Document:

Exhibit 4.1

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT COVERING THIS WARRANT AND/OR SUCH SECURITIES, OR THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE WARRANT AND/OR SUCH SECURITIES SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE OR FOREIGN LAW.

 

POLYPID LTD.

 

WARRANT

 

To purchase

              Series D-2 Preferred Shares (as defined below) (subject to adjustment hereunder) of

PolyPid Ltd. (the “Company”)

at a per share price and subject to the terms detailed below

VOID AFTER 20:00 local Israel time

on the last day of the Warrant Period (as defined below)

 

THIS IS TO CERTIFY THAT           (the “Holder”), is entitled to purchase from the Company, during the Warrant Period, an aggregate of up to           Series D-2 Preferred Shares of the Company, nominal value NIS 0.10 per share (the “Series D Preferred Shares”), as may be adjusted hereunder, at a price per share of US$ 1.27 (as may be adjusted hereunder) (the “Exercise Price”) (it being acknowledged that the amount of Series D-2 Preferred Shares that the Holder is entitled to purchase from the Company pursuant to this Warrant and the Exercise Price thereof, are subject to further adjustments in accordance herewith and in accordance with the provisions of the Articles of Association of the Company (as in effect from time to time) (“Amended AOA”) and the provisions of the SPA).

 

Unless otherwise is specifically set forth herein, all capitalized terms used but not defined herein shall have the meanings ascribed to them in that certain Securities Purchase Agreement dated as of February     , 2016 (the “SPA”), by and among the Company and the Investors (as such term is defined in the SPA).

 

1.                        EXERCISE OF WARRANT

 

1.1.              Number of Warrant Shares.

 

1.1.1.               In General. The number of Series D-2 Preferred Shares into which this Warrant may be exercised at any time (the “Warrant Shares”) shall equal the aggregate number of Ordinary Shares of the Company, nominal value NIS 0.10 per share (the

 

 

“Ordinary Shares”) into which the Base Number (as defined below) may be converted, in accordance with the Amended AOA (the “Conversion Ratio”). For the avoidance of doubt, the Base Number, and (whether or not the Base Number is adjusted) the number of Warrant Shares, shall be subject to adjustment in accordance with the provisions hereof (including but not limited to Sections 1.2.5 and 4), the Amended AOA (principally, Article 9), and the provisions of the SPA.

 

1.1.2.               As of Closing. The Company hereby represents and warrants that, as of the Closing: (a) the “Base Number” (which shall initially be the number of Warrant Shares which the Holder is to be granted the right to purchase, at the Closing, as reflected on the Capitalization Table attached to the SPA) is        Series D-2 Preferred Shares, (b) the aggregate Base Number of Series D-2 Preferred Shares are convertible into an equal number of Ordinary Shares, and (c) the number of Warrant Shares is thus equal to        Series D-2 Preferred Shares.

 

1.1.3.               Adjustment Upon Trigger Event. Upon the occurrence of a Trigger Event, the Base Number shall automatically, and for no additional consideration, be increased (and, for the avoidance of doubt, in no event decreased) so that it equals the aggregate number of Warrant Shares as reflected in the “Trigger Event” column in the Capitalization Table attached to the SPA, and the Exercise Price under the Warrants shall be reduced to equal the Adjusted Investors’ Conversion Price (as defined in the Amended AOA and as may be adjusted from time to time thereunder) of the Series D-2 Preferred Shares , so that the aggregate exercise price hereunder (i.e., US$     ) remains the same.

 

1.2.              Exercise Price. Without derogating from, and in addition to, any other provision hereof (including but not limited to Section 4), the Exercise Price shall be, and shall be adjusted, as follows:

 

1.2.1.               In General. Except in case of exercise of the Warrant at any time upon or following a Trigger Event, in which case, the provisions of Sections 1.1.3, 1.2.3, and 1.2.4 hereof will apply, the Exercise Price hereunder shall at all times equal 15% more than the Adjusted Investors’ Conversion Price, as determined in accordance with the Amended AOA.

 

1.2.2.               As of Closing. The Company hereby represents and warrants that, as of the Closing, (A) the Adjusted Investors’ Conversion Price equals the Price Per Share under the SPA, i.e. US$1.1036, and (B) as such, the Exercise Price equals US$1.27 (i.e. the Price Per Share times 1.15).

 

1.2.3.               Adjustments. Upon each adjustment to the Adjusted Investors’ Conversion Price under the Amended AOA, the Exercise Price shall concurrently be reduced (and, for the avoidance of doubt, not increased) to equal (i) if prior to, and not in conjunction with, a Trigger Event, 15% more than the new Adjusted Investors’ Conversion Price thereunder, and (ii) if upon or at any time following a Trigger Event, such Adjusted Investors’ Conversion Price.

