally occurring
molecules known to modulate inflammation. The lead product candidate from this program, VB-201, is a Phase 2-ready molecule that
demonstrated efficacy in reducing vascular inflammation in a Phase 2 sub-study in psoriatic patients with cardiovascular risk.
Due to business limitations associated with the heavy burden of developing medications for cardiovascular diseases, we chose to
test it in psoriasis and ulcerative colitis; however, as we reported in February 2015, VB-201 failed to meet the primary endpoint
in Phase 2 clinical trials for psoriasis and for ulcerative colitis. As a result, we have terminated our development of VB-201
in those indications. Nevertheless, based on recent pre-clinical studies, we believe that VB-201 and some second generation molecules
such as VB-703 may be applicable for NASH and renal fibrosis. Since the company intends to focus its efforts and resources on
advancing our oncology program, we will seek to advance our Lecinoxoid assets via strategic deals. Accordingly, in March 2019,
we announced a strategic exclusive option license agreement with one of the world-leading European animal health companies, for
the development of VB-201 for veterinary use. We retain the VB-201 rights for treatment of humans, worldwide.
We
are also conducting a research program exploring the potential of targeting of MOSPD2 for immuno-oncology applications. In January
2017, we reported that targeting of MOSPD2 inhibits chemotaxis of monocytes and neuropils. In 2018, we published a manuscript
showing that MOSPD2 can play a major role in breast cancer cell migration and metastasis, and that targeting MOSPD2 may be employed
to prevent the spreading of breast cancer cells. We also presented proof-of-concept data demonstrating antibody-mediated killing
of MOSPD2-expressing cancer cells. We believe that targeting of MOSPD2 may have several therapeutic applications, including inhibition
of monocyte migration in chronic inflammatory conditions, inhibition of tumor cell metastases and targeting of MOSPD2-expressing
tumor cells. We are developing our “VB-600 series” of pipeline candidates towards inflammatory and oncology applications.
We
are developing our lead oncology product candidate, VB-111, for solid tumor indications, with current clinical programs in rGBM,
thyroid cancer and ovarian cancer. In interim analyses of data from our ongoing open-label Phase 2 clinical trial of VB-111 in
rGBM, we observed dose-dependent attenuation of tumor growth and an increase in median overall survival, which is the time interval
from initiation of treatment to the patient’s death. The U.S. Food and Drug Administration, or FDA, has granted VB-111 fast
track designation for prolongation of survival in patients with glioblastoma that has recurred following treatment with temozolomide,
a chemotherapeutic agent commonly used to treat newly diagnosed glioblastoma, and radiation. On July 1, 2014, the FDA concurred
with the design and planned analyses of our Phase 3 pivotal trial of VB-111 in rGBM pursuant to an SPA. While VBL’s request
was to use the same regimen of the Phase 2 clinical trial in rGBM for the Phase 3 study, the agency requested that the Phase 3
study design would be revised. Accordingly, whereas in the Phase 2 study the experimental arm received VB-111 monotherapy and
upon disease progression to continue VB-111 in combination with bevacizumab, the SPA language defined that subjects in the Phase
3 experimental arm were to receive VB-111 in combination with bevacizumab, from start. At the time, commencement of the trial
was subject to our providing the agency with more information regarding our potency release assay for the trial. We developed
this assay and submitted initial information to the FDA on May 26, 2014. On February 5, 2015 the FDA has found our data satisfactory
and removed the partial hold.
We
began our Phase 3 pivotal trial of VB-111 in rGBM in August 2015 and completed patient enrollment for the study in December 2016,
five months ahead of our initial plan. Following positive safety reviews announced in December 2016, in April 2017 and the third
and final safety review that was announced in October 2017, the GLOBE trial continued to completion. On March 8, 2018, we announced
top-line results from the GLOBE study, which showed that the study did not meet its pre-specified primary endpoint of overall
survival (OS). In November 2018, full data from the GLOBE trial were presented at the 2018 Society for Neuro-Oncology Annual Meeting
by Dr. Timothy Cloughesy, MD, Professor of Clinical Neurology and Director of the Neuro-Oncology Program, UCLA School of Medicine
and principal investigator of the GLOBE trial. Thorough analyses of the baseline risk factors of the Phase 2 and the Phase 3 treatment
groups did not reveal any differences. Therefore, patient selection or different patient populations could not explain the difference
between the results of the two studies. The analyses pointed to the regimen in GLOBE trial as the potential reason for its failure,
indicating that priming with VB-111 without bevacizumab may be critical for the immune and vascular-disruptive/anti-angiogenic
mechanism of VB-111 in rGBM. Following independent MRI analyses at UCLA which validated the overall clinical and survival benefit
of VB-111 among patients who were primed with VB-111 in our prior Phase 2 study in rGBM, a new investigator-sponsored trial evaluating
VB-111 in rGBM patients is expected to be launched in the second quarter of 2019.
VB-111
was also being studied in a Phase 2 trial for recurrent platinum-resistant Ovarian Cancer and in a Phase 2 study in recurrent,
iodine-resistant differentiated Thyroid Cancer. In a Phase 2 trial for recurrent platinum-resistant ovarian cancer, VB-111 demonstrated
a statistically significant increase in overall survival and about 60% durable response rate (as measured by reduction in CA-125),
approximately twice the historical response with bevacizumab plus chemotherapy in ovarian cancer. In December 2016, we had an
end-of-Phase-2 meeting with the FDA, in which we received approval from the FDA to advance VB-111 for a Phase 3 study in platinum-resistant
ovarian cancer, which we launched in December 2017. The OVAL study is conducted in collaboration with the Gynecologic Oncology
Group (GOG) Foundation, Inc., a leading organization for research excellence in the field of gynecologic malignancies. In March
2019, at the Society of Gynecologic Oncology conference, we presented data from of ovarian cancer patients, showing the potential
of VB-111 to stimulate the immune system and drive immune cells to infiltrate the tumor microenvironment. An interim analysis
in the OVAL study is expected to occur in year-end 2019.
In
February 2017, we reported full data from our exploratory Phase 2 study of VB-111 in recurrent, iodine-resistant differentiated
thyroid cancer. The primary endpoint of the trial, defined as 6-month progression-free-survival (PFS-6) of 25%, was met with a
dose response. Forty-seven percent of patients in the therapeutic-dose cohort reached PFS-6, versus 25% in the sub-therapeutic
cohort, both groups meeting the primary endpoint. An overall survival benefit was seen, with a tail of more than 40% at 3.7 years
for the therapeutic-dose cohort, similar to historical data for pazopanib (Votrient
®
), a tyrosine kinase inhibitor;
however, most patients in the VB-111 study had tumors that previously had progressed on pazopanib or other kinase inhibitors.
As
of December 31, 2018, we had studied VB-111 in over 300 patients and have observed it to be well-tolerated. In December 2015,
were granted a US composition of matter patent that provides intellectual property protection for VB-111 in the US until October
2033 before any patent term extension.
In
October 2017, we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant can be the commercial
facility for production of VB-111, if approved. The Modiin facility is the first commercial-scale gene therapy manufacturing facility
in Israel and currently one of the largest gene-therapy designated ones in the world (20,000 sq. ft.).
In
November 2017, we signed an exclusive license agreement with NanoCarrier Co., Ltd. (TSE Mothers:4571) for the development, commercialization,
and supply of VB-111 in Japan. VBL retains rights to VB-111 in the rest of the world. Under terms of the agreement, VBL has granted
NanoCarrier an exclusive license to develop and commercialize VB-111 in Japan for all indications. VBL will supply NanoCarrier
with VB-111, and NanoCarrier will be responsible for all regulatory and other clinical activities necessary for commercialization
in Japan. In exchange, we received an up-front payment of $15 million, and are entitled to receive greater than $100 million in
development and commercial milestone payments to the extent we achieve the related milestones. VBL will also receive tiered royalties
on net sales in the high-teens.
Based
on support from pre-clinical data and the histological data in ovarian cancer showing ability of VB-111 to turn an immunologically
“cold” to “hot” tumor, an exploratory Phase 2 study for VB-111 in combination a checkpoint inhibitor,
is planned in colon cancer. Launch of this trial is expected in the second half of 2019.
Corporate
Information
The
legal name of our company is Vascular Biogenics Ltd. and we conduct business under the name VBL Therapeutics. We were incorporated
in Israel on January 31, 2000 as a company limited by shares under the name Medicard Ltd. In January 2003, we changed our name
to Vascular Biogenics Ltd. Our registered and principal office is located 8 HaSatat St., Modi’in, Israel 7178106. Our service
agent in the United States is located at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark Delaware 19711
and our telephone number is 972-8-9935000. Throughout this prospectus, we refer to various trademarks, service marks and trade
names that we use in our business. The “Vascular Biogenics” design logo, “VBL Therapeutics,” “Vascular
Targeting System,” “VTS,” “Lecinoxoids,” “VB-111,” “VB-201,” the “OVAL”
design logo and other trademarks or service marks of Vascular Biogenics Ltd. appearing in this prospectus are the property of
Vascular Biogenics Ltd. We have several other registered trademarks, service marks and pending applications relating to our products.
Although we have omitted the “®” and “” trademark designations for such marks in this prospectus supplement,
all rights to such trademarks are nevertheless reserved. Other trademarks and service marks appearing in this prospectus are the
property of their respective holders.
THE
OFFERING
Issuer:
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Vascular
Biogenics Ltd.
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Ordinary shares
offered by us:
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A
number of ordinary shares resulting in aggregate gross proceeds to us of up to $15.0 million.
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Ordinary
shares to be outstanding after this offering:
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Up
to 47,977,902 ordinary shares, assuming sales of 12,096,774 of our ordinary shares in this offering at an offering price of
$1.24 per share, which was the last reported sale price of our ordinary shares on the NASDAQ Global Market on May 14, 2019.
The actual number of shares issued will vary depending on the sales price under this offering.
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Manner of offering:
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“At
the market” offering that may be made from time to time by or through Oppenheimer, acting as sales agent or principal.
See “Plan of Distribution” on page S-23.
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Use of proceeds:
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We
intend to use the net proceeds from this offering for the advancement of clinical programs, product development, and for working
capital and other general corporate purposes. See “Use of Proceeds” on page S-11.
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Risk factors:
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Investing
in our ordinary shares involves a high degree of risk. You should review carefully the risks and uncertainties described
under the heading “Risk Factors” beginning on page S-6 of this prospectus supplement and other information
included or incorporated into this prospectus supplement, as well as the risks and uncertainties described in the other
documents we file with the SEC.
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Nasdaq Global Market symbol:
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“VBLT”
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Unless
otherwise indicated, the number of our ordinary shares to be outstanding immediately after this offering as shown above is based
on 35,881,128 ordinary shares outstanding as of March 31, 2019, but excluding the following as of such date:
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5,056,914
ordinary shares issuable upon the exercise of share options outstanding as of March 31, 2019 at a weighted average exercise
price of $3.36 per share;
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7,154,762 ordinary
shares issuable upon the exercise of warrants outstanding as of March 31, 2019 at a weighted average exercise price of $3.58
per share; and
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1,930,305 ordinary
shares reserved for future issuance under our equity incentive plans as of March 31, 2019.
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RISK
FACTORS
Investing
in our ordinary shares involves a high degree of risk. Before making an investment decision, you should carefully consider the
risks and uncertainties described below, together with all of the other information included in this prospectus, and the information
incorporated by reference herein, including the risks described under the heading “Risk Factors” beginning on page
6 of our Annual Report,
as
well as in the other documents we file with the SEC.
If
any of the risks described below, or incorporated by reference into this prospectus, actually occur, our business, financial condition,
results of operations and future prospects could suffer. In that case, the trading price of our ordinary shares may decline and
you may lose all or part of your investment. The risks and uncertainties we have described are not the only ones we face. Additional
risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, financial
condition, results of operations and future prospects. Certain statements below are forward-looking statements. See the information
included under the heading “Special Note Regarding Forward-Looking Information.”
Risks
Related to this Offering and Ownership of Our Ordinary Shares
There
has been limited trading volume for our ordinary shares.
Even
though our ordinary shares have been listed on the Nasdaq Global Market, there has been limited liquidity in the market for the
ordinary shares, which could make it more difficult for holders to sell their ordinary shares. There can be no assurance that
an active trading market for our ordinary shares will be sustained. In addition, the stock market generally has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies.
Broad market and industry factors may negatively affect the market price of our ordinary shares, regardless of our actual operating
performance. The market price and liquidity of the market for our ordinary shares that will prevail in the market may be higher
or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control.
Even
if this offering is successful, we may seek to raise additional funding to pursue our long-term strategy, which may not be available
on acceptable terms, or at all. Failure to obtain such funding may force us to delay, limit or terminate our product development
efforts or other operations.
We
are currently advancing VB-111 for recurrent glioblastoma, or rGBM, an aggressive form of brain cancer, ovarian cancer and thyroid
cancer. We intend to advance VB-111 through clinical development and other product candidates through preclinical and clinical
development. Developing pharmaceutical products is expensive, and we expect our research and development expenses to increase
substantially in connection with our ongoing activities, particularly as we advance our product candidates in clinical trials.
As
of March 31, 2019, our cash and cash equivalents and short-term bank deposits were $47.7 million. We estimate that this amount,
before the net proceeds from this offering, if any, will be sufficient to fund our operations into 2021. We estimate that the
net proceeds from this offering will be approximately $14.4 million, based on an offering price of $1.24 per share, which was
the last reported sale price of our ordinary shares on the Nasdaq Global Market on May 14, 2019, after deducting sales agent fees
and estimated offering expenses payable by us, assuming the full amount of ordinary shares are sold. However, our operating plan
may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned,
through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements
and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. Raising funds in
the current economic environment may present additional challenges. Even if we believe we have sufficient funds for our current
or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic
considerations.
Our
management will have broad discretion with respect to the use of the proceeds of this offering.
Although
we have highlighted the intended use of proceeds for this offering, our management will have broad discretion as to the application
of these net proceeds and could use them for purposes other than those contemplated at the time of this offering. Accordingly,
you will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the
opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible
that the proceeds will be invested in a way that does not yield a favorable, or any, return for us and cause the price of our
ordinary shares to decline.
We
do not intend to pay dividends on our ordinary shares, so any returns will be limited to the value of our shares.
We
have never declared or paid any cash dividends on our share capital. We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for
the foreseeable future. Any return to shareholders will therefore be limited to the appreciation of their shares. In addition,
Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes. Furthermore,
our payment of dividends (out of tax-exempt income) may retroactively subject us to certain Israeli corporate income taxes, to
which we would not otherwise be subject.
The
Israeli government grants we have received for research and development expenditures restrict our ability to manufacture products
and transfer technologies outside of Israel and require us to satisfy specified conditions. If we fail to satisfy these conditions,
we may be required to refund grants previously received together with interest and penalties.
Our
research and development efforts have been financed, in part, through the grants that we have received from the Israel Innovation
Authority, or IIA (formerly the Office of the Chief Scientist). As of March 31, 2019, we have received an aggregate funding of
$22.6 million (which together with Libor calculated as of March 31, 2019, amounts to $27.9 million). We, therefore, must comply
with the requirements of the Israeli Law for the Encouragement of Research, Development and Technological Innovation in Industry
Law, 5754-1984, or the Research Law.
Under
the Research Law, we are required to manufacture the major portion of each of our products developed using these grants in the
State of Israel or otherwise ask for special approvals. We may not receive the required approvals for any proposed transfer of
manufacturing activities. Even if we do receive approval to manufacture products developed with government grants outside of Israel,
the royalty rate may be increased and we may be required to pay up to 300% of the grant amounts plus interest, depending on the
manufacturing volume that is performed outside of Israel. This restriction may impair our ability to outsource manufacturing or
engage in our own manufacturing operations for those products or technologies. See “Item 5. Operating and Financial Review
and Prospects-Financial Overview-Research and Development Expenses” for additional information.
Additionally,
under the Research Law, we are prohibited from transferring, including by way of license, the IIA-financed technologies and related
intellectual property rights and know-how outside of the State of Israel, except under limited circumstances and only with the
approval of the IIA Research Committee. We may not receive the required approvals for any proposed transfer and, even if received,
we may be required to pay the IIA a portion, to be set by the IIA upon their approval of such transaction, of the consideration
or milestone and royalties payments that we receive upon any sale or out licensing of such technology to a non-Israeli entity,
up to 600% of the grant amounts plus interest. The scope of the support received, the royalties that we have already paid to the
IIA, the amount of time that has elapsed between the date on which the know-how or the related intellectual property rights were
transferred and the date on which the IIA grants were received and the sale price and the form of transaction will be taken into
account in order to calculate the amount of the payments to the IIA. Approval of the transfer of technology to residents of the
State of Israel is required, and may be granted in specific circumstances only if the recipient abides by the provisions of applicable
laws, including the restrictions on the transfer of know-how and the obligation to pay royalties. No assurance can be made that
approval to any such transfer, if requested, will be granted.
These
restrictions may impair our ability to sell our technology assets or to perform or outsource manufacturing outside of Israel,
engage in change of control transactions or otherwise transfer our know-how outside of Israel and may require us to obtain the
approval of the IIA for certain actions and transactions and pay additional royalties and other amounts to the IIA. In addition,
any change of control and any change of ownership of our ordinary shares that would make a non-Israeli citizen or resident an
“interested party,” as defined in the Research Law, requires prior written notice to the IIA, and our failure to comply
with this requirement could result in criminal liability.
These
restrictions will continue to apply even after we have repaid the full amount of royalties on the grants. If we fail to satisfy
the conditions of the Research Law, we may be required to refund certain grants previously received together with interest and
penalties, and may become subject to criminal charges.
Future
sales of substantial amounts of our ordinary shares, or the possibility that such sales could occur, could adversely affect the
market price of our ordinary shares
.
We
may issue up to $15.0 million of our ordinary shares from time to time in this offering. The issuance from time to time of shares
of our ordinary shares in this offering, as well as the fact that we have the ability to issue such shares in this offering, could
have the effect of depressing the market price or increasing the market price volatility of our ordinary shares.
It
is not possible to predict the actual number of ordinary shares we will sell under the Distribution Agreement, or the gross proceeds
resulting from those sales.
Subject
to certain limitations in the Distribution Agreement and compliance with applicable law, we have the discretion to deliver a placement
notice to Oppenheimer at any time throughout the term of the Distribution Agreement. The number of ordinary shares that are sold
through Oppenheimer after delivering a placement notice will fluctuate based on a number of factors, including the market price
of our ordinary shares during the sales period, the limits we set with Oppenheimer in any applicable placement notice, and the
demand for our ordinary shares during the sales period. Because the price per share of each share sold will fluctuate during this
offering, it is not currently possible to predict the number of shares that will be sold or the gross proceeds to be raised in
connection with those sales.
The
ordinary shares offered hereby will be sold in “at the market” offerings, and investors who buy shares at different
times will likely pay different prices.
Investors
who purchase shares in this offering at different times will likely pay different prices, and so may experience different levels
of dilution and different outcomes in their investment results. We will have discretion, subject to market demand, to vary the
timing, prices, and numbers of shares sold in this offering. In addition, subject to the final determination by our board of directors,
there is no minimum or maximum sales price for shares to be sold in this offering. Investors may experience a decline in the value
of the shares they purchase in this offering as a result of sales made at prices lower than the prices they paid.
We
might be classified as a passive foreign investment company in future years, and our U.S. shareholders may suffer adverse tax
consequences as a result.
Generally,
if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable
to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized
as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income
includes dividends, interest, and gains from the sale or exchange of investment property and rents and royalties other than rents
and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are
characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale
of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends
received on our ordinary shares by individuals who are U.S. holders, and having interest charges apply to distributions by us
and the proceeds of share sales. See “Item 10E. Taxation-Certain Material U.S. Federal Income Tax Considerations-Passive
Foreign Investment Company Considerations” in our Annual Report and “Taxation –Certain Material U.S. Federal
Income Tax Considerations” below for additional information.
Since
PFIC status depends on the composition of our income and the composition and value of our assets (which may be determined in part
by reference to the market value of our ordinary shares, which may be volatile) from time to time, there can be no assurance that
we will not be considered a PFIC for any taxable year. Based upon the expected value of our assets, including any goodwill, and
the expected composition of our income and assets, we believe that we should not be a PFIC for our 2018 taxable year and we do
not anticipate that we will be a PFIC with respect to our 2019 taxable year. Each prospective investor is strongly urged to consult
its tax advisors regarding the application of these rules to such investor’s particular circumstances.
Certain
U.S. shareholders may be subject to adverse tax consequences if we are characterized as “Controlled Foreign Corporation.”
