Document:

Exhibit 4.2

 

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 10.2

 

POLYPID LTD.
 2012 SHARE OPTION PLAN

 

1.                        Definitions

 

As used herein capitalized terms shall have the meanings set forth in Annex A hereto, unless the context clearly indicates to the contrary.

 

2.                        The Plan

 

2.1                 Purpose

 

The purpose and intent of the Plan is to advance the interests of the Company by affording to selected employees, officers, directors, consultants and other services providers of the Company or Affiliated Companies an opportunity to acquire a proprietary interest in the Company or to increase their proprietary interest therein, as applicable, by the grant in their favor, of Options, thus providing such Grantee an additional incentive to become, and to remain, employed or engaged by the Company or Affiliated Company, as the case may be, and encouraging such Grantee’s sense of proprietorship and stimulating his or her active interest in the success of the Company and the Affiliated Company by which such Grantee is employed or engaged.

 

2.2                 Effective Date and Term

 

The Plan shall become effective as of the day it was adopted by the Board, and shall continue in effect until the earlier of (a) its termination by the Board; or (b) the date on which all of the Options available for issuance under the Plan have been granted and exercised; or (c) the lapse of ten (10) years from the date the Plan is adopted by the Board.

 

3.                        Administration

 

3.1                 This Plan and any Sub-Plans shall be administered by the Board. The Board may appoint a committee which, subject to any applicable limitations imposed by the Companies Law, and/or by any other applicable Law, shall have all of the powers of the Board granted herein (in which event of such limitations, such committee may make recommendations to the Board). Subject to the above, the term “Board” whenever used herein, shall mean the Board or such appointed committee, as applicable.

 

3.2                 Unless specifically required otherwise under applicable Mandatory Law, the Board shall have sole and full discretion and authority, without the need to submit its determinations or actions to the shareholders of the Company for their approval or authorization, to administer the Plan and any Sub-Plans and all actions related thereto, including without limitation the performance, at any time and from time to time, of any and all of the following:

 

3.2.1                     the designation of Grantees;

 

3.2.2                     the determination of the terms of each grant of Options (which need not be identical), including without limitation the number of Options to be granted in favor of each Grantee and the vesting schedule and the Exercise Price thereof and the documents to be executed by the Grantee;

 

3.2.3                     the determination of the applicable tax regimes to which the Options will be subject;

 

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3.2.4                     the determination of the terms and form of the Option Agreements (which need not be identical), whether a general form or a specific form with respect to a certain Grantee;

 

3.2.5                     the modification or amendment of the Exercise Period, vesting schedules (including by way of accelaration) and/or of the Exercise Price of Options, including without limitation the reduction thereof, either prior to or following their grant; the repricing of Options or any other action which is or may be treated as repricing under generally accepted accounting principles; the grant to the holder of an outstanding Option, in exchange for such Option, of a new Option having a purchase price equal to, lower than or higher than the Exercise Price provided in the Option so surrendered and canceled, and containing such other terms and conditions as the Board may prescribe;

 

3.2.6                     any other action and/or determination deemed by the Board to be required or advisable for the administration of the Plan and/or any Sub-Plan or Option Agreement;

 

3.2.7                     the determination of the Fair Market Value of the Shares, and the mechanism of such determination;

 

3.2.8                     the interpretation of the Plan, any Sub-Plans, and the Option Agreements;

 

3.2.9                     the adoption of Sub-Plans, including without limitation the determination, if the Board sees fit to so determine, that to the extent any terms of such Sub-Plan are inconsistent with the terms of this Plan, the terms of such Sub-Plan shall prevail; and

 

3.2.10              the extension of the period of the Plan or any Sub-Plans.

 

3.3                 The Board may, without shareholder approval, amend, modify (including by adding new terms and rules), and/or cancel or terminate this Plan, any Sub-Plans, and any Options granted under this Plan or any Sub-Plans, any of their terms, and/or any rules, guidelines or policies relating thereto. Notwithstanding the foregoing (a) material amendments to the Plan or any Sub-Plans (but not the exercise of discretion under the Plan or any Sub-Plans) shall be subject to shareholder approval to the extent so required by applicable Mandatory Law; and (b) no termination or amendment of the Plan or any Sub-Plan shall affect any then outstanding Options nor the Board’s ability to exercise its powers with respect to such outstanding Options granted prior to the date of such termination, unless expressly provided by the Board.

 

3.4                 Unless otherwise determined by the Board, any amendment or modification of this Plan and/or any applicable Sub-Plan and/or Option Agreement shall apply to the relationship between the Grantee and the Company; and such amendment or modification shall be deemed to have been included, ab initio, in the Plan and any such applicable Sub-Plan and/or Option Agreement, and shall have full force and effect with respect to the relationship between the Company and the Grantee.

