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TABLE OF CONTENTS
POLYPID LTD. CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2019

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As confidentially submitted to the Securities and Exchange Commission on February 24, 2020
pursuant to the Jumpstart Our Business Startups Act of 2012. All information herein is strictly confidential.

Registration No. 333-                

 

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



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



PolyPid Ltd.
(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant's name into English)

State of Israel
(State or other jurisdiction of
incorporation or organization)
  2834
(Primary Standard Industrial
Classification Code Number)
  Not Applicable
(I.R.S. Employer
Identification Number)

18 Hasivim Street
Petach Tikva 4959376, Israel
Tel: +972 (74) 719-5700

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



PolyPid Inc.
The Atrium at 47 Maple Street
Suite 302A
Summit, NJ 07901
Telephone: (908) 378-9530
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:
Divakar Gupta
Daniel I. Goldberg
Joshua A. Kaufman
Madison A. Jones
Cooley LLP
55 Hudson Yards
New York, NY 10001
Telephone: (212) 479-6000
Facsimile: (212) 479-6275
  Oded Har-Even
David Huberman
Reut Alfiah
Zysman, Aharoni, Gayer & Co.
41-45 Rothschild Blvd.
Beit Zion
Tel Aviv, Israel 6578401
Telephone: +972 (3) 795-5555
Facsimile: +972 (3) 795-5550
  Nathan Ajiashvili
Joshua G. Kiernan
Latham & Watkins LLP
885 Third Avenue
New York, NY 10022
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
  Barry P. Levenfeld
Adrian Daniels
Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv, Israel 67021
Telephone: +972 (3) 608-7777
Facsimile: +972 (2) 623-9236



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

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

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

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

           Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company    ý

           If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.    o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
To Be Registered

  Proposed Maximum
Aggregate Offering
Price(1)

  Amount of
Registration Fee(2)

 

Ordinary Shares, par value NIS 0.80 per share

  $                   $                

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the ordinary shares that the underwriters have the option to purchase.

(2)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities, in any jurisdiction where an offer or sale is not permitted.

Subject to Completion, dated                           , 2020

PROSPECTUS


              Shares

PolyPid Ltd.

Ordinary Shares


PolyPid Ltd. is offering             ordinary shares. This is our initial public offering, and no public market currently exists for our ordinary shares. We anticipate that the initial public offering price will be between $             and $             .

We have applied to list our ordinary shares on The Nasdaq Global Market under the symbol "POLY."

We are an "emerging growth company" as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

Investing in our ordinary shares involves risks. See "Risk Factors" beginning on page 11.

 
  Per Ordinary
Share
  Total  

Price to public

  $     $    

Underwriting discounts and commissions(1)

  $     $    

Proceeds to us (before expenses)

  $     $    

(1)
See "Underwriting" for a description of compensation payable to the underwriters.

The underwriters may also exercise their option to purchase up to an additional             ordinary shares from us at the initial public offering price, less underwriting discounts and commissions, for 30 days after the date of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities being offered by this prospectus, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ordinary shares to purchasers on                           , 2020.


Barclays

   

Prospectus dated                           , 2020


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PROSPECTUS SUMMARY

    1  

RISK FACTORS

    11  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    64  

USE OF PROCEEDS

    66  

DIVIDEND POLICY

    67  

CAPITALIZATION

    68  

DILUTION

    70  

SELECTED FINANCIAL DATA

    73  

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

    74  

BUSINESS

    88  

MANAGEMENT

    124  

PRINCIPAL SHAREHOLDERS

    142  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    144  

DESCRIPTION OF SHARE CAPITAL

    146  

SHARES ELIGIBLE FOR FUTURE SALE

    154  

TAXATION

    157  

UNDERWRITING

    165  

EXPENSES OF THIS OFFERING

    173  

LEGAL MATTERS

    173  

EXPERTS

    173  

ENFORCEMENT OF CIVIL LIABILITIES

    173  

WHERE YOU CAN FIND MORE INFORMATION

    174  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

    F-1  



        Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus, any amendment or supplement to this prospectus, or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we nor the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell ordinary shares and seeking offers to purchase ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of ordinary shares. Our business, financial condition, results of operations and prospects may have changed since the date on the front cover of this prospectus.

        Through and including                        , 2020 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        Neither we nor any of the underwriters have taken any action to permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

        PolyPid and BonyPid are trademarks of ours that we use in this prospectus. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus appear without the ® or ™ symbols, but those references are not intended to indicate, in any way, that we will not assert,


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to the fullest extent under applicable law, our rights, or the right of the applicable licensor to our trademark and tradenames.

        The terms "shekel," "Israeli shekel" and "NIS" refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms "dollar," "U.S. dollar" or "$" refer to United States dollars, the lawful currency of the United States of America. All references to "shares" in this prospectus refer to ordinary shares of PolyPid Ltd., par value NIS 0.80 per share.


MARKET, INDUSTRY AND OTHER DATA

        This prospectus contains estimates, projections and other information concerning our industry, our business, and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Life Science Intelligence, Inc., the primary source for our market opportunity data included in this prospectus, was commissioned by us to compile this information.

        In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause our future performance to differ materially from our assumptions and estimates. See "Special Note Regarding Forward-Looking Statements."

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PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before deciding to invest in our ordinary shares, you should read this entire prospectus carefully, including the sections of this prospectus entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus. Unless the context otherwise requires, references in this prospectus to the "company," "PolyPid," "we," "us," "our" and other similar designations refer to PolyPid Ltd. and our subsidiary, PolyPid Inc.

Company Overview

        We are a Phase 3 clinical-stage biopharmaceutical company focused on developing targeted, locally administered and prolonged-release therapeutics using our proprietary Polymer-Lipid Encapsulation matriX, or PLEX, technology. Our product candidates are designed to address diseases with high unmet medical needs by pairing our PLEX technology with drugs already approved by the U.S. Food and Drug Administration, or FDA. Our PLEX technology is designed to deliver drugs directly to precise sites in the body at predetermined release rates and over durations ranging from several days to several months. We believe that our PLEX technology and product candidates have the potential to cause a major shift in the management of a wide variety of localized medical conditions, including surgical site infections, or SSIs, cancer, inflammation and pain. Our lead product candidate, D-PLEX100, is in a potentially pivotal Phase 3 clinical trial for the prevention of sternal (bone) SSIs. The World Health Organization, or WHO, estimates that SSIs result in up to $10 billion of additional hospital costs per year in the United States alone, and a further €11 billion per year in the European Union. We believe D-PLEX100, if approved, would be a significant improvement over the current standard of care, which includes systemic administration of drugs.

        We believe our PLEX technology has the potential to address many of the limitations of the current standard of care of systemic administration of drugs, resulting in significantly improved patient outcomes and lower overall cost of treatment by enabling targeted and local delivery of medications at predetermined and customizable release rates and duration. The systemic administration of drugs can have significant potential disadvantages for the treatment of localized medical conditions in the body, including limited efficacy due to poor local drug concentration, which often requires the use of a considerably higher quantity of drugs over a prolonged period of time and can result in substantial side effects.

        D-PLEX pairs our novel, proprietary PLEX technology with doxycycline, a first line, broad spectrum and FDA-approved antibiotic. In our clinical trials to date, patients treated with D-PLEX demonstrated a reduction in SSIs compared to patients treated with the standard of care alone. Our lead product candidate, D-PLEX100, is currently in a potentially pivotal Phase 3 clinical trial for the prevention of SSIs in sternal (bone) surgeries, and, subject to feedback from the FDA, we plan to continue development of D-PLEX100 for the prevention of SSIs following abdominal (soft tissue) surgeries. Infections resulting from surgery can be fatal and create a significant public health burden despite the extensive use of systemically administered antibiotics both pre- and post-operatively and other measures taken to reduce infection risk in the intra-operative setting. SSIs occur in approximately 2% to 5% of all patients undergoing inpatient surgery worldwide. The WHO and the Centers for Disease Control and Prevention have recently labeled SSIs as a high priority unmet medical need due to the associated morbidity, mortality and economic cost burden.

        In October 2019, we reported topline data from our Phase 2 clinical trial of D-PLEX100 for the prevention of SSIs in patients undergoing abdominal surgery. Patients treated with D-PLEX100 and the standard of care had a statistically significant reduction of 57% (p=0.0136) in deep or superficial

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incisional SSIs or mortality for any reason within 30 days of surgery, which was the primary endpoint for the trial, as compared to patients who received the standard of care alone. In addition, there was a statistically significant difference (p=0.0290) in patient deaths within 60 days of surgery, with no deaths observed in the D-PLEX100 treatment arm, as compared to five deaths observed in the standard-of-care arm. In this trial, D-PLEX100 was observed to be generally well tolerated, with no confirmed drug-related serious adverse events, or SAEs, and did not increase wound healing impairment at the incision site as compared to the control arm.

        In January 2018, we reported data from our Phase 1b/2 clinical trial of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery. None of the 58 patients treated with D-PLEX100 and the standard of care had a primary sternal infection within 90 days post-surgery, which was the primary endpoint of the trial, as compared to one patient in the group treated with the standard of care alone, representing a 4.3% infection rate. In this trial, D-PLEX100 was observed to be generally well tolerated, with no drug-related SAEs and no drug-related wound healing issues at the incision site.

        In December 2019, we initiated a potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of sternal (bone) SSIs, and we enrolled the first patient in February 2020. We expect to enroll between 1,200 and 1,600 cardiac surgery patients in the trial and anticipate conducting an interim analysis in            . In February 2020, we held an end of Phase 2 meeting with the FDA to discuss our proposed pivotal clinical trial of D-PLEX100 for the prevention of abdominal (soft tissue) SSIs. Subject to feedback from the FDA, we plan to continue development on D-PLEX100 in this indication. We intend to pursue a broad label for D-PLEX100 for the prevention of SSIs, the scope of which will depend on the clinical data generated from our Phase 3 clinical trials and discussions with the FDA and the European Medicines Agency, or the EMA.

        We intend to seek approval of D-PLEX100 under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FFDCA, which provides an abbreviated pathway for marketing approval by the FDA in the United States, and will seek approval under the comparable hybrid application pathway in the European Union. We also received two Qualified Infectious Disease Product, or QIDP, designations from the FDA for D-PLEX100 for the prevention of post-abdominal surgery incisional infection and for the prevention of sternal wound infection post-cardiac surgery. The QIDP designation from the FDA confers, among other benefits, a five-year extension to any period of non-patent exclusivity awarded upon approval, such as a three-year period of exclusivity for new clinical investigations of previously approved products, which we expect for D-PLEX100, if approved. Additionally, in November 2018 we received Fast Track Designation from the FDA for D-PLEX100 for prevention of sternal wound infections post-cardiac surgery, which could potentially expedite the FDA's review of D-PLEX100 and enables early and frequent communication with the FDA as we continue to generate data from our ongoing and planned clinical trials.

        Our PLEX technology consists of a proprietary matrix of several thousand layers of chemically inactive and biocompatible polymers and lipids that physically embed the drug within the layers. A drug stored within the PLEX layers is released over time in customizable, predetermined amounts at the local site where it is administered. PLEX technology is designed to protect the embedded medication from the natural enzymes and other biochemicals in the body that would otherwise degrade or alter the drug. Over time, natural hydration in the body disintegrates the layers of PLEX, from the outer layer to the inner layers, which triggers a release of the medicine in an unmodified, active form. We believe that these characteristics may enable our PLEX product candidates to be efficacious using only a small fraction of the medicines required in systemic administration.

        We believe our PLEX platform technology may have broad therapeutic application for other localized medical conditions. Because our PLEX technology is designed to be agnostic to the nature and size of the underlying drug, we believe it has the potential to be paired with a wide variety of currently marketed drugs or product candidates in development, including small molecules, peptides,

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antibodies and other proteins, as well as nucleic acid-based APIs, to create novel therapies in a broad range of locally delivered applications. We are pursuing research and development programs for our PLEX platform in a variety of other potential indications where we have identified a targeted active pharmaceutical ingredient, or API, for use with our PLEX technology, including for the treatment of cancer, inflammation and pain. We are currently evaluating PLEXONC in preclinical studies as an intratumoral therapy for the treatment of cancer. We will consider licensing rights to our PLEX technology for use with various biologics and small molecules.

        As of February 13, 2020, we had 79 issued patents, including utility and composition of matter patents, and one allowed patent application. Additionally, we have 36 pending patent applications in the United States, the European Patent Office, Canada, Australia, China, Japan, Israel, Brazil, the Eurasian Patent Organization, India, Mexico, New Zealand, the Philippines, Singapore, South Korea and Thailand. Our issued patents expire between 2029 and 2035.

Our Pipeline


(1)
In December 2019, we initiated a potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery and, subject to feedback from the FDA, we plan to continue development of D-PLEX100 for the prevention of SSIs in patients undergoing abdominal surgery. We intend to pursue a broad label for D-PLEX100 for the prevention of SSIs, the scope of which will depend on the clinical data generated from our potentially pivotal Phase 3 clinical trials and discussions with the FDA and the EMA.

Our Strategy

        Our goal is to leverage our PLEX technology to develop and commercialize a pipeline of potentially transformative therapies for the local and prolonged delivery of drugs to address diseases with high unmet medical needs. The key elements of our strategy are as follows:

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Risks Associated With Our Business

        Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include, among others, the following:

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Corporate Information

        We are an Israeli corporation based in Israel near Tel Aviv, and were incorporated in 2008. Our principal executive offices are located at 18 Hasivim Street, P.O. Box 7126, Petach Tikva 4959376 Israel. Our telephone number is +972 (74) 719-5700. Our website address is www.polypid.com. The information contained on our website and available through our website is not incorporated by reference into and should not be considered a part of this prospectus, and the reference to our website in this prospectus is an inactive textual reference only.

Implications of Being an "Emerging Growth Company" and a Foreign Private Issuer

        As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

        We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earlier to occur of: (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (2) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (3) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC. We may choose to take advantage of some but not all of these reduced burdens, and therefore the information that we provide holders of our ordinary shares may be different than the information you might receive from other public companies in which you hold equity. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult. In addition, the information that we provide in this prospectus may be different than the information you may receive from other public companies in which you hold equity interests.

        Upon consummation of this offering, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we continue to qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

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        Both foreign private issuers and emerging growth companies are also exempt from certain more stringent executive compensation disclosure rules. Thus, even if we no longer qualify as an emerging growth company, but remain a foreign private issuer, we will continue to be exempt from the more stringent compensation disclosures required of companies that are neither an emerging growth company nor a foreign private issuer.

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THE OFFERING

Ordinary shares offered by us               ordinary shares

Underwriters' option to purchase additional ordinary shares

 

            ordinary shares

Ordinary shares to be outstanding immediately after this offering

 

            ordinary shares (or            ordinary shares if the underwriters exercise their option to purchase an additional            ordinary shares in full)

Use of proceeds

 

We estimate that the net proceeds to us from this offering will be approximately $             million, or approximately $             million if the underwriters exercise their option to purchase additional ordinary shares in full, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $             per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus.

 

 

We intend to use the net proceeds from this offering, together with our existing cash, cash equivalents and short-term deposits: (i) to continue clinical development of D-PLEX100 for the prevention of SSIs after abdominal surgery and for the prevention of sternal SSIs after cardiac surgery and (ii) for general corporate purposes, including research and development, and working capital.

 

 

See "Use of Proceeds" for more information about the intended use of proceeds from this offering.

Risk factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our ordinary shares.

Passive foreign investment company considerations

 

Based upon the expected value of our assets, including any goodwill, and the expected nature and composition of our income and assets, we may be classified as a passive foreign investment company, or a PFIC, for the taxable year ending December 31, 2020 and in future taxable years. In particular, so long as we do not generate revenue from operations for any taxable year and do not receive any research and development grants, or if such grants that we receive do not constitute gross income for purposes of the PFIC test, we likely will be classified as a PFIC for such taxable year.

Proposed Nasdaq Global Market symbol

 

"POLY"

        Unless otherwise stated, the number of ordinary shares to be outstanding after this offering is based on 13,742,118 ordinary shares outstanding as of December 31, 2019, and excludes the following:

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

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SUMMARY FINANCIAL DATA

        The following table summarizes our financial data. We have derived the following statements of operations data for the years ended December 31, 2019 and 2018 and the balance sheet data as of December 31, 2019 from our audited consolidated financial statements included elsewhere in this prospectus, which have been prepared in accordance with U.S. GAAP. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of results that may be expected for any full year. The following summary financial data should be read in conjunction with "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes included elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2019   2018  
 
  (in thousands, except share
and per share amounts)

 

Statements of operations data:

             

Research and development, net

  $ 14,083   $ 12,550  

General and administrative

    4,477     5,814  

Operating loss

    (18,560 )   (18,364 )

Financial income, net

    11,655     24,281  

Net (loss) profit

  $ (6,905 ) $ 5,917  

Basic net (loss) profit per ordinary share

  $ (22.65 ) $ 0.15  

Diluted net loss per ordinary share

  $ (22.65 ) $ (0.82 )

Weighted average number of ordinary shares used in computing basic net loss per share

    588,338     586,938  

Weighted average number of ordinary shares used in computing diluted net loss per share

    588,338     641,587  

Pro forma basic and diluted net loss per ordinary share(1)

  $ (0.97 )      

Weighted average number of ordinary shares used in computing basic and diluted net loss per share — pro forma (unaudited)

    13,741,806        

(1)
See Note 13 to our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per ordinary share.
 
  As of December 31, 2019  
 
  Actual   Pro Forma(1)   Pro Forma As
Adjusted(2)
 
 
   
  (unaudited)
   
 
 
  (in thousands)
 

Balance sheet data:

                   

Cash, cash equivalents and short-term deposits

  $ 26,609   $ 26,622   $    

Working capital(3)

    24,822     24,835        

Total assets

    33,752     33,765        

Convertible preferred shares

    106,313            

Convertible preferred shares warrant liability

    12,241            

Total shareholders' equity (deficiency)

    (87,632 )   30,935        

(1)
Pro forma balance sheet data give effect to: (i) the automatic conversion of all outstanding preferred shares into 13,097,218 ordinary shares upon the closing of this offering and (ii) the

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(2)
Pro forma as adjusted balance sheet data give additional effect to the sale of            ordinary shares in this offering at the assumed initial public offering price of $            per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(3)
Working capital is defined as total current assets minus total current liabilities.

        The pro forma information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, cash equivalents and short-term deposits, total assets and shareholders' equity (deficiency) by $            million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of ordinary shares offered by us at the assumed initial public offering price would increase (decrease) each of cash, cash equivalents and short-term deposits, total assets and shareholders' equity (deficiency) by $             million.

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RISK FACTORS

        Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information set forth in this prospectus, including the consolidated financial statements and the related notes included elsewhere in this prospectus, before purchasing our ordinary shares. If any of the following risks actually occurs, our business, financial condition, cash flows and results of operations could be negatively impacted. In that case, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment.

Risks Related to Our Financial Condition and Capital Requirements

We have a limited operating history and have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.

        We are a Phase 3 clinical-stage pharmaceutical company with a limited operating history. We have incurred operating losses each year since our inception, including operating losses of $18.6 million and $18.4 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had an accumulated deficit of $93.3 million. We have devoted substantially all of our financial resources to designing and developing our PLEX product candidates, including conducting clinical trials and preclinical studies and providing general and administrative support for these operations. We expect that our expenses and operating losses will increase for the foreseeable future as we continue clinical development of D-PLEX100 for the prevention of surgical site infections, or SSIs, and develop other product candidates using our PLEX technology. Our ability to ultimately achieve revenues and profitability is dependent upon our ability to successfully complete the development of D-PLEX100 and any future product candidates, obtain necessary regulatory approvals for and successfully manufacture, market and commercialize our products.

        We anticipate that our expenses will increase substantially based on a number of factors, including to the extent that we:

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        To date, we have financed our operations primarily through the sale of equity securities, convertible loans made by certain of our shareholders, royalty-bearing and non-royalty bearing grants that we received from the Israeli Innovation Authority, or the IIA, formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry, and non-royalty bearing grants under the European Commission's Seventh Framework Programme for Research, or the FP7. The amount of any future operating losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity or debt financings, strategic collaborations or grants. Even if we obtain regulatory approval to market one or more product candidates, our future revenue will depend upon the size of any markets in which such product candidates receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party payors for such product candidates. Further, the operating losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.

We have never generated any revenue from product sales and may never be profitable.

        We have no products approved for marketing in any jurisdiction and we have never generated any revenue from product sales. Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, D-PLEX100 or any future product candidates. We do not anticipate generating revenue from product sales for at least the next several years. Our ability to generate future revenue from product sales will depend heavily on our ability to:

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        Even if D-PLEX100 or any future product candidates are approved for marketing and sale, we anticipate incurring significant incremental costs associated with commercializing such product candidates. Our expenses could increase beyond expectations if we are required by the United States Food and Drug Administration, or the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies, domestic or foreign, or ethical committees in medical centers, to change our manufacturing processes or assays or to perform clinical, nonclinical or other types of studies in addition to those that we currently anticipate. Even if we are successful in obtaining regulatory approvals to market D-PLEX100 or any future product candidates, our revenue earned from such product candidates will be dependent in part upon the breadth of the product label, the size of the markets in the territories for which we gain regulatory approval for such products, the accepted price for such products, our ability to obtain reimbursement for such products at any price, whether we own the commercial rights for that territory in which such products have been approved and the expenses associated with manufacturing and marketing such products for such markets. Therefore, we may not generate significant revenue from the sale of such products, even if approved. Further, if we are not able to generate significant revenue from the sale of our approved products, we may be forced to curtail or cease our operations. Due to the numerous risks and uncertainties involved in product development, it is difficult to predict the timing or amount of increased expenses, or when, or if, we will be able to achieve or maintain profitability.

Even if this offering is successful, we will need to raise substantial additional funding, which may not be available on acceptable terms, or at all. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue our product development efforts or other operations.

        We are currently advancing D-PLEX100 through clinical development, as well as our preclinical and research and development programs, in an effort to obtain regulatory approval. Developing product candidates is expensive, and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance product candidates through clinical trials and regulatory approval. Furthermore, upon the closing of this offering, we expect to incur additional ongoing costs associated with operating as a public company.

        To date, we have financed our operations primarily through the sale of equity securities, convertible loans made by certain of our shareholders, royalty-bearing and non-royalty bearing grants that we received from the IIA and FP7. As of December 31, 2019, we had cash, cash equivalents and short-term deposits of $26.6 million. We will require significant additional financing in the future to fund our operations. Our future funding requirements will depend on many factors, including but not limited to:

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        Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if and when approved, may not achieve commercial success. Our product revenues, if any, will be derived from or based on sales of product candidates that may not be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

        We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all, and the terms of any financing may adversely affect the interests or rights of our shareholders. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline.

        To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish certain rights to our technologies or our product candidates, or to grant licenses on terms that are not favorable to us.

        If we are unable to obtain funding on acceptable terms and on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research, development or manufacturing programs or the commercialization of any approved product, or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.

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Risks Related to the Discovery, Development and Clinical Testing of Product Candidates

We are heavily dependent on the success of D-PLEX100, including obtaining regulatory approval to market D-PLEX100 in the United States and the European Union.

        To date, we have invested all of our efforts and financial resources to: (i) research and develop our PLEX technology, our lead product candidate, D-PLEX100, and our preclinical and research and development programs, including conducting preclinical studies and clinical trials, and providing general and administrative support for these operations; and (ii) develop and secure our intellectual property portfolio for D-PLEX100 and our PLEX technology. Our future success is dependent on our ability to successfully develop, obtain regulatory approval for and commercialize one or more of our current and future product candidates. Our product candidates' marketability is subject to significant risks associated with successfully completing current and future clinical trials, including:

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        Many of these clinical, regulatory and commercial risks are beyond our control. Accordingly, we cannot assure you that we will be able to advance D-PLEX100 and any future product candidates through clinical development, or to obtain regulatory approval of or commercialize any product candidates. If we fail to achieve these objectives or overcome the challenges presented above, we could experience significant delays or an inability to successfully commercialize D-PLEX100 and any future product candidates. Accordingly, we may not be able to generate sufficient revenues through the sale of our product candidates to enable us to continue our business.

        Additionally, approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.

Regulatory approval processes of the FDA, EMA and comparable foreign regulatory authorities are lengthy, time-consuming and unpredictable, and if we are ultimately unable to obtain regulatory approval for D-PLEX100 or any future product candidates, our business may fail.

        The research, development, testing, manufacturing, labeling, packaging, approval, promotion, advertising, storage, recordkeeping, marketing, distribution, post-approval monitoring and reporting and export and import of drug products are subject to extensive regulation by the FDA, the EMA and by foreign regulatory authorities in other countries. These regulations differ from country to country. To gain approval to market D-PLEX100 and any future product candidates, we must provide data from well-controlled clinical trials that adequately demonstrate the safety and efficacy of the product for the intended indication to the satisfaction of the FDA, EMA or other regulatory authority. We have not yet obtained regulatory approval to market any product candidate in the United States or any other country. The FDA, EMA or other regulatory agencies can delay, limit or deny approval of D-PLEX100 or any future product candidate for many reasons, including:

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        In the United States, we will be required to submit an NDA to obtain FDA approval before marketing any product candidate. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate's safety and efficacy for each desired indication. In the case of an NDA covered by Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or the FFDCA, we may rely in part on data not developed by us and for which we have not obtained a right of reference or use, including published scientific literature or the FDA's findings of safety and/or effectiveness for a previously approved drug. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product. The FDA may further inspect our manufacturing facilities to ensure that the facilities can manufacture any product candidate and any product, if and when approved, in compliance with the applicable regulatory requirements, as well as inspect our clinical trial sites to ensure that our trials are properly conducted. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA, or ultimately be approved. If the application is not accepted for review or approval, the FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will reconsider our application. If the FDA requires additional trials or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. Even if the FDA agrees that results from our ongoing Phase 3 trial evaluating D-PLEX100 for the prevention of post-cardiac surgery sternal SSIs and our planned Phase 3 trial for the prevention of SSIs following abdominal surgery are sufficient to support the submission of one or more NDAs, the FDA may determine that the data from these trials support a more narrow indication than we may propose, if the FDA were to approve such NDAs at all.

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In addition, the FDA may not consider any additional information to be complete or sufficient to support approval.

        Regulatory authorities outside of the United States, such as in the European Union, also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of a product candidate. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in a different jurisdiction. Approval processes vary among countries and can involve additional product candidate testing and validation and additional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time consuming. Foreign regulatory approval may include all of the risks associated with obtaining FDA approval. For all of these reasons, if we seek foreign regulatory approval for any product candidate, we may not obtain such approvals on a timely basis, if at all.

        Even if we eventually complete clinical testing and receive approval of any regulatory filing for a product candidate, the FDA may grant approval contingent on the performance of costly and potentially time-consuming additional post-approval clinical trials or subject to contraindications, black box warnings, restrictive surveillance or Risk Evaluation and Mitigation Strategies, or REMS. Further, the FDA, EMA or other foreign regulatory authorities may also approve a product candidate for a more limited indication or a narrower patient population than we originally requested, and these regulatory authorities may not approve the labeling that we believe is necessary or desirable for the successful commercialization of any product candidate. Following any approval for commercial sale of a product candidate, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, as well as new safety information, will be subject to additional FDA notification, or review and approval. Also, regulatory approval for any product candidate may be withdrawn. To the extent we seek regulatory approval in foreign countries, we may face challenges similar to those described above with regulatory authorities in applicable jurisdictions. Any delay in obtaining, or inability to obtain, applicable regulatory approval for D-PLEX100 or any future product candidate would delay or prevent commercialization of such product candidate and would thus negatively impact our business, results of operations and prospects.

Clinical drug development is difficult to design and implement and involves a lengthy and expensive process with uncertain outcomes.

        Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. We do not know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:

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        We may also experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketing approval or commercialize any product candidate, including:

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        We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial's data safety monitoring board, by the FDA, EMA or other regulatory agencies. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or site by the FDA, EMA or other regulatory agencies resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

        Further, conducting clinical trials in foreign countries, as we plan to do for D-PLEX100 and any future product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries.

        If we experience delays in completing any clinical trial of a product candidate or successfully obtaining regulatory approval, the commercial prospects of such product candidate may be harmed, and our ability to generate product revenues from such product candidate will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

The results of earlier studies and trials may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate the safety and efficacy of our product candidates.

        Results from preclinical studies or early-stage clinical trials are not necessarily predictive of future clinical trial results. Preclinical tests and Phase 1 and Phase 2 clinical trials are primarily designed to test safety, to study pharmacokinetics and pharmacodynamics and to understand the side effects of product candidates at various doses and schedules. Success in preclinical or animal studies and early clinical trials does not ensure that later, large-scale efficacy trials will be successful nor does it predict final results. Our product candidates may fail to show the desired safety and efficacy in clinical development despite positive results in preclinical studies or after having successfully advanced through initial clinical trials. This failure might cause us to abandon further development of D-PLEX100 for the prevention of SSIs, which is currently our most advanced product candidate.

        There is a high failure rate for product candidates proceeding through clinical trials. Many companies in the pharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many factors, including due to changes in regulatory policy during the period of our product

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candidate development. Success in preclinical testing and early clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. Frequently, product candidates that have shown promising results in early clinical trials have subsequently suffered significant setbacks in later clinical trials. Additionally, even if we are able to complete clinical trials, the results may not be sufficient to obtain regulatory approval for our product candidates.

Interim, "top-line" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

        From time to time, we may publicly disclose top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the top-line or preliminary data we previously published. As a result, top-line and preliminary data should be viewed with caution until the final data are available.

        From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock after this offering.

        Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

        If the interim, top-line or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

If the FDA does not conclude that D-PLEX100 satisfies the requirements under Section 505(b)(2) of the FFDCA, or Section 505(b)(2), or if we are unable to utilize the hybrid application pathway in the European Union, or if the requirements are not as we expect, the approval pathway for D-PLEX100 will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

        We intend to utilize the FDA's Section 505(b)(2) regulatory pathway, and the hybrid application pathway in the European Union, which is analogous to the Section 505(b)(2) pathway, to seek approval of D-PLEX100. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FFDCA. Section 505(b)(2) permits the filing of

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an NDA where at least some of the information required for approval comes from trials or studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference or use from the person by or for whom the investigations were conducted, which we believe could expedite the development program for D-PLEX100 by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval. However, while we believe that D-PLEX100 is a reformulation of an already-approved drug and, therefore, will be eligible for submission of an NDA under Section 505(b)(2), the FDA may disagree and determine that D-PLEX100 is not eligible for review under such regulatory pathway.

        If we are unable to pursue these regulatory pathways as anticipated, we may need to conduct additional preclinical experiments and clinical trials, provide additional data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for D-PLEX100, and complications and risks associated with D-PLEX100, would likely increase significantly. Moreover, inability to pursue the Section 505(b)(2) or similar regulatory pathway could result in new competitive products reaching the market more quickly than D-PLEX100 or any future product candidates, which would likely harm our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) or similar regulatory pathway, D-PLEX100 may not receive the requisite approvals for commercialization, and there is no guarantee the 505(b)(2) or similar pathway would ultimately lead to faster product development or earlier approval.

        In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA's interpretation of Section 505(b)(2). If the FDA's interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is also not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition.

        Moreover, even if D-PLEX100 or any future product candidates are approved under the Section 505(b)(2) pathway, as the case may be, the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

PLEX is a novel technology, which makes it difficult to accurately and reliably predict the time and cost of development and of subsequently obtaining regulatory approval of D-PLEX100 or any future PLEX product candidates.

        We have concentrated our efforts and product research on our PLEX drug delivery technology, and our future success depends on the successful development of this technology and products based on it. There can be no assurance that any development problems we experience in the future related to our product candidates will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may be unable to maintain and further develop sustainable, reproducible and scalable manufacturing processes, or transfer these processes to collaborators, which may prevent us from completing our clinical studies or commercializing our products on a timely or

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profitable basis, if at all. To our knowledge, no regulatory authority has granted approval to any person or entity, including us, to market and commercialize therapeutics using our novel delivery system. We may never receive approval to market and commercialize any product candidate that utilizes PLEX.

As an organization, we have not previously conducted pivotal clinical trials, and we may be unable to do so for any product candidates we may develop, including D-PLEX100.

        We will need to successfully complete pivotal clinical trials in order to obtain the approval of the FDA, EMA or other regulatory agencies to market D-PLEX100 or any future product candidates. Carrying out later-stage clinical trials and the submission of a successful NDA is a complicated process. As an organization, we have not previously conducted any later stage or pivotal clinical trials and have limited experience in preparing, submitting and prosecuting regulatory filings. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials, including our ongoing and planned Phase 3 trials, in a way that leads to marketing approval of D-PLEX100. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in commercializing D-PLEX100. See "—Risks Related to our Reliance on Third Parties—We rely on third parties to conduct certain elements of our preclinical and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates."

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with such trials.

        Identifying and qualifying patients to participate in our clinical trials is critical to our success. The timing of our clinical trials depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical trials if we encounter difficulties in enrollment. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites, clinicians' and patients' perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any drugs that may be approved for the indications we are investigating, the eligibility criteria for the trials, our ability to obtain and maintain patient consents and the risk that patients enrolled in clinical trials will drop out of the trials before completion.

        We may not be able to identify, recruit and enroll a sufficient number of patients to complete our clinical trials because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical trials, the proximity and availability of clinical trial sites for prospective patients and the patient referral practices of physicians. We may also face challenges in identifying trial sites and enrolling patients in global trials such as our ongoing and planned Phase 3 trials of D-PLEX100. If patients are unwilling to participate in our trials for any reason, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products will be delayed.

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Our product candidates and the administration of our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any.

        Undesirable side effects, including toxicology, caused by D-PLEX100 or any future product candidates, or the drugs encapsulated by such product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA, EMA or other regulatory agencies. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our clinical studies could be suspended or terminated, and the FDA, EMA or other regulatory agencies could order us to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications. Moreover, during the conduct of clinical trials, patients report changes in their health, including illnesses, injuries and discomforts, to their study doctor. Often, it is not possible to determine whether or not the product candidate being studied caused these conditions.

        Drug-related, drug-product related, formulation-related and administration-related side effects could affect patient recruitment, the ability of enrolled patients to complete the clinical trials or result in potential product liability claims, which could exceed our clinical trial insurance coverage. We do not currently have product liability insurance and do not anticipate obtaining product liability insurance until such time as we have received FDA, EMA or other comparable foreign authority marketing approval for one of our product candidates and such product is being provided to patients outside of clinical trials.

        Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

        Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

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Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize any of our product candidates, and the approval may be for a more narrow indication than we seek or be subject to other limitations or restrictions that limit its commercial profile.

        We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our current or future product candidates meet safety and efficacy endpoints in pivotal clinical trials, the regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. This may include approval of a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials and the review process.

        Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of warnings or a REMS. These regulatory authorities may require precautions or contra-indications with respect to conditions of use or they may grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of any of our product candidates. For example, the FDA may disagree that our ongoing and planned Phase 3 trials evaluating D-PLEX100 for the prevention of post-cardiac surgery sternal SSIs and for the prevention of SSIs following abdominal surgery are sufficient to support either NDA submissions seeking approval for the specific indications under evaluation in our ongoing and planned Phase 3 trials or NDA submissions seeking approval for broader indications covering the prevention of SSIs. Although we intend to pursue a broad label for D-PLEX100, to date we have not had any discussions with, nor received any feedback from, the FDA with respect to the possibility of pursuing a label broader than the prevention of post-cardiac surgery sternal SSIs or the prevention of SSIs following abdominal surgery. Even if the FDA were to agree that these trials were sufficient to support one or more NDA submissions, the FDA may determine that the data from these trials support more narrow indications than we may propose, if the FDA were to approve such NDA submissions at all. If the FDA does not agree that our ongoing and planned Phase 3 trials support the submission of an NDA for any indication, we will be required to conduct additional clinical trials to support our proposed indications. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates and materially and adversely affect our business, financial condition, results of operations and prospects.

Although D-PLEX100 has been granted Qualified Infectious Disease Product designation by the FDA for the prevention of sternal wound infection after cardiac surgery and for the prevention of post-abdominal surgery incisional infection, these designations do not guarantee a shorter FDA review process, or that D-PLEX100 will ultimately be approved by the FDA for any indication.

        Under the Generating Antibiotic Incentives Now Act, or GAIN Act, the FDA may designate a product as a "qualified infectious disease product," or QIDP. In order to receive this designation, a drug must qualify as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called "qualifying pathogen" found on a list of potentially dangerous, drug-resistant organisms established and maintained by the FDA under the GAIN Act. A sponsor must request such designation before submitting a marketing application. We requested and received QIDP designations for D-PLEX100 for the prevention of sternal wound infection after cardiac surgery and for the prevention of post-abdominal surgery incisional

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infection. We anticipate that the QIDP designations will provide, among other benefits, an overall increased level of communication with the FDA during the development process. The benefits of QIDP designation also include eligibility for priority review and an extension by an additional five years of any non-patent market exclusivity period awarded, such as a five-year exclusivity period awarded for a new molecular entity or a three-year market exclusivity period awarded to an applicant whose application relies on new clinical investigations essential to the approval. This extension is in addition to any pediatric exclusivity extension that may be awarded. GAIN Act exclusivity may not be awarded if the indication for which we obtain approval does not meet the definition of a qualified infectious disease product. However, there is limited precedent for understanding the way in which the GAIN Act will be implemented. Receipt of QIDP designation in practice may not result in a faster development process, review or approval compared to drugs considered for approval under conventional FDA procedures, and does not assure ultimate approval by the FDA or related exclusivity benefits.

Fast Track Designation from the FDA may not actually lead to a faster development or regulatory review or approval process.

        We received Fast Track Designation from the FDA for D-PLEX100 for topical use for the prevention of post-cardiac surgery sternal infections. We may seek Fast Track Designation for future product candidates.

        If a product candidate is intended for the treatment of a serious or life-threatening condition and the product candidate demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. The FDA has broad discretion whether or not to grant this designation, so even if we believe one of our product candidates is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, such as the Fast Track Designation received for D-PLEX100, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

Breakthrough therapy designation by the FDA may not lead to a faster development or regulatory review or approval process.

        We may seek a breakthrough therapy designation for one or more product candidates. A breakthrough therapy is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the BLA.

        Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a product candidate may not result in a faster development process, review or approval compared to product candidates considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide

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that the product candidate no longer meets the conditions for qualification or it may decide that the time period for FDA review or approval will not be shortened.

Even if we obtain regulatory approval for a product candidate, our products and business will remain subject to ongoing regulatory obligations and review.

        If our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including both federal and state requirements in the United States and comparable requirements outside of the United States. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

        Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, EMA or other regulatory agencies and to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product's approved label. As such, we may not promote our products for indications or uses for which they do not have FDA, EMA or other regulatory agency approval. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our product candidates in general or in specific patient subsets. An unsuccessful post-marketing trial or failure to complete such a clinical trial could result in the withdrawal of marketing approval. Furthermore, any new legislation addressing drug safety issues could result in delays in product development or commercialization or increased costs to assure compliance. Foreign regulatory authorities impose similar requirements. If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

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        Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

        The FDA's and other regulatory authorities' policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

        We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA's ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these Executive Orders will be implemented, and the extent to which they will impact the FDA's ability to exercise its regulatory authority. If these executive actions impose constraints on FDA's ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

We may be subject, directly or indirectly, to U.S. federal and state healthcare fraud and abuse laws, false claims laws, physician payment transparency laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

        Our current and future operations may be directly or indirectly through our relationships with U.S. healthcare providers, patients and other persons and entities, subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain our business or financial arrangements and relationships through which we research, market, sell and distribute our products in the United States. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

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        Many states have analogous state laws and regulations, such as state anti-kickback and false claims laws, that may apply to our business practices, including but not limited to, research, distribution, sales or marketing arrangements and claims involving healthcare items or services reimbursed by

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non-governmental third-party payors, including private insurers. In addition, certain states require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government. Certain states and local jurisdictions require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and register pharmaceutical sales representatives. Additionally, certain states also require pharmaceutical companies to file reports relating to pricing information or marketing expenditures and have laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

        Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, the ACA has strengthened these laws. For example, recent health care reform legislation, has among other things, amended the intent requirement of the U.S. Anti-Kickback statute and certain criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

        Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices, including arrangements we may have with physicians and other healthcare providers, some of whom may receive stock options as compensation for services provided, do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market and distribute our products after clearance or approval is obtained.

        From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

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        In addition, in the United States, there have been a number of legislative and regulatory proposals to change the health care system in ways that could affect our ability to sell our products profitably. The pharmaceutical industry in the United States, as an example, has been affected by the passage of the ACA, which, among other things, imposed new fees on entities that manufacture or import certain branded prescription drugs and expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs. There remain judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been enacted. The Tax Cuts and Jobs Act of 2017 includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate". In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated "Cadillac" tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.

        Further, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. There have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration's budget proposal for fiscal year 2020 contained further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a "Blueprint" to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services, or HHS, has solicited feedback on some of these measures and, at the same, has implemented others under its existing authority. For example, in May 2019, the Centers for Medicare & Medicaid Services, or CMS, issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS's policy change that was effective January 1, 2019. While some of these and other measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also become

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increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and in some cases, designed to encourage importation from other countries and bulk purchasing. In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of drug products, including our product candidates. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Our results of operations could be adversely affected by the ACA and by other health care reforms that may be enacted or adopted in the future.

We face intense competition in an environment of rapid technological change and the possibility that our competitors may develop products and drug delivery systems that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully market or commercialize our product candidates.

        The pharmaceutical industry in which we operate is intensely competitive and subject to rapid and significant technological change. We are currently aware of various existing therapies in the market and in development that may in the future compete with our product candidates, including other therapies that address the management of SSIs, as well as other drug delivery mechanisms that utilize polymer and/or lipid technology to deliver APIs at the local level. Other approaches may also emerge for the prevention or treatment of any of the indications on which we focus, and new technologies may emerge in localized drug delivery.

        We have competitors both in the United States and internationally, including major multinational pharmaceutical companies and specialty pharmaceutical companies. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors. See "Business—Competition."

Even if we obtain and maintain approval for D-PLEX100 or our other product candidates from the FDA, we may never obtain approval outside of the United States, which would limit our market opportunities and adversely affect our business.

        Approval of a product candidate in the United States by the FDA does not ensure approval of such product candidate by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain approval from the FDA or other regulatory authorities may negatively impact our ability to obtain approval in other foreign countries. Sales of D-PLEX100 or our other product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval. Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries also must approve the manufacturing and marketing of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and more onerous than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our product candidates, if approved, is also subject to approval.

        We intend to submit a marketing authorization application to the EMA for approval of D-PLEX100 in the European Union, but obtaining such approval from the European Commission following the

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opinion of the EMA is a lengthy and expensive process. Even if a product candidate is approved, the applicable regulatory agency may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming additional clinical trials or reporting as conditions of approval. Regulatory authorities in countries outside of the United States and the European Union also have requirements for approval of product candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our product candidates in certain countries.

        Further, clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Also, regulatory approval for a product candidate may be withdrawn. If we fail to comply with the regulatory requirements, our target market will be reduced and our ability to realize the full market potential of D-PLEX100 or our other product candidates will be harmed and our business, financial condition, results of operations and prospects will be adversely affected.

The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.

        Prescription drugs may be promoted only for the approved indications in accordance with the approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label may be subject to significant liability. If the FDA does not agree that our data support the submission of an NDA seeking approval for the prevention of SSIs generally or SSIs in bone and soft tissue, we intend to seek marketing approval for D-PLEX100 for the prevention of sternal SSIs after cardiac surgery and the prevention of SSIs in patients undergoing abdominal surgery. We will train our marketing and sales personnel to not promote our products, if approved, for any off-label uses. We cannot, however, prevent a physician from using our products off-label, when in the physician's independent professional medical judgment he or she deems it appropriate. For example, if we obtain approval of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery and/or the prevention of SSIs in patients undergoing abdominal surgery, physicians may nevertheless decide to use D-PLEX100 in an attempt to prevent infections in connection with other types of surgeries, and there may be increased risk of injury to patients if physicians attempt to use our products for these uses for which they are not approved. While the FDA does not regulate the behavior of physicians in their choice of treatments, the FDA does restrict manufacturer's communications on the subject of off-label use of their products. Furthermore, the use of our products for indications other than those approved by the FDA or any foreign regulatory body may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

        If the FDA, EMA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs and the curtailment of our operations.

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Risks Related to our Reliance on Third Parties

We rely on third parties to conduct certain elements of our preclinical studies and clinical trials and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates.

        We have relied upon, and plan to continue to rely upon, third-party vendors, including CROs, to monitor and manage data for our ongoing preclinical studies and clinical trials. If our CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. We rely on these CROs for execution of our preclinical studies and clinical trials, and we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the vendors and CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors are required to comply with good clinical practice, cGMP, the Helsinki Declaration, the International Conference on Harmonization Guideline for Good Clinical Practice, applicable European Commission Directives on Clinical Trials, laws and regulations applicable to clinical trials conducted in other territories, and good laboratory practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, including GCP and cGMP regulations, the clinical data generated in our clinical studies may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

        If any of our relationships with these third-party CROs or vendors terminate, we may not be able to enter into arrangements with alternative CROs or vendors or do so on commercially reasonable terms. In addition, our CROs are not our employees, and, except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated, which could adversely affect our results of operations and the commercial prospects for our product candidates, increase our costs and delay our ability to generate revenue.

        Replacing or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, we may encounter similar challenges or delays in the future, which could have a material adverse impact on our business, financial condition and prospects.

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Independent clinical investigators and CROs that we engage to conduct our clinical trials may not devote sufficient time or attention to our clinical trials or be able to repeat their past success.

        We expect to continue to depend on third parties, including independent clinical investigators and CROs, to conduct our clinical trials. CROs may also assist us in the collection and analysis of data. There is a limited number of third-party service providers and vendors that specialize or have the expertise required to achieve our business objectives. Identifying, qualifying and managing performance of third-party service providers can be difficult, time consuming and cause delays in our development programs.

        These investigators and CROs will not be our employees and we will not be able to control, other than through contract, the amount of resources, including time, which they devote to our product candidates and clinical trials. If independent investigators or CROs fail to devote sufficient resources to the development of our product candidates, or if their performance is substandard, it may delay or compromise the prospects for approval and commercialization of any product candidates that we develop.

        Investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or other regulatory authorities. The FDA or other regulatory authorities may conclude that a financial relationship between us and an investigator has created a conflict of interest or otherwise affected interpretation of the trial. The FDA or other regulatory authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval or rejection of our marketing applications by the FDA or other regulatory authorities, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates.

        In addition, the use of third-party service providers requires us to disclose our proprietary information to these parties, which could increase the risk that this information will be misappropriated. Further, the FDA and other regulatory authorities require that we comply with standards, commonly referred to as GCP, for conducting, recording and reporting clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial subjects are protected. Failure of clinical investigators or CROs to meet their obligations to us or comply with GCP procedures could adversely affect the clinical development of our product candidates and harm our business.

We rely on third parties to manufacture the raw materials, including the active pharmaceutical ingredients that we use to create our product candidates. Our business could be harmed if existing and prospective third parties fail to provide us with sufficient quantities of these materials and products or fail to do so at acceptable quality levels or prices.

        We rely on third party suppliers for certain raw materials necessary to manufacture our product candidates for our preclinical studies and clinical trials. Some of these raw materials are difficult to source. Because there are a limited number of suppliers for these raw materials, we may need to engage alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials, and if approved, ultimately for commercial sale. In several cases, we rely on a sole provider, and there may be a need to identify additional providers in the future. We do not have any control over the availability of raw materials. If we or our manufacturers are unable to purchase these raw materials on acceptable terms, at sufficient quality levels, or in adequate quantities, if at all, the development and commercialization of our product candidates or any future product candidates, would be delayed or there would be a shortage in

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supply, which would impair our ability to meet our development objectives for our product candidates or generate revenues from the sale of any approved products.

        Even following our establishment of our own cGMP-compliant manufacturing capabilities, we intend to continue to rely on third party suppliers for these raw materials, which will continue to expose us to manufacturing risks including:

        Certain of our raw material suppliers will be required to become cGMP-compliant and establish a drug master file for the applicable ingredient before we can submit our NDA for D-PLEX100. If these suppliers do not successfully carry out their contractual duties or manufacture our raw materials in accordance with regulatory requirements, we will not be able to submit our NDA as planned or complete, or may be delayed in completing, the clinical trials required for approval of D-PLEX100. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense prior to the approval of D-PLEX100 and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

        Additionally, we have not yet entered into binding agreements with certain third-party manufacturers to produce the raw materials and products that we use to manufacture our product candidates. Although we intend to rely on third-party manufacturers for the raw materials and products to support the manufacturing of our product candidates for commercialization, we have not yet entered into agreements with certain manufacturers. We may be unable to negotiate binding agreements with the manufacturers to support our commercialization activities at commercially reasonable terms.

Although we have established our own manufacturing facility, we may utilize third parties as needed to conduct our product manufacturing. Therefore, we are subject to the risk that this third party may not perform satisfactorily.

        Although we expect that our manufacturing facility will be the primary source of clinical and commercial supply for D-PLEX100 for at least the first three years following a commercial launch, if approved, we intend to evaluate potential third-party manufacturing capabilities if necessary to meet further commercial demand. In the event that we engage third-party manufacturers and they do not successfully carry out their contractual duties, meet expected deadlines or manufacture D-PLEX100 in accordance with regulatory requirements or if there are disagreements between us and any third-party manufacturer, we may be delayed in producing sufficient clinical and commercial supply of D-PLEX100 or other product candidates. In such instances, we may need to locate an appropriate replacement third-party relationship, which may not be readily available or on acceptable terms, which would cause additional delay or increased expense and would thereby have a material adverse effect on our business, financial condition, results of operations and prospects.

        The manufacture of pharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. We and our contract manufacturers must comply with cGMP requirements. In the event that our contract manufacturers fail to meet cGMP requirements, we may be delayed or unable to supply our products. In addition, manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up and validating initial production and contamination controls.

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These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination.

        We also rely on third party manufacturers to conduct quality control reviews of and sterilization services for our product candidates or any approved products. We cannot assure you that any stability, sterility or other issues relating to the manufacture of any of our product candidates or any approved products will not occur in the future.

        Additionally, our third-party manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our third-party manufacturers were to encounter any of these difficulties, our ability to provide any products to patients, once approved, would be jeopardized. Any adverse developments affecting commercial manufacturing may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the supply of an approved product. We may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives. Accordingly, failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay and could have a material adverse effect on our business, prospects, financial condition and results of operations. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of product manufacture.

Our reliance on third parties requires us to share our trade secrets and intellectual property, which increases the possibility that a competitor will discover them or that our trade secrets and intellectual property will be misappropriated or disclosed.

        Because we rely on third parties to provide us with the materials that we use to develop and, if appropriate in the future, manufacture our product candidates or approved products, we may, at times, share trade secrets and intellectual property with such third parties. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements, or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets and intellectual property. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.

        Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our trade secrets by third parties. A competitor's discovery of our trade secrets would impair our competitive position and have an adverse impact on our business, financial condition, results of operations and prospects.

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Risks Related to Our Intellectual Property

If we are unable to obtain and maintain effective patent rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.

        We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product candidates. Our success depends in large part on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology and product candidates.

        We have sought to protect our proprietary position by filing patent applications in the United States and in other countries, with respect to our novel technologies and product candidates, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

        As of February 13, 2019, our portfolio of owned patents and patent applications consists of seven families that protect our technology, including 79 issued patents, one allowed patent application and 36 pending patent applications in jurisdictions in the United States, the European Patent Office, Canada, Australia, China, Japan, Israel, Brazil, the Eurasian Patent Organization, India, Mexico, New Zealand, the Philippines, Singapore, South Korea and Thailand. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.

        Further, the patent position of pharmaceutical companies generally is highly uncertain and involves complex legal and factual questions for which legal principles remain unsolved. This renders the patent prosecution process particularly expensive and time-consuming. There is no assurance that all potentially relevant prior art relating to our patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and any future patents may not adequately protect our intellectual property, provide exclusivity for our product candidates, or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.

        If we cannot obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively, and our business and results of operations would be harmed.

We may not have sufficient patent lifespan to effectively protect our products and business.

        Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after its priority date. Although various extensions may be available, including pursuant to the QIDP designations we have received for D-PLEX100, the life of a patent, and the protection it affords, is limited. Even if any of our patent applications mature into issued patents, if we do not have

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sufficient patent terms or regulatory exclusivity to protect our products, our business and results of operations will be adversely affected.

Patent policy and rule changes could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.

        Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and licensed patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming the other requirements for patentability are met, for United States patent applications filed prior to March 15, 2013, the first to conceive a claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent. After March 15, 2013, under the Leahy-Smith America Invents Act, or the AIA, enacted on September 16, 2011, the United States has moved to a first to file system. The AIA also includes a number of significant changes that affect the way patent applications are prosecuted and may also affect patent litigation. The effects of these changes are currently unclear as the United States Patent and Trademark Office, or the USPTO, must still implement various regulations, the courts have yet to address many of these provisions and the applicability of the AIA and new regulations on specific patents discussed herein have not been determined and would need to be reviewed. In general, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could have a material adverse effect on our business and financial condition.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

        Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. If other entities use trademarks similar to ours in different jurisdictions, or have senior rights to ours, it could interfere with our use of our current trademarks throughout the world.

If we are unable to maintain effective proprietary rights for our product candidates or any future product candidates, we may not be able to compete effectively in our markets.

        In addition to the protection afforded by any patents that have been or may be granted, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining the physical security of our premises and physical and electronic security of

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our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently discovered by competitors.

        Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets and intellectual property could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the trade secret.

Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from third parties in order to develop or market our product candidate. Such litigation or licenses could be costly or not available on commercially reasonable terms.

        It is inherently difficult to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may suffer if patents issued to third parties or other third party intellectual property rights cover our product candidates or elements thereof, or our manufacturing or uses relevant to our development plans. In such cases, we may not be in a position to develop or commercialize products or our product candidates unless we successfully pursue litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that if they result in issued patents, could be alleged to be infringed by our product candidates. If such an infringement claim should be brought and be successful, we may be required to pay substantial damages, be forced to abandon our product candidates or seek a license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.

        It is also possible that we have failed to identify relevant third party patents or applications. For example, U.S. applications filed before November 29, 2000 and certain U.S. applications filed after that date that will not be filed outside the U.S. remain confidential until patents issue. Patent applications in the U.S. and elsewhere are published approximately 18 months after the earliest filing to which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our product candidates or platform technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our platform technologies, our product candidates or the use of our product candidates. Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in pursuing the development of and/or marketing of our product candidates. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our product candidates that are held to be infringing. We might, if possible, also be forced to redesign our product candidates so that we no longer infringe the

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third party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

        Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There have been many lawsuits and other proceedings involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and reexamination proceedings before the USPTO and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the pharmaceutical industry expands and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.

        Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture, or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any materials formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidates unless we obtain a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable.

        Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture, or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all.

        Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.

We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

        Because our programs may require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license, or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and the rights to these formulations may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes, or other third-party intellectual property rights from third parties that we identify as necessary for our product candidates. The licensing and

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acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.

        For example, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution's rights in technology resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

        In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, we may have to abandon development of that program and our business and financial condition could suffer.

We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

        Competitors may infringe our intellectual property or that of our licensors that we may acquire in the future. If we or a future licensing partner were to initiate legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Under the AIA, the validity of U.S. patents may also be challenged in post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.

        Interference proceedings provoked by third parties or brought by us or declared by the USPTO may be necessary to determine the priority of inventions with respect to our patent or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.

        Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our ordinary shares.

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We may be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

        We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants, or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employees' former employers or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

We may be subject to claims challenging the inventorship of our intellectual property.

        We may be subject to claims that former employees, collaborators or other third parties have an interest in or right to compensation with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. To the extent that our employees have not effectively waived the right to compensation with respect to inventions that they helped create, they may be able to assert claims for compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims are successful which in turn could impact our future profitability.

Changes in United States and international patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

        Our success is heavily dependent on intellectual property. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and enforcing these patents is costly, time consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent United States Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on future actions by the United States Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain patents or to enforce patents that we might obtain in the future.

We may not be able to protect our intellectual property rights throughout the world.

        Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some

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foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.

        Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own product candidates and may also export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product candidates. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products or methods of treatment, which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Risks Related to Our Business Operations

Our future success depends in part on our ability to retain our senior management team and to attract, retain and motivate other qualified personnel.

        We are highly dependent on the members of our senior management team. The loss of their services without a proper replacement may adversely impact the achievement of our objectives. Our employees may leave our employment at any time. Recruiting and retaining other qualified employees, consultants and advisors for our business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled personnel in our industry, which is likely to continue for the foreseeable future. As a result, competition for skilled personnel is intense, and the turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In addition, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel. The inability to recruit and retain qualified personnel, or the loss of the services of any members of our senior management team without proper replacement, may impede the progress of our research, development and commercialization objectives.

We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.

        Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth. As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and legal personnel. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may

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divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.

Due to our limited resources and access to capital, we must, and have in the past decided to, prioritize development of certain product candidates over other potential candidates. These decisions may prove to have been wrong and may adversely affect our revenues.

        Because we have limited resources and access to capital to fund our operations, we must decide which product candidates to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, collaboration, management and financial resources toward particular product candidates may not lead to the development of viable commercial products and may divert resources away from better opportunities. Similarly, our decisions to delay, terminate or collaborate with third parties in respect of certain product development programs may also prove not to be optimal and could cause us to miss valuable opportunities. If we make incorrect determinations regarding the market potential of our product candidates or misread trends in the pharmaceutical industry, in particular for our lead product candidate, our business, financial condition and results of operations could be materially adversely affected.

We may not be successful in our efforts to identify, discover or license additional product candidates.

        Although a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of D-PLEX100, the success of our business also depends upon our ability to identify, discover or license additional product candidates. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development for a number of reasons, including: lack of financial or personnel resources to acquire or discover additional product candidates; new product candidates may not succeed in preclinical or clinical testing, or may be shown to have harmful side effects or may have other characteristics that may make them unmarketable or unlikely to receive marketing approval; our competitors may develop alternatives that render our product candidates obsolete or less attractive; the market for a product candidate may change during our development program so that such product may become unprofitable to continue to develop; new product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all; and new product candidates may not be accepted as safe and effective by patients, the medical community, or third-party payors.

        We may be forced to abandon our development efforts for a program or programs that are unsuccessful, or we may not be able to identify, license, or discover additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. Further, research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

European data collection is governed by restrictive regulations governing the collection, use, processing and cross-border transfer of personal information.

        We may collect, process, use or transfer personal information from individuals located in the European Union in connection with our business, including in connection with conducting clinical trials in the European Union. Additionally, we intend to commercialize D-PLEX100, and any of our product candidates that receive marketing approval, in the European Union. The collection and use of personal health data in the European Union is governed by the provisions of the General Data Protection Regulation ((EU) 2016/679), or the GDPR, along with other European Union and country-specific laws and regulations. The United Kingdom and Switzerland have also adopted data protection laws and

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regulations. These legislative acts (together with regulations and guidelines) impose requirements relating to having legal bases for processing personal information relating to identifiable individuals and transferring such information outside of the EEA, including to the United States, providing details to those individuals regarding the processing of their personal information, keeping personal information secure, having data processing agreements with third parties who process personal information, responding to individuals' requests to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact assessments and record-keeping. The GDPR imposes additional responsibilities and liabilities in relation to personal data that we process and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. Failure to comply with the requirements of the GDPR and related national data protection laws of the member states of the European Union may result in substantial fines, other administrative penalties and civil claims being brought against us, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

Our business and operations would suffer in the event of computer system failures, cyber attacks or a deficiency in our cybersecurity.

        Despite the implementation of security measures intended to secure our data against impermissible access and to preserve the integrity and confidentiality of our data, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, including under data privacy laws such as the GDPR, damage to our reputation, and the further development of our drug candidates could be delayed.

We will incur significant increased costs as a result of operating as a public company in the United States, and our management will be required to devote substantial time to new compliance initiatives.

        As a public company whose ordinary shares are listed in the United States, we will be subject to an extensive regulatory regime, requiring us, among other things, to maintain various internal controls and facilities and to prepare and file periodic and current reports and statements, including reports on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. Complying with these requirements will be costly and time consuming. We will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In the event that we are unable to demonstrate compliance with our obligations as a public company in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or The Nasdaq Global Market, and investors may lose confidence in our operating results and the price of our ordinary shares could decline.

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        Our independent registered public accounting firm was not engaged to perform an audit of our internal control over financial reporting, and as long as we remain an emerging growth company, as such term is defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we will be exempt from the requirement to have an independent registered public accounting firm perform such audit. Accordingly, no such opinion was expressed or will be expressed any during any such period. Once we cease to qualify as an emerging growth company our independent registered public accounting firm will be required to attest to our management's annual assessment of the effectiveness of our internal controls over financial reporting, which will entail additional costs and expenses.