Each
“Ten Percent Shareholder” in a non-U.S. corporation that is classified as a “controlled foreign corporation,”
or a CFC, for U.S. federal income tax purposes generally is required to include in income for U.S. federal tax purposes such Ten
Percent Shareholder’s pro rata share of the CFC’s “subpart F income” and the CFC’s increase in earnings
invested in “U.S. property,” in each case as defined and calculated under U.S. tax law, even if the CFC has made no
distributions to its shareholders. A non-U.S. corporation generally will be classified as a CFC for U.S. federal income tax purposes
if Ten Percent Shareholders own, directly or indirectly, more than 50% of either the total combined voting power of all classes
of stock of such corporation entitled to vote or of the total value of the stock of such corporation. A “Ten Percent Shareholder”
is a U.S. person (as defined by the U.S. Internal Revenue Code of 1986, as amended, or the Code), who owns or is considered to
own 10% or more of the total combined voting power of all classes of stock entitled to vote of such corporation. The determination
of CFC status is complex and includes attribution rules, the application of which is not entirely certain.
We
do not believe that we were a CFC for the taxable year ended December 31, 2018 or that we are currently a CFC. It is possible,
however, that a shareholder treated as a U.S. person for U.S. federal income tax purposes will acquire, directly or indirectly,
enough shares to be treated as a Ten Percent Shareholder after application of the constructive ownership rules and, together with
any other Ten Percent Shareholders of our company, cause us to be treated as a CFC for U.S. federal income tax purposes. We believe
that certain of our shareholders are Ten Percent Shareholders for U.S. federal income tax purposes. Holders should consult their
own tax advisors with respect to the potential adverse U.S. federal income tax consequences of becoming a Ten Percent Shareholder
in a CFC.
SPECIAL
NOTE REGARDING FORWARD-LOOKING INFORMATION
This
prospectus supplement contains “forward-looking statements” within the meaning of the federal securities laws, which
statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the
safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included or incorporated
by reference in this prospectus supplement, other than statements of historical fact, are forward-looking statements. You can
identify forward-looking statements by the use of words such as “may,” “will,” “could,” “anticipate,”
“expect,” “intend,” “believe,” “continue” or the negative of such terms, or other
comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. In
particular, forward-looking statements contained in this prospectus supplement relate to, among other things, our future or assumed
financial condition, results of operations, liquidity, business forecasts and plans, research and product development plans, manufacturing
plans, strategic plans and objectives, capital needs and financing plans, product launches, regulatory approvals, competitive
environment, and the application of accounting guidance. We caution you that the foregoing list may not include all of the forward-looking
statements made in this prospectus supplement.
Our
forward-looking statements are based on our management’s current assumptions and expectations about future events and trends,
which affect or may affect our business, strategy, operations or financial performance. Although we believe that these forward-looking
statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are
made in light of information currently available to us. Our actual financial condition and results could differ materially from
those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section
entitled “Risk Factors” beginning on page S-6 of this prospectus supplement and page 6 of our Annual Report, as
well as those described in the other documents we file with the SEC. You should read this prospectus supplement, and the documents
incorporated by reference herein, completely and with the understanding that our actual future results may be materially different
from and worse than what we expect.
Moreover,
we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for
our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements.
Forward-looking
statements speak only as of the date they were made, and, except to the extent required by law or the rules of the NASDAQ Global
Market, we undertake no obligation to update or review any forward-looking statement because of new information, future events
or other factors. You should, however, review the risks and uncertainties we describe in the reports we will file from time to
time with the SEC, after the date of this prospectus. See the information included under the heading “Where You Can Find
More Information; Incorporation of Certain Information by Reference.”
We
qualify all of our forward-looking statements by these cautionary statements.
USE OF PROCEEDS
We
may issue and sell our ordinary shares having aggregate gross proceeds of up to $15.0 million from time to time. Because there
is no minimum offering amount required as a condition to close this offering, the actual total public offering amount, commissions
and proceeds to us, if any, are not determinable at this time. We estimate that the net proceeds from the sale of our ordinary
shares that we are offering may be up to $14.4 million, after deducting Oppenheimer’s commission and estimated offering
expenses payable by us.
We
intend to use the net proceeds from the sale of our ordinary shares for the advancement of clinical programs, product development,
and for working capital and other general corporate purposes. As of the date of this prospectus supplement, we cannot predict
with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts
that we will actually spend on the uses set forth above. The amounts and timing of our actual use of proceeds will vary depending
on numerous factors, including the factors described under the heading “Risk Factors” beginning on page S-6 of
this prospectus supplement and page 6 of our Annual Report, as well as the other documents we file with the SEC. As a result,
management will retain broad discretion over the allocation of the net proceeds from this offering, and investors will be relying
on the judgment of our management regarding the application of the net proceeds.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our share capital. We currently anticipate that we will retain future earnings
for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for
the foreseeable future. Any return to shareholders will therefore be limited to the appreciation of their shares. In addition,
Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes. Furthermore,
our payment of dividends (out of tax- exempt income) may retroactively subject us to certain Israeli corporate income taxes, to
which we would not otherwise be subject.
TAXATION
The
information presented under the caption “Israeli Tax Considerations and Government Programs” below is a discussion
of the material Israeli tax laws applicable to us, and certain Israeli Government programs that may benefit us. The information
presented under the caption “Certain Material U.S. Federal Income Tax Considerations” below is a discussion of certain
material U.S. federal income tax considerations to a U.S. Holder (as defined below) of the acquisition, ownership and disposition
of our ordinary shares.
You
should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences
that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
Israeli
Tax Considerations and Government Programs
The
following is a brief summary of the material Israeli tax laws applicable to us, and certain Israeli Government programs that may
benefit us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition
of our ordinary shares purchased by investors. This summary does not discuss all the aspects of Israeli tax law that may be relevant
to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special
treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to
special tax regimes not covered in this discussion. Because parts of this discussion are based on new tax legislation that has
not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or
the courts will accept the views expressed in this discussion. The discussion below is subject to change, including due to amendments
under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect
the tax consequences described below.
General
Corporate Tax Structure in Israel
Israeli
companies are generally subject to corporate tax, currently at the rate of 23% of a company’s taxable income. However, the
effective tax rate payable by a company that derives income from an Approved Enterprise, a Benefited Enterprise, a Preferred Enterprise
or a Preferred Technology Enterprise (as discussed below) may be considerably less. Capital gains derived by an Israeli company
are generally subject to tax at the prevailing corporate tax rate.
Law
for the Encouragement of Industry (Taxes), 5729-1969
The
Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several
tax benefits for “Industrial Companies.”
The
Industry Encouragement Law defines an “Industrial Company” as a company incorporated and resident in Israel, of which
90% or more of its income in any tax year, other than income from defense loans, is derived from an “Industrial Enterprise”
owned by it that is located in Israel. An “Industrial Enterprise” is defined as an enterprise whose principal activity
in a given tax year is industrial production.
The
following corporate tax benefits, among others, are available to Industrial Companies:
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●
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amortization
over an eight-year period of the cost of patents and rights to use patents and know-how which were purchased in good faith
and are used for the development or advancement of the Industrial Enterprise;
|
|
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under
certain conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and
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●
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expenses
related to a public offering are deductible in equal amounts over three years.
|
There
is no assurance that we qualify as an Industrial Company or that the benefits described above are currently available to us or
will be available to us in the future.
Law
for the Encouragement of Capital Investments, 5719-1959
The
Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives
for capital investments in productive assets, such as production facilities, by “Industrial Enterprises” (as defined
under the Investment Law).
The
Investment Law was significantly amended effective April 1, 2005 (the “2005 Amendment”), and further amended as of
January 1, 2011 (the “2011 Amendment”) and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the
2005 Amendment, tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005
Amendment remain in force but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly,
the 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in
effect prior to the 2011 Amendment. However, companies entitled to benefits under the Investment Law as in effect prior to January
1, 2011 were entitled to choose to continue to enjoy such benefits, provided that certain conditions are met, or elect instead,
irrevocably, to forego such benefits and have the benefits of the 2011 Amendment apply. Finally, the 2017 Amendment provided another
benefits track, which represents an alternative to the tracks available under the 2005 Amendment and the 2011 Amendment. We have
examined the possible effect, if any, of these provisions of the 2011 Amendment and the 2017 Amendment on our financial statements
and have decided, at this time, not to opt to apply the new benefits under the 2011 Amendment or the 2017 Amendment.
Tax
Benefits Prior to the 2005 Amendment
An
investment program that is implemented in accordance with the provisions of the Investment Law prior to the 2005 Amendment, referred
to as an “Approved Enterprise,” is entitled to certain benefits. A company that wished to receive benefits as an Approved
Enterprise must have received approval from the Investment Center of the Israeli Ministry of the Economy (formerly the Ministry
of Industry, Trade and Labor), or the Investment Center. Each certificate of approval for an Approved Enterprise relates to a
specific investment program in the Approved Enterprise, delineated both by the financial scope of the investment and by the physical
characteristics of the facility or the asset.
In
general, an Approved Enterprise is entitled to receive a grant from the Government of Israel or an alternative package of tax
benefits, known as the alternative benefits track. The tax benefits from any certificate of approval relate only to taxable income
attributable to the specific Approved Enterprise. Income derived from activity that is not integral to the activity of the Approved
Enterprise does not enjoy tax benefits.
In
addition, a company that has an Approved Enterprise program is eligible for further tax benefits if it qualifies as a Foreign
Investors’ Company (“FIC”), which is a company with a level of foreign investment, as defined in the Investment
Law, of more than 25%. The level of foreign investment is measured as the percentage of rights in the company (in terms of shares,
rights to profits, voting and appointment of directors), and of combined share capital and loans, that are owned, directly or
indirectly, by persons who are not residents of Israel. The determination as to whether a company qualifies as an FIC is made
on an annual basis.
If
a company elects the alternative benefits track and distributes a dividend out of income derived by its Approved Enterprise during
the tax exemption period it will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect the
pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have
been applicable without the tax exemption under the alternative benefits track. In addition, dividends paid out of income attributed
to an Approved Enterprise are generally subject to withholding tax at source at the rate of 15% or such lower rate as may be provided
in an applicable tax treaty.
The
Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment
that are included in an Approved Enterprise program during the first five years in which the equipment is used.
The
benefits available to an Approved Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and
its regulations and the criteria in the specific certificate of approval. If a company does not meet these conditions, it would
be required to repay the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest.
We
do not have Approved Enterprise programs.
Tax
Benefits Subsequent to the 2005 Amendment
The
2005 Amendment applies to new investment programs commencing after 2004, but does not apply to investment programs approved prior
to April 1, 2005. The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted
before the 2005 Amendment became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect
on the date of such approval.
The
2005 Amendment provides that a certificate of approval from the Investment Center will only be necessary for receiving cash grants.
As a result, it was no longer necessary for a company to obtain an Approved Enterprise certificate of approval in order to receive
the tax benefits previously available under the alternative benefits track. Rather, a company may claim the tax benefits offered
by the alternative benefits track directly in its tax returns, provided that it meets the criteria for tax benefits set forth
in the amendment. In order to receive the tax benefits, the 2005 Amendment states,
inter alia
, that a company must make
an investment which meets all of the conditions, including a minimum qualifying investment in certain productive assets as specified
in the Investment Law. Such investment, along with the fulfillment of certain export requirements, allows a company to receive
“Benefited Enterprise” status, and may be made over a period of no more than three years culminating with the end
of the Benefited Enterprise election year.
The
extent of the tax benefits available under the 2005 Amendment to qualifying income of a Benefited Enterprise depends on, among
other things, the geographic location in Israel of the Benefited Enterprise. The location will also determine the period for which
tax benefits are available. Such tax benefits include an exemption from corporate tax on undistributed income generated by the
Benefited Enterprise for a period of between two to ten years, depending on the geographic location of the Benefited Enterprise
in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the level
of foreign investment in the company in each year. The benefits period is limited to 12 years from the beginning of the Benefited
Enterprise election year. With respect to an establishment Benefited Enterprise plan located in certain specific locations, the
benefits period is limited to 14 years from the beginning of the Benefited Enterprise election year, depending on the location
of the Benefited Enterprise. We informed the Israeli Tax Authority of our choice of 2012 as a Benefited Enterprise election year.
A company qualifying for tax benefits under the 2005 Amendment which pays a dividend out of income derived by its Benefited Enterprise
during the tax exemption period will be subject to corporate tax in respect of the amount of the dividend (grossed-up to reflect
the pre-tax income that it would have had to earn in order to distribute the dividend) at the corporate tax rate which would have
otherwise been applicable. Dividends paid out of income attributed to a Benefited Enterprise are generally subject to withholding
tax at source at the rate of 15% or such lower rate as may be provided in an applicable tax treaty.
The
benefits available to a Benefited Enterprise are subject to the fulfillment of conditions stipulated in the Investment Law and
its regulations. If a company does not meet these conditions, in a given tax year during the benefits period, it would generally
not be eligible for tax benefits during such tax year; however, the company’s eligibility for tax benefits in prior and
future years should not be impacted.
We
currently have one Benefited Enterprise program under the Investments Law, which, we believe, may entitle us to certain tax benefits.
The tax benefit period for this program has not yet commenced but is expected to end no later than the end of tax year 2023. During
the benefits period, which shall commence with the year we will first earn taxable income relating to such enterprise, subject
to the 12 years limitation described above, and shall run for a period of up to 10 years (assuming FIC status), a corporate tax
exemption is expected to apply with respect to the taxable income from our Benefited Enterprise program (once generated) generated
during the first two years of the benefits period (so long as it remains undistributed) and reduced corporate tax rates are expected
to apply to such taxable income generated in the remaining years of the benefits period.
There
is no assurance that our future taxable income will qualify as Benefited Enterprise income or that the benefits described above
will be available to us in the future.
Tax
Benefits Under the 2011 Amendment
The
2011 Amendment canceled the availability of the benefits granted to companies under the Investment Law prior to 2011, subject
to certain exceptions, and, instead, introduced new benefits for income generated by a “Preferred Company” through
its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition
of a Preferred Company includes a company incorporated in Israel that is not wholly-owned by a governmental entity, and that has,
among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment, in
2014 and thereafter a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived
by its Preferred Enterprise unless the Preferred Enterprise is located in development zone A, in which case the rate will be 9%.
This latter rate was reduced to 7.5% as of January 1, 2017. It should be noted, that the classification of income generated from
the provision of usage rights in know-how or software that were developed in the Preferred Enterprise, as well as royalty income
received with respect to such usage, as Preferred Enterprise income may be subject to the issuance of a pre-ruling from the Israel
Tax Authority stipulating that such income is associated with the productive activity of the Preferred Enterprise in Israel.
Dividends
paid out of income attributed to a Preferred Enterprise are generally subject to withholding tax at source at the rate of 20%
or such lower rate as may be provided in an applicable tax treaty. However, if such dividends are paid to an Israeli company,
no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company,
withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty will apply).
The
2011 Amendment also provided transitional provisions to address companies that may be eligible for tax benefits under the Approved
Enterprise or Benefited Enterprise regimes. These transitional provisions provide, among other things, that unless an irrevocable
request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to be derived as of January
1, 2011: (1) the terms and benefits included in any certificate of approval that was granted to an Approved Enterprise which chose
to receive grants before the 2011 Amendment became effective will remain subject to the provisions of the Investment Law as in
effect on the date of such approval, and subject to certain other conditions, (2) terms and benefits included in any certificate
of approval that was granted to an Approved Enterprise which had participated in an alternative benefits track before the 2011
Amendment became effective will remain subject to the provisions of the Investment Law as in effect on the date of such approval,
provided that certain conditions are met, and (3) a Benefited Enterprise can elect to continue to benefit from the benefits provided
to it before the 2011 Amendment came into effect, provided that certain conditions are met.
We
have examined the potential Israeli tax implications associated with the adoption and implementation of the provisions of the
2011 Amendment and have decided, at this time, not to apply the new benefits under the 2011 Amendment. There is no assurance that
our future taxable income will qualify as Preferred Enterprise income or that the benefits described above will be available to
us in the future.
The
termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax
liabilities.
Tax
Benefits Under the 2017 Amendment
The
2017 Amendment introduced new benefits for income generated by a “Preferred Company” (as defined above) through its
“Preferred Technology Enterprise” (as defined in the Investment Law) as of January 1, 2017. Pursuant to the 2017 Amendment,
in 2017 and thereafter a Preferred Company is entitled to a reduced corporate tax rate of 12% with respect to its income derived
by its Preferred Technology Enterprise unless the Preferred Enterprise is located in development zone A, in which case the rate
will be 7.5%. It should be noted that the calculation of a Preferred Company’s Preferred Technology Enterprise income is
based on a complex formula and the income not classified as such may be classified as Preferred Enterprise income or ordinary
income depending on the circumstances. In addition, a Preferred Company must generally fulfill certain conditions to be eligible
for Preferred Technology Enterprise status including,
inter alia
, an R&D expenses level of at least 7% of total revenues
or more than NIS 75 million per year.
Dividends
paid out of Preferred Technology Enterprise income are generally subject to withholding tax at source at the rate of 20% or such
lower rate as may be provided in an applicable tax treaty. However, subject to the fulfillment of certain conditions, to the extent
that the dividends are paid to a direct foreign parent company holding at least 90% of the shares of the Preferred Company, a
reduced withholding tax rate of 4% shall apply. Notwithstanding the above, if such dividends are paid to an Israeli company, no
tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company,
withholding tax at a rate of 20% or such lower rate as may be provided in an applicable tax treaty will apply).
We
have examined the potential Israeli tax implications associated with the adoption and implementation of the provisions of the
2017 Amendment and have decided, at this time, not to apply the new benefits under the 2017 Amendment. There is no assurance that
our future taxable income will qualify as Preferred Technology Enterprise income or that the benefits described above will be
available to us in the future.
The
termination or substantial reduction of any of the benefits available under the Investment Law could materially increase our tax
liabilities.
Taxation
of Our Shareholders
This
discussion does not address the tax consequences applicable to shareholders that own, or have owned at any time, directly or indirectly,
10% or more of our shares (“Controlling Shareholders”), and such shareholders should consult their tax advisers as
to the tax consequences of owning or disposing of our shares.
Capital
Gains Taxes Applicable to Non-Israeli Resident Shareholders
A
non-Israeli resident who derives capital gains from the sale of shares in an Israeli resident company that were purchased after
the Company was listed for trading on a stock exchange outside of Israel will be exempt from Israeli tax so long as,
inter
alia
, such capital gains were not attributable to a permanent establishment that the non-resident maintains in Israel.
However,
non-Israeli resident corporations will not be entitled to the foregoing exemption if the Israeli residents: (i) have a controlling
interest, directly or indirectly, alone, together with another (i.e., together with a relative, or together with someone who is
not a relative but with whom, according to an agreement, there is regular cooperation in material matters of the company, directly
or indirectly), or together with another Israeli resident, of more than 25% in one or more of the means of control in such non-Israeli
resident corporation, or (ii) Israeli residents are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits
of such non-Israeli resident corporation, whether directly or indirectly.
Additionally,
a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable
tax treaty. For example, under the United States- Israel Tax Treaty, the disposition of shares by a shareholder who (1) is a U.S.
resident (for purposes of the treaty), (2) holds the shares as a capital asset, and (3) is entitled to claim the benefits afforded
to such person by the treaty, is generally exempt from Israeli capital gains tax. Such exemption will not apply if: (1) the capital
gain arising from the disposition can be attributed to a permanent establishment in Israel, (2) the shareholder holds, directly
or indirectly, shares representing 10% or more of the voting power of the company during any part of the 12-month period preceding
the disposition, subject to certain conditions, or (3) such U.S. resident is an individual and was present in Israel for 183 days
or more during the relevant taxable year. In such case, the sale, exchange or disposition of our ordinary shares would be subject
to Israeli tax, to the extent applicable; however, under the United States-Israel Tax Treaty, the taxpayer would be permitted
to claim a credit for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition,
subject to the limitations under U.S. law applicable to foreign tax credits. The United States-Israel Tax Treaty does not relate
to U.S. state or local taxes.
In
some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment of the consideration
may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from
tax on their capital gains in order to avoid withholding at source at the time of sale.
Taxation
of Non-Israeli Shareholders on Receipt of Dividends
Non-Israeli
residents are generally subject to Israeli withholding tax on the receipt of dividends paid on our ordinary shares at the rate
of 25%, unless relief is provided in a treaty between Israel and the shareholder’s country of residence, subject to receipt
of a valid certificate from the Israeli Tax Authority allowing for such reduced rate. With respect to a person who is a “substantial
shareholder” at the time of receiving the dividend or at any time during the preceding twelve months, the applicable withholding
tax rate is 30%. Furthermore, an additional 3% tax might be applicable to individual shareholders if certain conditions are met.