 

1.2.4.               Increase of Warrant Shares. Upon each reduction to the Exercise Price, the number of Warrant Shares shall be correspondingly increased, with the intent that, as a result of such adjustments, the aggregate exercise price of this Warrant shall remain the same.

 

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1.2.5.               Exercise Upon Certain Transactions. If this Warrant is exercised in the context of an IPO (including, for the purposes of this Warrant, any other public offering) or a Deemed Liquidation (as such capitalized terms are defined in the Amended AOA), then, even if the exercise of this Warrant in such case shall be required to occur no later than immediately prior to the closing of such transaction, the Adjusted Investors’ Conversion Price shall be deemed to be the Adjusted Investors’ Conversion Price as it would have been adjusted in accordance with the Amended AOA upon an issuance by the Company of shares (in this clause, the “Exit Shares”), in each case as if such Exit Shares were issued by the Company prior to such transaction. In such event, the Exercise Price and the number of Warrant Shares shall be adjusted accordingly, as of immediately prior to such transaction.

 

1.3.              Warrant Period. This Warrant may be exercised, subject to the terms and conditions hereof, in whole or in part, at one time or from time to time during the period commencing upon the Closing until the 4th anniversary of the Closing; provided, however, that if a Trigger Event occurs, then such period shall terminate upon the 5th anniversary of the Closing; provided further, however, that in the event of a Deemed Liquidation, this Warrant will expire immediately prior to the closing of the Deemed Liquidation, subject to such closing and the application of the terms hereof to such transaction, including but not limited to Section 1.2.5; provided further, however, that if such Deemed Liquidation is a transaction with a private company, then this Warrant shall expire upon the closing of such Deemed Liquidation, if so required by the acquiring entity, but only if the Investors receive their entire Series D Preference (as such capitalized terms are defined in the Amended AOA) in such transaction, in liquid proceeds (cash or publicly-tradable shares). The above period shall be referred to herein as the “Warrant Period”.

 

1.4.              Exercise for Cash. The Holder may elect to exercise this Warrant in whole or in part and from time to time during the Warrant Period, by presentation and surrender thereof to the Company at its principal office or at such other office or agency as it may designate from time to time, accompanied by:

 

1.4.1.               A duly executed notice of exercise, in the form attached hereto as Schedule 1.4.1  (the “Exercise Notice”); and

 

1.4.2.               Payment to the Company, for the account of the Company, of the aggregate Exercise Price for the Warrant Shares being acquired upon such exercise, payable in immediately available funds by wire transfer to the Company’s bank account.

 

1.5.              Exercise on Net Issuance Basis. In lieu of payment to the Company as set forth in Section 1.4 above, the Holder may elect to convert this Warrant into the number of Warrant Shares calculated pursuant to the formula below, by presentation and surrender thereof to the Company at its principal office or at such other office or agency it may designate from time to time, accompanied by a duly executed notice of cashless exercise, in the form attached hereto as Schedule 1.5 (the “Net Issuance Notice”):

 

 

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Where:

 

X =               the number of Warrant Shares to be issued to the Holder;

 

Y =               the number of Warrant Shares otherwise purchasable upon exercise of this Warrant (or such lesser number of shares as Holder may designate in case of a partial exercise of this Warrant);

 

A =               the fair market value of one Warrant Share (or of any securities into which Warrant Shares have been converted in accordance with the Company’s organizational documents and applicable law) at the time the net issuance election under this Section 1.5 is made; and

 

B =               the Exercise Price per Warrant Share.

 

For purposes hereof, the “fair market value” of one (1) Warrant Share as of a particular date shall be: (a) if applicable, the average of the closing bid and asked prices of Warrant Shares (or of any securities into which the Warrant Shares have been converted in accordance with the Company’s organizational documents and applicable law) quoted in the over-the-counter market summary or the closing price quoted on any exchange on which the Warrant Share (or any securities into which the Warrant Shares have been converted in accordance with the Company’s organizational documents and applicable law) is listed, whichever is applicable, for the five (5) trading days immediately prior to but not including the date of determination of fair market value; (b) if the exercise pursuant to this Section 1.5 is as of immediately prior to the consummation of an M&A Event (or other similar corporate transaction), then (without, for the avoidance of doubt, derogating from the adjustment provisions hereof) the fair market value of one (1) Warrant Share (or of any securities into which the Warrant Shares have been converted in accordance with the Company’s governing documents, this Warrant, and applicable law) in such transaction (i.e. the price per share paid by the surviving or acquiring entity in such transaction, as set forth in Section 1.2.5 above). In the event that the price in the transaction is not in cash, then the applicable fair market value of the non-cash consideration shall be determined by the Company’s auditors; (c) if the exercise pursuant to this Section 1.5 is immediately prior to the closing of an IPO of a corporate successor of the Company’s equity interests, then the public offering price (before deduction of discounts, commissions or expenses) in such offering; or (d) if the Company’s shares are not publicly traded or registered on any stock exchange at the time of exercise and clauses (b) and (c) are not applicable, then as determined by the Company’s auditors.