        Furthermore, we are only in the early stages of determining formally whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. These controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States or Israel.

        Other than our headquarters and other operations which are located in Israel (as further described below), we currently have limited international operations, but our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product candidates. We plan to retain sales representatives and third party distributors and conduct physician, infectious disease specialist, hospital pharmacist and patient association outreach activities, as well as clinical trials, outside of the United States, European Union and Israel. Doing business internationally involves a number of risks, including but not limited to:

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        Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

The United Kingdom's withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business, which could reduce the price of our ordinary shares.

        Following the result of a referendum in 2016, the United Kingdom left the European Union on January 31, 2020, commonly referred to as Brexit. Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom will be subject to a transition period until December 31, 2020, or the Transition Period, during which European Union rules will continue to apply. Negotiations between the United Kingdom and the European Union are expected to continue in relation to the customs and trading relationship between the United Kingdom and the European Union following the expiry of the Transition Period.

        Since a significant proportion of the regulatory framework in the United Kingdom applicable to our business and our product candidates is derived from European Union directives and regulations, Brexit, following the Transition Period, could materially impact the regulatory regime with respect to the development, manufacture, importation, approval and commercialization of our product candidates in the United Kingdom or the European Union. For example, as a result of the uncertainty surrounding Brexit, the EMA relocated to Amsterdam from London. Following the Transition Period, the United Kingdom will no longer be covered by the centralized procedures for obtaining European Union-wide marketing and manufacturing authorizations from the EMA and, unless a specific agreement is entered into, a separate process for authorization of drug products, including D-PLEX100 and any future product candidates, will be required in the United Kingdom, the potential process for which is currently unclear. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. In addition, we may be required to pay taxes or duties or be subjected to other hurdles in connection with the importation of our product candidates into the European Union, or we may incur expenses in establishing a manufacturing facility in the European Union in order to circumvent such hurdles. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom or the European Union for our product candidates, or incur significant additional expenses to operate our business, which could significantly and materially harm or delay our ability to generate revenues or achieve profitability of our business. Any further changes in international trade, tariff and import/export regulations as a result of Brexit or otherwise may impose unexpected duty costs or other non-tariff barriers on us. These developments, or the perception that any of them could occur, may significantly reduce global trade and, in particular, trade between the impacted nations and the United Kingdom. It is also possible that Brexit may negatively affect our ability to attract and retain employees, particularly those from the European Union.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

        Our research, development and manufacturing activities and our third party manufacturers' and suppliers' activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and

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disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers' facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages, such liability could exceed our resources, and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.

Our employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

        We are exposed to the risk of fraud or other misconduct by our employees and independent contractors. Misconduct by these parties could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee and independent contractor misconduct could also involve the improper use of information obtained in the course of clinical trials, including individually identifiable information, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of product candidates, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.

Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees.

        We generally enter into non-competition agreements with our employees and certain key consultants. These agreements prohibit our employees and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us.

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        For example, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the secrecy of a company's confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished.

Risks Related to Commercialization of Our Product Candidates

We have limited manufacturing experience and could experience production problems that result in delays in our development or commercialization programs or otherwise adversely affect our business.

        We have limited experience manufacturing D-PLEX100. Although we have established our own manufacturing facility to support current and future clinical trials, and have received regulatory approvals for clinical manufacturing, and an initial commercial launch, we may be unable to produce commercial materials or meet demand for D-PLEX100 if we are unable to receive or maintain commercial regulatory approvals for our facility. Any such failure could delay or prevent our development of D-PLEX100 and would have a material adverse effect on our business, financial condition and results of operations.

        The manufacturing process we use to produce D-PLEX100 has not been validated for commercial use. Although we have increased the scale of our manufacturing process in order to produce sufficient quantities of D-PLEX100 for our ongoing and planned clinical trials and at least the first three years following a commercial launch, if D-PLEX100 is approved, in the future we will need to increase the scale of our manufacturing process either at our facility or at third-party manufacturers, or both. We may not be successful in producing sufficient quantities of D-PLEX100, due to several factors, including equipment malfunctions, facility contamination, technical process challenges, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers. Problems with the manufacturing process, even minor deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls, product liability claims or insufficient inventory. We may encounter problems achieving adequate quantities and quality of clinical- and commercial-grade materials that meet FDA, EMA or other applicable standards or specifications with consistent and acceptable production yields and costs.

        Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable changes in the product that could result in lot failures or product recalls. There is no assurance we will not experience such failures at our own manufacturing facility or that of a third party in the future. Lot failures or product recalls could cause us to delay product launches or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

        We also may encounter problems hiring and retaining the experienced specialist scientific, quality control and manufacturing personnel needed to operate our manufacturing process, which could result in delays in our production or difficulties in maintaining compliance with applicable regulatory requirements.

        Any problems in our manufacturing process or facilities could make us a less attractive collaborator for potential partners, including biopharmaceutical companies, which could limit our access to additional attractive development programs. Problems in our manufacturing process or facilities also could restrict our ability to meet market demand for D-PLEX100 or future product candidates.

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If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

        Our projections of the number of people who have the potential to benefit from treatment with our product candidates are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, surveys of clinics or market research, and may prove to be incorrect. Our target patient population may be lower than expected, may not be otherwise amenable to treatment with our product candidate or patients may become increasingly difficult to identify and access, all of which would adversely affect our business, financial condition, results of operations and prospects. In addition, medical advances may reduce our target markets. For example, new processes and advances in oral antibiotic medications or new operative procedures may limit the need for localized delivery systems like our product candidates. Further, advances in treatments in the fields in which we are conducting research programs that reduce side effects and have better deliverability to target organs may limit the market for our future product candidates. If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

We currently have no marketing and sales organization. If we are unable to establish sales and marketing capabilities, or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate any product revenue.

        We have no experience selling and marketing our product candidates, and we currently have no marketing or sales organization. To successfully commercialize any product candidates that may result from our development programs, we will need to develop these capabilities, either on our own or with others. If our product candidates receive regulatory approval, we intend to establish a sales and marketing organization independently or by utilizing experienced third parties with technical expertise and supporting distribution capabilities to commercialize our product candidates in major markets, all of which will be expensive, difficult and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact our ability to commercialize our product candidates.

        Further, given our lack of prior experience in marketing and selling pharmaceutical products, our initial estimate of the size of the required sales force may be materially more or less than the size of the sales force actually required to effectively commercialize our product candidates. As such, we may be required to hire sales representatives and third party distributors to adequately support the commercialization of our product candidates, or we may incur excess costs if we hire more sales representatives than necessary. With respect to certain geographical markets, we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable to enter into such agreements on favorable terms, if at all. We also may enter into collaborations with large pharmaceutical companies to develop and commercialize product candidates. If our future collaborators do not commit sufficient resources to develop and commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We may compete with companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

        Our efforts to educate the medical community, including physicians, hospital pharmacists and third-party payors on the benefits of our product candidates may require significant resources and may never be successful. If any of our product candidates are approved but fail to achieve market acceptance among physicians, patients or third-party payors, we will not be able to generate significant revenues from such product, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

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We are subject to significant regulatory oversight with respect to manufacturing our product candidates. Delays in establishing and obtaining regulatory approval of our manufacturing process and facility or disruptions in our manufacturing process may delay or disrupt our product development and commercialization efforts.

        The preparation of drug products for clinical trials or commercial sale is subject to extensive regulation. Before we can begin to commercially manufacture D-PLEX100 or any product candidate, whether in a third-party facility or in our own facility, we must obtain regulatory approvals from the Israeli Ministry of Health, or MOH, the FDA and similar regulatory agencies, as applicable for our manufacturing process and facility. A manufacturing authorization must also be obtained from the appropriate regulatory authorities in the European Union and worldwide. In addition, we must pass a pre-approval inspection of our manufacturing facility by the FDA before D-PLEX100 or any product candidate can obtain marketing approval. In order to obtain approval, we will need to ensure that all of our processes, methods and equipment are compliant with cGMP, and perform extensive audits of vendors, contract laboratories and suppliers. If any of our vendors, contract laboratories or suppliers is found to be out of compliance with cGMP, we may experience delays or disruptions in manufacturing while we work with these third parties to remedy the violation or while we work to identify suitable replacement vendors. For example, in the past, a cGMP audit by the MOH of the manufacturing process in the facility of our contract manufacturer for D-PLEX100 resulted in certain critical observations, which have since been resolved. There can be no guarantee, however, that future inspections by regulatory authorities of our manufacturing facilities or those of our contract manufacturers will result in MOH's agreement that these critical observations have been resolved or that similar inspectional observations will not be identified. If we do not demonstrate to the satisfaction of the applicable regulator that our manufacturing facilities, or those of our contract manufacturers, are in compliance with applicable requirements, we may be materially delayed in the development of our product candidates, which would materially harm our business. The cGMP requirements govern quality control of the manufacturing process and documentation policies and procedures. In complying with cGMP, we will be obligated to expend time, money and effort in production, record keeping and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we would be subject to possible regulatory action and may not be permitted to sell any product candidate that we may develop.

        Our failure to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of any approved products and our product candidates.

        Operating our own manufacturing facility will require additional investment, will be time-consuming and may be subject to delays, including because of shortage of labor or compliance with regulatory requirements. In addition, operating a manufacturing facility may cost more than we currently anticipate. Delays or problems in the build out of our manufacturing facility may adversely impact our ability to provide supply for the development and commercialization of D-PLEX100 as well as our financial condition.

If we receive marketing approval for our product candidates, sales will be limited unless the product achieves broad market acceptance by physicians, patients, third-party payors, hospital pharmacists, infectious disease specialists and others in the medical community.

        The commercial success of our product candidates will depend upon the acceptance of the product by the medical community, including physicians, patients, healthcare payors, hospital pharmacists and

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infectious disease specialists. The degree of market acceptance of any approved product will depend on a number of factors, including:

        If our product candidates are approved but do not achieve an adequate level of acceptance by physicians, patients, healthcare payors, hospital pharmacists and infectious disease specialists, we may not generate sufficient revenue from the product, and we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.

It may be difficult for us to profitably sell our product candidates if coverage and reimbursement for these products is limited by government authorities and/or third-party payor policies.

        In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of our product candidates, if approved, will depend on, in part, the extent to which the procedures utilizing our product candidates, performed by health care providers, will be covered by third party payors, such as government health care programs, commercial insurance and managed care organizations. Our product candidates will be purchased or provided by health care providers for utilization in certain surgical procedures. In the event health care providers and patients accept our product candidates as medically useful, cost effective and safe, there is uncertainty regarding whether our product candidates will be directly reimbursed, reimbursed through a bundled payment or if the product candidates will be included in another type of value-based reimbursement program. Third party payors determine the extent to which new products will be covered as a benefit under their plans and the level of reimbursement for any covered product or procedure which may utilize a covered product. It is difficult to predict at this time what third party payors will decide with respect to the coverage and reimbursement for our product candidates.

        A primary trend in the U.S. healthcare industry and elsewhere has been cost containment, including price controls, restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Third party payors decide which products and procedures

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they will pay for and establish reimbursement and co-payment levels. Government and other third-party payors are increasingly challenging the prices charged for health care products and procedures, examining the cost effectiveness of procedures, and the products used in such procedures, in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement. We cannot be sure that coverage will be available for our product candidates, if approved, or, if coverage is available, the level of direct or indirect reimbursement.

        We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products. Further, the adoption and implementation of any future governmental cost containment or other health reform initiative may result in additional downward pressure on the price that we may receive for any approved product.

        Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor's determination that use of a product is:

        There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement are typically made by CMS, an agency within HHS, as CMS decides whether and to what extent products, and the procedures that utilize such products, will be covered and reimbursed under Medicare. Private payors may follow CMS, but have their own methods and approval processes for determining reimbursement for new products, and the procedures that utilize such products. It is difficult to predict what CMS as well as other payors will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.

        Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. Additionally, we may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product candidates, or achieve profitably at all, even if approved.

Our business entails a significant risk of clinical trial and/or product liability and our ability to obtain sufficient insurance coverage could have a material effect on our business, financial condition, results of operations or prospects.

        Our business exposes us to significant clinical trial and/or product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Clinical trial and/or product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, product liability claims could result in an FDA investigation of the safety and

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effectiveness of our products, our manufacturing processes and facilities or our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management's time and our resources, substantial monetary awards to trial participants or patients and a decline in our company valuation. While we currently have clinical trial liability insurance, we do not have product liability insurance and do not anticipate obtaining product liability insurance until such time as we have received FDA or other comparable foreign authority approval for a product and there is a product that is being provided to patients outside of clinical trials. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance are becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by clinical trial and product liability claims that could have a material adverse effect on our business.

Risks Related to this Offering and Ownership of Our Ordinary Shares

An active trading market for our ordinary shares may not develop.

        Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price for our ordinary shares will be determined through negotiations with the underwriters. Although we have applied to have our ordinary shares listed on The Nasdaq Global Market, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our ordinary shares does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares, or at all.

The market price of our ordinary shares may be highly volatile, which could result in substantial losses for purchasers of our ordinary shares in this offering.

        The trading price of our ordinary shares is likely to be volatile. The stock market in general, and the market for pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your ordinary shares at or above the initial public offering price. The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our ordinary shares:

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        If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our ordinary shares could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

        In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation often has been instituted against that company. Such litigation, if instituted against us, could cause us to incur substantial costs to defend such claims and divert management's attention and resources, which could seriously harm our business, financial condition, results of operations and prospects.

If you purchase our ordinary shares in this offering, you will incur immediate and substantial dilution in the book value of your shares.

        The initial public offering price of our ordinary shares will be substantially higher than the net tangible book value per share of our ordinary shares. Therefore, if you purchase ordinary shares in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent outstanding options and warrants are exercised, you will incur further dilution. Based on an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $            per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering at the assumed initial public offering price. In addition, purchasers of ordinary shares in this offering will have contributed approximately             % of the aggregate price paid by all purchasers of our ordinary shares but will own only approximately            % of our ordinary shares outstanding after this offering. See "Dilution."

Sales of a substantial number of shares of our ordinary shares in the public market by our existing shareholders could cause our share price to fall.

        Sales of a substantial number of our ordinary shares in the public market, or the perception that these sales might occur, could depress the market price of our ordinary shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our ordinary shares. Substantially all of the shares owned by our existing shareholders and option and warrant holders are subject to lock-up agreements with the underwriters of this offering that restrict the shareholders' ability to transfer our ordinary shares for at least six months from the date of this prospectus. Substantially all of our outstanding shares will become eligible for unrestricted sale upon expiration of the lockup period, as described in the sections of this prospectus entitled "Shares Eligible for Future Sale" and "Underwriting." In addition, shares issued or issuable upon exercise of options and warrants vested as of the expiration of the lock-up period will be eligible for sale at that time. Sales of shares by these shareholders could have a material adverse effect on the trading price of our ordinary shares. Moreover, after this offering, holders of an aggregate of approximately 16,834,161 ordinary shares will have rights, subject to some conditions, to require us to file registration statements covering their

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shares or to include their shares in registration statements that we may file for ourselves or other shareholders. We intend to register all ordinary shares that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and the lock-up agreements described in the "Underwriting" section of this prospectus.

Our management will have broad discretion in the use of the net proceeds from this offering and may allocate the net proceeds from this offering in ways that you and other shareholders may not approve.

        Our management will have broad discretion in the use of the net proceeds from this offering, including for any of the purposes described in the section entitled "Use of Proceeds," and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. The failure of our management to use these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities and depositary institutions. These investments may not yield a favorable return to our shareholders.

Our executive officers, directors and principal shareholders will maintain the ability to exert significant control over matters submitted to our shareholders for approval.

        Assuming the sale by us of            ordinary shares in this offering, our executive officers, directors and principal shareholders who owned more than 5% of our outstanding ordinary shares before this offering will, in the aggregate, beneficially own shares representing approximately            % of our share capital. As a result, if these shareholders were to act together, they would be able to control all matters submitted to our shareholders for approval, as well as our management and affairs. For example, these persons, if they act together, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other shareholders may desire or result in management of our company that our public shareholders disagree with.

There is a substantial risk that we are or will become classified as a passive foreign investment company. If we are or become classified as a passive foreign investment company, our U.S. shareholders may suffer adverse tax consequences as a result.

        Generally, for any taxable year, if at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which produce passive income (including amounts derived by reason of the temporary investment of funds raised in offerings of our shares) and rents and royalties other than rents and royalties which are received from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. holders, and having interest charges apply to distributions by us and gains from the sales of our shares.

        Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which, assuming we are not a "controlled foreign corporation," or a CFC, under Section 957(a) of the Internal Revenue Code of 1986, as amended, or the Code, for the

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year being tested, may be determined based on the fair market value of each asset, with the value of goodwill and going concern value determined in large part by reference to the market value of our common shares, which may be volatile). Our status may also depend, in part, on how quickly we utilize the cash proceeds from this offering in our business. Based upon the expected value of our assets, including any goodwill, and the expected nature and composition of our income and assets, we may be classified as a PFIC for the taxable year ending December 31, 2019 and in future taxable years. In particular, so long as we do not generate revenue from operations for any taxable year and do not receive any research and development grants, or even if we receive a research and development grant, if such grant does not constitute gross income for United States federal income tax purposes, we likely will be classified as a PFIC for such taxable year. Because the determination of whether we are a PFIC for any taxable year is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC in any taxable year.

        The tax consequences that would apply if we are classified as a PFIC would also be different from those described above if a U.S. shareholder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. shareholders with the information necessary for a U.S. shareholder to make a QEF election. Prospective investors should assume that a QEF election will not be available.

If a United States person is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.

        If a United States person is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a "United States shareholder" with respect to each "controlled foreign corporation" in our group (if any). If our group includes one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be treated as controlled foreign corporations (regardless of whether we are or are not treated as a controlled foreign corporation). A United States shareholder of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of "Subpart F income," "global intangible low-taxed income" and investments in U.S. property by controlled foreign corporations, whether or not we make any distributions. An individual that is a United States shareholder with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for the year for which reporting was due from starting. We cannot provide any assurances that we will assist investors in determining whether any of our non-U.S. subsidiaries are treated as a controlled foreign corporation or whether such investor is treated as a United States shareholder with respect to any of such controlled foreign corporations or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting and tax paying obligations. A United States investor should consult their own advisors regarding the potential application of these rules to its investment in the shares.

We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.

        We have never declared or paid cash dividends on our ordinary shares. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, of our ordinary shares will be investors' sole source of gain for the foreseeable future. In addition, Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes.

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could decline.

        The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, and we will not be subject to certain U.S. securities laws including, but not limited to, U.S. proxy rules and the filing of certain Exchange Act reports.

        As a foreign private issuer, we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required by the Nasdaq Stock Market for domestic U.S. issuers. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on The Nasdaq Global Market may provide less protection to you than what is accorded to investors under the listing rules of Nasdaq applicable to domestic U.S. issuers. See the section titled "Management—Corporate Governance Practices."

        As a foreign private issuer, we will be exempt from the rules and regulations under the Securities Exchange Act of 1934, or the Exchange Act, related to the furnishing and content of proxy statements, including the applicable compensation disclosure requirements. Nevertheless, pursuant to regulations promulgated under the Israeli Companies Law, 5759-1999, or the Israeli Companies Law, we are required to disclose the annual compensation of our five most highly compensated office holders on an individual basis. Such disclosure will not be as extensive as that required of a U.S. domestic issuer. Our officers, directors and principal shareholders will also be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will be exempt from filing quarterly reports with the SEC under the Exchange Act. Moreover, we will not be required to comply with Regulation FD, which restricts the selective disclosure of material information, although we intend to voluntarily adopt a corporate disclosure policy substantially similar to Regulation FD. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.

        We would lose our foreign private issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

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We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors.

        We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not emerging growth companies.

        For as long as we remain an emerging growth company we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not "emerging growth companies." These exemptions include:

        We will remain an emerging growth company until the earliest of: (i) the last day of our fiscal year during which we have total annual gross revenues of at least $1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the closing of this offering; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a "large accelerated filer" under the Exchange Act. We have opted out of the extended transition period made available to emerging growth companies to comply with newly adopted public company accounting requirements.

        When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We cannot predict if investors will find our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

Risks Related to Israeli Law and Our Operations in Israel

Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

        Our executive offices, research and development laboratories and manufacturing facility are located in Petach Tikva, Israel. In addition, the majority of our key employees, officers and directors are residents of Israel. If these or any future facilities in Israel were to be damaged, destroyed or otherwise unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, hurricanes, storms, tornadoes, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development is disrupted for any other reason, such an event could delay our clinical trials or, if our product candidates are approved and we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as

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promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives, or if we are unable to manufacture an approved product within a timeframe that meets our prospective customers' expectations, our business, prospects, financial results and reputation could be harmed.

        Political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and groups in its neighboring countries, Hamas (an Islamist militia and political group that has historically controlled the Gaza Strip) and Hezbollah (an Islamist militia and political group based in Lebanon). In addition, several countries, principally in the Middle East, restrict doing business with Israel, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. Any hostilities involving Israel, terrorist activities, political instability or violence in the region or the interruption or curtailment of trade or transport between Israel and its trading partners could adversely affect our operations and results of operations and the market price of our ordinary shares.

        Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business, financial condition and results of operations.

        Further, our operations could be disrupted by the obligations of our employees to perform military service. As of December 31, 2019, we had 54 full-time employees based in Israel. Of these employees, some may be military reservists, and may be called upon to perform military reserve duty of up to 36 days per year (and in some cases more) until they reach the age of 40 (and in some cases, up to the age of 45 or older). Additionally, they may be called to active duty at any time under emergency circumstances. In response to increased tension and hostilities in the region, there have been, at times, call-ups of military reservists, and it is possible that there will be additional call-ups in the future. Our operations could be disrupted by the absence of these employees due to military service. Such disruption could harm our business and operating results.

Our operations are subject to currency and interest rate fluctuations.

        Although our functional currency is the U.S. dollar, and our financial records are maintained in U.S. dollars, we also incur expenses in Euros and New Israeli Shekels. In the future, we expect that a substantial portion of our revenues will be generated in U.S. dollars, Euros and other foreign currencies, although we currently incur a significant portion of our expenses in currencies other than U.S. dollars, mainly New Israeli Shekels. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk, and our financial results may be affected by fluctuations in the exchange rates of currencies in the countries in which our prospective product candidates may be sold. We do not currently hedge our foreign currency exchange rate risk.

We received Israeli government grants for certain of our research and development activities, the terms of which may require us to pay royalties and to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we fail to satisfy these conditions, we may be required to pay penalties and refund grants previously received.

        Our research and development efforts have been financed in part through royalty-bearing and non-royalty-bearing grants in an aggregate amount of $4.9 million that we received from the IIA as of December 31, 2019. The current IIA-approved research and development grants ended on December 31, 2018. With respect to the royalty-bearing grants we are committed to pay royalties at a

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rate of 3.0% on sales proceeds from our products that were developed under IIA programs up to the total amount of grants received, linked to the U.S. dollar and bearing interest at an annual rate of LIBOR applicable to U.S. dollar deposits. We are further required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation Law, 5744-1984, as amended, and related regulations, or the Research Law, with respect to those past grants. When a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer or license of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development.

        The transfer or license of IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported products, technology or know-how outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred or licensed technology or know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.

        Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company's issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the Company's outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the shares does not reflect their fair market value, and petition an Israeli court to alter the consideration for the acquisition accordingly, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights, and the acquirer or the company published all required information with respect to the tender offer prior to the tender offer's response date.

        Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such

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shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred. These provisions could delay, prevent or impede an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.

It may be difficult to enforce a judgment of a U.S. court against us and our executive officers and directors and the Israeli experts named in this prospectus in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our executive officers and directors and these experts.

        We were incorporated in Israel. Substantially all of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. See "Enforceability of Civil Liabilities" for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this prospectus.

Your rights and responsibilities as a shareholder will be governed in key respects by Israeli laws, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

        The rights and responsibilities of the holders of our ordinary shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in such company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company's amended and restated articles of association, increases in a company's authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. See "Management—Approval of Related Party Transactions under Israeli Law—Fiduciary Duties of Directors and Executive Officers—Shareholder Duties" for additional information. There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. companies.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate," "continue," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "should," "target," "will," "would," and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

        Forward-looking statements are based on our management's current expectations, estimates, forecasts and projections about our business and the industry in which we operate and our management's beliefs and assumptions, and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond

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our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Important factors that may cause actual results to differ materially from current expectations include, among other things, those listed under "Risk Factors" and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements.

        The forward-looking statements included in this prospectus speak only as of the date of this prospectus. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See "Where You Can Find More Information."

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USE OF PROCEEDS

        We estimate that the net proceeds from the sale of ordinary shares in this offering will be approximately $                million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus. If the underwriters exercise their option to purchase up to an additional                    ordinary shares in full, we estimate that the net proceeds to us from this offering will be approximately $             million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $                per ordinary share would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $                million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of ordinary shares we are offering. An increase (decrease) of 1.0 million in the number of ordinary shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, by $                million, assuming the assumed initial public offering price stays the same.

        We intend to use the net proceeds from this offering, together with our existing cash, cash equivalents and short-term deposits, as follows:

        We may also use a portion of the net proceeds from this offering to acquire or invest in complementary products, technologies or businesses, although we have no present agreements or commitments to do so.

        Although we currently anticipate that we will use the net proceeds from this offering as described above, there may be circumstances where a reallocation of funds is necessary. Due to the uncertainties inherent in the clinical development and regulatory approval process, it is difficult to estimate with certainty the exact amounts of the net proceeds from this offering that may be used for any of the above purposes on a stand-alone basis. Amounts and timing of our actual expenditures will depend upon a number of factors, including our sales, marketing and commercialization efforts, regulatory approval and demand for our product candidates, operating costs and other factors described under "Risk Factors" in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.

        Based on our current plans, we believe that our existing cash, cash equivalents and short-term deposits, together with the net proceeds of this offering, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for                . We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect.

        Pending our application of the net proceeds from this offering, we plan to invest such proceeds in in short-term, investment-grade, interest-bearing securities and depositary institutions.

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DIVIDEND POLICY

        We have never declared or paid any cash dividends to our shareholders of our ordinary shares, and we do not anticipate or intend to pay cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors in compliance with applicable legal requirements and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors may deem relevant.

        The Israeli Companies Law imposes further restrictions on our ability to declare and pay dividends. See "Description of Share Capital—Dividend and Liquidation Rights" for additional information.

        Payment of dividends may be subject to Israeli withholding taxes. See "Taxation—Material Israeli Tax Considerations" for additional information.

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CAPITALIZATION

        The following table sets forth our cash, cash equivalents and short-term deposits and capitalization as of December 31, 2019, on:

        The pro forma and pro forma as adjusted data included in the table below are also unaudited. You should read this information together with our condensed consolidated financial statements appearing elsewhere in this prospectus and the information set forth under the headings "Selected Financial Data," "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of December 31, 2019  
 
  Actual   Pro Forma   Pro Forma
As Adjusted
 
 
  (unaudited)
(in thousands)

 

Cash, cash equivalents and short-term deposits(1)

  $ 26,609   $ 26,622   $    

Convertible preferred shares warrant liability

  $ 12,241   $   $    

Preferred A, A-1, B, B-1, C-1, C-2, D-1, D-2, D-3, E and E-1 shares of NIS 0.80 par value: 18,741,017 shares authorized and pro forma actual; no shares authorized, pro forma as adjusted; 13,097,218 shares issued and outstanding, actual; no shares issued and outstanding, pro forma and pro forma as adjusted

    106,313            

Shareholders' (deficiency) equity:

                   

Ordinary shares of NIS 0.80 par value: 23,500,000 shares authorized, actual and pro forma;            shares authorized pro forma as adjusted; 588,650 shares issued and outstanding, actual; 13,742,118 shares issued and outstanding, pro forma;            shares issued and outstanding, pro forma as adjusted

    130     3,175        

Additional paid-in capital

    5,541     121,063        

Accumulated deficit

    (93,303 )   (93,303 )      

Total shareholders' (deficiency) equity(1)

    (87,632 )   30,935        

Total capitalization(1)

  $ 30,922   $ 30,935   $    

(1)
Each $1.00 increase or decrease in the assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, respectively, the amount of cash, cash equivalents and short-term deposits, total shareholders' (deficiency) equity and total capitalization by $                million, assuming the number of ordinary shares offered by us, as set forth on the cover page of

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        The number of ordinary shares issued and outstanding, actual, pro forma and pro forma as adjusted shown in the foregoing table and calculations excludes:

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DILUTION

        If you invest in our ordinary shares in this offering, your interest will be immediately diluted to the extent of the difference between the initial public offering price per ordinary share in this offering and the pro forma as adjusted net tangible book value per ordinary share after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the net tangible book value per ordinary share. As of December 31, 2019, we had a historical net tangible book value of $30.9 million, or $52.53 per ordinary share. Our net tangible book value per share represents total tangible assets less total liabilities, divided by the number of ordinary shares outstanding on December 31, 2019.

        Our pro forma net tangible book value as of December 31, 2019 was $30.9 million, or $2.25 per ordinary share. Pro forma net tangible book value per share represents total tangible assets less total liabilities, divided by the number of ordinary shares outstanding as of December 31, 2019, after giving effect to the automatic conversion of all outstanding preferred shares into ordinary shares and the exercise of warrants to purchase 56,250 Series A preferred shares, and the automatic conversion thereof into 56,250 ordinary shares, which will occur upon the closing of this offering.

        After giving effect to the sale of ordinary shares in this offering at an assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses, and after taking into account the automatic conversion of all of our outstanding preferred shares into ordinary shares and the exercise of warrants to purchase 56,250 Series A preferred shares, and the automatic conversion thereof into 56,250 ordinary shares, which will occur upon the closing of this offering, our pro forma as adjusted net tangible book value at December 31, 2019 would have been $                per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $                per share to existing shareholders and immediate dilution of $                per ordinary share to new investors. The following table illustrates this dilution per ordinary share:

Assumed initial public offering price per ordinary share

        $    

Historical net tangible book value per ordinary share as of December 31, 2019

  $ 52.53        

Decrease in net tangible book value per ordinary share due to conversion of preferred shares and exercise of warrants to purchase shares of Series A preferred shares

    (50.28 )      

Pro forma net tangible book value per ordinary share as of December 31, 2019

    2.25        

Increase in pro forma net tangible book value per ordinary share attributable to new investors

             

Pro forma as adjusted net tangible book value per ordinary share after this offering

             

Dilution per ordinary share to new investors participating in this offering

        $    

        The pro forma and pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value as of December 31, 2019 after this offering by approximately $                per ordinary share, and would increase (decrease) dilution to investors in this offering by $                per ordinary share, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses

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payable by us. We may also increase or decrease the number of ordinary shares we are offering. An increase (decrease) of 1.0 million in the number of ordinary shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value as of December 31, 2019 after this offering by approximately $                per ordinary share, and would decrease (increase) dilution to investors in this offering by approximately $                per ordinary share, assuming the assumed initial public offering price per ordinary share remains the same, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        If the underwriters exercise in full their option to purchase additional ordinary shares, the pro forma as adjusted net tangible book value will increase to $                per ordinary share, representing an immediate increase in pro forma as adjusted net tangible book value to existing shareholders of $                per ordinary share and an immediate dilution of $                 per ordinary share to new investors participating in this offering.

        The following table shows, as of December 31, 2019, on a pro forma as adjusted basis, the number of ordinary shares purchased from us, the total consideration paid to us and the average price paid per share during the last five years by existing shareholders and by new investors purchasing ordinary shares in this offering at an assumed initial public offering price of $                per ordinary share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 
  Shares Subscribed
for/Purchased
  Total
Consideration
   
 
 
  Average Price
per Share
 
(in thousands, except share
and per share amounts and percentages)

  Number   Percent   Amount   Percent  

Existing shareholders

            % $         % $    

Investors participating in this offering

                               

Total

          100 % $       100 %      

        A $1.00 increase (decrease) in the assumed initial public offering price of $                per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all shareholders and the average price per share paid by all shareholders by approximately $                million, $                million and $                , respectively, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a 1.0 million share increase (decrease) in the number of ordinary shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all shareholders and the average price per share paid by all shareholders by approximately $             million, $                 million and $                , respectively, assuming the assumed initial public offering price of $                per ordinary share (the midpoint of the price range set forth on the cover page of this prospectus) remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The tables and discussion above shown are based on 13,742,118 ordinary shares outstanding as of December 31, 2019, after giving effect to the automatic conversion of all outstanding preferred shares into ordinary shares and the exercise of warrants to purchase 56,250 Series A preferred shares, and the automatic conversion thereof into 56,250 ordinary shares, each of which will occur upon the closing of this offering, and excludes:

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        To the extent that outstanding options are exercised, new options or warrants are issued or we issue additional ordinary shares in the future, there will be further dilution to new investors. We may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our equity holders.

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SELECTED FINANCIAL DATA

        The following table summarizes our financial data. We have derived the following statements of operations data for the years ended December 31, 2019 and 2018 and the balance sheet data as of December 31, 2019 and 2018 from our audited consolidated financial statements included elsewhere in this prospectus, which have been prepared in accordance with U.S. GAAP. Our historical results are not necessarily indicative of the results that may be expected in the future, and our results for any interim period are not necessarily indicative of results that may be expected for any full year. The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes included elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2019   2018  
 
  (in thousands, except share
and per share amounts)

 

Statements of operations data:

             

Research and development, net

  $ 14,083   $ 12,550  

General and administrative

    4,477     5,814  

Operating loss

    (18,560 )   (18,364 )

Financial income, net

    11,655     24,281  

Net (loss) profit

  $ (6,905 ) $ 5,917  

Basic net (loss) profit per ordinary share

  $ (22.65 ) $ 0.15  

Diluted net loss per ordinary share

  $ (22.65 ) $ (0.82 )

Weighted average number of ordinary shares used in computing basic net loss per share

    588,338     586,938  

Weighted average number of ordinary shares used in computing diluted net loss per share

    588,338     641,587  

Pro forma basic and diluted net loss per ordinary share(1)

  $ (0.97 )      

Weighted average number of ordinary shares used in computing, basic and diluted net loss per share—pro forma (unaudited)

    13,741,806        

(1)
See Note 13 to our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate the historical and pro forma basic and diluted net loss per ordinary share.


 
  As of December 31,  
 
  2019   2018  
 
  (in thousands)
 

Balance sheet data:

             

Cash, cash equivalents and short-term deposits

  $ 26,609   $ 7,327  

Working capital(1)

    24,822     4,345  

Total assets

    33,752     14,484  

Convertible preferred shares

    106,313     69,347  

Convertible preferred shares warrant liability

    12,241     22,926  

Total shareholders' equity (deficiency)

    (87,632 )   (81,710 )

(1)
Working capital is defined as total current assets minus total current liabilities

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

        You should read the following discussion in conjunction with our audited consolidated financial statements including the related notes thereto, beginning on page F-1 of this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should read the sections of this prospectus titled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" for a discussion of the factors that could cause our actual results to differ materially from our expectations.

Overview

        We are a Phase 3 clinical-stage biopharmaceutical company focused on developing targeted, locally administered and prolonged-release therapeutics using our proprietary Polymer-Lipid Encapsulation matriX, or PLEX, technology. Our product candidates are designed to address diseases with high unmet medical needs by pairing our PLEX technology with drugs already approved by the U.S. Food and Drug Administration, or the FDA. Our PLEX technology is designed to deliver drugs directly to precise sites in the body at predetermined release rates and over durations ranging from several days to several months. We believe that our PLEX technology and product candidates have the potential to cause a major shift in the management of a wide variety of localized medical conditions, including surgical site infections, or SSIs, cancer, inflammation and pain. Our lead product candidate, D-PLEX100, is in a potentially pivotal Phase 3 clinical trial for the prevention of sternal (bone) SSIs.

        Since our inception in 2008, we have incurred significant operating losses. Our operating loss for the years ended December 31, 2018 and 2019 were $18.4 million and $18.6 million, respectively. As of December 31, 2019, we had an accumulated deficit of $93.3 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and our losses may fluctuate significantly from year to year. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

        We do not have any product candidates approved for sale and have not generated any revenue from product sales. To date, we have financed our operations primarily through private placements of equity securities and convertible debt, as well as grants from the Israel Innovation Authority, or IIA, and the European Commission's Seventh Framework Programme for Research, or FP7. From our

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inception through December 31, 2019, we have raised an aggregate of $114.1 million from private placements of equity securities and convertible debt, including an aggregate of $37.6 million of net proceeds from the issuance of our Series E-1 convertible preferred shares in 2019.

Components of Results of Operations

Revenue

        To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for at least the next several years.

Research and Development, Net

        Research and development, net consist primarily of costs incurred in connection with our research and development activities. This includes conducting clinical trials and preclinical studies, manufacturing development efforts and activities related to regulatory filings for product candidates, as well as overhead costs. Our research and development expenses primarily consist of:

        Research and development expenses are expensed as incurred. We record accrued expenses for research and development activities conducted, on our behalf, by third-party service providers, which include the performance of clinical trials and the conduct of preclinical studies and contract manufacturing activities. We record these accrued expenses based upon research and development activities performed by such third-party service providers and reported to us, and we include these costs in accrued liabilities in the consolidated balance sheets and within research and development expense in the consolidated statements of operations.

        We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or preclinical programs.

        From inception though December 31, 2019, we have incurred approximately $60.3 million in research and development expenses, net to advance the development of our clinical-stage product candidates, as well as other preclinical research and development programs. As of December 31, 2019, we have received royalty-bearing grants of $4.9 million in the aggregate from the IIA. Pursuant to the terms of the grants, we are required to pay royalties of 3.0% to the IIA on revenues from sales of

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products for which the research and development was funded, in whole or in part, by the IIA, up to a limit of 100% of the amount of the grant received, plus annual interest calculated at a rate based on 12-month LIBOR. In addition, we must abide by other restrictions associated with the receipt of such grants under the R&D Law that continues to apply following repayment to IIA. These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our knowledge outside of Israel and may require us to obtain IIA approval for certain actions and transactions and pay additional amounts to the IIA. In addition, any change of control and any change of ownership of our ordinary shares that would make a non-Israel citizen or resident an "interested party" as defined in the R&D Law requires prior written notice from the IIA. As of December 31, 2019, we have also received non-royalty bearing grants of $0.3 million in the aggregate from the IIA and $0.7 million in the aggregate from the FP7.

        Substantially all of our research and development expenses for the years ended December 31, 2018 and 2019 were related to the development of D-PLEX100.

        We expect our research and development expenses will increase for the foreseeable future as we seek to advance D-PLEX100 through Phase 3 clinical trials, including the cost of manufacturing drug supply for these clinical trials, further our preclinical studies and other research and development programs. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

        A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.

General and Administrative

        General and administrative expenses consist primarily of salaries and personnel-related expenses, including benefits and share-based compensation expense, for employees performing functions other than research and development. This includes personnel in executive, finance, business development, marketing and administrative support functions. Other general and administrative expenses include professional fees for auditing, tax and legal services and other consulting fees, as well as facility-related costs not otherwise allocated to research and development.

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        We expect our general and administrative expenses will increase in the future to support continued research and development activities. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs, as well as investor, public relations and compliance expenses, associated with operating as a public company. We expect increased expenses if any of our product candidates receives regulatory approval and we determine to build a commercial infrastructure to support commercial sales and marketing of our products.

Financial Income, Net

        Financial income, net consists of reevaluation of our preferred share warrant liability, as well as interest income on our short-term deposits and our foreign exchange gains and losses.

Results of Operations

Comparison of the Years Ended December 31, 2018 and 2019

        The following table summarizes our results of operations for the years ended December 31, 2018 and 2019:

 
  Year Ended
December 31,
 
 
  2018   2019  
 
  (in thousands)
 

Research and development, net

  $ 12,550   $ 14,083  

General and administrative

    5,814     4,477  

Operating loss

    18,364     18,560  

Financial income, net

    24,281     11,655  

Net profit (loss)

  $ 5,917   $ (6,905 )

Net profit (loss) attributable to ordinary shares

  $ 89   $ (13,327 )

Research and Development, Net

        Research and development, net increased by $1.5 million for the year ended December 31, 2019 compared to the year ended December 31, 2018. This increase was primarily related to additional costs of $2.0 million attributable to our manufacturing facility, research costs of $1.7 million related to our Phase 1b/2 clinical trial and Phase 2 clinical trial of D-PLEX100 and a decrease in IIA grants of $0.1 million. These increases were partially offset by decreases in CMC costs of $1.9 million resulting from the establishment of the manufacturing facility, as well as a decrease of $0.6 million in costs related to preclinical studies, regulatory expenses and other research and development projects.

General and Administrative

        General and administrative decreased by $1.3 million for the year ended December 31, 2019 compared to the year ended December 31, 2018. This decrease was primarily related to the $1.3 million write-off of initial public offering expenses in 2018 and a decrease in legal and professional costs of $0.5 million.

Financial Income, Net

        Financial income, net decreased by $12.6 million for the year ended December 31, 2019 compared to the year ended December 31, 2018. This decrease was driven by the reevaluation of our convertible preferred share warrant liability following the decrease in fair value of the warrants. This decrease was

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partially offset by income related to exchange rate differences of $0.2 million in 2019, compared to losses of $0.3 million in 2018.

Net Profit (Loss) Attributable to Ordinary Shares

        Net loss attributable to ordinary shares for the year ended December 31, 2019 increased by $13.4 million for the year ended December 31, 2019 compared to the year ended December 31, 2018. This increase was primarily related to the decrease in financial income, net of $12.6 million and the increase in research and development, net of $1.5 million. This increase was partially offset by the decrease in general and administrative of $1.3 million.

Liquidity and Capital Resources

Sources of Liquidity

        Since our inception, we have not generated any revenue and have incurred operating losses and negative cash flows from our operations. We have funded our operations primarily through the sale of equity securities and convertible debt. From our inception through December 31, 2019, we have raised an aggregate of $114.1 million from private placements of equity securities and convertible debt, including an aggregate of $37.6 million of net proceeds from the issuance of our Series E-1 convertible preferred shares in 2019. As of December 31, 2019, we had $26.6 million in cash, cash equivalents and short-term deposits.

        We currently have no ongoing material financing commitments, such as lines of credit or guarantees that are expected to affect our liquidity over the next five years, other than our lease obligations.

Cash Flows

        The following table provides information regarding our cash flows for the periods indicated:

 
  Year Ended
December 31,
 
 
  2018   2019  
 
  (in thousands)
 

Net cash used in operating activities

  $ (16,678 ) $ (17,358 )

Net cash provided by (used in) investing activities

    10,957     (23,564 )

Net cash provided by financing activities

    9,388     37,653  

Net increase (decrease) in cash, cash equivalents and restricted cash

  $ 3,667   $ (3,269 )

Operating Activities

        Net cash used in operating activities related primarily to our net losses adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net loss for non-cash items mainly included depreciation, reevaluation of convertible preferred share warrants and share-based compensation.

        Net cash used in operating activities was $17.4 million for the year ended December 31, 2019, as compared to $16.7 million for the year ended December 31, 2018. This increase was primarily related to increased research and development costs and associated general and administrative expenses, as we conducted clinical trials related to D-PLEX100.

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Investing Activities

        Net cash used in investing activities related primarily to the purchase of short-term deposits and the acquisition of laboratory equipment, office equipment and furniture and leasehold improvements.

        Net cash used in investing activities was $23.6 million for the year ended December 31, 2019, as compared to net cash provided by investing activities of $11.0 million for the year ended December 31, 2018. This increase in net cash used in investing activities primarily related to the purchase of short-term deposits, partially offset by a decrease in the purchase of equipment.

Financing Activities

        Net cash provided by financing activities was $37.7 million for the year ended December 31, 2019, as compared to $9.4 million for the year ended December 31, 2018, each related to the issuance of our Series E-1 convertible preferred shares.

Funding Requirements

        To date, we have not generated any revenues from the commercial sale of our product candidates, and we do not expect to generate revenue for at least the next several years. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue and/or initiate Phase 3 clinical trials of, and seek marketing approval for, D-PLEX100 and as we continue the research and development of our other existing and future product candidates. In addition, if we obtain marketing approval for D-PLEX100 or any other product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators. Furthermore, following the completion of this offering, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

        We expect that our existing cash and cash equivalents and short-term deposits will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We anticipate that these funds, together with the net proceeds of this offering, will be sufficient to                                        . We anticipate that we will need to raise additional capital in order to commercialize D-PLEX100, if approved, in any indication. Our future capital requirements will depend on many factors, including:

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        Identifying potential product candidates and conducting clinical trials and preclinical studies is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

        Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations and Commitments

        The following table summarizes our contractual obligations and commitments at December 31, 2019:

 
  Less than
1 Year
  1 to 3
Years
  4 to 5
Years
  More than
5 Years
  Total  
 
  (in thousands)
 

Operating lease obligations(1)

  $ 1,103   $ 2,864   $ 530   $ 396   $ 4,893  

(1)
Operating lease obligations consist of payments pursuant to lease agreements for our facility in Israel and motor vehicle leases.

        The commitment amounts in the table above are associated with contracts that are enforceable and legally binding. The table does not include obligations under agreements that we can cancel without a significant penalty.

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        We enter into contracts in the normal course of business for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination upon notice, and therefore we believe that our non-cancelable obligations under these agreements are not material.

Off-Balance Sheet Arrangements

        We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts.

Critical Accounting Policies

        Our consolidated financial statements are prepared in accordance with accepted accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. Our most critical accounting policies are summarized below. See note 2 to our consolidated financial statements beginning on page F-1 of this prospectus for a description of our other significant accounting policies.

Share-Based Compensation

        We account for share-based compensation in accordance with ASC No. 718, "Compensation—Stock Compensation," which requires companies to estimate the fair value of equity-based payment awards on the date of grant using the option-pricing model, or OPM. We recognize compensation expenses for the value of our awards granted based on the straight-line attribution method over the requisite service period of each of the awards. We recognize forfeitures of awards as they occur.

        We recognize compensation costs only for those shares expected to vest using the straight line method over the requisite service period of the award, which is generally the option vesting term of three years. We recognize forfeitures of awards as they occur.

Option Valuations

        We selected the Black-Scholes-Merton model as the most appropriate fair value method for our option awards. The Black-Scholes-Merton model requires a number of assumptions, of which the most significant are the expected share price, volatility and the expected option term.

        The fair value of ordinary shares underlying the options has historically been determined by our management and the board of directors with the assistance of an independent financial and economic consultant. As there has been no public market for our ordinary shares, our board of directors has determined fair value of an ordinary share at the time of grant of the option by considering a number of objective and subjective factors including data from other comparable companies, sales of convertible preferred shares to unrelated third parties, our operating and financial performance, the lack of liquidity of share capital and general and industry specific economic outlook, amongt other factors. The fair value of the underlying ordinary shares will be determined by our board of directors until such time as our ordinary shares are listed on an established share exchange or national market system. Our board of directors determined the fair value of ordinary shares based on independent valuations performed using the hybrid method, which takes into account the initial public offering and the non-initial public offering scenario method as of December 31, 2019.

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        The Black-Scholes-Merton option-pricing model requires the input of highly subjective assumptions, including the fair value of the underlying ordinary shares, the expected volatility of the price of our ordinary shares, the expected term of the option, risk-free interest rates and the expected dividend yield of our ordinary shares. These estimates involve inherent uncertainties and the application of the management's judgment. If such inputs change and different assumptions are used, our share-based compensation expenses could be materially different in the future. These assumptions are estimated as follows:

        If any of the assumptions used in the Black-Scholes-Merton model change significantly, the share-based compensation expenses in future awards may differ materially as compared with the current awards granted.

        The following table presents the assumptions used to estimate the fair value of options granted to employees, non-employee directors and service providers during the periods presented:

 
  Year Ended
December 31,
 
  2018   2019

Expected term (in years)

  6–7   6–7

Expected volatility

  91.44%–96.87%   69.8%–76.14%

Risk-free rate

  3.43%–3.90%%   2.26%–3.13%

Dividend yield

  0.0%   0.0%

        We incurred non-cash share-based compensation expense of $1.0 million during the years ended December 31, 2019 and 2018. We expect to continue to grant share option awards in the future, and to the extent that we do, our actual share-based compensation expenses recognized are likely to increase.

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Determination of the Fair Value of Stock-Based Compensation Grants

        The following table summarizes by grant date the number of ordinary shares subject to share option awards granted between January 1, 2018 and December 31, 2019, as well as the associated per-ordinary share exercise price of the award, the estimated fair value per ordinary share on the grant date and the aggregate grant date fair value:

Option Grant Date
  Number of
Ordinary Shares
Underlying
Options Granted
  Estimated Fair
Value Per
Ordinary Share
at Grant Date
  Exercise
Price Per
Ordinary Share
  Aggregate
Grant Date
Fair Value(1)(2)
 

January 30, 2018

    6,250   $ 8.27   $ 8.27   $ 71  

September 4, 2018

    1,250   $ 8.05   $ 8.05   $ 8  

October 16, 2018

    6,688   $ 8.27   $ 8.05   $ 44  

December 3, 2018

    3,750   $ 8.27   $ 8.27   $ 23  

December 18, 2018

    3,750   $ 8.27   $ 8.27   $ 23  

February 3, 2019

    2,500   $ 7.67   $ 8.27   $ 13  

March 19, 2019

    27,750   $ 7.67   $ 7.67   $ 145  

May 23, 2019

    52,500   $ 7.86   $ 7.67   $ 229  

August 7, 2019

    75,000   $ 6.47   $ 7.67-8.27   $ 308  

(1)
Aggregate grant date fair value was determined using the Black-Scholes-Merton option pricing model.

(2)
In thousands

        Based upon the assumed initial public offering price of $            per ordinary share, the midpoint of the range set forth on the cover page of this prospectus, the intrinsic value of the awards outstanding as of December 31, 2019 was $             million, of which $             million related to vested options and $             million related to unvested options.

Valuation of Our Ordinary Shares

        The fair value of the ordinary shares underlying our option awards was determined by our board of directors, with input from management. We believe that our board of directors has the relevant experience and expertise to determine the fair value of our ordinary share as of each respective grant date. The valuations of our ordinary shares were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the AICPA Practice Aid. The assumptions used in the valuation model are based on future expectations combined with management judgment. Our board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our ordinary shares as of the date of each option grant, including the following factors:

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        In the event of a qualified initial public offering, our preferred shares would convert into ordinary shares on a one-to-one basis, and accordingly would receive the same amount of proceeds per share as ordinary shares. In the case of a sale or liquidation of our company, the preferred shares would receive their liquidation preferences and thereafter a fraction in the remaining proceeds with the ordinary shares on a pro-rata basis. Accordingly, we determined the fair value of our ordinary shares under two scenarios and then applied a weighted average of these values based on their relative probabilities in order to calculate the final per share value.

        First, we determined value in an exit scenario due to a liquidity event, such as an initial public offering using the market approach and based on discussions with investment banks. In this scenario, all preferred shares, warrants to purchase preferred shares and options to purchase our ordinary shares convert into, or are deemed to be exercised for, ordinary shares. The firm value is divided by the resulting number of shares to determine a per share value.

        Second, the equity value was determined based on, among other things, financing transactions with third parties.

        We then allocated the value between all elements of our securities (preferred shares, ordinary shares, warrants for preferred shares and options for ordinary shares) using the OPM, on the assumption that our preferred shares will benefit from their liquidation preference.

        Under the OPM, preferred and ordinary shares are treated as a series of call options, with the preferred shares having an exercise price based on the liquidation preference of the respective preferred share. The OPM operates through a series of Black-Scholes-Merton option pricing models, with the exercise prices of the options representing the upper and lower bounds of the proceed ranges that a security holder would receive upon a liquidity event. The strike prices occur at break points where the allocation of firm value changes among the various security holders. The ordinary shares are presumed to have value only if funds available for distribution to shareholders exceed the value of the respective liquidation preferences at the time of a liquidity event. The OPM requires an enterprise level input of firm value or a transaction level input of specific security value (typically, a recently issued convertible preferred security) to anchor the allocation of firm value among the various classes of securities.

        In making the final determination, we also applied a discount for lack of marketability right, as applicable, to our ordinary shares.

        First, we determined value in an exit scenario due to a liquidity event, such as an initial public offering using the market approach and based on discussions with investment banks. In this scenario, all preferred shares, warrants to purchase preferred shares and options to purchase our ordinary shares convert into, or are deemed to be exercised for, ordinary shares. The firm value is divided by the resulting number of shares to determine a per share value.

        Second, we determined value using the Probability Weighted Excepted Return Method, or PWERM. The PWERM is a scenario-based methodology that estimates the fair value of our ordinary shares based upon an analysis of future values for our company, assuming various outcomes. The ordinary share value is based on the probability-weighted present value of expected future investment

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returns considering each of the possible outcomes available, as well as the rights of each class of our outstanding capital stock. The weighted average enterprise value is then calculated by applying the unleveraged discounted cash flow approach. We believe that this is the most appropriate valuation method as it theoretically captures various future possible outcomes, including an initial public offering.

        We then allocated the value between all elements of our securities (preferred shares, ordinary shares, warrants for preferred shares and options for ordinary shares) using the OPM, on the assumption that our preferred shares will benefit from their liquidation preference.

        Under the OPM, preferred and ordinary shares are treated as a series of call options, with the preferred shares having an exercise price based on the liquidation preference of the respective preferred share. The OPM operates through a series of Black-Scholes-Merton option pricing models, with the exercise prices of the options representing the upper and lower bounds of the proceed ranges that a security holder would receive upon a liquidity event. The strike prices occur at break points where the allocation of firm value changes among the various security holders. The ordinary shares are presumed to have value only if funds available for distribution to shareholders exceed the value of the respective liquidation preferences at the time of a liquidity event. The OPM requires an enterprise level input of firm value or a transaction level input of specific security value (typically, a recently issued convertible preferred security) to anchor the allocation of firm value among the various classes of securities.

        In making the final determination, we also applied a discount for lack of marketability right, as applicable, to our ordinary shares.

        Following the completion of our initial public offering and the listing of our ordinary shares on The Nasdaq Global Market, the determination of the fair market value of our ordinary shares for purposes of setting the exercise price of future option awards or other share-based compensation to employees and other grantees will be based on the market price of our ordinary shares and will no longer require good faith estimates by our board of directors based on various comparisons or benchmarks.

Accounting Treatment of the Convertible Preferred Shares

        We classify convertible preferred shares that are redeemable under certain circumstances outside of our control as mezzanine equity on the balance sheet. They are not included as a component of shareholders' equity (deficiency). The carrying value of the preferred shares is equal to cost. We did not adjust the carrying value to redemption value since it is not probable that the preferred shares will be redeemed.

Warrants to Purchase Convertible Preferred Shares

        Warrants to purchase our convertible preferred shares are classified as a liability on the balance sheet, and measured at fair value, as the underlying shares are contingently redeemable (upon a deemed liquidation event) and, therefore, may obligate us to transfer assets at some point in the future. The warrants are subject to re-measurement to fair value at each balance sheet date and any change in fair value is recognized as a component of financial income, net, in the statement of operations.

        Our board of directors calculates the fair value of the warrants on the issuance date and on subsequent reporting dates, considering among other things, a third-party valuation. We first calculated the underlying preferred share value by using the income approach and the market approach. Then the equity value was allocated by using the hybrid model method utilizing OPM and initial public offering discount. Once the preferred shares value was derived from the two scenarios, the Black-Scholes-Merton model was utilized to calculate the warrants value in each one of the scenarios. 50% probability for each one of the scenarios was applied to derive the weighted average fair value of the warrants. In

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making the final determination, we also applied a discount for lack of marketability right, as applicable, to our ordinary shares.

Grants and Participation

        Royalty-bearing grants from the IIA for funding approved research and development projects are recognized at the time we are entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. Since the payment of royalties is not probable when the grants are received, we do not record a liability for amounts received from the IIA until the related revenues are recognized. Non-royalty-bearing grants from the IIA MAGNET program and from FP7 for funding approved research and development projects are recognized at the time we are entitled to such grants, on the basis of the costs incurred, and are presented as a deduction from research and development expenses. In the event of failure of a project that was partly financed by the IIA, we would not be obligated to pay any royalties or repay the amounts received.

        As of December 31, 2019, we have received royalty-bearing grants totaling $4.9 million. Pursuant to the terms of the grants, we are required to pay royalties to the IIA of 3.0% on revenues from sales of products developed financed in whole or in part by IIA, up to a limit of 100% of the grants received, plus annual interest calculated on the 12-month LIBOR rate as published on the first business day of each calendar year.

        In addition, we must abide by other restrictions associated with the receipt of such grants under the R&D Law that continue to apply following repayment to the IIA. These restrictions may impair our ability to outsource manufacturing or otherwise transfer our knowledge outside of Israel, or engage in change of control transactions, and may require us to obtain IIA approval for certain actions and transactions and pay additional amounts to the IIA. In addition, any change of control and any change of ownership of our ordinary shares that would make a non-Israel citizen or resident an "interested party" as defined in the R&D Law requires prior written notice from the IIA.

Recent Accounting Pronouncements

        See note 2 to our consolidated financial statements beginning on page F-1 of this prospectus for a description of recent accounting pronouncements applicable to our consolidated financial statements.

Qualitative and Quantitative Disclosures about Market Risk

Foreign Currency Exchange Risk

        We operate primarily in Israel, and approximately 75% of our expenses are denominated in New Israeli Shekels, or NIS. We are therefore exposed to market risk, which represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Changes of 5% and 10% in the U.S. dollar/NIS exchange rate would have increased/decreased operating expenses by approximately 4% and 8%, respectively, during the fiscal year ended December 31, 2019.

        We currently partially hedge our foreign currency exchange rate risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.

Interest Rate Risk

        We do not anticipate undertaking any significant long-term borrowings. At present, our investments consist primarily of cash and cash equivalents and short-term deposits. We may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money

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market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments may be exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any.

Inflation-Related Risks

        Inflation generally affects us by increasing our NIS-denominated expenses, including salaries and benefits, as well as facility rental costs and payment to local suppliers. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2018 and 2019.

JOBS Act Transition Period

        Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.

        We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.07 billion or (c) in which we are deemed to be a "large accelerated filer" under the rules of the U.S. Securities and Exchange Commission, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

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BUSINESS

Overview

        We are a Phase 3 clinical-stage biopharmaceutical company focused on developing targeted, locally administered and prolonged-release therapeutics using our proprietary Polymer-Lipid Encapsulation matriX, or PLEX, technology. Our product candidates are designed to address diseases with high unmet medical needs by pairing our PLEX technology with drugs already approved by the U.S. Food and Drug Administration, or FDA. Our PLEX technology is designed to deliver drugs directly to precise sites in the body at predetermined release rates and over durations ranging from several days to several months. We believe that our PLEX technology and product candidates have the potential to cause a major shift in the management of a wide variety of localized medical conditions, including surgical site infections, or SSIs, cancer, inflammation and pain. Our lead product candidate, D-PLEX100, is in a potentially pivotal Phase 3 clinical trial for the prevention of sternal (bone) SSIs. The World Health Organization, or WHO, estimates that SSIs result in up to $10 billion of additional hospital costs per year in the United States alone, and a further €11 billion per year in the European Union. We believe D-PLEX100, if approved, would be a significant improvement over the current standard of care, which includes systemic administration of drugs.

        We believe our PLEX technology has the potential to address many of the limitations of the current standard of care of systemic administration of drugs, resulting in significantly improved patient outcomes and lower overall cost of treatment by enabling targeted and local delivery of medications at predetermined and customizable release rates and duration. The systemic administration of drugs can have significant potential disadvantages for the treatment of localized medical conditions in the body, including limited efficacy due to poor local drug concentration, which often requires the use of a considerably higher quantity of drugs over a prolonged period of time and can result in substantial side effects.

        D-PLEX pairs our novel, proprietary PLEX technology with doxycycline, a first line, broad spectrum and FDA-approved antibiotic. In our clinical trials to date, patients treated with D-PLEX demonstrated a reduction in SSIs compared to patients treated with the standard of care alone. Our lead product candidate, D-PLEX100, is currently in a potentially pivotal Phase 3 clinical trial for the prevention of SSIs in sternal (bone) surgeries, and, subject to feedback from the FDA, we plan to continue development of D-PLEX100 for the prevention of SSIs following abdominal (soft tissue) surgeries. Infections resulting from surgery can be fatal and create a significant public health burden despite the extensive use of systemically administered antibiotics both pre- and post-operatively and other measures taken to reduce infection risk in the intra-operative setting. SSIs occur in approximately 2% to 5% of all patients undergoing inpatient surgery worldwide. The WHO and the Centers for Disease Control and Prevention, or CDC, have recently labeled SSIs as a high priority unmet medical need due to the associated morbidity, mortality and economic cost burden.