A “substantial shareholder” is generally a person who alone or together with such person’s relative or another
person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means
of control” of the corporation. “Means of control” generally include the right to vote in a general meeting
of the shareholders, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or instruct
someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Notwithstanding the above, dividends
paid to a non-Israeli resident “substantial shareholder” on publicly traded shares, like our ordinary shares, which
are held via a “nominee company” (as defined under the Securities Law, 1968), are generally subject to Israeli withholding
tax at a rate of 25%, unless a different rate is provided under an applicable tax treaty, provided that a certificate from the
Israeli Tax Authority allowing for a reduced withholding tax rate is obtained in advance. Under the United States-Israel Tax Treaty,
the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who is a U.S. resident
(for purposes of the United States- Israel Tax Treaty) is 25%. Unless a reduced tax rate is provided under an applicable tax treaty,
a distribution of dividends to non-Israeli residents is subject to withholding tax at source at a rate of 15% if the dividend
is distributed from income attributed to an Approved Enterprise or a Benefited Enterprise, while a 20% rate applies if the dividend
is distributed from Preferred Enterprise income or Preferred Technology Enterprise income (unless the dividend is paid to a foreign
parent company directly holding at least 90% of the shares of the Preferred Company, in which case a 4% withholding tax rate shall
apply). We cannot assure you that in the event we declare a dividend we will designate the income out of which the dividend is
paid in a manner that will reduce shareholders’ tax liability.
If
the dividend is attributable partly to Approved Enterprise income, Benefited Enterprise income, Preferred Enterprise income or
Preferred Technology Enterprise income, and partly to other sources of income, the withholding rate will be a blended rate reflecting
the relative portions of the two types of income. U.S. residents who are subject to Israeli withholding tax on a dividend may
be entitled to a credit or deduction for Untied States federal income tax purposes in the amount of the taxes withheld, subject
to detailed rules contained in U.S. tax legislation.
Estate
and Gift Tax
Israeli
law presently does not impose estate or gift taxes.
Certain
Material U.S. Federal Income Tax Considerations
The
following is a description of the material U.S. federal income tax considerations relating to the ownership and disposition of
our ordinary shares by a U.S. Holder (as defined below). This description addresses only the U.S. federal income tax considerations
to U.S. Holders that will hold such ordinary shares as capital assets. This description does not address tax considerations applicable
to U.S. Holders that may be subject to special tax rules, including, without limitation:
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banks,
financial institutions or insurance companies;
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real
estate investment trusts, regulated investment companies or grantor trusts;
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brokers,
dealers or traders in securities, commodities or currencies;
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tax
exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined
in Section 408 or 408A of the Code (as defined below), respectively;
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certain
former citizens or long term residents of the United States;
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persons
that received our shares as compensation for the performance of services;
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persons
that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction
or as a position in a “straddle” for U.S. federal income tax purposes;
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partnerships
(including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders
that will hold our shares through such an entity;
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corporations;
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persons
that acquire ordinary shares as a result of holding or owning our preferred shares;
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persons
whose “functional currency” is not the U.S. dollar; or
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persons
that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares.
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Moreover,
this description does not address the U.S. federal estate, gift, or alternative minimum tax considerations, any election to apply
Section 1400Z-2 of the Code (as defined below) to gains recognized with respect to shares of our ordinary shares, or any U.S.
state, local or non-U.S. tax considerations of the ownership and disposition of our ordinary shares.
This
description is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, changes to the code based on the U.S.
tax reform (as described below) existing, proposed and temporary U.S. Treasury Regulations promulgated thereunder and administrative
and judicial interpretations thereof, in each case as in effect and available on the date hereof. All the foregoing is subject
to change, which change could apply retroactively, and to differing interpretations, all of which could affect the tax considerations
described below. There can be no assurances that the U.S. Internal Revenue Service, or the IRS, will not take a different position
concerning the tax consequences of the ownership and disposition of our ordinary shares or that such a position would not be sustained.
Holders should consult their own tax advisers concerning the U.S. federal, state, local and foreign tax consequences of owning
and disposing of our ordinary shares in their particular circumstances.
For
purposes of this description, the term “U.S. Holder” means a beneficial owner of our ordinary shares that, for U.S.
federal income tax purposes, is (i) a citizen or resident of the United States, (ii) a corporation (or entity treated as a corporation
for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the
District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv)
a trust with respect to which a court within the United States is able to exercise primary supervision over its administration
and one or more U.S. persons have the authority to control all of its substantial decisions.
If
a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds our ordinary shares, the
U.S. federal income tax consequences relating to an investment in our ordinary shares will depend in part upon the status of the
partner and the activities of the partnership. Such a partner or partnership should consult its tax advisor regarding the U.S.
federal income tax considerations of acquiring, owning and disposing of our ordinary shares in its particular circumstances.
As
indicated below, this discussion is subject to U.S. federal income tax rules applicable to a “passive foreign investment
company,” or a PFIC.
Persons
considering an investment in our ordinary shares should consult their own tax advisors as to the particular tax consequences applicable
to them relating to the ownership and disposition of our ordinary shares, including the applicability of U.S. federal, state and
local tax laws and non-U.S. tax laws.
Distributions
Subject
to the discussion under “-Passive Foreign Investment Company Considerations,” below, if you are a U.S. Holder, the
gross amount of any distribution made to you with respect to our ordinary shares before reduction for any Israeli taxes withheld
therefrom, other than certain distributions, if any, of our ordinary shares distributed pro rata to all our shareholders, generally
will be includible in your income as dividend income to the extent such distribution is paid out of our current or accumulated
earnings and profits as determined under U.S. federal income tax principles. To the extent that the amount of any distribution
by us exceeds our current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will
generally be treated first as a return of your adjusted tax basis in our ordinary shares and thereafter as either long-term or
short-term capital gain depending upon whether the U.S. Holder has held our ordinary shares for more than one year as of the time
such distribution is received. We do not expect to maintain calculations of our earnings and profits under U.S. federal income
tax principles. Therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as
dividend income. Non-corporate U.S. Holders may qualify for the preferential rates of taxation with respect to dividends on ordinary
shares applicable to long-term capital gains (i.e., gains from the sale of capital assets held for more than one year) applicable
to qualified dividend income (as discussed below). The Company, which is incorporated under the laws of the State of Israel, believes
that it qualifies as a resident of Israel for purposes of, and is eligible for the benefits of, the Convention between the Government
of the United States of America and the Government of the State of Israel with Respect to Taxes on Income, signed on November
20, 1975, as amended and currently in force, or the U.S.-Israel Tax Treaty, although there can be no assurance in this regard.
Further, the IRS has determined that the U.S.-Israel Tax Treaty is satisfactory for purposes of the qualified dividend rules and
that it includes an exchange-of-information program. Therefore, subject to the discussion under “-Passive Foreign Investment
Company Considerations,” below, if the U.S.-Israel Tax Treaty is applicable, such dividends will generally be “qualified
dividend income” in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period
and the absence of certain risk reduction transaction requirements are met. The dividends will not be eligible for the dividends
received deduction generally allowed to corporate U.S. Holders.
U.S.
Holders, other than certain U.S. Holder’s that are U.S. corporations, generally may claim the amount of Israeli withholding
tax withheld either as a deduction from gross income or as a credit against U.S. federal income tax liability. However, the foreign
tax credit is subject to numerous complex limitations that must be determined and applied on an individual basis. Each U.S. Holder
should consult its own tax advisors regarding the foreign tax credit rules.
In
general, the amount of a distribution paid to a U.S. Holder in a foreign currency will be the dollar value of the foreign currency
calculated by reference to the spot exchange rate on the day the U.S. Holder receives the distribution, regardless of whether
the foreign currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. Holder realizes on
a subsequent conversion of foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received
in foreign currency are converted into U.S. dollars on the day they are received, a U.S. Holder generally should not be required
to recognize foreign currency gain or loss in respect of the dividend.
Sale,
Exchange or Other Taxable Disposition of Our Ordinary Shares
Subject
to the discussion below under “-Passive Foreign Investment Company Considerations,” if you are a U.S. Holder, you
generally will recognize gain or loss on the sale, exchange or other taxable disposition of our ordinary shares equal to the difference
between the amount realized on such sale, exchange or other taxable disposition and your adjusted tax basis in our ordinary shares,
and such gain or loss will be capital gain or loss. The adjusted tax basis in an ordinary share generally will be equal to the
cost of such ordinary share. If you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other taxable disposition
of ordinary shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period
determined at the time of such sale, exchange or other taxable disposition for such ordinary shares exceeds one year (i.e., such
gain is long-term capital gain). The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations
under the Code. Any such gain or loss that a U.S. Holder recognizes generally will be treated as U.S. source income or loss for
foreign tax credit limitation purposes.
Passive
Foreign Investment Company Considerations
If
we are classified as a PFIC in any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce
or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S.
company that does not distribute all of its earnings on a current basis.
A
non-U.S. corporation is classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying
certain look-through rules with respect to the income and assets of subsidiaries, either (i) at least 75% of its gross income
is “passive income” or (ii) at least 50% of the average quarterly value of its total gross assets (for which purpose
the total value of our assets may be determined in part by the market value of our ordinary shares, which is subject to change)
is attributable to assets that produce “passive income” or are held for the production of passive income.
Passive
income for this purpose generally includes dividends, interest, royalties, rents, gains from commodities and securities transactions,
the excess of gains over losses from the disposition of assets which produce passive income, and includes amounts derived by reason
of the temporary investment of funds raised in any offerings. If a non-U.S. corporation owns directly or indirectly at least 25%
by value of the stock of another corporation, the non-U.S. corporation is treated for purposes of the PFIC tests as owning its
proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s
income. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns our ordinary shares, we will continue
to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns our ordinary
shares, regardless of whether we continue to meet the tests described above.
Since
PFIC status depends on the composition of our income and the composition and value of our assets (which may be determined in large
part by reference to the market value of our ordinary shares, which may be volatile) from time to time, there can be no assurance
that we will not be considered a PFIC for any taxable year. Based upon the expected value of our assets, including any goodwill,
and the expected composition of our income and assets, we believe that we should not be a PFIC for our 2018 taxable year and we
do not anticipate that we will be a PFIC with respect to our 2019 taxable year.
If
we are a PFIC, and you are a U.S. Holder, then unless you make one of the elections described below, a special tax regime will
apply to both (a) any “excess distribution” by us to you (generally, your ratable portion of distributions in any
year which are greater than 125% of the average annual distribution received by you in the shorter of the three preceding years
or your holding period for our ordinary shares) and (b) any gain realized on the sale or other disposition of the ordinary shares.
Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject to tax as
if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in each
year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income
allocated to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s
regular ordinary income rate for the current year and would not be subject to the interest charge discussed below), and (c) the
interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those
years. In addition, dividend distributions made to you will not qualify for the lower rates of taxation applicable to long-term
capital gains discussed above under “Distributions.”
Certain
elections may potentially be used to reduce the adverse impact of the PFIC rules on U.S. Holders (“qualifying electing fund”
(“QEF”) and “mark-to-market” elections), but these elections may accelerate the recognition of taxable
income and may result in the recognition of ordinary income.
The
rules described above for excess distributions would not apply to a U.S. Holder if the U.S. Holder makes a timely QEF election
for the first taxable year of the U.S. Holder’s holding period for ordinary shares and we comply with specified reporting
requirements. A timely QEF election for a taxable year generally must be made on or before the due date (as may be extended) for
filing the taxpayer’s U.S. federal income tax return for the year. A U.S. Holder who makes a QEF election generally must
report on a current basis a pro rata share of our ordinary earnings and net capital gain for any taxable year in which we are
a PFIC, whether or not those earnings or gains are distributed. A U.S. Holder who makes a QEF election must file a Form 8621 with
its annual income tax return. If we determine we are a PFIC for any taxable year, we intend to make available an information statement
that will contain the necessary information required for a U.S. holder to make a QEF election with respect to our ordinary shares,
and we will permit such U.S. Holders access to certain information in the event of an audit by the U.S. tax authorities.
If
a U.S. Holder does not make a QEF election for the first taxable year of the U.S. Holder’s holding period for ordinary shares
during which we are a PFIC, the QEF election will not be treated as timely and the adverse tax regime described above would apply
to dispositions of or excess distributions on the ordinary shares. In such case, a U.S. Holder may make a deemed sale election
whereby the U.S. Holder would be treated as if the U.S. Holder had sold the ordinary shares in a fully taxable sale at fair market
value on the first day of such taxable year in which the QEF election takes effect. Such U.S. Holder would be required to recognize
any gain on the deemed sale as an excess distribution and pay any tax and interest due on the excess distribution when making
the deemed sale election. The effect of such further election would be to restart the U.S. Holder’s holding period in the
ordinary shares, subject to the QEF regime, and to purge the PFIC status of such ordinary shares going forward.
If
a U.S. Holder makes the mark-to-market election with respect to ordinary shares, the U.S. Holder generally will recognize as ordinary
income any excess of the fair market value of the ordinary shares at the end of each taxable year over their adjusted tax basis,
and will recognize an ordinary loss in respect of any excess of the adjusted tax basis of the ordinary shares over their fair
market value at the end of the taxable year (but only to the extent of the net amount of income previously included as a result
of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder’s tax basis in the ordinary shares
will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition of ordinary shares
in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but only to
the extent of the net amount of income previously included as a result of the mark-to-market election). The mark-to-market election
is available only if we are a PFIC and our ordinary shares are “regularly traded” on a “qualified exchange.”
Our ordinary shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity
of the ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter (subject to the rule
that trades that have as one of their principle purposes the meeting of the trading requirement as disregarded). The NASDAQ Global
Market is a qualified exchange for this purpose and, consequently, if the ordinary shares are regularly traded, the mark-to-market
election will be available to a U.S. Holder.
U.S.
Holders should consult their tax advisors to determine whether any of these elections would be available and if so, what the consequences
of the alternative treatments would be in their particular circumstances.
If
we are a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions and
gains deemed to be realized by U.S. Holders in respect of any of our subsidiaries that also may be determined to be PFICs.
If
a U.S. Holder owns ordinary shares during any year in which we are a PFIC and the U.S. Holder recognizes gain on a disposition
of our ordinary shares or receives distributions with respect to our ordinary shares, the U.S. Holder generally will be required
to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund)
with respect to the company, generally with the U.S. Holder’s federal income tax return for that year. If our company were
a PFIC for a given taxable year, then you should consult your tax advisor concerning your annual filing requirements.
The
U.S. federal income tax rules relating to PFICs are complex. Prospective U.S. investors are urged to consult their own tax advisers
with respect to the ownership and disposition of our ordinary shares, the consequences to them of an investment in a PFIC, any
elections available with respect to our ordinary shares and the IRS information reporting obligations with respect to the ownership
and disposition of our ordinary shares.
Medicare
Tax
Certain
U.S. Holders that are individuals, estates or trusts may be required to pay an additional 3.8% Medicare tax on all or a portion
of their “net investment income,” which may include all or a portion of their dividend income and net gains from the
disposition of ordinary shares. U.S. Holders will likely not be able to credit foreign taxes against the 3.8% Medicare tax. Each
U.S. Holder that is an individual, estate or trust is urged to consult its tax advisors regarding the applicability of the Medicare
tax to its income and gains in respect of its investment in our ordinary shares.
Backup
Withholding Tax and Information Reporting Requirements
U.S.
backup withholding tax and information reporting requirements may apply to certain payments to certain shareholders. Information
reporting generally will apply to payments of dividends on, and to proceeds from the sale or redemption of, our ordinary shares
made within the United States, or by a U.S. payor or U.S. middleman, to a holder of our ordinary shares, other than an exempt
recipient (including a payee that is not a U.S. person that provides an appropriate certification and certain other persons).
A payor may be required to withhold backup withholding tax from any payments of dividends on, or the proceeds from the sale or
redemption of, ordinary shares within the United States, or by a U.S. payor or U.S. middleman, to a holder, other than an exempt
recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish
an exemption from, such backup withholding tax requirements. Any amounts withheld under the backup withholding rules should generally
be allowed as a credit against the beneficial owner’s U.S. federal income tax liability, if any, and any excess amounts
withheld under the backup withholding rules may be refunded, provided that the required information is timely furnished to the
IRS.
Foreign
Asset Reporting
Certain
U.S. Holders who are individuals may be required to report information relating to an interest in our ordinary shares, subject
to certain exceptions (including an exception for shares held in accounts maintained by U.S. financial institutions) by filing
IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their federal income tax return. U.S. Holders are urged to
consult their tax advisors regarding their information reporting obligations, if any, with respect to their ownership and disposition
of our ordinary shares.
THE
DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PROSPECTIVE INVESTOR.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ORDINARY
SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.
PLAN
OF DISTRIBUTION
We
have entered into the Distribution Agreement with Oppenheimer as our sales agent and/or principal, which we have filed as an exhibit
to the registration statement of which this prospectus supplement forms a part. The Distribution Agreement is incorporated by
reference in this prospectus supplement. Sales of our ordinary shares, if any, may be made in sales deemed to be “at the
market” offerings as defined in Rule 415 of the Securities Act. Oppenheimer is not required to sell any specific amount,
but will use commercially reasonable efforts to sell on our behalf all of our ordinary shares requested to be sold by us, consistent
with its normal trading and sales practices, under the terms and subject to the conditions set forth in the Distribution Agreement.
We may instruct Oppenheimer not to sell our ordinary shares if the sales cannot be effected at or above the price designated by
us in any instruction or placement notice we deliver to Oppenheimer. We or Oppenheimer may suspend the offering of our ordinary
shares upon delivering notice and subject to other conditions, as further described in the Distribution Agreement.
Oppenheimer
will provide written confirmation to us following the close of trading on the Nasdaq Global Market each day in which our shares
are sold under the Distribution Agreement. Each such confirmation will include the number of ordinary shares sold on such day,
the net proceeds to us, the compensation payable by us to Oppenheimer in connection with the sales of such ordinary shares, and
the additional expenses deducted from the net proceeds payable to us.
We
will pay Oppenheimer commissions for its services in acting as agent and/or principal in the sale of our ordinary shares. Oppenheimer
will be entitled to compensation at a fixed commission rate of up to 3.0% of the gross sales price of all of our ordinary shares
sold through it as sales agent under the Distribution Agreement. We estimate that the total expenses for the offering, excluding
compensation payable to Oppenheimer under the terms of the Distribution Agreement, will be approximately $150,000, which includes
the reimbursement to Oppenheimer for the reasonable out-of-pocket costs and expenses in an amount not to exceed $75,000.
Settlement
for sales of our ordinary shares will occur on the second business day following the date on which any sales are made, or on such
other date as is agreed upon by us and Oppenheimer in connection with a particular transaction, in return for payment of the net
proceeds to us. Settlement for all shares of our ordinary shares shall be effected by book-entry delivery of the shares of our
ordinary shares to Oppenheimer’s account at The Depository Trust Company against payments by Oppenheimer of the net proceeds
from the sale of such ordinary shares in same day funds delivered to an account designated by us.
We
will report at least quarterly the number of ordinary shares sold through Oppenheimer, as sales agent, under the Distribution
Agreement, the net proceeds to us and the compensation paid by us to Oppenheimer in connection with the sales of our ordinary
shares.
Oppenheimer
and its affiliates have provided, and may in the future provide, various investment banking, commercial banking, fiduciary and
advisory services for us from time to time for which they have received, and may in the future receive, customary fees and expenses.
Oppenheimer and its affiliates may, from time to time, engage in other transactions with and perform services for us in the ordinary
course of their business.
In
connection with the sale of our ordinary shares on our behalf, Oppenheimer will be deemed to be an “underwriter” within
the meaning of the Securities Act, and the compensation of Oppenheimer will be deemed to be underwriting commissions or discounts.
We have agreed to indemnify Oppenheimer against specified liabilities, including liabilities under the Securities Act, or to contribute
to payments that Oppenheimer may be required to make because of those liabilities.
The
offering of shares of our ordinary shares pursuant to the Distribution Agreement will terminate upon the earlier of (1) the sale
of all shares subject to the Distribution Agreement or (2) termination of the Distribution Agreement. The Distribution Agreement
may be terminated by Oppenheimer or as further described in the Distribution Agreement.
LEGAL
MATTERS
The
validity of the securities offered by this prospectus and other legal matters concerning this offering relating to Israeli law
has been passed upon for us by Horn & Co. Law Offices, Tel Aviv, Israel. Certain legal matters with respect to U.S. federal
law and New York law in connection with this offering will be passed upon for us by Goodwin Procter LLP, New York, New York. Oppenheimer
is being represented in connection with this offering by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York, New York,
and, with respect to certain Israeli law matters by Zysman, Aharoni, Gayer & Co., Tel Aviv, Israel.