 

For the avoidance of doubt, the Holder may effect partial exercise(s) of this Warrant pursuant to this Section 1.5. Any exercise under this Section 1.5 shall, for the avoidance of doubt, be for no further consideration by the Holder.

 

1.6.              Issuance of Warrant Shares. Upon presentation and surrender of this Warrant, accompanied by (a) the duly executed Exercise Notice and the payment of the applicable aggregate Exercise Price pursuant to Section 1.4 above; or (b) the duly executed Net Issuance Notice pursuant to Section 1.5 above, as the case may be, the Company shall promptly (i) issue to the Holder the Warrant Shares to which the Holder is entitled; and (ii) deliver to the Holder the share certificate evidencing such Warrant Shares, and (iii) in any event, the Holder shall be deemed to be the holder of record of the Warrant Shares issuable upon such exercise,

 

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notwithstanding that the share transfer books of the Company shall then be closed or that certificates representing such shares shall not then be actually delivered to the Holder.

 

1.7.              Fractional Shares. No fractions of Warrant Shares shall be issued in connection with the exercise of this Warrant, and the number of shares issued shall be rounded to the nearest whole number.

 

1.8.              Automatic Exercise. If this Warrant or any portion hereof is still outstanding on the final day of the Warrant Period, then if, at such time, the fair market value of a Warrant Share is more than the Exercise Price for such share, this Warrant shall be deemed automatically exercised by the Holder in full immediately prior to the conclusion of the Warrant Period, on a net issuance basis pursuant to Section 1.5 hereof.

 

1.9.              Loss or Destruction of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonable expense reimbursement and indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date.

 

1.10.       Partial Exercise; Effective Date of Exercise. In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the Warrant Shares purchasable hereunder. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above. The person entitled to receive the Warrant Shares shall be treated for all purposes as the holder of record of such shares as of the close of business on the date the Holder is deemed to have exercised this Warrant.

 

1.11.       Conditional Exercise. If this Warrant is exercised in the context of an IPO or Deemed Liquidation, then such exercise shall be deemed conditional on the closing of such transaction, and for the avoidance of doubt, if such transaction does not close, then this Warrant shall not be considered exercised at such time (unless the Holder explicitly notifies the Company otherwise).

 

1.12.       Right to Exercise into Ordinary Shares. The Holder shall have the right, at its sole discretion, to exercise this Warrant into the number of Ordinary Shares into which the Warrant Shares otherwise purchasable hereunder could be converted at such time in accordance with the provisions of the Amended AOA (as in effect from time to time). If at any time the entire class of Series D-2 Preferred Shares is converted into Ordinary Shares or another class of shares pursuant to the provisions of the Amended AOA, then this Warrant shall automatically be deemed to be exercisable for such number of Ordinary Shares or shares of such other class, into which the Warrant Shares would have been converted had the Warrant Shares been issued and outstanding on the date of such conversion, and the Exercise Price shall equal the Exercise Price in effect as of immediately prior to such conversion divided by the number of Ordinary Shares or shares of such other class into which one Warrant Share would have been converted, all subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.

 

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2.                        TAXES

 

2.1.              The Holder acknowledges that the grant of the Warrant, the issue of the Warrant Shares and the execution and/or performance of this Warrant may have tax consequences to the Holder.

 

2.2.              The Company shall pay all of the applicable taxes and other charges payable by the Company in connection with the issuance of the Warrant Shares and the preparation and delivery of share certificates pursuant to Section 1 in the name of the Holder, if any, but shall not pay any taxes payable by the Holder by virtue of the holding, issuance, exercise or sale of this Warrant or the Warrant Shares by the Holder, which shall be the obligation of the Holder.

 

2.3.              The Company shall withhold taxes, if and as required according to the requirements under the applicable laws, rules, and regulations for withholding taxes at source, provided  that the Company shall inform the Holder of such withholding requirement at least 5 (five) business days prior to such anticipated withholding, so as to allow the Holder to obtain and provide the Company with an appropriate certificate of exemption, if available. No withholding shall be made if an exemption, satisfactory to the Company, is obtained and delivered to the Company, for as long as it is valid in accordance with applicable law. Holder shall indemnify the Company, its shareholders, directors and/or officers, as applicable, and hold them harmless from and against any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Holder, provided that they acted in due care.

 

3.                        RESERVATION OF SHARES; PRESERVATION OF RIGHTS OF HOLDER

 

3.1.              Reservation of Shares. The Company hereby agrees that, at all times prior to the expiration or exercise of this Warrant, it will maintain and reserve, free from pre-emptive or similar rights, (a) such number of authorized but unissued Series D-2 Preferred Shares, and (b) such number of Ordinary Shares into which such Series D-2 Preferred Shares shall, at any time, be convertible, so that this Warrant may be exercised into Series D-2 Preferred Shares and/or (at the Holder’s discretion, or in case of automatic conversion pursuant to the Articles) into Ordinary Shares, without additional authorization of shares.