        In October 2019, we reported topline data from our Phase 2 clinical trial of D-PLEX100 for the prevention of SSIs in patients undergoing abdominal surgery. Patients treated with D-PLEX100 and the standard of care had a statistically significant reduction of 57% (p=0.0136) in deep or superficial incisional SSIs or mortality for any reason within 30 days of surgery, which was the primary endpoint for the trial, as compared to patients who received the standard of care alone. In addition, there was a statistically significant difference (p=0.0290) in patient deaths within 60 days of surgery, with no deaths observed in the D-PLEX100 treatment arm, as compared to five deaths observed in the standard-of-care arm. In this trial, D-PLEX100 was observed to be generally well tolerated, with no confirmed drug-related serious adverse events, or SAEs, and did not increase wound healing impairment at the incision site as compared to the control arm.

        In January 2018, we reported data from our Phase 1b/2 clinical trial of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery. None of the 58 patients treated with D-PLEX100 and

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the standard of care had a sternal infection within 90 days post-surgery, which was the primary endpoint of the trial, as compared to one patient in the group treated with the standard of care alone, representing a 4.3% infection rate. In this trial, D-PLEX100 was observed to be generally well tolerated, with no drug-related SAEs and no drug-related wound healing issues at the incision site.

        In December 2019, we initiated a potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of sternal (bone) SSIs, and we enrolled the first patient in February 2020. We expect to enroll between 1,284 and 1,600 cardiac surgery patients in the trial and anticipate conducting an interim analysis in                . In February 2020, we held an end of Phase 2 meeting with the FDA to discuss our proposed potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of abdominal (soft tissue) SSIs. We intend to pursue a broad label for D-PLEX100 for the prevention of SSIs, the scope of which will depend on the clinical data generated from our Phase 3 clinical trials and discussions with the FDA and the European Medicines Agency, or the EMA.

        We intend to seek approval of D-PLEX100 under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FFDCA, which provides an abbreviated pathway for marketing approval by the FDA in the United States, and will seek approval under the comparable hybrid application pathway in the European Union. We also received two Qualified Infectious Disease Product, or QIDP, designations from the FDA for D-PLEX100 for the prevention of post-abdominal surgery incisional infection and for the prevention of sternal wound infection post-cardiac surgery. The QIDP designation from the FDA confers, among other benefits, a five-year extension to any period of non-patent exclusivity awarded upon approval, such as a three-year period of exclusivity for new clinical investigations of previously approved products, which we expect for D-PLEX100, if approved. Additionally, in November 2018 we received Fast Track Designation from the FDA for D-PLEX100 for topical use for the prevention of sternal infections post-cardiac surgery, which could potentially expedite the FDA's review of D-PLEX100 and enables early and frequent communication with the FDA as we continue to generate data from our ongoing and planned clinical trials.

        Our PLEX technology consists of a proprietary matrix of several thousand layers of chemically inactive and biocompatible polymers and lipids that physically embed the drug within the layers. A drug stored within the PLEX layers is released over time in customizable, predetermined amounts at the local site where it is administered. PLEX technology is designed to protect the embedded medication from the natural enzymes and other biochemicals in the body that would otherwise degrade or alter the drug. Over time, natural hydration in the body disintegrates the layers of PLEX, from the outer layer to the inner layers, which triggers a release of the medicine in an unmodified, active form. We believe that these characteristics may enable our PLEX product candidates to be efficacious using only a small fraction of the medicines required in systemic administration.

        We believe our PLEX platform technology may have broad therapeutic application for other localized medical conditions. Because our PLEX technology is designed to be agnostic to the nature and size of the underlying drug, we believe it has the potential to be paired with a wide variety of currently marketed drugs or product candidates in development, including small molecules, peptides, antibodies and other proteins, as well as nucleic acid-based APIs, to create novel therapies in a broad range of locally delivered applications. We are pursuing research and development programs for our PLEX platform in a variety of other potential indications where we have identified a targeted active pharmaceutical ingredient, or API, for use with our PLEX technology, including for the treatment of cancer, inflammation and pain. We are currently evaluating PLEXONC in preclinical studies as an intratumoral therapy for the treatment of cancer. We will consider licensing rights to our PLEX technology for use with various biologics and small molecules.

        As of February 13, 2020, we have 79 issued patents, including utility and composition of matter patents, and one allowed patent application. Additionally, we have 36 pending patent applications in the United States, the European Patent Office, Canada, Australia, China, Japan, Israel, Brazil, the

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Eurasian Patent Organization, India, Mexico, New Zealand, the Philippines, Singapore, South Korea and Thailand. Our issued patents expire between 2029 and 2035.

Our Pipeline

State-of-the-Art Manufacturing Facility

        In October 2018, we completed the construction of an approximately 10,500 square foot, state-of-the-art, sterile manufacturing facility in Israel to enhance supply chain control, increase our supply capacity and meet clinical demand for our ongoing and planned clinical trials of D-PLEX100, as well as for initial commercial demand if D-PLEX100 is approved. The facility is designed to comply with the FDA's current good manufacturing practice, or cGMP, regulations, and EMA regulations. In 2019, the facility was cGMP certified by Israel's Ministry of Health, or IMOH, and inspected by an EU-qualified person, enabling cGMP manufacturing of D-PLEX100 for our ongoing and planned potentially pivotal Phase 3 clinical trials to be conducted in the United States and Europe.

Our Strategy

        Our goal is to leverage our PLEX technology to develop and commercialize a pipeline of potentially transformative therapies for the local and prolonged delivery of drugs to address diseases with high unmet medical needs. The key elements of our strategy are as follows:

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The Problem: Limitations to Current Drug Delivery Systems

        The systemic administration of drugs may have significant disadvantages for the treatment of localized medical conditions in the body, including limited efficacy due to poor penetration from the blood stream into the needed organ or other target tissues and challenges related to sensitivity to blood factors. This limited efficacy often results in the need to use a significantly higher quantity of drugs over a prolonged period of time, which can result in substantial side effects. Additionally, systemic administration can be associated with complexities of drug-drug interactions in the context of polypharmacy for patients with comorbid conditions. In the case of antibiotics, systemic administration results in challenges related to the emergence of antibiotic resistance.

        Localized delivery of medications for site-specific conditions may have significant advantages over systemic administration because it has the potential to increase the efficacy and clinical benefit of the treatment. Localized delivery may also reduce the risk of overall toxicity and adverse side effects, improve patient compliance and enable a much lower amount of medicine to be used in treatment. In order to address the limitations of systemic administration to treat localized medical conditions, an effective localized drug delivery system must be able to selectively deliver the needed medication to the specific target site, ensure the appropriate concentration needed and release the active medication in a controlled, consistent method over the entire desired treatment period.

        Existing localized treatments, including extended release formulations based on polymer-only or lipid-only technologies, such as liposomal-based technologies, frequently suffer from one or more of the following limitations:

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        These disadvantages are significantly challenging for the management of SSIs, where the controlled and prolonged local delivery of a drug is likely to be more effective in preventing and managing an infection than a release profile of an initial high burst of drug over a shorter duration. While we believe that localized drug delivery systems are well suited for the management of SSIs, it is important for these systems to overcome these limitations in order to change the treatment paradigm for infection management.

        These limitations are particularly problematic in treating infection caused by bacteria that are resistant to currently available treatments, such as methicillin-resistant Staphylococcus aureus, or MRSA. The inability to generate a sufficiently high local concentration of a drug for an extended period of time limits the drug's effectiveness in treating antibiotic-resistant bacterial infections.

Our Solution: PLEX Technology

        Our PLEX technology is designed to overcome the limitations of both systemic administration and current localized delivery systems. PLEX consists of a proprietary matrix of several thousand alternating layers of chemically-inactive and biocompatible polymers and lipids that physically embed an active medication in a protected reservoir between the layers. The technology is designed to enable localized drug delivery at customizable, predetermined release rates and durations directly at the target site over periods ranging from several days to several months. For example, D-PLEX100 consists of approximately ten thousand layers of biodegradable polymers and lipids. Medications stored between the PLEX matrix layers are released over time in customizable, predetermined amounts by the gradual disintegration of the layers, from the outer layer to the inner layers. PLEX is designed to protect the embedded drug from the body's natural hydration and enzymes that would otherwise degrade or alter the underlying drug. Over time, natural hydration in the body disintegrates the outer layers of PLEX, which triggers release of the drug in an unmodified active form, similar to continuous direct administration, as illustrated below:

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        We believe PLEX has a number of key design benefits:

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Benefits of D-PLEX for the Prevention of SSIs

        Doxycycline received FDA approval in 1967 and is on the WHO's Essential Medicines List for drugs deemed to be among the safest and most effective for addressing important public health needs today. Doxycycline has been safely used for decades in millions of patients globally and has the following additional advantages over many other antibiotics:

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        D-PLEX100 is designed to prevent SSIs by releasing doxycycline locally to the surgical site at predetermined release rates and durations for up to four weeks. The plasma concentration of doxycycline following treatment with D-PLEX100 is lower than the plasma concentration following the commonly used daily dose of orally administered doxycycline. We believe that this prolonged delivery following a single administration and subsequent high local concentrations of the antibiotic supersedes any existing antibiotic delivery system, and as such may offer advantages over systemic treatments in the prevention of SSIs, including against many antibiotic-resistant bacterial strains. We believe that, by combining doxycycline with PLEX, D-PLEX100 has the potential to overcome these limitations and deliver significant advantages in the prevention of SSIs, including:

        D-PLEX100 has the potential to positively impact the treatment paradigm for SSIs. For example, we have observed in our clinical trials that surgeons applying D-PLEX100 directly to an open wound during an initial surgery avoided repeated surgical interventions to treat an active infection. Moreover, because it uses a smaller dose of doxycycline, we believe that D-PLEX100 will not contribute to the growing problem of antibiotic-resistant bacteria.

        Further, we believe D-PLEX100 has the potential to treat antibiotic-resistant bacterial infections, where the required concentrations of drugs to overcome the infection cannot be delivered safely via systemic administration. In three investigator-initiated compassionate use cases, patients with severe bone bacterial infections, including MRSA, were treated with D-PLEX100 or D-PLEX1000, a predecessor product candidate to D-PLEX100. After a single application of D-PLEX, the infection was eradicated in all patients. In preclinical studies, we also observed that a single application of D-PLEX100 substantially reduced MRSA and vancomycin-resistant bacterial infections in surgical sites.

The Burdens of SSIs

        Hospital acquired infections, or HAIs, are infections that patients acquire when receiving medical treatment in a healthcare facility. According to the WHO, HAIs are the most frequent adverse event affecting patient safety worldwide. SSIs are the second most common HAI in both the United States and the European Union and occur in approximately 2% to 5% of all patients undergoing inpatient surgery worldwide despite accepted antibiotic strategies intended to prevent infection. However, these figures are likely underestimated for a number of reasons, including surgeon underreporting and negative reimbursement implications, and because approximately 50% of SSIs become evident only

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after a patient has been discharged. Further, the incidence and morbidity of SSIs may differ based on the surgical procedure performed and underlying patient risk factors.

        SSIs prolong patient recovery and cause a substantial increase in the clinical and economic burdens of surgery, due to longer hospital stays, as well as increased costs related to diagnostic tests and management of the infection. Certain patients may require readmission, subsequent surgeries and other interventions, as well as further outpatient care, due to SSIs. According to the WHO, SSIs account for an estimated $10 billion of incremental hospital costs per year in the United States and €11 billion per year in the European Union. Directly attributable costs of SSIs range from approximately $11,000 to $26,000 per infection. In more complex infections involving a prosthetic joint or an antimicrobial-resistant organism, the costs per case can exceed $90,000. SSIs are associated with approximately seven to eleven additional post-operative hospital days, and patients with an SSI have a two to eleven times increased risk of death compared to infection-free patients. Following discharge from the hospital, SSI patients may also require healthcare from other community care services, further contributing to the overall economic burden of the infection. The CDC estimates that the financial costs of treating SSIs will continue to increase, both because more surgeries are being performed and because surgical patients present with increasingly complex comorbidities. Moreover, in the United States, CMS tracks SSI rates, particularly those following hysterectomies and colorectal resection surgeries, and are increasingly using these statistics to deny reimbursement claims for certain SSIs or reduce total annual CMS payments for hospitals that CMS deems to not meet certain quality metrics for the prevention of infection. CMS also publishes the SSI incidence rate for hospitals, and, consequently, hospitals have economic and reputational, in addition to human, incentives to prevent SSIs.

        Despite the high incidence of SSIs, a large proportion of SSIs are estimated to be preventable with the use of evidence-based measures. The prevention of SSIs is complex and requires the implementation of a range of prevention and treatment approaches before, during and after surgery. Most significantly, the WHO, CDC and other health organizations recommend the use of systemic and antiseptic measures prior to surgery to help prevent SSIs; however, systemic administration of antibiotics comes with the risk of further development of antibiotic-resistant bacteria.

Health Economic Benefits of D-PLEX100

        We believe that D-PLEX100, if approved, may provide significant health economic benefits that play an important role in formulary decision making. Members of our management team have experience in applying health economic outcomes research to support the launch of successful commercial products. Our goal is to work directly with hospital customers, group purchasing organizations, integrated health networks, payors, quality improvement organizations and key opinion leaders in the field of SSI prevention to deliver data showing the potential for demonstrable pharmacoeconomic benefits from the use of D-PLEX100, if approved.

        Reimbursement for surgical procedures is typically capitated or fixed by third-party payors based on the specific surgical procedure performed. However, for many patients undergoing high-risk surgeries or those with co-morbidities, the incidence of SSIs remains high, potentially leading to significant healthcare cost burdens relative to the capitated reimbursement related to prolonged lengths of stay in the hospital, readmissions and additional surgical and other interventions due to the infection. In addition, hospitals continue to focus on quality improvements to reduce SSIs in order to support optimal reimbursement and reduced penalties under CMS initiatives, such as the Hospital Acquired Condition Reduction Program, Hospital Readmission Reduction Program and the Hospital Value-Based Purchasing Program. Following discharge from the hospital, patients with an SSI may also rely on healthcare from other community care services, which further contributes to the overall economic burden of the infection.

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        D-PLEX100 is designed to be applied directly to the surgical site during the initial surgery and is intended to prevent SSIs and improve associated mortality and morbidity, with potential broader healthcare economic benefits by reducing lengths of stay in the hospital, readmissions and additional surgical and other interventions.

        For example, in our Phase 1b/2 clinical trial of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery, we observed that patients treated with D-PLEX100 plus the standard of care had a 67% reduction in sternal wound discharge within 90 days post-surgery, as compared to the control arm. We also conducted a post-hoc analysis, which showed an 85% reduction in patients who were treated with intravenous antibiotics due to sternum wound discharge within 90 days post-surgery, as compared to the control arm.

        We intend to complete potentially pivotal Phase 3 trials in the abdominal (soft tissue) and sternal (bone) surgery settings. In such trials, we plan to evaluate health economic outcomes in order to generate further evidence to potentially support approval by the FDA and EMA and, if D-PLEX100 is approved, broad adoption among healthcare providers and payors. We intend to further support any such data with post-marketing studies.

Our D-PLEX100 Market Opportunity

        We are initially focused on developing D-PLEX100 for the prevention of SSIs, where we believe there is a high unmet medical need, especially in surgeries that are at high-risk for infection or infection-related complications. Further, patients with co-morbidities, including those who are diabetic, obese, smokers, immunocompromised, aged 60 or over and those who are undergoing surgeries with a longer duration or a longer incision size, are particularly at risk for SSI-related complications, even if they are not undergoing high-risk surgeries. We believe that D-PLEX100, if approved, also has the potential to address the needs of these patients.

SSIs in Soft Tissue Surgeries

        SSIs are one of the most frequent complications in abdominal surgeries, and they represent a significant cause of mortality and morbidity. SSIs occur in approximately 5% to 30% of soft tissue surgeries, including approximately 10% to 15% of open abdominal surgeries, which represent the majority of the "Selected Gastrointestinal Surgeries" below, approximately 15% to 30% of colorectal surgeries and up to 4% of hysterectomies. Patients undergoing colorectal surgeries are at particularly high risk of developing SSIs because of the high risk of additional bacterial contamination originating from the operated gastrointestinal organs. Abdominal SSIs are associated with an average of 18 additional post-operative hospital days. Patients undergoing abdominal surgery and that are subjected to an SSI are at greater risk of additional complications such as hernias, which can significantly affect health outcomes and require additional corrective surgery.

        The table below provides the estimated sizes of our soft tissue surgery addressable market opportunity in selected gastrointestinal surgeries and selected gynecological and urologic surgeries in the United States, the EU-5, which, for purposes of the following data, includes France, Germany, Italy, Spain and the United Kingdom, and the rest of the world, or ROW, which, for purposes of the

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following data, includes India, China, Brazil and Japan, based on the number of procedures performed in 2017, according to a study we commissioned from Life Science Intelligence, Inc.

 
  Number of
Surgeries (2017)
 

Selected Gastrointestinal Surgeries

       

United States

    7,984,000  

EU-5

    7,816,000  

ROW

    4,789,800  

Selected Gynecological and Urologic Surgeries

       

United States

    1,096,000  

EU-5

    720,000  

ROW

    827,200  

Total

    23,233,000  

SSIs in Bone Surgeries

        In the context of cardiac surgeries, SSIs can occur in 5% to 8% of procedures but carry a mortality rate of up to 40% for deep sternal wound infections, which are more difficult to treat than superficial infections. Deep sternal wound SSIs are associated with an average of 35 post-operative hospital days, compared with a mean of 11 days for infection-free patients. The cost of care for a patient that develops a deep sternal wound SSI can be as much as three times greater than the cost of care for an infection-free patient.

        In the context of orthopedic surgeries, SSIs can occur in 0.5% to 4.0% of primary hip, knee and spine surgery and in 10% to 15% of general trauma and open fracture surgery. Orthopedic SSIs are difficult to treat and associated with lifelong infection recurrence risk of 10% to 20%, including MRSA infections. Further, bone healing may also be impaired, which can result in disabling complications, including amputation. Orthopedic SSIs have been estimated to prolong total hospital stay by a median of two weeks per patient, approximately double readmission rates and increase healthcare costs by more than 300% compared to infection-free patients.

        The table below provides the estimated sizes of our bone surgery addressable market opportunity in open heart surgeries and selected orthopedic surgeries, including both primary and revision knee and hip replacements, open fractures and spine fusions, in the United States, the EU-5 and ROW, based on the number of procedures performed in 2017, according to a study we commissioned from Life Science Intelligence, Inc.

 
  Number of
Surgeries (2017)
 

Open Heart Surgeries

       

United States

    347,000  

EU-5

    362,000  

ROW

    441,000  

Selected Orthopedic Surgeries

       

United States

    4,516,000  

EU-5

    2,783,000  

ROW

    3,922,000  

Total

    12,371,000  

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Clinical Development of D-PLEX100

        We are currently conducting a potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of SSIs in sternum (bone) surgeries, and subject to feedback from the FDA, we plan to continue development of D-PLEX100 for the prevention of SSIs in abdominal (soft tissue) surgeries.

Completed Clinical Trials of D-PLEX100 for the Prevention of SSIs

Phase 2 Clinical Trial for D-PLEX100 in the Prevention of SSIs after Abdominal Surgery

        In October 2019, we reported topline data from our Phase 2 clinical trial of D-PLEX100 for the prevention of superficial and deep incisional SSIs after elective abdominal colon surgery involving resection. This prospective, multicenter, randomized, controlled, single-blind, two-arm clinical trial of 201 patients assessed the safety and efficacy of D-PLEX100 with the standard of care, a prophylactic antibiotic administered intravenously prior to surgery, compared to a standard of care control arm. The primary endpoint was the combination of incisional SSIs and mortality rate as measured by the number and proportion of subjects with either an SSI event, as determined by a blinded and independent adjudication committee, or mortality for any reason within 30 days post-surgery. All subjects were followed 60 days post-surgery for the assessment of safety.

        We enrolled 201 patients between the ages of 19 and 92, with a median age of 64, who underwent surgery at eight sites in Israel between October 2018 and August 2019, and 101 patients were randomly assigned to receive D-PLEX100. Of these patients, 77% underwent surgery for colon or rectal carcinoma and 14% for treatment of Crohn's disease, and 65% of the surgeries were minimally invasive (laparoscopies) and 35% were open surgeries (laparotomies). The treatment and control arms were balanced across patient baseline characteristics such as age, sex and BMI, reason for the surgery and type of surgery performed.

        Patients treated with D-PLEX100 had a statistically significant reduction of 57% (p=0.0136) in deep or superficial incisional SSIs or mortality for any reason within 30 days of surgery, which was the primary endpoint for the trial, as compared to patients who received the standard of care as illustrated below.


*
A result is considered to be statistically significant when the probability of the result occurring by random chance, rather than from the efficacy of the treatment, is sufficiently low. The conventional method for determining the statistical significance of a result is known as the "p-value," which represents the probability that random chance caused the result

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        In addition, in the 179 patients who completed the trial without any major protocol deviations, patients treated with D-PLEX100 achieved a statistically significant reduction of 69% (p=0.0024) in the primary endpoint events of deep or superficial incisional SSIs or mortality for any reason within 30 days of surgery as compared to patients who received the standard of care, as illustrated below. Two patients in the control arm developed deep SSIs, as compared to no patients in the treatment arm.

        Further, there was a statistically significant difference (p=0.0290) in patient deaths within 60 days of surgery, with no deaths observed in the D-PLEX100 treatment arm as compared to five deaths observed in the standard-of-care arm.

        D-PLEX100 was observed to be generally well tolerated, with no confirmed drug-related SAEs, and did not increase wound healing impairment at the incision site as compared to the control arm. There were eight treatment emergent adverse events, or TEAEs, in patients treated with D-PLEX100 that were determined to be possibly drug-related, versus 18 TEAEs in the control arm. Patients in the treatment arm also had 15 post-operative wound infection AEs, as compared to 23 in the control arm. Further, patients in both the treatment arm and the control arm had a 4% rate of wound healing impairment, suggesting that D-PLEX100 did not increase wound healing impairment. We also evaluated patients using the ASEPSIS scale, a common method of assessing wound healing based on the need for additional treatment, the presence of serious discharge, skin redness and/or drainage, the separation of deep tissue, the isolation of bacteria and the duration of inpatient stay. Patients treated with D-PLEX100 had lower average and cumulative ASEPSIS assessment scores than patients in the control arm.

        More than 70% of the bacteria strains isolated from patients' SSIs were resistant to more than one type of commonly used antibiotics, with more than 60% considered multidrug resistant bacteria.

        Patient pharmacokinetic data collected from treated patients showed evidence of D-PLEX100-released doxycycline for approximately 30 days.

Phase 1b/2 Clinical Trial for D-PLEX100 in the Prevention of Sternal SSIs after Cardiac Surgery

        In January 2018, we reported data from our Phase 1b/2 clinical trial of D-PLEX100 for the prevention of sternal SSIs in patients undergoing cardiac surgery through median sternotomy. This

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two-part trial was conducted in 81 patients at four sites in Israel, with a six-month safety follow-up period. An independent, blinded adjudication committee reviewed all patients with an SSI as identified by the principal investigator.

        The first part was an open label, single arm trial of 20 patients who received D-PLEX100 together with the standard of care, which generally consists of a systemic antibiotic given within one hour prior to surgery. Based on feedback from the FDA, the second part of the clinical trial was designed as a randomized and single-blinded trial of 61 patients, divided in a two-to-one ratio between treatment and control arms. This trial was not powered for statistical significance. One arm received D-PLEX100 and the standard of care, and the second arm received the standard of care alone. One patient randomized to the standard-of-care arm received D-PLEX100, and two patients randomized to the D-PLEX100 treatment group did not receive the study drug.

        None of the 58 patients treated with D-PLEX100 and the standard of care had a sternal infection within 90 days post-surgery, which was the primary endpoint of the trial, as compared to one patient in the group treated with the standard of care alone, representing 4.3% infection rate. According to recent literature, the expected infection rate for patients receiving the standard of care alone is 5% to 8%.

        In patients treated with D-PLEX100 plus the standard of care, we observed a 67% reduction in the number of patients with sternal wound discharge within 90 days post-surgery, as compared to the control arm. We also conducted a post-hoc analysis, which showed an 85% reduction in patients who were treated with intravenous antibiotics due to sternum wound discharge within 90 days post-surgery, as compared to the control arm.

        D-PLEX100 was observed to be generally well tolerated, with no drug-related SAEs and no drug-related wound healing issues at the incision site. Patient pharmacokinetic data collected from treated patients showed evidence of D-PLEX100-released doxycycline for approximately 30 days.

Ongoing and Planned Phase 3 Clinical Trials of D-PLEX100

Phase 3 Clinical Trial for the Prevention of SSIs after Abdominal Surgery

        Subject to feedback from the FDA, we plan to continue development of D-PLEX100 for the prevention of SSIs following abdominal surgeries.

Phase 3 Clinical Trial for the Prevention of Sternal SSIs after Cardiac Surgery

        In December 2019, we initiated a potentially pivotal Phase 3 clinical trial of D-PLEX100 for the prevention of sternal SSIs after cardiac surgery, and we enrolled the first patient in February 2020. This trial is a prospective, multinational, multicenter, randomized, two-arm, single-blinded trial to evaluate the efficacy and safety of D-PLEX100 in combination with the standard of care, which is a prophylactic antibiotic administered prior to surgery. We plan to run an adaptive design clinical trial and expect to enroll between 1,284 and 1,600 patients, aged 18 years and older, undergoing median sternotomy in cardiac surgery, with additional SSI-related comorbidities, such as diabetes and abnormal body mass index, at sites in the United States, Europe and Israel. Eligible patients will be randomly allocated into two arms to receive either D-PLEX100 in combination with the standard of care or the standard of care alone.

        The primary efficacy endpoint for this clinical trial is the infection rate as measured by the proportion of patients with at least one sternal wound infection event, including deep and superficial sternal wound infections, as determined by a blinded and independent adjudication committee, or mortality for any reason within 90 days post-surgery. Among the secondary endpoints we will evaluate

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are health economic endpoints, including but not limited to the overall number of hospitalization days post-surgery due to sternal infection, number of antibiotic treatment days post-surgery and number of surgical interventions due to SSI within 90 days post-surgery. We will also evaluate safety for six months post-surgery.

        We expect to conduct an interim analysis of data from the clinical trial in                . We have agreed on an initial Pediatric Study Plan with the FDA.

Additional Clinical Data in Support of D-PLEX100

        We completed a clinical trial of the safety and efficacy of D-PLEX1000, a predecessor product candidate to D-PLEX100, for the prevention of infection in contaminated bone following open tibia fractures in 51 patients. Given that D-PLEX1000 is another product candidate from the D-PLEX family, we believe these clinical trial results may also be relevant to the clinical development profile of D-PLEX100. At the six-month follow-up period, patients treated with D-PLEX1000 with the standard of care had no infections or infection-related bone morbidities, including non-union of the bone, following surgery, as compared to 11.1% of the patients treated only with the standard of care. D-PLEX1000 was observed to be generally well tolerated, with no drug-related AEs

        We also conducted two pilot clinical trials of D-PLEX1000 in patients with infected open long bone fractures. In these trials, patients treated with D-PLEX1000 with the standard of care had no bone infections at the treatment site in the six months following treatment. In contrast, according to recent literature the expected infection rate for patients receiving the standard of care alone is 7% to 19%. Additionally, at the six-month follow up date, no deaths, amputations or drug-related SAEs were observed in the treatment arms.

        We do not plan to pursue further independent development of D-PLEX1000, as we believe the prevention of SSIs in the orthopedic market can be adequately addressed by D-PLEX100.

Future Development of PLEX in other Medical Applications

        Our PLEX platform technology may have broad applications for other localized medical conditions other than the prevention of SSIs. We have conducted research and development for our PLEX platform in a variety of potential indications, including for the treatment of infection, cancer, inflammation and pain.

PLEX for Cancer

        We are conducting preclinical studies of PLEXONC, which pairs PLEX with chemotherapy as an intratumoral therapy. In our research and development program, we have paired PLEX with monoclonal antibodies for use in immunotherapy. In preclinical rodent studies, we have observed the prolonged, predetermined release for a duration of three weeks of an antibody when paired with PLEX.

PLEX for Other Applications

        In our research and development programs, we have paired PLEX with small molecules, proteins, antibodies, peptides, nucleic acids-based drugs and growth factors. We continue to evaluate these research and development programs for potential development by us or in collaboration with leading biopharmaceutical companies.

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Competition

        The biopharmaceutical industry is intensely competitive and subject to rapid and significant technological change. Our potential competitors include large and experienced companies that have significant competitive advantages over us, such as greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition, and more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities. These companies may develop new drugs to treat the indications that we target or seek to have existing drugs approved for use in the indications that we target.

        These potential competitors may therefore introduce competing products without our prior knowledge and without our ability to take preemptive measures in anticipation of their commercial launch. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in this industry. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective, easier to administer or less costly than our product candidates.

        The current standard of care for preventing SSIs involves the implementation of a range of treatment and prevention measures before, during and after surgery, including prophylactic antibiotic administration, antiseptic measures and wound care. We anticipate that D-PLEX100, if approved, could be used as a complementary part of many surgical protocols, rather than competitive, in addition to the current standard of care for the prevention of SSIs. In addition, we are aware of other approved treatments that can be applied locally during surgery for the prevention of SSIs, including triclosan-coated antiseptic sutures, negative wound pressure therapy, the CleanCision wound retraction and protection system and a resorbable gentamicin-collagen sponge, which is approved in the European Union and Canada. In orthopedic surgeries, we are aware of approved treatments for localized SSI prevention that pair bone cement or bone graft substitutes premixed with an antibiotic. Further, we are aware of prior clinical development of a vaccine against Staphylococcus aureus that was halted due to lack of efficacy.

        We may also face competition from companies that are developing localized extended release delivery systems, including, among others, Pacira Pharmaceuticals, Inc., Heron Therapeutics, Inc., Urogen Pharma Ltd., Flexion Therapeutics, Inc. and LIDDS AB.

Manufacturing

        Our PLEX product candidates are manufactured using a scalable self-assembly process with well-defined operations. This highly specialized and precisely controlled process enables us to manufacture product candidates consistently and efficiently for clinical and commercial applications. We have constructed a state-of-the-art, sterile manufacturing facility that is designed to be cGMP compliant for the production of our product candidates adjacent to our administrative headquarters in Petach Tikva, Israel. The manufacturing facility is cGMP certified by the IMOH and inspected by an EU-qualified person, enabling cGMP manufacturing of D-PLEX100 for our ongoing and planned potentially pivotal Phase 3 clinical trials to be conducted in the United States and Europe.

        We estimate that our facility will meet commercial demand for at least the first three years following a commercial launch of D-PLEX100, if approved. We intend to use this capacity as the basis to build a fully integrated biopharmaceutical company, supported by our in-house research and development team and our anticipated commercial infrastructure. If necessary to meet further commercial demand in the future, we may expand our manufacturing capabilities or employ third-party contract manufacturing organizations.

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        Additionally, we rely on third parties as needed for the supply of certain raw materials necessary to manufacture our product candidates.

Marketing, Sales and Distribution

        Given our current stage of development, we have limited internal marketing, sales and distribution capabilities. We have established a wholly-owned United States subsidiary, PolyPid Inc., a Delaware corporation with operations in New Jersey, to support our potential commercialization efforts in the United States and our clinical development program. We intend to launch D-PLEX100 and any future product candidates in the United States using a direct salesforce targeting our primary market of hospitals where major surgeries are undertaken. We may elect to also partner in parallel in the United States in order to maximize our commercial success and launch of any approved products. We believe that the cost-effectiveness and potential clinical benefits of D-PLEX100 will support its commercial launch under existing Medicare rates given the associated mortality, morbidity and cost burden of SSIs and the associated penalties imposed on hospital reimbursement from CMS. In addition, we believe that there may be opportunities for reimbursement of D-PLEX100 under CMS programs. Outside the United States, we intend, where appropriate, to pursue commercialization relationships, including strategic alliances and licensing, with pharmaceutical companies and other strategic partners that are equipped to market or sell our products through their well-developed sales, marketing and distribution organizations in such countries.

        In addition, we may out-license some or all of our patent rights to more than one party to achieve the fullest development, marketing and distribution of any products we develop.

Intellectual Property

        Our patent estate includes patents and patent applications with claims directed to our PLEX technology platform, D-PLEX100 product candidate and claims for potential future product candidates. As of February 13, 2020, our patent estate includes 79 issued patents, one allowed patent application and 36 pending patent applications for our product candidates, manufacturing processes and methods of treatment.

        Our patents and patent applications primarily relate to a polymer-lipid-based platform for sustained release of an active pharmaceutical agent at a target site. As of February 13, 2020, we have 34 issued patents and two pending patent applications in various countries worldwide related to compositions for sustained release of an API, including a lipid-saturated matrix formed from a biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 17 issued patents and one pending patent application in various countries worldwide related to compositions for sustained release of an API including a lipid-saturated matrix formed from a non-biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 12 issued patents in various countries worldwide related to compositions for sustained release of a nucleic agent including a lipid-saturated matrix formed from a biodegradable polymer, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have an issued Australian patent and a pending Indian patent application related to compositions for sustained release of peptidic molecules, as well as methods for producing such compositions and methods of treatment through the use of such compositions. We also have 13 issued patents, one patent application that has been allowed and four pending patent applications in various countries worldwide related to methods for treating bone fractures through the use of biocompatible fillers coated with sustained release antibiotic compositions, along with one issued patent and several pending patent applications in various countries worldwide related to methods for treating peri-implantitis and one issued patent and several pending patent applications in various countries worldwide related to methods for preventing and treating SSIs through similar processes. As of

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February 13, 2020, our patent estate includes eight issued United States patents as well as issued patents and/or pending patent applications in Australia, Brazil, Canada, China, the Eurasian Patent Organization, the European Patent Office, India, Israel, Japan, Mexico, New Zealand, the Philippines, Singapore, South Africa, South Korea, Thailand and the United States. Our issued patents are expected to remain in effect between 2029 and 2035.

        In addition to patents, we have two registered trademarks. "BonyPid" which is registered with the United States Patent and Trademark Office, or the USPTO, with the European Union Intellectual Property Office and with the Israeli Patent Office, and "PolyPid" which is registered with the USPTO, with the Israeli Patent Office and with the following European Union countries: Benelux, France, Germany, Spain, Austria, Italy, the United Kingdom, Ireland and Portugal. Furthermore, we rely upon trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position.

        Preparing and filing patent applications is a joint endeavor of our research and development team and our in-house and external patent attorneys. Our patent attorneys conduct patent prior-art searches and then analyze the data in order to provide our research and development team with recommendations on a routine basis. This results in:

        We initially submit applications to the USPTO as provisional patent applications. Then typically we continue by filing non-provisional patent applications under the Patent Cooperation Treaty, or the PCT, which is an international patent law treaty that provides a unified procedure for filing a single initial patent application to later seek patent protection for an invention in any number of the member states of the PCT. Although a PCT application does not itself issue as a patent, it acts as a placeholder allowing the applicant to seek protection in any of the member states through national-phase applications.

Government Regulation

        The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, packaging, recordkeeping, tracking, approval, import, export, distribution, advertising and promotion of our products.

U.S. Government Regulation of Drug Products

        In the United States, the FDA regulates drugs under the FFDCA and its implementing regulations. The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA's refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.

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        The process required by the FDA before product candidates may be marketed in the United States generally involves the following:

        The testing and approval process requires substantial time, effort and financial resources. Preclinical studies include laboratory evaluation of drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as animal studies to assess potential safety and efficacy. Prior to commencing the first clinical trial with a product candidate, we must submit the results of the preclinical tests and preclinical literature, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical studies may continue even after the IND is submitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial.

        Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development, as well as amendments to previously submitted clinical trials. Further, an independent IRB for each study site proposing to conduct the clinical trial must review and approve the plan for any clinical trial, its informed consent form and other communications to study subjects before the clinical trial commences at that site. The IRB must continue to oversee the clinical trial while it is being conducted, including any changes to the study plans.

        Regulatory authorities, an IRB or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk, the clinical trial is not being conducted in accordance with the FDA's or the IRB's

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requirements, if the drug has been associated with unexpected serious harm to subjects, or based on evolving business objectives or competitive climate. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the clinical trial and may advise us to halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds, such as no demonstration of efficacy.

        In general, for purposes of NDA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

        The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate and can provide important safety information.

        Clinical trials must be conducted under the supervision of qualified investigators in accordance with GCP requirements, which includes the requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, and the review and approval of the study by an IRB. Investigators must also provide information to the clinical trial sponsors to allow the sponsors to make specified financial disclosures to the FDA. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the trial procedures, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated and a statistical analysis plan. Information about some clinical trials, including a description of the trial and trial results, must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

        The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and active pharmaceutical ingredients imported into the United States are also subject to regulation by the FDA relating to their labeling and distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements of the receiving country as well as U.S. export requirements under the FFDCA. Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and the IRB and more frequently if serious adverse effects occur.

        Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the product

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candidate as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

Orange Book Listing

        In seeking approval for a drug through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA patents whose claims cover the applicant's product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products with Therapeutic Equivalence Evaluations, also known as the Orange Book.

        Any applicant who files a 505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA (1) that no patent information on the drug product that is the subject of the application has been submitted to the FDA; (2) that such patent has expired; (3) the date on which such patent expires; or (4) that such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application is submitted. This last certification is known as a Paragraph IV certification. Generally, the 505(b)(2) NDA cannot be approved until all listed patents have expired, except where the 505(b)(2) NDA applicant challenges a listed patent through a Paragraph IV certification.

        If the applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the holder of the NDA for the reference listed drug and the patent owner once the application has been accepted for filing by the FDA. The applicant may also elect to submit a "section viii" statement certifying that its proposed label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent. The NDA holder or patent owner may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification prevents the FDA from approving the application until the earlier of 30 months from the date of the lawsuit, expiration of the patent, settlement of the lawsuit, a decision in the infringement case that is favorable to the applicant or such shorter or longer period as may be ordered by a court. This prohibition is generally referred to as the 30-month stay. In instances where a 505(b)(2) NDA applicant files a Paragraph IV certification, the NDA holder or patent owner regularly take action to trigger the 30-month stay, recognizing that the related patent litigation may take many months or years to resolve. Thus, approval of a 505(b)(2) NDA could be delayed for a significant period of time depending on the patent certification the applicant makes and the reference drug sponsor's decision to initiate patent litigation.

Exclusivity

        The FDA provides periods of non-patent regulatory exclusivity, which provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug for a period of three or five years following the FDA's approval of the NDA. Five years of exclusivity are available to new chemical entities, or NCEs. An NCE is a drug that contains no active moiety that has been approved by the FDA in any other NDA. An active moiety is the molecule or ion, excluding those appended portions of the molecule that cause the drug to be an ester, salt, including a salt with hydrogen or coordination bonds, or other noncovalent, or not involving the sharing of electron pairs between atoms, derivatives, such as a complex (i.e., formed by the chemical interaction of two compounds), chelate (i.e., a chemical compound), or clathrate (i.e., a polymer framework that traps molecules), of the molecule, responsible for the therapeutic activity of the drug substance. During the exclusivity period, the FDA may not accept for review or approve an

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Abbreviated New Drug Application, or ANDA, or a 505(b)(2) NDA submitted by another company that contains the previously approved active moiety. An ANDA or 505(b)(2) application, however, may be submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed.

        If a product is not eligible for the NCE exclusivity, it may be eligible for three years of exclusivity. Three-year exclusivity is available to the holder of an NDA, including a 505(b)(2) NDA, if one or more new clinical trials, other than bioavailability or bioequivalence trials, was essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects against FDA approval of ANDAs and 505(b)(2) NDAs for the particular condition of the new drug's approval or the change to a marketed product, such as a new formulation for a previously approved drug. Five-year and three-year exclusivity will not delay the submission or approval of a 505(b)(1) NDA; however, an applicant submitting a 505(b)(1) NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and efficacy.

        In addition, under the Generating Antibiotic Incentives Now, or GAIN, Act, which was enacted as part of the Food and Drug Administration Safety and Innovation Act, or FDASIA, which was signed into law in July 2012, the FDA may designate a product as a QIDP. In order to receive this designation, a drug must qualify as an antibiotic or antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either (1) an antibiotic or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (2) a so-called "qualifying pathogen" found on a list of potentially dangerous, drug-resistant organisms to established and maintained by the FDA. A sponsor must request such designation before submitting a marketing application. We obtained QIDP designations for D-PLEX100 for the prevention of post-abdominal surgery incisional infection and the prevention of post-cardiac surgery sternal infection. Upon approving a marketing application for a QIDP-designated product, the FDA will extend by an additional five years any non-patent marketing exclusivity period awarded, such as a three-year exclusivity period awarded for new clinical investigations of previously approved products. This extension is in addition to any pediatric exclusivity extension awarded, and the extension will be awarded only to a drug first approved on or after the date of enactment of the GAIN Act. The GAIN Act prohibits the grant of an exclusivity extension where the application is a supplement to an application for which an extension is in effect or has expired, is a subsequent application for a specified change to an approved product, or is an application for a product that does not meet the definition of QIDP based on the uses for which it is ultimately approved.

Hatch Waxman Amendments and the 505(b)(2) Regulatory Approval Process

        Section 505 of the FFDCA describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is an application that contains full reports of investigations of safety and efficacy, but where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant to rely, in part, on the FDA's prior findings of safety and efficacy for an existing product, or published literature, in support of its application. Specifically, the applicant may rely upon the FDA's prior findings of safety and efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2) NDA. The FDA may also require 505(b)(2) applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the 505(b)(2) applicant. Lastly, the FDA permits marketing applications through Section 505(j), which establishes an abbreviated

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approval process for a generic version of approved drug products through the submission of an ANDA. An ANDA provides for marketing of a generic drug product that has the same active ingredients, dosage form, strength, route of administration, labeling, performance characteristics and intended use, among other things, to a previously approved product. ANDAs are termed "abbreviated" because they are generally not required to include preclinical (animal) and clinical (human) data to establish safety and efficacy. Instead, generic applicants must scientifically demonstrate that their product is bioequivalent to, or performs in the same manner as, the innovator drug through in vitro, in vivo, or other testing. The generic version must deliver the same amount of active ingredients into a subject's bloodstream in the same amount of time as the innovator drug and can often be substituted by pharmacists under prescriptions written for the reference listed drug.

Special FDA Expedited Review and Approval Programs

        The FDA has various programs, including fast track designation, breakthrough therapy designation, accelerated approval, and priority review, which are intended to expedite or simplify the process for the development and FDA review of drugs that are intended for the treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

        Under the fast track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate. To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life threatening disease or condition and demonstrates the potential to address an unmet medical need, or that the drug qualifies as a QIDP under the GAIN Act. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. We obtained a Fast Track designation in November 2018 for D-PLEX100 for the prevention of post-cardiac surgery sternal infection. Fast track designation provides additional opportunities for interaction with the FDA's review team and may allow for rolling review of NDA components before the completed application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. However, the FDA's time period goal for reviewing an application does not begin until the last section of the NDA is submitted. The FDA may decide to rescind the fast track designation if it determines that the qualifying criteria no longer apply.

        In addition, a sponsor can request breakthrough therapy designation for a drug if it is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. Drugs designated as breakthrough therapies are eligible for intensive guidance from the FDA on an efficient drug development program, organizational commitment to the development and review of the product including involvement of senior managers, and, like fast track products, are also eligible for rolling review of the NDA. Both fast track and breakthrough therapy products are also eligible for accelerated approval and/or priority review, if relevant criteria are met.

        Under the FDA's accelerated approval regulations, the FDA may approve a drug for a serious or life threatening illness that provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely

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to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. A drug candidate approved on this basis is subject to rigorous post marketing compliance requirements, including the completion of Phase 4 or post approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post approval studies, or confirm a clinical benefit during post marketing studies, will allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated approval regulations are subject to prior review by the FDA.

        Once an NDA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current The Prescription Drug User Fee Act, or PDUFA, guidelines. Under the current PDUFA agreement, these six and ten month review periods are measured from the 60-day filing date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review from the date of submission. Most products that are eligible for fast track breakthrough therapy designation are also likely to be considered appropriate to receive a priority review.

        Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. In addition, the manufacturer of an investigational drug for a serious or life threatening disease is required to make available, such as by posting on its website, its policy on responding to requests for expanded access. Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and priority review do not change the standards for approval and may not ultimately expedite the development or approval process.

NDA Submission and Review by the FDA

        Assuming successful completion of the required clinical and preclinical testing, among other items, the results of product development, including chemistry, manufacture and controls, nonclinical studies and clinical trials are submitted to the FDA, along with proposed labeling, as part of an NDA. The submission of an NDA requires payment of a substantial user fee to the FDA. These user fees must be filed at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in some circumstances. One basis for a waiver of the application user fee is if the applicant employs fewer than 500 employees, including employees of affiliates, the applicant does not have an approved marketing application for a product that has been introduced or delivered for introduction into interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application.

        In addition, under the Pediatric Research Equity Act, an NDA or supplement to an NDA for a new active ingredient, indication, dosage form, dosage regimen or route of administration must contain data that are adequate to assess the safety and efficacy of the drug for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

        The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.

        The FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active ingredients, that have not previously been approved by the FDA to an advisory committee or provide in an action letter a summary of the reasons for not referring it to an advisory committee. The FDA may also refer drugs which present difficult questions of safety, purity or potency

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to an advisory committee. An advisory committee is typically a panel that includes clinicians and other experts who review, evaluate and make a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.

        The FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product's identity, strength, quality and purity. Before approving an NDA, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical trial sites to assure compliance with GCPs.

        Once the FDA receives an application, it has 60 days to review the NDA to determine if it is substantially complete to permit a substantive review, before it accepts the application for filing. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA. The FDA's NDA review times may differ based on whether the application is a standard review or priority review application. The FDA may give a priority review designation to drugs that are intended to treat serious conditions and provide significant improvements in the safety or effectiveness of the treatment, diagnosis, or prevention of serious conditions. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has set the review goal of 10 months from the 60-day filing date to complete its initial review of a standard NDA for a new molecular entity, or NME, and make a decision on the application. For non-NME standard applications, the FDA has set the review goal of 10 months from the date that the FDA receives the application to complete its initial review and to make a decision on the application. For priority review applications, the FDA has set the review goal of reviewing NME NDAs within six months of the 60-day filing date and non-NME applications within six months of the date that the FDA receives the application. Such deadlines are referred to as the PDUFA date. The PDUFA date is only a goal and the FDA does not always meet its PDUFA dates. The review process and the PDUFA date may also be extended if the FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding the submission.

        Once the FDA's review of the application is complete, the FDA will issue either a Complete Response Letter, or CRL, or approval letter. A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A CRL generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA and may require additional clinical or preclinical testing, or other information or analyses in order for the FDA to reconsider the application. The FDA has the goal of reviewing 90% of application resubmissions in either two or six months of the date that the FDA receives the application, depending on the kind of resubmission. Even with the submission of additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the FDA's satisfaction, the FDA may issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

        The FDA may delay or refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to monitor safety or efficacy of a product, or impose other conditions, including distribution restrictions or other risk management mechanisms. For example, the FDA may require a REMS as a condition of approval or following approval to mitigate any identified or suspected serious risks and ensure safe use of the drug. The FDA may prevent or limit further marketing of a product, or impose additional post-marketing requirements, based on the results of post-marketing studies or surveillance programs. After approval, some types of changes to the approved product, such as adding

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new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements, FDA notification and FDA review and approval. Further, should new safety information arise, additional testing, product labeling or FDA notification may be required.

        If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be marketed or may include contraindications, warnings or precautions in the product labeling, which has resulted in a Black Box warning. A Black Box warning is the strictest warning put in the labeling of prescription drugs or drug products by the FDA when there is reasonable evidence of an association of a serious hazard with the drug. The FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require Phase 4 post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post-marketing studies.

Post-approval Requirements

        Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including manufacturing, periodic reporting, product sampling and distribution, advertising, promotion, drug shortage reporting, compliance with any post-approval requirements imposed as a conditional of approval such as Phase 4 clinical trials, REMS and surveillance, recordkeeping and reporting requirements, including adverse experiences.

        After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any approved products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data. Drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies and to list their drug products, and are subject to periodic announced and unannounced inspections by the FDA and these state agencies for compliance with cGMPs and other requirements, which impose procedural and documentation requirements upon us and our third-party manufacturers.

        Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented, or FDA notification. FDA regulations also require investigation and correction of any deviations from cGMPs and specifications, and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance.

        Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in withdrawal of marketing approval, mandatory revisions to the approved labeling to add new safety information or other limitations, imposition of post-market studies or clinical trials to assess new safety risks, or imposition of distribution or other restrictions under a REMS program, among other consequences.

        The FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA. Physicians, in their independent professional medical judgement, may prescribe legally available products for uses that are not described in the product's labeling and that differ from those tested by us and approved by the FDA. We, however, are prohibited from marketing or promoting drugs for uses outside of the approved labeling.

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        In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing Act, or PDMA, which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. The Drug Supply Chain Security Act also imposes obligations on manufacturers of pharmaceutical products related to product and tracking and tracing.

        Failure to comply with any of the FDA's requirements could result in significant adverse enforcement actions. These include a variety of administrative or judicial sanctions, such as refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, corporate integrity agreements, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and imprisonment. It is also possible that failure to comply with the FDA's requirements relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection laws. Any of these sanctions could result in adverse publicity, among other adverse consequences.

Other Healthcare Regulations

        Our business activities, including but not limited to, research, sales, promotion, distribution, medical education and other activities are subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to the FDA, including the Department of Justice, the Department of Health and Human Services, or HHS, and its various divisions, including CMS and the Health Resources and Services Administration, the Department of Veterans Affairs, the Department of Defense and state and local governments. Our business activities must comply with numerous healthcare laws and regulations, including those described below.

        The federal Anti-Kickback Statute prohibits, among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for, or purchasing, leasing, ordering, or arranging for the purchase, lease or order of, any good, facility, item or service reimbursable under Medicare, Medicaid or other federal healthcare programs. The Anti-Kickback Statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers on the other hand. The term remuneration has been interpreted broadly to include anything of value. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the PPACA, amended the intent requirement of the federal Anti-Kickback Statute, and other healthcare criminal fraud statutes, so that a person or entity no longer needs to have actual knowledge of the federal Anti-Kickback Statute, or the specific intent to violate it, to have violated the

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statute. The PPACA also provided that a violation of the federal Anti-Kickback Statute is grounds for the government or a whistleblower to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act, or FCA.

        The federal civil and criminal false claims laws, including the FCA, prohibit, among other things, any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to, or approval by, the U.S. federal government, including the Medicare and Medicaid programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim or to avoid, decrease or conceal an obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of 2009, a claim includes "any request or demand" for money or property presented to the U.S. government. In addition, manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. The FCA also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free products to customers with the expectation that the customers would bill federal programs for the products; providing consulting fees and other benefits to physicians to induce them to prescribe products; engaging in promotion for "off-label" uses; and submitting inflated best price information to the Medicaid Rebate Program.

        As a condition of receiving Medicaid coverage for prescription drugs, the Medicaid Drug Rebate Program requires manufacturers to calculate and report to CMS their Average Manufacturer Price, or AMP, which is used to determine rebate payments shared between the states and the federal government and, for some multiple source drugs, Medicaid payment rates for the drug, and for drugs paid under Medicare Part B, to also calculate and report their average sales price, which is used to determine the Medicare Part B payment rate for the drug. In January 2016, CMS issued a final rule regarding the Medicaid Drug Rebate Program, or MDRP, effective April 1, 2016, that, among other things, revised the manner in which the AMP is calculated by manufacturers participating in the program and implemented certain amendments to the Medicaid rebate statute created under the PPACA. In addition, the MDRP requires pharmaceutical manufacturers to enter into and have in effect a National Drug Rebate Agreement, or NDRA, with the Secretary of HHS as a condition for states to receive federal matching funds for the manufacturer's outpatient drugs furnished to Medicaid patients. On March 23, 2018, CMS finalized updates to the NDRA, or the Updated NDRA, to incorporate a number legislative and regulatory changes, including changes to align with certain provisions of the PPACA.

        Drugs that are approved under a biologics license application, or BLA, or an NDA, including a 505(b)(2) NDA, are subject to an additional requirement to calculate and report the manufacturer's best price for the drug and inflation penalties which can substantially increase rebate payments. For BLA and NDA drugs, the Veterans Health Care Act requires manufacturers to calculate and report to the Department of Veterans Affairs a different price called the Non-Federal AMP, offer the drugs for sale on the Federal Supply Schedule, and charge the government no more than a statutory price referred to as the Federal Ceiling Price, which includes an inflation penalty. A separate law requires manufacturers to pay rebates on these drugs when paid by the Department of Defense under its TRICARE Retail Pharmacy Program. Knowingly submitting false pricing information to the government creates potential federal False Claims Act liability.

        HIPAA created additional federal criminal statutes that prohibits, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program

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or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick, scheme or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Additionally, the PPACA amended the intent requirement of some of these criminal statutes under HIPAA so that a person or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have committed a violation.

        Additionally, the federal Open Payments program pursuant to the Physician Payments Sunshine Act, created under Section 6002 of the PPACA and its implementing regulations, requires some manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with specified exceptions) to report annually information related to specified payments or other transfers of value provided to physicians, as defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually specified ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties.

        In addition, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements relating to the privacy, security and transmission of individually identifiable health information held by covered entities and their business associates. Among other things, HITECH makes HIPAA's security standards directly applicable to business associates, defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

        Many states have also adopted laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any third-party payor, including commercial insurers. We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information, state and local laws that require the registration of pharmaceutical sales representatives, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

        Ensuring that our internal operations and business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from government

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funded healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations, any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

Coverage and Reimbursement

        Our ability to commercialize any products successfully will also depend in part on the extent to which coverage and adequate reimbursement for the procedures utilizing our product candidates, performed by health care providers, once approved, will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which procedures, and the products utilized in such procedures, they will cover and establish reimbursement levels. Assuming coverage is obtained for procedures utilizing a given product, by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who undergo procedures for the treatment of their conditions, and their treating physicians, generally rely on third-party payors to reimburse all or part of the costs associated with the procedures which utilize our products. Treating physicians are unlikely to use and order our products unless coverage is provided and the reimbursement is adequate to cover all or a significant portion of the cost of the procedures which utilize our products. Therefore, coverage and adequate reimbursement for procedures which utilize new products is critical to the acceptance of such new products. Coverage decisions may depend upon clinical and economic standards that disfavor new products when more established or lower cost therapeutic alternatives are already available or subsequently become available.

        By way of example, in the United States, Congress created a New Technology Add-On Payment, or NTAP, pathway for innovative therapies used to treat Medicare beneficiaries in the hospital inpatient setting, provided that such therapies meet certain criteria, including, without limitation, demonstrating a substantial clinical improvement relative to services or technologies previously available. An NTAP provides additional payment to hospitals above the standard Medicare Severity Diagnosis-Related Group, or DRG, payment amount, under the inpatient prospective payment system. When criteria are met, CMS may provide incremental reimbursement for up to 65% of the cost of therapy, in addition to the standard DRG payment. We can provide no assurances, however, that we will seek, or whether CMS would approve a NTAP, for our product candidates, if approved.

        Government authorities and other third-party payors are developing increasingly sophisticated methods of cost containment, such as including price controls, restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Government and other third-party payors are increasingly challenging the prices charged for health care products and procedures, examining the cost effectiveness of procedures, and the products used in such procedures, in addition to their safety and efficacy, and limiting or attempting to limit both coverage and the level of reimbursement. Further, no uniform policy requirement for coverage and reimbursement exists among third-party payors in the United States, which causes significant uncertainty related to the insurance coverage and reimbursement of newly approved products, and the procedures which may utilize such newly approved products. Therefore, coverage and reimbursement can differ significantly from payor to payor and health care provider to health care provider. As a result, the coverage determination process is often a time-consuming and costly process that requires the provision of scientific and clinical support for the use of new products to each payor separately,

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with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

        There may be significant delays in obtaining coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA. Moreover, eligibility for coverage and reimbursement does not imply that a product, or the procedures which utilize such product, will be paid for in all cases or at a rate which the health care providers who purchase those products will find cost effective. Additionally, we expect pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes.

        We cannot be sure that coverage and reimbursement will be available for any product that we commercialize, or the procedures which utilize such product, and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.

Healthcare Reform Measures

        The United States and some non-U.S. jurisdictions are considering or have enacted a number of legislative and regulatory proposals designed to change the healthcare system. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

        For example, the pharmaceutical industry in the United States has been affected by the passage of PPACA, which, among other things: imposed new fees on entities that manufacture or import certain branded prescription drugs; expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs; implemented a licensure framework for follow-on biologic products; expanded health care fraud and abuse laws; revised the methodology by which rebates owed by manufacturers to the state and federal government under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including products that are inhaled, infused, instilled, implanted or injected; imposed an additional rebate similar to an inflation penalty on new formulations of drugs; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations; expanded the 340B program which caps the price at which manufacturers can sell covered outpatient pharmaceuticals to specified hospitals, clinics and community health centers; and provided incentives to programs that increase the federal government's comparative effectiveness research.

        There remain judicial and Congressional challenges to certain aspects of the PPACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the PPACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance mandated by the PPACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate". Additionally, the 2020 federal spending package permanently eliminated,

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effective January 1, 2020, the PPACA-mandated "Cadillac" tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amended the PPACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole". On December 14, 2018, a Texas U.S. District Court Judge ruled that the PPACA is unconstitutional in its entirety because the "individual mandate" was repealed by Congress as part of the Tax Act. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. It is unclear how this decision, future decisions, subsequent appeals, and other efforts to repeal and replace the PPACA will impact the PPACA.

        Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2.0% per fiscal year, which went into effect in April 2013, and due to subsequent legislative amendments, including the BBA, will remain in effect through 2029, unless additional U.S. Congressional action is taken. In addition, in January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Additionally, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, ended the use of the statutory formula for clinician payment and established a quality payment incentive program, also referred to as the Quality Payment Program. This program provides clinicians with two ways to participate, including through the Advanced Alternative Payment Models, or APMs, and the Merit-based Incentive Payment System, or MIPS. In November 2019, CMS issued a final rule finalizing the changes to the Quality Payment Program. At this time, it is unclear how the introduction of the Quality Payment Program will impact overall physician reimbursement under the Medicare program. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

        In addition, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time periods. Specifically, there have been several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of prescription drugs under Medicare and reform government program reimbursement methodologies for pharmaceutical products. The Trump administration's budget proposal for fiscal year 2020 contains further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Further, the Trump administration released a blueprint to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. HHS has solicited feedback on some of these measures and has implemented others under its existing authority For example, in, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS's policy change that was effective January 1, 2019.Although a number of these and other measures may require additional authorization to become effective, Congress and the Trump administration have each

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indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. In addition, individual states in the United States have become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit coverage and reimbursement of products.

The Foreign Corrupt Practices Act

        The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Non-U.S. Government Regulation

        To the extent that any of our product candidates, once approved, are sold in a country outside of the United States, we will be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals.

        In order to market our future products in the EEA (which is comprised of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein) and many other foreign jurisdictions, we must obtain separate regulatory approvals. More concretely, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of marketing authorizations:

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        Under the above described procedures, before granting the MA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Data and Marketing Exclusivity

        In the EEA, new products authorized for marketing, or reference products, qualify for eight years of data exclusivity and an additional two years of market exclusivity upon marketing authorization. The data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization in the European Union during a period of eight years from the date on which the reference product was first authorized in the European Union. The market exclusivity period prevents a successful generic or biosimilar applicant from commercializing its product in the European Union until 10 years have elapsed from the initial authorization of the reference product in the European Union. The 10-year market exclusivity period can be extended to a maximum of eleven years if, during the first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

Pediatric Investigation Plan

        In the EEA, marketing authorization applications for new medicinal products not authorized have to include the results of studies conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA's Pediatric Committee, or PDCO. The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought. The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults. Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients. Once the marketing authorization is obtained in all Member States of the European Union and study results are included in the product information, even when negative, the product is eligible for six months' supplementary protection certificate extension.

Employees

        As of December 31, 2019, we had 54 full-time employees and two part-time employees, all of whom were based in Israel and one full time employee who is based in the United States. Of these employees, 42 are primarily engaged in research and development activities and 14 are primarily engaged in general and administrative matters. A total of 11 employees have a Medical Doctor or Doctor of Philosophy degree. None of our employees are represented by a labor union. We have never experienced any employment-related work stoppages and believe our relationships with our employees are good.

        Israeli labor laws govern the length of the workday and workweek, minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days, advance notice of termination, payments to the National Insurance Institute, and other conditions of employment and include equal opportunity and anti-discrimination laws. While none of our employees is party to any collective bargaining agreements, certain provisions of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the

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Coordination Bureau of Economic Organizations (including the Industrialists' Associations) are applicable to our employees in Israel by order of the Israeli Ministry of Economy and Industry. These provisions primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation pay and travel expenses. We generally provide our employees with benefits and working conditions beyond the required minimums.