EXPERTS
The
financial statements incorporated in this prospectus supplement by reference to the Annual Report on Form 20-F for the year ended
December 31, 2018 have been so incorporated in reliance on the report of Kesselman & Kesselman, an independent registered
public accounting firm and a member firm of PricewaterhouseCoopers International Limited, given on the authority of said firm
as experts in auditing and accounting. The offices of Kesselman & Kesselman are located at Trade Tower, 25 Hamered Street,
Tel-Aviv 6812508, Israel.
WHERE
YOU CAN FIND MORE INFORMATION; INCORPORATION OF INFORMATION BY REFERENCE
We
have filed a registration statement on Form F-3 with the SEC in connection with this offering. In addition, we file reports with,
and furnish information to, the SEC. You may read and copy the registration statement and any other documents we have filed at
the SEC, including any exhibits and schedules, at the SEC’s public reference room at 100 F Street N.E., Washington, D.C.
20549. You may call the SEC at 1-800-SEC-0330 for further information on this public reference room. As a foreign private issuer,
all documents which were filed after November 4, 2002 on the SEC’s EDGAR system are available for retrieval on the SEC’s
website at
www.sec.gov
. and from commercial document retrieval services.
This
prospectus supplement is part of the registration statement and does not contain all of the information included in the registration
statement. Whenever a reference is made in this prospectus supplement to any of our contracts or other documents, the reference
may not be complete and, for a copy of the contract or document, you should refer to the exhibits that are a part of the registration
statement.
The
SEC allows us to “incorporate by reference” into this prospectus supplement the information we file with it, which
means that we can disclose important information to you by referring you to those documents. Information incorporated by reference
is part of this prospectus supplement. We incorporate by reference the documents listed below and amendments to them. These documents
and their amendments were previously filed with the SEC.
This
prospectus supplement will be deemed to incorporate by reference the following documents previously filed by us with the SEC:
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our
Reports on Form 6-K filed on May 15, 2019 and May 17, 2019;
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our
Annual Report on Form 20-F for the year ended December 31, 2018, filed on March 28, 2019, to the extent the information in
that report has not been updated or superseded by this prospectus supplement; and
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the
description of our ordinary shares contained in Item 1 of our registration statement on Form 8-A, filed with the SEC on July
29, 2014 under the Exchange Act, and any amendment or report filed for the purpose of updating that description.
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Any
statement contained in any document incorporated by reference herein shall be deemed to be modified or superseded for purposes
of this prospectus supplement to the extent that a statement contained in this prospectus supplement modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part
of this prospectus supplement.
This
prospectus supplement shall also be deemed to incorporate by reference all subsequent annual reports filed on Form 20-F, Form
40-F or Form 10-K, and all subsequent filings on Forms 10-Q and 8-K filed by the registrant pursuant to the Exchange Act, prior
to the termination of the offering made by this prospectus supplement. We may incorporate by reference into this prospectus supplement,
any Form 6-K meeting the requirements of Form F-3 which is submitted to the SEC after the date of this prospectus supplement and
before the date of termination of this offering. Any such Form 6-K which we intend to so incorporate shall state in such form
that it is being incorporated by reference into this prospectus supplement.
We
will provide to each person, including any beneficial owner, to whom this prospectus supplement is delivered, a copy of these
filings, at no cost, upon written or oral request to us at: 8 HaSatat St., Modi’in, Israel 7178106, Attn: Corporate Secretary,
telephone number: +972-8-9935000. Copies of these filings may also be accessed at our website,
www.vblrx.com
. Click on
“Investor Relations” and then “SEC Filings.”
A
copy of this prospectus supplement, the accompanying prospectus, our memorandum of association and our articles of association,
are available for inspection at our offices at 8 HaSatat St., Modi’in, Israel 7178106.
As
a foreign private issuer, we are exempt from the rules under Section 14 of the Exchange Act prescribing the furnishing and content
of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and other provisions
in Section 16 of the Exchange Act.
ENFORCEABILITY
OF CIVIL LIABILITIES AND
AGENT
FOR SERVICE OF PROCESS IN THE UNITED STATES
We
are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the
Israeli experts named in this registration statement, substantially all of whom reside outside of the United States, may be difficult
to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors
and officers are located outside of the United States, any judgment obtained in the United States against us or any of our directors
and officers may not be collectible within the United States.
We
have been informed by our legal counsel in Israel, Horn & Co. Law Offices, that it may be difficult to assert U.S. securities
law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of
U.S. securities laws reasoning that Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli
court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process.
Certain matters of procedure will also be governed by Israeli law.
Subject
to specified time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject
to certain exceptions, is non-appealable, including a judgment based upon the civil liability provisions of the Securities Act
and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:
|
●
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the
judgment was obtained after due process before a court of competent jurisdiction, according to the laws of the state in which
the judgment was given and the rules of private international law currently prevailing in Israel;
|
|
●
|
the
prevailing law of the foreign state in which the judgment was rendered allows for the enforcement of judgments of Israeli
courts;
|
|
●
|
adequate
service of process has been effected and the defendant has had a reasonable opportunity to be heard and to present his or
her evidence;
|
|
●
|
the
judgment is not contrary to public policy of Israel, and the enforcement of the civil liabilities set forth in the judgment
is not likely to impair the security or sovereignty of Israel;
|
|
●
|
the
judgment was not obtained by fraud and do not conflict with any other valid judgments in the same matter between the same
parties;
|
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●
|
an
action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted
in the foreign court; and
|
|
●
|
the
judgment is enforceable according to the laws of Israel and according to the law of the foreign state in which the relief
was granted.
|
If
a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted
into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at
the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending
collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli
consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors
must bear the risk of unfavorable exchange rates.
For
further information regarding enforceability of civil liabilities against us and other persons, see the discussions in Item 3
of our Annual Report on Form 20-F for the year ended December 31, 2018, incorporated by reference in this prospectus supplement,
under the caption “Risk Factors — Risks Related to Our Incorporation and Operations in Israel — It may be difficult
to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this prospectus supplement
in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors
and these experts.”
This
prospectus supplement is part of a registration statement we filed with the SEC. You should rely only on the information or representations
contained in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide information
other than that provided in this prospectus supplement and the accompanying prospectus. We are not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the information in this prospectus supplement or accompanying
prospectus is accurate as of any date other than the date on the front of this document.
PROSPECTUS
$150,000,000
Ordinary
Shares
Debt
Securities
Warrants
Units
We
may offer under this prospectus from time to time, at prices and on terms to be determined by market conditions at the time we
make the offer, up to an aggregate of $150,000,000 of our:
●
|
ordinary
shares;
|
|
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●
|
debt
securities (including convertible debt securities);
|
|
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●
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warrants
to purchase ordinary shares or debt securities; or
|
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●
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any
combination of the above, separately or as units.
|
This
prospectus may not be used to sell our securities unless accompanied by a prospectus supplement. Before you invest in our securities,
you should carefully read both this prospectus and the prospectus supplement related to the offering of the securities.
Our
ordinary shares are listed on the Nasdaq Global Market under the symbol “VBLT.” The last reported sale price of our
ordinary shares on December 15, 2017 on the Nasdaq Global Market was $6.70 per share. We have not yet determined whether any of
the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system or over-the-counter
market. If we decide to seek listing of any such securities, a prospectus supplement relating to those securities will disclose
the exchange, quotation system or market on which the securities will be listed.
If
we sell securities through agents or underwriters, we will include their names and the fees, commissions and discounts they will
receive, as well as the net proceeds to us, in the applicable prospectus supplement.
The
securities offered hereby involve a high degree of risk. See “Risk Factors” on page 5.
None
of the U.S. Securities and Exchange Commission, the Israeli Securities Authority or any state securities commission have approved
or disapproved of these securities or passed upon the adequacy, completeness or accuracy of this prospectus. Any representation
to the contrary is a criminal offense.
The
date of this prospectus is January 4, 2018
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
This
is a summary of our business and this offering. For a more complete understanding of our business and this offering, you should
read the entire prospectus and the documents incorporated by reference.
Company
Overview
We
are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of first-in-class treatments
for cancer. Our program is based on our proprietary Vascular Targeting System, or VTS, platform technology, which utilizes genetically
targeted therapy to destroy newly formed, or angiogenic, blood vessels, and which we believe will allow us to develop product
candidates for multiple oncology indications.
Our
lead product candidate, VB-111 (ofranergene obadenovec), is a gene-based biologic that we are developing for solid tumor indications,
with an advanced program for recurrent glioblastoma, or rGBM, an aggressive form of brain cancer. We have obtained fast track
designation for VB-111 in the United States for prolongation of survival in patients with glioblastoma that has recurred following
treatment with standard chemotherapy and radiation. We have also received orphan drug designation for GBM in both the United States
and Europe. VB-111 has also received an orphan designation for the treatment of ovarian cancer by the European Medicines Agency.
In September 2015, we reported complete results from our Phase 2 trial of VB-111 in rGBM, demonstrating a statistically-significant
benefit in overall survival and favorable response rate in patients treated with VB-111 in combination with bevacizumab. Our pivotal
Phase 3 GLOBE study in rGBM began in August 2015 and is comparing a combination of VB-111 and bevacizumab to bevacizumab alone.
The study is being conducted under a special protocol assessment, or SPA, agreement with the U.S. Food and Drug Administration,
or FDA, with full endorsement by the Canadian Brain Tumor Consortium, or CBTC. We completed enrollment for the trial in December
2016, five months ahead of our initial plan, with a total of 256 patients in the US, Canada and Israel.
We
also have been conducting a program targeting anti-inflammatory diseases, based on the use of our Lecinoxoid platform technology.
Lecinoxoids are a novel class of small molecules we developed that are structurally and functionally similar to naturally occurring
molecules known to modulate inflammation. The lead product candidate from this program, VB-201, is a Phase 2-ready molecule that
demonstrated efficacy in reducing vascular inflammation in a Phase 2 sub-study in psoriatic patients with cardiovascular risk.
Due to business limitations associated with the heavy burden of developing medications for cardiovascular diseases, we chose to
test it in psoriasis and ulcerative colitis; however, as we reported in February 2015, VB-201 failed to meet the primary endpoint
in Phase 2 clinical trials for psoriasis and for ulcerative colitis. As a result, we have terminated our development of VB-201
in those indications. Nevertheless, based on recent pre-clinical studies, we believe that VB-201 and some second generation molecules
such as VB-703 may be applicable for NASH and renal fibrosis. Since the company intends to focus substantially all of our efforts
and resources on advancing our oncology program, we will seek to advance our Lecinoxoid assets via strategic deals.
We
are also conducting a research program exploring the potential of targeting of MOSPD2 for immuno-oncology applications. In January
2017, we reported that targeting of MOSPD2 inhibits chemotaxis of monocytes and neuropils, and that unpublished VBL data also
show MOSPD2 expression on certain tumor cells. We believe that targeting of MOSPD2 may have several therapeutic applications,
including inhibition of monocyte migration in chronic inflammatory conditions, inhibition of tumor cell metastases and targeting
of MOSPD2-expressing tumor cells. We are developing our “VB-600 series” of pipeline candidates towards these applications.
We
are developing our lead oncology product candidate, VB-111, for solid tumor indications, with clinical programs in rGBM, thyroid
cancer and ovarian cancer. In our open-label Phase 2 clinical trial of VB-111 in rGBM, we observed dose-dependent attenuation
of tumor growth and an increase in median overall survival, which is the time interval from initiation of treatment to the patient’s
death. The U.S. Food and Drug Administration, or FDA, has granted VB-111 fast track designation for prolongation of survival in
patients with glioblastoma that has recurred following treatment with temozolomide, a chemotherapeutic agent commonly used to
treat newly diagnosed glioblastoma, and radiation. On July 1, 2014, the FDA concurred with the design and planned analyses of
our Phase 3 pivotal trial of VB-111 in rGBM pursuant to an SPA. At the time, commencement of the trial was subject to our providing
the agency with more information regarding our potency release assay for the trial. We developed this assay and submitted initial
information to the FDA on May 26, 2014. On February 5, 2015 the FDA has found our data satisfactory and removed the partial hold.
We began our Phase 3 pivotal trial of VB-111 in rGBM in August 2015 and completed patient enrollment for the study in December
2016, five months ahead of our initial plan. Following positive safety reviews announced in December 2016 , in April 2017 and
the third and final safety review that was announced in October 2017, the GLOBE trial continues as planned. Top-line data after
the occurrence of 189 events are expected in the first quarter of 2018. Based on interactions with the FDA and the SPA for the
trial, we believe the current trial should support a Biologics License Application, or BLA.
VB-111
was also being studied in a Phase 2 trial for recurrent platinum-resistant ovarian cancer and in a Phase 2 study in recurrent,
iodine-resistant differentiated thyroid cancer. In a Phase 2 trial for recurrent platinum-resistant ovarian cancer, VB-111 demonstrated
a statistically significant increase in overall survival and 60% durable response rate (as measured by reduction in CA-125), approximately
twice the historical response with bevacizumab plus chemotherapy in ovarian cancer. In December 2016, we had an end-of-Phase-2
meeting with the FDA, following which we advanced VB-111 to a Phase 3 study in platinum-resistant ovarian cancer that we intend
to launch by year-end 2017.
In
February 2017, we reported full data from our exploratory Phase 2 study of VB-111 in recurrent, iodine-resistant differentiated
thyroid cancer. The primary endpoint of the trial, defined as 6-month progression-free-survival, or PFS-6, of 25%, was met with
a dose response. Forty-seven percent of patients in the therapeutic-dose cohort reached PFS-6, versus 25% in the sub-therapeutic
cohort, both groups meeting the primary endpoint. An overall survival benefit was seen, with a tail of more than 40% at 3.7 years
for the therapeutic-dose cohort, similar to historical data for pazopanib (Votrient), a tyrosine kinase inhibitor; however, most
patients in the VB-111 study had tumors that previously had progressed on pazopanib or other kinase inhibitors.
In
June 2017, at the BIO international conference we provided an update on the long-term status and survival of patients from three
completed Phase 2 trials with VB-111. In the Phase 2 study in rGBM patients, 12-month survival was 54% in patients who were treated
with VB-111 through progression, including a rGBM patient who remains alive with complete response after >40 months, compared
to 23% of patients who had limited exposure of a therapeutic dose of VB-111. According to a meta-analysis, the 12-month survival
on Avastin™ (bevacizumab) is only 24%. In the Phase 2 study in recurrent platinum-resistant and refractory ovarian cancer,
53% of patients treated with a therapeutic dose of VB-111 in combination with paclitaxel were alive at 15 months. No patients
in the sub-therapeutic dose were alive at the 15-month time point. In the Phase 2 study in radioiodine refractory differentiated
thyroid cancer, 53% of those who received multiple therapeutic doses of VB-111 were alive at 24 months, compared to 33% of those
who received a single, sub-therapeutic dose of VB-111.
Based
on support from pre-clinical data, which we recently presented at the American Society of Gene & Cell Therapy (ASGCT) conference,
we also plan to conduct an exploratory study for VB-111 in combination with a checkpoint inhibitor in non-small cell lung cancer
.
Launch of this trial is expected in the first quarter of 2018.
In
October 2017, we announced the opening of our new gene therapy manufacturing plant in Modiin, Israel. This plant will be the commercial
facility for production of VB-111, if approved. The Modiin facility is the first commercial-scale gene therapy manufacturing facility
in Israel and currently one of the largest gene-therapy designated ones in the world (20,000 sq. ft.). It is capable of manufacturing
in large-scale capacity of 1,000 liters and is scalable to 2,000 liters.
In
November 2017, we signed an exclusive license agreement with NanoCarrier Co., Ltd. (TSE Mothers:4571) for the development, commercialization,
and supply of VB-111 in Japan. VBL retains rights to VB-111 in the rest of the world. Under terms of the agreement, VBL has granted
NanoCarrier an exclusive license to develop and commercialize VB-111 in Japan for all indications. VBL will supply NanoCarrier
with VB-111, and NanoCarrier will be responsible for all regulatory and other clinical activities necessary for commercialization
in Japan. In exchange, we received an up-front payment of $15 million, and are entitled to receive greater than $100 million in
development and commercial milestone payments. VBL will also receive tiered royalties on net sales in the high-teens.
As
of December 1, 2017, we had studied VB-111 in over 300 patients and have observed it to be well-tolerated. In December 2015, we
were granted a US composition of matter patents that provides intellectual property protection for VB-111 in the US until October
2033 before any patent term extension.
The
legal name of our company is Vascular Biogenics Ltd. and we conduct business under the name VBL Therapeutics. We were incorporated
in Israel on January 27, 2000 as a company limited by shares under the name Medicard Ltd. In January 2003, we changed our name
to Vascular Biogenics Ltd. Our registered and principal office is located at 8 HaSatat St., Modi’in, Israel 7178106. Our
service agent in the United States is located at c/o Puglisi & Associates, 850 Library Avenue, Suite 204, Newark Delaware
19711 and our telephone number is + 972-8-9935000. Throughout this prospectus, we refer to various trademarks, service marks
and trade names that we use in our business. The “Vascular Biogenics” design logo, “VBL Therapeutics,”
“Vascular Targeting System,” “VTS,” “Lecinoxoids,” “VB-111,” “VB-201,”
and other trademarks or service marks of Vascular Biogenics Ltd. appearing in this prospectus are the property of Vascular Biogenics
Ltd. We have several other registered trademarks, service marks and pending applications relating to our products. Although we
have omitted the “®” and “™” trademark designations for such marks in this prospectus, all rights
to such trademarks are nevertheless reserved. Other trademarks and service marks appearing in this prospectus are the property
of their respective holders.
Further
details about us and our operations are provided in our Annual Report on Form 20-F, and the other documents incorporated by reference
into this prospectus. See “Where You Can Find More Information; Incorporation of Information by Reference.” You are
encouraged to thoroughly review the documents incorporated by reference into this prospectus as they contain important information
concerning our business and our prospects.
Our
website address is www.vblrx.com. Information contained on, or accessible through, our website is not a part of this prospectus,
and the inclusion of our website address in this prospectus is an inactive textual reference.
The
Offering
This
prospectus is part of a registration statement on Form F-3 that we filed with the Securities and Exchange Commission utilizing
a “shelf” registration process. Under this process, we may sell any combination of the securities described in this
prospectus in one or more offerings up to a total dollar amount of $150,000,000. This prospectus provides you with a general description
of the securities we may offer. Each time we offer to sell securities under this prospectus, we will provide a prospectus supplement
containing specific information about the terms of that offering. The prospectus supplement may also add, update or change information
contained in this prospectus. To the extent that any information we provide in a prospectus supplement is inconsistent with information
in this prospectus, the information in the prospectus supplement will modify or supersede this prospectus. You should read both
this prospectus and any prospectus supplement together with the additional information described under the headings “Where
You Can Find More Information; Incorporation of Information by Reference.”
RISK
FACTORS
An
investment in our securities is speculative and involves a high degree of risk. Therefore, you should not invest in our securities
unless you are able to bear a loss of your entire investment. You should carefully consider the risk factors described in our
Annual Report on Form 20-F for the year ended December 31, 2016, filed with the SEC, which is incorporated by reference in this
prospectus, and in subsequent reports that we file with the SEC. You should carefully consider these risks together with the other
information contained or incorporated by reference in this prospectus before deciding to invest in our securities. If any of these
risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.
In that case, the trading price of our ordinary shares could decline, and you may lose all or part of your investment.
NOTE
CONCERNING FORWARD-LOOKING STATEMENTS
The
statements incorporated by reference or contained in this prospectus discuss our future expectations, contain projections of our
results of operations or financial condition, and include other forward-looking information within the meaning of Section 27A
of the Securities Act of 1933, as amended. You should not unduly rely on forward-looking statements contained or incorporated
by reference in this prospectus. Our actual results and performance may differ materially from those expressed in such forward-looking
statements. Forward-looking statements that express our beliefs, plans, objectives, assumptions, future events or performance
may involve estimates, assumptions, risks and uncertainties. Such risks and uncertainties are discussed in this prospectus under
the heading “Risk Factors,” and in our other filings with the Securities and Exchange Commission, which are also filed
with the Israel Securities Authority. You should read and interpret any forward-looking statements together with these documents.
Forward-looking statements often, although not always, include words or phrases such as the following: “will likely result,”
“are expected to,” “will continue,” “is anticipated,” “estimate,” “intends,”
“plans,” “projection” and “outlook.”