 

3.2.              Preservation of Rights. Subject to the provisions of Section 8.1 below, the Company will not, by amendment of its organizational documents or through reorganization, recapitalization, consolidation, merger, dissolution, transfer of assets, issue or sale of securities or any other voluntary act, avoid or seek to avoid the observance or performance of any of the covenants, stipulations, conditions or terms to be observed or performed hereunder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in the taking of all such actions and making all such adjustments as may be necessary or appropriate in order to fulfill the provisions hereof.

 

4.                        ADJUSTMENT

 

4.1.              In addition to, and without derogating from, the other provisions hereof, the Amended AOA and the SPA, the number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time or upon exercise, as follows:

 

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4.1.1.                Bonus Shares. In the event that during the Warrant Period the Company shall declare or distribute to all of its shareholders, and/or to the holders of Warrant Shares, bonus shares or other securities or non-cash property (except for any securities distributed as dividends) (in this Section, “bonus shares”), then this Warrant shall represent the right to acquire, in addition to the number of Warrant Shares into which it was exercisable as of immediately prior to such event, the amount of such bonus shares that are distributed to all shareholders of the Company, and/or to the holders of Warrant Shares, without payment of any additional consideration therefor, to which the Holder would have been entitled had this Warrant been exercised prior to the issuance of the bonus shares.

 

4.1.2.               Consolidation and Division. In the event that during the Warrant Period the Company consolidates its entire share capital and/or the class of shares representing the Warrant Shares into shares of greater par value, or subdivides them into shares of lesser par value, then the number of Warrant Shares to be allotted on exercise of this Warrant after such consolidation or subdivision shall be reduced or increased accordingly, as the case may be, and in each case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.

 

4.1.3.               Capital Reorganization. In the event that during the Warrant Period a reorganization of the share capital of the Company is effected (other than as provided for elsewhere in this Section 4), including any recapitalization, reclassification or similar event resulting in a change of the Series D-2 Preferred Shares and/or number of the Series D-2 Preferred Shares and/or the Ordinary Shares into a different number of shares of the same class or any other class or classes of shares, then, as part of such transaction, provision shall be made so that the Holder shall be entitled to purchase, upon exercise of this Warrant, such kind and number of shares or other securities of the Company to which the Holder would have been entitled had this Warrant been exercised immediately prior to such transaction. In such case the Exercise Price shall be adjusted appropriately such that the aggregate consideration hereunder to the Company shall not change.

 

4.2.              Certificate of Adjustment. Whenever an adjustment is effected under this Warrant, the Company shall promptly compute such adjustment and deliver to the Holder a certificate setting forth the number of Warrant Shares (or any other securities) for which this Warrant is exercisable and the Exercise Price as a result of such adjustment, a brief statement of the facts requiring such adjustment and the computation thereof and when such adjustment has or will become effective.

 

4.3.              Parallel Adjustments. For the avoidance of any doubt, it is the intention of the parties that any adjustments made to the exercise price and the number of warrant shares purchasable pursuant to the warrants granted by the Company to the Investors under the SPA, shall also be made to the Exercise Price and the number of Warrant Shares purchasable hereunder even if the Holder did not actually invest funds under the SPA.

 

5.                        NOTICE OF CERTAIN EVENTS

 

5.1.              If at any time during the Warrant Period, any of the Notice Events set forth in Section 5.2 below shall occur, then, in any one or more of such events, the Company shall deliver to the Holder written notice thereof, including the date on which (a) a record shall be taken in

 

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connection with such event (if applicable); and (b) such event is to be consummated. Such written notice shall be delivered to the Holder at least fourteen (14) days prior to the consummation of the applicable event and not less than fourteen (14) days prior to the record date in respect thereof.

 

5.2.              For the purposes hereof, a “Notice Event” shall mean any of the following: (i) an IPO by the Company or a corporate successor of its equity interests; or (ii) a Liquidation (as defined in the Amended AOA) or Deemed Liquidation, or (iii) the date on which the Company shall distribute a cash or other dividend.

 

5.3.              Notwithstanding the aforementioned, in the event that any notice pursuant to Section 5.1 shall lawfully be delivered by the Company to its shareholders within a shorter period, then such shorter period shall apply and the notice above shall be required to be delivered contemporaneously to the Holder with the delivery of such notice by the Company to its shareholders.

 

6.                        RIGHTS OF THE HOLDER

 

6.1.              No Current Rights as Shareholder. This Warrant shall not entitle the Holder, by virtue hereof, to any voting rights or other rights as a shareholder of the Company, except for the rights expressly set forth herein.

 

6.2.              Certain Restrictions. The Holder acknowledges that the Warrant Shares shall be subject to certain rights, privileges, restrictions and limitations as set forth in this Warrant, and the Amended AOA (as in effect from time to time).