 

4.                        Eligibility

 

The persons eligible for participation in the Plan as Grantees include employees, officers, directors, consultants, and other service providers of the Company or any Affiliated Company (including persons who are responsible for or contribute to the management, growth or profitability of, or who provide substantial services to, the Company or any Affiliated Company). The Board, in its sole discretion shall select from time to time the individuals,

 

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from among the persons eligible to participate in the Plan, who shall receive Options. In determining the persons in favor of whom Options are to be granted, the number of Options to be granted thereto and the terms of such grants, the Board may take into account the nature of the services rendered by such person, his/her present and future potential contribution to the Company or to the Affiliated Company by which he/she is employed or engaged, and such other factors as the Board in its discretion shall deem relevant.

 

5.                        Option Pool

 

The total number of Options to be granted pursuant to this Plan shall be Seventeen Million Seven Hundred and Fifty Five Thousand Five Hundred and Six (17,755,506) and the Company has reserved Seventeen Million Seven Hundred and Fifty Five Thousand Five Hundred and Six (17,755,506) authorized but unissued Shares for the purpose of the Plan, subject to adjustment as set forth in Section 12 below, and as shall be amended by the Board from time to time.

 

The Company shall at all times until the expiration or termination of this Plan keep reserved a sufficient number of Shares to meet the requirements of this Plan. Any of such Shares, which, as of the expiration or termination of this Plan, remain unissued and not subject to outstanding Options, shall at such time cease to be reserved for the purposes of this Plan. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, such Option may be returned to said pool of Options and may again be granted under this Plan.

 

6.                        Grant of Options  

 

6.1                 The Options shall be granted for no consideration.

 

6.2                 Each Option granted pursuant to the Plan shall be evidenced by an Option Agreement.

 

6.3                 Each Grantee shall be required to execute, in addition to the Option Agreement, any and all other documents required by the Company or any Affiliated Company, whether before or after the grant of the Options (including without limitation any customary documents and undertakings towards a trustee, if any, and/or the tax authorities). Notwithstanding anything to the contrary in this Plan or in any Sub-Plan, no Option shall be deemed granted unless all documents required by the Company or any Affiliated Company to be signed by the Grantee prior to or upon the grant of such Option, shall have been duly signed and delivered to the Company or such Affiliated Company.

 

7.                        Terms of Options

 

Option agreements between the Company and a Grantee will be in such form approved by the Board, which may be a general form or a specific form with respect to a certain Grantee.

 

Unless otherwise determined by the Board (which determination shall not require shareholder approval, unless so required in order to comply with the provisions of applicable Mandatory Law) and provided accordingly in the applicable Option Agreement, such Option Agreement shall set forth, by appropriate language, the number of Options granted thereunder and the substance of all of the following provisions:

 

7.1                 Exercise Price: The Exercise Price for each Grantee shall be as determined by the Board and specified in the applicable Option Agreement. Without derogating from and in addition to the provisions of Section 18 of the Plan, the Exercise Price shall be denominated in the currency of the primary economic environment of, at the Company’s discretion, either the Company or the Grantee (that is the functional currency of the Company or the currency in which the Grantee is paid).

 

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7.2                 Vesting: Unless otherwise determined by the Board with respect to any specific Grantee and/or to any specific grant (which determination shall not require shareholder approval unless so required in order to comply with the provisions of applicable Mandatory Law) and provided accordingly in the applicable Option Agreement, the Options shall vest (become exercisable) according to the following 3 year vesting schedule:

 

	
Period of Grantee’s Continuous Service from 
   the Start Date:
    	
 
    	
Portion of Total Number of Options
   that becomes Vested and Exercisable
    	
 
    
	
Upon the   completion of a full twelve (12) months of continuous Service
    	
 
    	
33
    	
%
    
	
Upon the lapse   of each full additional three month(s) of the Grantee’s continuous   Service thereafter, until all the Options are vested (i.e. 100% of the grant   will be vested after 3 years)
    	
 
    	
8.375
    	
%
    

 

For the purposes hereof, the “Start Date” shall mean the Date of Grant, unless otherwise determined by the Board (which determination shall not require shareholder approval unless so required in order to comply with the provisions of the Companies Law), and provided accordingly in the applicable Option Agreement.