Any
forward-looking statement speaks only as of the date on which that statement is made. We will not update, and expressly disclaim
any obligation to update, any forward-looking statement to reflect events or circumstances that occur after the date on which
such statement is made.
WHERE
YOU CAN FIND MORE INFORMATION; INCORPORATION OF
INFORMATION
BY REFERENCE
We
have filed a registration statement on Form F-3 with the Securities and Exchange Commission in connection with this offering.
In addition, we file reports with, and furnish information to, the Securities and Exchange Commission. You may read and copy the
registration statement and any other documents we have filed at the Securities and Exchange Commission, including any exhibits
and schedules, at the Securities and Exchange Commission’s public reference room at 100 F Street N.E., Washington, D.C.
20549. You may call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on this public reference
room. As a foreign private issuer, all documents which were filed after November 4, 2002 on the Securities and Exchange Commission’s
EDGAR system are available for retrieval on the Securities and Exchange Commission’s website at www.sec.gov. and from commercial
document retrieval services. We also generally make available on our own web site (www.vblrx.com) our quarterly and year-end financial
statements as well as other information.
This
prospectus is part of the registration statement and does not contain all of the information included in the registration statement.
Whenever a reference is made in this prospectus to any of our contracts or other documents, the reference may not be complete
and, for a copy of the contract or document, you should refer to the exhibits that are a part of the registration statement.
The
Securities and Exchange Commission allows us to “incorporate by reference” into this prospectus the information we
file with it, which means that we can disclose important information to you by referring you to those documents. Information incorporated
by reference is part of this prospectus. We incorporate by reference the documents listed below and amendments to them. These
documents and their amendments were previously filed with the Securities and Exchange Commission.
This
prospectus will be deemed to incorporate by reference the following documents previously filed by us with the Securities and Exchange
Commission:
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Annual
report on Form 20-F for the year ended December 31, 2016, filed on March 27, 2017, as amended on October 11, 2017, to the
extent the information in that report has not been updated or superseded by this prospectus;
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The
description of our ordinary shares contained in Item 1 of our registration statement on Form 8-A filed with the SEC on July
29, 2014 under the Exchange Act and any amendment or report filed for the purpose of updating that description;
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Reports
on Form 6-K filed on January 6, 2017; January 9, 2017; February 21, 2017; May 15, 2017; June 5, 2017; June 19, 2017; June
22, 2017; August 14, 2017; October 20, 2017; October 23, 2017; November 6, 2017; November 14, 2017; November 20, 2017 and
November 21, 2017; and
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any
report on Form 6-K, or parts thereof, meeting the requirements of Form F-3 filed after the date of the initial registration
statement and prior to its effectiveness, which states that it, or any part thereof, is being incorporated by reference herein.
|
This
prospectus shall also be deemed to incorporate by reference all subsequent annual reports filed on Form 20-F, Form 40-F or Form
10-K, and all subsequent filings on Forms 10-Q and 8-K filed by the registrant pursuant to the Exchange Act, prior to the termination
of the offering made by this prospectus. We may incorporate by reference into this prospectus, any Form 6-K meeting the requirements
of Form F-3 which is submitted to the Securities and Exchange Commission after the date of the filing of the registration statement
being filed in connection with this offering and before the date of termination of this offering. Any such Form 6-K which we intend
to so incorporate shall state in such form that it is being incorporated by reference into this prospectus.
We
will provide to each person, including any beneficial owner, to whom this prospectus is delivered, a copy of these filings, at
no cost, upon written or oral request to us at:
8 HaSatat St., Modi’in, Israel 7178106
,
Attn: Corporate Secretary, telephone number: 972-8-9935000. Copies of these filings may also be accessed at our website, www.vblrx.com.
Click on “Investor Relations” and then “Filings.”
A
copy of this prospectus, our memorandum of association and our articles of association, are available for inspection at our offices
at
8 HaSatat St., Modi’in, Israel 7178106
.
As
a foreign private issuer, we are exempt from the rules under Section 14 of the Exchange Act prescribing the furnishing and content
of proxy statements and our officers, directors and principal shareholders are exempt from the reporting and other provisions
in Section 16 of the Exchange Act.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table sets forth our ratio of earnings to fixed charges for the periods indicated. The ratio of earnings to fixed charges
is computed by dividing fixed charges into earnings from continuing operations before income tax and extraordinary items plus
fixed charges. For the purposes of computing the ratio of earnings to fixed charges, earnings consist of pretax income (loss)
from continuing operations plus fixed charges:
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|
Year
Ended December 31,
|
|
|
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2016
|
|
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2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Ratio of earnings as adjusted
to fixed charges
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
For
the purpose of these computations, earnings (losses) have been calculated as the sum in thousands of (i) pretax income from continuing
operations; and (ii) amortization of capitalized interest offset by interest capitalized. Fixed charges are immaterial to each
period.
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
2012
|
|
Earnings
(losses):
|
|
|
(16,007
|
)
|
|
|
(14,882
|
)
|
|
|
(17,397
|
)
|
|
|
(17,348
|
)
|
|
|
(12,218
|
)
|
Fixed
Charges:
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss plus fixed
charges
|
|
|
(16,007
|
)
|
|
|
(14,882
|
)
|
|
|
(17,397
|
)
|
|
|
(17,348
|
)
|
|
|
(12,218
|
)
|
Ratio
of earnings to fixed charges
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
CAPITALIZATION
AND INDEBTEDNESS
The
following table sets forth our cash and cash equivalents, short-term bank deposits, long-term debt, debentures and capitalization
as of September 30, 2017 on an actual basis. The table should be read in conjunction with our unaudited condensed consolidated
balance sheets as of September 30, 2017, included in our Form 6-K filed on November 14, 2017, which have been incorporated
by reference in this prospectus.
|
|
(US
dollars
in
thousands)
|
|
Cash
and cash equivalents
|
|
$
|
11,667
|
|
Short-term
bank deposits
|
|
|
16,497
|
|
|
|
|
|
|
Total
liabilities
|
|
|
5,100
|
|
Shareholders’
equity:
|
|
|
|
|
Ordinary
shares, NIS 0.01 par value per share; 70,000,000 shares authorized; 27,224,566 shares issued and outstanding
|
|
|
50
|
|
Other
comprehensive income
|
|
|
40
|
|
Additional
paid-in capital
|
|
|
201,489
|
|
Warrants
|
|
|
2,960
|
|
Accumulated
deficit
|
|
|
(174,496
|
)
|
Total
shareholders’ equity
|
|
$
|
30,043
|
|
Total
capitalization
|
|
$
|
35,143
|
|
PRICE
RANGE OF ORDINARY SHARES
Our
ordinary shares have been quoted on the Nasdaq Global Market under the symbol “VBLT” since September 30, 2014.
Prior to that date, there was no public trading market for our ordinary shares. Our initial public offering was priced at
$6.00 per ordinary share on September 30, 2014. The following table sets forth for the periods indicated the high and low
closing sales prices per ordinary share as reported on Nasdaq:
The
following table sets forth, for the periods indicated, the high and low reported sales prices of the ordinary shares on Nasdaq.
|
|
Low
|
|
|
High
|
|
|
|
(in
U.S. dollars)
|
|
Annual:
|
|
|
|
|
|
|
|
|
2017
(through December 15, 2017)
|
|
$
|
3.90
|
|
|
$
|
9.05
|
|
2016
|
|
$
|
2.76
|
|
|
$
|
7.58
|
|
2015
|
|
$
|
3.09
|
|
|
$
|
17.02
|
|
2014
(beginning October 1, 2014)
|
|
$
|
4.65
|
|
|
$
|
7.56
|
|
Quarterly:
|
|
|
|
|
|
|
|
|
Fourth
Quarter 2017 (through December 15, 2017)
|
|
$
|
5.60
|
|
|
$
|
9.05
|
|
Third
Quarter 2017
|
|
$
|
3.90
|
|
|
$
|
7.25
|
|
Second
Quarter 2017
|
|
$
|
4.35
|
|
|
$
|
6.70
|
|
First
Quarter 2017
|
|
$
|
4.20
|
|
|
$
|
6.50
|
|
Fourth
Quarter 2016
|
|
$
|
4.45
|
|
|
$
|
6.20
|
|
Third
Quarter 2016
|
|
$
|
3.74
|
|
|
$
|
5.83
|
|
Second
Quarter 2016
|
|
$
|
3.03
|
|
|
$
|
7.58
|
|
First
Quarter 2016
|
|
$
|
2.76
|
|
|
$
|
5.22
|
|
Fourth
Quarter 2015
|
|
$
|
4.66
|
|
|
$
|
8.54
|
|
Third
Quarter 2015
|
|
$
|
4.60
|
|
|
$
|
12.25
|
|
Second
Quarter 2015
|
|
$
|
3.66
|
|
|
$
|
8.15
|
|
First
Quarter 2015
|
|
$
|
3.19
|
|
|
$
|
16.23
|
|
Most
Recent Six Months (and Most Recent Partial Month):
|
|
|
|
|
|
|
|
|
December
2017 (through December 15, 2017
|
|
$
|
6.30
|
|
|
$
|
6.95
|
|
November
2017
|
|
$
|
5.95
|
|
|
$
|
9.05
|
|
October
2017
|
|
$
|
5.60
|
|
|
$
|
7.05
|
|
September
2017
|
|
$
|
4.90
|
|
|
$
|
7.25
|
|
August
2017
|
|
$
|
3.90
|
|
|
$
|
5.30
|
|
July
2017
|
|
$
|
3.90
|
|
|
$
|
4.70
|
|
June
2017
|
|
$
|
4.35
|
|
|
$
|
5.65
|
|
On
December 15, 2017, the last reported sale price of the ordinary shares was $6.70 on the Nasdaq Global Market.
USE
OF PROCEEDS
Unless
we state otherwise in a prospectus supplement, we will use the net proceeds from the sale of securities under this prospectus
for general corporate purposes. From time to time, we may evaluate the possibility of acquiring businesses, products, equipment
tools and technologies, and we may use a portion of the proceeds as consideration for such acquisitions. Until we use net proceeds
for these purposes, we may invest them in interest-bearing securities.
DILUTION
We
will set forth in a prospectus supplement the following information regarding any material dilution of the equity interests of
investors purchasing securities in an offering under this prospectus:
|
●
|
the
net tangible book value per share of our equity securities before and after the offering;
|
|
|
|
|
●
|
the
amount of the increase in such net tangible book value per share attributable to the cash payments made by purchasers in the
offering; and
|
|
|
|
|
●
|
the
amount of the immediate dilution from the public offering price which will be absorbed by such purchasers.
|
DESCRIPTION
OF SHARE CAPITAL
General
Our
authorized share capital consists solely of 70,000,000 ordinary shares, par value NIS 0.01 per share. All of our outstanding
ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any
preemptive rights.
Share
History
The
following is a summary of the history of our share capital for the last three years.
|
●
|
Since
January 1, 2012, we have issued and sold484,634 ordinary shares pursuant to the exercise of share options.
|
|
|
|
|
●
|
In
November 2015, we sold 2,500,000 ordinary shares and warrants to purchase up to 1,250,000 ordinary shares in an underwritten
offering. Piper Jaffray acted as sole book-running manager and JMP Securities acted as co-manager for the offering. The aggregate
offering price of the shares sold was approximately $15.0 million. The net proceeds that we received from the offering were
approximately $13.6 million. The offering was conducted pursuant to our registration statement on Form F-3, SEC file number
333-207250.
|
|
|
|
|
●
|
In
June 2016, we sold 4,359,091 ordinary shares an in registered offering. Rodman & Renshaw, a unit of H.C. Wainwright &
Co. acted as the exclusive placement agent for the offering. The aggregate offering price of the shares sold was approximately
$24.0 million. The net proceeds that we received from the offering were approximately $22.1 million. The offering was conducted
pursuant to our registration statement on Form F-3, SEC file number 333-207250.
|
|
|
|
|
●
|
In
December 2016, we entered into separate Equity Distribution Agreements with JMP Securities LLC and Chardan Capital Markets,
LLC, each as agents, to implement an “at the market offering” program under which we may, from time to time, offer
and sell ordinary shares having an aggregate offering price of up to $20,000,000 through the agents. We have sold an aggregate
of 224,695 ordinary shares for aggregate gross proceeds of $1.36 million, and have received net proceeds of $1.32 million,
through the program. The offering was conducted pursuant to our registration statement on Form F-3, SEC file number 333-207250.
|
|
|
|
|
●
|
In
November 2017, we sold 2,500,000 ordinary shares an in underwritten offering. Piper Jaffray acted as the sole underwriter
for the offering. The aggregate offering price of the shares sold was approximately $18.0 million. The net proceeds that we
received from the offering were approximately $17.9 million. The offering was conducted pursuant to our registration statement
on Form F-3, SEC file number 333-207250.
|
Registration
Number and Purpose of the Company
Our
registration number with the Israeli Registrar of Companies is 51-289976-6. Our purpose as set forth in our amended and restated
articles of association is to engage in any lawful activity.
Voting
Rights and Conversion
All
ordinary shares will have identical voting and other rights in all respects.
Transfer
of Shares
Our
fully paid ordinary shares are issued in registered form and may be freely transferred under our amended and restated articles
of association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock
exchange on which the shares are listed for trade. The ownership or voting of our ordinary shares by non-residents of Israel
is not restricted in any way by our amended and restated articles of association or the laws of the State of Israel, except for
ownership by nationals of some countries that are, or have been, in a state of war with Israel.
Election
of Directors
Our
ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of
the voting power represented at a shareholders meeting have the power to elect all of our directors, subject to the special approval
requirements for external directors described under “Management—External Directors.”
Under
our amended and restated articles of association, our board of directors must consist of not less than three, not including two
external directors, but no more than nine directors (including the external directors). Pursuant to our amended and restated articles
of association, other than the external directors, for whom special election requirements apply under the Companies Law, the vote
required to appoint a director is a simple majority vote of holders of our voting shares, participating and voting at the relevant
meeting. Each director will serve until his or her successor is duly elected and qualified or until his or her earlier death,
resignation or removal by a vote of the majority voting power of our shareholders at a general meeting of our shareholders or
until his or her office expires by operation of law, in accordance with the Companies Law. In addition, our amended and restated
articles of association allow our board of directors to appoint directors to fill vacancies on the board of directors to serve
for a term of office equal to the remaining period of the term of office of the directors(s) whose office(s) have been vacated.
External directors are elected for an initial term of three years, may be elected for additional terms of three years each under
certain circumstances, and may be removed from office pursuant to the terms of the Companies Law.
Dividend
and Liquidation Rights
We
may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under
the Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders
of a company unless the company’s articles of association provide otherwise. Our amended and restated articles of association
do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our
board of directors.
Pursuant
to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous
two years, according to our then last reviewed or audited financial statements, provided that the date of the financial statements
is not more than six months prior to the date of the distribution, or we may otherwise only distribute dividends that do not meet
such criteria only with court approval. In each case, we are only permitted to distribute a dividend if our board of directors
and the court, if applicable, determines that there is no reasonable concern that payment of the dividend will prevent us from
satisfying our existing and foreseeable obligations as they become due.
In
the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of
our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected
by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that
may be authorized in the future.
Exchange
Controls
There
are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale
of the shares or interest or other payments to non- residents of Israel, except for shareholders who are subjects of countries
that are, or have been, in a state of war with Israel.
Shareholder
Meetings
Under
Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held
no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general
meeting of shareholders are referred to in our amended and restated articles of association as extraordinary general meetings.
Our board of directors may call extraordinary general meetings whenever it sees fit, at such time and place, within or outside
of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene an
extraordinary general meeting upon the written request of (i) any two of our directors or one- quarter of the members
of our board of directors or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding
issued shares and 1% of our outstanding voting power or (b) 5% or more of our outstanding voting power. One or more shareholders,
holding 1% or more of the outstanding voting power, may ask the board to add an item to the agenda of a prospective meeting, if
the proposal merits discussion at the general meeting.
Subject
to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote
at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four
and 40 days prior to the date of the meeting. Furthermore, the Companies Law requires that resolutions regarding the following
matters must be passed at a general meeting of our shareholders:
|
●
|
amendments
to our articles of association;
|
|
|
|
|
●
|
appointment
or termination of our auditors;
|
|
|
|
|
●
|
appointment
of external directors;
|
|
|
|
|
●
|
approval
of certain related party transactions;
|
|
|
|
|
●
|
increases
or reductions of our authorized share capital;
|
|
|
|
|
●
|
a
merger; and
|
|
|
|
|
●
|
the
exercise of our board of directors’ powers by a general meeting, if our board of directors is unable to exercise its
powers and the exercise of any of its powers is required for our proper management.
|
The
Companies Law and our amended and restated articles of association require that a notice of any annual general meeting or extraordinary
general meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes the
appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an
approval of a merger, notice must be provided at least 35 days prior to the meeting.
Under
the Companies Law and our amended and restated articles of association, shareholders are not permitted to take action via written
consent in lieu of a meeting.
Voting
Rights
Quorum
Requirements
Pursuant
to our amended and restated articles of association, holders of our ordinary shares have one vote for each ordinary share held
on all matters submitted to a vote before the shareholders at a general meeting. As a foreign private issuer, the quorum required
for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or written ballot who
hold or represent between them at least 25% of the total outstanding voting rights. A meeting adjourned for lack of a quorum is
generally adjourned to the same day in the following week at the same time and place or to a later time or date if so specified
in the notice of the meeting. At the reconvened meeting, any two or more shareholders present in person or by proxy shall constitute
a lawful quorum.
Vote
Requirements
Our
amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote,
unless otherwise required by the Companies Law or by our amended and restated articles of association. Under the Companies Law,
each of (i) the approval of an extraordinary transaction with a controlling shareholder and (ii) the terms of employment
or other engagement of the controlling shareholder of the company or such controlling shareholder’s relative (even if not
extraordinary) requires, the approval of our audit committee, our board of directors and a Special Majority, in that order. Under
our amended and restated articles of association, the alteration of the rights, privileges, preferences or obligations of any
class of our shares requires a simple majority vote of the class so affected (or such other percentage of the relevant class that
may be set forth in the governing documents relevant to such class), in addition to the ordinary majority vote of all classes
of shares voting together as a single class at a shareholder meeting. An exception to the simple majority vote requirement is
a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant
to Section 350 of the Companies Law, which requires the approval of holders of 75% of the voting rights represented at the
meeting, in person, by proxy or by voting deed and voting on the resolution.
Access
to Corporate Records
Under
the Companies Law, shareholders are provided access to: minutes of our general meetings; our shareholders register and principal
shareholders register, articles of association and financial statements; and any document that we are required by law to file
publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request to be
provided with any document related to an action or transaction requiring shareholder approval under the related party transaction
provisions of the Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is
necessary to protect our interest or protect a trade secret or patent.
Modification
of Class Rights
Under
the Companies Law and our amended and restated articles of association, the rights attached to any class of share, such as voting,
liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a majority of the shares of that
class present at a separate class meeting, or otherwise in accordance with the rights attached to such class of shares, as set
forth in our amended and restated articles of association.
Registration
Rights
Our
investor rights agreement entitles shareholders who previously held preferred shares prior to our initial public offering to certain
registration rights. In accordance with this agreement, and subject to conditions described below, the following executives, directors
and entities, which as of the date of this prospectus beneficially own more than 5% of our ordinary shares, are entitled to registration
rights: Jecheskiel Gonczarowski, Thai Lee Family Trust, persons and entities affiliated with Aurum Ventures, Pitango Ventures
and J.J.D. Holdings.
Form
F-1 Demand Rights
. Upon the request of the holders of more than 50% of the shares held by our former preferred shareholders
given more than 180 days after the effective date of the registration statement related to our initial public offering, we are
required to file a registration statement on Form F-1 in respect of the ordinary shares held by our former preferred shareholders.
Following a request to effect such a registration, we are required to give notice of the request to the other holders of registrable
securities and offer them an opportunity to include their shares in the registration statement. We are not required to effect
more than two registrations on Form F-1 in the aggregate and not more than one registration in any 12 month period and we are
only required to do so if the aggregate proceeds from any such registration are estimated in good faith to be in excess of $6.0
million.
Form
F-3 Demand Rights
. Upon the request of the holders of more than 20% of the shares held by our former
preferred shareholders, we are required to file a registration statement on Form F-3 in respect of the ordinary shares held by
our former preferred shareholders. Following a request to effect such a registration, we are required to give notice of the request
to the other holders of registrable securities and offer them an opportunity to include their shares in the registration statement.
We are not required to effect a registration on Form F-3 more than twice in any 12 month period and are only required to do so
if the aggregate proceeds from any such registration are estimated in good faith to be in excess of $2.0 million.