Facilities

        Our principal executive offices are located at 18 Hasivim Street, Petach Tikva 4959376, Israel, where we lease an approximately 33,500 square foot facility. This Israeli facility houses our administrative headquarters, research and development laboratories and state-of-the-art manufacturing facility. We also maintain an office at 47 Maple Street, Suite 302A, Summit, New Jersey, which serves as the headquarters for our U.S subsidiary.

Environmental, Health and Safety Matters

        We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily Israel, governing, among other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals, air, water and ground contamination; air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage. Our operations use chemicals and produce waste materials and sewage and require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health. The Ministry of Environmental Protection and the MOH, local authorities and the municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations. These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation. If we fail to comply with such laws, regulations or permits, we may be subject to fines and other civil, administrative or criminal sanctions, including the revocation of permits and licenses necessary to continue our business activities. In addition, we may be required to pay damages or civil judgments in respect of third-party claims, including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport, manufacture or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several liability for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments could have a material adverse effect on our business, financial condition and results of operations. In addition, laws and regulations relating to environmental, health and safety matters are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance measures or to penalties for activities that were previously permitted.

Legal Proceedings

        We are not currently party to any material legal proceedings.

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MANAGEMENT

Executive Officers and Directors

        The following table sets forth information regarding our executive officers and directors, including their ages as of December 31, 2019:

Name
  Age   Position
Executive Officers        
Amir Weisberg   64   Chief Executive Officer and Director
Dikla Czaczkes Akselbrad   46   Executive Vice President and Chief Financial Officer
Noam Emanuel, Ph.D.    60   Chief Technology Officer, Chief Scientific Officer and Director
Shaul Mukhtar, Ph.D.    64   Chief Operating Officer
Dalit Hazan   49   Vice President of Regulatory Affairs
Taunia Markvicka, Pharm.D.    51   Chief Operating Officer, PolyPid Inc.
Non-Employee Directors        
Jacob Harel   64   Chairman
Yechezkel Barenholz, Ph.D.    78   Director
Chaim Hurvitz   59   Director
Itzhak Krinsky, Ph.D.    67   Director
Gerry Rubens.    68   Director
Anat Tsour Segal   53   Director

Executive Officers

        Amir Weisberg has served as our Chief Executive Officer and a director since October 2010. From 2007 to 2010, Mr. Weisberg served as the chief executive officer of Implant Protection Ltd. He has over 20 years of entrepreneurial experience, including as chief executive officer of several startup companies in the life science sphere.

        Dikla Czaczkes Akselbrad has served as our Executive Vice President and Chief Financial Officer since December 2016. Prior to that time, Ms. Czaczkes Akselbrad served as our Chief Strategy Officer from July 2014 to December 2016. She holds a B.A. in accounting and economics and an MBA in finance, both from Tel Aviv University, and is a certified public accountant in Israel.

        Noam Emanuel, Ph.D.    has served as our Chief Technology Officer and a director since October 2010 and as our Chief Scientific Officer since April 2019. Dr. Emanuel has over 15 years of experience in drug development, drug delivery and immunology, including with respect to local, systemic and trans-dermal drug delivery systems, as well as in imaging and diagnostics. He holds a Ph.D. in immunology and drug delivery from the Hebrew University of Jerusalem.

        Shaul Mukhtar, Ph.D.    has served as our Chief Operating Officer and Executive Vice President since February 2019. Dr. Mukhtar also serves as a consultant with L.S.M. consulting services, a position he has held since February 2018, and as an affiliated partner with the GlobalClose Alliances Group, a position he has held since July 2018. Dr. Mukhtar previously worked at Teva Pharmaceuticals Industries Ltd., most recently as the Senior Vice President, Chief Operating Officer and Regional Research and Development Manager for Teva Japan and South Korea from 2013 to December 2017. Dr. Mukhtar holds a Ph.D. in pharmaceutical sciences from Hebrew University of Jerusalem, and an MBA in international business administration from Tel Aviv University.

        Dalit Hazan has served as our Vice President of Regulatory Affairs since March 2018. Prior to that time, Ms. Hazan was the head of Global Regulatory Affairs at Teva Pharmaceuticals Industries Ltd.

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From 2013 to April 2016. She holds a B.S. in biology and a M.S. in physiology and pharmacology from the Sackler Faculty of Medicine at Tel Aviv University.

        Taunia Markvicka, Pharm.D.    has served as Chief Operating Officer for PolyPid Inc., our U.S. subsidiary, since May 2019. Prior to that time, Dr. Markvicka served as the Chief Commercial Officer at Symbiomix Therapeutics, LLC from March 2016 to July 2018 and the Senior Vice President, Chief Commercial Officer at Pacira Pharmaceuticals, Inc. from January 2008 to January 2016. She served as a director of CorMedix from April 2014 to June 2017. She holds a B.S. in pharmacy from Creighton University, a Pharm.D. in pharmacy from the University of Nebraska and an M.B.A. from Saint Joseph's University.

Non-Employee Directors

        Jacob Harel has served as a director since November 2017 and the chairman of our board of directors since December 2017. Mr. Harel currently serves as the Chief Executive Officer of The Harel Group, a consulting firm that provides business development support to pharmaceutical companies, which he founded in 2014. He holds a B.S. in economics from Haifa University and an M.B.A. from Tel Aviv University.

        Yechezkel Barenholz, Ph.D.    has served as a director since April 2008. Dr. Barenholz currently serves as head of the Laboratory of Membrane and Liposome Research at the Department of Biochemistry of the Hadassah Medical School at the Hebrew University of Jerusalem, a position he has held since 1978. He is the co-inventor of Doxil, the first nano-delivery system approved by the FDA. He holds a B.S., M.S. and Ph.D. in biochemistry from the Hebrew University of Jerusalem.

        Chaim Hurvitz has served as a director since February 2016. Mr. Hurvitz currently serves as Chief Executive Officer of CH Health, a private venture capital firm, a position he has held since May 2011. He served as chairman of Galmed Pharmaceuticals Ltd. from 2011 to December 2018 and a director of UroGen Pharma Ltd. from May 2013 to December 2017. He holds a B.A. in political science and economics from Tel Aviv University.

        Itzhak Krinsky, Ph.D.    has served as a director since January 2019. Dr. Krinsky previously worked at Teva Pharmaceuticals Industries Ltd., most recently as a Senior Executive, Special Assignments from May 2016 to February 2017 and as the Chairman of Teva Japan and South Korea and Head of Business Development, Asia Pacific from October 2012 to April 2016. Dr. Krinsky served as a director of Kamada Ltd. from November 2017 to November 2019. He holds a B.A. and M.A. in economics from Tel Aviv University and a Ph.D. in economics from McMaster University.

        Gerry Rubens has served as a director since January 2019. Mr. Rubens has served as Managing Director of Belami Ltd. since October 1979. Mr. Rubens holds a B.S. in industrial engineering and management from the Technion—Israel Institute of Technology.

        Anat Tsour Segal has served as a director since April 2008. Ms. Segal founded Anat Segal Consulting & Technology Investments, an independent consulting and investment banking practice advising Israeli technology and healthcare companies, in January 2000. She has served as Chief Executive Officer of Capital Nature since October 2018. From April 2003 to February 2016, she also served as the founder, chief executive officer and a director of Xenia Venture Capital. She holds a B.A. in economics and management, an M.B.A. in finance and an LL.B. from Tel Aviv University.

Arrangements Concerning Election of Directors; Family Relationships

        Our board of directors consists of eight directors, each of whom will continue to serve pursuant to their appointment until the first annual general meeting of shareholders held after this offering. We are

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not a party to, and are not aware of, any voting agreements among our shareholders. In addition, there are no family relationships among our executive officers and directors.

Corporate Governance Practices

        Companies incorporated under the laws of the State of Israel whose shares are publicly traded, including companies with shares listed on The Nasdaq Global Market, are considered public companies under Israeli law and are required to comply with various corporate governance requirements under Israeli law relating to such matters as the composition and responsibilities of the audit committee and the compensation committee (subject to certain exceptions that we intend to utilize), and a requirement to have an internal auditor. This is the case even if our shares are not listed on the Tel Aviv Stock Exchange, or TASE, which our shares are not expected to be. These requirements are in addition to the corporate governance requirements imposed by the rules of The Nasdaq Global Market, or the Nasdaq Rules, and other applicable provisions of U.S. securities laws to which we will become subject (as a foreign private issuer) upon the closing of this offering and the listing of our ordinary shares on The Nasdaq Global Market. Under the Nasdaq Rules, a foreign private issuer may generally follow its home country rules of corporate governance in lieu of the comparable requirements of the Nasdaq Rules, except for certain matters including the composition and responsibilities of the audit committee.

        We intend to rely on this "home country practice exemption" with respect to the following Nasdaq requirements:

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        Other than as stated above, we currently intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act of 2002, the rules adopted by the SEC and The Nasdaq Global Market's listing standards. Nevertheless, we may in the future decide to use the foreign private issuer exemption with respect to some or all of the other Nasdaq corporate governance rules. Following our home country governance practices, as opposed to the requirements that would otherwise apply to a company listed on Nasdaq, may provide less protection than is accorded to investors under the Nasdaq listing requirements applicable to domestic issuers. For more information, see "Risk Factors—As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable Nasdaq requirements, and we will not be subject to certain U.S. securities laws including, but not limited to, U.S. proxy rules and the filing of certain Exchange Act reports."

Board Practices

Board of Directors

        Under the Israeli Companies Law, our board of directors is responsible for setting our general policies and supervising the performance of management. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the terms of the employment agreement that we have entered into with him. All other executive officers are also appointed by our board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with them.

        Under our amended and restated articles of association, to be effective upon the closing of this offering, our board of directors must consist of at least five directors and not more than eleven directors. Our board of directors will consist of                        directors upon the closing of this offering. Other than vacancies to be filled through selection by the remaining members of our board, the Israeli Companies Law and our amended and restated articles of association provide that directors are elected at the annual general meeting of our shareholders by a vote of the majority of the total voting power of our company voting in person, by proxy or by other voting instrument at that meeting. We have only one class of directors.

        Under the Israeli Companies Law, our board of directors is required to employ independent judgment and discretion when voting, and is prohibited from entering into any voting arrangements with respect to actions taken at meetings of the board. Further, the Israeli Companies Law provides that in the event a director learns about an alleged breach of law or improper conduct of business

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relating to a company matter, said director must promptly take action to summon a meeting of the board of directors to address any such breach.

        Notwithstanding the exemptions available to foreign private issuers under Nasdaq Rules, we intend to follow the requirements of the Nasdaq Rules with regard to the process of nominating directors by means of our compensation, nominating and corporate governance committee, which is comprised of directors who our board has deemed to be independent under Nasdaq Rules.

        In addition, our amended and restated articles of association allows our board of directors to appoint directors to fill vacancies on our board of directors, including filling empty board seats up to the maximum number of directors permitted under our articles of association, for a term of office equal to the remaining period of the term of office of each director whose office has been vacated. Vacancies on our board of directors may be filled by a vote of a simple majority of the directors then in office. A director so appointed will hold office until the next annual general meeting of our shareholders in which the other directors then in office are proposed to be replaced or reappointed.

        Directors may be removed from office by a resolution at a general meeting of shareholders adopted by a vote of 65% of the total voting power of our company in accordance with the Israeli Companies Law and our amended and restated articles of association.

        Under the Israeli Companies Law, and except as described below, we would be required to include on our board of directors at least two members, each of whom qualifies as an external director, and as to whom special qualifications and other provisions would be applicable. We would also be required to include one such external director on each of our board committees.

        Under regulations promulgated under the Israeli Companies Law, Israeli companies whose shares are traded on stock exchanges such as The Nasdaq Global Market that do not have a controlling shareholder (as defined therein) and which comply with the requirements of the jurisdiction where the company's shares are traded with respect to the appointment of independent directors and the composition of an audit committee and compensation committee, may elect not to follow the Israeli Companies Law requirements with respect to the composition of its audit committee and compensation committee and the appointment of external directors. As we do not have a controlling shareholder, we intend to comply with the requirements of the Nasdaq Stock Market with respect to the composition of our board and such committees, and therefore we will be exempt from the Israeli Companies Law requirements with respect thereto, including the appointment of external directors.

Director Independence

        Although not required of foreign private issuers under Nasdaq Rules, we intend to comply with the requirements thereunder applicable to domestic listed companies that a majority of the board of directors be deemed to be independent under such rules, as well as the independence requirements that would be applicable to our audit committee and compensation, nominating and corporate governance committee if we were a domestic listed company, as described below. In light of this obligation, our board of directors has undertaken a review of the independence of our directors under current rules and regulations of the SEC and Nasdaq Rules and considered whether any of our directors has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning such director's background, employment and affiliations, including family relationships, our board of directors determined that                , representing            of our        directors, are "independent directors" as defined under current rules and regulations of the SEC and Nasdaq Rules. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our share capital by each non-employee director

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and the transactions involving them described in "Certain Relationships and Related Party Transactions."

Leadership Structure of the Board

        In accordance with the Israeli Companies Law and our amended and restated articles of association, our board of directors is required to appoint one of its members to serve as chairman of the board of directors. Our board of directors has appointed Jacob Harel to serve as chairman of the board of directors.

Board Committees

        Under the Israeli Companies Law and our amended and restated articles of association, our board of directors is permitted to form committees, and to delegate to any such committee powers allotted to the board of directors, subject to certain exceptions. In general, the board of directors may overturn a resolution adopted by a committee it has formed; provided, however, that the board's decision shall not affect the ability of third parties, who were not aware of such decision, to rely on the committee's resolution prior to the time it is overturned. Only members of the board of directors can be members of a board committee, unless the committee is solely advisory.

Audit Committee

        Following the listing of our ordinary shares on The Nasdaq Global Market, our audit committee will consist of            .

Israeli Companies Law Requirements

        Under the Israeli Companies Law, we will be required to appoint an audit committee following the closing of this offering.

Nasdaq Listing Requirements

        Under the Nasdaq Rules, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has accounting or related financial management expertise. We are permitted to phase-in our compliance with the independent audit committee requirements set forth in the Nasdaq Rules and the SEC rules, as follows: (1) we must have one independent member at the time of listing, (2) we must have a majority of independent members within 90 days of listing and (3) we must have all independent members within one year of listing. We expect that, within 90 days of our listing on The Nasdaq Global Market, a third independent director for audit committee purposes (as determined under the Nasdaq Rules and the SEC rules) will have been added to our audit committee.

        All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and The Nasdaq Global Market. Our board of directors has determined that            is an audit committee financial expert as such term is defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq Rules. Each of the members of our audit committee is "independent" as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Rules.

Audit Committee Role

        Our audit committee charter, to be effective upon the listing of our shares on The Nasdaq Global Market, sets forth the responsibilities of the audit committee consistent with the rules and regulations

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of the SEC and the Nasdaq Rules, as well as the requirements for such committee under the Israeli Companies Law, including the following:

        Our audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the auditors are independent of management.

        Under the Israeli Companies Law, our audit committee is responsible, among other things, for:

Compensation, Nominating and Corporate Governance Committee and Compensation Policy

        Upon the listing of our ordinary shares on The Nasdaq Global Market, we intend to establish a compensation, nominating and corporate governance committee. The composition of our compensation, nominating and corporate governance committee meets the requirements for and guidance under the Nasdaq Rules and current SEC rules and regulations applicable to domestic issuers. The members of this committee will be            , each of whom is independent in accordance with the Nasdaq rules.

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Israeli Companies Law Requirements

        Under the Israeli Companies Law, the board of directors of a public company must appoint a compensation committee.

        The duties of the compensation committee under the Israeli Companies Law, include the recommendation to the company's board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. That policy must be adopted by the company's board of directors, after considering the recommendations of the compensation, nominating and corporate governance committee, and will need to be approved by the company's shareholders, which approval requires what we refer to as a Special Majority Approval for Compensation. A Special Majority Approval for Compensation requires shareholder approval by a majority vote of the shares present and voting at a meeting of shareholders called for such purpose, provided that either: (i) such majority includes at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such compensation arrangement, excluding abstentions; or (ii) the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement does not exceed 2% of the company's aggregate voting rights. Our board of directors intends to adopt, and we will ask our shareholders to approve, a compensation policy to be effective in connection with, and upon the consummation of, this offering, which policy would be in effect until the fifth anniversary of this offering.

        The compensation policy must (subject to certain exemptions) set the framework and limitation for decisions concerning the financial terms of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company's long-term objectives, business plan and policies, and creation of appropriate incentives for office holders. It must also consider, among other things, the company's risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:

        The compensation policy must also include the following principles:

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Compensation, Nominating and Corporate Governance Committee Roles

        The compensation, nominating and corporate governance committee is responsible for (i) recommending the compensation policy to our board of directors for its approval (and subsequent approval by our shareholders) and (ii) duties related to the compensation policy and to the compensation of our office holders, including:

        Our compensation, nominating and corporate governance charter, to be effective upon the closing of this offering, sets forth the responsibilities of the compensation, nominating and corporate committee, which include:

        In addition, our compensation, nominating and corporate governance committee is responsible for:

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Disclosure of Compensation of Executive Officers

        For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers on an individual, rather than on an aggregate, basis. Nevertheless, under regulations promulgated under the Israeli Companies Law, we will be required, after we become a public company, to disclose the annual compensation of our five most highly compensated office holders (as defined under the Israeli Companies Law) on an individual basis. This disclosure will not be as extensive as that required of a U.S. domestic issuer. We intend to commence providing such disclosure, at the latest, in the notice (which is generally part of the proxy statement) for our first annual general meeting of shareholders following this offering, which will be furnished under cover of a Report of Foreign Private Issuer on Form 6-K, or we may elect to provide such information at an earlier date.

Internal Auditor

        Under the Israeli Companies Law, the board of directors of an Israeli public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not, among other things, be:

        The role of the internal auditor is to examine, among other things, our compliance with applicable law and orderly business procedures, and to report to the chief executive officer, the chairman of the board and the chairman of the audit committee. The internal auditor is entitled to receive notice of audit committee meetings and to participate in them. In addition, the internal auditor may request that the chairman of the audit committee convene a meeting within a reasonable time to discuss an issue raised by the internal auditor. The internal auditor is responsible for preparing a proposal for an annual or periodical audit plan and submit such plan to the board of directors or the audit committee for their approval. We intend to appoint an internal auditor following the closing of this offering.

Approval of Related Party Transactions under Israeli Law

Fiduciary Duties of Directors and Executive Officers

        The Israeli Companies Law codifies the fiduciary duties that office holders owe to a company. Each person listed in the table under "—Executive Officers and Directors" is an office holder under the Israeli Companies Law.

        An office holder's fiduciary duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of loyalty includes an obligation that an office holder act in good faith and in the best interests of the company.

        The duty of care includes a duty to use reasonable means to obtain:

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        The duty of loyalty includes a duty to:

Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions

        The Israeli Companies Law requires that an office holder promptly disclose to the board of directors any personal interest that he or she may be aware of and all related material information or documents concerning any existing or proposed transaction with the company. An interested office holder's disclosure must be made promptly and in any event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an interest of any person in an action or transaction of a company, including a personal interest of such person's relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she has the right to appoint at least one director or the general manager, but excluding a personal interest stemming from one's ownership of shares in the company.

        A personal interest also includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such person has no personal interest in the matter.

        If it is determined that an office holder has a personal interest in a non-extraordinary transaction, meaning any transaction that is in the ordinary course of business, on market terms or that is not likely to have a material impact on the company's profitability, assets or liabilities, approval by the board of directors is required for the transaction, unless the company's articles of association provide for a different method of approval. Any such transaction that is adverse to the company's interests may not be approved by the board of directors.

        If it is determined that an office holder has a personal interest in a transaction, which is not an extraordinary transaction, approval by the board of directors is required for the transaction, unless the company's articles of association provide for a different method of approval. Further, so long as an office holder has disclosed his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise be deemed a breach of his or her duty of loyalty. However, a company may not approve a transaction or action that is not in the company's interest or that is not performed by the office holder in good faith.

        An extraordinary transaction in which an office holder has a personal interest requires approval first by the company's audit committee and subsequently by the board of directors.

        The compensation of, or an undertaking to indemnify or insure, an office holder who is not a director generally requires approval first by the company's compensation committee, then by the company's board of directors. If such compensation arrangement or an undertaking to indemnify or insure is inconsistent with the company's stated compensation policy, or if the office holder is the chief executive officer (apart from a number of specific exceptions), then such arrangement is further subject

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to a Special Majority Approval for Compensation. If the shareholders of a company do not approve the compensation terms of office holders at a meeting of the shareholders, other than directors, the compensation committee and board of directors may override the shareholders' decision, subject to certain conditions. Arrangements regarding the compensation, indemnification or insurance of a director (who is not the chief executive officer) require the approval of the compensation committee, board of directors and shareholders by simple majority, in that order, and under certain circumstances, a Special Majority Approval for Compensation.

        Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at such a meeting or vote on that matter unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present in order to present the transaction that is subject to approval. If a majority of the members of the audit committee or the board of directors (as applicable) has a personal interest in the approval of a transaction, then all directors may participate in discussions of the audit committee or the board of directors (as applicable) on such transaction and the voting on approval thereof, but shareholder approval is also required for such transaction.

Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions

        Pursuant to Israeli law, the disclosure requirements regarding personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. In the context of a transaction involving a controlling shareholder of the company or in which a controlling shareholder has an interest, a controlling shareholder also includes a shareholder who holds 25% or more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose, the holdings of all shareholders who have a personal interest in the same transaction will be aggregated.

        The approval of the audit committee, the board of directors and the shareholders of the company, in that order, is required for (i) extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (ii) the engagement with a controlling shareholder or his or her relative, directly or indirectly, for the provision of services to the company, (iii) the terms of engagement and compensation of a controlling shareholder or his or her relative who is not an office holder or (iv) the employment of a controlling shareholder or his or her relative by the company, other than as an office holder. In addition, the shareholder approval requires one of the following, which we refer to as a Special Majority:

        To the extent that any such transaction with a controlling shareholder is for a period extending beyond three years and under certain conditions, five years from a company's initial public offering, approval is required at the end of such period unless, with respect to certain transactions, the audit committee determines that the duration of the transaction is reasonable given the circumstances related thereto.

        Arrangements regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require the approval of the compensation committee, board of directors and shareholders by a Special Majority.

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        Pursuant to regulations promulgated under the Israeli Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors or other office holders, that would otherwise require approval of a company's shareholders may be exempt from shareholder approval under certain conditions.

Shareholder Duties

        Pursuant to the Israeli Companies Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following matters:

        A shareholder also has a general duty to refrain from discriminating against other shareholders.

        In addition, certain shareholders have a duty of fairness toward the company. These shareholders include a controlling shareholder, a shareholder who knows that he or she has the power to determine the outcome of a shareholder vote and a shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company. The Israeli Companies Law does not define the substance of the duty of fairness, except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.

Exculpation, Insurance and Indemnification of Directors and Officers

        Under the Israeli Companies Law, a company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association which will be effective upon the closing of this offering include such a provision. A company may not exculpate in advance a director from liability arising out of a breach of the duty of care with respect to a distribution.

        Under the Israeli Companies Law, a company may indemnify an office holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:

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        Under the Israeli Companies Law, a company may insure an office holder against the following liabilities incurred for acts performed by him or her as an office holder, if and to the extent provided in the company's articles of association:

        Under the Israeli Companies Law, a company may not indemnify or insure an office holder against any of the following:

        Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders. See "—Approval of Related Party Transactions under Israeli Law—Fiduciary Duties of Directors and Executive Officers."

        Our amended and restated articles of association to be effective upon the closing of this offering will permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Israeli Companies Law.

        We intend to obtain directors and officers liability insurance for the benefit of our office holders and intend to increase such coverage in an amount standard for a company of our size prior to the closing of this offering. We intend to maintain such increased coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law. In addition, prior to the

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closing of this offering, we intend to enter into agreements with each of our directors and executive officers exculpating them from liability to us for damages caused to us as a result of a breach of duty of care and undertaking to indemnify them, in each case, to the fullest extent permitted by our amended and restated articles of association to be effective upon the closing of this offering and Israeli law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance. In the opinion of the SEC, however, indemnification of directors and office holders for liabilities arising under the Securities Act is against public policy and therefore unenforceable.

Code of Business Conduct and Ethics

        We will adopt, effective upon the consummation of this offering, a Code of Business Conduct and Ethics applicable to all of our directors and employees, including our Chief Executive Officer, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a "code of ethics" as defined in Item 16B of Form 20-F promulgated by the SEC. Upon the effectiveness of the registration statement of which this prospectus forms a part, the full text of the Code of Business Conduct and Ethics will be posted on our website at www.polypid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. If we make any amendment to the Code of Business Conduct and Ethics or grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC. Under Item 16B of Form 20-F, if a waiver or amendment of the Code of Business Conduct and Ethics applies to our principal executive officer, principal financial officer, principal accounting officer or controller and relates to standards promoting any of the values described in Item 16B(b) of Form 20-F, we are required to disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.

Compensation of Executive Officers and Directors

        The aggregate compensation paid, and equity-based compensation and other payments expensed by us, to our directors and executive officers with respect to the year ended December 31, 2019 was $3.2 million. This amount does not include business travel, relocation, professional and business association dues and expenses reimbursed to office holders, and other benefits commonly reimbursed or paid by companies in our industry.

        As of December 31, 2019, options to purchase 1,095,095 ordinary shares granted to our directors and executive officers were outstanding under our 2012 Share Option Plan at a weighted average exercise price of $4.83 per share. Such number, and the following table, excludes options to purchase up to 127,882 ordinary shares, which are contingent upon the closing of this offering. The following table sets forth information regarding options granted to our executive officers and directors during the year ended December 31, 2019:

Name
  Grant Date   Stock
Options
  Exercise
Price
  Expiration
Date

Shaul Mukhtar

  March 12, 2019     12,500   $ 7.67   March 12, 2029

Taunia Markvicka

  May 23, 2019     50,000   $ 7.67   May 23, 2029

Jacob Harel

  August 7, 2019     56,250   $ 7.67   August 7, 2029

Itzhak Krinsky

  August 7, 2019     18,750   $ 8.27   August 7, 2029

        Our Chief Executive Officer, Amir Weisberg, and our Chief Technology Officer and Chief Scientific Officer, Noam Emanuel, each will receive a bonus payment in the amount of $                , and our Chief Financial Officer, Dikla Czaczkes Akselbrad, will receive a bonus payment in the amount of $                .

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        The following table sets forth information regarding options granted to our director Chaim Hurvitz, the vesting of which is contingent upon the closing of this offering:

Name
  Grant Date   Stock
Options
  Exercise
Price
  Expiration
Date

Chaim Hurvitz

  June 1, 2017     127,882   $ 3.92   June 1, 2027

        Our board of directors intends to adopt, and we will ask our shareholders to approve, a compensation policy to be effective upon the consummation of this offering, which will provide for cash and equity compensation to be paid to our non-employee directors for their service on the board of directors and its committees. Pursuant to the compensation policy, the maximum annual cash compensation to be paid for service on our board of directors is                , or                for service as the chairperson of our board of directors. In addition, pursuant to the compensation policy, we may also provide additional compensation for service on our board of directors committees as follows:                for service on our audit committee, or                for service as the chairperson of our audit committee, and                for service on our compensation, nominating and corporate governance committee, or                for service as the chairperson of our compensation, nominating and corporate governance committee. In addition, we intend to award equity compensation in the form of options to each of our non-employee directors who are serving as of the consummation of this offering to purchase ordinary shares with an exercise price equal to the public offering price in this offering, and for newly appointed directors thereafter, to award equity compensation in the form of options to purchase ordinary shares with an exercise price equal to the fair market value of the shares on the date of grant. We further intend to award on an annual basis equity compensation in the form of options to purchase ordinary shares with an exercise price equal to the fair market value of the shares on the date of grant to each of our non-employee directors. The ordinary shares to be issued to our non-employee directors would be awarded under the 2012 Plan and the awards to be granted thereunder will be subject to the provisions thereof, including with respect to vesting and termination.

        Other than with our Chief Executive Officer, Mr. Amir Weisberg, and our Chief Technology Officer, Dr. Noam Emanuel, we do not have written agreements with any director providing for benefits upon the termination of their employment with our company. See "—Agreements with Executive Officers."

Agreements with Executive Officers

        We currently have employment agreements with all of our executive officers. We contribute (usually following a trial period of three months) monthly amounts for the benefit and on behalf of all our employees located in Israel to a pension fund pursuant to Section 14 of Israel's Severance Pay Law. Employees covered by Section 14 are entitled to monthly deposits at a rate of 8.33% of their monthly salary, made on their behalf by us. Payments in accordance with Section 14 release us from any future severance liabilities in respect of those employees. We do not set aside or accrue any additional amounts to provide pension, severance, retirement or other similar benefits or expenses. Our executive officers do not receive benefits upon the termination of their respective employment with us, other than benefits under Section 14.

Equity Incentive Plans

Amended and Restated 2012 Share Option Plan

        Our Amended and Restated 2012 Share Option Plan, or the 2012 Plan, was adopted by our board of directors on August 29, 2012 and amended on January 30, 2018. The 2012 Plan provides for the grant of options to our directors, employees, office holders, service providers and consultants. As December 31, 2018, a total of 1,292,091 shares are reserved but unissued under our 2012 Plan.

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        The 2012 Plan is administered by our board of directors, which, on its own or upon the recommendation of a remuneration committee or any other similar committee of the board of directors, shall determine, subject to applicable law, the identity of grantees of awards and various terms of the grant. With respect to those grantees subject to Israeli taxation, the 2012 Plan provides for granting options in compliance with Section 102 of the Israeli Income Tax Ordinance, 1961, or the Ordinance, under the capital gains track, and for grants to non-employee Israeli service providers, consultants and shareholders who hold 10% or more of our total share capital or are otherwise controlling shareholders pursuant to section 3(i) of the Ordinance, as further detailed below.

        Section 102 of the Ordinance allows employees, directors and officers who are not controlling shareholders and are considered Israeli residents to receive favorable tax treatment for compensation in the form of shares or options. Our non-employee service providers and controlling shareholders may only be granted options under section 3(i) of the Ordinance, which does not provide for similar tax benefits. Section 102 includes two alternatives for tax treatment involving the issuance of options or shares to a trustee for the benefit of the grantees and also includes an additional alternative for the issuance of options or shares directly to the grantee. Section 102(b)(2) of the Ordinance, the most favorable tax treatment for the grantee, permits the issuance to a trustee under the "capital gain track." However, under this track we are not allowed to deduct an expense with respect to the issuance of the options or shares.

        Generally, options will not be exercisable before the first anniversary of the date of grant of options, with respect to the 33.0% of the option shares, and with respect to each additional 8.375% of the option shares, become exercisable at the end of each three-month period during the second and third years from the date of grant. Generally, options that are not exercised within ten years from the grant date shall expire.

        Other than by will or laws of descent, neither the options nor any right in connection with such options are assignable or transferable. If we terminate a grantee's employment or service for any reason whatsoever, other than for cause, any options granted to such grantee that are not vested shall immediately expire. All of the grantee's vested options shall be deemed expired on the earlier of: (a) the expiration date of such vested options as was in effect immediately prior to such termination; or (b) three months following the date of such termination, or if such termination is the result of death or disability of the grantee, 12 months from the date of such termination. However, for certain executives and other senior management, our board of directors (and shareholders where applicable) has resolved that the expiration date of their vested options shall be between two to four years following the date of such termination. If we terminate a grantee's employment or service for cause, all of the grantee's vested and unvested options will expire on the date of termination. Also, and subject to applicable law, if the grantee's employment or services is terminated for cause, then we will have a right of repurchase against any shares issued pursuant to the exercise of options. In the event that we exercise such right of repurchase, we will pay such grantee for each such share being repurchased an amount equal to the price originally paid by the grantee for such share. Alternatively, we may assign such rights of repurchase to our shareholders pro rata to their respective holdings of our issued and outstanding shares.

        If we are party to a merger or consolidation, outstanding options and shares acquired under the 2012 Plan will be subject to the agreement of merger or consolidation, which will provide for one or more of the following: (i) the assumption of such options by the surviving corporation or its parent, (ii) the substitution by the surviving corporation or its parent of new options, or (iii) in the event that the successor entity neither assumes nor substitutes all outstanding options, then each respective grantee shall have a period of 15 days to exercise his or her vested options, after which all remaining options, whether vested or not shall expire. For certain individuals, if their position is terminated within a certain period after the transaction, their options shall accelerate.

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        In the event of any variation in our share capital, including a share dividend, share split, combination or exchange of shares, recapitalization, or any other like event, the number, class and kind of shares subject to the 2012 Plan and outstanding options, and the exercise prices of the options, will be appropriately and equitably adjusted so as to maintain the proportionate number of shares without changing the aggregate exercise price of the options.

        On January 30, 2018, our board of directors adopted an appendix to the 2012 Plan for U.S. residents, which was approved by our shareholders on February 8, 2018. Under this appendix, the 2012 Plan provides for the granting of options to U.S. residents in compliance with the U.S. Internal Revenue Code of 1986, as amended.

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PRINCIPAL SHAREHOLDERS

        The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of                    , 2020 by:

        The beneficial ownership of our ordinary shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power, or the right to receive the economic benefit of ownership. For purposes of the table below, we deem ordinary shares issuable pursuant to options that are currently exercisable or exercisable within 60 days of                        , 2020 to be outstanding and to be beneficially owned by the person holding the options for the purposes of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the percentage ownership of any other person.

        The percentage of shares beneficially owned has been computed on the basis of             ordinary shares outstanding as of                        , 2020, which reflects the assumed exercise for cash of all of our warrants to purchase Series A preferred shares and the subsequent conversion of all of our preferred shares into ordinary shares.

        As of December 31, 2019 and based on their reported registered office, 375 of our shareholders were U.S. persons, holding in aggregate approximately 25.9% of our outstanding ordinary shares immediately prior to this offering. We have also set forth below information known to us regarding any significant change in the percentage ownership of our ordinary shares by any major shareholders during the past three years. Except where otherwise indicated, we believe, based on information furnished to us by such owners, that the beneficial owners of the ordinary shares listed below have sole investment and voting power with respect to such shares.

        Following the closing of this offering, all of our shareholders, including the shareholders listed below, will have the same voting rights attached to their ordinary shares, and neither our principal shareholders nor our directors and executive officers will have different or special voting rights with respect to their ordinary shares. See "Description of Share Capital—Voting Rights." A description of any material relationship that our principal shareholders have had with us or any of our predecessors or affiliates within the past three years is included under "Certain Relationships and Related Party Transactions."

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        Unless otherwise noted below, the address of each shareholder, director and executive officer is c/o PolyPid Ltd., 18 Hasivim Street, P.O. Box 7126 Petach Tikva, 4959376 Israel.

 
   
  Percentage of
ordinary shares
beneficially owned
 
Name of beneficial owner
  Ordinary shares
beneficially owned
  Before
offering
  After
offering
 

5% or Greater Shareholders

                   

Aurum Ventures M.K.I. Ltd. 

                   

Shavit Capital Fund III (US), L.P. 

                   

Shirat Hachaim Ltd. 

                   

Directors and Executive Officers

                   

Amir Weisberg

                   

Dikla Czaczkes Akselbrad

                   

Noam Emanuel

                   

Dalit Hazan

                   

Taunia Markvicka

                   

Shaul Mukhtar

                   

Yechezkel Barenholz

                   

Jacob Harel

                   

Chaim Hurvitz

                   

Itzhak Krinsky

                   

Gerry Rubens. 

                   

Anat Tsour Segal

                   

All directors and executive officers as a group (13 persons)

                   

*
Indicates beneficial ownership of less than 1% of the total ordinary shares outstanding.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

        The following is a description of the material terms of those transactions with related parties to which we, or our subsidiaries, are party.

Private Placements of our Securities

Sale of Series E Shares

        In the third and fourth quarters of 2017, we entered into share purchase agreements with certain investors, including one of our holders of greater than 5% of our ordinary shares, pursuant to which we issued a total of 1,178,038 Series E preferred shares for an aggregate purchase price of $15.0 million, or the Series E Private Placement. The following table sets forth the aggregate number of Series E preferred shares issued to our related parties in the Series E Private Placement:

Participant
  Series E
Preferred Shares
 

Shirat Hachaim Ltd. 

    110,986  

Sale of Series E-1 Shares

        In August 2018, February 2019 and August 2019, we entered into share purchase agreements with certain investors, including holders of greater than 5% of our ordinary shares, pursuant to which we issued a total of 3,958,733 Series E-1 preferred shares for an aggregate purchase price of $50.3 million, or the Series E-1 Private Placement. The following table sets forth the aggregate number of Series E-1 preferred shares issued to our related parties in the Series E-1 Private Placement:

Participant
  Series E
Preferred Shares
 

Shirat Hachaim Ltd. 

    117,962  

Entities associated with Shavit Capital(1)

    78,641  

(1)
Affiliates of Shavit Capital whose securities are aggregated for purposes of reporting share ownership are Shavit Capital Fund III (US), L.P. and Shavit Capital Fund 3 (Israel). L.P.

Agreement with CTG Weld

        In July 2019, we entered into a master service agreement with CTG Weld, a contract research organization, to conduct of a portion of a Phase 3 clinical trial in Bulgaria and Romania for a total cost of $0.7 million. Chaim Hurvitz, a director of our company, serves as a director for, and is a shareholder of, CTG Weld.

Investor Rights Agreement

        We are party to an amended and restated investor rights agreement, or the IRA, with certain of our shareholders. The IRA provides that certain holders of our ordinary shares have the right to demand that we file a registration statement or request that their ordinary shares be covered by a registration statement that we are otherwise filing. The registration rights are described in more detail under "Description of Share Capital—Registration Rights." All rights under the registration rights agreement, other than the registration rights described in such section, will terminate upon the closing of this offering.

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Agreements and Arrangements With, and Compensation of, Directors and Executive Officers

        Certain of our executive officers have employment agreements with us. These agreements will terminate at the closing of this offering and will be replaced by new employment agreements, which will contain customary provisions and representations, including confidentiality, non-competition, non-solicitation and inventions assignment undertakings by the executive officers. Under current applicable Israeli employment laws, we may not be able to enforce (either in whole or in part) covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. See "Management—Compensation of Executive Officers and Directors."

Indemnification Agreements

        Our amended and restated articles of association permit us to exculpate, indemnify and insure each of our directors and office holders to the fullest extent permitted by the Israeli Companies Law. Upon the closing of this offering, we intend to enter into indemnification agreements with each of our directors and executive officers, undertaking to indemnify them to the fullest extent permitted by Israeli law, including with respect to liabilities resulting from a public offering of our shares, to the extent that these liabilities are not covered by insurance. We have also obtained directors and officers insurance for each of our executive officers and directors. For further information, see "Management—Exculpation, Insurance and Indemnification of Directors and Officers."

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DESCRIPTION OF SHARE CAPITAL

        The following descriptions of our share capital and provisions of our amended and restated articles of association which will be effective upon the closing of this offering are summaries and do not purport to be complete. A form of our amended and restated articles of association will be filed with the SEC as an exhibit to our registration statement, of which this prospectus forms a part. The description of the ordinary shares reflects changes to our capital structure that will occur upon the closing of this offering.

General

        Upon the closing of this offering, our authorized share capital will consist of NIS                divided into                        ordinary shares, with a nominal value NIS 0.80 per share, of which                        shares will be issued and outstanding (assuming that the underwriters do not exercise their option to purchase additional ordinary shares prior thereto).

        All of our outstanding ordinary shares are validly issued, fully paid and non-assessable. Our ordinary shares are not redeemable and do not have any preemptive rights.

        All ordinary shares have identical voting and other rights in all respects.

Registration Number and Purpose of the Company

        Our registration number with the Israeli Registrar of Companies is 514105923. Our purpose as set forth in our amended and restated articles of association is to engage in any lawful activity. Following the completion of this offering and the resulting registration of our ordinary shares for trading, our registration number is expected to change to reflect our becoming a public company.

Conversion of Preferred Shares

        Upon the closing of this offering, all of our preferred shares outstanding will automatically convert into ordinary shares, and will have no further preferences, privileges or priority rights of any kind.

Transfer of Shares

        Our fully paid ordinary shares are issued in registered form and may be freely transferred under our amended and restated articles of association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trading. The ownership or voting of our ordinary shares by non-residents of Israel is not restricted in any way by our amended and restated articles of association or the laws of the State of Israel, except for ownership by nationals of some countries that are, or have been, in a state of war with Israel.

Election of Directors

        Our ordinary shares do not have cumulative voting rights for the election of directors. As a result, the holders of a majority of the voting power represented at a meeting of shareholders have the power to elect all of our directors.

        Under our amended and restated articles of association to be effective upon the closing of this offering, our board of directors must consist of at least five and not more than eleven directors. Our board of directors will consist of                directors upon the closing of this offering.

        Pursuant to our amended and restated articles of association, each of our directors, will be appointed by a vote of the majority of the total voting power of our company, participating and voting at an annual general meeting of our shareholders. Each director will serve until the next annual general meeting following his or her election and his or her successor is duly elected and qualified or until his

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or her earlier death, resignation or removal by a vote of 65% of the total voting power of our company at a general meeting of our shareholders or until his or her office expires by operation of law. In addition, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on the board of directors, including filling empty board seats up to the maximum number of directors permitted under our articles of association, to serve until the next annual general meeting of shareholders. Our amended and restated articles of association do not have a retirement age requirement for our directors.

Dividend and Liquidation Rights

        We may declare a dividend to be paid to the holders of our ordinary shares in proportion to their respective shareholdings. Under the Israeli Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company's articles of association provide otherwise. Our amended and restated articles of association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.

        Pursuant to the Israeli Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to our then last reviewed or audited financial statements, provided that the end of the period to which the financial statements relate is not more than six months prior to the date of the distribution. If we do not meet such criteria, then we may distribute dividends only with court approval. In each case, we are only permitted to distribute a dividend if our board of directors and the court, if applicable, determines that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.

        In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our ordinary shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.

Exchange Controls

        There are currently no Israeli currency control restrictions on remittances of dividends on our ordinary shares, proceeds from the sale of the shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that are, or have been, in a state of war with Israel.

Shareholder Meetings

        Under Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year that must be held no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to in our amended and restated articles of association as extraordinary meetings. Our board of directors may call extraordinary meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Israeli Companies Law provides that our board of directors is required to convene an extraordinary meeting upon the written request of (i) any two or more of our directors or one-quarter or more of the members of our board of directors, or (ii) one or more shareholders holding, in the aggregate, either (a) 5% or more of our outstanding issued shares and 1% of our outstanding voting power, or (b) 5% or more of our outstanding voting power.

        Subject to the provisions of the Israeli Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which may be between four and 40 days prior

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to the date of the meeting. Furthermore, the Israeli Companies Law requires that resolutions regarding the following matters must be passed at a general meeting of our shareholders:

        The Israeli Companies Law requires that a notice of any annual general meeting or extraordinary meeting be provided to shareholders at least 21 days prior to the meeting and if the agenda of the meeting includes the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, or an approval of a merger, notice must be provided at least 35 days prior to the meeting.

        Under Israeli Companies Law, whenever we cannot convene or conduct a general meeting in the manner prescribed under the law or our articles of association, the court may, upon our, shareholders' or directors' request, order that we convene and conduct a general meeting in the manner the court deems appropriate.

Voting Rights

Quorum Requirements

        Pursuant to our amended and restated articles of association, holders of our ordinary shares have one vote for each ordinary share held on all matters submitted to a vote before the shareholders at a general meeting. As a foreign private issuer, the quorum required for our general meetings of shareholders consists of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Israeli Companies Law who hold or represent between them at least 331/3% of the total outstanding voting rights. A meeting adjourned for lack of a quorum is generally adjourned to the same day in the following week at the same time and place or to a later time or date if so specified in the notice of the meeting. At the reconvened meeting, in general any shareholder present in person or by proxy shall constitute a lawful quorum.

Vote Requirements

        Our amended and restated articles of association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required by the Israeli Companies Law or by our amended and restated articles of association. Under the Israeli Companies Law, among others, each of (i) the approval of an extraordinary transaction with a controlling shareholder, and (ii) the terms of employment or other engagement of the controlling shareholder of the company or such controlling shareholder's relative (even if such terms are not extraordinary) requires the approval described above under "Management—Approval of Related Party Transactions under Israeli Law—Fiduciary Duties of Directors and Executive Officers—Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions." Additionally, (i) the approval and extension of a compensation policy and certain deviations therefrom require the approvals described above under "Management—Compensation, Nominating and Corporate Governance Committee and Compensation Policy—Israeli

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Companies Law Requirements," and (ii) the terms of employment or other engagement of the chief executive officer of the company require the approvals described above under "Management—Approval of Related Party Transactions under Israeli Law—Disclosure of Personal Interests of an Office Holder and Approval of Certain Transactions." Under our amended and restated articles of association, (i) the removal of a director from office requires the adoption of a resolution at a general meeting of shareholders by 65% of the total voting power of our company and (ii) the alteration of the rights, privileges, preferences or obligations of any class of our shares requires a simple majority of all classes of shares voting together as a single class at a shareholder meeting.

        Further exceptions to the simple majority vote requirement are a resolution for the voluntary winding up, or an approval of a scheme of arrangement or reorganization, of the company pursuant to Section 350 of the Israeli Companies Law, that governs the settlement of debts and reorganization of a company, which requires the approval of holders of 75% of the voting rights represented at the meeting and voting on the resolution.

Access to Corporate Records

        Under the Israeli Companies Law, shareholders are provided access to: minutes of our general meetings; our shareholders register and principal shareholders register, articles of association and annual audited financial statements; and any document that we are required by law to file publicly with the Israeli Companies Registrar or the Israel Securities Authority. In addition, shareholders may request to be provided with any document related to an action or transaction requiring shareholder approval under the related party transaction provisions of the Israeli Companies Law. We may deny this request if we believe it has not been made in good faith or if such denial is necessary to protect our interest or protect a trade secret or patent.

Modification of Class Rights

        Under our amended and restated articles of association, the rights attached to any class of shares, such as voting, liquidation and dividend rights, may be amended by adoption of a resolution by the holders of a simple majority of of all classes of shares voting together as a single class at a shareholder meeting.

Registration Rights

        We are party to the IRA with certain of our shareholders. Under the IRA, holders of a total of 16,834,161 of our ordinary shares will have the right to require us to register their ordinary shares under the Securities Act under specified circumstances and will have incidental registration rights as described below.

Demand Registration Rights

        At any time beginning six months after the consummation of this offering, the holders of at least 50% of the registrable securities then outstanding may request that we file a registration statement (including, once we are eligible to use Form F-3, which we anticipate will occur twelve months following the consummation of this offering, a registration of the sale of their shares on a delayed or continuous basis under Form F-3, and in such case pursuant to a demand of at least 50% of the registrable securities then outstanding held by at least two classes of holders) with respect to the registrable securities held by them. This demand right is subject to an anticipated aggregate offering price, net of selling expenses, of at least $7.5 million in an ordinary demand registration and $3.0 million for a registration on Form F-3. Upon receipt of such registration request, we are obligated to use our best efforts to effect, as soon as practicable, the registration under the Securities Act of all registrable securities that the holders request to be registered. Our shareholders have the right to

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utilize their demand rights up to two times for an ordinary demand and up to two times for registration on Form F-3.

        We will not be obligated to file a registration statement at any such time if in the good faith judgment of our board of directors (as reflected in a certificate delivered by our chief executive officer or the chairman of our board of directors), such registration would be seriously detrimental to our company, provided that we do not use that exemption more than once in any 12 month period. We also have the right not to effect or take any action to effect a registration statement during the period starting with the date 60 days prior to our good faith estimate of the date of the filing of, and ending on a date 180 days following the effective date of, a Company-initiated registration statement.

Piggyback Registration Rights

        In addition, if we register any of our ordinary shares in connection with the public offering of such securities solely for cash, the holders of all registrable securities are entitled to notice of the registration and to include all or a portion of their registrable securities in the registration. If the public offering that we are effecting is underwritten, the right of any shareholder to include shares in the registration related thereto is conditioned upon the shareholder accepting the terms of the underwriting as agreed between us and the underwriters. Each shareholder may furthermore only include such quantity of registrable securities as the underwriters in their sole discretion determine will not jeopardize the success of our offering.

Expenses

        We will pay all registration expenses (other than underwriting discounts and selling commissions) and the reasonable fees and expenses of a single counsel for the selling shareholders, related to any demand or piggyback registration.

Acquisitions under Israeli Law

Full Tender Offer

        A person wishing to acquire shares of an Israeli public company and who would as a result hold over 90% of the target company's issued and outstanding share capital is required by the Israeli Companies Law to make a tender offer to all of the company's shareholders for the purchase of all of the issued and outstanding shares of the company. A person wishing to acquire shares of a public Israeli company and who would as a result hold over 90% of the issued and outstanding share capital of a certain class of shares is required to make a tender offer to all of the shareholders who hold shares of the relevant class for the purchase of all of the issued and outstanding shares of that class. If the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. However, a tender offer will also be accepted if the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class of shares.

        Upon a successful completion of such a full tender offer, any shareholder that was an offeree in such tender offer, whether such shareholder accepted the tender offer or not, may, within six months from the date of acceptance of the tender offer, petition an Israeli court to determine whether the tender offer was for less than fair value and that the fair value should be paid as determined by the court. However the offeror may include in the terms of the tender offer that an offeree who accepted the offer will not be entitled to petition the Israeli court as described above.

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        If (i) the shareholders who did not respond or accept the tender offer hold at least 5% of the issued and outstanding share capital of the company or of the applicable class or the shareholders who accept the offer constitute less than a majority of the offerees that do not have a personal interest in the acceptance of the tender offer, or (ii) the shareholders who did not accept the tender offer hold 2% or more of the issued and outstanding share capital of the company (or of the applicable class), the acquirer may not acquire shares from shareholders who accepted the tender offer that will increase its holdings to more than 90% of the company's issued and outstanding share capital or of the applicable class.

Special Tender Offer

        The Israeli Companies Law provides that, subject to certain exceptions, an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply if there is already another holder of at least 25% of the voting rights in the company. Similarly, the Israeli Companies Law provides that, subject to certain exceptions, an acquisition of shares in a public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company.

        A special tender offer must be extended to all shareholders of a company. A special tender offer may be consummated only if (i) the offeror acquired shares representing at least 5% of the voting power in the company and (ii) the number of shares tendered by shareholders who accept the offer exceeds the number of shares held by shareholders who object to the offer (excluding the offeror, controlling shareholders, holders of 25% or more of the voting rights in the company or any person having a personal interest in the acceptance of the tender offer or any of their relatives or any entity controlled by them). If a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer. Shares purchased in contradiction to the tender offer rules under the Israeli Companies Law, will have no rights and will become dormant shares.

Merger

        The Israeli Companies Law permits merger transactions if approved by each party's board of directors and, unless certain requirements described under the Israeli Companies Law are met, by a majority vote of the voting power represented at a general meeting in person or by proxy and voting thereon, as one class, and disregarding abstentions from the count of the voting power present and voting of each party's shareholders. In the case of the target company, approval of the merger further requires a majority vote of each class of its shares.

        The board of directors of a merging company is required pursuant to the Israeli Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors determines that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies.

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        For purposes of the shareholder vote of a merging company whose shares are held by the other merging company or a person or entity holding 25% or more of the voting rights at the general meeting or the right to appoint 25% or more of the directors of the other merging company, unless a court rules otherwise, the merger will not be deemed approved if a majority of the votes of shares represented at the meeting of shareholders that are held by parties other than the other party to the merger, or by any person (or group of persons acting in concert) who holds (or hold, as the case may be) 25% or more of the voting rights or the right to appoint 25% or more of the directors of the other party, vote against the merger. If, however, the merger involves a merger with a company's own controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same Special Majority approval that governs all extraordinary transactions with controlling shareholders (as described under "Management—Approval of Related Party Transactions under Israeli Law—Disclosure of Personal Interests of Controlling Shareholders and Approval of Certain Transactions").

        If the transaction would have been approved by the shareholders of a merging company but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the petition of holders of at least 25% of the voting rights of a company. For such petition to be granted, the court must find that the merger is fair and reasonable, taking into account the respective values assigned to each of the parties to the merger and the consideration offered to the shareholders of the target company.

        Under the Companies Law, each merging company must deliver to its secured creditors the merger proposal and inform its unsecured creditors of the merger proposal and its content. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of the merging entities, and may further give instructions to secure the rights of creditors.

        In addition, a merger may not be consummated unless at least 50 days have passed from the date on which a proposal for approval of the merger is filed with the Israeli Registrar of Companies and at least 30 days have passed from the date on which the merger was approved by the shareholders of each party.

Anti-Takeover Measures under Israeli Law

        The Israeli Companies Law allows us to create and issue shares having rights different from those attached to our ordinary shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having preemptive rights. As of the closing of this offering, no preferred shares will be authorized under our amended and restated articles of association. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of their ordinary shares. The authorization and designation of a class of preferred shares will require an amendment to our amended and restated articles of association, which requires the prior approval of the holders of a majority of the voting power attaching to our issued and outstanding shares and voting at a general meeting. The convening of the meeting, the shareholders entitled to participate and the majority vote required to be obtained at such a meeting will be subject to the requirements set forth in the Israeli Companies Law as described above in "—Voting Rights."

Borrowing Powers

        Pursuant to the Israeli Companies Law and our amended and restated articles of association, our board of directors may exercise all powers and take all actions that are not required under law or

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under our amended and restated articles of association to be exercised or taken by our shareholders, including the power to borrow money for company purposes.

Changes in Capital

        Our amended and restated articles of association enable us to increase or reduce our share capital. Any such changes are subject to the provisions of the Israeli Companies Law and must be approved by a resolution duly passed by our shareholders at a general meeting by voting on such change in the capital. In addition, transactions that have the effect of reducing capital, such as the declaration and payment of dividends in the absence of sufficient retained earnings or profits, require the approval of both our board of directors and an Israeli court.

Transfer Agent and Registrar

        The transfer agent and registrar for our ordinary shares is                                                 .

Listing

        Application has been made to have our ordinary shares listed on The Nasdaq Global Market under the symbol "POLY."

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SHARES ELIGIBLE FOR FUTURE SALE

        Prior to this offering, no public market existed for our ordinary shares. Sales of substantial amounts of our ordinary shares following this offering, or the perception that these sales could occur, could adversely affect prevailing market prices of our ordinary shares and could impair our future ability to obtain capital, especially through an offering of equity securities. Assuming that the underwriters do not exercise in full their option to purchase additional ordinary shares with respect to this offering and assuming no exercise of options outstanding following this offering, we will have an aggregate of ordinary shares outstanding upon the closing of this offering. Of these shares, the ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, unless purchased by "affiliates" (as that term is defined under Rule 144 of the Securities Act, or Rule 144), who may sell only the volume of shares described below and whose sales would be subject to additional restrictions described below.

        The remaining ordinary shares will be held by our existing shareholders and will be deemed to be "restricted securities" under Rule 144. Subject to certain contractual restrictions, including the lock-up agreements described below, restricted securities may only be sold in the public market pursuant to an effective registration statement under the Securities Act or pursuant to an exemption from registration under Rule 144, Rule 701 or Rule 904 under the Securities Act. These rules are summarized below. Sales of these shares in the public market after the restrictions under the lock-up agreements lapse, or the perception that those sales may occur, could cause the prevailing market price of our ordinary shares to decrease or to be lower than it might be in the absence of those sales or perceptions.

Eligibility of Restricted Shares for Sale in the Public Market

        Approximately                        of our ordinary shares will be eligible for resale pursuant to Rule 144 after 90 days following the pricing of this offering as follows:

        In each case, the shares will also be subject to the contractual restrictions arising under the lock-up agreements described below.

        All of the ordinary shares sold in this offering will be eligible for immediate sale upon the closing of this offering.

Lock-Up Agreements

        We, all of our directors and executive officers and holders of substantially all of our outstanding ordinary shares and our ordinary shares issuable upon the exercise of options and warrants have signed lock-up agreements. Pursuant to such lock-up agreements, such persons have agreed, subject to certain exceptions, not to sell or otherwise dispose of ordinary shares or any securities convertible into or exchangeable for ordinary shares for a period of 180 days after the date of this prospectus without the prior written consent of Barclays Capital Inc., which may, in its sole discretion, at any time without prior notice, release all or any portion of the ordinary shares from the restrictions in any such agreement.

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Rule 144

Shares Held for Six Months

        In general, under Rule 144 as currently in effect, and subject to the terms of any lock-up agreement, commencing 90 days after the closing of this offering, a person (or persons whose shares are aggregated), including an affiliate, who has beneficially owned our ordinary shares for six months or more, including the holding period of any prior owner other than one of our affiliates (i.e., commencing when the shares were acquired from our company or from an affiliate of our company as restricted securities), is entitled to sell our shares, subject to the availability of current public information about us. In the case of an affiliate shareholder, the right to sell is also subject to the fulfillment of certain additional conditions, including manner of sale provisions and notice requirements, and to a volume limitation that limits the number of shares to be sold thereby, within any three-month period, to the greater of:

        The six month holding period of Rule 144 does not apply to sales of unrestricted securities. Accordingly, persons who hold unrestricted securities may sell them under the requirements of Rule 144 described above without regard to the six-month holding period, even if they were considered our affiliates at the time of the sale or at any time during the ninety days preceding such date.

Shares Held by Non-Affiliates for One Year

        Under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is not considered to have been one of our affiliates at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than one of our affiliates, is entitled to sell his, her or its shares under Rule 144 without complying with the provisions relating to the availability of current public information or with any other conditions under Rule 144. Therefore, unless subject to a lock-up agreement or otherwise restricted, such shares may be sold immediately upon the closing of this offering.

Rule 701

        In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who received or purchased ordinary shares from us under our 2012 Plan or other written agreement before the closing of this offering is entitled to resell these shares.

        The SEC has indicated that Rule 701 will apply to typical share options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of these options, including exercises after the closing of this offering. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above (see "Lock-Up Agreements"), may be sold beginning 90 days after the closing of this offering in reliance on Rule 144 by:

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Options

        As of December 31, 2019, options to purchase a total of 1,672,853 ordinary shares were issued and outstanding under our 2012 Plan. Of the total number of issued and outstanding options,                    will be vested upon the closing of this offering. See "Management—Equity Incentive Plans—2012 Share Option Plan." All of our ordinary shares issuable under these options are subject to contractual lock-up agreements with us or the underwriters.

Form S-8 Registration Statement

        Following the completion of this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register up to                    ordinary shares, in the aggregate, issued or reserved for issuance under the 2012 Plan. The registration statement on Form S-8 will become effective automatically upon filing.

        Ordinary shares issued upon exercise of a share option and registered pursuant to the Form S-8 registration statement will, subject to vesting provisions and Rule 144 volume limitations applicable to our affiliates, be available for sale in the open market immediately unless they are subject to the 180 day lock-up period or, if subject to the lock-up, immediately after the 180 day lock-up period expires. See "Management—Equity Incentive Plan—2012 Share Option Plan."

Registration Rights

        Following the closing of this offering, holders of a total of 16,834,161 ordinary shares will have the right to require us to register these shares under the Securities Act under specified circumstances and will have incidental registration rights. After registration pursuant to these rights, these shares will become freely tradable without restriction under the Securities Act. For more information on these registration rights, see "Description of Share Capital—Registration Rights."

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TAXATION

        The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your own tax advisor concerning the tax consequences in your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.

Material Israeli Tax Considerations

        The following is a summary of the material Israeli income tax laws applicable to us. This section also contains a discussion of material Israeli income tax considerations concerning the ownership and disposition of our ordinary shares by holders that purchase ordinary shares pursuant to the offering and hold such ordinary shares as capital assets. This summary does not discuss all the aspects of Israeli income tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. This summary is based on laws and regulations in effect as of the date of this prospectus and does not take into account possible future amendments which may be under consideration.

General Corporate Tax Structure in Israel

        As of January 1, 2018, Israeli resident companies like us are generally subject to corporate tax at the rate of 23.0%.

        Capital gains derived by an Israeli resident company are generally subject to tax at the same rate as the corporate tax rate. Under Israeli tax legislation, a corporation will be considered as an "Israeli resident" if it meets one of the following: (a) it was incorporated in Israel; or (b) the control and management of its business are exercised in Israel.

Taxation of our Israeli Individual Shareholders on Receipt of Dividends

        Israeli residents who are individuals are generally subject to Israeli income tax for dividends paid on our ordinary shares (other than bonus shares or share dividends) at a rate of 25.0%, or 30.0% if the recipient of such dividend is a "substantial shareholder" (as defined below) at the time of distribution or at any time during the preceding 12-month period.