 

For the purposes hereof, the term “Service” means a Grantee’s employment or engagement by the Company or an Affiliated Company. Service shall be deemed terminated upon the effective date of the termination of the employment/engagement relationship. A Grantee’s Service shall not be deemed terminated or interrupted solely as a result of a change in the capacity in which the Grantee renders Service to the Company or an Affiliated Company (i.e., as an employee, officer, director, consultant, etc.); nor shall it be deemed terminated or interrupted due solely to a change in the identity of the specific entity (out of the Company and its Affiliated Companies) to which the Grantee renders such Service, provided that there is no actual interruption or termination of the continuous provision by the Grantee of such Service to any of the Company and its Affiliated Companies. Furthermore, a Grantee’s Service with the Company or Affiliated Company shall not be deemed terminated or interrupted as a result of any military leave, sick leave, or other bona fide leave of absence taken by the Grantee and approved by the Company or such Affiliated Company by which the Grantee is employed or engaged, as applicable; provided, however, that if any such leave exceeds ninety (90) days, then on the ninety-first (91st) day of such leave the Grantee’s Service shall be deemed to have terminated unless the Grantee’s right to return to Service with the Company or such Affiliated Company is secured by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or Affiliated Company, as the case may be, or required by law, time spent in a leave of absence shall not be treated as time spent providing Service for the purposes of calculating accrued vesting rights under the vesting schedule of the Options. Without derogating from the aforesaid, the Service of a Grantee to an Affiliated Company shall also be deemed terminated in the event that such Affiliated Company for which the Grantee performs Service ceases to fall within the definition of an “Affiliated Company” under this Plan, effective as of the date said Affiliated Company ceases to be such. In all other cases in which any doubt may arise regarding the termination of a Grantee’s Service or the effective date of such termination, or the implications of absence from Service on vesting, the Corporation, in its discretion, shall determine whether the Grantee’s Service has terminated and the effective date of such termination and the implications, if any, on vesting.

 

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The Board shall be entitled, but not obliged, at its sole discretion, to accelerate, in whole or in part, the vesting schedule of any Option, including, without limitation, in connection with a Merger Transaction and/or an IPO.

 

7.3                 Expiration Date: Unless expired earlier pursuant to either Section 7.4 or Section 9 below, unexercised Options shall expire and terminate and become null and void upon the lapse of ten (10) years from the Date of Grant (the “Expiration Date”).

 

7.4                 Exercise Period:

 

7.4.1       Each Option shall be exercisable from the date upon which it becomes vested until the Expiration Date of such Option (the “Exercise Period”).

 

7.4.2       Notwithstanding anything to the contrary contained in this Plan, in the event of a merger of the Company with or into another corporation, or the sale of all or substantially all the assets or the shares of the Company (such merger or sale: a “Merger Transaction”), the surviving or the acquiring entity, as the case may be, or its respective parent company or subsidiary (the “Successor Entity”) may either assume the Company’s rights and obligations under outstanding Options or substitute the outstanding Options, as follows:

 

(a)                   For purposes of this Section 7.4.2, the outstanding Options shall be deemed assumed or substituted by the Successor Entity if, following the consummation of the Merger Transaction, the outstanding Options confer the right to receive, for each share underlying any outstanding Option immediately prior to the consummation of the Merger Transaction, the same consideration (whether shares, cash or other securities or property) to which an existing holder of a Share on the effective date of consummation of the Merger Transaction was entitled; provided, however, that if the consideration to which such existing holder is entitled comprises consideration other than or in addition to securities of the Successor Entity, then the Board may determine, with the consent of the Successor Entity, that the consideration to be received by the Grantees for their outstanding Options will comprise solely securities of the Successor Entity equal in their market value to the per share consideration received by the holders of Shares in the Merger Transaction.

 

(b)                   In the event that the Successor Entity neither assumes nor substitutes all of the outstanding Options of a Grantee, then such Grantee shall have a period of 15 days (or if so decided by the Board, such longer period as the Board may determine in its sole discretion) from the date designated by the Company in a written notice given to the Grantee (such date to be no earlier than the date upon which said notice is delivered to the Grantee) to exercise his or her Vested Options.

 

(c)                    All Options, whether vested or not, which are neither assumed or substituted by the Successor Entity, nor exercised by the end of the said 15-day period, shall expire effective as of the date of the consummation of the Merger Transaction, whereupon they shall become null and void and shall no longer entitle the Grantee to any right in or towards the Company or the Successor Entity.

 

7.5                 Exercise Notice and Payment:

 

Vested Options may be exercised at one time or from time to time during the Exercise Period, by giving a written notice of exercise (the “Exercise Notice”) to the Company, at their principal offices, in accordance with the following terms, or such other procedures as shall be determined from time to time by the Board and notified in writing to the Grantees:

 

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(a)                       The Exercise Notice must be signed by the Grantee and must be delivered to the Company, prior to the termination of the Options, by certified or registered mail - return receipt requested, with a copy delivered to the Chief Financial Officer (or such other authorized representative) of the Affiliated Company with which the Grantee is employed or engaged, if applicable.

 

(b)                       The Exercise Notice will specify the number of Vested Options being exercised.