 

6.3.              Registration Rights. All Warrant Shares which are, at any time, issuable upon exercise of this Warrant, and all and Ordinary Shares which are, at any time, issuable upon exercise hereof and/or conversion of the Warrant Shares, shall be “Registrable Securities” pursuant to the Investors’ Rights Agreement, dated on even date herewith, by and among the Company, the Holder, the other Investors and the other parties named therein (the “Investors’ Rights Agreement”), and shall be entitled, subject to the terms and conditions of the Investors’ Rights Agreement, as an Investor thereunder, to all registration rights granted to holders of Registrable Securities thereunder.

 

6.4.              Conversion of Series D-2 Preferred Shares. In the event that the entire class of Series D-2 Preferred Shares is converted into Ordinary Shares in accordance with the terms of the Amended AOA, this Warrant shall become exercisable for Ordinary Shares.

 

6.5.              Lockup. The Holder understands that in the event of any registration of the Company’s shares on any stock exchange, the underwriters may request, or it may be required under applicable law and/or by any governmental authority, that the Warrant Shares shall be subject to a lock up period of up to 180 days. If, in connection with an IPO, the underwriter will request the shareholders of the Company and the Holder of this Warrant to be subject to a lock-up period of up to 180 days, (a) the Holder shall not be allowed to sell or transfer any of the Warrant Shares, provided that in any case, any “lock-up” restrictions applicable to this Warrant and/or the Warrant Shares which may be acquired hereunder, shall terminate no later than upon the end of the “lock-up” period applicable to the Investors Shares (or the Ordinary Shares into which they may be converted) in such registration; and (b) the Holder shall sign a customary lock up agreement as required by the underwriter or the Company with respect to the lock up restriction specified in this Section 6.5.

 

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7.                        REPRESENTATIONS OF THE COMPANY

 

The Company represents and warrants to the Holder as follows: (i) this Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms; (ii) the Warrant Shares (and the Ordinary Shares into which such Warrant Shares are convertible) are duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid (subject to the full payment of the exercise price, or valid net issuance exercise, by the Holder) and non-assessable and not subject to any third party rights or liens, except as set forth in the Amended AOA and any agreement entered into between the Company and the holders of Preferred D-1 Shares; and (iii) the execution and delivery of this Warrant are not, and the issuance of the Warrant Shares upon exercise of this Warrant in accordance with the terms hereof and the issuance of the Ordinary Shares into which such Warrant Shares are convertible in accordance with the terms hereof and the Amended AOA (as in effect from time to time), will not be, inconsistent with the Company’s governing documents, do not and will not conflict with or contravene with all applicable laws and will be issued in compliance with all applicable laws, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any government authority or agency or other person, other than those consents or approvals that shall have been previously obtained and reports of issuance to the Israeli Registrar of Companies and to OCS (if applicable).

 

8.                        MISCELLANEOUS

 

8.1.              Entire Agreement; Amendment. This Warrant, and the provisions of the SPA and the Amended AOA relating hereto, set forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all existing agreements among them concerning such subject matter. All section headings herein are inserted for convenience only and shall not modify or affect the construction or interpretation of any provision of this Warrant. No modification or amendment of this Warrant will be valid unless executed in writing by the Company and the Holder; provided however that in the event that the Majority Investors (as defined in the Amended AOA) agree with the Company to make an amendment which will apply to the Warrants granted pursuant to the SPA, then this Warrant shall be amended in accordance with such amendment, without the need for further action or approval on the part of the Holder.

 

8.2.              Waiver. No failure or delay on the part of any of the parties in exercising any right, power or privilege hereunder and/or under any applicable laws or the exercise of such right or power in a manner inconsistent with the provisions of this Warrant or applicable law shall operate as a waiver thereof. Any waiver must be evidenced in writing signed by the party against whom the waiver is sought to be enforced.

 

8.3.              Successors and Assigns. Except as otherwise expressly limited herein, this Warrant shall inure to the benefit of, be binding upon, and be enforceable by the Holder and its respective successors, and administrators.

 

8.4.              Assignment. This Warrant and all rights hereunder are transferable by the Holder, subject to compliance with applicable securities laws and the Amended AOA, provided that the assignee will sign and provide to the Company an undertaking to be bound by all of the terms of this Warrant. Without derogating from the foregoing it is clarified that the Holder may transfer this Warrant to its Permitted Transferees under the Amended AOA. Within a

 

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reasonable time after the Company’s receipt of an executed Assignment Form in the form attached hereto as Schedule 8.4, the transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices. In the event of a transfer hereunder which is only a partial transfer hereof, the Company shall issue to the holders one or more appropriate new warrants in accordance with the provisions of Section 1.10.

 

8.5.              Governing Law. This Warrant shall be exclusively governed and construed in accordance with the laws of the State of Israel, without regard to conflicts of laws provisions thereof.