Piggyback
Registration Rights
. Shareholders holding registrable securities also have the right to request that we include their registrable
securities in any registration statement filed by us in the future for the purposes of a public offering for cash, subject to
specified exceptions.
Cutback
.
In the event that the managing underwriter advises the registering shareholders that marketing factors require a limitation on
the number of shares that can be included in a registered offering, the shares will be included in the registration statement
in an agreed order of preference among the holders of registration rights. The same preference also applies in the case of a piggyback
registration, but we have first preference and the number of shares of shareholders that are included may not be less than 30%
of the total number of shares included in the offering.
Termination
.
All registration rights granted to holders of registrable securities terminate on the fifth anniversary of the closing of our
initial public offering and, with respect to any of our holders of registrable securities that holds less than 1% of our outstanding
shares, when the shares held by such shareholder can be sold within a 90 day period under Rule 144.
Expenses
.
We will pay all expenses in carrying out the foregoing registrations other than selling shareholders’ underwriting discounts
and transfer taxes.
Acquisitions
under Israeli Law
Full
Tender Offer
A
person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company’s
issued and outstanding share capital is required by the Companies Law to make a tender offer to all of the company’s shareholders
for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli
company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required
to make a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued
and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding
share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest
in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by
operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than
2% of the issued and outstanding share capital of the company or of the applicable class of shares.
Upon
a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder
accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli
court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined
by the court. However, under certain conditions, the offeror may include in the terms of the tender offer that an offeree who
accepted the offer will not be entitled to petition the Israeli court as described above.
If
(a) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share
capital of the company or of the applicable class or the shareholders who accept the offer constitute less than a majority of
the offerees that do not have a personal interest in the acceptance of the tender offer, or (b) the shareholders who did
not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class),
the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s issued
and outstanding share capital or of the applicable class from shareholders who accepted the tender offer.
Special
Tender Offer
The
Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer
if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This
requirement does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly,
the Companies Law provides that an acquisition of shares in a public company must be made by means of a special tender offer if,
as a result of the acquisition, the purchaser would become a holder of more than 45% of the voting rights in the company, provided
that there is no other shareholder of the company who holds more than 45% of the voting rights in the company, subject to certain
exceptions.
A
special tender offer must be extended to all shareholders of a company but the offeror is not required to purchase shares representing
more than 5% of the voting power attached to the company’s outstanding shares, regardless of how many shares are tendered
by shareholders. A special tender offer may be consummated only if (i) outstanding shares representing at least 5% of the
voting power of the company will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the
number of shares whose holders objected to the offer (excluding the purchaser, controlling shareholders, holders of 25% or more
of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer). If a special
tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser
or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and
may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser
or such person or entity undertook to effect such an offer or merger in the initial special tender offer.
Merger
The
Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain requirements
described under the Companies Law are met, by a majority vote of each party’s shareholders, and, in the case of the target
company, a majority vote of each class of its shares, voted on the proposed merger at a shareholders meeting.
For
purposes of the shareholder vote, unless a court rules otherwise, the merger will not be deemed approved if a majority of the
votes of shares represented at the shareholders meeting that are held by parties other than the other party to the merger, or
by any person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights
or the right to appoint 25% or more of the directors of the other party, vote against the merger. If, however, the merger involves
a merger with a company’s own controlling shareholder or if the controlling shareholder has a personal interest in the merger,
then the merger is instead subject to the same Special Majority approval that governs all extraordinary transactions with controlling
shareholders. A Special Majority approval constitutes shareholder approval by a majority vote of the shares present and voting
at a meeting of shareholders called for such purpose, provided that either: (a) such majority includes at least a majority
of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation
arrangement; or (b) the total number of shares of non-controlling shareholders and shareholders who do not have a personal
interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company’s aggregate
voting rights.
If
the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class
or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request
of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking
into account the value of the parties to the merger and the consideration offered to the shareholders of the target company.
Upon
the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that
there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations
of the merging entities, and may further give instructions to secure the rights of creditors.
In
addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of
the merger was filed by each party with the Israeli Registrar of Companies and at least 30 days have passed from the date on which
the merger was approved by the shareholders of each party.
Anti-Takeover
Measures under Israeli Law
The
Companies Law allow us to create and issue shares having rights different from those attached to our ordinary shares, including
shares providing certain preferred rights with respect to voting, distributions or other matters and shares having preemptive
rights. No preferred shares are currently authorized under our amended and restated articles of association. In the future, if
we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights
that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from
realizing a potential premium over the market value of their ordinary shares. The authorization and designation of a class of
preferred shares will require an amendment to our amended and restated articles of association, which requires the prior approval
of the holders of a majority of the voting power attaching to our issued and outstanding shares at a general meeting. The convening
of the meeting, the shareholders entitled to participate and the majority vote required to be obtained at such a meeting will
be subject to the requirements set forth in the Companies Law as described above in “Voting Rights.”
Borrowing
Powers
Pursuant
to the Companies Law and our amended and restated articles of association, our board of directors may exercise all powers and
take all actions that are not required under law or under our amended and restated articles of association to be exercised or
taken by our shareholders, including the power to borrow money for company purposes.
Changes
in Capital
Our
amended and restated articles of association enable us to increase or reduce our share capital. Any such changes are subject to
the provisions of the Companies Law and must be approved by a resolution duly passed by our shareholders at a general meeting
by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration
and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of
directors and an Israeli court.
Warrants
As
of the date of this prospectus, warrants to purchase 1,281,932 ordinary shares were issued and outstanding at a weighted average
exercise price of $7.31 per ordinary share. The expiration dates of these warrants range from April 1, 2021 to December 28, 2021.
Transfer
Agent and Registrar
Our
transfer agent in the United States is American Stock Transfer & Trust Company, LLC.
Listing
Our
ordinary shares are listed on The NASDAQ Global Market under the symbol “VBLT.”
FOREIGN
EXCHANGE CONTROLS AND OTHER LIMITATIONS
Israeli
law limits foreign currency transactions and transactions between Israeli and non-Israeli residents. The Controller of Foreign
Exchange at the Bank of Israel, through “general” and “special” permits, may regulate or waive these limitations.
In May 1998, the Bank of Israel liberalized its foreign currency regulations by issuing a new “general permit” providing
that foreign currency transactions are generally permitted, although some restrictions still apply. Under the new general permit,
all foreign currency transactions must be reported to the Bank of Israel, and a foreign resident must report to his financial
mediator about any contract for which Israeli currency is being deposited in, or withdrawn from, his account.
The
State of Israel generally does not restrict the ownership or voting of ordinary shares of Israeli entities by non-residents of
Israel, except with respect to subjects of countries that are in a state of war with Israel.
DESCRIPTION
OF DEBT SECURITIES
This
prospectus describes the general terms and provisions of the debt securities we may offer and sell by this prospectus. When we
offer to sell a particular series of debt securities, we will describe the specific terms of the series in a prospectus supplement.
We will also indicate in the prospectus supplement whether the general terms and provisions described in this prospectus apply
to a particular series of debt securities.
We
may offer under this prospectus up to $150,000,000 in aggregate principal amount of debt securities, or if debt securities are
issued at a discount, or in a foreign currency or composite currency, such principal amount as may be sold for an initial offering
price of up to $150,000,000. We may offer debt securities in the form of either senior debt securities or subordinated debt
securities. The senior debt securities will be issued under one or more senior indentures, dated as of a date prior to such issuance,
between us and the trustee identified in the applicable prospectus supplement, as amended or supplemented from time to time. We
will refer to any such indenture throughout this prospectus as the “senior indenture.” Any subordinated debt securities
will be issued under one or more separate indentures, dated as of a date prior to such issuance, between us and the trustee identified
in the applicable prospectus supplement, as amended or supplemented from time to time. We will refer to any such indenture throughout
this prospectus as the “subordinated indenture” and to the trustee under the senior or subordinated indenture as the
“trustee.” The senior indenture and the subordinated indenture are sometimes collectively referred to in this prospectus
as the “indentures.” The indentures will be subject to and governed by the Trust Indenture Act of 1939, as amended.
The
debt securities will be issued under an indenture between us and a trustee, the form of which is incorporated by reference as
an exhibit to the registration statement of which this prospectus forms a part. We have summarized the general features of
the debt securities to be governed by the indenture. The summary is not complete. The executed indenture will be incorporated
by reference from a report on Form 6-K. We encourage you to read the indenture, because the indenture, and not this summary,
will govern your rights as a holder of debt securities. Capitalized terms used in this summary will have the meanings specified
in the indenture. References to “we,” “us” and “our” in this section, unless the context
otherwise requires or as otherwise expressly stated, refer to Vascular Biogenics Ltd.
Compliance
with Certain Israeli Laws and Regulations
Any
indenture and any debt securities issued thereunder may need to contain certain provisions to assure compliance with Israeli laws
or regulations. These provisions will be set forth in one or more supplemental indentures and will be incorporated by reference
from a report on Form 6-K.
Additional
Information
The
terms of each series of debt securities will be established by or pursuant to a resolution of our board of directors, or a committee
thereof, and set forth or determined in the manner provided in an officers’ certificate or by a supplemental indenture. The
particular terms of each series of debt securities will be described in a prospectus supplement relating to such series, including
any pricing supplement.
We
may issue an unlimited amount of debt securities under the indenture, and the debt securities may be in one or more series with
the same or various maturities, at par, at a premium or at a discount. Except as set forth in any prospectus supplement,
we will also have the right to “reopen” a previous series of debt securities by issuing additional debt securities
of such series without the consent of the holders of debt securities of the series being reopened or any other series. Any
additional debt securities of the series being reopened will have the same ranking, interest rate, maturity and other terms as
the previously issued debt securities of that series. These additional debt securities, together with the previously issued
debt securities of that series, will constitute a single series of debt securities under the terms of the applicable indenture.
Unless
we give you different information in the applicable prospectus supplement, the senior debt securities will be unsubordinated obligations
and will rank equally with all of our other unsecured and unsubordinated indebtedness. Payments on the subordinated debt securities
will be subordinated to the prior payment in full of all of our senior indebtedness, as described under “Description of
Debt Securities—Subordination” and in the applicable prospectus supplement.
Each
indenture provides that we may, but need not, designate more than one trustee under an indenture. Any trustee under an indenture
may resign or be removed and a successor trustee may be appointed to act with respect to the series of debt securities administered
by the resigning or removed trustee. If two or more persons are acting as trustee with respect to different series of debt securities,
each trustee shall be a trustee of a trust under the applicable indenture separate and apart from the trust administered by any
other trustee. Except as otherwise indicated in this prospectus, any action described in this prospectus to be taken by each trustee
may be taken by each trustee with respect to, and only with respect to, the one or more series of debt securities for which it
is trustee under the applicable indenture.
We
will set forth in a prospectus supplement, including any pricing supplement, relating to any series of debt securities being offered,
the aggregate principal amount and other terms of the debt securities, which will include some or all of the following:
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the
title of the debt securities and whether they are senior or subordinated;
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the
aggregate principal amount of the debt securities being offered, the aggregate principal amount of the debt securities outstanding
as of the most recent practicable date and any limit on their aggregate principal amount, including the aggregate principal
amount of debt securities authorized;
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the
price at which the debt securities will be issued, expressed as a percentage of the principal and, if other than the principal
amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof
or, if applicable, the portion of the principal amount of such debt securities that is convertible into common stock or other
securities of ours or the method by which any such portion shall be determined;
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if
convertible, the terms on which such debt securities are convertible, including the initial conversion price or rate and the
conversion period and any applicable limitations on the ownership or transferability of common stock or other securities of
ours received on conversion;
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the
date or dates, or the method for determining the date or dates, on which the principal of the debt securities will be payable;
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the
fixed or variable interest rate or rates of the debt securities, or the method by which the interest rate or rates is determined;
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the
date or dates, or the method for determining the date or dates, from which interest will accrue;
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the
dates on which interest will be payable;
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the
record dates for interest payment dates, or the method by which such dates will be determine;
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the
persons to whom interest will be payable;
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the
basis upon which interest will be calculated if other than that of a 360-day year of twelve 30-day months;
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any
make-whole amount, which is the amount in addition to principal and interest that is required to be paid to the holder of
a debt security as a result of any optional redemption or accelerated payment of such debt security, or the method for determining
the make-whole amount;
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the
place or places where the principal of, and any premium or make-whole amount, and interest on, the debt securities will be
payable;
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where
the debt securities may be surrendered for registration of transfer or conversion or exchange;
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where
notices or demands to or upon us in respect of the debt securities and the applicable indenture may be served;
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the
times, prices and other terms and conditions upon which we may redeem the debt securities;
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any
obligation we have to redeem, repay or purchase the debt securities pursuant to any sinking fund or analogous provision or
at the option of holders of the debt securities, and the times and prices at which we must redeem, repay or purchase the debt
securities as a result of such obligation;
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the
currency or currencies in which the debt securities are denominated and payable if other than United States dollars, which
may be a foreign currency or units of two or more foreign currencies or a composite currency or currencies and the terms and
conditions relating thereto, and the manner of determining the equivalent of such foreign currency in United States dollars;
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whether
the principal of, and any premium or make-whole amount, or interest on, the debt securities of the series are to be payable,
at our election or at the election of a holder, in a currency or currencies other than that in which the debt securities are
denominated or stated to be payable, and other related terms and conditions;
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whether
the amount of payments of principal of, and any premium or make-whole amount, or interest on, the debt securities may be determined
according to an index, formula or other method and how such amounts will be determined;
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whether
the debt securities will be in registered form, bearer form, or both, and (i) if in registered form, the person to whom
any interest shall be payable, if other than the person in whose name the security is registered at the close of business
on the regular record date for such interest, or (ii) if in bearer form, the manner in which, or the person to whom,
any interest on the security shall be payable if otherwise than upon presentation and surrender upon maturity;
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any
restrictions applicable to the offer, sale or delivery of securities in bearer form and the terms upon which securities in
bearer form of the series may be exchanged for securities in registered form of the series and vice versa, if permitted by
applicable laws and regulations;
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whether
any debt securities of the series are to be issuable initially in temporary global form and whether any debt securities of
the series are to be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests
in any such permanent global security may, or shall be required to, exchange their interests for other debt securities of
the series, and the manner in which interest shall be paid;
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the
identity of the depositary for securities in registered form, if such series are to be issuable as a global security;
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the
date as of which any debt securities in bearer form or in temporary global form shall be dated if other than the original
issuance date of the first security of the series to be issued;
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the
applicability, if any, of the defeasance and covenant defeasance provisions described in this prospectus or in the applicable
indenture;
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whether
and under what circumstances we will pay any additional amounts on the debt securities in respect of any tax, assessment or
governmental charge and, if so, whether we will have the option to redeem the debt securities in lieu of making such a payment;
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whether
and under what circumstances the debt securities being offered are convertible into common stock or other securities of ours,
as the case may be, including the conversion price or rate and the manner or calculation thereof;
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the
circumstances, if any, specified in the applicable prospectus supplement, under which beneficial owners of interests in the
global security may obtain definitive debt securities and the manner in which
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payments
on a permanent global debt security will be made if any debt securities are issuable in temporary or permanent global form;
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any
provisions granting special rights to holders of securities upon the occurrence of such events as specified in the applicable
prospectus supplement;
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if
the debt securities of such series are to be issuable in definitive form only upon receipt of certain certificates or other
documents or satisfaction of other conditions, then the form and/or terms of such certificates, documents or conditions;
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the
name of the applicable trustee and the nature of any material relationship with us or any of our affiliates, and the percentage
of debt securities of the class necessary to require the trustee to take action;
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any
deletions from, modifications of or additions to our events of default or covenants with regard to such debt securities and
any change in the right of any trustee or any of the holders to declare the principal amount of any of such debt securities
due and payable;
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applicable
CUSIP numbers; and
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any
other terms of such debt securities not inconsistent with the provisions of the applicable indenture.
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We
may issue debt securities that provide for less than the entire principal amount thereof to be payable upon declaration of acceleration
of the maturity of the debt securities. We refer to any such debt securities throughout this prospectus as “original issue
discount securities.” We will provide information on the applicable United States and Israeli income tax considerations
and other special considerations applicable to any of these debt securities in the applicable prospectus supplement.
If
we denominate the purchase price of any of the debt securities in a foreign currency or currencies or a foreign currency unit
or units, or if the principal of, and premium and interest on, any series of debt securities is payable in a foreign currency
or currencies or a foreign currency unit or units, we will provide you with information on the restrictions, elections, general
tax considerations, specific terms and other information with respect to that issue of debt securities and such foreign currency
or currencies or foreign currency unit or units in the applicable prospectus supplement.
We
also may issue indexed debt securities. Payments of principal of, and premium and interest on, indexed debt securities are determined
with reference to the rate of exchange between the currency or currency unit in which the debt security is denominated and any
other currency or currency unit specified by us, to the relationship between two or more currencies or currency units or by other
similar methods or formulas specified in the prospectus supplement.
Except
as described under “Merger, Consolidation or Sale of Assets” or as may be set forth in any prospectus supplement,
the debt securities will not contain any provisions that (i) would limit our ability to incur indebtedness or (ii) would
afford holders of debt securities protection in the event of (a) a highly leveraged or similar transaction involving us,
or (b) a change of control or reorganization, restructuring, merger or similar transaction involving us that may adversely
affect the holders of the debt securities. In the future, we may enter into transactions, such as the sale of all or substantially
all of our assets or a merger or consolidation, that may have an adverse effect on our ability to service our indebtedness, including
the debt securities, by, among other things, substantially reducing or eliminating our assets.
We
will provide you with more information in the applicable prospectus supplement regarding any deletions, modifications, or additions
to the events of default or covenants that are described below, including any addition of a covenant or other provision providing
event risk or similar protection.
Payment
Unless
we give you different information in the applicable prospectus supplement, the principal of, and any premium or make-whole amount,
and interest on, any series of the debt securities will be payable at the corporate trust office of the trustee. We will provide
you with the address of the trustee in the applicable prospectus supplement. We may also pay interest by mailing a check to the
address of the person entitled to it as it appears in the applicable register for the debt securities or by wire transfer of funds
to that person.
All
monies that we pay to a paying agent or a trustee for the payment of the principal of, and any premium or make-whole amount, or
interest on, any debt security will be repaid to us if unclaimed at the end of two years after the obligation underlying payment
becomes due and payable. After funds have been returned to us, the holder of the debt security may look only to us for payment,
without payment of interest for the period which we hold the funds.
Denomination,
Interest, Registration and Transfer
Unless
otherwise described in the applicable prospectus supplement, the debt securities of any series will be issuable in denominations
of $1,000 and integral multiples of $1,000.
Subject
to the limitations imposed upon debt securities that are evidenced by a computerized entry in the records of a depository company
rather than by physical delivery of a note, a holder of debt securities of any series may:
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exchange
them for any authorized denomination of other debt securities of the same series and of a like aggregate principal amount
and kind upon surrender of such debt securities at the corporate trust office of the applicable trustee or at the office of
any transfer agent that we designate for such purpose;
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and
surrender them for registration of transfer or exchange at the corporate trust office of the applicable trustee or at the
office of any transfer agent that we designate for such purpose.
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Every
debt security surrendered for registration of transfer or exchange must be duly endorsed or accompanied by a written instrument
of transfer satisfactory to the applicable trustee or transfer agent. Payment of a service charge will not be required for any
registration of transfer or exchange of any debt securities, but we or the trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith. If in addition to the applicable trustee, the applicable
prospectus supplement refers to any transfer agent initially designated by us for any series of debt securities, we may at any
time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent
acts, except that we will be required to maintain a transfer agent in each place of payment for such series. We may at any time
designate additional transfer agents for any series of debt securities.
Neither
we, nor any trustee, will be required to:
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issue,
register the transfer of or exchange debt securities of any series during a period beginning at the opening of business 15 days
before the day that the notice of redemption of any debt securities selected for redemption is mailed and ending at the close
of business on the day of such mailing;
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register
the transfer of or exchange any debt security, or portion thereof, so selected for redemption, in whole or in part, except
the unredeemed portion of any debt security being redeemed in part; and
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issue,
register the transfer of or exchange any debt security that has been surrendered for repayment at the option of the holder,
except the portion, if any, of such debt security not to be so repaid.