 

(c)                        The Exercise Notice will be accompanied by payment in full of the Exercise Price for the exercised Options and by such other representations and agreements as required by the Company with respect to the Grantee’s investment intent regarding the Exercised Shares. Payment will be made by personal check or cashier’s check payable to the order of the Company, or at the discretion of the Board, payment of such other lawful consideration as the Board may determine (such as, by way of example, cashless exercise), provided however, that in case of payment by check, the Options shall not be deemed exercised, and the Company shall not issue the Exercised Shares in respect thereof, until the check shall have been fully and irrevocably honored by the bank on which it was drawn.

 

7.6                 Conditions of Issuance

 

No Options shall be deemed exercised nor shall any Share be issued thereunder, until the Company has been provided with confirmation by the applicable tax authorities or is otherwise under a tax arrangement, which either: (a) waives or defers the tax withholding obligation with respect to such exercise and issuance; or (b) confirms receipt of the payment of all the tax due with respect to such exercise; or (c) confirms the conclusion of another arrangement with the Grantee regarding the tax amounts, if any, that are to be withheld by the Company or any Affiliated Company under Law with respect to such exercise, and which arrangement is satisfactory to the Company. If such confirmations/exemptions/arrangements are not available under the tax subjections of the Grantee, the Company shall be entitled to require as a condition of issuance that the Grantee remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. A determination of the Company’s counsel that a withholding tax is required in connection with the exercise of Options shall be conclusive for the purposes of this requirement condition.

 

Furthermore, notwithstanding any other provision of this Plan, the Company shall have no obligation to issue or deliver Shares under the Plan unless the exercise of the Option and the issuance and delivery of the underlying Shares comply with, and do not result in a breach of, all applicable Laws, to the satisfaction of the Company in its sole discretion, and have received, if deemed desirable by the Company, the approval of legal counsel for the Company with respect to such compliance. The Company may further require the Grantee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with applicable Laws.

 

As a condition to the exercise of an Option, the Company may require, among other things, that: (a) the Grantee represent and warrant at the time of any exercise that the underlying Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, and make such other representations, warranties and covenants as may be reasonably required to comply with applicable laws; (b) a legend be stamped on the certificates representing such underlying Shares indicating that they may not be pledged, sold or otherwise transferred unless an opinion of legal counsel (acceptable by the Company’s counsel) stating that such transfer is not in violation of any applicable Law, is provided; and

 

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(c) the Grantee execute and deliver to the Company such an agreement as may be in use by the Company setting forth certain terms and conditions applicable to the Shares.

 

8.                        Transferability

 

8.1                 The Options are not publicly traded.

 

8.2                 Other than by will or laws of descent, neither the Options nor any of the rights in connection therewith shall be assignable, transferable, made subject to attachment, lien or encumbrance of any kind, and the Grantee shall not grant with respect thereto any power of attorney or transfer deed, whether valid immediately or in the future.

 

8.3                 Following the exercise of Vested Options, the Exercised Shares shall be transferable; provided, however, that Exercised Shares may be subject to applicable securities regulations, a right of first refusal, one or more repurchase options, market stand-off provisions, lock up periods and such other conditions and restrictions as may be included in the Company’s Articles, the Plan, any applicable Sub-Plan, the applicable Option Agreement, and/or any conditions and restrictions included in the Company’s Securities Law Compliance Manual/Insider Trade Policy, or similar document, if any, all as determined by the Board in its discretion, provided however, that if the Options are subject to a right of first refusal or a repurchase option, then for as long as the Company is not publicly traded, a Grantee shall not transfer any Exercised Shares, prior to the lapse of six (6) months and one day from the date on which s/he exercised the Options. The Company shall have the right to assign at any time any repurchase or right of first refusal right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, the Grantee shall execute any agreement or document evidencing such transfer restrictions prior to the receipt of Exercised Shares hereunder, and shall promptly present to the Company any and all certificates representing Exercised Shares for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

 

The Grantee may transfer or sell only Exercised Shares, or any part thereof, to any third party, provided that all of the following conditions have been met prior to such transfer: (a) the transfer is made in accordance with and subject to the provisions of the Company’s Articles (including, without limitation, any rights of first refusal provided therein, if any); and (b) the transferee confirmed in writing its acceptance of the terms and conditions of the Plan, any applicable Sub-Plan and the applicable Option Agreement with respect to the Exercised Shares being transferred, instead of the Grantee, to the satisfaction of the Board (including the execution of the proxy referred to in Section 10.2 below); and (c) actual payment of all taxes required to be paid upon such sale and transfer of the Exercised Shares has been made to the tax assessor, and the trustee (if applicable) received confirmation from the tax assessor that all taxes required to be paid upon such sale and transfer have been paid.

 

Any transfer that is not made in accordance with the Plan, any applicable Sub-Plan or the applicable Option Agreement shall be null and void.