        As of January 1, 2017, an additional income tax at a rate of 3.0% is imposed on high earners whose annual taxable income or gain exceeds certain thresholds (NIS 651,600 as of January 1, 2020).

        A "substantial Shareholder" is generally a person who alone, or together with his or her relative or another person who collaborates with him on a regular basis, holds, directly or indirectly, at least 10.0% of any of the "means of control" of the corporation. "Means of control" generally include the right to vote in a general meeting of shareholders, receive profits, nominate a director or an officer, receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is to exercise such right(s), and whether by virtue of shares, rights to shares or other rights, or in any other manner, including by means of voting or trusteeship agreements.

        The term "Israeli resident" for individuals is generally defined under the Israeli Income Tax Ordinance [New Version], 1961, or the Israeli Tax Ordinance, as an individual whose center of life is in Israel. According to the Israeli Tax Ordinance, in order to determine the center of life of an individual, account will be taken of the individual's family, economic and social connections, including: (a) the place of the individual's permanent home; (b) the place of residence of the individual and the

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individual's family; (c) the place of the individual's regular or permanent place of business or the place of the individual's permanent employment; (d) place of the individual's active and substantial economic interests; (e) place of the individual's activities in organizations, associations and other institutions. The center of life of an individual will be presumed to be in Israel if: (a) the individual was present in Israel for 183 days or more in the tax year; or (b) the individual was present in Israel for 30 days or more in the tax year, and the total period of the individual's presence in Israel in that tax year and the two previous tax years is 425 days or more. The presumption in this paragraph may be rebutted either by the individual or by the assessing officer.

Taxation of Israeli Resident Corporations on Receipt of Dividends

        Israeli resident corporations are generally exempt from Israeli corporate income tax with respect to dividends paid on our ordinary shares unless the distribution is from a Preferred Enterprise, as defined below.

Capital Gains Taxes Applicable to Israeli Resident Shareholders

        The income tax rate applicable to Real Capital Gain, which is the excess of the total capital gain over inflationary surplus computed generally on the basis of the increase in the Israeli consumer price index between the date of purchase and the date of disposal, derived by an Israeli individual from the sale of shares which had been purchased after January 1, 2012, whether listed on a stock exchange or not, is 25.0%. However, if such shareholder is considered a "Substantial Shareholder" (as defined above) at the time of sale or at any time during the preceding 12-month period, such gain will be taxed at the rate of 30.0%. As of January 1, 2017, an additional income tax at a rate of 3% will be imposed on high earners whose annual taxable income or gain exceeds certain thresholds (NIS 651,600).

        Moreover, capital gains derived by a shareholder who is a dealer or trader in securities, or to whom such income is otherwise taxable as ordinary business income, are taxed in Israel at ordinary income rates (currently, up to 50.0% for individuals and as of January 1, 2018, the corporate tax rate is 23.0%.

Taxation of Non-Israeli Shareholders on Receipt of Dividends

        Non-Israeli residents (individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25.0% (or 30.0% if such person or entity is a "substantial shareholder" at the time receiving the dividend or on any date in the 12 months preceding such date), which tax will be withheld at source, unless a tax certificate is obtained from the Israeli Tax Authority authorizing withholding-exempt remittances or a reduced rate of tax pursuant to an applicable tax treaty.

        A non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the duty to file tax returns in Israel in respect of such income, provided such income was not derived from a business conducted in Israel by such taxpayer, and such taxpayer has no other taxable sources of income in Israel.

        For example, under the Convention Between the Government of the United States of America and the Government of Israel with Respect to Taxes on Income, as amended, Israeli withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25.0%, or 15.0% in the case of dividends paid out of the profits of an Approved Enterprise, subject to certain conditions. Where the recipient is a U.S. corporation owning 10.0% or more of the issued and outstanding voting shares of the paying corporation during the part of the paying corporation's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any) and not more than 25.0% of the gross income of the paying corporation for such prior taxable year (if

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any) consists of certain interest or dividends and the dividend is not paid from the profits of an Approved Enterprise, the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.

Capital Gains Income Taxes Applicable to Non-Israeli Shareholders

        Provided certain conditions are met, non-Israeli resident shareholders are generally exempt from Israeli capital gains tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that such gains were not derived from a permanent establishment or business activity of such shareholders in Israel. However, non-Israeli corporations' shareholders will not be entitled to the foregoing exemptions if Israeli residents (i) have a controlling interest of more than 25.0% in such non-Israeli corporation or (ii) are the beneficiaries of or are entitled to 25.0% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.

        Regardless of whether shareholders may be liable for Israeli income tax on the sale of our ordinary shares, the payment of the consideration may be subject to withholding of Israeli tax at the source. Accordingly, shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale.

Tax Benefits Under the 2011 Amendment

        On January 1, 2011, new legislation amending the Investment Law came into effect, or the 2011 Amendment. The 2011 Amendment introduced a new status of Preferred Enterprise. Subject to certain conditions, a Preferred Enterprise entitles the company to reduced corporate tax rates, without limitations on dividends and other distributions, instead of full exemption from corporate tax. These preferred corporate tax rates vary from 7.5% for Preferred Enterprises residing in a "development zone," or 16.0% for Preferred Enterprises residing in other zones in Israel.

        In order to gain the status of Preferred Enterprise, a company must meet the conditions of competitive industrial company that contributes to the GDP or compatative industrial company in the field of renewable energy.

Estate Tax

        Currently, Israeli law does not impose estate taxes.

Material U.S. Federal Income Tax Considerations to U.S. Holders

        The following discussion describes the material U.S. federal income tax considerations relating to the ownership and disposition of our ordinary shares by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase ordinary shares pursuant to the offering and hold such ordinary shares as capital assets within the meaning of Section 1221 of the Code. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as certain financial institutions, insurance companies, broker-dealers and traders in securities or other persons that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, persons who hold ordinary shares as part of a "straddle," "hedge," "conversion transaction," "synthetic security" or integrated investment, persons who received their ordinary shares as compensatory payments, persons that have a "functional currency" other than the U.S. dollar, persons that own directly, indirectly or through attribution 10% or more of our shares by vote or value, persons subject to special tax accounting rules

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as a result of any item of gross income with respect to the shares being taken into account in an applicable financial statement, corporations that accumulate earnings to avoid U.S. federal income tax, partnerships and other pass-through entities, and investors in such pass-through entities). This discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative minimum tax or Medicare tax consequences.

        As used in this discussion, the term "U.S. Holder" means a beneficial owner of ordinary shares that is, for U.S. federal income tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a domestic trust for U.S. federal income tax purposes.

        If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ordinary shares, the U.S. federal income tax consequences relating to an investment in the ordinary shares will depend in part upon the status and activities of such entity or arrangement and the particular partner. Any such entity or arrangement should consult its own tax advisor regarding the U.S. federal income tax consequences applicable to it and its partners of the purchase, ownership and disposition of ordinary shares.

        Persons considering an investment in ordinary shares should consult their own tax advisors as to the particular tax consequences applicable to them relating to the purchase, ownership and disposition of ordinary shares, including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.

Passive Foreign Investment Company Consequences

        In general, a corporation organized outside the United States will be treated as a passive foreign investment company, or PFIC, for any taxable year in which either (1) at least 75% of its gross income is "passive income", the PFIC income test, or (2) on average at least 50% of its assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income, the PFIC asset test. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or exchange of property that gives rise to passive income. Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

        Our status as a PFIC will depend on the nature and composition of our income and the nature, composition and value of our assets (which, assuming we are not a "controlled foreign corporation," or a CFC, under Section 957(a) of the Internal Revenue Code of 1986, as amended, or the Code, for the year being tested, may be determined based on the fair market value of each asset, with the value of goodwill and going concern value being determined in large part by reference to the market value of our common shares, which may be volatile). Based upon the expected value of our assets, including any goodwill and the expected nature and composition of our income and assets, we may be classified as a PFIC for the taxable year ending December 31, 2020 and future taxable years. In particular, so long as we do not generate revenue from operations for any taxable year and do not receive any research and development grants, or even if we receive a research and development grant, if such grant does not constitute gross income for U.S. federal income tax purposes, we likely will be classified as a PFIC for

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such taxable year. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that the IRS will agree with our conclusion and that the IRS would not successfully challenge our position. Our status as a PFIC is a fact-intensive determination made on an annual basis after the end of each taxable year. Accordingly, our U.S. counsel expresses no opinion with respect to our PFIC status for our taxable year ending December 31, 2019, and also expresses no opinion with regard to our expectations regarding our PFIC status in the future.

        If we are a PFIC in any taxable year during which a U.S. Holder owns ordinary shares, the U.S. Holder could be liable for additional taxes and interest charges under the "PFIC excess distribution regime" upon (1) a distribution paid during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder's holding period for the ordinary shares, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or gain would be determined by allocating the distribution or gain ratably over the U.S. Holder's holding period for ordinary shares. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.

        If we are a PFIC for any year during which a U.S. Holder holds ordinary shares, we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. Holder holds the ordinary shares, unless we cease to meet the requirements for PFIC status and the U.S. Holder makes a "deemed sale" election with respect to the ordinary shares. If the election is made, the U.S. Holder will be deemed to sell the ordinary shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder's ordinary shares would not be treated as shares of a PFIC unless we subsequently become a PFIC.

        If we are a PFIC for any taxable year during which a U.S. Holder holds ordinary shares and one of our non-U.S. corporate subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions or dispositions. Each U.S. Holder is advised to consult its tax advisors regarding the application of the PFIC rules to our non-U.S. subsidiaries.

        If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on ordinary shares if such U.S. Holder makes a valid "mark-to-market" election for our ordinary shares. A mark-to-market election is available to a U.S. Holder only for "marketable stock." Our ordinary shares will be marketable stock as long as they remain listed on the Nasdaq Global Market and are regularly traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. If a mark-to-market election is in effect, a U.S. Holder generally would take into account, as ordinary income for each taxable year of the U.S. holder, the excess of the fair market value of ordinary shares held at the end of such taxable year over the adjusted tax basis of such ordinary shares. The U.S. Holder would also take into account, as an ordinary loss each year, the excess of the adjusted tax basis of such ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a result of the mark-to-market election. The U.S. Holder's tax basis in ordinary shares would be adjusted to reflect any income or loss recognized as a

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result of the mark-to-market election. Any gain from a sale, exchange or other disposition of ordinary shares in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as capital loss.

        A mark-to-market election will not apply to ordinary shares for any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any non-U.S. subsidiaries that we may organize or acquire in the future. Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs that we may organize or acquire in the future notwithstanding the U.S. Holder's mark-to-market election for the ordinary shares.

        The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to make a valid qualified electing fund, or QEF, election. At this time, we do not expect to provide U.S. Holders with the information necessary for a U.S. Holder to make a QEF election. Prospective investors should assume that a QEF election will not be available.

        Each U.S. person that is an investor of a PFIC is generally required to file an annual information return on IRS Form 8621 containing such information as the U.S. Treasury Department may require. The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations with respect to U.S. federal income tax.

        The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of ordinary shares, the consequences to them of an investment in a PFIC, any elections available with respect to the ordinary shares and the IRS information reporting obligations with respect to the purchase, ownership and disposition of ordinary shares of a PFIC.

Distributions

        As described in the section entitled "Dividend Policy," we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we make a distribution contrary to the expectation, subject to the discussion above under "—Passive Foreign Investment Company Consequences," a U.S. Holder that receives a distribution with respect to ordinary shares generally will be required to include the gross amount of such distribution in gross income as a dividend when actually or constructively received to the extent of the U.S. Holder's pro rata share of our current and/or accumulated earnings and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend because it exceeds the U.S. Holder's pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder's ordinary shares. To the extent the distribution exceeds the adjusted tax basis of the U.S. Holder's ordinary shares, the remainder will be taxed as capital gain. Because we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all distributions to be reported to them as dividends.

        Distributions on ordinary shares that are treated as dividends generally will constitute income from sources outside the United States for foreign tax credit purposes and generally will constitute passive category income. Subject to certain complex conditions and limitations, Israeli taxes withheld on any distributions on ordinary shares may be eligible for credit against a U.S. Holder's federal income tax liability. The rules relating to the determination of the U.S. foreign tax credit are complex, and U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit in their particular circumstances and the possibility of claiming an itemized deduction (in lieu of the foreign tax credit) for any foreign taxes paid or withheld.

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        Dividends paid by a "qualified foreign corporation" are eligible for taxation to non-corporate U.S. holders at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances. Distributions on ordinary shares that are treated as dividends generally will not be eligible for the "dividends received" deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.

        A non-United States corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for purposes of this provision and which includes an exchange of information provision, or (b) with respect to any dividend it pays on ordinary shares that are readily tradable on an established securities market in the United States. We believe that we qualify as a resident of Israel for purposes of, and are eligible for the benefits of, the U.S.-Israel Treaty, although there can be no assurance in this regard. Further, the IRS has determined that the U.S.-Israel Treaty is satisfactory for purposes of the qualified dividend rules and that it includes an exchange of information provision. Our ordinary shares will also generally be considered to be readily tradable on an established securities market in the United States if they are listed on The Nasdaq Global Market, as we intend the ordinary shares to be. Therefore, subject to the discussion above under "—Passive Foreign Investment Company Consequences," if the U.S.-Israel Treaty is applicable, or if our ordinary shares are readily tradable on an established securities market in the United States, such dividends will generally be "qualified dividend income" in the hands of individual U.S. Holders, provided that certain conditions are met, including holding period and the absence of certain risk reduction transaction requirements. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate on dividends with regard to its particular circumstances.

Sale, Exchange or Other Disposition of Ordinary Shares

        Subject to the discussion above under "—Passive Foreign Investment Company Consequences," a U.S. Holder generally will recognize capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of ordinary shares in an amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property received) on the sale, exchange or other disposition and such U.S. Holder's adjusted tax basis in the ordinary shares. Such capital gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on the date of sale, exchange or other disposition, the ordinary shares were held by the U.S. Holder for more than one year. Any capital gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is subject to limitations. Any gain or loss recognized from the sale or other disposition of ordinary shares will generally be gain or loss from sources within the United States for U.S. foreign tax credit purposes.

Information Reporting and Backup Withholding

        U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in ordinary shares, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). As described above under "Passive Foreign Investment Company Consequences", each U.S. Holder who is a shareholder of a PFIC must file an annual report containing certain information. U.S. Holders paying more than US$100,000 for ordinary shares may be required to file IRS Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) reporting this

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payment. Substantial penalties may be imposed upon a U.S. Holder that fails to comply with the required information reporting.

        Dividends on and proceeds from the sale or other disposition of ordinary shares may be reported to the IRS unless the U.S. Holder establishes a basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate United States taxpayer identification number or otherwise establish a basis for exemption (usually on IRS Form W-9), or (2) is described in certain other categories of persons. However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder's U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.

        U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules.

        EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN ORDINARY SHARES IN LIGHT OF THE INVESTOR'S OWN CIRCUMSTANCES.

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UNDERWRITING

        Barclays Capital Inc. is acting as the representative of the underwriters and the sole book-running manager of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of ordinary shares shown opposite its name below:

Underwriters
  Number of
Shares

Barclays Capital Inc. 

   

        The underwriting agreement provides that the underwriters' obligation to purchase ordinary shares depends on the satisfaction of the conditions contained in the underwriting agreement including:

Commissions and Expenses

        The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional ordinary shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the ordinary shares.

 
  No Exercise   Full Exercise  

Per ordinary share

  $                $    

Total

  $                $    

        Barclays Capital Inc. has advised us that the underwriters propose to offer the ordinary shares directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $            per ordinary share. If all the ordinary shares are not sold at the initial offering price following the initial offering, the representative may change the offering price and other selling terms.

        The expenses of the offering that are payable by us are estimated to be approximately $            (excluding underwriting discounts and commissions).

Option to Purchase Additional Ordinary Shares

        We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of            ordinary shares from us at the public offering price less underwriting discounts and commissions. This option may be exercised to the extent the underwriters sell more than            ordinary shares in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional ordinary shares based on the underwriter's percentage underwriting commitment in the offering as indicated in the table at the beginning of this section.

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Lock-Up Agreements

        We, all of our directors and executive officers and holders of more than        % of our outstanding ordinary shares have agreed that, for a period of 180 days after the date of this prospectus subject to certain limited exceptions as described below, we and they will not directly or indirectly, without the prior written consent of Barclays Capital Inc., offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any ordinary shares, or any options or warrants to purchase any ordinary shares, or any securities convertible into, exchangeable for or that represent the right to receive ordinary shares, whether now owned or hereinafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership, or engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of ordinary shares.

        Barclays Capital Inc., in its sole discretion, may release the ordinary shares and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release ordinary shares and other securities from lock-up agreements, Barclays Capital Inc. will consider, among other factors, the holder's reasons for requesting the release, the number of ordinary shares and other securities for which the release is being requested and market conditions at the time. At least three business days before the effectiveness of any release or waiver of any of the restrictions described above with respect to an officer or director, Barclays Capital Inc. will notify us of the impending release or waiver and we have agreed to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver, except where the release or waiver is effected solely to permit a transfer of ordinary shares that is not for consideration and where the transferee has agreed in writing to be bound by the same terms as the lock-up agreements described above to the extent and for the duration that such terms remain in effect at the time of transfer.

Offering Price Determination

        Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price was negotiated between the representative and us. In determining the initial public offering price of our ordinary shares, the representative considered:

Indemnification

        We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

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Stabilization, Short Positions and Penalty Bids

        The representative may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the ordinary shares, in accordance with Regulation M under the Exchange Act:

        These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of the ordinary shares. As a result, the price of the ordinary shares may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The Nasdaq Global Market or otherwise and, if commenced, may be discontinued at any time.

        Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the ordinary shares. In addition, neither we nor any of the underwriters make any representation that the representative will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

        A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of ordinary shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representative on the same basis as other allocations.

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        Other than the prospectus in electronic format, the information on any underwriter's or selling group member's web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

Listing on The Nasdaq Global Market

        Application has been made to list our ordinary shares on The Nasdaq Global Market under the symbol "POLY."

Stamp Taxes

        If you purchase ordinary shares offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Other Relationships

        The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and expenses.

        In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriters or their affiliates have a lending relationship with us, the underwriters or their affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the ordinary shares offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the ordinary shares offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

        This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the ordinary shares or possession or distribution of this prospectus or any other offering or publicity material relating to the ordinary shares in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each

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underwriter has undertaken that it will not, directly or indirectly, offer or sell any ordinary shares or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of ordinary shares by it will be made on the same terms.

European Economic Area and United Kingdom

        In relation to each Member State of the European Economic Area and the United Kingdom (each, a "Relevant State"), no ordinary shares have been offered or will be offered pursuant to this offering to the public in that Relevant State prior to the publication of a prospectus in relation to the ordinary shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of Shares may be made to the public in that Relevant State at any time:

provided that no such offer of ordinary shares shall require the Issuer or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.

        For the purposes of this provision, the expression an "offer to the public" in relation to any Shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase or subscribe for any Shares, and the expression "Prospectus Regulation" means Regulation (EU) 2017/1129.

United Kingdom

        This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000 (the "FSMA")) as received in connection with the issue or sale of the ordinary shares in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to the ordinary shares in, from or otherwise involving the United Kingdom.

Canada

        The ordinary shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the ordinary shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

        Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a

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misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.

        Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts ("NI 33-105"), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Switzerland

        The ordinary shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under Article 652a or Article 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under Article 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

        Neither this document nor any other offering or marketing material relating to the offering, the Company or the ordinary shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of ordinary shares will not be supervised by, the Swiss Financial Market Supervisory Authority, FINMA, and the offer of ordinary shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of ordinary shares.

Australia

        No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.

        Any offer in Australia of the ordinary shares may only be made to persons, which we refer to as Exempt Investors, who are "sophisticated investors" (within the meaning of Section 708(8) of the Corporations Act), "professional investors" (within the meaning of Section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in Section 708 of the Corporations Act so that it is lawful to offer the ordinary shares without disclosure to investors under Chapter 6D of the Corporations Act.

        The ordinary shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under Section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring ordinary shares must observe such Australian on-sale restrictions.

        This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision,

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investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.

Hong Kong

        The ordinary shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong), or Companies (Winding Up and Miscellaneous Provisions) Ordinance, or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or Securities and Futures Ordinance, or (ii) to "professional investors" as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the ordinary shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.

Singapore

        This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the ordinary share may not be circulated or distributed, nor may the ordinary shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA") (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

        Where the ordinary shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the ordinary shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation's securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore, or Regulation 32.

        Where the ordinary shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the or under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in

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Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.

Japan

        No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the "FIEL") has been made or will be made with respect to the solicitation of the application for the acquisition of the ordinary shares.

        Accordingly, the ordinary shares have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.

For Qualified Institutional Investors, or QII

        Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ordinary shares constitutes either a "QII only private placement" or a "QII only secondary distribution" (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ordinary shares. The ordinary shares may only be transferred to QIIs.

For Non-QII Investors

        Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the ordinary shares constitutes either a "small number private placement" or a "small number private secondary distribution" (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the ordinary shares. The ordinary shares may only be transferred en bloc without subdivision to a single investor.

Israel

        This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the securities offered hereby is directed only at, (i) a limited number of persons in accordance with the Securities Law and (ii) investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and "qualified individuals," each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.

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EXPENSES OF THIS OFFERING

        The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by us in connection with the sale of our ordinary shares being registered. All amounts are estimates except for the SEC registration fee, the FINRA filing fee and The Nasdaq Global Market listing fee.

Item
  Amount to
be Paid
 

SEC registration fee

  $   *

FINRA filing fee

      *

The Nasdaq Global Market listing fee

      *

Printing and engraving expenses

      *

Legal fees and expenses

      *

Accounting fees and expenses

      *

Miscellaneous expenses

      *

Total

  $   *

*
To be filed by amendment.


LEGAL MATTERS

        The validity of the issuance of our ordinary shares offered in this prospectus and certain other matters of Israeli law will be passed upon for us by Zysman, Aharoni, Gayer & Co., Tel Aviv, Israel. Certain matters of U.S. federal law will be passed upon for us by Cooley LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Yigal Arnon & Co., Tel Aviv, Israel, with respect to Israeli law, and Latham & Watkins LLP with respect to U.S. federal law.


EXPERTS

        The consolidated financial statements as of December 31, 2019 and 2018 and for each of the two years in the period ended December 31, 2019 appearing in this Prospectus and Registration Statement have been audited by Kost, Forer, Gabbay & Kasierer, Certified Public Accountants (Israel), an independent registered public accounting firm and a member firm of Ernst & Young Global, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. The address of Kost, Forer, Gabbay & Kasierer is Menachem Begin 144, Tel Aviv, Israel.


ENFORCEMENT OF CIVIL LIABILITIES

        We are incorporated under the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in this registration statement, most of whom reside outside of the United States, may be difficult to obtain within the United States. Furthermore, because substantially all of our assets and substantially all of our directors and officers are located outside of the United States, any judgment obtained in the United States against us or any of our directors and officers may not be collectible within the United States.

        We have been informed by our legal counsel in Israel, Zysman, Aharoni, Gayer & Co., that it may be difficult to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found

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to be applicable, the content of applicable U.S. law must be proved as a fact which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law.

        We have irrevocably appointed PolyPid Inc. as our agent to receive service of process in any action against us in any U.S. federal or state court arising out of this offering or any purchase or sale of securities in connection with this offering. Subject to specified time limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to certain exceptions, is non-appealable, including a judgment based upon the civil liability provisions of the Securities Act and the Exchange Act and including a monetary or compensatory judgment in a non-civil matter, provided that among other things:

        If a foreign judgment is enforced by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment, but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form F-1 under the Securities Act relating to this offering of our ordinary shares. This prospectus does not contain all of the information contained in the registration statement. The rules and regulations of the SEC allow us to omit certain information from this prospectus that is included in the registration statement. Statements made in this prospectus concerning the contents of any contract, agreement or other document are summaries of all material information about the documents summarized, but are not complete descriptions of all terms of these documents. If we filed any of these documents as an exhibit to the registration statement, you may read the document itself for a complete description of its terms.

        Our SEC filings are available to the public at the SEC's website at http://www.sec.gov. Upon completion of this offering, we will be subject to the information reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements will file

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reports with the SEC. As a foreign private issuer, we will be exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

        We maintain a corporate website at http://www.polypid.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.

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POLYPID LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2019

INDEX

 
  Page  

Report of Independent Registered Public Accounting Firm

    F-2  

Consolidated Balance Sheets

   
F-3
 

Consolidated Statements of Operations

   
F-4
 

Consolidated Statements of Changes in Convertible Preferred Shares and Shareholders' Deficiency

   
F-5
 

Consolidated Statements of Cash Flows

   
F-6
 

Notes to Consolidated Financial Statements

   
F-7 - F-32
 

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REPORT OF INDEPENDENT AUDITORS

To the Shareholders and Board of Directors of

POLYPID LTD.

Opinion on the Consolidated Financial Statements

        We have audited the accompanying consolidated balance sheets of Polypid Ltd. and subsidiary (the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, changes in convertible preferred shares and shareholders' deficiency and cash flows for each of the two years in the period ended December 31, 2019 and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

        These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

        We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

        Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company's auditor since 2010.
Tel-Aviv, Israel
February 24, 2020

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POLYPID LTD. AND ITS SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share and per share data)

 
  December 31,    
 
 
  Pro forma as of
December 31,
2019
 
 
  2018   2019  
 
   
   
  (Unaudited)
 

ASSETS

                   

CURRENT ASSETS:

   
 
   
 
   
 
 

Cash and cash equivalents

  $ 7,327   $ 3,924   $ 3,937  

Restricted cash

    221     375     375  

Short-term deposits

        22,685     22,685  

Prepaid expenses and other receivables

    486     417     417  

Total current assets

    8,034     27,401     27,414  

Long-term assets:

                   

Property and equipment, net

    6,189     6,121     6,121  

Other long-term assets

    261     230     230  

Total long-term assets

    6,450     6,351     6,351  

Total assets

  $ 14,484   $ 33,752   $ 33,765  

LIABILITIES, CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS' (DEFICIENCY) EQUITY

                   

CURRENT LIABILITIES:

   
 
   
 
   
 
 

Trade payables

  $ 1,132   $ 1,581   $ 1,581  

Other payables and accrued expenses

    2,557     998     998  

Total current liabilities

    3,689     2,579     2,579  

Long-term liabilities:

                   

Other liabilities

    232     251     251  

Warrants to convertible preferred shares

    22,926     12,241      

Total long-term liabilities

    23,158     12,492     251  

Commitments and contingencies

                   

Convertible preferred shares:

                   

Preferred A, A-1, B, B-1, C-1, C-2, D-1, D-3, E and E-1 shares of NIS 0.8 par value—Authorized: 18,741,017 and 16,741,017 shares at December 31, 2019 and 2018, respectively; Issued and outstanding: 13,097,218 and 9,889,539 shares at December 31, 2019 and 2018, respectively; Aggregate liquidation preference of $161,198 at December 31, 2019

    69,347     106,313      

Shareholders' (deficiency) equity:

                   

Share capital—

                   

Ordinary shares of NIS 0.8 par value—Authorized: 23,500,000 and 20,500,000 shares at December 31, 2019 and 2018, respectively; Issued and outstanding: 588,650 and 587,057 shares at December 31, 2019 and 2018

    130     130     3,175  

Additional paid-in capital

    4,558     5,541     121,063  

Accumulated deficit

    (86,398 )   (93,303 )   (93,303 )

Total shareholders' (deficiency) equity

    (81,710 )   (87,632 )   30,935  

Total liabilities, convertible preferred shares and shareholders' equity

  $ 14,484   $ 33,752   $ 33,765  
February 24, 2020   /s/ Amir Weisberg   /s/ Dikla Czaczkes-Akselbrad
Date of approval of the consolidated financial statements   Amir Weisberg
Chief Executive Officer and Director
  Dikla Czaczkes-Akselbrad
Chief Financial Officer

   

The accompanying notes are an integral part of the consolidated financial statements.

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POLYPID LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

 
  Year ended
December 31,
 
 
  2018   2019  

Operating expenses:

             

Research and development, net

  $ 12,550   $ 14,083  

General and administrative

    5,814     4,477  

Operating loss

    18,364     18,560  

Financial income, net

    (24,281 )   (11,655 )

Net (profit) loss

  $ (5,917 ) $ 6,905  

Basic net (profit) loss per ordinary share

  $ (0.15 ) $ 22.65  

Diluted net loss per ordinary share

  $ 0.82   $ 22.65  

Weighted average number of ordinary shares used in computing basic net loss per share

    586,938     588,338  

Weighted average number of ordinary shares used in computing diluted net loss per share

    641,587     588,338  

Pro forma basic and diluted net loss per ordinary share (unaudited)

        $ 0.97  

Weighted average number of ordinary shares used in computing basic and diluted net loss per share—pro forma (unaudited)

          13,741,806  

   

The accompanying notes are an integral part of the consolidated financial statements.

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POLYPID LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND CHANGES IN SHAREHOLDERS' DEFICIENCY

U.S. dollars in thousands (except share data)

 
  Convertible Preferred shares   Shareholders' deficiency  
 
  Number of
shares
  Amount   Total   Number of
ordinary
shares
  Amount   Additional
paid-in
capital
  Accumulated
deficit
  Total
shareholders'
deficiency
 

Balances as of January 1, 2018

    9,138,485   $ 59,983   $ 59,983     584,151   $ 129   $ 3,540   $ (92,315 ) $ (88,646 )

Exercise of options

   
   
   
   
2,906
   
1
   
23
   
   
24
 

Share-based compensation

                        995         995  

Issuance of series E-1 Preferred shares, net**

    751,054     9,364     9,364                                

Net profit

                            5,917     5,917  

Balances as of December 31, 2018

    9,889,539     69,347     69,347     587,057     130     4,558     (86,398 )   (81,710 )

Exercise of options

   
   
   
   
1,593
   
*
 
7
   
   
7
 

Share-based compensation

                        976         976  

Issuance of series E-1 Preferred shares, net***

    3,207,679     36,966     36,966                      

Net loss

                            (6,905 )   (6,905 )

Balances as of December 31, 2019

    13,097.218   $ 106,313   $ 106,313     588,650   $ 130   $ 5,541   $ (93,303 ) $ (87,632 )

*
Lower than $ 1.

**
Net of issuance costs of $ 187 in cash.

***
Net of issuance costs of $ 3,822 in cash and warrants

The accompanying notes are an integral part of the consolidated financial statements.

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POLYPID LTD. AND ITS SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 
  Year ended December 31,  
 
  2018   2019  

Cash flows from operating activities:

             

Net (loss) profit

  $ 5,917   $ (6,905 )

Adjustments to reconcile net loss to net cash used in operating activities:

             

Depreciation

    411     947  

Re-evaluation of warrants

    (24,473 )   (11,365 )

Share-based compensation

    995     976  

Changes in assets and liabilities:

             

Increase in receivables and prepaid expenses

    306     69  

Decrease in deferred equity offering costs

    1,088      

Decrease in advances on account of collaboration agreement

    (600 )    

Increase in other long-term assets

    5     11  

Increase (decrease) in trade payables

    (887 )   449  

Increase (decrease) in other payables and accrued expenses and other liabilities

    560     (1,540 )

Net cash used in operating activities

    (16,678 )   (17,358 )

Cash flows from investing activities:

             

Short-term deposits, net

    14,031     (22,685 )

Purchase of property and equipment

    (3,074 )   (879 )

Net cash provided by (used in) investing activities

    10,957     (23,564 )

Cash flows from financing activities:

             

Proceeds from issuance of convertible preferred shares and warrants, net

    9,364     37,646  

Proceeds from exercise of options

    24     7  

Net cash provided by financing activities

    9,388     37,653  

Increase (decrease) in cash, cash equivalents and restricted cash

    3,667     (3,269 )

Cash, cash equivalents and restricted cash at the beginning of the year

    4,100     7,767  

Cash, cash equivalents and restricted cash at the end of the year

  $ 7,767   $ 4,498  

Non-cash activity:

             

Purchase of property and equipment included in trade payable

    600      

Issuance of E-1 warrants

        680  

   

The accompanying notes are an integral part of the consolidated financial statements.

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands (except share and per share data)

NOTE 1:—GENERAL

a.
Polypid Ltd. (the "Company") was incorporated under the laws of Israel and commenced operations on February 28, 2008. The Company is a Phase 3 clinical-stage pharmaceutical company focused on developing and commercializing novel, locally administered therapies using its PLEX (Polymer-Lipid Encapsulation matriX) technology. The Company's product candidates are designed to address diseases with high unmet medical needs by by pairing PLEX technology with drugs already approved by the U.S. Food and Drug Administration. The Company's lead product candidate, D-PLEX100, is in potentially pivotal Phase 3 trials for the prevention of abdominal (soft tissue) and sternal (bone) surgical site infections.
b.
The Company's activities since inception have consisted of performing research and development activities. Successful completion of the Company's development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to secure financing; obtain marketing approval from regulatory authorities; access potential markets; and build a sustainable customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. The Company's operations are funded by its shareholders and research and development grants and the Company intends to seek further private or public financing as well as make applications for further research and development grants for continuing its operations. Although management believes that the Company will be able to successfully fund its operations, there can be no assurance that the Company will be able to do so or that the Company will ever operate profitably.

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 1:—GENERAL (Continued)

c.
On December 30, 2018 the Company received a notice from MIS Implants Technologies Ltd. ("MIS") terminating the Memorandum of Understanding (the "MOU") signed in February, 2013. The MOU granted MIS an exclusive right to market a specific dental application of the Company's technology for a period of at least 5 years, starting after receipt of either European Medicines Agency ("EMA") marketing approval or U.S. Food and Drug Administration ("FDA") regulatory approval and beginning of commercialized sales in the applicable market, accordingly.

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES

        The consolidated financial statements are prepared according to United States generally accepted accounting principles ("U.S. GAAP")

a.
Use of estimates:
b.
Consolidated financial statements in U.S. dollars:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

c.
Principles of consolidation:
d.
Cash equivalents:
e.
Restricted cash:
 
  December 31,  
 
  2018   2019  

Cash and cash equivalents, as reported on the balance sheets

  $ 7,327   $ 3,924  

Restricted cash, as reported on the balance sheets

    221     375  

Restricted cash in other long-term assets, as reported on the balance sheets

    219     199  

Cash, cash equivalents, and restricted cash, as reported in the statements of cash flows

  $ 7,767   $ 4,498  
f.
Short-term deposits:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

g.
Property and equipment, net:
 
  %

Computers, software and laboratory equipment

  15 - 33

Furniture and office equipment

  7 - 15

Leasehold improvements

  Over the shorter of the term of the lease or its useful life
h.
Impairment of long-lived assets:
i.
Research and development expenses:
j.
Deferred Offering Costs:
k.
Basic and diluted net loss (profit) per share:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

l.
Unaudited pro forma net loss per share attributable to ordinary shareholders:
m.
Accounting for share-based payments:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

n.
Unaudited pro forma balance sheet and pro forma net loss per ordinary share:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

o.
Grants and participations:
p.
Convertible preferred shares and convertible preferred shares warrant liability:
q.
Fair value of financial instruments:

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

r.
Income taxes:

F-14


Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

s.
Concentration of credit risks:
t.
Severance pay:
u.
Derivative financial instruments:

F-15


Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

v.
Contingent liabilities
w.
Recently adopted accounting pronouncements

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES (Continued)

x.
Recently Issued Accounting Pronouncements and not yet adopted

NOTE 3:—PREPAID EXPENSES AND OTHER RECEIVABLES

 
  December 31,  
 
  2018   2019  

Government authorities

  $ 235   $ 177  

Prepaid expenses

    227     180  

Lease deposits

    24     18  

Others

        42  

  $ 486   $ 417  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 4:—PROPERTY AND EQUIPMENT, NET

 
  December 31,  
 
  2018   2019  

Cost:

             

Computers and software

 
$

347
 
$

389
 

Laboratory equipment

    2,647     3,356  

Furniture and office equipment

    147     147  

Leasehold improvements

    4,225     4,353  

    7,366     8,245  

Accumulated depreciation

    (1,177 )   (2,124 )

Depreciated cost

  $ 6,189   $ 6,121  

        Depreciation expenses amounted to $947 and $411 for the years ended December 31, 2019 and 2018, respectively.

NOTE 5:—OTHER PAYABLES AND ACCRUED EXPENSES

 
  December 31,  
 
  2018   2019  

Employees and payroll accruals

  $ 798   $ 673  

Accrued expenses

    1,652     319  

Other expenses

    107     6  

  $ 2,557   $ 998  

NOTE 6:—COMMITMENTS AND CONTINGENT LIABILITIES

a.
The Company's facilities are leased under operating lease agreements for periods ending no later than 2027. The Company also leases motor vehicles under various operating leases, the latest of which expires in 2022.
As of December 31, 2019
   
 

2020

    1,103  

2021

    1,033  

2022

    979  

2023

    852  

2024

    265  

Thereafter

    661  

  $ 4,893  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 6:—COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

b.
In connection with its research and development programs, through December 31, 2019, the Company received participation payments from the IIA in the aggregate amount of $4,898. In return for IIA's participation, the Company is committed to pay royalties at a rate of 3% of sales of the developed products, up to 100% of the amount of grants received plus interest at LIBOR rate. Through December 31, 2019, no royalties have been paid or accrued.

c.
On December 22, 2016, the Company received a written demand for a finder's fee in amount of $250, in connection with 2nd 2016 SPA. In September 2017, a suit was filed against the Company in the Tel-Aviv Magistrates Court in amount of $250. Following an unsuccessful mitigation process, the parties provided their Main Testimony and are waiting for the final verdict in the near future.

NOTE 7:—FAIR VALUE MEASUREMENTS

        Financial instruments measured at fair value on a recurring basis include warrants to convertible preferred shares (see Note 9). The warrants are classified as a liability in accordance with ASC 480-10-25. These warrants were classified as level 3 in the fair value hierarchy since some of the inputs used in the valuation (the share price) were determined based on management's assumptions. To calculate the fair value of the warrants, we first calculated the underlying preferred share value by using the income approach and the market approach. Then the equity value was allocated by using the hybrid model method utilizing two scenarios of OPM and IPO. Once the preferred shares value was derived from the two scenarios, the Black-Scholes model was utilized to calculate the warrants value in each one of the scenarios. 50% probability for each one of the scenarios was applied to derive the weighted average fair value of the warrants.

        As of December 31, 2019:

        According to the liquidation scenario the underlying share price was between $12.67 - $12.81 for the Convertible Preferred E-1 shares with an exercise price of 15.25. The following assumptions were used to estimate the value of the series E-1 Preferred share warrants as of December 31, 2019: expected volatility of 69.11%, risk free interest rates of 1.82%, dividend yield of 0%, and expected term of 2.25 years. Under the IPO scenario the underlying share price was $11.64 for the Convertible Preferred E-1 shares with an exercise price of $15.25. The following assumptions were used to estimate the value of the series E-1 Preferred share warrants as of December 31, 2019: expected volatility of 64.03%, risk free interest rates of 1.87%, dividend yield of 0%, and expected term of 0.42 years. Accordingly, the fair value of the series E-1 Preferred share warrants as of December 31, 2019 was $563.

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 7:—FAIR VALUE MEASUREMENTS (Continued)

        According to the liquidation scenario, the underlying share price was $9.84 for the Convertible Preferred D-2 shares with an exercise price of $8.83. The following assumptions were used to estimate the value of the series D-2 Preferred share warrants as of December 31, 2019: expected volatility of 69.11%, risk free interest rates of 1.82%, dividend yield of 0% and expected term of 2.25 years. Under the IPO scenario the underlying share price was $11.64 for the Convertible Preferred D-2 shares with an exercise price of $ 8.83. The following assumptions were used to estimate the value of the series D-2 Preferred share warrants as of December 31, 2019: expected volatility of 64.03%, risk free interest rates of 1.87%, dividend yield of 0%, and expected term of 0.42 years. Accordingly, the fair value of the series D-2 Preferred share warrants as of December 31, 2019 was $11,275.

        According to the liquidation scenario, the underlying share price was $4.16 for the Convertible Preferred A shares with an exercise price of NIS 0.80. The following assumptions were used to estimate the value of the series A Preferred share warrants as of December 31, 2019: expected volatility of 69.11%, risk free interest rates of 1.82% dividend yield of 0% and expected term of 2.25 years. Under the IPO scenario the underlying share price was $11.64 for the Convertible Preferred A shares with an exercise price of 0.8 NIS. The following assumptions were used to estimate the value of the series A Preferred share warrants as of December 31, 2019: expected volatility of 64.03%, risk free interest rates of 1.87%, dividend yield of 0%, and expected term of 0.42 years. Accordingly, the fair value of the series A Preferred share warrants as of December 31, 2019 was $403.

        As of December 31, 2018:

        According to the liquidation scenario, the underlying share price was $13.94 for the Convertible Preferred D-2 shares with an exercise price of $8.83. The following assumptions were used to estimate the value of the series D-2 Preferred share warrants as of December 31, 2018: expected volatility of 96.87%, risk free interest rates of 2.47%, dividend yield of 0% and expected term of 3.25 years. Under the IPO scenario the underlying share price was $13.10 for the Convertible Preferred D-2 shares with an exercise price of $8.83. The following assumptions were used to estimate the value of the series D-2 Preferred share warrants as of December 31, 2018: expected volatility of 92.96%, risk free interest rates of 2.59%, dividend yield of 0%, and expected term of 1 years. Accordingly, the fair value of the series D-2 Preferred share warrants as of December 31, 2018 was $22,367.

        According to the liquidation scenario, the underlying share price was $8.94 for the Convertible Preferred A shares with an exercise price of NIS 0.8. The following assumptions were used to estimate the value of the series A Preferred share warrants as of December 31, 2018: expected volatility of 96.87%, risk free interest rates of 2.47% dividend yield of 0% and expected term of 3.25 years. Under the IPO scenario the underlying share price was $13.10 for the Convertible Preferred A shares with an exercise price of 0.80 NIS. The following assumptions were used to estimate the value of the series A Preferred share warrants as of December 31, 2018: expected volatility of 92.96%, risk free interest rates of 2.59%, dividend yield of 0%, and expected term of 1 years. Accordingly, the fair value of the series A Preferred share warrants as of December 31, 2018 was $559.

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 7:—FAIR VALUE MEASUREMENTS (Continued)

        The change in the fair value of the preferred share warrants liability is summarized below:

 
  2018   2019  

Beginning of year

  $ 47,399   $ 22,926  

Issuance of warrants

        680  

Change in fair value

    (24,473 )   (11,365 )

End of year

  $ 22,926   $ 12,241  

NOTE 8:—INCOME TAXES

a.
Corporate tax rates:
b.
Net operating losses carry forward:
c.
Deferred taxes:
 
  December 31,  
 
  2018   2019  

Reserves and allowances

  $ 152   $ 173  

Temporary differences

    1,847     2,204  

Loss carryforward

    12,595     15,406  

Deferred tax assets before valuation allowance

    14,594     17,783  

Less—valuation allowance

    (14,594 )   (17,783 )

Net deferred tax assets

  $   $  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 8:—INCOME TAXES (Continued)

d.
Tax assessment:

NOTE 9:—CONVERTIBLE PREFERRED SHARES AND WARRANTS

a.
The Composition of the Company's Convertible Preferred shares is as follows:
 
  December 31, 2018   December 31, 2019  
 
  Authorized   Issued and
outstanding
  Authorized   Issued and
outstanding
 
 
  Number of shares
 

Series A Convertible Preferred shares of NIS 0.8 par value

    562,500     506,250     562,500     506,250  

Series A-1 Convertible Preferred shares of NIS 0.8 Par value

    937,500     835,721     937,500     835,721  

Series B Convertible Preferred shares of NIS 0.8 par value

    625,000     592,454     625,000     592,454  

Series B-1 Convertible Preferred shares of NIS 0.8 par value

    1,953,517     1,831,912     1,953,517     1,831,912  

Series C-1 Convertible Preferred shares of NIS 0.8 par value

    750,000     675,651     750,000     675,651  

Series C-2 Convertible Preferred shares of NIS 0.8 par value

    475,000     429,073     475,000     429,073  

Series D-1 Convertible Preferred shares of NIS 0.8 par value

    2,625,000     2,485,889     2,625,000     2,485,889  

Series D-2 Convertible Preferred shares of NIS 0.8 par value

    3,000,000         3,000,000      

Series D-3 Convertible Preferred shares of NIS 0.8 par value

    625,000     603,497     625,000     603,497  

Series E Convertible Preferred shares of NIS 0.8 par value

    1,187,500     1,012,891     1,187,500     890,998  

Series E-1 Convertible Preferred shares of NIS 0.8 par value

    4,000,000     916,201     6,000,000     4,245,773  

Total

    16,741,017     9,889,539     18,741,017     13,097,218  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 9:—CONVERTIBLE PREFERRED SHARES AND WARRANTS (Continued)

b.
Preferred shares rights:

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 9:—CONVERTIBLE PREFERRED SHARES AND WARRANTS (Continued)

c.
Financing rounds:
d.
Warrants to purchase Preferred shares:

F-24


Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 9:—CONVERTIBLE PREFERRED SHARES AND WARRANTS (Continued)

NOTE 10:—SHAREHOLDERS' DEFICIENCY

a.
General:
b.
Ordinary share capital is composed as follows:
 
  December 31, 2018   December 31, 2019  
 
  Authorized   Issued and
outstanding
  Authorized   Issued and
outstanding
 
 
  Number of shares
 

Ordinary shares of NIS 0.80 par value

    20,500,000     587,057     23,500,000     588,650  
c.
Ordinary shares rights:

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 10:—SHAREHOLDERS' DEFICIENCY (Continued)

d.
Share option plans:
 
  Year ended December 31, 2019  
 
  Number
of options
  Weighted
average
exercise
price
  Aggregate
intrinsic
value
  Weighted
average
remaining
contractual
life (years)
 

Outstanding at beginning of year

    1,291,785     4.39     4,608     5.96  

Granted

    86,000     7.69              

Exercised

    (1,593 )   4.34              

Forfeited and cancelled

    (102,158 )   6.21              

Outstanding at end of year

    1,274,034     4.42     3,411     5.04  

Exercisable options

    1,159,208     4.10     3,406     4.66  

Vested and expected to vest

    1,274,034     4.42     3,406     5.04  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 10:—SHAREHOLDERS' DEFICIENCY (Continued)


 
  Year ended December 31, 2018  
 
  Number
of options
  Weighted
average
exercise
price
  Aggregate
intrinsic
value
  Weighted
average
remaining
contractual
life (years)
 

Outstanding at beginning of year

    1,695,182     4.96     22,596     7.60  

Granted

    40,438     11.93              

Exercised

    (2,906 )   8.00              

Forfeited and cancelled

    (440,929 )   7.36              

Outstanding at end of year

    1,291,785     4.39     4,608     5.96  

Exercisable options

    1,109,866     4.02     4,292     5.52  

Vested and expected to vest

    1,291,785     4.39     4,608     5.96  
 
  Year ended
December 31,
 
 
  2018   2019  

Research and development

    239     180  

General and administrative

    756     796  

Total share-based compensation expense

    995     976  

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Table of Contents


POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 10:—SHAREHOLDERS' DEFICIENCY (Continued)

Exercise
price ($)
  Options
outstanding
as of
December 31,
2019
  Weighted
average
exercise
price ($)
  Weighted
average
remaining
contractual
term
  Options
exercisable
as of
December 31,
2019
  Weighted
average
exercise
price ($)
  Weighted
average
remaining
contractual
term
 
 
   
   
  Years
   
   
  Years
 

*0.21

    261,047     0.21     3.22     261,047     0.21     3.22  

1.68

    112,870     1.68     3.22     112,870     1.68     3.22  

3.44

    87,346     3.44     3.33     87,346     3.44     3.33  

4.84

    297,899     4.84     4.34     297,899     4.84     4.34  

8.83

    209,444     8.83     5.88     209,444     8.83     5.88  

2.96

    33,407     2.96     6.41     33,407     2.96     6.41  

3.76

    61,563     3.76     6.98     61,563     3.76     6.98  

3.92

    21,875     3.92     7.19     20,052     3.92     7.19  

4.00

    15,750     4.00     7.40     15,645     4.00     7.40  

7.36

    71,145     7.36     7.85     47,658     7.36     7.85  

8.05

    7,938     8.05     8.78     3,044     8.05     8.77  

8.27

    16,250     8.27     8.64     6,108     8.27     8.44  

7.67

    77,500     7.67     9.34     3,125     7.67     9.22  

    1,274,034     4.42     5.04     1,159,208     4.10     4.66  

*
The exercise price of the options is denominated in NIS and was translated to USD in the table above using the exchange rate as of the issuance date of the options. The options were granted at the Ordinary share par value.

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 10:—SHAREHOLDERS' DEFICIENCY (Continued)

e.
Options issued to non-employees:
Grant date
  Options
outstanding
as of
December 31,
2019
  Average
Exercise
price
per share
  Options
exercisable
as of
December 31,
2019
  Exercisable
through

March 2013

    23,282   $ 1.68     23,282   March 2023

October 2013

    5,982   $ 4.84     5,982   October 2023

June 2014

    5,875   $ 4.84     5,875   June 2024

September 2014

    5,982   $ 4.84     5,982   September 2024

April 2016

    6,250   $ 2.96     6,250   April 2026

December 2016

    7,500   $ 3.76     7,500   March 2023

June 2017

    206,823   $ 3.92     78,941   June 2027

August 2017

    5,875   $ 8.88     5,875   August 2027

November 2017

    56,250   $ 7.36     37,500   March 2027

August 2019

    75,000   $ 7.82     37,406   August 2029

    398,819           214,593    

        In June 2017, the Company granted options to a director, who is also a shareholder, to purchase up to 127,882 ordinary shares which vesting is contingent upon an IPO.

NOTE 11:—FINANCIAL EXPENSES, NET

 
  Year ended
December 31,
 
 
  2018   2019  

Financial expenses:

             

Foreign currency transaction loss, net

    276      

Others

    42     15  

Total financial expenses, net

    318     15  

Financial income:

             

Interest from deposits

    (126 )   (60 )

Revaluation of warrants

    (24,473 )   (11,365 )

Foreign currency transaction gains, net

        (245 )

Total financial income:

    (25,599 )   (11,670 )

Financial income, net

  $ (24,281 ) $ (11,655 )

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 12:—BASIC AND DILUTED NET LOSS PER SHARE

        The following table sets forth the computation of the Company's basic and diluted net loss per Ordinary share:

 
  Year ended
December 31,
 
 
  2018   2019  

Basic net loss (profit) per share

             

Numerator:

             

Allocation of net loss (profit)

  $ (5,917 ) $ 6,905  

Preferred share preference

    4,439     6,422  

Net income allocated to preferred shareholders

    1,389      

Allocation of net loss (profit) attributable to Ordinary shareholders

  $ (89 ) $ 13,327  

Denominator:

             

Weighted average Ordinary shares outstanding

    586,938     588,338  

Basic net loss (profit) per share

  $ (0.15 ) $ 22.65  

Diluted net loss (profit) per share:

             

Numerator:

             

Allocation of net loss (profit) attributable for basic computation

  $ (89 ) $ 13,327  

Revaluation of warrants to convertible preferred shares

    616      

Allocation of net loss attributable to Ordinary shareholders

  $ 527   $ 13,327  

Denominator:

             

Number of shares used in basic calculation

    586,938     588,338  

Weighted average effect of dilutive securities

             

Warrants to convertible preferred shares

    54,650      

Number of shares used in diluted calculation

    641,587     588,338  

Diluted net loss per share

  $ 0.82   $ 22.65  

        The Company excluded 17.9 million potentially dilutive share-based options, warrants and convertible preferred shares from the computation of diluted net loss per share for the year ended December 31, 2019 and 14.4 million potentially dilutive share-based options, warrants and convertible preferred shares from the computation of diluted net loss per share for the year ended December 31, 2018 because including them would have had an anti-dilutive effect.

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POLYPID LTD. AND ITS SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

U.S. dollars in thousands (except share and per share data)

NOTE 13:—PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE

        The following table sets forth the computation of the Company's pro forma basic and diluted net loss per ordinary share (unaudited):

 
  Year ended
December 31,
2019
 
 
  (Unaudited)
 

Net loss attributable to ordinary shares as reported

  $ 13,327  

Shares used in computing net loss per ordinary share, basic and diluted

    588,338  

Pro forma adjustments to reflect assumed conversion of convertible preferred shares and exercise of warrants A

    13,153,468  

Shares used in computing pro forma net loss per ordinary share, basic and diluted

    13,741,806  

Pro forma net loss per ordinary share, basic and diluted

  $ 0.97  

        The A warrants will expire upon the consummation of the Company's initial public offering. Accordingly, the Company assumes, considering the exercise price of the A warrants and the fair value of the Company's Ordinary Shares at present, and the increase in fair value following the Company's initial public offering, that the investors will exercise the A warrants prior to the warrants' expiration.

        The D-2 and E-1 warrants, on the other hand, do not expire upon the consummation of the Company's initial public offering. Accordingly, no assumptions are made regarding exercise by investors. Furthermore, pursuant to their terms, if at any time the entire class of Series D-2 and E-1 preferred shares is converted into Ordinary Shares, then the warrant shall automatically be deemed exercisable into Ordinary Shares. Pursuant to the Company's articles of association currently in effect, upon the consummation of the Company's initial public offering, the entire class of Series D-2 and E-1 preferred shares shall be converted into Ordinary Shares.

NOTE 14:—RELATED PARTIES

        Through February 2016, several management members also provided services to the Company as service providers. As of December 31, 2019, and 2018, the Company has recorded a provision for severance pay liability for such service providers in amount of $251 and $232 respectively. Theses amounts are included in "Other Liabilities".

        In July 2019, the Company entered into a master service agreement with a third party provider (the "provider") to conduct a portion of a phase three clinical trial in Bulgaria and Romania for a total cost of $700. The Company's director serves as a director and shareholder in the provider. During the year 2019, the company recognized as expense of $68 as part of the research and development expenses.

NOTE 15:—SUBSEQUENT EVENTS

        The Company evaluates events or transactions that occur after the balance sheet date but prior to the issuance of the consolidated financial statements to identify matters that require additional disclosure. For its annual consolidated financial statements as of December 31, 2019 and for the year then ended, the Company evaluated subsequent events through February 24, 2020, the date that the consolidated financial statements were issued. The Company has concluded that no subsequent event has occurred that require disclosure.

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Table of Contents


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 6.    Indemnification of Directors, Officers and Employees.

Indemnification

        The Israeli Companies Law 5759-2999, or the Israeli Companies Law, and the Israeli Securities Law, 5728-1968, or the Securities Law, provide that a company may indemnify an office holder against the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:

        The Israeli Companies Law also permits a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her, as described above, then the undertaking should be limited and shall detail the following foreseen events and amount or criteria:

        We have entered into indemnification agreements with all of our directors and with all members of our senior management. Each such indemnification agreement provides the office holder with indemnification permitted under applicable law and up to a certain amount, and to the extent that these liabilities are not covered by directors and officers insurance.

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Table of Contents

Insurance

        An Israeli company may insure an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the company's articles of association:

Exculpation

        Under the Israeli Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance an office holder from his or her liability to the company, in whole or in part, for damages caused to the company as a result of a breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association provide that we may exculpate, in whole or in part, any office holder from liability to us for damages caused to the company as a result of a breach of his or her duty of care, but prohibit an exculpation from liability arising from a company's transaction in which our controlling shareholder or officer has a personal interest. Subject to the aforesaid limitations, under the indemnification agreements, we will exculpate and release our office holders from any and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law.

Limitations

        The Israeli Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any act or omission committed with the intent to derive an illegal personal benefit; or (4) any fine, monetary sanction, penalty or forfeit levied against the office holder.

        Under the Israeli Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to certain office holders or under certain circumstances, also by the shareholders.

        Our amended and restated articles of association to be effective upon the closing of this offering will permit us to exculpate, indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Israeli Companies Law.

        We intend to obtain directors and officers liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay all premiums thereunder to the fullest extent permitted by the Israeli Companies Law. In addition, prior to the closing of this offering, we intend to enter into agreements with each of our directors and executive officers exculpating them from liability to us for damages caused to us as a result of a breach of duty of care and undertaking to indemnify them, in each case, to the fullest extent permitted by our amended and restated articles of association to be effective upon the closing of this offering and Israeli law, including with respect to liabilities resulting from this offering to the extent that these liabilities are not covered by insurance.

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        Insofar as the indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to directors, officers or persons controlling the registrant, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Item 7.    Recent Sales of Unregistered Securities.

        The following list sets forth information as to all securities we have sold since January 1, 2017, which were not registered under the Securities Act.

        The sales of the above securities were deemed to be exempt from registration under the Securities Act because they were made outside of the United States of America to certain non-U.S. individuals or entities pursuant to Regulation S or, in reliance upon the exemption from registration provided under Section 4(a)(2) of the Securities Act and the regulations promulgated thereunder.

        Additionally, since Janauary 1, 2017 we have granted share options to employees, directors, consultants and service providers under our 2012 Plan covering an aggregate of 636,677 ordinary shares, with exercise prices ranging from $3.92 to $8.27 per share.

        We claimed exemption from registration under the Securities Act for the option grants described above under Section 4(a)(2), Regulation S, or under Rule 701 of the Securities Act as transactions pursuant to written compensatory plans or pursuant to a written contract relating to compensation.

        No underwriters were employed in connection with the securities issuances set forth in this Item.

Item 8.    Exhibits and Financial Statement Schedules.

(a)
Exhibits.    See the Exhibit Index attached to this registration statement, which is incorporated by reference herein.

(b)
Financial Statement Schedules.    Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Item 9.    Undertakings.

        The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful

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defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

        The undersigned Registrant hereby undertakes that:

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EXHIBIT INDEX

EXHIBIT
NUMBER
  EXHIBIT DESCRIPTION
  1.1 * Form of Underwriting Agreement
        
  3.1   Amended and Restated Articles of Association of the Registrant, as currently in effect
        
  3.2 * Form of Articles of Association of the Registrant to be effective upon the closing of this offering
        
  4.1   Form of Warrant to purchase Series D-2 Preferred Shares
        
  4.2   Form of Warrant to purchase Series E-1 Preferred Shares
        
  5.1 * Opinion of Zysman, Aharoni, Gayer & Co., Israeli counsel to the Registrant, as to the validity of the ordinary shares
        
  10.1 * Form of Officer Indemnity and Exculpation Agreement
        
  10.2   Amended and Restated PolyPid Ltd. 2012 Share Option Plan
        
  10.3   Amended and Restated Investors' Rights Agreement, dated June 28, 2019, among the Registrant and the shareholders named therein
        
  10.4   Lease Agreement, dated March 27, 2014, by and between the Registrant and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original)
        
  10.4.1   Addendum to Lease Agreement, dated July 1, 2014, by and between the Registrant and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original)
        
  10.4.2   Second Addendum to Lease Agreement, dated July 23, 2017, by and between the Registrant and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original)
        
  10.4.3   Third Addendum to Lease Agreement, dated November 28, 2017, by and between the Registrant and Ogen Yielding Real Estate Ltd. (unofficial English translation from Hebrew original)
        
  21.1   Subsidiaries of the Registrant
        
  23.1 * Consent of Kost, Forer, Gabbay & Kasierer, Certified Public Accountants (Israel), an independent registered public accounting firm and a member firm of Ernst & Young LLP
        
  23.2 * Consent of Zysman, Aharoni, Gayer & Co. (included in Exhibit 5.1)
        
  23.3 * Consent of Life Science Intelligence, Inc.
        
  24.1 * Power of Attorney (included in signature pages of Registration Statement)

*
To be filed by amendment.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Petach Tikva, Israel on this        day of                        , 2020.

    POLYPID LTD.

 

 

By:

 

  

Amir Weisberg
Chief Executive Officer

        The undersigned officers and directors of PolyPid Ltd. hereby constitute and appoint Amir Weisberg and Dikla Czaczkes Akselbrad with full power of substitution, our true and lawful attorney-in-fact and agent to take any actions to enable the Company to comply with the Securities Act, and any rules, regulations and requirements of the SEC, in connection with this Registration Statement on Form F-1, including the power and authority to sign for us in our names in the capacities indicated below any and all further amendments to this registration statement and any other registration statement filed pursuant to the provisions of Rule 462 under the Securities Act.

        Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE
 
TITLE
 
DATE

 

 

 

 

 
  

Amir Weisberg
  Chief Executive Officer and Director (Principal Executive Officer)    

 

Dikla Czaczkes Akselbrad

 

Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

 

 

 

Jacob Harel

 

Chairman

 

 

  

Yechezkel Barenholz, Ph.D.

 

Director

 

 

  

Noam Emanuel, Ph.D.

 

Chief Technology Officer, Chief Scientific Officer and Director

 

 

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SIGNATURE
 
TITLE
 
DATE

 

 

 

 

 
  

Chaim Hurvitz
  Director    

 

Itzhak Krinsky, Ph.D.