 

8.6.              Jurisdiction. The competent courts in Tel Aviv shall have sole and exclusive jurisdiction over all matters relating to this Agreement.

 

8.7.              Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by facsimile or email with confirmation of transmission if sent during normal business hours of the recipient, if not, then on the next business day; (c) ten (10) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) two business days after deposit with an internationally-recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent out as set forth in the SPA or as otherwise notified by the parties.

 

8.8.              Severability. In the event one or more of the provisions of this Warrant should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Warrant, which shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Warrant (including, without limitation, the portion of this Warrant containing any provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

8.9.              Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

8.10.       Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

8.11.       Preamble. The preamble hereto is an integral part hereof.

 

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IN WITNESS WHEREOF, PolyPid Ltd. has caused this Warrant to be executed by its officer thereunto duly authorized.

 

	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
POLYPID   LTD.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
AGREED   AND ACCEPTED:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    
						

 

 

Schedule 1.4.1 

Exercise Notice

 

Date:                 

 

To: PolyPid Ltd. (the “Company”)

 

The undersigned, pursuant to the provisions set forth in the Warrant to which this Exercise Notice is attached (the “Warrant”), hereby elects to purchase                  Series D-2 Preferred Shares of the Company pursuant to Section 1.4 of the Warrant, and herewith makes payment of US$           , representing the full Exercise Price for such shares in accordance with the Warrant. The undersigned makes again here, with respect to the securities it is acquiring upon the exercise of the Warrant as contemplated hereby, the same representations, warranties and acknowledgements for the benefit of the Company, as it made in the Warrant.

 

Please issue a certificate representing the Warrant Shares in the name of the undersigned or as otherwise indicated below and deliver it to the address stated below, and if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, then please also issue a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant in the name of the undersigned or as otherwise indicated below and deliver it to the address stated below:

 

Name:

 

Address:

 

ID / Social Security No./ company number:

 

 

	
 
    	
Signature:
    	
 
    

 

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Schedule 1.5

Net Issuance Notice

 

Date:                

 

To: PolyPid Ltd. (the “Company”)

 

The undersigned, pursuant to the provisions set forth in the Warrant to which this Exercise Notice is attached (the “Warrant”), hereby elects to exercise the Warrant, for no additional consideration, for the purchase of         Series D-2 Preferred Shares of the Company, pursuant to the provisions of Section 1.5 of the Warrant (net issuance).

 

The undersigned makes again here, with respect to the securities it is receiving upon the exercise of the Warrant as contemplated hereby, the same representations, warranties and acknowledgements for the benefit of the Company, as it made in the Warrant.

 

Please issue a certificate representing the Warrant Shares in the name of the undersigned or as otherwise indicated below and deliver it to the address stated below, and if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant in its entirety via net issuance, then please also issue a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant in the name of the undersigned or as otherwise indicated below and deliver it to the address stated below:

 

Name:

 

Address:

 

ID / Social Security No./ company number:

 

	
 
    	
Signature:
    	
 
    

 

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Schedule 8.4 

Assignment Form

 

(To assign the foregoing Warrant to purchase shares of PolyPid Ltd., execute this form and
 supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to the undersigned transferee, who will assume all obligations of the Holder under the Warrant and under the SPA and all of the schedules and exhibits attached thereto and contemplated thereby:

 

 

	
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14Exhibit 4.2

 

Execution Version

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

PLACEMENT AGENT WARRANT

 

POLYPID LTD.

 

	
Warrant Shares: 208,727
    	
No.                    
    
	
Initial   Exercise Date: August 29, 2019,
    	
 
    

 

This PLACEMENT AGENT WARRANT (this “Warrant”) certifies that, for value received, NATIONAL SECURITIES CORPORATION, a Washington corporation, or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the initial exercise date first referenced above (the “Initial Exercise Date”) and on or prior to the close of business on the four (4) year anniversary of the Initial Exercise Date or as provided under Section 3(d) herein (whichever occurs earlier) (the “Termination Date”) but not thereafter, to subscribe for and purchase from POLYPID LTD., an Israeli corporation (including its successors and assigns, the “Company”), up to 208,727 shares(1) (as subject to adjustment hereunder, the “Warrant Shares”) of the Company’s Series E-1 preferred stock (“E-1 Preferred Stock”).  The purchase price of one share of E-1 Preferred Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  As used herein, the term “Warrant Shares” shall include (as the context requires) any securities of the Company into which the E-1 Preferred Stock may be converted or exchanged in the future (e.g., in the event that the entire class of Series E-1 Preferred Shares is converted into Ordinary Shares of the Company, then this Warrant shall become exercisable only for Company’s Ordinary Shares as of said conversion date).