 

8.4                 No transfer of an Exercised Share or Option by the Grantee by will or by the laws of descent shall be effective against the Company, unless and until: (a) the Company shall have been furnished with written notice thereof, accompanied by an authenticated copy of probate of a will together with the will or inheritance order and/or such other evidence as the Board may deem necessary to establish the validity of the transfer; and (b) the contemplated transferee(s) shall have confirmed to the Company in writing its acceptance of the terms and conditions of

 

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the Plan, any applicable Sub-Plan and Option Agreement, with respect to the Exercised Share or Options being transferred, to the satisfaction of the Board.

 

8.5                 In the event that prior to an IPO, holders holding in the aggregate no less than a controlling interest in the Company (“Selling Shareholders”) elect to sell all or substantially all of their shares in the Company either to a third party or to one shareholder of the Company, then, if so requested by the purchaser, the Grantee shall be obligated to join the sale and sell all of his/her Shares in the Company (and if requested, also his/her unexpired Vested Options), all under the same terms under which the Selling Shareholders have agreed to sell their shares (provided that with respect to Vested Options, the Exercise Price shall be deducted from the purchase price paid for the shares in such transaction) and in accordance with the provisions of the Articles of the Company.

 

9.                        Termination of Options and Repurchase of Exercised Shares

 

9.1                 Notwithstanding anything to the contrary, any Option granted in favor of any Grantee but not exercised by such Grantee within the Exercise Period and in strict accordance with the terms of the Plan, any applicable Sub-Plan and the applicable Option Agreement, shall, upon the lapse of the Exercise Period, immediately expire and terminate and become null and void.

 

9.2                 Upon the termination of a Grantee’s Service, for any reason whatsoever, any Options granted in favor of such Grantee, which are not Vested Options, shall immediately expire and terminate and become null and void.

 

9.3                 Additionally, in the event of the termination of a Grantee’s Service for Cause (a) all of such Grantee’s Vested Options shall also, upon such termination for Cause, immediately expire and terminate and become null and void; and (b) any and all of such Grantee’s Exercise Shares shall be subject to the Company’s “Repurchase Right”, as described below.

 

For the purposes hereof the term “Cause” shall mean (a) the conviction of the Grantee for any felony involving moral turpitude or affecting the Company or any Affiliated Company; (b) the embezzlement of funds of the Company or any Affiliated Company; (c) any breach of the Grantee’s fiduciary duties or duties of care towards the Company or any Affiliated Company (including without limitation any disclosure of confidential information of the Company or any Affiliated Company or any breach of a non-competition undertaking); (d) any conduct in bad faith reasonably determined by the Board to be materially detrimental to the Company or, with respect to any Affiliated Company, reasonably determined by the Board of Directors of such Affiliated Company to be materially detrimental to either the Company or such Affiliated Company; or (e) any other event classified under any applicable agreement between the Grantee and the Company or the Affiliated Company, as applicable, as a “cause” for termination or by other language of similar substance.

 

The Company’s “Repurchase Right” shall be as follows: If any Grantee’s Service is terminated by the Company for Cause, then, within 180 days after such termination, the Company shall have the right, but not the obligation, to repurchase from the Grantee, or his or her legal representative, as the case may be, all or part of the Shares s/he exercised pursuant to the Options, if any. The Repurchase Right shall be exercised by the Company by giving the Grantee, or his/her legal representative written notice, within said 180 days, of its intention to exercise the Repurchase Right, indicating the number of such Exercised Shares to be repurchased and the date on which the repurchase is to be effected, and shall pay the Grantee for each such Exercised Share being repurchased, an amount equal to the price originally paid by the Grantee for such Exercised Shares, subject to adjustments as provided in Section 12 below. The certificate(s) representing such Exercised Shares to be repurchased shall, prior to

 

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the close of business on the date specified for the repurchase, be delivered to the Company together with a duly endorsed stock assignment certificate. Payment shall be made in cash, cash equivalents, or in any other way of payment allowed under any applicable Law, and authorized by the Board. Concurrently with the exercise of the Repurchase Right, if exercised, the Grantee (or the holder of the Exercised Shares so repurchased) shall no longer have any rights as a holder of such repurchased Exercised Shares. Such repurchased Exercised Shares shall be deemed to have been repurchased, whether or not the certificate(s) therefor have been delivered. If the Grantee fails to deliver such stock certificate(s), the Company shall be entitled to take such action as may be necessary to remove the requisite number of Shares registered in the name of the Grantee from the books and records of the Company. The Repurchase Right shall be in addition to any and all other rights and remedies available to the Company.