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Merger,
Consolidation or Sale of Assets
The
indentures provide that we may, without the consent of the holders of any outstanding debt securities, (i) consolidate with,
(ii) sell, lease or convey all or substantially all of our assets to, or (iii) merge with or into, any other entity
provided that:
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either
we are the continuing entity, or the successor entity, if other than us, assumes the obligations (a) to pay the principal
of, and any premium or make-whole amount, and interest on, all of the debt securities and (b) to duly perform and observe
all of the covenants and conditions contained in each indenture;
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after
giving effect to the transaction, there is no event of default under the indentures and no event which, after notice or the
lapse of time, or both, would become such an event of default, occurs and continues; and
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an
officers’ certificate and legal opinion covering such conditions are delivered to each applicable trustee.
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Covenants
Existence
. Except
as described under “—Merger, Consolidation or Sale of Assets,” the indentures require us to do or cause to be
done all things necessary to preserve and keep in full force and effect our existence, rights and franchises. However, the indentures
do not require us to preserve any right or franchise if we determine that any right or franchise is no longer desirable in the
conduct of our business.
Payment
of taxes and other claims
. The indentures require us to pay, discharge or cause to be paid or discharged, before they
become delinquent (i) all taxes, assessments and governmental charges levied or imposed on us, and (ii) all lawful claims
for labor, materials and supplies which, if unpaid, might by law become a lien upon our property. However, we will not be required
to pay, discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity
is being contested in good faith by appropriate proceedings.
Provision
of financial information
. The indentures require us to (i) within 15 days of each of the respective dates by
which we are required to file our annual reports, quarterly reports and other documents with the SEC, file with the trustee copies
of the annual report, quarterly report and other documents that we file with the SEC under Section 13 or 15(d) of the Exchange
Act, (ii) file with the trustee and the SEC any additional information, documents and reports regarding compliance by us
with the conditions and covenants of the indentures, as required, (iii) within 30 days after the filing with the trustee,
mail to all holders of debt securities, as their names and addresses appear in the applicable register for such debt securities,
without cost to such holders, summaries of any documents and reports required to be filed by us pursuant to (i) and (ii) above,
and (iv) supply, promptly upon written request and payment of the reasonable cost of duplication and delivery, copies of
such documents to any prospective holder.
Additional
covenants
. The applicable prospectus supplement will set forth any our additional covenants relating to any series of
debt securities.
Events
of Default, Notice and Waiver
Unless
the applicable prospectus supplement states otherwise, when we refer to “events of default” as defined in the indentures
with respect to any series of debt securities, we mean:
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default
in the payment of any installment of interest on any debt security of such series continuing for 30 days;
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default
in the payment of principal of, or any premium or make-whole amount on, any debt security of such series for five business
days at its stated maturity;
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default
in making any sinking fund payment as required for any debt security of such series for five business days;
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default
in the performance or breach of any covenant or warranty in the debt securities or in the indenture by us continuing for 60 days
after written notice as provided in the applicable indenture, but not of a covenant added to the indenture solely for the
benefit of a series of debt securities issued thereunder other than such series;
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a
default under any bond, debenture, note, mortgage, indenture or instrument:
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having
an aggregate principal amount of at least $30,000,000; or
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(ii)
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under
which there may be issued, secured or evidenced any existing or later created indebtedness for money borrowed by us, if we
are directly responsible or liable as obligor or guarantor, if the default results in the indebtedness becoming or being declared
due and payable prior to the date it otherwise would have, without such indebtedness having been discharged, or such acceleration
having been rescinded or annulled, within 30 days after notice to the issuing company specifying such default. Such notice
shall be given to us by the trustee, or to us and the trustee by the holders of at least 10% in principal amount of the outstanding
debt securities of that series. The written notice shall specify such default and require us to cause such indebtedness to
be discharged or cause such acceleration to be rescinded or annulled and shall state that such notice is a “Notice of
Default” under such indenture;
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bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or trustee of us; and
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any
other event of default provided with respect to a particular series of debt securities.
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If
an event of default occurs and is continuing with respect to debt securities of any series outstanding, then the applicable trustee
or the holders of 25% or more in principal amount of the debt securities of that series will have the right to declare the principal
amount of all the debt securities of that series to be due and payable. If the debt securities of that series are original issue
discount securities or indexed securities, then the applicable trustee or the holders of 25% or more in principal amount of the
debt securities of that series will have the right to declare the portion of the principal amount as may be specified in the terms
thereof to be due and payable. However, at any time after such a declaration of acceleration has been made, but before a judgment
or decree for payment of the money due has been obtained by the applicable trustee, the holders of at least a majority in principal
amount of outstanding debt securities of such series or of all debt securities then outstanding under the applicable indenture
may rescind and annul such declaration and its consequences if:
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we
have deposited with the applicable trustee all required payments of the principal, any premium or make-whole amount, interest
and, to the extent permitted by law, interest on overdue installment of interest, plus applicable fees, expenses, disbursements
and advances of the applicable trustee; and
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all
events of default, other than the non-payment of accelerated principal, or a specified portion thereof, and any premium or
make-whole amount, have been cured or waived.
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The
indentures also provide that the holders of at least a majority in principal amount of the outstanding debt securities of any
series or of all debt securities then outstanding under the applicable indenture may, on behalf of all holders, waive any past
default with respect to such series and its consequences, except a default:
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in
the payment of the principal, any premium or make-whole amount, or interest;
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in
respect of a covenant or provision contained in the applicable indenture that cannot be modified or amended without the consent
of the holders of the outstanding debt security that is affected by the default; or
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in
respect of a covenant or provision for the benefit or protection of the trustee, without its express written consent.
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The
indentures require each trustee to give notice to the holders of debt securities within 90 days of a default unless such
default has been cured or waived. However, the trustee may withhold notice if specified persons of such trustee consider such
withholding to be in the interest of the holders of debt securities. The trustee may not withhold notice of a default in the payment
of principal, any premium or interest on any debt security of such series or in the payment of any sinking fund installment in
respect of any debt security of such series.
The
indentures provide that holders of debt securities of any series may not institute any proceedings, judicial or otherwise, with
respect to such indenture or for any remedy under the indenture, unless the trustee fails to act for a period of 60 days
after the trustee has received a written request to institute proceedings in respect of an event of default from the holders of
25% or more in principal amount of the outstanding debt securities of such series, as well as an offer of indemnity reasonably
satisfactory to the trustee. However, this provision will not prevent any holder of debt securities from instituting suit for
the enforcement of payment of the principal of, and any premium or make-whole amount, and interest on, such debt securities at
the respective due dates thereof.
The
indentures provide that, subject to provisions in each indenture relating to its duties in the case of a default, a trustee has
no obligation to exercise any of its rights or powers at the request or direction of any holders of any series of debt securities
then outstanding under the indenture, unless the holders have offered to the trustee reasonable security or indemnity. The holders
of at least a majority in principal amount of the outstanding debt securities of any series or of all debt securities then outstanding
under an indenture shall have the right to direct the time, method and place of conducting any proceeding for any remedy available
to the applicable trustee, or of exercising any trust or power conferred upon such trustee. However, a trustee may refuse to follow
any direction which:
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is
in conflict with any law or the applicable indenture;
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may
involve the trustee in personal liability; or
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may
be unduly prejudicial to the holders of debt securities of the series not joining the proceeding.
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Within
120 days after the close of each fiscal year, we will be required to deliver to each trustee a certificate, signed by one
of our several specified officers, stating whether or not that officer has knowledge of any default under the applicable indenture.
If the officer has knowledge of any default, the notice must specify the nature and status of the default.
Modification
of the Indentures
The
indentures provide that modifications and amendments may be made only with the consent of the affected holders of a majority in
principal amount of all outstanding debt securities issued under that indenture. However, no such modification or amendment may,
without the consent of the holders of the debt securities affected by the modification or amendment:
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change
the stated maturity of the principal of, or any premium or make-whole amount on, or any installment of principal of or interest
on, any such debt security;
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reduce
the principal amount of, the rate or amount of interest on, or any premium or make-whole amount payable on redemption of,
any such debt security;
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reduce
the amount of principal of an original issue discount security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect any right of repayment of the holder of any
such debt security;
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change
the place of payment or the coin or currency for payment of principal of, or any premium or make-whole amount, or interest
on, any such debt security;
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impair
the right to institute suit for the enforcement of any payment on or with respect to any such debt security;
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reduce
the percentage in principal amount of any outstanding debt securities necessary to modify or amend the applicable indenture
with respect to such debt securities, to waive compliance with particular provisions thereof or defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the applicable indenture; and
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modify
any of the foregoing provisions or any of the provisions relating to the waiver of particular past defaults or covenants,
except to increase the required percentage to effect such action or to provide that some of the other provisions may not be
modified or waived without the consent of the holder of such debt security.
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The
holders of a majority in aggregate principal amount of the outstanding debt securities of each series may, on behalf of all holders
of debt securities of that series, waive, insofar as that series is concerned, our compliance with material restrictive covenants
of the applicable indenture.
We
and our respective trustee may make modifications and amendments of an indenture without the consent of any holder of debt securities
for any of the following purposes:
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to
evidence the succession of another person to us as obligor under such indenture;
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to
add to our covenants for the benefit of the holders of all or any series of debt securities or to surrender any right or power
conferred upon us in such indenture;
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to
add events of default for the benefit of the holders of all or any series of debt securities;
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to
add or change any provisions of an indenture (i) to change or eliminate restrictions on the payment of principal of,
or premium or make-whole amount, or interest on, debt securities in bearer form, or (ii) to permit or facilitate the
issuance of debt securities in uncertificated form, provided that such action shall not adversely affect the interests of
the holders of the debt securities of any series in any material respect;
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to
change or eliminate any provisions of an indenture, provided that any such change or elimination shall become effective only
when there are no debt securities outstanding of any series created prior thereto which are entitled to the benefit of such
provision;
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to
secure the debt securities;
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to
establish the form or terms of debt securities of any series;
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to
provide for the acceptance of appointment by a successor trustee or facilitate the administration of the trusts under an indenture
by more than one trustee;
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to
cure any ambiguity, defect or inconsistency in an indenture, provided that such action shall not adversely affect the interests
of holders of debt securities of any series issued under such indenture; and
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to
supplement any of the provisions of an indenture to the extent necessary to permit or facilitate defeasance and discharge
of any series of such debt securities, provided that such action shall not adversely affect the interests of the holders of
the outstanding debt securities of any series.
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Voting
The
indentures provide that in determining whether the holders of the requisite principal amount of outstanding debt securities of
a series have given any request, demand, authorization, direction, notice, consent or waiver under the indentures or whether a
quorum is present at a meeting of holders of debt securities:
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the
principal amount of an original issue discount security that shall be deemed to be outstanding shall be the amount of the
principal thereof that would be due and payable as of the date of such determination upon declaration of acceleration of the
maturity thereof;
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the
principal amount of any debt security denominated in a foreign currency that shall be deemed outstanding shall be the United
States dollar equivalent, determined on the issue date for such debt
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security,
of the principal amount or, in the case of an original issue discount security, the United States dollar equivalent on the
issue date of such debt security of the amount determined as provided in the preceding bullet point;
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the
principal amount of an indexed security that shall be deemed outstanding shall be the principal face amount of such indexed
security at original issuance, unless otherwise provided for such indexed security under such indenture; and
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debt
securities owned by us or any other obligor upon the debt securities or by any affiliate of ours or of such other obligor
shall be disregarded.
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The
indentures contain provisions for convening meetings of the holders of debt securities of a series. A meeting will be permitted
to be called at any time by the applicable trustee, and also, upon request, by us or the holders of at least 25% in principal
amount of the outstanding debt securities of such series, in any such case upon notice given as provided in such indenture. Except
for any consent that must be given by the holder of each debt security affected by the modifications and amendments of an indenture
described above, any resolution presented at a meeting or adjourned meeting duly reconvened at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority of the aggregate principal amount of the outstanding debt securities
of that series represented at such meeting.
Notwithstanding
the preceding paragraph, except as referred to above, any resolution relating to a request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the holders of a specified percentage, which is less
than a majority of the aggregate principal amount of the outstanding debt securities of a series, may be adopted at a meeting
or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of such specified percentage.
Any
resolution passed or decision taken at any properly held meeting of holders of debt securities of any series will be binding on
all holders of such series. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be persons
holding or representing a majority in principal amount of the outstanding debt securities of a series. However, if any action
is to be taken relating to a consent or waiver which may be given by the holders of at least a specified percentage in principal
amount of the outstanding debt securities of a series, the persons holding such percentage will constitute a quorum.
Notwithstanding
the foregoing provisions, the indentures provide that if any action is to be taken at a meeting with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that such indenture expressly provides may be made, given or
taken by the holders of a specified percentage in principal amount of all outstanding debt securities affected by such action,
or of the holders of such series and one or more additional series:
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there
shall be no minimum quorum requirement for such meeting; and
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the
principal amount of the outstanding debt securities of such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken under such indenture.
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Subordination
Unless
otherwise provided in the applicable prospectus supplement, subordinated debt securities will be subject to the following subordination
provisions.
Upon
any distribution to our creditors in a liquidation, dissolution or reorganization, the payment of the principal of and interest
on any subordinated debt securities will be subordinated to the extent provided in the applicable indenture in right of payment
to the prior payment in full of all senior debt. However, our obligation to make payments of the principal of and interest on
such subordinated debt securities otherwise will not be affected. No payment of principal or interest will be permitted to be
made on subordinated debt securities at any time if a default on senior debt exists that permits the holders of such senior debt
to accelerate its maturity and the default is the subject of judicial proceedings or we receive notice of the default. After all
senior debt is paid in full and until the subordinated debt securities are paid in full, holders of subordinated debt securities
will be subrogated to the rights of holders of senior debt to the extent that distributions otherwise payable to holders of subordinated
debt securities have been applied to the payment of senior debt. The subordinated indenture will not restrict the amount of senior
debt or other indebtedness of ours. As a result of these subordination provisions, in the event of a distribution of assets upon
insolvency, holders of subordinated debt securities may recover less, ratably, than our general creditors.
The
term “senior debt” will be defined in the applicable indenture as the principal of and interest on, or substantially
similar payments to be made by us in respect of, other outstanding indebtedness, whether outstanding at the date of execution
of the applicable indenture or subsequently incurred, created or assumed. The prospectus supplement may include a description
of additional terms implementing the subordination feature.
No
restrictions will be included in any indenture relating to subordinated debt securities upon the creation of additional senior
debt.
If
this prospectus is being delivered in connection with the offering of a series of subordinated debt securities, the accompanying
prospectus supplement or the information incorporated in this prospectus by reference will set forth the approximate amount of
senior debt outstanding as of the end of our most recent fiscal quarter.
Discharge,
Defeasance and Covenant Defeasance
Unless
otherwise indicated in the applicable prospectus supplement, the indentures allow us to discharge our obligations to holders of
any series of debt securities issued under any indenture when:
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either
(i) all securities of such series have already been delivered to the applicable trustee for cancellation; or (ii) all
securities of such series have not already been delivered to the applicable trustee for cancellation but (a) have become
due and payable, (b) will become due and payable within one year, or (c) if redeemable at our option, are to be
redeemed within one year, and we have irrevocably deposited with the applicable trustee, in trust, funds in such currency
or currencies, currency unit or units or composite currency or currencies in which such debt securities are payable, an amount
sufficient to pay the entire indebtedness on such debt securities in respect of principal and any premium or make-whole amount,
and interest to the date of such deposit if such debt securities have become due and payable or, if they have not, to the
stated maturity or redemption date;
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we
have paid or caused to be paid all other sums payable; and
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an
officers’ certificate and an opinion of counsel stating the conditions to discharging the debt securities have been
satisfied has been delivered to the trustee.
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Unless
otherwise indicated in the applicable prospectus supplement, the indentures provide that, upon our irrevocable deposit with the
applicable trustee, in trust, of an amount, in such currency or currencies, currency unit or units or composite currency or currencies
in which such debt securities are payable at stated maturity, or government obligations, or both, applicable to such debt securities,
which through the scheduled payment of principal and interest in accordance with their terms will provide money in an amount sufficient
to pay the principal of, and any premium or make-whole amount, and interest on, such debt securities, and any mandatory sinking
fund or analogous payments thereon, on the scheduled due dates therefor, the issuing company may elect either:
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to
defease and be discharged from any and all obligations with respect to such debt securities; or
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to
be released from its obligations with respect to such debt securities under the applicable indenture or, if provided in the
applicable prospectus supplement, its obligations with respect to any other covenant, and any omission to comply with such
obligations shall not constitute an event of default with respect to such debt securities.
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Notwithstanding
the above, we may not elect to defease and be discharged from the obligation to pay any additional amounts upon the occurrence
of particular events of tax, assessment or governmental charge with respect to payments on such debt securities and the obligations
to register the transfer or exchange of such debt securities, to replace temporary or mutilated, destroyed, lost or stolen debt
securities, to maintain an office or agency in respect of such debt securities, or to hold monies for payment in trust.
The
indentures only permit us to establish the trust described in the paragraph above if, among other things, we have delivered to
the applicable trustee an opinion of counsel to the effect that the holders of such debt securities will not recognize income,
gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject
to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred. Such opinion of counsel, in the case of defeasance, will be required
to refer to and be based upon a ruling received from or published by the Internal Revenue Service or a change in applicable United
States federal income tax law occurring after the date of the indenture. In the event of such defeasance, the holders of such
debt securities would be able to look only to such trust fund for payment of principal, any premium or make-whole amount, and
interest.
When
we use the term “government obligations,” we mean securities that are:
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direct
obligations of the United States or the government that issued the foreign currency in which the debt securities of a particular
series are payable, for the payment of which its full faith and credit is pledged; or
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obligations
of a person controlled or supervised by and acting as an agency or instrumentality of the United States or other government
that issued the foreign currency in which the debt securities of such series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States or such other government, which are not callable or
redeemable at the option of the issuer thereof and shall also include a depository receipt issued by a bank or trust company
as custodian with respect to any such government obligation or a specific payment of interest on or principal of any such
government obligation held by such custodian for the account of the holder of a depository receipt. However, except as required
by law, such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt
from any amount received by the custodian in respect of the government obligation or the specific payment of interest on or
principal of the government obligation evidenced by such depository receipt.
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Unless
otherwise provided in the applicable prospectus supplement, if after we have deposited funds and/or government obligations to
effect defeasance or covenant defeasance with respect to debt securities of any series, (i) the holder of a debt security
of such series is entitled to, and does, elect under the terms of the applicable indenture or the terms of such debt security
to receive payment in a currency, currency unit or composite currency other than that in which such deposit has been made in respect
of such debt security, or (ii) a conversion event occurs in respect of the currency, currency unit or composite currency
in which such deposit has been made, the indebtedness represented by such debt security will be deemed to have been, and will
be, fully discharged and satisfied through the payment of the principal of, and premium or make-whole amount, and interest on,
such debt security as they become due out of the proceeds yielded by converting the amount so deposited in respect of such debt
security into the currency, currency unit or composite currency in which such debt security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange rate.
When
we use the term “conversion event,” we mean the cessation of use of:
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a
currency, currency unit or composite currency both by the government of the country that issued such currency and for the
settlement of transactions by a central bank or other public institutions of or within the international banking community;
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the
European Currency Unit both within the European Monetary System and for the settlement of transactions by public institutions
of or within the European Communities; or
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any
currency unit or composite currency other than the European Currency Unit for the purposes for which it was established.
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Unless
otherwise provided in the applicable prospectus supplement, all payments of principal of, and any premium or make-whole amount,
and interest on, any debt security that is payable in a foreign currency that ceases to be used by its government of issuance
shall be made in United States dollars.
In
the event that (i) we effect covenant defeasance with respect to any debt securities and (ii) those debt securities
are declared due and payable because of the occurrence of any event of default, the amount in the currency, currency unit or composite
currency in which such debt securities are payable, and government obligations on deposit with the applicable trustee, will be
sufficient to pay amounts due on such debt securities at the time of their stated maturity but may not be sufficient to pay amounts
due on such debt securities at the time of the acceleration resulting from such event of default. However, the issuing company
would remain liable to make payments of any amounts due at the time of acceleration.
The
applicable prospectus supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance,
including any modifications to the provisions described above, with respect to the debt securities of or within a particular series.
Conversion
Rights
The
terms and conditions, if any, upon which the debt securities are convertible into common stock or other securities of ours will
be set forth in the applicable prospectus supplement. The terms will include whether the debt securities are convertible into
shares of common stock or other securities of ours, the conversion price, or manner of calculation thereof, the conversion period,
provisions as to whether conversion will be at the issuing company’s option or the option of the holders, the events requiring
an adjustment of the conversion price and provisions affecting conversion in the event of the redemption of the debt securities
and any restrictions on conversion.