 

Section 1.                                           Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Placement Agent Agreement, dated as of April 29, 2019 (the “Placement Agent Agreement”), by and between the Company and National Securities Corporation, as placement agent for the Company’s authorized issuance and sale of shares of E-1 Preferred Stock.

 

(1)                                 Aggregate of 10% of the number of shares of Series E-1 Preferred Stock sold in the Offering (excluding Series E-1 Preferred Shares sold to Excluded Investors).

 

 

Section 2.                                           Exercise.

 

a)                                     Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, subject to compliance with Section 2(e), at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy (or e-mail attachment) of the notice of exercise (the “Notice of Exercise”) substantially in the form attached hereto as Exhibit A.  Within the earlier of: (i) three (3) days on which the trading market is open for trading (or three (3) business days in New York, if there is at the time no public listing for the Company’s securities) (each, a “Trading Day”) and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise.  No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within one (1) Trading Day of receipt of such notice.  The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)                                     Exercise Price.  The exercise price per share of the E-1 Preferred Stock under this Warrant shall be equal to $15.25, subject to adjustment hereunder (the “Exercise Price”).

 

c)                                      Cashless Exercise.  In addition to the method of exercise set forth in Section 2(a) hereof, this Warrant may also be exercised, in whole or in part and in the discretion of the Holder, at any time from and after the Initial Exercise Date by means of a “cashless exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

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(A) = the last Price Per Share immediately preceding the time of delivery of the Notice of Exercise giving rise to the applicable “cashless exercise”, as set forth in the applicable Notice of Exercise (to clarify, the “last Price Per Share” if the Company’s securities are then listed or trading will be the last Price Per Share as calculated over an entire Trading Day such that, in the event that this Warrant is exercised at a time that the trading market on which the Company’s securities are listed or trading (if applicable) is open, the prior Trading Day’s Price Per Share shall be used in this calculation);

 

(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period of the Warrant Shares being issued may be tacked on to the holding period of this Warrant.  The Company agrees not to take any position contrary to this Section 2(c).

 

“Price Per Share” means, for any date, the price determined by the first of the following clauses that applies: (a) if the E-1 Preferred Stock is then listed or quoted on a trading market, the daily volume weighted average price of the E-1 Preferred Stock for such date (or the nearest preceding date) on the trading market on which the E-1 Preferred Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if OTCQB or OTCQX is not a trading market, the volume weighted average price of the E-1 Preferred Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the E-1 Preferred Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the E-1 Preferred Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the E-1 Preferred Stock so reported, or (d) in all other cases, the fair market value of a share of E-1 Preferred Stock as determined by the Company in good faith, taking into consideration customary valuation metrics and methodologies.

 

d)                                     Mechanics of Exercise.

 

i.                  Delivery of Warrant Shares Upon Exercise.  Warrant Shares purchased hereunder shall be transmitted by the Company or, as applicable, the Company’s authorized transfer agent (the “Transfer Agent”) to the Holder either in certificate form (if the Warrant Shares or not then listed or quoted for public trading) or (if the Warrant Shares are then listed or quoted for public trading) by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust

 

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Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earlier of (i) three (3) Trading Days and the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”).   As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary trading market or quotation system with respect to the E-1 Preferred Stock as in effect on the date of delivery of the Exercise Notice. Upon delivery of the Notice of Exercise the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares; provided payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within three Trading Days of delivery of the Notice of Exercise.

 

ii.                                 Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.                        Rescission Rights.  If the Company fails, or fails to cause the Transfer Agent, to transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.                       No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

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v.                          Charges, Taxes and Expenses.  Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that any and all income taxes and capital gain taxes applicable to the Holder and its affiliates or assignees in connection with the grant of this Warrant or the exercise thereof shall be borne exclusively by the Holder, provided, further, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the assignment form (the “Assignment Form”) substantially in the form attached hereto as Exhibit B, duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.  The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vi.                       Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e)                                      Holder’s Exercise Limitations.  From and after the date that the Company has a class of its equity securities registered under, or is otherwise subject to or is voluntarily complying with the reporting requirements of, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates (as defined under Rule 405 under the Securities Act), and any other individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government authority (or an agency or subdivision thereof) or other entity of any kind (a “Person”) acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of E-1 Preferred Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of E-1 Preferred Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of E-1 Preferred Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  E-1 Preferred Stock Equivalents)

 

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subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of E-1 Preferred Stock, a Holder may rely on the number of outstanding shares of E-1 Preferred Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of E-1 Preferred Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of E-1 Preferred Stock then outstanding.  In any case, the number of outstanding shares of E-1 Preferred Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of E-1 Preferred Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the E-1 Preferred Stock outstanding immediately after giving effect to the issuance of shares of E-1 Preferred Stock issuable upon exercise of this Warrant.  The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the E-1 Preferred Stock outstanding immediately after giving effect to the issuance of shares of E-1 Preferred Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The

 

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limitations contained in this paragraph shall apply to a successor holder of this Warrant. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of E-1 Preferred Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of E-1 Preferred Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

Section 3.                                           Certain Adjustments.