 

In the event that the Company shall be prohibited, on account of any applicable Mandatory Law, from repurchasing Exercised Shares, the Company may assign the Repurchase Right to it wholly owned subsidiary, or if the same is not possible on account of any applicable Law, to all of the stockholders of the Company at the time of the exercise of said right (excluding other shareholders pursuant to the exercise of Options), on a pro-rata, as converted basis, all under the same terms and conditions set forth in this Plan, in which event the Company portion shall inform the Grantee of the identity of the particular assignee in the Company’s Notice, and the provisions of this Section regarding the Company shall apply to such assignee(s), mutatis mutandis.

 

In the event that at the time the Company wishes to exercise its Repurchase Right, the Grantee does not own a sufficient number of Exercised Shares to satisfy the Company’s Repurchase Right, in addition to performing any obligations necessary to satisfy the Company’s Repurchase Right, the Company may require the Grantee to deliver to the Company, for each Exercised Share that is the subject of the Repurchase Right and is not available for repurchase as it has been sold or transferred, an aggregate cash amount, equal to the difference between the fair market value of each such missing Share and the price originally paid by the Grantee to the Company for each such Exercised Share, as adjusted.

 

9.4                 Unless otherwise determined by the Board (which determination shall not require shareholder approval, unless so required in order to comply with the provisions of applicable Mandatory Law), following termination of Grantee’s Service other than for Cause, the Expiration Date of such Grantee’s Vested Options shall be deemed the earlier of: (a) the Expiration Date of such Vested Options as was in effect immediately prior to such termination; or (b) 3 (three) calendar months following the date of such termination or, if such termination is the result of death or disability of the Grantee, 12 (twelve) calendar months from the date of such termination.

 

9.5                 Notwithstanding anything to the contrary herein, upon the issuance of a court order declaring the bankruptcy of a Grantee, or the appointment of a receiver or a provisional receiver for a Grantee over all of his assets, or any material part thereof, or upon making a general assignment for the benefit of his creditors, any outstanding Options issued in favor of such Grantee (whether vested or not) shall immediately expire and terminate and become null and void and shall entitle neither the Grantee nor the Grantee’s receiver, successors, creditors or assignees to any right in or towards the Company or any Affiliated Company in connection with the same, and all interests and rights of the Grantee or the Grantee’s receiver, successors, creditors or assignees in and to the same, shall expire.

 

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10.                 Rights as Shareholder, Voting Rights, Dividends and Bonus Shares

 

10.1          It is hereby clarified that a Grantee shall not, by virtue of this Plan, any applicable Sub-Plan or the applicable Option Agreement or any Option granted to the Grantee, have any of the rights of a shareholder with respect to the Shares underlying the Options, until the Options have been exercised and the Exercised Shares issued in the Grantee’s name.

 

10.2          Prior to the closing of an IPO, the Board shall be entitled to require, as a condition to the exercise of any Option, that the Grantee (and the trustee, if there is a trustee who is the holder of the Exercised Shares) sign and deliver to such person as may be designated by the Board (the “Nominee”) an irrevocable proxy, in a form to be provided by the Company, appointing the Nominee as the sole person entitled to exercise the voting rights conferred by such shares. The Nominee shall not exercise the voting rights conferred by the Exercised Shares held by him or with respect to which the Nominee has been given an irrevocable proxy as aforesaid, in any way whatsoever, and shall not issue a proxy to any person or entity to vote such shares, unless otherwise instructed by the Board, and in accordance with such instructions. Unless instructed otherwise by the Board, the Nominee shall vote such Exercised Shares in a manner pro-rata to the votes of the other voting shares, such that the votes of the Exercised Shares shall not affect the end result of the vote. The Nominee shall be indemnified and held harmless by the Company, to the extent permitted by applicable law, against any cost or expense (including counsel fees) reasonably incurred by him/it, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of the aforesaid proxy unless arising out of such Nominee’s own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the Nominee(s) may have as a director or otherwise under the Company’s Articles, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.

 

10.3          Notwithstanding anything to the contrary herein or in the Company’s Articles, none of the Grantees shall have (and they hereby waive the right to have), any pre-emptive rights to purchase, along with the other shareholders in the Company, a pro rata portion of any securities proposed to be offered by the Company prior to the offering thereof to any third party or any rights of first refusal to purchase any securities of the Company offered by the other shareholders of the Company.

 

10.4          Cash dividends paid or distributed, if any, with respect to the Exercised Shares shall be remitted to the Trustee and the Trustee shall make reasonable efforts to remit to the Grantee who is entitled to the Exercised Shares for which the dividends are being paid or distributed, subject to any applicable taxation and laws on such distribution of dividend, and the withholding thereof.

 

10.5          All bonus shares to be issued by the Company, if any, with regard to the Exercised Shares held by a trustee, if any, shall be registered in the name of such trustee and all provisions applying to such Exercised Shares, shall apply to the bonus shares issued by virtue thereof, mutatis mutandis.