Global
Securities
The
debt securities of a series may be issued in whole or in part in the form of one or more global securities that will be deposited
with, or on behalf of, a depository identified in the applicable prospectus supplement relating to such series. Global securities,
if any, issued in the United States are expected to be deposited with The Depository Trust Company, or DTC, as depository. We
may issue global securities in either registered or bearer form and in either temporary or permanent form. We will describe the
specific terms of the depository arrangement with respect to a series of debt securities in the applicable prospectus supplement
relating to such series. We expect that unless the applicable prospectus supplement provides otherwise, the following provisions
will apply to depository arrangements.
Once
a global security is issued, the depository for such global security or its nominee will credit on its book-entry registration
and transfer system the respective principal amounts of the individual debt securities represented by such global security to
the accounts of participants that have accounts with such depository. Such accounts shall be designated by the underwriters, dealers
or agents with respect to such debt securities or by us if we offer such debt securities directly. Ownership of beneficial interests
in such global security will be limited to participants with the depository or persons that may hold interests through those participants.
We
expect that, under procedures established by DTC, ownership of beneficial interests in any global security for which DTC is the
depository will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its
nominee, with respect to beneficial interests of participants with the depository, and records of participants, with respect to
beneficial interests of persons who hold through participants with the depository. Neither we nor the trustee will have any responsibility
or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC or any of its
participants relating to beneficial ownership interests in the debt securities. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to own,
pledge or transfer beneficial interest in a global security.
So
long as the depository for a global security or its nominee is the registered owner of such global security, such depository or
such nominee, as the case may be, will be considered the sole owner or holder of the debt securities represented by the global
security for all purposes under the applicable indenture. Except as described below or in the applicable prospectus supplement,
owners of beneficial interest in a global security will not be entitled to have any of the individual debt securities represented
by such global security registered in their names, will not receive or be entitled to receive physical delivery of any such debt
securities in definitive form and will not be considered the owners or holders thereof under the applicable indenture. Beneficial
owners of debt securities evidenced by a global security will not be considered the owners or holders thereof under the applicable
indenture for any purpose, including with respect to the giving of any direction, instructions or approvals to the trustee under
the indenture. Accordingly, each person owning a beneficial interest in a global security with respect to which DTC is the depository
must rely on the procedures of DTC and, if such person is not a participant with the depository, on the procedures of the participant
through which such person owns its interests, to exercise any rights of a holder under the applicable indenture. We understand
that, under existing industry practice, if DTC requests any action of holders or if an owner of a beneficial interest in a global
security desires to give or take any action which a holder is entitled to give or take under the applicable indenture, DTC would
authorize the participants holding the relevant beneficial interest to give or take such action, and such participants would authorize
beneficial owners through such participants to give or take such actions or would otherwise act upon the instructions of beneficial
owners holding through them.
Payments
of principal of, and any premium or make-whole amount, and interest on, individual debt securities represented by a global security
registered in the name of a depository or its nominee will be made to or at the direction of the depository or its nominee, as
the case may be, as the registered owner of the global security under the applicable indenture. Under the terms of the applicable
indenture, we and the trustee may treat the persons in whose name debt securities, including a global security, are registered
as the owners thereof for the purpose of receiving such payments. Consequently, neither we nor the trustee have or will have any
responsibility or liability for the payment of such amounts to beneficial owners of debt securities including principal, any premium
or make-whole amount, or interest. We believe, however, that it is currently the policy of DTC to immediately credit the accounts
of relevant participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in
the relevant global security as shown on the records of DTC or its nominee. We also expect that payments by participants to owners
of beneficial interests in such global security held through such participants will be governed by standing instructions and customary
practices, as is the case with securities held for the account of customers in bearer form or registered in street name, and will
be the responsibility of such participants. Redemption notices with respect to any debt securities represented by a global security
will be sent to the depository or its nominee. If less than all of the debt securities of any series are to be redeemed, we expect
the depository to determine the amount of the interest of each participant in such debt securities to be redeemed to be determined
by lot. Neither we, the trustee, any paying agent nor the security registrar for such debt securities will have any responsibility
or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global
security for such debt securities or for maintaining any records with respect thereto.
Neither
we nor the trustee will be liable for any delay by the holders of a global security or the depository in identifying the beneficial
owners of debt securities, and we and the trustee may conclusively rely on, and will be protected in relying on, instructions
from the holder of a global security or the depository for all purposes. The rules applicable to DTC and its participants are
on file with the SEC.
If
a depository for any debt securities is at any time unwilling, unable or ineligible to continue as depository and we do not appoint
a successor depository within 90 days, we will issue individual debt securities in exchange for the global security representing
such debt securities. In addition, we may at any time and at our sole discretion, subject to any limitations described in the
applicable prospectus supplement relating to such debt securities, determine not to have any of such debt securities represented
by one or more global securities and in such event will issue individual debt securities in exchange for the global security or
securities representing such debt securities. Individual debt securities so issued will be issued in denominations of $1,000 and
integral multiples of $1,000.
The
debt securities of a series may also be issued in whole or in part in the form of one or more bearer global securities that will
be deposited with a depository, or with a nominee for such depository, identified in the applicable prospectus supplement. Any
such bearer global securities may be issued in temporary or permanent form. The specific terms and procedures, including the specific
terms of the depositary arrangement, with respect to any portion of a series of debt securities to be represented by one or more
bearer global securities will be described in the applicable prospectus supplement.
No
Recourse
There
is no recourse under any obligation, covenant or agreement in the applicable indenture or with respect to any security against
any of our or our successor’s past, present or future shareholders, employees, officers or directors.
Governing
Law
The
indenture and the debt securities will be governed by, and construed in accordance with, the internal laws of the State of New
York, without regard to conflict of law principles that would result in the application of any law other than the laws of the
State of New York.
DESCRIPTION
OF UNITS
We
may issue units comprised of ordinary shares, debt securities and warrants in any combination. We may issue units in such amounts
and in as many distinct series as we wish. This section outlines certain provisions of the units that we may issue. If we issue
units, they will be issued under one or more unit agreements to be entered into between us and a bank or other financial institution,
as unit agent. The information described in this section may not be complete in all respects and is qualified entirely by reference
to the unit agreement with respect to the units of any particular series. The specific terms of any series of units offered will
be described in the applicable prospectus supplement. If so described in a particular supplement, the specific terms of any series
of units may differ from the general description of terms presented below. We urge you to read any prospectus supplement related
to any series of units we may offer, as well as the complete unit agreement and unit certificate that contain the terms of the
units. If we issue units, forms of unit agreements and unit certificates relating to such units will be incorporated by reference
as exhibits to the registration statement, which includes this prospectus.
Each
unit that we may issue will be issued so that the holder of the unit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in the unit may not be held or transferred separately, at any
time or at any time before a specified date. The applicable prospectus supplement may describe:
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
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any
provisions of the governing unit agreement;
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the
price or prices at which such units will be issued;
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the
applicable United States federal income tax considerations relating to the units;
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any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units;
and
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any
other terms of the units and of the securities comprising the units.
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The
provisions described in this section, as well as those described under “Description of Share Capital,” “Description
of Debt Securities” and “Description of Warrants” will apply to the securities included in each unit, to the
extent relevant and as may be updated in any prospectus supplements.
Issuance
in Series
We
may issue units in such amounts and in as many distinct series as we wish. This section summarizes terms of the units that apply
generally to all series. Most of the financial and other specific terms of your series will be described in the applicable prospectus
supplement.
Unit
Agreements
We
will issue the units under one or more unit agreements to be entered into between us and a bank or other financial institution,
as unit agent. We may add, replace or terminate unit agents from time to time. We will identify the unit agreement under which
each series of units will be issued and the unit agent under that agreement in the applicable prospectus supplement.
The
following provisions will generally apply to all unit agreements unless otherwise stated in the applicable prospectus supplement:
Modification
without Consent
We
and the applicable unit agent may amend any unit or unit agreement without the consent of any holder:
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to
cure any ambiguity; any provisions of the governing unit agreement that differ from those described below;
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to
correct or supplement any defective or inconsistent provision; or
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to
make any other change that we believe is necessary or desirable and will not adversely affect the interests of the affected
holders in any material respect.
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We
do not need any approval to make changes that affect only units to be issued after the changes take effect. We may also make changes
that do not adversely affect a particular unit in any material respect, even if they adversely affect other units in a material
respect. In those cases, we do not need to obtain the approval of the holder of the unaffected unit; we need only obtain any required
approvals from the holders of the affected units.
Modification
with Consent
We
may not amend any particular unit or a unit agreement with respect to any particular unit unless we obtain the consent of the
holder of that unit, if the amendment would:
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impair
any right of the holder to exercise or enforce any right under a security included in the unit if the terms of that security
require the consent of the holder to any changes that would impair the exercise or enforcement of that right;
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or
reduce the percentage of outstanding units or any series or class the consent of whose holders is required to amend that series
or class, or the applicable unit agreement with respect to that series or class, as described below.
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Any
other change to a particular unit agreement and the units issued under that agreement would require the following approval:
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If
the change affects only the units of a particular series issued under that agreement, the change must be approved by the holders
of a majority of the outstanding units of that series; or
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If
the change affects the units of more than one series issued under that agreement, it must be approved by the holders of a
majority of all outstanding units of all series affected by the change, with the units of all the affected series voting together
as one class for this purpose.
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These
provisions regarding changes with majority approval also apply to changes affecting any securities issued under a unit agreement,
as the governing document.
In
each case, the required approval must be given by written consent.
Unit
Agreements Will Not Be Qualified under Trust Indenture Act
No
unit agreement will be qualified as an indenture, and no unit agent will be required to qualify as a trustee, under the Trust
Indenture Act. Therefore, holders of units issued under unit agreements will not have the protections of the Trust Indenture Act
with respect to their units.
Mergers
and Similar Transactions Permitted; No Restrictive Covenants or Events of Default
The
unit agreements will not restrict our ability to merge or consolidate with, or sell our assets to, another corporation or other
entity or to engage in any other transactions. If at any time we merge or consolidate with, or sell our assets substantially as
an entirety to, another corporation or other entity, the successor entity will succeed to and assume our obligations under the
unit agreements. We will then be relieved of any further obligation under these agreements.
The
unit agreements will not include any restrictions on our ability to put liens on our assets, nor will they restrict our ability
to sell our assets. The unit agreements also will not provide for any events of default or remedies upon the occurrence of any
events of default.
Governing
Law
The
unit agreements and the units will be governed by New York law.
Form,
Exchange and Transfer
We
will issue each unit in global—i.e., book-entry—form only. Units in book-entry form will be represented by a
global security registered in the name of a depositary, which will be the holder of all the units represented by the global security.
Those who own beneficial interests in a unit will do so through participants in the depositary’s system, and the rights
of these indirect owners will be governed solely by the applicable procedures of the depositary and its participants. We will
describe book-entry securities, and other terms regarding the issuance and registration of the units in the applicable prospectus
supplement.
Each
unit and all securities comprising the unit will be issued in the same form.
If
we issue any units in registered, non-global form, the following will apply to them.
The
units will be issued in the denominations stated in the applicable prospectus supplement. Holders may exchange their units for
units of smaller denominations or combined into fewer units of larger denominations, as long as the total amount is not changed.
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Holders
may exchange or transfer their units at the office of the unit agent. Holders may also replace lost, stolen, destroyed or
mutilated units at that office. We may appoint another entity to perform these functions or perform them ourselves.
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Holders
will not be required to pay a service charge to transfer or exchange their units, but they may be required to pay for any
tax or other governmental charge associated with the transfer or exchange. The transfer or exchange, and any replacement,
will be made only if our transfer agent is satisfied with the holder’s proof of legal ownership. The transfer agent
may also require an indemnity before replacing any units.
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If
we have the right to redeem, accelerate or settle any units before their maturity, and we exercise our right as to less than
all those units or other securities, we may block the exchange or transfer of those units during the period beginning 15 days
before the day we mail the notice of exercise and ending on the day of that mailing, in order to freeze the list of holders
to prepare the mailing. We may also refuse to register transfers of or exchange any unit selected for early settlement, except
that we will continue to permit transfers and exchanges of the unsettled portion of any unit being partially settled. We may
also block the transfer or exchange of any unit in this manner if the unit includes securities that are or may be selected
for early settlement.
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Only
the depositary will be entitled to transfer or exchange a unit in global form, since it will be the sole holder of the unit.
Payments
and Notices
In
making payments and giving notices with respect to our units, we will follow the procedures as described in the applicable prospectus
supplement.
DESCRIPTION
OF WARRANTS
We
may issue warrants, options or rights to purchase our debt or equity securities or securities of third parties or other rights,
including rights to receive payment in cash or securities based on the value, rate or price of one or more specified securities
or indices, or any combination of the foregoing. Warrants may be issued independently or together with any other securities and
may be attached to, or separate from, such securities. Each series of warrants will be issued under a separate warrant agreement
to be entered into between us and a warrant agent. The terms of any warrants to be issued and a description of the material provisions
of the applicable warrant agreement will be set forth in the applicable prospectus supplement.
The
applicable prospectus supplement will describe the following terms of any warrants in respect of which the prospectus is being
delivered:
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the
title of such warrants;
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the
aggregate number of such warrants;
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the
price or prices at which such warrants will be issued;
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the
currency or currencies, in which the price of such warrants will be payable;
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the
securities or other rights, including rights to receive payment in cash or securities based on the value, rate or price of
one or more specified commodities, currencies, securities or indices, or any combination of the foregoing, purchasable upon
exercise of such warrants;
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the
date on which the right to exercise such warrants shall commence and the date on which such right shall expire;
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if
applicable, the minimum or maximum amount of such warrants which may be exercised at any one time;
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if
applicable, the designation and terms of the securities with which such warrants are issued and the number of such warrants
issued with each such security;
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if
applicable, the date on and after which such warrants and the related securities will be separately transferable;
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information
with respect to book-entry procedures, if any;
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any
material Israeli and U.S. federal income tax consequences;
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the
anti-dilution provisions of the warrants; and
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any
other terms of such warrants, including terms, procedures and limitations relating to the exchange and exercise of such warrants.
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PLAN
OF DISTRIBUTION
We
may sell securities under this prospectus in offerings:
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through
one or more underwriters or dealers;
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through
other agents;
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directly
to holders of our securities pursuant to subscription rights distributed to holders of our securities; or
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directly
to investors.
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We
may price the securities we sell under this prospectus:
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at
a fixed public offering price or prices, which we may change from time to time;
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at
market prices prevailing at the times of sale;
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at
prices calculated by a formula based on prevailing market prices;
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at
negotiated prices; or
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in
a combination of any of the above pricing methods.
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If
we use underwriters for an offering, they will acquire securities for their own account and may resell them from time to time
in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations
of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement.
We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Subject to certain conditions and except as otherwise set forth in the applicable prospectus supplement,
the underwriters will be obligated to purchase all the securities of the series offered by the prospectus supplement. The public
offering price and any discounts or concessions allowed or re-allowed or paid to dealers may change from time to time. Only underwriters
named in a prospectus supplement are underwriters of the securities offered by that prospectus supplement.
We
may grant to the underwriters options to purchase additional securities to cover over-allotments, if any, at the public offering
price with additional underwriting discounts or commissions. If we grant any over-allotment option, the terms of any over-allotment
option will be set forth in the prospectus supplement relating to those securities.
We
may also sell securities directly or through agents. We will name any agent involved in an offering and we will describe any commissions
we will pay the agent in the prospectus supplement. Unless the prospectus supplement states otherwise, our agents will act on
a best-efforts basis.
We
may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from
us at the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment
and delivery on a specified date in the future. We will describe the conditions of these contracts and the commissions we must
pay for solicitation of these contracts in the prospectus supplement.
We
may provide agents and underwriters with indemnification against certain civil liabilities, including liabilities under the Securities
Act of 1933, as amended, or contribution with respect to payments that the agents or underwriters may make with respect to such
liabilities. Underwriters or agents may engage in transactions with us, or perform services for us, in the ordinary course of
business. We may also use underwriters or agents with whom we have a material relationship. We will describe the nature of any
such relationship in the prospectus supplement.
An
underwriter may engage in overallotment, stabilizing transactions, short covering transactions and penalty bids in accordance
with Regulation M under the Securities Exchange Act of 1934. Overallotment involves sales in excess of the offering size, which
create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids
do not exceed a specified maximum. Short covering transactions involve purchases of the securities in the open market after the
distribution is completed to cover short positions. Penalty bids permit the underwriter to reclaim a selling concession from a
dealer when the securities originally sold by the dealer are purchased in a covering transaction to cover short positions. These
activities may cause the price of our securities to be higher than it would otherwise be on the open market. The underwriter may
discontinue any of these activities at any time.
All
securities we offer, other than ordinary shares, will be new issues of securities, with no established trading market. Underwriters
may make a market in these securities, but will not be obligated to do so and may discontinue market making at any time without
notice. We cannot guarantee the liquidity of the trading markets for any securities.
OFFERING
EXPENSES
The
following is a statement of expenses in connection with the distribution of the securities registered. All amounts shown
are estimates except the SEC registration fee. The estimates do not include expenses related to offerings of particular securities.
Each prospectus supplement describing an offering of securities will reflect the estimated expenses related to the offering of
securities under that prospectus supplement.
SEC
registration fees
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$
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18,675
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Legal
fees and expenses
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$
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50,000
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Accountants
fees and expenses
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$
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20,000
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Miscellaneous
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$
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10,000
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TOTAL
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$
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98,675
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LEGAL
MATTERS
The
validity of the securities offered in this prospectus will be passed upon for us by Horn & Co. Law Offices our Israeli
counsel, and by Goodwin Procter LLP, our U.S. counsel. On the date of this prospectus, the partners and associates of Horn &
Co. Law Offices own beneficially, directly or indirectly, in the aggregate, less than 1% of the securities of our company. Any
underwriters will be advised with respect to other issues relating to any offering by their own legal counsel.
EXPERTS
The
financial statements incorporated in this Prospectus by reference to the Annual Report on Form 20-F for the year ended December
31, 2016 have been so incorporated in reliance on the report of Kesselman & Kesselman, a member firm of PricewaterhouseCoopers
International Limited, an independent registered public accounting firm, given on the authority of said firm as experts in auditing
and accounting. The offices of Kesselman & Kesselman are located at Trade Tower, 25 Hamered Street, Tel-Aviv 6812508,
Israel.
ENFORCEABILITY
OF CIVIL LIABILITIES AND
AGENT FOR SERVICE OF PROCESS IN THE UNITED STATES
We
are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the
Israeli experts named in this registration statement, substantially all of whom reside outside of the United States, may be difficult
to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors
and officers are located outside of the United States, any judgment obtained in the United States against us or any of our directors
and officers may not be collectible within the United States.
We
have been informed by our legal counsel in Israel, Horn & Co. Law Offices, that it may be difficult to assert U.S. securities
law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of
U.S. securities laws reasoning that Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli
court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found
to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process.
Certain matters of procedure will also be governed by Israeli law.
Subject
to specified time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject
to certain exceptions, is non-appealable, including a judgment based upon the civil liability provisions of the Securities Act
and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:
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the
judgment was obtained after due process before a court of competent jurisdiction, according to the laws of the state in which
the judgment was given and the rules of private international law currently prevailing in Israel;
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the
prevailing law of the foreign state in which the judgment was rendered allows for the enforcement of judgments of Israeli
courts;
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adequate
service of process has been effected and the defendant has had a reasonable opportunity to be heard and to present his or
her evidence;
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the
judgment is not contrary to public policy of Israel, and the enforcement of the civil liabilities set forth in the judgment
is not likely to impair the security or sovereignty of Israel;
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the
judgment was not obtained by fraud and do not conflict with any other valid judgments in the same matter between the same
parties;
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an
action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted
in the foreign court; and
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the
judgment is enforceable according to the laws of Israel and according to the law of the foreign state in which the relief
was granted.
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If
a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted
into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an
amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at
the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending
collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli
consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors
must bear the risk of unfavorable exchange rates.
For
further information regarding enforceability of civil liabilities against us and other persons, see the discussions in Item 3
of our Annual Report on Form 20-F for the year ended December 31, 2014, incorporated by reference in this prospectus, under
the caption “Risk Factors — Risks Related to Our Incorporation and Operations in Israel — It may be difficult
to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this prospectus in Israel or
the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and these
experts.”
This
prospectus is part of a registration statement we filed with the SEC. You should rely only on the information or representations
contained in this prospectus and any accompanying prospectus supplement. We have not authorized anyone to provide information
other than that provided in this prospectus and any accompanying prospectus supplement. We are not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the information in this prospectus or any accompanying
prospectus supplement is accurate as of any date other than the date on the front of the document.
Up
to $15,000,000
Ordinary
Shares
PROSPECTUS
SUPPLEMENT
Oppenheimer
& Co.
May
17, 2019
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