 

Director

 

 

  

Gerry Rubens

 

Director

 

 

  

Anat Tsour Segal

 

Director

 

 

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SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

        Pursuant to the requirements of the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of PolyPid Ltd., has signed this Registration Statement on                        , 2020.


 

 

POLYPID INC.

 

 

By:

 

    
       
Amir Weisberg
President

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Exhibit 3.1

 

THE COMPANIES LAW - 1999

 

A COMPANY LIMITED BY SHARES

 

AMENDED AND RESTATED

 

ARTICLES OF ASSOCIATION OF

 

POLYPID LTD.

 

PRELIMINARY

 

1.                                      In these Articles of Association, unless the context otherwise requires:

 

The “Articles” shall mean the Articles of Association of the Company as shall be in force from time to time.

 

The “Aurum Group” shall mean (i) Aurum Ventures M.K.I. Ltd. (“Aurum”) and any entity which Controls Aurum, any entity which Aurum Controls, any entity Controlled by the same entity Controlling Aurum or with respect to any of the aforementioned Aurum entities which is an individual, such Person’s spouse, siblings and children or any trust for the benefit of any of the foregoing and any of their respective Controlled entities, and any successor and assignor thereof; and (ii) Dan Gelvan.

 

The “Board of Directors” or “Board” shall mean the Company’s Board of Directors.

 

The “Closing” shall mean the Closing pursuant to the Purchase Agreement.

 

The “Company” shall mean PolyPid Ltd.

 

The “Companies Law” shall mean the Companies Law 5759-1999, as amended from time to time and the provisions of the Companies Ordinance [New Version] 5743-1983 that remain in effect or are given effect from time to time.

 

Control” shall mean holding of more than 50% of the issued and outstanding share capital of a company on an as converted basis and/or the voting rights of a company, and/or the right to appoint the majority of the directors of a company.

 

The “Directors” shall mean the members of Company’s Board of Directors.

 

An “Eligible E Holder” shall mean any holder of Preferred E Shares, holding at least 1% of the Company’s issued and outstanding share capital (on an as-converted basis).

 

An “Eligible E Investor” shall mean any shareholder that is an investor under both the Series E SPA and the Series E-1 SPA, and is a holder, immediately prior to any closing of the Series E-1 SPA, of Series E Preferred Shares (which Series E Preferred Shares (or any part thereof) shall be converted into Series E-1 Preferred Shares upon and subject to such closing).

 

An “Institutional Entity” shall mean any of the entities listed in the First Supplement of the Securities Law, 5728-1968.

 

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The “Issuing Date” shall mean, in the case of a particular Share, the date on which such share was originally issued by the Company to a Shareholder.

 

The “Lead Investor” shall mean Shavit Capital Fund III (US), L.P., a Delaware limited partnership and Gabriel Capital Fund (US), L.P., a Delaware limited partnership.

 

The “Limited Partners” shall mean the following (i) limited partners of Friendly Angels I., L.P. (“FAC Partnership”): Gerry Rubens, David Delevi, Shabtay Vogel, Eitan Adres, Leo Malamud, Adi Lahat, Eftan Investment Consulting Ltd., Egon Mining and Exploration Ltd., RB Holding Company S.A., Tiferet Hamechonit Leasing Ltd., WG-Fifth Ave LLC, Six Continents Group LLC Defined Benefit Jeffrey Sacks Trustee, Yaki De Levi, Ory Vogel, Saul Goldberg, Jose Birnabaum, Yuval Harari, Joseph Englhard, Eitan Kyiet, Yosef Paciuk, Arnon Wilinski, Ran Gants, Yossi Zaykovsky and Gil Naor, Neveh-Oded Building & Investment company Ltd., Trans Opera SARL, Guibor S.A., Financiere Saint James S.A.S, H. Stark Investments Ltd., Stark Investments (D.H.) Limited, Friendly Angels, L.P. (“Partnership”), Friendly Angels Club Advisors Ltd. and AW Equity S.A and any subsequent limited partner of the Partnership as shall be notified by the general partner of the Partnership and as shall be approved by the Board of Directors of the Company.

 

The “Majority E Holders” shall mean the holders of Preferred E Shares holding the majority of the issued and outstanding Preferred E Shares.

 

The “Majority Investors” shall mean the holders of Series D-1 Preferred Shares, Series D-2 Preferred Shares and Series D-3 Preferred Shares holding the majority of the issued and outstanding Series D-1 Preferred Shares, Series D-2 Preferred Shares and Series D-3 Preferred Shares, pari passu, on an as converted basis which majority shall in all events (except in relation to the provisions of Article 11(d)(i)(B)) include the Lead Investor, as long as the Lead Investor (and its Permitted Transferees) continues to hold at least 50% of the Series D-1 Preferred Shares issued to it at the Closing (not including, for the avoidance of doubt, any Warrant Shares).

 

The “Office” shall mean the registered office of the Company, as it shall be from time to time.

 

The “Ordinary Shares” are as defined in Article 5.

 

The “Original Issue Priceshall generally mean, with respect to each Preferred Share, the original price actually paid or deemed to have been paid to the Company for such Preferred Share, and shall be subject to adjustment as provided herein. The Original Issue Price of each Series A Preferred Share is US$1.44. The Original Issue Price of each Series A-1 Preferred Share is US$1.6752. The Original Issue Price of each Series B Preferred Share is US$3.436. The Original Issue Price of each Series B-1 Preferred Share is US$4.8448. The Original Issue Price of each Series C-1 Preferred Share is US$6.6208. The Original Issue Price of each Series C-2 Preferred Share is US$8.828. The Original Issue Price of each Series D-1 Preferred Share is US$ 8.8288. The Original Issue Price of each Series D-2 Preferred Share shall initially be US$8.8288, but such figure shall be as may be adjusted under the Purchase Agreement, the Warrant and/or hereunder from time to time in accordance therewith and herewith. The Original Issue Price of each Series D-3 Preferred Share is US$ 8.8288. The Original Issue Price of each Series E Preferred Share is US$ 12.716, and the Original Issue Price of each Series E-1 Preferred Share is US$ 12.716.

 

The “Preferred Shareholders” shall mean the holders of Preferred Shares.

 

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The “Preferred E Shares” shall mean the Series E Preferred Shares together with the Series E-1 Preferred Shares, pari passu among them.

 

The “Preferred Shares” shall mean the Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series D Preferred Shares and the Preferred E Shares.

 

The “Purchase Agreementshall mean the Securities Purchase Agreement dated effective February 2nd, 2016 by and between the Company and the Investors (as such term is defined therein) (the “Investors”), including for the avoidance of doubt any joinder thereto.

 

A “Provident Fund” shall mean any of the following (as the case may be): (i) a provident fund, (ii) a study fund, or (iii) a provident fund for severance pay, or (iv) an entity holding shares in the Company on behalf of Provident Fund(s) under its management, as disclosed to the Company.

 

The “Register” shall mean the register of Shareholders that is to be kept pursuant to Section 127 of the Companies Law.

 

The “Series A-1 Group” shall mean the following: Amir Weisberg, Prof. David Segal, Yehuda Nir, Yossi Dotan and Aharon Lukach.

 

The “Series E Investor” shall mean an investor under the Series E SPA.

 

The “Series E-1 Investor” shall mean an investor under the Series E-1 SPA.

 

The “Series E SPA” shall mean the Series E Preferred Share Purchase Agreement dated effective October 31, 2017 by and among the Company and the Series E Investors.

 

The “Series E-1 SPA” shall mean the Series E-1 Preferred Share Agreement dated effective       , 2018 by and among the Company and certain investors listed therein (including any joinder to the Series E-1 SPA).

 

A “Shareholder” shall mean any person or entity that is the owner of at least one share of the Company, as registered in the Register.

 

The “Shares” shall mean the Preferred Shares and the Ordinary Shares.

 

The “Warrant Shares” shall mean the Series D-2 Preferred Shares which may be issued upon the exercise of warrants to purchase such shares granted by the Company to any holder thereof (“Warrants”).

 

In these Articles, subject to this Article and unless the context otherwise requires, expressions defined in the Companies Law, or any modification thereof in force on the date upon which these Articles become binding on the Company, shall have the meanings so defined therein; and words importing the singular shall include the plural, and vice versa, and words importing the masculine gender shall include the feminine gender, and words importing persons shall include bodies corporate, unless the context requires otherwise.  The titles of the Articles are not part of the Articles.

 

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PRIVATE COMPANY

 

2.                                      The Company is a private company, and accordingly:

 

(a)                                 the right to transfer the Shares of the Company shall be restricted in the manner hereinafter appearing; and

 

(b)                              no invitation shall be issued to the public to subscribe for any shares or debentures or debenture stock of the Company.

 

3.                                      The Company’s objectives are to conduct any legal business. The Company may also make contributions of reasonable amounts for worthy purposes even if such contributions are not made on the basis of business considerations.

 

OFFICE

 

4.                                      The Office shall be at such place as the Board of Directors shall from time to time decide.

 

LIABILITY OF THE SHAREHOLDERS

 

4A.                             The liability of a Shareholder for the obligations of the Company will be limited to the payment of the consideration (including the premium) for which his shares were issued to him, but not less than the par value of such shares; except in the event that said shares have been issued to such Shareholder lawfully for a consideration which is below the par value, in which event such Shareholders’ liability will be limited to the payment of the consideration for which said shares were issued to him/her/it. The Company may not alter the liability of a Shareholder or obligate any Shareholder to acquire additional shares, without such Shareholder’s written consent.

 

THE CAPITAL

 

5.                                      The authorized share capital of the Company shall be NIS 33,792,814, comprised of 42,241,017 shares, divided into 23,500,000 Ordinary Shares, nominal value NIS 0.80 per share (the “Ordinary Shares”), 562,500 Series A Preferred Shares, nominal value NIS 0.80 per share (the “Series A Preferred Shares”), 937,500 Series A-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series A-1 Preferred Shares”), 625,000 Series B Preferred Shares, nominal value NIS 0.80 per share (the “Series B Preferred Shares”), 1,953,517 Series B-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series B-1 Preferred Shares”), 750,000 Series C-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series C-1 Preferred Shares”), 475,000 Series C-2 Preferred Shares, nominal value NIS 0.80 per share (the “Series C-2 Preferred Shares”, and together with the Series C-1 Preferred Shares, the “Series C Preferred Shares”), 2,625,000 Series D-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-1 Preferred Shares”), 3,000,000 Series D-2 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-2 Preferred Shares”), and 625,000 Series D-3 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-3 Preferred Shares” and together with the Series D-1 Preferred Shares and the Series D-2 Preferred Shares, the “Series D Preferred Shares”), 1,187,500 Series E Preferred Shares, nominal value NIS 0.80 per share (the “Preferred Shares”), and 6,000,000 Series E-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series E-1 Preferred Shares”).

 

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RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED SHARES

 

6.                                      The rights, preferences, privileges, and restrictions granted to and imposed on the Preferred Shares, are as set forth below:

 

DIVIDEND PREFERENCE

 

7.                                      In the event that the Company will distribute any dividends then:

 

(a)                                 Prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (including Ordinary Shares), each of the holders of the Preferred E Shares shall be entitled to receive, pari passu among themselves, for each Preferred E Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the Original Issue Price for such Preferred E Share (ii) times 1.3 (the “Multiplier”), plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually, (the “Series E Dividend Preference”).

 

(b)                                 Following payment in full of the Series E Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares), each of the holders of the Series D Preferred Shares shall be entitled to receive, pari passu among themselves, for each Series D Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to: (1) with respect to the holders of the Series D-1 Preferred Shares and/or the Series D-2 Preferred Shares - (A) (i) the applicable Original Issue Price for such Series D Preferred Share (ii) times the Multiplier, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually, and (2) with respect to the holders of the Series D-3 Preferred Shares — (A) (i) the applicable Original Issue Price for such Series D-3 Preferred Share (ii) times the Multiplier, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually, (the “Series D Dividend Preference”).

 

(c)                                  Following payment in full of the Series E Dividend Preference and the Series D Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares and the Series D Preferred Shares), each of the holders of the Series C Preferred Shares shall be entitled to receive, for each Series C Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the applicable Original Issue Price for such Series C Preferred Share, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually(the “Series C Dividend Preference”).

 

(d)                                 Following payment in full of the Series E Dividend Preference, Series D Dividend Preference and the Series C Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares, Series D Preferred Shares and Series C Preferred Shares), each of the holders of the Series B-1 Preferred Shares shall be entitled to

 

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receive, for each Series B-1 Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the applicable Original Issue Price for such Series B-1 Preferred Share, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually (the “Series B-1 Dividend Preference”).

 

(e)                                  Following payment in full of the Series E Dividend Preference, Series D Dividend Preference, the Series C Dividend Preference, and the Series B-1 Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, and Series B-1 Preferred Shares), each of the holders of the Series B Preferred Shares shall be entitled to receive, for each Series B Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the applicable Original Issue Price for such Series B Preferred Share, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually (the “Series B Dividend Preference”).

 

(f)                                   Following payment in full of the Series E Dividend Preference, Series D Dividend Preference, the Series C Dividend Preference, Series B-1 Dividend Preference, and the Series B Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, Series B-1 Preferred Shares, and Series B Preferred Shares), each of the holders of the Series A-1 Preferred Shares shall be entitled to receive, for each Series A-1 Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the applicable Original Issue Price for such Series A-1 Preferred Share, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually (the “Series A-1 Dividend Preference”).

 

(g)                                  Following payment in full of the Series E Dividend Preference, Series D Dividend Preference, the Series C Dividend Preference, Series B-1 Dividend Preference, Series B Dividend Preference, and the Series A-1 Dividend Preference, and prior to and in preference to the distribution of any dividends to the holders of any class or series of shares of the Company (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares), each of the holders of the Series A Preferred Shares shall be entitled to receive, for each Series A Preferred Share held by it, cumulative dividends (whether paid in cash or otherwise), if and when declared by the Board, out of any funds legally available for distribution therefor, an amount equal to (A) (i) the applicable Original Issue Price for such Series A Preferred Share, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%), per annum, calculated from the Issuing Date thereof, compounding annually (the “Series A Dividend Preference”, and together with the Series E Dividend Preference Series D Dividend Preference, the Series C Dividend Preference, Series B-1 Dividend Preference, Series B Dividend Preference, and the Series A-1 Dividend Preference, the “Dividend Preferences”).

 

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(h)                                 Following the payment in full of all of the Dividend Preferences set forth in Article 7(a)-(g) above, the holders of the Preferred Shares and the Ordinary Shares shall be entitled to receive, pro rata, on an as-converted basis, any and all other dividends distributed by the Company.

 

(i)                                     For the avoidance of doubt, no dividends shall be paid on any other class of shares, unless the Dividend Preferences have been paid in full.

 

(j)                                    Notwithstanding the provisions of Article 7(a), if the aggregate dividend that would be due to the holders of: (1) the Series D Preferred Shares, with respect to each Series D Preferred Share held by them, and/or (2) the Preferred E Shares, with respect to each Preferred E Share held by them, on the relevant date for such distribution, pursuant to a theoretical distribution to all shareholders under Article 8(a) and 8(b) which does not (solely for the purpose of calculating such theoretical distribution) give effect to the Multiplier, equals at least three hundred percent (300%) of the Original Issue Price for such share (the “3X Cap Amount”), then (i) the Multiplier shall not apply for such class of Preferred Shares achieving the 3X Cap Amount (including for the avoidance of doubt, in case where the class of the Series D Preferred Shares achieves the 3X Cap Amount, the Series D-3 Preferred Shares), and (ii) the applicable Dividend Preference (i.e., Series D Dividend Preference and/or Series E Dividend Preference, as applicable) for each such Preferred Share will equal (I) (A) the applicable Original Issue Price of such Preferred Share plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually from the Issuing Date; less (II) the amount of any Dividend Preference previously and actually paid on such class of Preferred Share, and (iii) the holders of such class of Preferred Shares shall receive, upon such distribution, with respect to each Preferred Share held by them on the relevant date for such distribution, their applicable Dividend Preference for such share as modified under clause (ii) above plus the amount payable per such Preferred Share, on an as-converted basis, under Article 7(h).

 

LIQUIDATION PREFERENCE

 

8.                                      In the event of any liquidation or winding up of the Company (whether voluntary or involuntary), the commencement of any bankruptcy or insolvency proceeding under any bankruptcy or insolvency or similar law (whether voluntary or involuntary), by or against the Company, which proceedings shall remain un-dismissed for a period of sixty (60) days, or if the Company by any act indicates its consent to, approval of or acquiescence in, any such proceeding, or the appointment of a receiver or liquidator to all or substantially all of the Company’s assets which appointment shall remain un-dismissed for a period of sixty (60) days or the making of an assignment for the benefit of creditors (a “Liquidation”):

 

(a)                                 Preferred Preferences.

 

(1)                                 Series E Preference. The holders of the Preferred E Shares shall be entitled to receive, on a pro-rata and pari passu basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof, for each Preferred E Share held by them, an amount equal to: (I) (A) (i) the applicable Original Issue Price of such Preferred Share (ii) times the Multiplier, plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date; plus (II) an amount equal to the declared but unpaid dividends on each such Preferred E Share; less (III) the

 

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amount of any Dividend Preference previously and actually paid on such Preferred E Share (the “Series E Preference”). If the amount available for distribution in such Liquidation (the “Distributable Proceeds”) is less than the amount needed to pay the holders of Preferred E Shares the full Series E Preference amount as provided herein, then all such Distributable Proceeds shall be distributed among the holders of the Preferred E Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had the Distributable Proceeds been sufficient for the distribution of the entire Series E Preference amount.

 

(2)                                 Series D Preference. Following payment in full of the Series E Preference, the holders of the Series D Preferred Shares shall be entitled to receive, on a pro-rata and pari passu basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares), for each Series D Preferred Share held by them, an amount equal to: (1) with respect to the holders of the Series D-1 Preferred Shares and/or the Series D-2 Preferred Shares - (I) (A) (i) the applicable Original Issue Price of such Preferred Share (ii) times the Multiplier plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date; plus (II) an amount equal to the declared but unpaid dividends on each such Series D-1 Preferred Share and/or Series D-2 Preferred Share (as applicable); less (III) the amount of any Dividend Preference previously and actually paid on such Series D-1 Preferred Share and/or Series D-2 Preferred Share (as applicable), and (2) with respect to the holders of Series D-3 Preferred Shares — (I) (A) (i) the applicable Original Issue Price of such Preferred Share (ii) times 1.3 plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date; plus (II) an amount equal to the declared but unpaid dividends on such Series D-3 Preferred Share; less (III) the amount of any Dividend Preference previously and actually paid on such Series D-3 Preferred Share, (the “Series D Preference”). If Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference, is less than the amount needed to pay the holders of Series D Preferred Shares the full Series D Preference amount as provided herein, then all such Distributable Proceeds shall be distributed among the holders of the Series D Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had the Distributable Proceeds been sufficient for the distribution of the entire Series D Preference amount.

 

(3)                                 Series C Preference. Following payment in full of the Series E Preference and the Series D Preference, the holders of the Series C Preferred Shares shall be entitled to receive, on a pro-rata basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares and Series D Preferred Shares), for each Series C Preferred Share held by them, an amount equal to (I) the applicable Original Issue Price of such Preferred Share, plus (II) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date, plus (III) an amount equal to the declared but unpaid dividends on such Series C Preferred Share; less (IV) the amount of any Dividend Preference previously and actually paid on such Series C Preferred Share (the “Series C Preference”). If the Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference and the Series D Preference, are less than the amount needed to pay the

 

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holders of Series C Preferred Shares the full Series C Preference amount as provided herein, then all such remaining Distributable Proceeds shall be distributed among the holders of the Series C Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had such remaining Distributable Proceeds been sufficient for the distribution of the entire Series C Preference amount.

 

(4)                                 Series B-1 Preference. Following payment in full of the Series E Preference and the Series D Preference and the Series C Preference, the holders of the Series B-1 Preferred Shares shall be entitled to receive, on a pro-rata basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares, Series D Preferred Shares and Series C Preferred Shares), for each Series B-1 Preferred Share held by them, an amount equal to (I) the applicable Original Issue Price of such Preferred Share, plus (II) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date, plus (III) an amount equal to the declared but unpaid dividends on such Series B-1 Preferred Share; less (IV) the amount of any Dividend Preference previously and actually paid on such Series B-1 Preferred Share (the “Series B-1 Preference”). If the Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference, the Series D Preference and the Series C Preference, are less than the amount needed to pay the holders of Series B-1 Preferred Shares the full Series B-1 Preference amount as provided herein, then all such remaining Distributable Proceeds shall be distributed among the holders of the Series B-1 Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had such remaining Distributable Proceeds been sufficient for the distribution of the entire Series B-1 Preference amount.

 

(5)                                 Series B Preference. Following payment in full of the Series E Preference, the Series D Preference, the Series C Preference, and the Series B-1 Preference, the holders of the Series B Preferred Shares shall be entitled to receive, on a pro-rata basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, and Series B-1 Preferred Shares), for each Series B Preferred Share held by them, an amount equal to (I) the applicable Original Issue Price of such Preferred Share, plus (II) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date, plus (III) an amount equal to the declared but unpaid dividends on such Series B Preferred Share; less (IV) the amount of any Dividend Preference previously and actually paid on such Series B Preferred Share (the “Series B Preference”). If the Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference, the Series D Preference, the Series C Preference, and the Series B-1 Preference, are less than the amount needed to pay the holders of Series B Preferred Shares the full Series B Preference amount as provided herein, then all such remaining Distributable Proceeds shall be distributed among the holders of the Series B Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had such remaining Distributable Proceeds been sufficient for the distribution of the entire Series B Preference amount.

 

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(6)                                 Series A-1 Preference. Following payment in full of the Series E Preference, the Series D Preference, the Series C Preference, the Series B-1 Preference, and the Series B Preference, the holders of the Series A-1 Preferred Shares shall be entitled to receive, on a pro-rata basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, Series B-1 Preferred Shares, and Series B Preferred Shares), for each Series A-1 Preferred Share held by them, an amount equal to (I) the applicable Original Issue Price of such Preferred Share, plus (II) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date, plus (III) an amount equal to the declared but unpaid dividends on such Series A-1 Preferred Share; less (IV) the amount of any Dividend Preference previously and actually paid on such Series A-1 Preferred Share (the “Series A-1 Preference”). If the Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference, the Series D Preference, the Series C Preference, the Series B-1 Preference, and the Series B Preference, are less than the amount needed to pay the holders of Series A-1 Preferred Shares the full Series A-1 Preference amount as provided herein, then all such remaining Distributable Proceeds shall be distributed among the holders of the Series A-1 Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had such remaining Distributable Proceeds been sufficient for the distribution of the entire Series A-1 Preference amount.

 

(7)                                 Series A Preference. Following payment in full of the Series E Preference, Series D Preference, the Series C Preference, the Series B-1 Preference, the Series B Preference, and the Series A-1 Preference, the holders of the Series A Preferred Shares shall be entitled to receive, on a pro-rata basis among themselves, prior and in preference to any distribution of any of the assets or surplus funds of the Company or otherwise available for distribution to the holders of any of the other securities of the Company by reason of their ownership thereof (except the holders of Preferred E Shares, Series D Preferred Shares, Series C Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares), for each Series A Preferred Share held by them, an amount equal to (I) the applicable Original Issue Price of such Preferred Share, plus (II) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date, plus (III) an amount equal to the declared but unpaid dividends on such Series A Preferred Share; less (IV) the amount of any Dividend Preference previously and actually paid on such Series A Preferred Share (the “Series A Preference”, and together with the Series E Preference, the Series D Preference, the Series C Preference, the Series B-1 Preference, the Series B Preference, and the Series A-1 Preference, the “Preferred Preferences”). If the Distributable Proceeds remaining available for distribution in such Liquidation following payment in full of the Series E Preference, Series D Preference, the Series C Preference, the Series B-1 Preference, the Series B Preference, and the Series A-1 Preference, are less than the amount needed to pay the holders of Series A Preferred Shares the full Series A Preference amount as provided herein, then all such remaining Distributable Proceeds shall be distributed among the holders of the Series A Preferred Shares, on a pro rata basis among them in proportion to the amounts such holders would have received had such remaining Distributable Proceeds been sufficient for the distribution of the entire Series A Preference amount.

 

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(b)                                 Remainder. Following the payment in full of all of the Preferred Preferences set forth in Article 8(a) above, the holders of the Preferred Shares and the Ordinary Shares shall be entitled to receive, pro rata, on an as-converted basis, any and all remaining Distributable Proceeds.

 

(c)                                  Notwithstanding the provisions of Article 8(a), if the aggregate proceeds that would be due to the holders of: (1) the Series D Preferred Shares, with respect to each Series D-1 Preferred Share and/or Series D-2 Preferred Share held by them, and/or (2) the Preferred E Shares, with respect to each Preferred E Share held by them (as applicable), at the closing of the Liquidation, pursuant to a theoretical distribution to all shareholders under Article 8(a) and 8(b) which does not (solely for the purpose of calculating such theoretical distribution) give effect to the Multiplier, equals at least the 3X Cap Amount, then (i) the Multiplier shall not apply for such class of Preferred Shares achieving the 3X Cap Amount (including for the avoidance of doubt, in case where the class of the Series D Preferred Shares achieves the 3X Cap Amount, the Series D-3 Preferred Shares), and (ii) the applicable Preferred Preference (i.e., the Series E Preference and/or Series D Preference, as applicable) for each such Preferred Share  will equal (I) (A) the applicable Original Issue Price of such Preferred Share plus (B) interest on the applicable Original Issue Price at the rate of six percent (6%) per year, compounding annually, from the Issuing Date; plus (II) an amount equal to the declared but unpaid dividends on such class of Preferred Share; less (III) the amount of any Dividend Preference previously and actually paid on such class of Preferred Share, and (iii) the holders of such class of Preferred Shares shall receive, at such closing, with respect to each such Preferred Share held by them at the closing of the Liquidation, the applicable Preferred Preference for such share as modified under clause (ii) above plus the amount payable per such Preferred Share, on an as-converted basis, under Article 8(b).

 

(d)                                 Deemed Liquidation.

 

(1)                                 General. For purposes of this Article 8, in addition to any Liquidation, or dissolution or winding up of the Company under applicable law, the Company shall, unless otherwise determined by the Majority Investors and the Majority E Holders, be deemed to be wound up in the event of (each a “Deemed Liquidation”): (i) the sale of all or substantially all of the intellectual property or assets or shares of the Company or (ii) the acquisition of the Company by another entity by means of any transaction or series of related transactions or any reorganization, merger or  consolidation with or into any other corporate entity as a result of which the shares of the Company outstanding immediately prior to such transaction will not represent, or are not converted into or exchanged for shares that represent, immediately following such transaction, fifty percent (50%) or more of the outstanding voting power of the Company or the surviving entity, in each case (i) or (ii) (an “M&A Event”) whether by a transaction or a series of related transactions; or (iii) any distribution of a dividend or a series of dividends  as a result of the sale or worldwide exclusive license of all or substantially all of the intellectual property or assets of the Company.

 

(2)                                 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation pursuant to Article 8(d)(1), if any portion of the consideration payable to the Shareholders is payable only upon satisfaction of contingencies (the “Additional Consideration”), then (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the Shareholders in accordance with Article 8(a) and (if relevant) Article 8(b) as if the Initial Consideration were the only consideration payable in connection with such Deemed

 

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Liquidation; and (b) any Additional Consideration which becomes payable to the Shareholders upon satisfaction of such contingencies shall be allocated among the Shareholders in accordance with Article 8(a) and (if relevant) Article 8(b) after taking into account the previous payment of the Initial Consideration as part of the same transaction.  For the purposes of this Article 8(d)(2), consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation shall be deemed to be Additional Consideration.

 

(3)                                 Non-Cash Proceeds. In the event of a Deemed Liquidation, if the consideration received by the Company is in whole or in part other than cash, the amount deemed paid or distributed to the Shareholders shall be the value of the property, rights or securities paid or distributed to such Shareholders. The value of such property, rights or securities shall be determined in good faith by the Board.

 

(e)                                  Definitive Agreements. The definitive agreements by which the Company is bound in connection with a Deemed Liquidation shall be effected shall provide that the proceeds from such transaction shall be distributed in accordance with Article 8(d); it being understood that such proceeds will not include any payments which may be paid to the employees and/or service providers of the Company following the closing in connection with their employment/engagement, in the nature of salaries, bonuses, options, and retention payments (the “Retention Consideration”).

 

(f)                                   Non-Compliance. In the event the requirements of this Article 8 are not complied with, the Company shall forthwith either:

 

(i)                                     cause such closing to be postponed until such time as the requirements of this Article 8 have been complied with; or

 

(ii)                                  cancel such transaction, in which event the rights, preferences and privileges of the holders of the Preferred Shares shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to above.

 

(g)                                  Notice. The Company shall give each holder of record of Preferred Shares written notice of such impending transaction not later than fourteen (14) days prior to the Shareholders’ meeting called to approve such transaction, or fourteen (14) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Article 8, and the Company shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than fourteen (14) days after the Company has given the first notice provided for herein or sooner than ten (10) days after the Company has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the Majority Investors.

 

CONVERSION OF PREFERRED SHARES INTO ORDINARY SHARES

 

9.                                      The holders of the Preferred Shares shall have conversion rights as follows (the “Conversion Rights”):

 

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(a)                                 Optional Conversion.  Each Preferred Share shall be convertible at the option of the holder thereof, at any time after the date of issuance of such share, at the Office of the Company, into such number of fully paid and non-assessable Ordinary Shares as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (as defined in and subject to adjustment under Article 9(d)) at the time in effect for such share.

 

(b)                                 Automatic Conversion. Each Preferred Share shall automatically be converted into such number of fully paid and non-assessable Ordinary Shares as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (subject to adjustment under Article 9(d)) at the time in effect for such share, upon the earlier to occur of the following (each an “Automatic Conversion”): (i) with respect to (A) the Series D Preferred Shares, the date specified by vote or written consent or agreement of the Majority Investors (B) the Preferred E Shares, the date specified by vote or written consent or agreement of the Majority E Holders and (C) with respect to all of the remaining (non-Series D) classes of Preferred Shares and excluding the Preferred E Shares, (the “Remaining Preferred”) the holders of the majority of such Remaining Preferred voting as a single class on an as-converted basis (and excluding, in any case, the Preferred E Shares); (the “Remaining Preferred Majority”) and (ii) without derogating from the provisions of Article 9(d)(iii), which shall apply to such event subject to and in accordance with the terms of such Article, upon the closing of the Company’s offer, in the United States, of its Ordinary Shares to the public in a firm underwriting pursuant to a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or any other securities laws (the “IPO”), resulting in gross proceeds to the Company of at least US$22,000,000 (the “QPO”);

 

Without derogating from the generality of the aforementioned, upon Closing or Deferred Closing (as such terms are defined under the Series E-1 SPA), as applicable, such number of Series E Preferred Shares held by each Eligible E Investor which equals the Applicable Portion (as defined below) shall be automatically converted into such number of Series E-1 Preferred Shares pursuant to a conversion ratio of 1:1 (in addition to the Series E-1 Preferred Shares purchased thereby upon Closing or Deferred Closing, as applicable). “Applicable Portion” means, with respect to each Eligible E Investor, such number of Series E Preferred Shares calculated by dividing (A) the total investment amount paid by such Eligible E Investor to the Company pursuant to the Series E SPA, provided however that in no event will such amount exceed the aggregate purchase price invested by such Eligible E Investor under the Series E-1 SPA; by (B) the Original Issue Price of each Series E-1 Preferred Share.

 

For example: if a certain Eligible E Investor invested under the Series E SPA a total amount of US$ 2,000,000 and also further invested a total amount of US$ 1,000,000 under the Series E-1 SPA, then upon closing of the Series E-1 SPA, a total number of 78,641 Series E Preferred Shares held by such Eligible E Investor shall be automatically converted into 78,641 Series E-1 Preferred Shares (i.e., since US$ 2,000,000>US$ 1,000,000, then the Applicable Portion = US$1,000,000/US$12.716 = 78,641).

 

(c)                               Mechanics of Conversion. A holder of Preferred Shares seeking (in the case of a conversion at such holder’s option) to convert the same into Ordinary Shares, shall surrender the certificate or certificates therefor, duly endorsed, at the Office of the Company, and shall give written notice by mail, postage prepaid, to the Company at the Office, of the election to convert the same and shall state therein the name or names of any nominee for such holder in which the certificate or certificates for Ordinary Shares are to be issued. Such conversion (in the case of a conversion at such holder’s option) shall be deemed to have been

 

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made immediately prior to the close of business on the date of such surrender of the certificate representing the Preferred Shares to be converted, and the person or persons entitled to receive the Ordinary Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Ordinary Shares as of such date.  If the conversion is in connection with an Automatic Conversion, then the conversion shall be deemed to have taken place automatically regardless of whether the certificates representing such shares have been tendered to the Company, but from and after such conversion any such certificates not tendered to the Company shall be deemed to evidence solely the Ordinary Shares received upon such conversion and the right to receive a certificate for such Ordinary Shares. If the conversion is in connection with a QPO, the conversion may, at the option of any holder tendering Preferred Shares for conversion, be conditioned upon the closing with the underwriter of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Ordinary Shares issuable upon such conversion of the Preferred Shares shall not be deemed to have converted such Preferred Shares until immediately prior to the closing of such QPO. The Company shall, as soon as practicable after the conversion and tender of the certificate for the Preferred Shares converted, issue and deliver at such Office to such holder of Preferred Shares or to the nominee or nominees of such holder of Preferred Shares, a certificate or certificates for the number of Ordinary Shares to which such holder shall be entitled as aforesaid.

 

(d)                                 Conversion Price and Adjustments. The “Conversion Price” with respect to each Preferred Share shall initially be equal to the applicable Original Issue Price of such Preferred Share, but shall be subject to adjustment under this Article 9(d). The Conversion Price shall be adjusted from time to time as follows:

 

(i)                                     Subdivision or Combination. If the Company subdivides or combines its Ordinary Shares, the Conversion Price shall be proportionately reduced, in case of a subdivision of shares, as at the effective date of such subdivision, or if the Company fixes a record date for the purpose of so subdividing, as at such record date, whichever is earlier, or shall be proportionately increased, in the case of a combination of shares, as the effective date of such combination, or, if the Company fixes a record date for the purpose of so combining, as at such record date, whichever is earlier.

 

(ii)                                  Dividend Issuances. Without derogating from Article 7, if the Company at any time pays a dividend, with respect to its Ordinary Shares only, payable in additional Ordinary Shares or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional Ordinary Shares, without any comparable payment or distribution to the holders of Preferred Shares, then the Conversion Price shall be adjusted as at the date the Company fixes as a record date for the purpose of receiving such dividend (or if no such record date is fixed, as at the date of such payment) to that price determined by multiplying the applicable Conversion Price in effect immediately prior to such record date (or if no record date is fixed then immediately prior to such payment) by a fraction (a) the numerator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the payment of such dividend and (b) the denominator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the payment of such dividend plus the number of Ordinary Shares issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Conversion Price shall be recomputed accordingly as of the close of

 

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business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection (ii) as of the time of actual payment of such dividends or distributions; and (b) no such adjustment shall be made if the holders of Preferred Shares simultaneously receive a dividend or other distribution of Ordinary Shares in a number equal to the number of Ordinary Shares as they would have received if all outstanding Preferred Shares had been converted into Ordinary Shares on the date of such event.

 

(iii)                               Price Protection for Investors.

 

(A)                               Until immediately following the earlier of a QPO and a Deemed Liquidation, in the event (and in each such event) of (1) a Deemed Liquidation or (2) the issuance or grant of New Shares by the Company (including, for the avoidance of doubt, (A) any issuance of New Shares in or as part of a public offering or in connection therewith, and (B) the transactions constituting the Deemed Liquidation) (each of (1) and (2), an “Issuance”), except for an Issuance of Exempt Securities, and unless otherwise approved by the Majority Investors, the Conversion Price applicable to:

 

(i) the Series D-1 Preferred Shares (the “Investors’ Conversion Price”) shall be reduced (and, for the avoidance of doubt, in no event increased) to a price equal to a 30% discount on the lowest price per share for which the Company issued New Shares in such transaction (such Issuance price, the “New Price”, and such adjusted Investors’ Conversion Price, as adjusted from time to time hereunder, the “Adjusted Investors’ Conversion Price”); provided however that for the purposes of this clause, the New Price shall be calculated, at the time of such transaction, as if the fully-diluted share capital of the Company included only 50% of the Warrant Shares actually issued and/or issuable;

 

(ii) the Warrant Shares (the “Warrant Shares Conversion Price”) shall be reduced (and, for the avoidance of doubt, in no event increased) so that it equals the product of (x) the Adjusted Investors’ Conversion Price as determined under clause (A)(i) above times (y) 1.15 (the “Adjusted Warrant Shares Conversion Price”).

 

For the avoidance of doubt, the price protection mechanism set forth in Article 9(d)(iii)(A) above shall also apply to any issuances or deemed issuances of New Shares as a result of reductions which may apply to the price per share and/or Conversion Price of the Series E-1 Preferred Shares pursuant to Article 9(d)(iii)(E) as a result of the issuance or deemed issuance of other New Shares.

 

(B)                               For the purpose of this Article 9(d), the consideration of any New Shares shall be calculated at the U.S. dollar equivalent thereof, on the day such New Shares are issued or deemed to be issued pursuant to Article 9(l).

 

(C)                               New Shares” shall mean shares of whatever class issued or deemed to have been issued pursuant to Article 9(l) by the Company other than the following exempt securities (the “Exempt Securities”): (i) shares or options to be issued to employees, consultants, Directors or observers of the Company (but not including (except for the purpose of this Article 9(d)(iii)(C)(iv) below), a grant, reservation and/or issuance to Amir Weisberg or Noam Emanuel (unless otherwise will be approved by the Lead Investor, in which case such grant of securities will be deemed as Exempt Securities (“Key Shareholder’s Securities”))), under the Company’s share option plan approved by the Company’s board (“ESOP”); notwithstanding the foregoing to the contrary, however, solely for purposes of

 

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Article 9(d)(v) below, the Key Shareholders’ Securities will be deemed as Exempt Securities, (ii) shares issued pursuant to the conversion of the Preferred Shares, (iii) Ordinary Shares, issued or issuable, as a share dividend or upon any subdivision of Ordinary Shares, or pursuant to any event for which adjustment is made pursuant to Sub-Articles 9(d)(i), 9(d)(ii), d(iii), d(iv) or 9(f), in which in each case all of the security holders are treated proportionately with the amount of securities they hold, (iv) the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities, options or warrants, outstanding as of the Closing, in accordance with their respective terms in effect as of the Closing, (v) securities issued in an IPO — provided, however, that for the purposes of Articles 9(d)(iii)(A) and 9(d)(iii)(E) herein, the foregoing securities issued in an IPO shall not be deemed as Exempt Securities, and (vi) any securities issued or granted to an investor which is deemed by the Board, in good faith, as a strategic investor and is approved by the Lead Investor. For the avoidance of doubt, the holders of the Series D-1 Preferred Shares and Series D-2 Preferred Shares have waived their rights to adjust their Investors’ Conversion Price pursuant to this Article 9(d) as a result of the issuance of Series D-3 Preferred Shares at the Series D-3 Original Issue Price set forth herein (US$ 1.1036) pursuant to the Securities Purchase Agreement signed between the Company and certain investors on August 24, 2016 (the “Series D-3 SPA”), and accordingly, solely for the purpose of Article 9(d)(iii)(A) (price protection for investors), and solely for the purpose of the capital raise pursuant to the Series D-3 SPA, the holders of Series D-3 Preferred Shares acquired under the Series D-3 SPA shall be deemed by the Board as strategic investors approved by the Lead Investor.

 

(D)                               In the event of a Deemed Liquidation, there shall be deemed to have been an Issuance by the Company at the price per share of Company shares reflected by the valuation attributed to the Company in such transaction, on an as-converted and fully-diluted basis (but not including for such purpose the additional securities to be issued by the Company in conjunction with such transaction pursuant to this Article 9(d)(iii)), provided however that for the purposes of this Article 9(d)(iii), the New Price shall be calculated, at the time of such transaction, as if the fully-diluted share capital of the Company included only 50% of the Warrant Shares actually issued and/or then issuable, as provided in Article 9(d)(iii)(A)(i).

 

(E)                                Until immediately following the IPO, in the event of the issuance of ordinary shares by the Company to the public in a public offering (except for an issuance of Exempt Securities), and unless otherwise approved by the holders of at least 50% of the issued and outstanding Series E-1 Preferred Shares (excluding Series E-1 Preferred Shares held by Shareholders who also hold other classes of Shares), the Conversion Price applicable to the Series E-1 Preferred Shares (the “Preferred E-1 Conversion Price”) shall be reduced (and, for the avoidance of doubt, in no event increased) to a price equal to the lowest price per share for which the Company issued ordinary shares to the public in such IPO (regardless of any discounts and warrants and it being further understood for all intents and purposes that the reduction of the Preferred E-1 Conversion Price shall not apply with respect to any changes to the Adjusted Investors’ Conversion Price or the Adjusted Warrant Shares Conversion Price) (the “IPO Price”) multiplied by 80% (the “E-1 New Price”, and such adjusted Preferred E-1 Conversion Price, as adjusted from time to time hereunder, the “Adjusted Preferred E-1 Conversion Price”); For the avoidance of doubt, the price protection mechanism set forth in Article 9(d)(iii)(E) above may be triggered and implemented only once, with respect to the lowest price per share for which the Company issued New Shares to the public in such IPO, and it shall not apply to any issuance or deemed issuance as a result of reductions which may apply to the price per share and/or Conversion

 

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Price of any other class(es) of shares (including but not limited to pursuant to Article 9(d)(iii)(A)) as a result of the issuance or deemed issuance of New Shares.

 

For example: if the Original Issue Price of the Series E-1 Preferred Shares and the Preferred E-1 Conversion Price immediately before the IPO is US$ 10.00 and the IPO Price is US$ 11.00, the Adjusted Preferred E-1 Conversion Price shall be US$ 8.80.  If the IPO Price is or exceeds US $12.50, then no adjustment will be made to the Preferred E-1 Conversion Price.

 

(iv)                              [reserved].

 

(v)                                 Adjustment of Conversion Price for Certain Dilutive Issuances with respect to the Preferred E Shares, Series D-3 Preferred Shares, Series C-1 Preferred Shares, Series C-2 Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares and the Series A-1 Preferred Shares. If, at any time, the Company shall issue any New Shares for no consideration or at a price per share less than the applicable Conversion Price of the Preferred E Shares, Series D-3 Preferred Shares, the, Series C-2 Preferred Shares, the Series C-1 Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares and the Series A-1 Preferred Shares (the “Reduced Price”) then in each such event, the Conversion Price of the Preferred E Shares, Series D-3 Preferred Shares, the Series C-1 Preferred Shares, Series C-2 Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares and the Series A-1 Preferred Shares, as the case may be, unless otherwise determined by the majority holders of such class (as applicable), will be reduced, for no additional consideration, in accordance with the following broad-based weighted average formula:

 

 

where CP is the reduced Conversion Price; A is the number of Ordinary Shares, on a fully-diluted, as-converted basis (as if all granted Options and Convertible Shares had been fully exercised and/or fully converted into Ordinary Shares, as of such date), outstanding immediately prior to the relevant issuance of the New Shares; P’ is the Conversion Price applicable to the Preferred E Shares, the Series D-3 Preferred Shares, the Series C-2 Preferred Shares, Series C-1 Preferred Shares, Series B-1 Preferred Shares, Series B Preferred Shares, and the Series A-1 Preferred Shares, as the case may be, in effect immediately prior to such issuance; C is the number of New Shares; and P’’ is the Reduced Price.

 

(e)                                  Other Distributions. In the event the Company declares a distribution payable in securities of other persons, evidences of indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in Sub-Article (d)(ii), then, in each such case, the holders of the Preferred Shares shall be entitled to receive such distribution, in respect of their holdings on an as-converted basis as of the record date for such distribution.

 

(f)                                   Recapitalization. If at any time or from time to time there shall be a recapitalization of the Ordinary Shares (other than a subdivision, combination, or merger transaction provided for elsewhere in this Article or Article 10), provision shall be made so that the holders of the Preferred Shares shall thereafter be entitled to receive upon conversion of the Preferred Shares the number of Ordinary Shares or other securities or property of the

 

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Company or otherwise, to which a holder of Ordinary Shares deliverable upon conversion of the Preferred Shares immediately prior to such recapitalization would have been entitled. In any such case, appropriate adjustments shall be made in the application of the provisions of this Article 9 with respect to the rights of the holders of the Preferred Shares after the recapitalization to the end that the provisions of this Article 9 (including adjustments of the Conversion Price then in effect and the number of shares issuable upon conversion of the Preferred Shares) shall be applicable after that event as nearly equivalent as may be practicable.

 

(g)                                  No Impairment. The Company will not, by amendment of these Articles or through any reorganization, recapitalization, 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 to be observed or performed hereunder in this Article 9 by the Company, (i) in respect of, touching or concerning, the Series D Preferred Shares and/or the holders thereof, without the consent of the Majority Investors, provided that if any of such action is in respect of, touching or concerning, only the Series D-3 Preferred Shares (but not or not substantially equally touching or concerning other Series D Preferred Shares and/or the holders thereof, mutatis mutandis), without also obtaining the consent of the holders of Series D-3 Preferred Shares holding the majority of the issued and outstanding Series D-3 Preferred Shares (provided that such majority consent of the holders of Series D-3 Preferred Shares shall not be unreasonably withheld and provided further that any exercise of any existing right of any Shareholder, under these Articles and under that certain Securities Purchase Agreement dated February 4, 2016 by and among the Company, the Lead Investor and other parties (including, without limitation, any existing right of any Shareholder under Article 9 herein) (collectively, “Additional Agreements”) shall not be deemed as an action that is touching and/or concerning and/or having an adverse effect on the Series D-3 Preferred Shares and/or the holders thereof, and in the event that the holders of Series D-3 Preferred Shares will not be equally affected by an event solely due to the fact that the holders of D-1 Preferred Shares and D-2 Preferred Shares have existing rights under these Articles and the Additional Agreements, then such event which caused the adverse effect will not require the specific additional consent of the D-3 Preferred holders pursuant to this clause (g)(i), (ii) in respect of adversely changing the rights attached to the Preferred E Shares, unless such change applies proportionally to all of the classes of shares of the Company, without the consent of the Majority E Holders, and (iii) in respect of, touching or concerning, any class of the Remaining Preferred and/or the rights granted to the holders thereof herein, without the consent of the Remaining Preferred Majority, but will at all times in good faith assist in the carrying out of all the provisions of this Article 9 and in taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of the Preferred Shares against impairment.

 

(h)                                 No Fractional Shares. No fractional shares shall be issued upon conversion of the Preferred Shares, and the number of Ordinary Shares to be issued shall be rounded to the nearest whole share.

 

(i)                                     Certificate of Adjustments. Upon the occurrence of each adjustment or readjustment of a Conversion Price pursuant to this Article 9, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Shares a certificate setting forth each adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, which shall be provided together with an updated capitalization table

 

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of the Company prepared on an as-converted and fully-diluted basis. The Company shall furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment or readjustment, (B) the Conversion Price, as the case may be, at the time in effect, and (C) the number of Ordinary Shares and the amount, if any, of other property which at the time would be received upon the conversion of each type of Preferred Share.

 

(j)                                    Notice of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (including a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of any class or any other securities or property, or to receive any other right, the Company shall mail to each holder of Preferred Shares, at least fourteen (14) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

 

(k)                                 Reservation of Shares. The Company shall at all times reserve and keep available out of its authorized but unissued Ordinary Shares, solely for the purpose of effecting the conversion of the Preferred Shares, such number of its Ordinary Shares as shall from time to time be sufficient to effect the conversion of all issued and outstanding Preferred Shares, including for such purpose, all Warrant Shares which may be acquired pursuant to the exercise of Warrants; and if at any time the number of authorized but unissued Ordinary Shares shall not be sufficient to effect the conversion of all such Preferred Shares, in addition to such other remedies as shall be available to the holders of such Preferred Shares, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Ordinary Share capital to such number of shares as shall be sufficient for such purposes.

 

(l)                                     Options or Convertible Shares. “Convertible Shares” shall mean any evidences of indebtedness, shares or other securities convertible into or exchangeable for Ordinary Shares. “Options” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Ordinary Shares or Convertible Shares. In the event the Company at any time or from time to time after the date of the filing of these Articles shall issue any Options or Convertible Shares (other than Exempt Securities) or shall fix a record date for the determination of holders of any class of shares entitled to receive any such Options or Convertible Shares, then the maximum number of Ordinary Shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Shares, the conversion or exchange of such Convertible Shares or, in the case of Options for Convertible Shares, the exercise of such Options and the conversion or exchange of the underlying securities, shall be deemed to have been issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, and (if applicable under these Articles) the Conversion Price shall be decreased accordingly, provided that in any such case in which shares are deemed to be issued:

 

(i)                                     so long as the Conversion Price decrease was implemented as contemplated above in this Article 9, and subject to clause (ii) below, no further decrease of the Conversion Price of any Preferred Share shall be made upon the subsequent issue of Convertible Shares or Ordinary Shares in connection with the exercise of such Options or conversion or exchange of such Convertible Shares;

 

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(ii)                                  if such Options or Convertible Shares by their terms provide, with the passage of time or otherwise, for any change in the consideration payable to the Company or in the number of Ordinary Shares issuable upon the exercise, conversion or exchange thereof, the Conversion Price and any subsequent adjustments based thereon shall be recomputed to reflect such change as if such change had been in effect as of the original issue thereof (or upon the occurrence of the record date with respect thereto);

 

(iii)                               no readjustment pursuant to clause (ii) above shall have the effect of increasing the Conversion Price of a Preferred Share to an amount above the Conversion Price that would have resulted from any other issuances of New Shares and any other adjustments provided for herein between the original adjustment date and such readjustment date;

 

(iv)                              upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Shares which shall not have been exercised, the Conversion Price of each Preferred Share computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto) and any subsequent adjustments based thereon shall, upon such expiration, be recomputed as if:

 

(A)                               in the case of Convertible Shares or Options for Ordinary Shares, the only New Shares issued were the Ordinary Shares, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Shares and the consideration received therefor was the consideration actually received by the Company for the issue of such exercised Options plus the consideration actually received by the Company upon such exercise or for the issue of all such Convertible Shares which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Company upon such conversion or exchange, and

 

(B)                               in the case of Options for Convertible Shares, only the Convertible Shares, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Company for the New Shares deemed to have been then issued was the consideration actually received by the Company for the issue of such exercised Options, plus the consideration deemed to have been received by the Company (determined pursuant to this Article 9(l) upon the issue of the Convertible Shares with respect to which such Options were actually exercised); and

 

(v)                                 if such record date shall have been fixed and such Options or Convertible Shares are not issued on the date fixed therefor, the adjustment previously made in the Conversion Price which became effective on such record date shall be canceled as of the close of business on such record date, and thereafter the Conversion Price shall be adjusted pursuant to this paragraph as of the actual date of their issuance.

 

10.                               MERGER/CONSOLIDATION

 

Without derogating from Article 11(d), and unless otherwise agreed by the Majority Investors and the Remaining Preferred Majority:

 

(a)                                 Subject to Article 10(d), in case of any merger of the Company with or into another corporation (even if such merger is an M&A Event), as a result of which holders of Preferred Shares receive equity in a private corporation in consideration for the merger (in

 

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this Article, “merger”), the Company or such successor corporation, as the case may be, shall, without payment by the holders of Preferred Shares of any additional consideration therefor, issue to the holders of Preferred Shares new preferred shares of a class, in the case of each class of Preferred Shares, with the same rights, preferences, privileges and restrictions granted to and imposed on the Preferred Shares in these Articles (all such classes collectively, the “New Preferred Shares”), including any rights of the Lead Investor hereunder, but providing that the holder of the New Preferred Shares shall have the right to exercise the conversion rights granted by such New Preferred Shares and procure upon such exercise of such conversion rights, in lieu of each Ordinary Share therefor issuable upon exercise of the Conversion Rights of the Preferred Shares, the kind and amount of shares of stock, other securities, money and assets receivable upon such merger by a holder of one Ordinary Share issuable upon exercise of the Conversion Rights had they been exercised immediately prior to such reclassification, change, consolidation, merger, sale or transfer. The provisions of this Article 10(a) shall similarly apply to successive mergers.

 

(b)                                 The Company shall give each holder of record of Preferred Shares written notice of such impending transaction under Article 10(a) not later than ten (10) days prior to the Shareholders’ meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Article 10, and the Company shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than fourteen (14) days after the Company has given the first notice provided for herein or sooner than ten (10) days after the Company has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the Majority Investors.

 

(c)                                  For the avoidance of doubt, this Article 10 shall not apply to a merger in which the Series D Preferred Shareholders receive their entire Series D Preference in such transaction in liquid proceeds (cash and/or publicly-traded securities).

 

(d)                                 The provisions of this Article 10 are in addition to the other provisions hereof, including but not limited to Articles 8 and 9.

 

Nothing in this Article 10 shall prevent Preferred Shareholders from exercising the rights to convert the Preferred Shares into Ordinary Shares prior to the conclusion of a transaction contemplated herein, in which case the provisions of Article 10 shall not apply to such converted Preferred Shares.

 

VOTING RIGHTS

 

11.                               (a)                                 The holder of each share of the Company shall be entitled to notice of any Shareholders’ meeting in accordance with these Articles.

 

(b)                                 The holder of any outstanding Ordinary Share shall have the right to one vote for each Ordinary Share held, with respect to any question upon which holders of Shares have the right to vote, except to the extent that these Articles or applicable law provide that only holders of Preferred Shares (or one or more classes thereof) shall be entitled to vote on such question.

 

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(c)                                  The holder of any Preferred Share shall have the right to one vote for each Ordinary Share into which such Preferred Share could then be converted (with any fractional share determined on an aggregate conversion basis being rounded to the nearest whole share), and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Ordinary Shares, and shall be entitled to notice of any Shareholders’ meeting in accordance with these Articles (including but not limited to a meeting of the holders of the Preferred Shares as a whole, or such class of Preferred Shares), and shall be entitled to vote, together with holders of Ordinary Shares, with respect to any question upon which holders of Ordinary Shares have the right to vote, and any question upon which holders of Preferred Shares as a whole, or such class of Preferred Shares, have the right to vote.

 

(d)                                 The foregoing or anything else herein notwithstanding, including but in no way limited to Article 67A, (i) the holders of the Series D Preferred Shares shall be entitled to vote, together, as a separate class on, and the approval of the Majority Investors shall be required for, any alteration of, waiver regarding, or change to (in each case, in whole or in part) any right, preference or privilege of the Series D Preferred Shares (including, for the avoidance of doubt, (A) any amendment, repeal or modification of any rights attached to the Series D Preferred Shares or any provision of these Articles resulting in or amounting to such, (B) the creation of any securities which are more senior to, or are otherwise in priority to, the Series D Preferred Shares, it being clarified that, notwithstanding anything else to the contrary set forth herein, taking the action under this clause (B) shall require the consent of the holders of the Series D Preferred Shares holding at least 60% of the issued and outstanding Series D Preferred Shares, on an as converted basis; provided however that the Series D Preferred Shares held by any shareholder (or its Permitted Transferee) investing in the financing that calls for the creation of such senior/priority securities beyond its or their pre-emptive rights pursuant to Article 14, shall not be counted towards achieving such majority, (C) the conversion of the entire class of Series D Preferred Shares to Ordinary Shares (except for an Automatic Conversion under Article 9(b)(ii) (i.e. a QPO)), and/or (D) any other decisions hereunder or pursuant to applicable law requiring the approval of, or class vote by, the Series D Preferred Shares) (each, a “Preferred D Vote”), and (ii) with respect to each Preferred D Vote, such vote shall be subject to the approval of the Majority Investors, and in the event that such approval shall not be obtained, the foregoing action shall not be taken), which decision shall be binding on all holders of Series D Preferred Shares; provided however that solely for the purposes of item (B) above, the term “Majority Investors” shall not require the approval of the Lead Investor. The foregoing or anything else herein notwithstanding, including but in no way limited to Article 67A, the holders of the Preferred E Shares shall be entitled to vote, together, as a separate class on, and the approval of the Majority E Holders shall be required for adversely changing the rights attached to the Preferred E Shares, unless such change applies proportionally to all of the classes of shares of the Company (in which case, the consent of the Majority E Holders will not be required). For the avoidance of doubt, it is hereby agreed that any class of Preferred Shares (including, without limitation, Preferred E Shares and Series D Preferred Shares) shall vote together with the Ordinary Shares of the Company, as a single class and not as a separate class over all matters and in all shareholders meetings, except as required by law and these Articles. For the purposes of voting rights hereunder, the Series D-1 Preferred Shares, the Series D-2 Preferred Shares and Series D-3 Preferred Shares shall be considered a single class, and shall vote together as a single class on all Preferred D Votes and/or any Class Meetings of the Series D Preferred Shares. Notwithstanding the above and other provisions, if a Preferred D Vote is only in respect of, touching or concerning, only the Series D-3 Preferred Shares (but not or

 

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not substantially equally touching or concerning other Series D Preferred Shares and/or the holders thereof, mutatis mutandis), the consent of the holders of Series D-3 Preferred Shares holding the majority of the issued and outstanding Series D-3 Preferred Shares shall also be required, provided that such majority consent shall not be unreasonably withheld, and provided further that any exercise of any existing right, of any Shareholder, under this Articles and/or the Additional Agreements (including, without limitation, any right of any Shareholder under Article 9 herein) shall not be deemed as an action that is touching and/or concerning and/or having an adverse effect on the Series D-3 Preferred Shares and/or the holders thereof, and in the event that the holders of Series D-3 Preferred Shares will not be equally affected by an event solely due to the fact that the holders of D-1 Preferred Shares and D-2 Preferred Shares have existing rights under these Articles and/or the Additional Agreements, then such event which caused the adverse effect will not require the additional specific consent of the D-3 Preferred holders pursuant to this sentence.

 

(e)                                  Notwithstanding the provisions of Section 20(c) of the Companies Law to the contrary, (i) other than as specifically set forth in Article 11(d) and elsewhere herein, and without derogating from any rights of the holders of Series D Preferred Shares hereunder or of the holders of Preferred E Shares hereunder (to the extent required pursuant to Article 11(d) above)), a separate class vote of each class of the Preferred Shares shall not be required in order to amend or waive the rights, preferences, privileges or restrictions granted to and imposed upon any class of Preferred Shares or Ordinary Shares, respectively, it being clarified that (subject to the terms of Article 11(d)(i)(B)) under no circumstances shall any class be granted more senior rights than those of the Preferred E Shares, without the approval of the Majority Investors and the Majority E Holders, and (ii) without derogating from the rights of the Lead Investor as specifically specified in these Articles and other than as specifically set forth in Article 11(d) and elsewhere herein, in no event shall any or some of the holders of any class of Preferred Shares and/or Ordinary Shares confer upon their holders the right to any separate Class Meeting (as defined below) or interest meeting or the right to any class or interest vote.

 

12. AGGREGATION OF SHARES

 

Subject to Articles 14(e) and 30(h), and subject to, and unless otherwise required by, applicable securities law:

 

(a)                                 Shares held by two or more shareholders who are Permitted Transferees may be aggregated together, unless otherwise stated herein, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

(b)                                 Shares held by Aurum Group and its Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

(c)                                  Shares held by the Limited Partners and their Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

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(d)                                 Shares held by the Series A-1 Group and its Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

(e)                                  Shares held by any Provident Fund and its Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

(f)                                   Shares held by the Lead Investor and its Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

(g)                                  Shares held by CY Company and Master Toy and their assignees or Permitted Transferees shall be aggregated together, for the purpose of determining the availability of any rights under these Articles for such shareholders, including rights which are conditioned on the relevant shareholder holding shares representing a minimum percentage.

 

ALLOTMENT OF SHARES

 

13.                               Subject to the provisions of Article 14, and without derogating from any right of the Preferred Shareholders, including without limitation pursuant to Articles 9 and 11(d), the unissued shares shall be under the control of the Board of Directors, which shall have the power to allot shares or otherwise dispose of them to such persons, on such terms and conditions (including inter-alia terms relating to calls as set forth in Article 33 hereof), and either at nominal value or at a premium, or, subject to the provisions of the Companies Law, at a discount, and at such times, as the Board of Directors may think fit, and the power to give any person the option to acquire from the Company any shares, either at nominal value or at premium, or, subject as aforesaid, at a discount, during such time and for such consideration as the Board of Directors may think fit.