 

11.                 Liquidation

 

In the event that the Company is liquidated or dissolved while unexercised Options remain outstanding under the Plan, then all or part of such outstanding Options may be exercised in full by the Grantees as of immediately prior to the effective date of such liquidation or dissolution of the Company, without regard to the vesting terms thereof.

 

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12.                 Adjustments

 

The number of Shares to which each outstanding Option is exercisable, together with those Shares otherwise reserved for the purposes of the Plan for Options not yet exercised as provided under Section 5 above, shall be proportionately adjusted for any increase or decrease in the number of Shares resulting from a stock split, reverse stock split, combination or reclassification of the Shares, as well as for any distribution of bonus shares. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive.

 

All provisions applying to the Exercised Shares shall apply to all Shares received as a result of an adjustment as described above.

 

No adjustment shall be made by virtue of the distribution, if any, of any cash or similar dividend.

 

13.                 No Interference

 

Neither the Plan nor any applicable Sub-Plan or Option Agreement shall affect, in any way, the rights or powers of the Company or its shareholders to make or to authorize any sale, transfer or change whatsoever in all or any part of the Company’s assets, obligations or business, or any other business, commercial or corporate act or proceeding, whether of a similar character or otherwise; any adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or business; any merger or consolidation of the Company; any issue of bonds, debentures, shares (including preferred or prior preference shares ahead of or affecting the existing shares of the Company including the shares into which the Options granted hereunder are exercisable or the Exercised Shares or the rights thereof, etc.); or the dissolution or liquidation of the Company; and none of the above acts or authorizations shall entitle the Grantee to any right or remedy, including without limitation, any right of compensation for any dilution resulting from any issuance of any shares or of any other securities in the Company to any person or entity whatsoever.

 

14.                 No Employment/Engagement/Continuance of Service Obligations

 

Nothing in the Plan, in any applicabl[ILLEGIBLE]e Sub-Plan or Option Agreements, or in any Option granted hereunder shall be construed as guaranteeing the Grantee’s continuous employment, engagement or service with the Company or any Affiliated Company, and no obligation of the Company or any Affiliated Company as to the length of the Grantee’s employment, engagement or service shall be implied by the same. The Company and its Affiliated Companies reserve the right to terminate the employment, engagement or service of any Grantee pursuant to such Grantee’s terms of employment, engagement or service and any law.

 

15.                 No Representation

 

The Company does not and shall not, through this Plan, any applicable Sub-Plan or the applicable Option Agreement, make any representation towards any Grantee with respect to the Company, its business, its value or either its shares in general or the Exercised Shares in particular.

 

Each Grantee, upon entering into the applicable Option Agreement, shall represent and warrant toward the Company that his/her consent to the grant of the Options issued in his/her favor and the exercise (if so exercised) thereof, neither is nor shall be made, in any respect, upon the basis of any representation or warranty made by the Company or by any of its directors, officers, shareholders or employees, and is and shall be made based only upon his/her examination and expectations of the Company, on an “as is” basis. Each Grantee shall waive any claim whatsoever of “non-conformity” of any kind, and any other cause of action or claim of any kind with respect to the Options and/or their underlying Shares.

 

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16.                 Tax Consequences

 

16.1          Any and all tax and/or other mandatory payment consequences arising from the grant or exercise of any Option, the payment for or the transfer of the Exercised Shares to the Grantee, or the sale of the Exercised Shares by the Grantee, or from any other event or act in connection therewith (including without limitation, in the event that the Options do not qualify under the tax classification/tax track in which they were intended) (whether of the Company, any Affiliated Company, a trustee, if applicable, or the Grantee), shall be borne solely by the Grantee.

 

16.2          The Company, any Affiliated Company and a trustee, if applicable, may each withhold (including at source), deduct and/or set-off, from any payment made to the Grantee, the amount of the tax and/or other mandatory payment the withholding of which is required with respect to the Options and/or the Exercised Shares under any applicable Law. The Company or an Affiliated Company may require the Grantee, through payroll withholding, cash payment or otherwise, to make adequate provision for any such tax withholding obligations of the Company, Affiliated Company or a trustee, if applicable, arising in connection with the Options or the Exercised Shares. Without derogating from the aforesaid, each Grantee shall provide the Company and/or any applicable Affiliated Company with any executed documents, certificates and/or forms that may be required from time to time by the Company or such Affiliated Company in order to determine and/or establish the tax liability of such Grantee.

 

16.3          Furthermore, each Grantee shall indemnify the Company, any applicable Affiliated Company and a trustee, if applicable, or any one thereof, and hold them harmless from and against any and all liability in relation with any such tax and/or other mandatory payments or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax and/or other mandatory payments from any payment made to the Grantee.