 

a)                                     Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its E-1 Preferred Stock or any other equity or equity equivalent securities payable in shares of E-1 Preferred Stock (which, for avoidance of doubt, shall not include any shares of E-1 Preferred Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of E-1 Preferred Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of E-1 Preferred Stock into a smaller number of shares or (iv) issues by reclassification of shares of the E-1 Preferred Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of E-1 Preferred Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of E-1 Preferred Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled

 

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to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)                                     Reserved.

 

c)                                      Pro Rata Distributions.  During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of E-1 Preferred Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Company will notify the Holder in writing with respect to its intention to declare dividends and to the extent that the Holder will exercise the Warrant, the Holder shall be entitled to participate in such Distribution to the same extent of the number of Warrant Shares acquired upon complete or partial exercise of this Warrant  immediately before the date of which a record is taken for such Distribution.

 

d)                                     Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any Deemed Liquidation (as defined in the Articles of Association) sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of E-1 Preferred Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding E-1 Preferred Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the E-1 Preferred Stock or any compulsory share exchange pursuant to which the E-1 Preferred Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of E-1 Preferred Stock (not including any shares of E-1 Preferred Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, the Company shall deliver to the Holder a written notice in this respect, at least 10 days prior to the closing of such Fundamental Transaction, provided that this Warrant shall automatically expire and terminate upon the first closing of any such Fundamental Transaction.

 

e)                                      Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this

 

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Section 3, the number of shares of E-1 Preferred Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of E-1 Preferred Stock (excluding treasury shares, if any) issued and outstanding.

 

f)                                       Notice to Holder.

 

i.                  Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.               Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the E-1 Preferred Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the E-1 Preferred Stock, (C) the approval of any stockholders of the Company shall be required in connection with any reclassification of the E-1 Preferred Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the E-1 Preferred Stock is converted into other securities, cash or property, or (D) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the E-1 Preferred Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the E-1 Preferred Stock of record shall be entitled to exchange their shares of the E-1 Preferred Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.  If the Company’s securities are then publicly listed or traded, to the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to an appropriate form.  The Holder shall remain entitled to

 

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exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice  except as may otherwise be expressly set forth herein.

 

Section 4.                                           Transfer of Warrant.

 

a)                                     Transferability.  Subject to compliance with relevant provisions under the Company’s Articles of Association, any applicable securities laws (including, without limitation, that each such assignee or transferee shall qualify as an accredited investor under the Securities Act, 1933 and the Israeli Securities Law, 1968 and shall deliver to the Company an executed declaration in this respect in a form reasonably acceptable to the Company), the rules and regulations of the Financial Industry Regulatory Authority, Inc., and the conditions set forth in Section 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole (but not in part), upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. In case of any assignment or transfer of this Warrant and/or the Warrant Shares, prior to the completion of an IPO, to more than one assignee and/or transferee, any such assignment or transfer shall be conditioned upon the execution of a proxy, in a form reasonably acceptable to the Company, by the assignee or transferee (as applicable) in favor of the Company’s chairman or Chief Executive Officer (as shall be determined by the Company).

 

b)                                     New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

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c)                                      Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d)                                     Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.                                           Miscellaneous.

 

a)                                     No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth in Section 3.

 

b)                                     Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c)                                      Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding Trading Day.

 

d)                                     Authorized Shares.

 

i.                  The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued securities a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be

 

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issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Company’s securities may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

ii.               Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.

 

e)                                      Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with Section 10(c) of the Placement Agent Agreement.

 

f)                                       Nonwaiver.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.

 

g)                                      Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with Section 10(a) of the Placement Agent Agreement.

 

h)                                     Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any E-1 Preferred Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

i)                                         Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

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j)                                        Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

k)                                     Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

l)                                         Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

m)                                 Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has caused this Placement Agent Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	
 
    	
POLYPID LTD.,   an Israeli corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

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EXHIBIT A

 

NOTICE OF EXERCISE

 

TO:                         POLYPID LTD.

 

(1)                                 The undersigned hereby elects to purchase          Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)                                 Payment shall take the form of (check applicable box):

 

o                                    in lawful money of the United States; or

 

o                                    if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 2(c).

 

(3)                                 Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

 

 

	
Signature of Holder:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name of Investing   Entity:
    	
 
    	
 
    
	
 
    	
 
    
	
Signature of Authorized   Signatory of Investing Entity:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Name of Authorized Signatory:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Title of Authorized   Signatory:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Date:
    	
 
    	
 
    
								

 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
Name:
    	
 
    	
 
    
	
 
    	
 
    	
(Please Print)
    
	
 
    	
 
    	
 
    
	
Address:
    	
 
    	
 
    
	
 
    	
 
    	
(Please Print)
    
	
 
    	
 
    	
 
    
	
Phone Number:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Email Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Dated:                                     ,
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Holder’s Signature:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Holder’s Address:

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