 

PRE-EMPTIVE RIGHTS

 

14.                               (a)                                 Prior to an IPO, each (x) holder of Preferred Shares holding, at such time, at least 3% of the issued and outstanding Company Shares, on an as-converted basis, (y) holder of Shares being a Provident Fund or its Permitted Transferee, or (z) any Eligible E Holder (in this Article 14, each an “Offeree”) shall have a right of pre-emption to purchase its Pro Rata Share (as defined below) of all Equity Securities (as defined below) that the Company may, from time to time, propose to sell and issue after the adoption of these Articles. A “Pro Rata Share” shall be equal to the ratio of (A) the number of the Company’s issued and outstanding Ordinary Shares (including all Ordinary Shares issued or issuable upon conversion of the Preferred Shares) held by an Offeree immediately prior to the issuance of such Equity Securities to (B) the total number of the Company’s issued outstanding Ordinary Shares (including all Ordinary Shares issued or issuable upon conversion of the Preferred Shares) immediately prior to the issuance of such Equity Securities (including but not limited to any Warrant Shares actually issued by the Company upon exercise of the Warrants); it being understood that in no event will options or warrants held by any Offeree will be taken into consideration for purposes of calculating the Pro Rata Shares, only to the extent that such options or warrants are outstanding and have not been fully exercised. For the purposes

 

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hereof, the term “Equity Securities” shall mean (i) any Ordinary Shares, Preferred Shares or other security of the Company, (ii) any security convertible, with or without consideration, into any Ordinary Shares, Preferred Shares or other security (including any option to purchase such a convertible security), (iii) any security carrying any warrant or right to subscribe to or purchase any Ordinary Shares, Preferred Shares or other security or (iv) any such warrant or right; provided however that Equity Securities shall not include Exempt Securities.

 

(b)                                 If the Company proposes to issue any Equity Securities, it shall give each Offeree written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same.  Each Offeree shall have fourteen (14) days from the giving of such notice to agree to purchase up to its pro rata share of the Equity Securities.

 

(c)                                  If the Offerees fail to exercise in full their preemptive rights within the periods specified herein, then the Company shall have ninety (90) days thereafter to sell the Equity Securities in respect of which the Offerees’ rights were not exercised, at a price and upon general terms and conditions no more favorable to the purchasers thereof than specified in the Company’s notice to the Offerees pursuant to Article 14(b) hereof.  If the Company has not sold such Equity Securities within ninety (90) days of the notice provided pursuant to Article 14(b), the Company shall not thereafter issue or sell any Equity Securities, without first offering such securities to the Offerees in the manner provided in this Article.

 

(d)                                 For purposes hereof, a “Permitted Transferee” of a Shareholder shall mean: (i) in the case of a limited partnership, its limited partners, general partners, and the limited and general partners of such limited and general partners, (ii) in the case of a corporation, its shareholders in accordance with their interest in the corporation, (iii) in the case of a limited liability company, its members and former members in accordance with their interest in the limited liability company, (iv) in the case of an individual, a first-degree family member or trust for the benefit of such individual and/or any other of his/her Permitted Transferee(s), and (v) with respect to entities that manage or co-manage, or are managed or whose account is managed by, directly or indirectly, such Shareholder and any of its limited partners, general partners and the limited and general partners of such limited and general partners and management company, (vi) with respect to a trustee of the Company’s employee share option plan, or any other trustee: a beneficiary and vice versa; provided that the Company will obtain a statement signed by the trustee pursuant to which the shares were held in trust solely for the beneficiary, (vii) with respect to Xenia Venture Capital Ltd. - the State of Israel, (viii) with respect to the FAC Partnership - each Limited Partner and also a transfer from each Limited Partner to FAC Partnership, (ix) with respect to any member of the Aurum Group, any other member of the Aurum Group, (x) with respect to any member of the Series A-1 Group and their Permitted Transferees, any other member of such Series A-1 Group and its Permitted Transferees, (vi) with respect to Aurius Trade Limited, Rami Lerner and Zvi Pugach — any of them will be deemed as a Permitted Transferee of each other; and (xi) with respect to a Provident Fund, any other affiliated Provident Fund and/or any other Institutional Entity and/or any other transferee to whom such provident fund is permitted by applicable law or regulation to make such transfer.

 

(e) If the offer to Offerees under this Article 14 may, if carried out, constitute, under applicable laws, an offer to the public which is subject to prospectus requirements, then such offer shall be limited, so that it is made only in a manner according to which it will not, and only to a number of Offerees which ensures that it will not, be subject to such prospectus

 

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requirements; and in furtherance of such goal, offerings shall only be made to members of the following groups in the following order of priority: (i) the type of Offerees the offering to which, at such time, is exempted from such prospectus requirement; (ii) holders of Series D Preferred Shares pro rata among themselves; and (iii) other Offerees; with a higher priority being given, within each of the groups in clauses (ii) and (iii), to an Offeree holding a greater percentage of Company Shares than other Offerees in such group (aggregating, for such purpose, the holdings of Permitted Transferees; provided that such Permitted Transferees shall be considered as separate entities to the extent viewed as such by applicable law).

 

BRING-ALONG

 

15.                               (a)                                 Prior to an IPO, subject to the Liquidation Preference rights of the Preferred E Shareholders and the Series D Preferred Shareholders and all other holders of Preferred Shares pursuant to Article 8(d) above, in the event of a proposed M&A Event or if any person or entity makes an offer to purchase all of the issued and outstanding share capital of the Company (the “Offer”), and the holders of more than 60% of the issued and outstanding shares of the Company, on an as-converted basis (the “Accepting Holders”), indicate their acceptance of such proposed M&A Event or offer, and such M&A Event or offer, as applicable, has been approved by the Board of Directors and otherwise in accordance with the provisions of these Articles (collectively, the “Required Consent”), then, at the closing of such transaction, all of the holders of all shares in the Company shall transfer such shares to such person or entity; provided, however, that the consideration paid by the acquirer to the Company or its shareholders (in their capacity as such, without including any Retention Consideration) shall in any event be allocated among the shareholders in accordance with Article 8 above. Each shareholder shall execute and deliver such documents and take such actions (including in shareholder votes) as may be reasonably required by the Board of Directors or the Accepting Holders. Notwithstanding the foregoing, no Shareholder shall be required to (i) make representations and warranties as to any matters other than matters that relate solely to their ownership of shares and their ability to sell such shares, (ii) become subject to any indemnification obligation which is not based on his or its representations and warranties (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company) or (iii) become subject to any indemnification obligation which could result in liability in excess of the gross proceeds actually paid to such Shareholder in the transaction, other than in case of fraud, willful misconduct or willful misrepresentation by such Shareholder.

 

(b)                                 In the event of an Offer under Article 15(a), then as soon as possible after receipt of the Offer but in any event not less than fifteen (15) days prior to the date set by the acquirer as the final date for accepting such Offer, the Company shall notify in writing each holder of Company securities of such Offer. Such notice shall set forth: (i) the name of the acquirer; and (ii) the proposed amount and form of consideration and terms and conditions of payment offered by the acquirer.

 

(c)                                  In the event that a Shareholder fails to surrender its certificate in connection with the consummation of a transaction as set forth above, such certificate shall be deemed cancelled and the Company shall be authorized to issue a new certificate in the name of the Shareholder and the Board of Directors shall be authorized to establish an escrow account, for the benefit of such Shareholder into which the consideration for such securities represented by such cancelled certificate shall be deposited and to appoint a trustee to administer such account.

 

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(d)                                 In the event of an Offer under Article 15(a), Section 341 of the Companies Law shall apply, except as otherwise set forth above.

 

REGISTERED HOLDER

 

16.                               (a)                                 If two or more persons are registered as joint holders of a share they shall be jointly and severally liable for any calls or any other liability with respect to such share.  However with respect to voting, powers of attorney and furnishing notices, the one registered first in the Register, insofar as all the registered joint holders shall not notify the Company in writing to relate to another one of them as the sole owner of the share, as aforesaid, shall be deemed to be the sole owner of the share.

 

(b)                                 If two or more persons are registered together as holders of a share, each one of them shall be permitted to give receipts binding all the joint holders for dividends or other monies in connection with the share and the Company shall be permitted to pay all the dividends or other monies due with respect to the share to one or more of the joint holders, as it shall choose.

 

SHARE CERTIFICATE

 

17.                               (a)                                 A Shareholder shall be entitled to receive from the Company without payment, one certificate that shall contain that number of shares registered in the name of such Shareholder, their class and serial numbering.  However, in the event of joint holders holding a share, the Company shall not be obligated to issue more than one certificate to all of the joint holders, and the delivery of such a certificate to one of the joint holders shall be deemed to be a delivery to all of the joint holders.

 

(b)                                 Each certificate shall carry the signature or signatures of two Directors or of those persons appointed by the Board of Directors for this purpose and the rubber stamp or the seal or the printed name of the Company.

 

(c)                                  If a share certificate is defaced, lost or destroyed, it may be replaced upon payment of such fee, if any, and on such terms, if any, as to evidence and indemnity as the Board of Directors may think fit.

 

PLEDGE

 

18.                               The Company shall have a lien and first pledge on all the shares, not fully paid, registered in the name of any Shareholder (whether registered in his name only or together with another or others) for any amount still outstanding with respect to that share, whether presently payable or not.  Such a pledge shall exist whether the dates of payment or fulfillment or execution of the obligations, debts or commitments have become due or not, and shall apply to all dividends that shall be decided upon from time to time in connection with these shares.  No benefit shall be created with respect to this share based upon the rules of equity which shall frustrate this pledge, however the Board of Directors may declare at any time with respect to any share, that it is released, wholly or in part, temporarily or permanently, from the provisions of this Article.

 

19.                               The Company may sell, in such manner and at such time as the Board of Directors thinks fit, any of the pledged shares, but no sale shall be made unless the date of payment of the monies or a part thereof has arrived, or the date of fulfillment and performance of the

 

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obligations and commitments in consideration of which the pledge exists has arrived, and after a written request has been furnished to the Shareholder or person who has acquired a right in the shares, which sets out the amount or obligation or commitment due from him and which demands their payment, fulfillment or execution, and which informs the person of the Board of Director’s desire to sell the shares in the event of non-fulfillment of the notice, and the person has not fulfilled his obligation pursuant to the notice within seven days after the notice had been sent to him.

 

20.                               The net proceeds of such sale shall be applied in payment of such sum due to the Company or to the fulfillment of the obligation or commitment, and the remainder (if there shall be any) shall be paid to the Shareholder or to the person who has acquired a right in the share sold pursuant to the above.

 

21.                               After execution of a sale as aforesaid, the Board of Directors shall be permitted to sign or to appoint someone to sign a deed of transfer of the sold shares and to register the buyer’s name in the Register as the owner of the sold shares and it shall not be the obligation of the buyer to supervise the application of monies nor will his right in the shares be affected by a defect or illegality in the sale proceedings after his name has been registered in the Register with respect to those shares.

 

The sole remedy of any person aggrieved by the sale shall be in damages only and against the Company exclusively.

 

TRANSFER OF SHARES AND THE MANAGEMENT THEREOF

 

22.                               Any transfer of shares shall be subject to the approval of the Board of Directors, which approval shall not be unreasonably withheld, provided that the transferor and transferee have complied with all relevant provisions of these Articles. If the Board of Directors shall make use of its powers in accordance with this Article and refuses to register a transfer of shares, it must inform the transferee of its refusal and the reason for such refusal, within 15 days of the day the deed of transfer had been furnished to the Company.

 

23.                               Each transfer of shares shall be made in writing in the form appearing herein below, or in a similar form, or in any form as determined by the Board of Directors from time to time, such form to be delivered to the Office together with the transferred share certificates and any other proof the Board of Directors shall require, if they shall so require, in order to prove the title of the transferor.

 

Deed of Transfer of Shares

 

I,                  of                  in consideration of the sum of NIS        (New Israeli Shekels) paid to me by               , of                 (hereinafter called the “Transferee”) do hereby transfer to the Transferee         (       )             share (or shares) having nominal value of NIS     , in PolyPid Ltd., to hold unto the Transferee, its executors, administrators, and assigns, subject to the several conditions on which I held the same at the time of the execution hereof; and I, the Transferee, do hereby agree to take the said share (or shares) subject to the conditions aforesaid.  As witness we have hereunto set our hands the        day of        .

 

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Transferee

 

Transferor

 

24.                               The deed of share transfer shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain a holder of the share until the name of the transferee is entered into the Register in respect thereof.

 

25.                               The Company shall be permitted to demand a fee for registration of a transfer, at a reasonable rate as to be determined by the Board of Directors from time to time.

 

26.                               The Register may be closed at such dates and for such other periods as determined by the Board of Directors from time to time, upon the condition that the Register shall not be closed for more than 15 days every year.

 

27.                               Upon the death of a Shareholder the remaining holders (in the event that the deceased was a joint holder in a share) or the administrators or executors or heirs of the deceased (in the event the deceased was the sole holder of the share or was the only one of the joint holders of the share to remain alive) shall be recognized by the Company as the sole holder of any title to the shares of the deceased.  However, nothing aforesaid shall release the estate of a joint holder of a share from any obligation with respect to the share that he held jointly with any other holder.

 

28.                               Any person becoming entitled to a share in consequence of the death or bankruptcy or liquidation of a Shareholder shall, upon such evidence being produced as may from time to time be required by the Board of Directors, have the right, either to be registered as a Shareholder in respect of the share upon the consent of the Board of Directors or, instead of being registered himself, to transfer such share to another person, subject to the provisions contained in these Articles with respect to transfers.

 

29.                               A person becoming entitled to a share because of the death of a Shareholder shall not be entitled to receive notices with respect to Company meetings or to participate or vote therein with respect to that share, or aside from the aforesaid, to use any right of a Shareholder, until he has been accepted as a Shareholder with respect to that share.

 

RIGHT OF FIRST REFUSAL

 

30.                               (a)                                 Any holder of Ordinary Shares (other than such holder all of whose Ordinary Shares were issued upon the conversion of Preferred Shares) and/or any Key Shareholder (as defined below) proposing, prior to the IPO, to sell, assign, transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way encumber (“Transfer”) all or any of the Ordinary Shares held by them, from time to time (other than a Transfer to a Permitted Transferee) (the “Offeror”), shall, by written notice, offer (the “Offer”) such Ordinary Shares (the “Offered Shares”), on the terms of the proposed transfer, to each (x) holder of Preferred Shares holding, at such time, at least 3% of the issued and outstanding Company Shares, on an as-converted basis, (y) holder of Shares being a Provident Fund or its Permitted Transferee, or (z) any Eligible E Holder (in this Article 30 and Article 31 below, the “Offerees”).

 

(b)                                 The Offeror shall send the notice (the “Notice”) to the Company, which shall in turn send it to the Offerees in the name of the Offeror. The Notice shall state the identity of the Offeror and of the proposed transferee(s), the number of Offered Shares, the price per

 

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share and other economic terms of sale of the Offered Shares. Any Offeree may accept such Offer in respect of all or any of the Offered Shares by giving the Company notice to that effect (the “Accepting Shareholder” and the “Acceptance”, respectively) within fifteen (15) days after being served with Notice of the Offer.

 

(c)                                  If the Acceptances provided during such fifteen (15) day period are, in the aggregate, in respect of at least all of the Offered Shares, then the Accepting Shareholders shall acquire the Offered Shares, on the terms set forth in the Notice, in proportion to their respective holdings in the Company (on a fully-diluted, as-converted basis) among themselves; provided that no Accepting Shareholder shall be entitled to acquire, under the provisions of this Sub-Article (c), more than the number of Offered Shares accepted by such Accepting Shareholder under its respective Acceptance, and upon the allocation to such Accepting Shareholder of the full number of shares so accepted by it in its Acceptance, such Accepting Shareholder shall be disregarded in any subsequent computations and allocations hereunder. Any shares remaining after the computation of such respective entitlements shall be re-allocated among the Accepting Shareholders (other than those to be disregarded as aforesaid), in the same manner, until one hundred percent (100%) of the Offered Shares have been allocated as aforesaid.

 

(d)                                 If no Acceptances are provided during such fifteen (15) day period, then the Offerees shall not be entitled to acquire any of the Offered Shares, and the Transfer shall become subject to the Co-Sale rights under Article 31, before the Offeror may complete the Transfer.

 

(e)                                  If the Acceptances provided during such fifteen (15) day period are, in the aggregate, in respect of some but not all of the total number of Offered Shares, then the Company shall, immediately after the expiration of such period, send written notice (the “Second Notice”) to the Accepting Shareholders. Each Accepting Shareholder shall have an additional option to purchase all or any part of the balance of any such remaining Offered Shares on the terms and conditions set forth in the Notice, by giving the Company notice to that effect (the “Follow-on Acceptance”) within ten (10) days after being served with Second Notice.

 

(i)                                     If all remaining Offered Shares are accepted in Follow-on Acceptances, such shares shall be allocated among those providing the Follow-on Acceptances, in proportion to their respective holdings in the Company (on a fully-diluted, as-converted basis) among themselves, and generally in accordance with the allocations mechanism provided under Article 30(c).

 

(ii)                                  If fewer than the remaining Offered Shares are accepted in Follow-on Acceptances, then the Accepting Shareholders shall not acquire any of the Offered Shares, including those for which Acceptances were provided, and the Transfer of all of the Offered Shares shall become subject to the Co-Sale rights under Article 31 (to the extent such Article is applicable thereto), before the Offeror may complete the Transfer thereof.

 

(f)                                   For the purposes of any Transfer under this Article 30, the respective holdings of any Accepting Shareholder shall mean the respective proportion of the aggregate number of Equity Securities held by such Accepting Shareholder, on a fully-diluted and as-converted basis, to the aggregate number of Ordinary Shares held by all the Accepting Shareholders, on a fully-diluted and as-converted basis.

 

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(g)                                  The Company shall not register any Transfer of its shares on its books, unless such Transfer fully complies with the provisions of this Article 30.

 

(h)                                 If the offer to Offerees under this Article 30 may, if carried out, constitute, under applicable laws, an offer to the public which is subject to prospectus requirements, then such offer shall be limited, so that it is made only in a manner according to which it will not, and only to a number of Offerees which ensures that it will not, be subject to such prospectus requirements; and in furtherance of such goal, offerings shall only be made to members of the following groups in the following order of priority: (i) the type of Offerees the offering to which, at such time, is exempted from such prospectus requirement; (ii) holders of Series D Preferred Shares pro rata among themselves; and (iii) other Offerees; with a higher priority being given, within each of the groups in clauses (ii) and (iii), to an Offeree holding a greater percentage of Company Shares than other Offerees in such group (aggregating, for such purpose, the holdings of Permitted Transferees; provided that such Permitted Transferees shall be considered as separate entities to the extent viewed as such by applicable law).

 

(i)                                     This Article 30 (right of first refusal) shall not apply in the case of a bring along transaction under Article 15.

 

CO-SALE RIGHT

 

31.                               Prior to the consummation of an IPO, if (a) the Offered Shares are not acquired in their entirety by the Offerees pursuant to the right of first refusal set forth in Article 30 above, and (b) solely with respect to any Key Shareholder, if such Key Shareholder wishes to transfer or sell any Equity Securities, then each Offeree under Article 30 shall have the right to participate in the Offeror’s Transfer of the Offered Shares (which were not acquired by the Offerees, as aforesaid) to the proposed transferee(s), as follows.

 

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(a)                       Exercise of Right.  If the Offered Shares intended to be Transferred by the Offeror under Article 30 (the “Transferring Shareholder”) are not acquired in their entirety pursuant to the right of first refusal set forth in Article 30, the Company shall notify the Offerees (as defined in Article 30) in writing (the “Co-Sale Notice”), at the end of the relevant notice period(s) thereunder, that they shall have the right, exercisable by written notice to the Company within seven (7) days of receipt of the Co-Sale Notice, to require the Transferring Shareholder to provide, as part of its proposed Transfer of the Offered Shares which were not acquired pursuant to the right of first refusal set forth in Article 30 (the “Residual Shares”), that such Offerees be given the right to participate in the Transfer of the Residual Shares by selling Ordinary Shares (or shares convertible into Ordinary Shares), on the same terms and conditions as the Transferring Shareholder, on a pro-rata basis (the “Offeree’s Pro-Rata Share”), as follows: each Offeree’s Pro-Rata Share shall equal the product obtained by multiplying (1) the aggregate number of the Residual Shares, by (2) a fraction, (x) the numerator of which is the number of shares owned by such Offeree at the time of the Transfer and (y) the denominator of which is the total number of shares owned by the Transferring Shareholder and the Offerees at the time of the Transfer, in each case measured on a fully-diluted and as-converted basis. If any Offeree exercises its rights hereunder, the Transferring Shareholder shall cause the acquirer to purchase, as part of the Transfer, the Offeree’s Pro-Rata Share of each participating Offeree (or any part thereof chosen by such Offeree to be sold, if it gave notice with respect to less than its Offeree’s Pro-Rata Share), and the Transferring Shareholder shall not proceed with such Transfer unless such Offerees are given the right to participate in the Transfer in accordance herewith.

 

(b)                       Transfer to Transferee(s). Subject to compliance with Article 30 and this Article 31, the Transferring Shareholder shall be entitled, at the expiration of the aforementioned periods, to Transfer all, or the appropriate portion (together with the Offeree’s Pro-Rata Share of each participating Offeree), as applicable, of the Offered Shares, to such proposed transferee(s); provided, however, that in no event shall the Offeror Transfer any of the Offered Shares on terms more favorable to the transferee(s) than those stated in the Notice; and provided further that any of the Offered Shares not Transferred within ninety (90) days after provision of the Notice, shall again be subject to the provisions of Article 30 and this Article 31.

 

(c)                        Permitted Transferees. For the removal of doubt, a Transfer by a Transferring Shareholder to its Permitted Transferee in accordance with the provisions of these Articles shall not trigger the application of Article 30 or this Article 31.

 

(d)                       This Article 31 (co-sale right) shall not apply in the case of a bring along transaction under Article 15.

 

NO SALE

 

32.                               Notwithstanding anything else to the contrary in these Articles, until the earliest of (i) January 1, 2020, (ii) the consummation of an IPO, (iii) the consummation of a Deemed Liquidation Event, and (iv) the termination of the engagement of the Key Shareholder with the Company (so long as it is not “for cause”), Dr. Noam Emanuel and Amir Weisberg (each, a “Key Shareholder”) shall not Transfer all or any of the Ordinary Shares of the Company and any shares issued upon exercise of any options, or issuable upon exercise of any option, held by the Key Shareholder (a “Restricted Transfer”), unless the Majority Investors have given their prior written consent for any such Restricted Transfer. Any Restricted Transfer by the Key Shareholder shall be subject to this Article 32 as well as the other provisions regarding Transfers set forth in these Articles, including but not limited to Articles 30 and 31.

 

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The provisions of this Article 32 shall not apply to any transfer by any of the Key Shareholders to its Permitted Transferee, provided that, upon and as a condition to such transfer, the Permitted Transferee will be deemed to be a Key Shareholder, and further provided that such Permitted Transferee shall not be permitted to transfer any Shares to any party which is not a Permitted Transferee of the Key Shareholder, even if such party would otherwise be a Permitted Transferee of the first Permitted Transferee.

 

CALLS

 

33.                               A Shareholder shall not be entitled to receive dividends nor to use any right a Shareholder has, unless he has paid all the calls that shall be made from time to time, with respect to money unpaid on all of his shares, whether he is the sole holder or holds the shares together with another person, in addition to interest and expenses if there shall be any.

 

34.                               The Board of Directors may, subject to the provisions of these Articles, make calls upon the Shareholders from time to time in respect of any moneys unpaid on their shares, as they shall determine proper, upon the condition that there shall be given reasonable prior notice on every call and each Shareholder shall be obligated to pay the total amount requested from him, or the installment on account of the call (if there shall so be) at the times and places to be determined by the Board of Directors.

 

35.                               The calls for payment shall be deemed to have been requested from the date the Board of Directors shall have decided upon the calls for payment.

 

36.                               The joint holders of a share shall be jointly and severally liable to pay the calls for payment in full and the installment on account, in connection with such calls.

 

37.                               If a sum called in respect of a share is not paid the holders of the share or the person to whom it has been issued shall be liable to pay interest and linkage differentials (“interest”) upon the amount of the call or the payments on account, as determined by the Board of Directors commencing from the day appointed for the payment thereof to the time of actual payment, but the Board of Directors shall be at liberty to waive payment of that interest, wholly or in part.

 

38.                               Any amount that according to the condition of issuance of a share must be paid at the time of issuance or at a fixed date, whether on account of the sum of the share or premium, shall be deemed for the purposes of these Articles to be a call of payment that was made duly and the date of payment shall be the date appointed for payment.  In the event of non-payment of this amount all of the Articles herein dealing with payment of interest, expenses, forfeiture, pledge and the like and all the other Articles connected therewith, shall apply, as if this sum had been duly requested and notice had been given, as aforesaid.

 

39.                               The Board may make different arrangements at the times of issuance of shares to different shareholders, with respect to the amount of calls to be paid, the times of payment, and the applicable rate of interest.

 

40.                               The Board of Directors may, if it thinks fit, receive from any Shareholder willing to pay in advance all of the monies or a part thereof that shall be due on account of his shares, in addition to any amounts for which the payment in fact has been requested and they shall be permitted to pay him interest at the rate the Board of Directors and the Shareholder shall agree upon, for the amounts paid in advance as aforesaid, or upon the part thereof which is in

 

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excess of the amounts whose payment was at the time requested on account of his shares in connection with which the payments have been made in advance, in addition to paying dividends that will be paid for that part of the share which has been paid in advance.

 

FORFEITURE OF SHARES

 

41.                               If a Shareholder fails to pay any call or installment of a call on the day appointed for payment thereof, the Board of Directors may, subject to the provisions of Section 181 of the Companies Law, at any time thereafter during such time as any part of such call or installment remains unpaid, serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest which may have accrued and any expenses that were incurred as a result of such non-payment.

 

42.                               The notice shall name a further day, not earlier than the expiration of seven days from the date of the notice, on or before which the amount of the call or installment or a part thereof is to be made together with interest and any expenses incurred as a result of such non-payment.  The notice shall also state the place the payment is to be made and that in the event of non-payment, at or before the time appointed, the shares in respect of which the call was made will be liable to be forfeited.

 

43.                               If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board of Directors to that effect. The forfeiture shall include those dividends that were declared but not yet distributed, with respect to the forfeited shares.

 

44.                               A share so forfeited shall be deemed to be the property of the Company and can be sold or otherwise disposed of, on such terms and in such manner as the Board of Directors thinks fit. At any time before a sale or disposition the forfeiture may be canceled on such terms as the Board of Directors thinks fit.

 

45.                               A person whose shares have been forfeited shall cease to be a Shareholder in respect of the forfeited shares, but shall notwithstanding remain liable to pay to the Company all monies which, at the date of forfeiture, were presently payable by him to the Company in respect of the shares, but his liability shall cease if and when the Company receives payment in full of the nominal amount of the shares.

 

46.                               The forfeiture of a share shall cause, at the time of forfeiture, the cancellation of all rights in the Company or any claim or demand against it with respect to that share and the other rights and obligations between the share owner and the Company accompanying the share, except for those rights and obligations not included in such a cancellation according to these Articles or that the Law imposes upon former Shareholders.

 

47.                               The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share, or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

 

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MODIFICATION OF CAPITAL

 

48.                               Subject to the rights of the Preferred Shareholders pursuant to these Articles, including but not limited to pursuant to Article 11(d), the Company may, from time to time, by a Shareholders resolution:

 

(a)                                 consolidate and divide all or any of its issued or unissued share capital into shares of larger nominal value than its existing shares;

 

(b)                                 cancel any shares which have not been taken or agreed to be taken by any person;

 

(c)                                  by subdivision of its existing shares, or any of them, divide the whole, or any part, of its share capital into shares of smaller amounts subject, nevertheless, to the provisions of the Companies Law and in a manner that with respect to the shares created as a result of the division it will be possible within the resolution of division to grant to one or more shares a preferable right or advantage with respect to dividend, capital, voting or otherwise over the remaining share or other similar shares; and

 

(d)                                 reduce its share capital and any fund reserved for capital redemption in the manner that it shall deem to be correct, with and subject to, any incident authorized, and consent required, by law.

 

INCREASE OF SHARE CAPITAL

 

49.                               The Company shall be permitted, subject to the rights of the Preferred Shareholders in these Articles (including but not limited to pursuant to the provisions of Article 11(d)), from time to time, by a resolution, to increase its share capital - whether or not all its shares have been issued, or whether the shares issued have been paid in full - by creation of new shares.  This new capital shall be in such an amount, divided into shares in such amounts and have such preferable or deferred or other special rights (subject always to the special rights conferred upon an existing class of share), subject to any condition and restrictions with respect to dividends, return of capital, voting or otherwise, all as shall be directed by the general meeting in its resolution sanctioning the increase of the share capital.

 

50.                               Subject to any decision to the contrary in the resolution sanctioning the increase in share capital, pursuant to these Articles, the new share capital shall be deemed to be part of the original share capital of the Company and shall be subject to the same provisions with reference to payment of calls, liens, title, forfeiture, transfer and otherwise as apply to the original share capital.

 

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GENERAL MEETINGS

 

51.                               A general meeting shall be held once in every year at such time, being not more than fifteen (15) months after the holding of the last preceding general meeting, and place as may be prescribed by the Board of Directors. The above mentioned general meetings shall be called “Ordinary Meetings”. All other general meetings shall be called “Extraordinary General Meetings”. Ordinary Meetings and Extraordinary General Meetings shall be referred to as “General Meetings”.

 

52.                               Subject to the provisions of these Articles the general function of the Ordinary Meeting shall be to receive and to deliberate with respect to the profit and loss statements, the balance sheets, the ordinary reports and accounts of the Board of Directors and auditors; to declare dividends, and to appoint auditors and to fix their compensation; provided that any other matter which may be considered and voted upon by the General Meeting may be discussed and voted upon at any General Meeting. For avoidance of doubt, General Meetings may be held telephonically or by video conference, provided that all Shareholders have an opportunity to hear and be heard by all other Shareholders wishing to participate in such meeting.

 

53.                               The Board of Directors may, whenever it thinks fit - and upon a requisition in writing as provided for in Sections 63 and 64 of the Companies Law, will be required to - convene an Extraordinary General Meeting. Every such requisition shall include the objects for which a meeting should be convened, shall be signed by the requisitioners and shall be sent to the Office of the Company.  If the Board of Directors does not convene a General Meeting within twenty-one (21) days from the date of the submission of the requisition as aforesaid, the requisitioners may, by themselves, convene a General Meeting.  However, the meeting which was so convened shall not be held after three months have passed since the date of the submission of the requisition.

 

NOTICE OF GENERAL MEETINGS

 

54.                               Subject to provisions of these Articles with respect to resolutions, a prior notice of seven (7) days at least shall be given with respect to the place, date and hour of the meeting, and - in the event that a matter requiring a resolution shall be discussed - a general description of the nature of that matter. The notice shall be given, as herein below provided for, to the Shareholders entitled pursuant to these Articles to receive notices from the Company.  With the consent of all the Shareholders who are entitled, at that time, to receive notices, it shall be permitted to convene all meetings and to resolve all types of resolutions, upon a shorter advance notice or without any notice and in such manner, generally, as such be approved by the Shareholders.

 

QUORUM

 

55.                               No deliberation shall be commenced with respect to any matter at the general meeting unless there shall be present a quorum at the time when the General Meeting proceeds to deliberate. Without derogating from the rights of the Preferred Shareholders in these Articles (including but not limited to pursuant to Article 11(d)), in any meeting a quorum shall be formed when there are present personally or by proxy not less than two Shareholders who hold or represent together fifty-one percent (51%) of the voting rights of the issued share capital of the Company (treating all Preferred Shares on an as-converted basis).

 

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56.                               If within half an hour from the time appointed for the meeting a quorum is not present, the meeting shall stand adjourned to the same day during the next week at the same place and time, or any other day and/or any other hour and/or any other place as the Board of Directors shall notify the Shareholders, and, if at the second meeting a quorum is not present within half an hour from the time appointed for the meeting any two Shareholders present personally or by proxy shall be a quorum, and shall, without derogating from the rights of the Preferred Shareholders in these Articles (including but not limited to pursuant to Article 11(d)), be entitled to deliberate and to resolve in respect of the matters for which the meeting was convened.

 

CHAIRMAN

 

57.                               The chairman of the Board of Directors shall preside as chairman at all General Meetings.  If there is no chairman or he is not present within fifteen (15) minutes from the time appointed for the meeting or if he shall refuse to preside at the meeting, the Shareholders present shall elect one of the Directors to act as chairman, and if only one Director is present, he shall act as chairman. If no Directors are present or if they all refuse to preside at the meeting the Shareholders present shall elect one of such Shareholders to preside at the meeting. The Chairman shall have no casting vote and/or additional special rights or privileges at any General Meeting.

 

POWER TO ADJOURN

 

58.                               The chairman may, with the consent of any meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, as the meeting shall decide.  If the meeting shall be adjourned, a notice shall be given of the adjourned meeting as in the case of an original meeting.  At an adjourned meeting no matters shall be discussed except for those permissible to be discussed at that meeting which decided upon the adjournment.

 

ADOPTION OF RESOLUTIONS

 

59.                               At every General Meeting, a resolution put to the vote of the meeting shall be decided upon by a show of hands, or by any Shareholder present, in person or by proxy, and entitled to vote at the meeting.  The declaration of the chairman that the resolution has been carried or carried unanimously or by a particular majority, or lost, or not carried by a particular majority, shall be final, and an entry to that effect in the minute book of the Company, shall be prima facie evidence of the fact without the necessity of proving the number or proportion of the votes recorded in favor or against such a resolution.  Subject to any provision in these Articles to the contrary, and without derogating from the rights of the Preferred Shareholders in these Articles (including but not limited to pursuant to Article 11(d)), a resolution shall be deemed to be passed at a General Meeting if it received an ordinary majority of the votes participating in the meeting (i.e., the holders of the majority of the shares held by the shareholders which participated in the meeting, in person or by proxy).

 

60.                               Deleted.

 

VOTES OF SHAREHOLDERS

 

61.                               Subject to and without derogating from the right or preference rights or restrictions existing at that time with respect to a certain class of shares forming part of the capital of the

 

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Company, and for the avoidance of doubt without derogating from Article 11(c), each Shareholder present at a meeting, personally or by proxy, shall be entitled, whether at a vote by show of hands or by secret ballot, to one vote for each share held by him, provided that no Shareholder shall be permitted to vote at a General Meeting or appoint a proxy to vote therein except if he has paid all calls for payment and all monies due to the Company from him with respect to his shares.

 

62.                               In the case of joint holders the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders; and for the purpose of this Article seniority shall be determined by the order in which the names stand in the Register. Joint holders of a share of which one of them is present at a meeting shall not vote by proxy. The appointment of a proxy to vote on behalf of a share held by joint holders shall be executed by the signature of the senior of the joint holders.

 

PROXIES

 

63.                               (a)                                 In every vote a Shareholder shall be entitled to vote either personally or by proxy.  A proxy present at a meeting shall also be entitled to request a secret ballot.  A proxy need not be a Shareholder of the Company.

 

(b)                                 A Shareholder of the Company that is a corporation or partnership shall be entitled by decision of its board of directors or by a decision of a person or other body, according to its articles, to appoint a person who it shall deem fit to be its representative at every meeting of the Company.  The representative, appointed as aforesaid, shall be entitled to perform all actions and exercise all powers, on behalf of the corporation he represents all the powers that the corporation itself perform or exercise, as if it was a person.

 

64.                               A vote pursuant to an instruction appointing a proxy shall be valid notwithstanding the death of the appointor or the appointor becoming of unsound mind or the cancellation of the proxy or its expiration in accordance with any law, or the transfer of the shares with respect to which the proxy was given, unless a notice in writing was given of the death, becoming of unsound mind, cancellation or transfer and was received at the Office before the meeting took place.

 

INSTRUMENT OF APPOINTMENT

 

65.                               A letter of appointment of a proxy or power of attorney or other certificate (if there shall be such) pursuant to which the appointee is acting, shall be in writing, and such instrument or a copy thereof confirmed as aforesaid, shall be deposited in the Office, or in another place in Israel or abroad - as the Board of Directors shall direct from time to time generally or with respect to a particular case, no later than upon the commencement of the meeting or adjourned meeting wherein the person referred to in the instrument is appointed to vote; otherwise, that person shall not be entitled to vote that share.  If the appointment shall be for a limited period, the instrument shall be valid for the period contained therein.

 

66.                               An instrument appointing a proxy (whether for a specific meeting or otherwise) may be in the following form or in any other similar form which the circumstances shall permit:

 

“I,                     , of                      , a Shareholder holding shares in PolyPid Ltd. and entitled to       votes hereby appoint                   , of                , or in his place                 , of               , to vote in my

 

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name and in my place at the general meeting (regular, extraordinary, adjourned - as the case may be) of the company to be held on the           day of             , 20      and at any adjournment thereof.

 

In witness whereof, I have hereby affixed my signature on this           day of                , 20  .

 

 

 

 

Appointor’s Signature

 

I hereby confirm that the foregoing instrument was signed by the appointor.

 

 

 

 

(name, profession and address)

 

RESOLUTION IN WRITING

 

67.                               A resolution in writing signed by all of the Shareholders then entitled to attend and vote at General Meetings or to which all such Shareholders have given their written consent (by letter, facsimile, email or otherwise) or their oral consent by telephone or otherwise (provided that a written summary thereof has been approved and signed by the chairman), shall be deemed to have been unanimously adopted by a General Meeting duly convened and held.

 

CLASS MEETINGS

 

67A.                      (a)                                 The provisions of these Articles relating to General Meetings shall generally apply, mutatis mutandis, to every class meeting of (A) all of the Preferred Shares (voting together as one separate class) and, (B) the individual classes of Preferred Shares, solely to the extent that the consent of any individual class is required, and (C) the Remaining Preferred (voting together as one single, separate class) (each a “Class Meeting”); provided however that: (i) a quorum at any Class Meeting under clause (A) shall include the Majority Investors; (ii) a quorum at any Class Meeting of the Series D Preferred Shares, shall mean the Majority Investors; (iii) a quorum at any Class Meeting of the Remaining Preferred, shall mean the Remaining Preferred Majority; and (iv) at any adjourned Class Meeting under clauses (i) and (ii), the quorum shall be the Majority Investors and at any adjourned Class Meeting under clause (iii), the quorum shall be the Remaining Preferred Majority; and (v) the provisions of Article 11(d) shall apply to each Preferred D Vote.

 

For all matters touching or concerning any or all classes of the Remaining Preferred, the Remaining Preferred classes shall all be considered a single and separate class, and shall, to the maximum extent permitted under applicable law, vote together as a single class.

 

For all matters touching or concerning any or all classes of the Series D Preferred Shares, the Series D Preferred Share classes shall all be considered a single and separate class, and shall vote together as a single class.

 

(b)                                           Subject to the rights of the holders of Series D Preferred Shares (the “Series D Preferred Shareholders”) pursuant to these Articles, including but not limited to pursuant to Article 11(d) and rights of the Remaining Preferred Majority pursuant hereto, if at any time

 

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the share capital is divided into different classes and/or series of shares, the Company may change, convert, broaden, add or vary in any other manner the rights, advantages, restrictions or provisions related to one or more of the classes or series, if such action was approved by the General Meeting.

 

(c)                                            The foregoing notwithstanding, but for the avoidance of doubt subject to the rights of the Series D Preferred Shareholders pursuant to these Articles, including but not limited to pursuant to Article 11(d), the authorization or issuance of additional securities, including, without limitation, securities which are comprised of a new class of shares having certain rights, preferences or privileges over or relative to any outstanding class of shares, shall not per se be deemed as affecting, changing or varying the rights of any outstanding class of shares and therefore shall not require any consent of the class pursuant to this Article 67A.

 

(d)                                           Subject to the rights of the Series D Preferred Shareholders pursuant to these Articles, including but not limited to Article 11(d), the Company may, from time to time, by a resolution of the General Meeting, authorize and/or issue shares having the same rights as existing shares or with such preferred or deferred rights or rights of redemption or different prices or other special rights and/or restrictions, whether with respect to liquidation, dividends, voting, conversion, repayment of share capital or otherwise, as may be stipulated in such resolution.

 

(e)                                            Subject to Article 67A(a) and to the rights of the Series D Preferred Shareholders pursuant to these Articles, including but not limited to Article 11(d), subject to the rights of the Lead Investor hereunder and subject to the rights of the Remaining Preferred Majority pursuant hereto, any resolution required to be adopted pursuant to these Articles by a separate General Meeting of a certain class of shares, shall be voted upon and adopted by simple majority of the holders of such class entitled to vote thereon, and no holder of a certain class shall be banned, unless the law otherwise expressly prescribes, from participating and voting in a separate General Meeting of such class by virtue of being a holder of more than one class of shares of the Company, irrespective of any conflicting interests that may exist between such different classes of shares. For illustration purposes, in the event that a certain Shareholder is the holder of a Preferred A Share and Ordinary Shares whilst another shareholder is the holder of Ordinary Shares only, the Shareholder holding two classes of shares shall not be banned from voting on a resolution which adversely affects the rights of the Ordinary Shares, irrespective of the affect such change shall have on the Series A Preferred Shares. Anything contained herein to the contrary notwithstanding, subject to any applicable law, a Shareholder shall not be required to refrain from participating in the discussion or voting on any resolution at a shareholders meeting concerning the modification or abrogation of the rights attached to any class of shares held by such Shareholder, due to the fact that such Shareholder may benefit in one way or another from the outcome of such resolution; e.g. a Shareholder shall be entitled to vote on the modification of rights attached to shares held by such Shareholder in a way that may benefit such holder either directly or indirectly (such as in the case of an increased financial value gained by virtue of such change).

 

(f)                                             To the maximum extent permitted under applicable law, and unless otherwise explicitly provided by these Articles (including but not limited to Article 11(d)) and/or under applicable law, all shareholders of the Company shall vote together as a single class, on an as-converted basis, on any matter presented to the shareholders and all matters shall require an approval by the holders of a majority of the voting power of the Company represented at

 

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the meeting of all shareholders of all classes voting together as a single class, on an as-converted basis, including, without limitation, any amendment to these Articles, any issuance of securities of the Company, or any transaction under Sections 341, 342 or 350 of the Israeli Companies Law.

 

(g)                                            Without derogating from the foregoing and without derogating from, and subject to, Article 11(d) and Article 9 and any other rights of the Preferred D Shareholders or the Remaining Preferred Majority, unless otherwise provided by these Articles, it is hereby clarified that:

 

(i)                                     The increase of the authorized and registered number of shares of an existing class of shares, and/or the issuance of additional shares thereof, and/or the creation of a new class of shares identical to an existing class of shares in all respects, except for the price per share paid for such shares, shall not be deemed, for purposes of these Articles, to directly adversely alter the rights attached to the previously issued shares of such class or of any other class;

 

(ii)                                  The creation, authorization and/or the issuance of additional shares or other equity securities of the Company having certain rights, preferences or privileges over or relative to all other shares or equity securities of the Company, including, without limitation, shares that have rights at Liquidation, Deemed Liquidation or distribution of Dividends that are senior to the rights with respect to such events of all existing Preferred Shares, shall not be deemed to be modifying or abrogating the rights, powers and privileges attached to the previously issued shares of any existing class, provided that the rights, preferences or privileges attached to such additional shares or other equity securities apply in the same manner vis-a-vis all other existing series or classes of shares, without a different application to different classes, even though the result of such equal application may be different with respect to different shareholders due to the number of shares held by them and/or even though such an issuance will change the economic value of the existing shares (but not the legal rights of such shares, as illustrated by the example set forth in Article 67A(g)(iii) below), and shall not be subject to the approval of a separate class vote of the holders of the shares of any particular class; and

 

(iii)                               The authorization of a new series of shares or class of shares, or the issuance of such shares, shall not be deemed, for any purpose hereunder (subject, for the avoidance of any doubt, to Article 11(d)), to modify or abrogate the rights attached to an existing class of shares if the rights attached to the new class of shares apply in the same manner vis-a-vis all other existing series or classes of shares, without a different application to different classes, even though the result of such equal application may be different with respect to different Shareholders due to the number of shares held by them and/or even though such an issuance will change the economic value of the existing shares (but not the legal rights of such shares — for example, if (a) the holders of the Ordinary Shares are entitled to appoint one Director and the holders of Preferred A Shares are entitled to appoint one Director; (b) the Board consists of 2 members; and (c) the Company issues a new class of shares (Preferred E Shares) which are entitled to appoint a Director, and to enable such an appointment, the Articles are amended to provide that the Board may consist of 3 members, then, in such an event, such an act will not be deemed to change, modify or abrogate the rights and powers attached to the Ordinary Shares or the Preferred Shares (as the holders thereof will continue to hold the power to appoint one Director), even if one may argue that the economic value of the Ordinary Shares or the Preferred Shares was decreased by such an act (the holders can then appoint one out of three members to the Board).

 

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(h)                                  Subject to and without derogating from the rights of the Preferred D Shareholders including but not limited to Article 11(d) and Article 9: if at any time, a restructure of the Company’s issued or unissued share capital is effectuated (a “Restructure”), and as a result of such Restructure the rights attached to one or more classes of shares are modified or abrogated, then, such Restructure shall require the consent of the holders of the majority of the issued and outstanding shares of such affected class (or classes as the case may be), which shall be obtained at a separate General Meeting of such class (in addition to such other approvals requires under these Articles or applicable law). In the event that such Restructure can be consummated in more than one manner (such as by means of arrangement proceedings approved by a court of law, or alternatively by means of amendment of the Company’s corporate documents), the sole and absolute discretion in determining the manner by which such Restructure shall be consummated shall vest in the Company’s Board.

 

DIRECTORS

 

68.                               The Board of Directors of the Company shall consist of up to ten (10) Directors, which shall be appointed by shareholders holding 60% of the issued and outstanding share capital of the Company.

 

69.                               The right to appoint a person to the Board of Directors shall include the right to remove and replace such Director. Appointments, removals and replacements shall be effected by furnishing written notification to the Company. Any notice regarding the appointment, removal or replacement of a Director shall be delivered to the Company in writing, and shall become effective on the date fixed in such notice, or upon the delivery thereof to the Company, whichever is later.

 

OBSERVERS

 

70.                               (A) Until QPO and as long as the Lead Investor (and its Permitted Transferees) holds at least 50% of the Series D-1 Preferred Shares issued to it at the Closing (not including, for the avoidance of doubt, any Warrant Shares), the Lead Investor shall have the right, but not the obligation, to appoint a non-voting observer to the Board, and (B) until QPO and as long as Rice Inc. (and its Permitted Transferees) holds at least 3.0% of the issued and outstanding share capital of the Company, it shall have the right, but not the obligation, to appoint a non-voting observer to the Board. Any such observer, and (unless otherwise determined by the Board) any other observer to the Board, shall be entitled to receive all notices, written documents and materials provided to the Directors and to be invited to and to attend all meetings of the Board and its committees in a non-voting capacity. If requested, any such observer shall execute a confidentiality agreement in a reasonable form approved by the Board for such purpose. For the avoidance of doubt, no observer shall be liable toward the Company or any Shareholder with respect to any action or inaction of the Board. This Article 70, and each other Article hereunder in which a right is granted to or held by the Lead Investor, may not be amended or cancelled without the Lead Investor’s approval.

 

ALTERNATE DIRECTOR

 

71.                               (a)                                 A Director may, by written notice to the Company, appoint an alternate for himself (in these Articles referred to as an “Alternate Director”), remove such Alternate Director and appoint another Alternate Director in place of any Alternate Director appointed by him whose office has been vacated for any reason whatsoever. Unless the appointing

 

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Director, by the instrument appointing an Alternate Director or by written notice to the Company, limits such appointment to a specific period of time or restricts it to a specified meeting or action of the Board of Directors, or otherwise restricts its scope, the appointment shall be for an indefinite period, and for all purposes. A Director and/or Alternate Director may act as an Alternate Director of another Director.

 

(b)                                 Any notice given to the Company pursuant to Article 71(a) shall become effective on the date fixed therein, or upon the delivery thereof to the Company, whichever is later.

 

(c)                                  An Alternate Director shall have, subject to the provisions of the instrument by which he was appointed, all the powers and authorities possessed by the Director for which he is serving as an Alternate Director, has.

 

(d)                                 The office of an Alternate Director shall be automatically vacated if his appointment is terminated by the one who appointed him in accordance with these Articles, or upon the occurrence of one of the events described in Article 72 or, if the office of the member of the Board of Directors with respect to whom he serves as an Alternate Director shall be vacated for any reason whatsoever.

 

(e)                                  The Alternate Director has the right to receive notice of the convening of a Board of Directors meeting and may participate in and vote at such meeting only if the Director appointing said Alternate Director is absent from said meeting.

 

72.                               Subject to the provisions of these Articles or to the provisions of an existing contract, the office of a Director shall be vacated, ipso facto, upon the occurrence of any of the following: (i) such Director’s death, (ii) such Director is convicted of a crime as described in Section 232 of the Companies Law, (iii) such Director is removed by a court of law in accordance with Section 233 or the Companies Law, (iv) such Director becomes legally incompetent, (v) if such Director is an individual, such Director is declared bankrupt, (vi) if such Director is a corporate entity, upon its winding-up or liquidation, whether voluntary or involuntary, or (vii) if he was appointed by a Shareholder, upon receipt by the Company of a written notice from the Shareholder who appointed him, of the termination of his appointment.  In addition, the office of a Director shall be vacated by his written resignation.  Such resignation shall become effective on the date fixed therein or upon the delivery to the Company, whichever is later.

 

REMUNERATION OF DIRECTOR

 

73.                               Members of the Board of Directors, not being employees of the Company or professionals providing special professional services for consideration to its members - shall not receive a salary from funds of the Company unless otherwise prescribed by the Board of Directors, and then only in the amount that the Board shall decide upon, all subject to the provisions of the Companies Law. The Directors and their substitutes, and any observers, shall be entitled to reimbursement for reasonable “out-of-pocket” expenses incurred by them in connection with their attendance at meetings of the Board of Directors and in accordance with a policy established or to be established by the Board of Directors.

 

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POWERS AND DUTIES OF DIRECTORS

 

74.                               The business of the Company shall be managed by the Directors. The Directors shall be entitled to exercise all the powers and authorities that the Company has and to perform in its name all the acts that it is entitled to perform according to its Articles and/or the Companies Law except for those which are, pursuant to the Companies Law or the Articles, vested in the General Meeting of the Company, subject to any provisions in the Companies Law or in these Articles or the resolutions that the Company shall adopt in its General Meeting (insofar as they do not contradict the Companies Law or these Articles). However any resolution adopted by the Company in its General Meeting shall not affect the legality of any prior act of the Board of Directors that would be legal and valid, if not for such a resolution.

 

75.                               A Director shall not be required to hold qualifying shares.

 

76.                               [reserved]

 

77.                               Subject to the Companies Law, a Director may hold another paid position or function in the Company or in any other company that the Company is a shareholder of or in which it has some other interest, together with his position as a Director (except an auditor) upon those conditions with respect to salary and other matters as decided by the Board of Directors and approved by the General Meeting, to the extent such approval is required under the Companies Law.

 

FUNCTIONS OF THE DIRECTORS

 

78.                               (a)                                 The Directors may meet in order to transact business, to adjourn their meetings or to organize them otherwise as they shall deem fit and to determine the legal quorum necessary to conduct business.

 

(b)                                 A quorum for meetings of the Board shall be the majority of the Directors then in office present personally or represented by their alternate.

 

CHAIRMAN

 

79.                               Until IPO, the Directors may from time to time elect a chairman from the acting Directors (who shall initially by Haim Hurvitz), and decide the period of time he shall hold such an office, and he shall preside at the meetings of the Board of Directors. However, if such a chairman is not elected or if he is not present at any particular meeting, the Directors present may choose one of their number to serve as chairman of that meeting. The Chairman shall have no rights or privileges other than those granted to Directors generally. The above notwithstanding, the Chairman of the Board shall be appointed and removed only with the approval of the Lead Investor.

 

MEETINGS OF THE BOARD

 

80.                               Subject to any contrary resolution accepted by the Board of Directors, a member of the Board of Directors may at any time call a Board of Directors’ meeting, and the Company shall be required on the request of such member to convene a Board of Directors’ meeting.  The Board of Directors will convene at such location as designated by the Board of Directors.

 

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81.                               (a)                                 Any notice of a Board of Directors’ meeting can be given orally, by telephone, in writing, or by email or fax provided that the notice is given not less than two (2) business days before the time appointed for the meeting, unless all the members of the Board of Directors shall agree to a shorter notice.

 

(b)                                 Prior and timely notice of the convening of a Board of Directors’ meeting shall be given to all Directors and observers.

 

(c)                                  Without derogating from the rights of the Preferred Shareholders in these Articles (including but not limited to pursuant to Article 11(d)), if applicable, all acts and determinations of the Board of Directors shall be determined by a simple majority of those attending.

 

(d)                                 Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute attendance in person at the meeting.

 

DELEGATION OF POWER

 

82.                               (a)                                 Notwithstanding anything in these Articles to the contrary, the Board of Directors may, subject to Section 112 of the Companies Law, delegate any of their executive powers to committee(s). The Board of Directors may appoint committees to discuss and generate recommendations regarding issues set forth by the Board of Directors, but such committee(s) shall not have executive powers whatsoever, except in the event such appointment is effected as aforesaid in this Sub-Article 82(a).

 

(b)                                 In the exercise of any power delegated to it by the Board of Directors, all committees shall conform to any regulations that may be imposed upon them by the Board of Directors, if there shall be any such regulation. Subject to Sub-Article (a) above, if no such regulations are adopted by the Board of Directors or if there are no complete and encompassing regulations, the committees shall act pursuant to these Articles dealing with organization of meetings, meetings and functions of the Board of Directors, mutatis mutandis, and insofar as no provision of the Board of Directors shall replace it pursuant to this Article.

 

83.                               All actions performed in a bona fide fashion by the Board of Directors or by a committee of the Board of Directors, or by any person acting as a Director or as a substitute shall be as valid, even if at a later date a flaw shall be discovered in the appointment of such a Director or such a person acting as aforesaid, or that all or some of them were unfit, as if each and every one of those persons shall have been duly appointed and fit to serve as a Director or substitute as the case may be.

 

PRESIDENT AND/OR CHIEF EXECUTIVE OFFICER (“CEO”)

 

84.                               (a)                                 The Board of Directors may from time to time appoint one or more persons, whether or not he is a member of the Board of Directors, as the President and/or CEO of the Company, either for a fixed period of time or without limiting the time that he or they will stay in office, and they may from time to time (subject to any provision in any

 

45


 

contract between him or them and the Company) release him or them from such office and appoint another or others in his or their place.

 

(b)                                 Without derogating from the rights of the Preferred Shareholders hereunder, including but not limited to under Article 11(d), the  Board of Directors may from time to time grant and bestow upon the President and/or CEO, at that time, those powers and authorities that it exercises pursuant to these Articles, as it shall deem fit, and may grant those powers and authorities for such period, and to be exercised for such objectives and purposes and in such time and conditions, and on such restrictions, as it shall decide; and it may grant such authorities whether concurrently with the Board of Directors’ authorities in that area, or in excess of them, or in place thereof or any one of them, and it can from time to time revoke, repeal, or change any one or all of those authorities.

 

(c)                                  Notwithstanding the aforesaid in Article 73, the wages of the President and/or CEO shall be determined from time to time by the Board of Directors (subject to the Companies Law and any provision in any contract between him and the Company).

 

MINUTES

 

85.                               (a)                                 The Directors shall cause minutes to be taken of all General Meetings of the Company, of the appointments of officials of the Company, of Board of Directors’ meetings and of committee meetings that shall include the following items, if applicable:

 

(i)                                     the names of the members present;

 

(ii)                                  the matters discussed at the meeting;

 

(iii)                               the results of the vote;

 

(iv)                              resolutions adopted at the meeting; and

 

(v)                                 directives given by the meeting to the committees.

 

(b)                                 The minutes of any meeting, signed or appearing to be signed by the chairman of the meeting or by the chairman of the meeting held immediately after that meeting, shall serve as a prima facie proof as to the facts in the minutes.

 

RESOLUTION IN WRITING

 

86.                               A resolution in writing signed by all the members of the Board of Directors, or of a committee, or such a resolution that all the members of the Board of Directors or a committee have agreed to in writing and/or fax and/or email shall be valid for every purpose as a resolution adopted at a Board of Directors’ or committee meeting, as the case may be, that was duly convened and held.  In place of a Director the aforesaid resolution may be signed and delivered by his alternate or his attorney or his alternate’s attorney.

 

SEAL, STAMP AND SIGNATURES

 

87.                               (a)                                 The Board of Directors shall cause the seal (if the Company shall have a seal) to be kept in safekeeping and it shall be forbidden to use the seal unless prior permission of the Board of Directors is given.  If such permission was given, the seal shall

 

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be affixed in the presence of whoever has been so appointed by the Board of Directors, and he shall sign any document upon which the seal has been affixed.

 

(b)                                 The Company shall have at least one rubber stamp. The Directors shall ensure that such a stamp is kept in a safe place.

 

(c)                                  The Board of Directors may designate and authorize any person or persons (even if they are not members of the Board of Directors) to act and to sign in the name of the Company, and the acts and signatures of such a person or persons shall bind the Company, insofar as such person or persons have acted and signed within the limits of their aforesaid authority.

 

(d)                                 The printing of the name of the Company by a typewriter or computer-printer or by hand next to the signatures of the authorized signatories of the Company, pursuant to sub-article (c) above, shall be valid as if the rubber stamp of the Company was affixed.

 

BRANCH REGISTERS

 

88.                               The Company may, subject to the provisions of Sections 138 and 139 inclusive of the Companies Law keep in every other country where those provisions shall apply, a register or registers of Shareholders living in that other country as aforesaid, and to exercise any other powers referred to in the laws with respect to such branch registers.

 

THE SECRETARY, OFFICERS AND ATTORNEYS

 

89.                               (a)                                 The Board of Directors may appoint a secretary of the Company upon the conditions that it finds fit.  The Board of Directors may as well, from time to time, appoint an associate secretary who shall be deemed to be the secretary for the period of his appointment.

 

(b)                                 The Board of Directors may, from time to time appoint to the Company, officers, workers, agents and functionaries to permanent, temporary or special positions, as they shall, from time to time, see fit and set compensation for them.

 

(c)                                  The Board of Directors may, at any time and from time to time, authorize any company, firm, person or group of people, whether this authorization is done by the Board of Directors directly or indirectly, to be the attorneys in fact of the Company for those purposes and with those powers and discretions which shall not exceed those conferred upon the Board of Directors or that the Board of Directors can exercise pursuant to these Articles - and for such a period of time and upon such conditions as the Board of Directors deems proper, and every such authorization may contain such directives as the Board of Directors deems proper for the protection and benefit of the persons dealing with such attorneys.

 

DIVIDEND

 

90.                               (a)                                 The following Articles 90-101 are subject to the provisions of these Articles, including but not limited to Articles 7 and 8, and subject to any rights or conditions of Preferred Shares and other rights and conditions attached at that time to any share in the capital of the Company granting preferential, special or deferred rights or not granting any rights with respect to dividends.

 

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(b)                                 The profits of the Company shall be distributable to the Shareholders of the Company according to the proportion of the nominal value paid up on account of the shares held by them at the date so appointed by the Company, calculated on an as-converted basis. Actual distribution, setting aside or declaration of dividend requires a decision of the Board of Directors.

 

(c)                                  The Board of Directors may issue any share upon the condition that a dividend shall be paid at a certain date or that a portion of the declared dividend for a certain period shall be paid, or that the period for which a dividend shall be paid shall commence at a certain date, or a similar condition, all as decided by the Board of Directors.  In every such case - subject to the provision mentioned in the beginning of this Article - the dividend shall be paid in respect of such a share in accordance with such condition.

 

91.                               At the time of declaration of a dividend the Company may decide that such dividend shall be paid in part or in whole, by way of distribution of certain properties, by way of distribution of fully paid up shares or debentures or debenture stock of the Company, or by way of distribution of fully paid up shares or debentures or debenture stock of any other company or in one or more of the aforesaid ways.  Without derogating from Articles 7 and 8, for purposes of any such distribution, the outstanding Preferred Shares shall be deemed to have been converted into Ordinary Shares as of the time appointed by the Company in order to determine entitlement to participate in such distribution.

 

92.                               The Board of Directors may, from time to time, pay to the Shareholders on account of the forthcoming dividend such interim dividend as shall be deemed just with regard to the situation of the Company.

 

93.                               The Board of Directors may put a lien on any dividend on which the Company has a charge, and it may use it to pay any debts, obligations or commitments with respect to which the charge exists.

 

94.                               The person registered in the Register as a Shareholder on the date appointed by the Company for that purpose shall be the one entitled to receive a dividend. A transfer of shares shall not transfer the right to a dividend which has been declared after the transfer but before the registration of the transfer.