 

17.                 Non-Exclusivity of the Plan

 

The adoption by the Board of this Plan and any Sub-Plans shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements, or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation the grant of options for shares in the Company otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

 

18.                 Currency Exchange Rates

 

Except as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this Plan, including without limitation the fair market value and the Exercise Price of each Option, shall be stated in United States Dollars. In the event that the Exercise Price is in fact to be paid in New Israeli Shekels, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels on the date of payment.

 

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ANNEX A

 

Capitalized Terms used in the 2012 Share Option Plan, shall have the meanings set forth below:

 

1.1                 “Affiliated Company” — means any present or future entity (a) which holds a controlling interest in the Company; (b) in which the Company holds a controlling interest; (c) in which a controlling interest is held by another entity, who also holds a controlling interest in the Company; or (d) which has been designated an “Affiliated Company” by resolution of the Board.

 

1.2                 “Board” — means the Board of Directors of the Company. 

 

1.3                 “Cause” — as defined in Section 9.3 of the Plan.

 

1.4                 “Company” — PolyPid Ltd.

 

1.5                 “Companies Law” — the State of Israel’s Companies Law, 5759 — 1999, as amended from time to time, and the rules and regulations promulgated thereunder.

 

1.6                 “Date of Grant” — the date determined by the Board to be the effective date of the grant of Options to a Grantee, or, if the Board has not determined such effective date, the date of the resolution of the Board approving the grant of such Options.

 

1.7                 “Exercise Notice” - as defined in Section 7.5 of the Plan. 

 

1.8                 “Exercise Period” - as defined in Section 7.4 of the Plan.

 

1.9                 “Exercise Price” - the price to be paid for the exercise of each Option.

 

1.10          “Exercised Shares” - the Shares that are issued upon the exercise of the Options.

 

1.11          “Expiration Date” - as defined in Section 7.3 of the Plan.

 

1.12          “Fair Market Value” means as of any date, the value of a Share determined as follows:

 

(i)                           If the Shares are listed on any established stock exchange or a national market system, including without limitation the Tel -Aviv Stock Exchange, the NASDAQ National Market System or the NASDAQ SmallCap Market, the Fair Market Value shall be the last reported sale price for such Shares (or the highest closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in The Wall Street Journal, or such other source as the Board deems reliable;

 

(ii)                        If the Shares are regularly quoted by one or more recognized securities dealers, but selling prices are not reported, the Fair Market Value shall be the mean between the highest bid and lowest asked prices for the Shares on the last market trading day prior to the day of determination; or

 

(iii)                     In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Board.

 

1.13          “Grantee” — a person or entity to whom Options are granted.

 

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1.14          “IPO” — an initial public offering of securities of the Company in a recognized stock exchange market or the listing thereof on NASDAQ or another recognized automated quotation system.

 

1.15          “Law” — federal, state and/or foreign, laws, rules and/or regulations and/or rules, regulations, guidelines and/or requirements of any relevant securities and exchange and/or tax commission and/or authority and/or any relevant stock exchange or quotations systems.

 

1.16          “Mandatory Law” — provisions of Law, which may not be contrarily addressed or regulated by the determination and/or consent of the Company and/or other parties.

 

1.17          “Merger Transaction” - as defined in Section 7.4 of the Plan.

 

1.18          “Option(s)” - an option(s) granted within the framework of this Plan, each of which imparts the right to purchase one Share.

 

1.19          “Option Agreement” — with respect to any Grantee — a written option agreement or a written instrument, executed by and between the Company and the Grantee, which shall set forth the terms and conditions with respect to the Options.

 

1.20          “Plan” - this Company’s 2012 Israeli Share Option Plan, as may be amended from time to time as set forth herein.

 

1.21          “Service”  — as defined in Section 7.2 of the Plan.

 

1.22          “Share(s)” — Ordinary Share(s) of the Company, par value of NIS 0.10 each, to which, subject to the provisions herein, are attached the rights specified in the Company’s Articles, as may be amended from time to time.

 

1.23          “Start Date”  — as defined in Section 7.2 of the Plan.

 

1.24          “Sub-Plan” - any supplements or sub-plans to the Plan adopted by the Board, applicable to Grantees employed in a certain country or region or subject to the laws of a certain country or region, as deemed by the Board to be necessary or desirable to comply with the laws of such region or country, or to accommodate the tax policy or custom thereof, which, if and to the extent applicable to any particular Grantee, shall constitute an integral part of the Plan.

 

1.25          “Vested Option(s)” — that portion of the Options which the Grantee is entitled to exercise in accordance with the provisions of Section 7.2 of the Plan or, if inconsistent with the provisions of Section 7.2 of the Plan - the provisions of the Option Agreement of such Grantee.

 

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