 

95.                               The Company may declare a dividend to be paid to the Shareholders, at a General Meeting, according to their rights and benefits in the profits and to decide the time of payment.  A dividend in excess of that proposed by the Board of Directors shall not be declared. However, the Company may declare at a General Meeting a smaller dividend.

 

96.                               A notice of the declaration of a dividend, whether an interim dividend or otherwise, shall be given to the Shareholders registered in the Register, in the manner provided for in these Articles.

 

97.                               If payment cannot be made by wire transfer, the dividend may be paid by check or payment order to be mailed to the registered address of a Shareholder or person entitled thereto in the Register or, in the case of registered joint owners, to the addresses of one of the joint owners as registered in the Register.  Every such check shall be made out to the person it is sent to.  The receipt of the person who, on the date of declaration of dividend, is registered as the holder of any share or, in the case of joint holders, of one of the joint holders, shall serve as a release with respect to payments made in connection with that share.

 

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98.                               [reserved]

 

99.                               [reserved]

 

100.                        All premiums received from the issue of shares shall be capital funds and they shall be treated for every purpose as capital and not as profits distributable as dividends. The Board of Directors may organize a reserve capital liability account and transfer, from time to time, all such premiums to the reserve capital liability account or use such premiums and monies to cover depreciation or doubtful loss. The Board of Directors may use any monies credited to the capital reserve liability account in any manner that these Articles or the law permits.

 

101.                        [reserved]

 

ACCOUNTS AND AUDIT

 

102.                        The Board of Directors shall cause the Company to maintain proper and complete books and records of account of the Company in accordance with Israeli law. The account books shall be kept in the Office or at such other place as the Board of Directors deem fit and they shall also be open for inspection by the Directors and observers.

 

103.                        The Board of Directors shall determine from time to time, in any specific case or type of case, or generally, whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company, or any of them, shall be open for inspection by the Shareholders, and no Shareholder, not being a Director or observer, shall have any right of inspecting any account book or document of the Company, except as conferred by law or authorized by the Board of Directors or by the Company in a General Meeting, or in a contract with the Shareholder.

 

104.                        Not less than once a year, the Board of Directors shall submit before the Company at a General Meeting financial statements for the period beginning from the previous account, in accordance with the relevant provisions of the Companies Law. To such financial statements shall be attached a report of the auditor and it shall be accompanied by a report from the Board of Directors with respect to the situation of the Company’s business and the amount (if any) which it proposes as a dividend and the amount (if any) that it proposes be set aside for the fund accounts.

 

105.                        Auditors shall be appointed and their function shall be set out in accordance with the Companies Law. The Board shall fix the compensation of the auditor of the Company for its auditing activities, and shall also fix the compensation of the auditor for additional services, if any, which are not auditing activities, and, in each case, shall report thereon to the General Meeting.

 

NOTICES

 

106.                        A notice or any other document may be served by the Company upon any Shareholder either personally or by sending it by fax or email with confirmed receipt addressed to such Shareholder at his address, wherever situated, as appearing in the Register.

 

107.                        All notices directed to be given to the Shareholders shall, with respect to any shares to which persons are jointly entitled, be given to one of the joint holders, and any notice so given shall be sufficient notice to the holders of such share.

 

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108.                        Prior and timely notice of the convening of a Shareholders meeting shall be given to each Shareholder, wherever situated, at the last address provided by the Shareholder.  Any Shareholder registered in the Register who shall, from time to time, furnish the Company with an address at which notices may be served, shall be entitled to receive all notices he is entitled to receive according to these Articles at that address.

 

109.                        A notice may be given by the Company to the persons entitled to a share in consequence of the death or bankruptcy of a Shareholder by sending it through the post in a prepaid letter or postcard or telegram, telex or telefax addressed to them by name, at the address, if any, in Israel furnished for the purpose by the persons claiming to be so entitled or, until such an address has been so furnished, by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred.

 

110.                        Notwithstanding any inference to the contrary in any other provision of these Articles, all notices required or permitted hereunder shall be in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed facsimile or email, on the next business day; (iii) seven (7) days after having been sent by registered or certified airmail, return receipt requested, postage prepaid; or (iv) three (3) days after deposit with an internationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Any list of Shareholder or Director contact details which is kept in the ordinary manner in the Company’s possession shall be prima facie proof of the delivery.

 

111.                        In any case where it is necessary to give prior notice of a certain number of days or a notice valid for a certain period, the date of delivery shall be taken into account in the number of days or period.

 

INDEMNITY

 

112.                        Subject to the provisions of the Companies Law, including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve in advance to exempt an “Officer” (as such term is defined in the Companies Law) from all or part of such Officer’s responsibility or liability for damages caused to the Company due to any breach of such Officer’s duty of care towards the Company.

 

113.                        (a)                                 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Company may indemnify or to enter into an agreement to indemnify in the future any Officer to the fullest extent permitted by the Companies Law.

 

(b)                                 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve retroactively to indemnify an Officer with respect to the following liabilities and expenses, provided that such liabilities or expenses were incurred by such Officer in such Officer’s capacity as an Officer of the Company:

 

(1)                                 a monetary liability imposed on him/her in favor of a third party in any judgment, including any settlement confirmed as judgment and an arbitrator’s award which has been confirmed by the court, in respect of an act performed by the Officer by virtue of the Officer being an Officer of the Company;

 

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(2)                                 reasonable litigation expenses, including legal fees, paid for by the Officer, in an investigation or proceeding conducted against such Officer by an agency authorized to conduct such investigation or proceeding, and which investigation or proceeding: (i) concluded without the filing of an indictment against such Officer and without there having been a financial obligation imposed against such Officer in lieu of a criminal proceeding, or (ii) concluded without the filing of an indictment against such Officer but with there having been a financial obligation imposed against such Officer in lieu of a criminal proceeding for an offense that does not require proof of criminal intent; all in respect of an act performed by the Officer by virtue of the Officer being an Officer of the Company; or

 

(3)                                 reasonable litigation expenses, including legal fees, paid for by the Officer, or which the Officer is obligated to pay under a court order, in a proceeding brought against the Officer by the Company, or on its behalf, or by a third party, or in a criminal proceeding in which the Officer is found innocent, or in a criminal proceeding in which the Officer was convicted of an offense that does not require proof of criminal intent, all in respect of an act performed by the Officer by virtue of the Officer being an Officer of the Company.

 

(c)                                  Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Board of Directors may resolve in advance to indemnify the Company’s Officer for those liabilities and expenses described in (i) Sub-Article 113(b)(1), provided that such indemnification obligation shall be limited to those events which in the Board’s opinion can be foreseen at the time the undertaking to indemnify is provided and to such expenses and measurements which the Board has determined are reasonable under the circumstances, and provided further that in the undertaking to indemnify such events, expenses and measurements shall be indicated; and (ii) Sub-Articles 113(b)(2) and 113(b)(3).

 

114.                        (a)                                 Subject to the provisions of the Companies Law including the receipt of all approvals as required therein or under any applicable law, the Company may enter into an agreement to insure an Officer for any liability that may be imposed on such Officer in connection with an act performed by such Officer in such Officer’s capacity as an Officer of the Company, with respect to each of the following:

 

(i)                                     violation of the duty of care of the Officer towards the Company or towards another person;

 

(ii)                                  breach of the fiduciary duty towards the Company, provided that the Officer acted in good faith and with reasonable grounds to assume that the action in question was in the best interests of the Company; and

 

(iii)                               a financial obligation imposed on the Officer for the benefit of another person.

 

(b)                                 Articles 112, 113 and 114(a) shall not apply under any of the following circumstances:

 

(i)                                     a breach of an Officer’s fiduciary duty, in which the Officer did not act in good faith and with reasonable grounds to assume that the action in question was in the best interest of the Company;

 

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(ii)                                  a grossly negligent or intentional violation of an Officer’s duty of care;

 

(iii)                               an intentional action by an Officer in which such Officer intended to reap a personal gain illegally; and

 

(iv)                              a fine or ransom levied on an Officer.

 

(c)                                  The Company may procure insurance for or indemnify any person who is not an Officer, including without limitation, any employee, agent, consultant, contractor, or observer, provided, however, that any such insurance or indemnification is in accordance with the provisions of these Articles and the Companies Law.

 

***************************************

 

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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

 

7


 

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.

 

8


 

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

 

9


 

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.

 

[THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK]

 

10


 

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:

 

 

12


 

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:

 

 

13


 

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:

 

 

Name:

 

 

(Please Print)

 

 

 

 

 

 

Address:

 

 

(Please Print)

 

 

 

 

 

Dated:

 

 

 

 

 

 

 

Holder’s

 

Signature:

 

 

 

 

 

 

 

Holder’s

 

Address:

 

 

 

 

 

 

 

Transferee’s

 

signature:

 

 

 

 

 

 

 

Transferee’s

 

address:

 

 

 

14




Exhibit 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:

 

2


 

(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

 

9


 

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:

 

 

 

 




Exhibit 10.2

 

POLYPID LTD.

AMENDED AND RESTATED 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;

 

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 acceleration) 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, 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 23,905,701 (twenty three million nine hundred and five thousand seven hundred and one) and the Company has reserved sufficient Shares for the purpose of the Plan, subject to adjustment as set forth in Section 12 below (the “Share Reserve”), and as shall be amended by the Board from time to time. The Share Reserve will automatically increase on January 1 of each year, for a period of not more than ten years, commencing on January 1 of the year following the year in which the IPO Date occurs and ending on (and including) January 1, 2028, by an amount equal to 4% of the total number of Shares outstanding on December 31st of the preceding calendar year.  Notwithstanding the foregoing, the Board may act prior to January 1 of a given year to provide that there will be no January increase in the Share Reserve

 


 

for such year or that the increase in the Share Reserve for such year will be a lesser number of Shares than would otherwise occur pursuant to the preceding sentence.

 

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).

 

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 4 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.

 

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 DateUnless 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:

 

(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 (or otherwise applied to any Shares issued in book entry form) 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 (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 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. Any certificate(s) representing such Exercised Shares to be repurchased shall, prior to 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, if any, have been delivered. If the Grantee fails to deliver any such stock certificate(s) or if such repurchased Exercised Shares were issued in book entry form, 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 its 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.

 

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 directly to the Grantee who is entitled to the Exercised Shares for which the dividends are being paid or distributed, subject to any applicable taxation 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.

 

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 applicable 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.

 

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.

 


 

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 in Israel or the United States, including without limitation the Tel -Aviv Stock Exchange and the Nasdaq Stock 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 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.

 

1.14                        IPO” — an initial public offering of securities of the Company in the United States in conjunction with the listing of such securities on any established stock exchange in Israel or the United States, including without limitation the Tel -Aviv Stock Exchange and the Nasdaq Stock Market.  The “IPO

 


 

Date” means the date of the underwriting agreement between the Company and the underwriter(s) managing the IPO, pursuant to which the securities are priced for the IPO.

 

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.

 


 

POLYPID LTD. - 2012 SHARE OPTION PLAN

Sub-Plan for Grantees Subject to Israeli Taxation

 

This Sub-Plan (“Sub-Plan”) to the 2012 PolyPid Ltd. Share Option Plan (the “Plan”) is hereby established effective          , 2012.

 

1.                                      Definitions

 

As used herein, the following terms shall have the meanings hereinafter set forth, unless the context clearly indicates to the contrary. Any capitalized term used herein which is not specifically defined in this Sub-Plan shall have the meaning set forth in the Plan.

 

1.1                               Affiliated Company,” for purposes of eligibility under the Sub-Plan shall have the meaning of the term in the Plan, provided however that any affiliated entity shall be an “employing company” within the meaning of such term in Section 102 of the Ordinance.

 

1.2                               Controlling Shareholder” - shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

 

1.3                               Election” — the election by the Company, with respect to grant of 102 Trustee Options, of either one of the following tax tracks — “Capital Gains Tax Track” or “Ordinary Income Tax Track”, as provided in and in accordance with the Section 102.

 

1.4                               Employee” - a person who is employed by the Company or its Affiliated Company, including an individual who is serving as a director or an office holder, but excluding any Controlling Shareholder, all as determined in Section 102 of the Ordinance.

 

1.5                               Fair Market Value” - solely for the purposes of 102 Trustee Options, if and to the extent Section 102 prescribes a specific mechanism for determining the Fair Market Value of the Exercised Shares, then notwithstanding the definition in the Plan, the Fair Market Value of 102 Trustee Options shall be as prescribed in Section 102, if applicable.

 

Without derogating from the definition of “Fair Market Value” enclosed in the Plan and solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the date of grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the date of grant of the Capital Gains Tax Track options, the fair market value of the Shares at the date of grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the date of grant or on the thirty (30) trading days following the date of registration for trading, as the case may be.

 

1.6                               ITA” - the Israeli Tax Authorities.

 

1.7                               102 Non-Trustee Option” — an Option granted not through a Trustee in accordance with and pursuant to Section 102.

 

1.8                               3(i) Option” — an Option granted pursuant to Section 3(i) of the Ordinance.

 

1.9                               Ordinance” - the Israeli Income Tax Ordinance [New Version], 1961, and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successor rules and regulations.

 

1.10                        Restricted Period” — as defined in Section 4.3 herein below.

 

1.11                        Section 102” — Section 102 of the Ordinance and the rules and regulations promulgated thereunder, as are in effect from time to time, and any similar successor rules and regulations.

 


 

1.12                        Trustee” - the trustee designated or replaced by the Company and/or applicable Affiliated Company for the purposes of the Plan and approved by the Israeli Tax Authorities all in accordance with the provisions of Section 102.

 

1.13                        102 Trustee Option” — an Option granted through a Trustee in accordance with and pursuant to Section 102.

 

2.                                      General

 

2.1                               The purpose of this Sub-Plan is to establish certain rules and limitations applicable to Options granted to Grantees, the grant of Options to whom (or the exercise thereof by whom) are subject to taxation by the Israeli Income Tax (“Israeli Grantees”), in order that such Options may comply with the requirements of Israeli law, including, if applicable, Section 102.

 

2.2                               The Plan and this Sub-Plan are complementary to each other and shall be read and deemed as one. In the event of any contradiction, whether explicit or implied, between the provisions of this Sub-Plan and the Plan, the provisions of this Sub-Plan shall prevail with respect to Options granted to Israeli Grantees.

 

2.3                               Options may be granted under this Sub-Plan in one of the following tax tracks, at the Company’s discretion and subject to applicable restrictions or limitations as provided in applicable law including without limitation any applicable restrictions and limitations in Section 102 regarding the eligibility of Israeli Grantees to each of the following tax tracks, based on their capacity and relationship towards the Company:

 

(i)                                     102 Trustee Options - in such tax track as determined in accordance with the Election; or

(ii)                                  102 Non-Trustee Options; or

(iii)                               3(i) Options.

 

For avoidance of doubt, the designation Options to any of the above tax tracks shall be subject to the terms and conditions set forth in Section 102.

 

2.3(a)                The Company’s Election of the type of 102 Trustee Options as Capital Gain Tax Track or Ordinary Income Tax Track granted to Employees, shall be appropriately filed with the ITA before the Date of Grant of an 102 Trustee Option. Such Election shall become effective beginning the first Date of Grant of a 102 Trustee Option under this Plan and shall remain in effect until the end of the year following the year during which the Company first granted 102 Trustee Options. The Election shall obligate the Company to grant only the type of 102 Trustee Option it has elected, and shall apply to all Israeli Grantees who were granted 102 Trustee Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting 102 Non-Trustee Options simultaneously.

 

3.                                      Administration

 

Without derogating from the powers and authorities of the Board detailed in the Plan, the Board shall have the 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, unless such approval is required to comply with applicable Mandatory Law, to administer this Sub-Plan and to take all actions related hereto and to such administration, including without limitation the performance, from time to time and at any time, of any and all of the following:

 

(a)                                 the determination of the specific tax track (as described in Section 2.3 and 2.3(a) above) in which the Options are to be issued.

 

(b)                                 the Election;

 

(c)                                  the appointment of the Trustee;

 

(d)                                 the adoption of forms of Option Agreements to be applied with respect to Israeli Grantees (the “Israeli Option Agreement”), incorporating and reflecting, inter alia, relevant provisions

 


 

regarding the grant of Options in accordance with this Sub-Plan, and the amendment or modification from time to time of the terms of such Israeli Option Agreements.

 

4.                                      102 Trustee Options

 

4.1                               Grant in the Name of Trustee:

 

Notwithstanding anything to the contrary in the Plan, 102 Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto and all rights attached thereto (including bonus shares), issued to, the Trustee, and all shall be registered in the name of the Trustee, who shall hold them in trust until such time as they are released by the transfer or sale thereof by the Trustee. In the case the requirements of Section 102 for 102 Trustee Options are not met, than the 102 Trustee Options may be regarded as 102 Non-Trustee Option, all in accordance with the provisions of Section 102. Notwithstanding anything to the contrary in the Plan, the Date of Grant of a 102 Trustee Option shall be the date determined by the Board to be the effective date of the grant of the 102 Trustee Options to an Israeli 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, which in the case of 102 Trustee Options shall not be before the lapse of 30 days (or such other period which may be determined by the Ordinance from time to time) from the date upon which the Plan is first submitted to the relevant Israeli Tax Authorities.

 

4.2                               The persons eligible for participation in the Israeli Sub Plan as Israeli Grantees shall include any Employees and/or Non-Employees of the Company or of any Affiliated Company; provided, however, that (i) Employees may only be granted 102 Trustee Options; and (ii) Non-Employees and/or Controlling Shareholders may only be granted 3(i) Options.

 

4.3                               The Company may designate Options granted to Employees pursuant to Section 102 as 102 Non-Trustee Options or 102 Trustee Options.

 

4.4                               The grant of 102 Trustee Options shall be made under this Sub Plan adopted by the Board, and shall be conditioned upon the approval of this Sub Plan by the ITA.

 

4.5                               102 Trustee Options may either be classified as Capital Gain Tax Track Options or Ordinary Income Tax Track Options.

 

4.6                               No 102 Trustee Options may be granted under this Sub Plan to any eligible Employee, unless and until, the Company’s Election, is appropriately filed with the ITA. Such Election shall become effective beginning the first date of grant of a 102 Trustee Options under this Sub Plan and shall remain in effect at least until the end of the year following the year during which the Company first granted 102 Trustee Options. The Election shall obligate the Company to grant only the type of 102 Trustee Options it has elected, and shall apply to all Israeli Grantees who were granted 102 Trustee Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting 102 Non-Trustee Options simultaneously.

 

4.7                               All 102 Trustee Options must be held in trust by a Trustee.

 

4.8                               For the avoidance of doubt, the designation of 102 Non-Trustee Options and 102 Trustee Options shall be subject to the terms and conditions set forth in Section 102.

 

4.9                               Exercise of Vested 102 Trustee Options:

 

Unless other procedures shall be determined from time to time by the Board and notified to the Israeli Grantees, the mechanism of exercising vested 102 Trustee Options shall be in accordance with the provisions of the Plan and of the Israeli Sub Plan, except that any notice of exercise of 102 Trustee Options shall be made in such form and method in compliance with the provisions of Section 102 and shall also be delivered in copy to the authorized representative of the Affiliated Company with which the Israeli Grantee is employed and/or engaged, if applicable, and to the Trustee.

 


 

4.10                        Restrictions on Transfer:

 

(a)                                 102 Trustee Options and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares), shall be held by the Trustee for such period of time as required by the provisions of Section 102 applicable to Options granted through a Trustee in the applicable tax track, as per the Election (the “Restricted Period”).

 

(b)                                 Subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, the Israeli Grantee shall provide the Company and the Trustee with a written undertaking and confirmation under which the Israeli Grantee confirms that he/she is aware of the provisions of Section 102 and the Elected tax track and agrees to the provisions of the Trust Note between the Company and the Trustee, and undertakes not to release, by sale or transfer, the 102 Trustee Options, and the Exercised Shares issued pursuant to the exercise thereof, and all rights attached thereto (including bonus shares) prior to the lapse of the Restricted Period. The Israeli Grantee shall not be entitled to sell or release from trust the 102 Trustee Options, nor the Exercised Shares issued pursuant to the exercise thereof, nor any right attached thereto (including bonus shares), nor to request the transfer or sale of any of the same to any third party, before the lapse of the Restricted Period. Notwithstanding the above, if any such sale or transfer occurs during the Restricted Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Israeli Grantee.

 

(c)                                  Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this Sub-Plan, the Option Agreement and applicable Law, the Trustee shall not release, by sale or transfer, the Exercised Shares issued pursuant to the exercise of the 102 Trustee Options, and all rights attached thereto (including bonus shares) to the Israeli Grantee, or to any third party to whom the Israeli Grantee wishes to sell the Exercised Shares (unless the contemplated transfer is by will or laws of descent) unless and until the Trustee has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to the Company and the Trustee. For the removal of doubt, it is clarified that the Trustee may release by sale or transfer to a third party only Exercised Shares (and not Options).

 

4.11                        Rights as Stockholder:

 

Without derogating from the provisions of the Plan, it is hereby further clarified that with respect to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, as long as they are registered in the name of the Trustee, the Trustee shall be the registered owner of such shares. Notwithstanding, the Trustee shall not exercise the voting rights conferred by such Exercised Shares in any way whatsoever, and shall not issue a proxy to any person or entity to vote such shares (other than to the applicable Israeli Grantee, subject to and in accordance with the provisions of Section 102). Notwithstanding, the Company shall be entitled at its sole discretion, and not required, to distribute dividends directly to the Trustee and the Trustee shall make reasonable efforts to remit the amount of cash dividends to the Israeli Grantees who is entitled to the Exercised Shares for which the dividends are being paid or distributed, subject to any applicable taxation on such distribution of dividend, applicable laws and the withholding thereof.

 

4.12                        Bonus Shares:

 

All bonus shares to be issued by the Company, if any, with regard to Exercised Shares issued pursuant to the exercise of 102 Trustee Options, while held by the Trustee, shall be registered in the name of the Trustee; and all provisions applying to such Exercised Shares shall apply to bonus shares issued by virtue thereof, if any, mutatis mutandis. Said bonus shares shall be subject to the Restricted Period of the Exercised Shares by virtue of which they were issued.

 


 

4.13                        Voting:

 

Without derogating from the provisions of Section 10.2 of the Plan, with respect to Exercised Shares of 102 Trustee Options, such Exercised Shares shall be voted in accordance with the provisions of Section 102.

 

4.14.                     Conditions of Issuance:

 

Without derogating from the provisions of Section 7.6 of the Plan, and in addition thereto, the arrangements with the ITA referred to therein shall, in the event of 102 Trustee Options also need to be satisfactory to the Trustee.

 

5.                                      102 Non-Trustee Options

 

5.1                               102 Non-Trustee Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant to the exercise thereof, issued to, the Israeli Grantee.

 

5.2                               Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this Sub-Plan, the Option Agreement and applicable Law, the Exercised Shares issued pursuant to the exercise of the 102 Non-Trustee Options, and all rights attached thereto (including bonus shares) shall not be transferred unless and until the Company has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the ITA or of another arrangement regarding such payment, which is satisfactory to the Company.

 

5.3                               An Israeli Grantee to whom 102 Non-Trustee Options are granted must provide, upon termination of his/her employment, a surety or guarantee to the satisfaction of the Company, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon the exercise of his/her outstanding 102 Non-Trustee Options, all in accordance with the provisions of Section 102.

 

6.                                      3(i) Options

 

6.1                               3(i) Options granted hereunder shall be granted to, and the Exercised Shares issued pursuant thereto issued to, the Israeli Grantee.

 

6.2                               Without derogating and subject to the above, and to all other applicable restrictions in the Plan, this Sub-Plan, the Option Agreement and applicable law, the Exercised Shares issued pursuant to the exercise of the 3(i) Options, and all rights attached thereto (including bonus shares) shall not be transferred unless and until the Company has either (a) withheld payment of all taxes required to be paid upon the sale or transfer thereof, if any, or (b) received confirmation either that such payment, if any, was remitted to the tax authorities or of another arrangement regarding such payment, which is satisfactory to the Company.

 

6.3                               The Company may require, as a condition to the grant of the 3(i) Options, that an Israeli Grantee to whom 3(i) Options are to be granted, provide a surety or guarantee to the satisfaction of the Company, to secure payment of all taxes which may become due upon the future transfer of his/her Exercised Shares to be issued upon the exercise of his/her outstanding 3(i) Options.

 

7.                                      Tax Consequences

 

Without derogating from and in addition to any provisions of the Plan, any and all tax and/or other mandatory payment consequences arising from the grant or exercise of Options, the payment for or the transfer or sale of Exercised Shares, 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, an Affiliated Company, the Trustee or the Israeli Grantee, including without limitation any non-compliance of the Israeli Grantee with the provisions hereof, shall be borne solely by the Israeli Grantee. The Company, any applicable Affiliated Company, and the Trustee, may each withhold (including at source), deduct and/or set-off, from any payment made to the Israeli Grantee, the amount of the taxes and/or other mandatory payments the of which is required with respect to the Options and/or Exercised Shares. Furthermore, each Israeli Grantee shall indemnify the Company, the applicable

 


 

Affiliated Company and the Trustee, or any one thereof, and to hold them harmless from any and all liability for any such tax and/or other mandatory payments or interest or penalty thereupon, 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 Israeli Grantee.

 

Without derogating from the aforesaid, each Israeli 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 Israeli Grantee.

 

Without derogating from the foregoing, it is hereby clarified that the Israeli Grantee shall bear and be liable for all tax and other consequences in the event that his/her 102 Trustee Options and/or the Exercised Shares issued pursuant to the exercise thereof are not held for the entire Restricted Period, all as provided in Section 102.

 

The Company and or when applicable the Trustee shall not be required to release any Share Certificate (or any Shares issued in book entry form) to an Israeli Grantee until all required payments have been fully made.

 

8.                                      Currency Exchange Rates

 

Except as otherwise determined by the Board, all monetary values with respect to Options granted pursuant to this Sub-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, at the sole discretion of the Board, the conversion rate shall be the last known representative rate of the US Dollar to the New Israeli Shekels on the date of payment.

 

9.                                      Subordination to the Ordinance

 

9.1                               It is clarified that the grant of the 102 Trustee Options hereunder is subject to the approval by the ITA of the Plan, this Sub-Plan and the Trustee, in accordance with Section 102.

 

9.2                               Any provisions of the Section 102 or Section 3(i) of the Ordinance and/or any of the rules or regulations promulgated thereunder, which is not expressly specified in the Plan or in the applicable Option Agreement, including without limitation any such provision which is necessary in order to receive and/or to keep any tax benefit, shall be deemed incorporated into this Sub-Plan and binding upon the Company, and applicable Affiliated Company and the Israeli Grantee.

 

9.3                               With regards to 102 Trustee Option, the provisions of the Plan and/or this Sub-Plan and/or the Option Agreement shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Plan and of this Sub-Plan and of the Option Agreement.

 

9.4                               The Options, the Plan, this Sub-Plan and any applicable Option Agreements are subject to the applicable provisions of the Ordinance, which shall be deemed an integral part of each, and which shall prevail over any term that is inconsistent therewith.

 

9.5                               Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Plan or the Sub Plan or the Option Agreement, shall be considered binding upon the Company and the Israeli Grantees.

 


 

POLYPID LTD. 2012 SHARE OPTION PLAN

Sub-Plan for U.S. Persons

 

1.                                      Purpose of the Sub-Plan

 

This Sub-Plan (the “Sub-Plan”) is part of the 2012 Share Option Plan of PolyPid Ltd. (the “Plan”) and is adopted by the Board pursuant to Section 1.24 of Annex A of the Plan.  All terms not otherwise defined herein shall have the meaning ascribed to them in the Plan.  This Sub-Plan governs grants of Options to United States employees, officers, consultants, and other service providers.

 

2.                                      Provisions of the Sub-Plan

 

The provisions of this Sub-Plan shall supersede and govern in the case of inconsistency between the provisions of this Sub-Plan and the provisions of the Plan; provided, however, that this Sub-Plan shall not be construed to grant to any Grantee rights not consistent with the terms of the Plan, unless specifically provided herein.

 

3.                                      Shares Available for Allocation; Other Board Limitations

 

10,000,000 (ten million) shares may be granted pursuant to this Sub-Plan as ISOs (as defined below).  Shares underlying ISOs that fail to vest or be fully exercised prior to expiration or other termination shall again become available for grant as ISOs pursuant to this Sub-Plan as permitted by applicable law.

 

Notwithstanding Section 3.2 or 3.3 of the Plan, no changes by the Board shall, without approval of the Company’s shareholders:  (a) increase the total number of Shares available for grant pursuant to this Sub-Plan as ISOs, except by operation of the provisions of Section 12 of the Plan; (b) change the class of persons eligible to receive grants pursuant to this Sub-Plan; or (c) extend the date on which ISOs can be granted pursuant to this Sub-Plan beyond the tenth (10th) anniversary of the earlier of the date the Board adopts this Sub-Plan or the date of shareholder approval described in the preceding paragraph.

 

4.                                      Eligibility

 

The individuals who shall be eligible to receive Options under the Plan that are subject to the provisions of this Sub-Plan shall be employees, directors, and other individuals and entities who are United States citizens or who are resident aliens of the United States for United States federal tax purposes (collectively, “U.S. Persons”) and who render services to the management, operation or development of the Company or an Affiliated Company and who have contributed or may be expected to contribute materially to the success of the Company or an Affiliated Company.

 

5.                                      Terms and Conditions of Options

 

(a)                                 In General.  Every Option granted to a U.S. Person shall be evidenced by an Option Agreement in such form as the Board shall approve from time to time, specifying the number of Shares, the time or times at which the Option shall become exercisable in whole or in part, whether the Option is intended to be an incentive stock option (“ISO”) or a nonqualified stock option (“NSO”), and such other terms and conditions as the Board shall approve, and containing or incorporating by reference the terms and conditions set forth in this Sub-Plan.  The Plan and this Sub-Plan shall be administered in such a manner as to permit those Options granted hereunder and specially designated as an ISO to qualify as incentive stock options as described in Section 422 of United States Internal Revenue Code of 1986, as amended (the “Code”).

 


 

(b)                                 Limitations Relating to ISOs.

 

(i)                                     ISOs shall not be granted to any person who is not an employee of the Company or an affiliate satisfying the requirements of Code Sections 424(e) or 424(f) (generally, a corporation in the group with respect to which there is at least fifty percent (50%) voting power) (for purposes of this Sub-Plan, an “ISO Corporation”).

 

(ii)                                  The special United States federal tax rules applicable to ISOs are not available to an ISO that is exercised at any time later than three (3) months following termination of employment with an ISO Corporation.  Accordingly, such an Option (if otherwise exercisable) shall be treated as an NSO upon exercise, rather than an ISO, for United States tax purposes.

 

(iii)                               Notwithstanding Section 7.3 of the Plan, no ISO granted to a Grantee who owns (directly or under the attribution rules of Code Section 424(d)) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any ISO Corporation shall expire later than five (5) years from its date of grant.

 

(iv)                              Method of Exercise.  Unless otherwise provided in the applicable Option Agreement, an ISO may be exercised only using any of the following methods:

 

(A)                               In cash or by check, payable to the order of the Company;

 

(B)                               By payment in cash or by check, payable to the order of the Company, of the par value of the Shares to be acquired and by payment of the balance of the exercise price in whole or in part by delivery of the Grantee’s recourse promissory note, in a form specified by the Board and to the extent consistent with applicable law, secured by the Shares acquired upon exercise of the Option and such other security as the Board may require;

 

(C)                               By (1) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (2) delivery by the Grantee to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

 

(D)                               By delivery (either by actual delivery or attestation) of Shares owned by the Grantee valued at their Fair Market Value, provided (1) the method of payment is then permitted under applicable law, (2) the Shares, if acquired directly from the Company, was owned by the Grantee for a minimum period of time, if any, as may be established by the Board in its sole discretion, and (3) the Shares is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements; or

 

(E)                                By any combination of the above permitted forms of payment.

 

In no event shall the “net exercise” method be used to exercise an ISO.

 

(v)                                 Notice of ISO Stock Disposition.  The Grantee must notify the Company promptly in the event that the Grantee sells, transfers, exchanges or otherwise disposes of any Shares issued upon exercise of an ISO before the later of (i) the second (2nd)

 


 

anniversary of the date of grant of the ISO or (ii) the first (1st) anniversary of the date the shares were issued upon his exercise of the ISO.

 

(d)                                 Exercise Price.  The exercise price of each Option shall be as specified by the Board in its discretion; provided, however, that the price shall be at least 100 percent (100%) of the Fair Market Value of the Shares on the date on which the Board grants the Option (or such later date as the Board shall specify), which shall be considered the date of grant of the Option for purposes of fixing the price; and provided, further, that the price with respect to an ISO granted to a Grantee who at the time of grant owns (directly or under the attribution rules of Code Section 424(d)) stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or of any ISO Corporation shall be at least 110 percent (110%) of the Fair Market Value of the Shares on the date of grant of the ISO.

 

(e)                                  Effect of Cessation of Employment or Service Relationship.  The Board shall determine in its discretion and specify in each applicable Option Agreement the effect, if any, of the termination of the Grantee’s employment with or performance of services for the Company or any Affiliated Company on the exercisability of the Option.

 

(f)                                   No Rights as Stockholder.  .  A Grantee shall have no rights as a stockholder with respect to any Shares covered by an Option until the date of issuance of a stock certificate (or book entry is made) to him or her for the Shares.  No adjustment shall be made for dividends or other rights for which the record date is earlier than the date the stock certificate is issued (or book entry is made), other than as required or permitted by the Plan.

 

For the avoidance of doubt, the provisions of Section 10.2 of the Plan shall apply to any Shares issued pursuant to the exercise of an Option.

 

(g)                                  Certain Adjustments Prohibited.  Notwithstanding any provision in Sections 3.2.5, 7.4.2 or 12 of the Plan, no adjustment shall be made to the terms or conditions of an Option under the terms of the Plan unless the adjustment would not otherwise cause adverse tax consequences to the Grantee under Code Section 409A or result in the loss of ISO status under Code Section 424 (without the Grantee’s consent).

 

6.                                      Requirements of Law

 

(a)                                 The Company shall not be required to transfer Shares or to sell or issue any Shares upon the exercise of any Option if the issuance of such Shares will result in a violation by the Grantee or the Company of any provisions of any law, statute or regulation of any governmental authority.  Specifically, in connection with the Securities Act of 1933, as amended from time to time (the “Securities Act”), upon the exercise of any Option, the Company will not be required to issue Shares unless the Board has received evidence satisfactory to it to the effect that the holder of the Option will not transfer such shares except pursuant to a registration statement in effect under the Securities Act or unless an opinion of counsel satisfactory to the Company has been received by the Company to the effect that registration is not required.  Any determination in this connection by the Board shall be conclusive.  The Company shall not be obligated to take any other affirmative action in order to cause the exercise of an Option to comply with any law or regulations of any governmental authority, including, without limitation, the Securities Act or applicable state securities laws in the United States.

 

(b)                                 All other provisions of this Sub-Plan and the Plan notwithstanding, this Sub-Plan and the Plan shall be administered and construed so as to avoid any person who receives an Option Grant incurring any adverse tax consequences under Code Section 409A.  The Board shall suspend the application of any provisions of the Plan which could, in its sole determination, result in an adverse tax consequence to any person under Code Section 409A.

 


 

7.                                      Tax Withholding

 

To the extent required by law, the Company may withhold or cause to be withheld income and other taxes with respect to any income recognized by a Grantee by reason of the exercise of an Option, and as a condition to the receipt of any Option the Grantee shall agree that if the amount payable to him or her by the Company or any Affiliated Company employing the Grantee in the ordinary course is insufficient to pay such taxes, then the Grantee shall upon the request of the Company pay to the Company an amount sufficient to satisfy its tax.

 




Exhibit 10.3

 

Execution Version

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

 

This AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (this “Agreement”), is made and entered into as of the 28 day of June, 2019, by and among PolyPid Ltd., an Israeli private company (the “Company”), the entities and individuals identified in Schedule 1 attached hereto (collectively, the “Existing Investors”), and each individual or entity identified on the signature pages hereto and on Schedule 2 attached hereto (the “Series E-1 Investors” and/or the “Purchasers”), and together with the Existing Investors, the  “Investor(s)”).

 

RECITALS

 

WHEREAS, the Company and the Existing Investors are parties to that certain Amended and Restated Investors’ Rights Agreement, dated as of October 31, 2017 (the “Current IRA”);

 

WHEREAS, the Company and the Purchasers are parties to that certain Securities Purchase Agreement, dated as of June 28, 2019 (the “Purchase Agreement”), whereby the Company is issuing for sale (the “Offering”) a maximum of USD $40,000,000 (the “Maximum Amount”), subject to  increase, as set forth herein, of shares of Series E-1 preferred stock, USD $0.22 par value per share (the “Series E-1 Preferred Shares”) to Purchasers who are “accredited investors” within the meaning of Rule 501(a) of the Securities Act (as defined herein).  The aggregate minimum Offering amount will be USD $15,000,000 and the Maximum Amount may be increased by up to USD $10,000,000 to accommodate demand with the approval of the Company and National Securities Corporation, a Washington corporation and the placement agent for the Offering (the “Placement Agent”); and

 

WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce the Purchasers to invest funds in the Company pursuant to the Purchase Agreement, the Investors and the Company hereby agree that this Agreement shall amend and restate, and supersede in its entirety, the Current IRA, and shall govern the rights of the Investors to cause the Company to register Company shares issued or issuable to the Investors, to receive certain information from the Company, and certain other matters as set forth in this Agreement.

 

NOW, THEREFORE, the parties hereby agree to amend and restate the Current IRA as follows:

 

1.                                      Definitions.  For purposes of this Agreement:

 

1.1                               Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

 

1.2                               Amended AOA” means the Company’s Amended and Restated Articles of Association, as defined in and adopted in conjunction with each closing of the Purchase Agreement (each, a “Closing”), as may be lawfully amended from time to time in accordance with its terms and applicable law.

 


 

1.3                               Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon: (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.

 

1.4                               Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

1.5                               Form F-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.

 

1.6                               Form F-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed or to be filed in the future by the Company with the SEC.

 

1.7                               IFRS” means International Financial Reporting Standards.

 

1.8                               Holder” means any holder of Registrable Securities who is a party to this Agreement.

 

1.9                               Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

1.10                        IPO” means the Company’s first underwritten public offering of its Ordinary Shares under the Securities Act.

 

1.11                        Majority in Interest” means such holders of Remaining Preferred Shares of the Company holding more than fifty percent (50%) of the issued and outstanding Remaining Preferred Shares held by all of the holders of Remaining Preferred Shares.

 

1.12                        Major Shareholder” means: (i) the Series D Investors, (ii) the Series D-3 Investor, (iii) the Series E Investor, (iv) the Series E-1 Investor, and (v) any other Investor hereunder that, individually or together with such Investor’s Permitted Transferee (as defined in the Amended AOA), holds, at the relevant time, at least three percent (3%) of the Company’s equity on a fully-diluted basis.

 

1.13                        Majority Investors” shall mean the shareholders holding the majority (more than fifty percent (50%)) of the issued and outstanding Preferred E Shares, Series D-1 Preferred Shares, Series D-2 Preferred Shares and Series D-3 Preferred Shares, pari passu, on an

 

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as converted basis, which majority shall in all events include the Lead Investor, as long as the Lead Investor (and its Permitted Transferees) (as such terms are defined in the Amended AOA) continues to hold at least fifty percent (50%) of the Series D-1 Preferred Shares issued to it at the closing of the Series D-1 Securities Purchase Agreement (not including, for the avoidance of doubt, any Warrant Shares).

 

1.14                        Ordinary Shares” means the Ordinary Shares of the Company, par value NIS 0.80 per share.

 

1.15                        Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

 

1.16                        Preferred Shares” means Series A Preferred Shares, nominal value NIS 0.80 per share (the “Series A Preferred Shares”), Series A-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series A-1 Preferred Shares”), Series B Preferred Shares, nominal value NIS 0.80 per share (the “Series B Preferred Shares”), Series B-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series B-1 Preferred Shares”), Series C-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series C-1 Preferred Shares”), Series C-2 Preferred Shares, nominal value NIS 0.80 per share (the “Series C-2 Preferred Shares”, and together with the Series C-1 Preferred Shares, the “Series C Preferred Shares”), Series D-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-1 Preferred Shares”), Series D-2 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-2 Preferred Shares”), Series D-3 Preferred Shares, nominal value NIS 0.80 per share (the “Series D-3 Preferred Shares”, and together with the Series D-1 Preferred Shares and Series D-2 Preferred Shares, the “Series D Preferred Shares”), Series E Preferred Shares, nominal value NIS 0.80 per share (the “Series E Preferred Shares”), and Series E-1 Preferred Shares, nominal value NIS 0.80 per share (the “Series E-1 Preferred Shares” and together with the Series E Preferred Shares, the “Preferred E Shares”), and “Remaining Preferred Shares” means all Preferred Shares other than the Series D Preferred Shares and the Preferred E Shares.

 

1.17                        Registrable Securities” means (i) the Ordinary Shares issuable or issued upon conversion of the Preferred Shares; (ii) any Ordinary Shares issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company acquired by the Investors after the date hereof, including but not limited to the Warrant Shares; and (iii) any Ordinary Shares issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend, upon any stock split or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (i) and (ii) above.

 

1.18                        Registrable Securities then outstanding”, or similar term, means the number of shares determined by adding the number of outstanding Ordinary Shares that are Registrable Securities and the number of Ordinary Shares issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.

 

1.19                        Restricted Securities” means the securities of the Company required to be notated with the legend set forth in Subsection 2.12(b) hereof.

 

1.20                        SEC” means the Securities and Exchange Commission.

 

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1.21                        SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

 

1.22                        SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

 

1.23                        Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

1.24                        Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, fees paid to financial advisors of the Company and any press releases expenses and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Subsection 2.6.

 

1.25                        Series D Investors” means any holder of Series D-1 Preferred Shares and/or a Warrant for the Warrant Shares.

 

1.26                        Series E Investor” means any holder of Series E Preferred Shares.

 

1.27                        Warrant Shares” means the Series D-2 Preferred Shares issued or issuable upon exercise of the warrants granted by the Company to the Series D Investors, as detailed on the Capitalization Table attached hereto as Schedule 3 (the “Warrants”), and shall include the Ordinary Shares into which such Warrant Shares may be convertible at any time.

 

2.                                      Registration Rights.  The Company covenants and agrees as follows:

 

2.1                                     Demand Registration.

 

(a)                                 Form F-1 Demand.  If at any time after one hundred eighty (180) days after the effective date of the registration statement for the IPO the Company receives a request from the Majority Investors or the Majority in Interest that the Company file a Form F-1 registration statement with respect to Registrable Securities of such Holders having an anticipated aggregate public offering price (net of underwriting discounts and commissions) of at least USD $7,500,000, then the Company shall (x) within twenty (20) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders, and (y) as soon as practicable, and in any event within ninety (90) days after the date such request is given by the Initiating Holders, file a Form F-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holder, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c), 2.1(d) and 2.3.

 

(b)                                 Form F-3 Demand.  If at any time when it is eligible to use a Form F-3 registration statement, the Company receives a request from the Majority Investors or the Majority in Interest that the Company file a Form F-3 registration statement with respect to Registrable Securities of such Holders having an anticipated aggregate public offering price (net of

 

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underwriting discounts and commissions) of at least USD $3,000,000, then the Company shall (i) within twenty (20) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form F-3 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within fourteen (14) days of the date the Demand Notice is given, and in each case, subject to the limitations of Subsections 2.1(c), 2.1(d) and 2.3. Notwithstanding the foregoing to the contrary, following the date on which the Company has received at least two requests under this Section from the Majority in Interest, then the majority of each class of Preferred Shares shall have a right to demand F-3 registration pursuant to this Section 2.3(b).

 

(c)                                  Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Subsection 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing (and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly), for a period of not more than ninety (90) days after the request of the Initiating Holders is given; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other shareholder during such ninety (90) day period.

 

(d)                                 The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(a): (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred and eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith best efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Subsection 2.1(a) initiated by the Majority Investors and two registrations pursuant to Subsection 2.1(a) initiated by the Majority in Interest; or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities, all of which may be immediately registered on Form F-3 pursuant to a request made pursuant to Subsection 2.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Subsection 2.1(b) if the Company has effected two registrations pursuant to Subsection 2.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Subsection 2.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Subsection 2.6, in which case such

 

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withdrawn registration statement shall be counted as “effected” for purposes of this Subsection 2.1(d).

 

2.2                               Company Registration. If the Company proposes to register (including, for this purpose, any registration effected by the Company on Form F-1, any registration effected by the Company for any shareholder(s) other than the Holders, and any registration on Form F-3 in which shares of any shareholder will be registered, but not including the IPO, a registration relating to employee benefit plans or registration relating to corporate reorganization, or other transactions on Forms F-4 or any successor form, or a registration on any registration form that does not permit secondary sales or does not include substantially the same information statement covering the sale of the Registrable Securities), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Subsection 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration.  The Company shall have the right to terminate or withdraw any registration initiated by it under this Subsection 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration; the expenses of such withdrawn registration shall be borne by the Company in accordance with Subsection 2.6.

 

2.3                               Underwriting Requirements.

 

(a)                                 If, pursuant to Subsection 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Subsection 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Subsection 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Subsection 2.3, if the managing underwriter advises the Initiating Holders and/or the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Company shall advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated as follows: first, Registrable Securities which are, or which derive from, the Preferred E Shares (collectively, the “Series E Registrable Securities”) (pro rata to the respective number of Registrable Securities required by the Holders thereof to be included in the registration); second, to the extent possible, Registrable Securities which are, or which derive from, the Series D Preferred Shares, including for such purpose, the Warrant Shares (collectively, the “Series D Registrable Securities”) (pro rata to the respective number of Registrable Securities required by the Holders thereof to be included in the registration); and third, to the extent possible, other Registrable Securities (pro rata to the respective number of Registrable Securities requested by the Holders thereof to be included in the registration); provided, however, that in any event all Registrable Securities must be included in

 

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such registration prior to any other shares of the Company or its shareholders of shares which are not “Registrable Securities” under this Agreement.

 

(b)                                 In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Subsection 2.2 (Company Registration), the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their reasonable discretion determine will not jeopardize the success of the offering by the Company.  If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated as follows: first, all the securities to be included by the Company, second, to the extent possible, ‎the Series E Registrable Securities (pro rata to the respective number of Registrable Securities required by the Holders thereof to be included in the registration); third, to the extent possible, ‎the Series D Registrable Securities (including for such purpose, the Warrant Shares) (pro rata to the respective number of Registrable Securities required by the Holders thereof to be included in the registration); fourth, to the extent possible, other Registrable Securities (pro rata to the respective number of Registrable Securities requested by the Holders thereof to be included in the registration); and fifth, to the extent possible, other shares (pro rata to the respective number of such shares requested by the holders thereof to be included in the registration). Notwithstanding the foregoing, (i) in no event shall the number of Series E Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, and (ii) in no event shall the number of Series E Registrable Securities and Series D Registrable Securities included in the offering be reduced below fifty percent (50%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other shareholders’ securities are included in such offering. For purposes of the provision in this Subsection 2.3(b) concerning apportionment, any selling Holder’s holdings shall be aggregated with the holdings of its Permitted Transferees, which shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.

 

(c)                                  For purposes of Subsection 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Subsection 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.

 

2.4                               Obligations of the Company.  Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

 

(a)                                 prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has

 

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been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter, from selling any securities included in such registration, and (ii) in the case of any registration of Registrable Securities on Form F-3 that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable SEC rules, such one hundred twenty (120) day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are either sold or may be sold in accordance with Rule 144 (other than control securities);

 

(b)                                 prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;

 

(c)                                  furnish to the selling Holders such number of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;

 

(d)                                 use its best efforts to register and qualify the securities covered by such registration statement under such other securities and/or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;

 

(e)                                  in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;

 

(f)                                   use its best efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;

 

(g)                                  provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;

 

(h)                                 furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to Section 2, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to Section 2, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting

 

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registration of Registrable Securities, and (ii) a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities;

 

(i)                                     notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed, or the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and

 

(j)                                    after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.

 

2.5                               Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.

 

2.6                               Expenses of Registration.  All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Subsection 2.1 if the registration request is subsequently withdrawn at the request of the Initiating Holders (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Initiating Holders agree to forfeit their right to one registration pursuant to Subsection 2.1(a) or 2.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one of their registrations pursuant to Subsection 2.1(a) or 2.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.

 

2.7                               Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as

 

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the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

 

2.8                               Indemnification.  If any Registrable Securities are included in a registration statement under this Section 2:

 

(a)                                 To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and shareholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act (collectively, “Holder Indemnitees”), against any Damages, and the Company will pay to each such Holder Indemnitee any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld or delayed, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration and, provided, further, that the foregoing indemnity obligations are subject to the condition that, insofar as it relates to any untrue statement or omission (or alleged untrue statement or omission) made in the preliminary prospectus but eliminated or remedied in the amended prospectus on file with the SEC at the time the registration statement becomes effective or in the final prospectus filed with the SEC, such indemnity agreement shall not inure to the benefit of the Holder’s Indemnitees, if a copy of the amended or final prospectus was not furnished to the Person asserting the loss, liability, suit, claim or damage at or prior to the time such furnishing is required by any applicable securities law and such that the amended or final prospectus would have cured the defect giving rise to such loss, liability, suit, claim or damage.

 

(b)                                 To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Subsection 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld or delayed; and provided further that in no event shall the aggregate amounts payable by any Holder by way of

 

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indemnity or contribution under Subsections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.

 

(c)                                  Promptly after receipt by an indemnified party under this Subsection 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Subsection 2.8, give the indemnifying party notice of the commencement thereof.  The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one  separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such action.  The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall only relieve such indemnifying party of any liability to the indemnified party under this Subsection 2.8 to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action. The failure to give notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Subsection 2.8.

 

(d)                                 To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either: (i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this Subsection 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Subsection 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Subsection 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a material fact, relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case (x) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no

 

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event shall a Holder’s liability pursuant to this Subsection 2.8(d), when combined with the amounts paid or payable by such Holder pursuant to Subsection 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.

 

(e)                                  Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Subsection 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.

 

(f)                                   Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

 

2.9                               Reports Under Exchange Act.  With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form F-3, the Company shall:

 

(a)                                 make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO;

 

(b)                                 file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

 

(c)                                  furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after it has become subject to such reporting requirements), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 (at any time after the Company so qualifies); and (ii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form F-3 (at any time after the Company so qualifies to use such form).

 

2.10                        Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company may not enter into any agreement with any holder or prospective holder of any securities of the Company that would, among others, (i) allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the

 

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Registrable Securities of the Holders that are included; or (ii) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder, or otherwise grant such holder senior registration rights, without the approval of the Majority Investors; provided however that the Series D Preferred Shares held by any holder of Series D Preferred Shares (or its Permitted Transferees) investing in the financing that calls for grant of senior registration rights, or registration rights which will comply with either sub-section (i) or (ii) above, beyond its or their pre-emptive rights pursuant to Article 14 of the Amended AOA, shall not be counted towards achieving such majority. For the avoidance of any doubt, it is hereby clarified that if the Company shall issue additional Series D Preferred Shares and grant such holders the same registration rights granted to the holders of Series D Preferred Shares under this Agreement, the foregoing shall not require the consent of the majority of the investors as stated above.

 

2.11                        “Market Stand-off” Agreement.  Each Holder hereby agrees that such Holder shall not, without the prior written consent of the managing underwriter, (i) sell, pledge or otherwise transfer or dispose of any Ordinary Shares (or other securities) of the Company held by such Holder, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Ordinary Shares or other securities, in cash, or otherwise, for a period specified by the Company or the representative of the underwriters not to exceed one hundred eighty (180) days following the effective date of the registration statement of the Company filed under the Securities Act with respect to the IPO, provided that:

 

(a)                                 such agreement shall apply only to the Company’s IPO;

 

(b)                                 all officers and directors of the Company, all shareholders of the Company holding at least one percent (1%) of the outstanding share capital and holders of registration rights enter into similar agreements; and

 

(c)                                  any discretionary waiver, release or termination of the foregoing restriction shall apply to all holders of share capital of the Company, on a pro rata basis.

 

The foregoing provisions of this Subsection 2.11 (1) shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, or the transfer of any shares to any Permitted Transferee of the Holder, provided that the Permitted Transferee agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value and (2) shall not be construed as to prohibit or limit the exercise of warrants or options during such period. The underwriters in connection with such registration are intended third-party beneficiaries of this Subsection 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were parties hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Subsection 2.11 or that are necessary to give further effect thereto.

 

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2.12                              Restrictions on Transfer.

 

(a)                                 The Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act and the Israeli Securities Laws and Companies Laws.  A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

 

(b)                                 Each certificate, instrument, or book entry representing shares of the Company be notated with a legend substantially in the following form:

 

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”).  SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR AN OPINION OF THE ISSUER’S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT.

 

THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN INVESTORS’ RIGHTS AGREEMENT BETWEEN THE COMPANY, THE SHAREHOLDER, AND OTHER PARTIES, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

 

The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Subsection 2.12.

 

(c)                                  The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2.  Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer.  Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who, and whose legal opinion, shall be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company.  The

 

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Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144; or (y) in any transaction in which such Holder distributes Restricted Securities to a  Permitted Transferee of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Subsection 2.12.  Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall be notated with, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Subsection 2.12(b), except that such certificate instrument, or book entry shall not be notated with such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.

 

2.13                        Foreign Jurisdiction.  If, upon the consent of the Majority Investors, the IPO, or any other registration of Company shares, is effected in a jurisdiction other than the United States, the provisions hereof shall apply in respect thereto, and to the laws of such jurisdiction, mutatis mutandis.

 

2.14                        Termination of Registration Rights.  The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Subsections 2.1 or 2.2 shall terminate upon such time as SEC Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration.

 

3.                                      Information Rights. Delivery of Financial Statements.  The Company shall deliver to each Major Shareholder:

 

(a)                                 as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company: (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined below) for such year, with an explanation of any material differences between such amounts. The financial statements, all in reasonable detail, shall be United States dollar-denominated, and prepared in accordance with United States generally accepted accounting principles (“GAAP”); and audited and certified by independent public accountants of internationally recognized standing selected by the Company;

 

(b)                                 as soon as practicable, but in any event within sixty (60) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited but reviewed statements of income and cash flows for such fiscal quarter, and an unaudited balance sheet as of the end of such fiscal quarter, all prepared in accordance with United States GAAP (except that such financial statements (i) may be subject to normal year-end audit adjustments and (ii) may not contain all notes thereto that may be required in accordance with United States GAAP;

 

(c)                                  as soon as practicable, but in any event within sixty (60) days after the end of each quarter of each fiscal year of the Company, a statement showing the number of shares of each class and series of share capital and securities convertible into or exercisable for share capital outstanding at the end of the period, the Ordinary Shares issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Ordinary Shares and the

 

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exchange ratio or exercise price applicable thereto, and the number of options (issued and not yet issued but reserved for issuance, if any), all in sufficient detail as to permit the Investors to calculate their respective percentage equity ownership in the Company on both issued and fully-diluted bases, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;

 

(d)                                 (i) as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year, approved by the Board of Directors and prepared by the management of the Company, in a form acceptable to the Majority Investors and (ii) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Shareholder may from time to time reasonably request;

 

(e)                                  with respect to the financial statements called for in Subsection 3.1(a) and Subsection 3.1(b), an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with United States GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Subsection 3.1(b)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein; and

 

(f)                                   such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Shareholder may from time to time reasonably request.

 

If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated financial statements of the Company and all such consolidated subsidiaries.

 

Without derogating from the foregoing, the Company shall deliver to any shareholder which is either a public company, a regulated body or a provident fund (“Regulated Body”), upon its request, any information as may be requested and any other report or information required by it, in order to comply with any applicable law, including without limitation, Securities Laws, Stock Exchange rules and regulations and/or any request of the Stock Exchange, Securities Authority, Ministry of Finance or any other authority. Without derogating from the generality of the above, the Company is aware that such Regulated Bodies are subject to the Securities Law, 5728-1968 and the regulations promulgated thereunder (together the “Securities Law”), as well as to the instructions of the professional staff of the Israel Securities Authority (the “Securities Authority”). The Company hereby undertake, upon any Regulated Body’s reasonable request, to make all commercially efforts to assist the Regulated Body to fulfill the aforementioned legal obligations.

 

3.2                               Inspection. The Company shall permit, each Major Shareholder (provided that the Board of Directors has not reasonably determined that such Major Shareholder is a competitor of the Company), at such party’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably

 

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requested by any Major Shareholder; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company).

 

3.3                               Termination of Covenants.  The covenants set forth in Subsection 3.1 and Subsection 3.2 shall terminate and be of no further force or effect subject to and immediately before the consummation of the IPO.

 

3.4                               Confidentiality.  Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement, unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Subsection 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Subsection 3.4; (iii) to any existing or prospective Affiliate, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

 

3.5                               Capitalization Table. Each Existing Investor hereby confirms and acknowledges (i) that the Company equity set forth on the Capitalization Table attached hereto as Schedule 3 next to its name is a true, correct and accurate reflection of all of the Company equity owned by it and to which it is entitled, as of the date hereof, and immediately prior to and simultaneously with each Closing, and (ii) that except as set forth on the Capitalization Table attached hereto as Schedule 3, it (A) does not, and shall not as of each Closing, own any other Company securities, and (B) (except for preemptive rights and anti-dilution rights under certain circumstances, if any, in relation to future issuances by the Company, as set forth in the Amended AOA (as may be amended from time to time in accordance therewith and applicable law)) does not and shall not have any other rights to acquire any other Company securities from the Company, and (C) shall have no claims against the Company in connection with the issuance or non-issuance of any securities in the Company, and any such claims are hereby irrevocably waived in full by such Existing Investor.

 

3.6                               Dividend Policy. As soon as is reasonably practicable after the end of each fiscal year and at such other time(s) as the Board of Directors of the Company (“Board”) shall specify, the Board shall consider the distribution of some or all of the profits of the Company available for distribution to the Shareholders. The Board may, in making that determination, take into account the provisions of applicable law and the reasonable financial requirements of the Company. Notwithstanding the foregoing, until the payment in full to the holders of Series D

 

17


 

Preferred Shares of their entire Series D Dividend Preference (as defined in the Amended AOA), if, at any time, the Company grants an exclusive license of its intellectual property or assets and as pursuant to such transaction, the Company has actually received non-refundable and non-contingent cash (revenues and/or receipts) in an amount which shall exceed USD $50,000,000(after deduction of VAT and any amounts paid in consideration for manufacturing, research and/or development and other third party expenses and royalties), then to the extent permitted under applicable law, and unless the Majority Investors otherwise agree, the Shareholders will recommend to the Board to distribute, in accordance with the Dividend Preference clause in the Amended AOA (Article 7), the balance of all of its distributable profits accumulated and undistributed in respect of prior periods to that date BUT after allowing for and/or deducting the Company’s budgeted expenditure for the next ensuing twenty-four (24) months. This section will expire upon the consummation of a QPO (as defined in the Amended AOA).

 

4.                                      Miscellaneous.

 

4.1                               Successors and Assigns.  The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Subsection 2.11. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties.  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

 

4.2                                     Governing Law; Prevailing Party; Agent for Service of Process.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Israel, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced either in the New York Courts or the competent courts located in Tel Aviv, Israel. Each party hereby irrevocably submits to the jurisdiction of each of the foregoing venues for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any action, suit or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice

 

18


 

thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of this Agreement, then, in addition to the obligations of the Company under Section 2.8, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. With respect to claims submitted to New York Courts, the Company irrevocably appoints Zysman, Aharoni, Gayer & Co. and Sullivan & Worcester LLP as its authorized agent (the “Authorized Agent”) upon which process may be served in any suit or proceeding arising out of this Agreement, and agrees that service of process in any manner permitted by applicable law upon the Authorized Agent shall be deemed in every respect effective service of process in any manner permitted by applicable law upon the Company in any such suit or proceeding. The Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of the Authorized Agent or a substitute authorized agent in full force and effect for a period of three (3) years from the date of this Agreement.

 

4.3                               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.  Such counterparts may be executed and delivered by facsimile or email/.pdf transmission, which shall not impair the validity of such execution or delivery.

 

4.4                               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.

 

4.5                               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 to the designated addressee as set forth in the respective purchase agreement of each Investor, or to the addresses provided by a party hereunder, as the case may be.

 

4.6                               Amendments and Waivers.  Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the Majority Investors, provided however that any rights granted under this Agreement to the Majority in Interest specifically shall not be adversely affected without obtaining the consent of the Majority in Interest; it being clarified that granting senior registration rights to a senior class of shares shall not be deemed in and of itself adversely derogating from the rights of the Majority in Interest, the holders of Remaining Preferred Shares, or any other class of Remaining Preferred Shares. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

19


 

4.7                               Severability. In the event one or more of the provisions of this Agreement 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 Agreement, which shall remain enforceable, to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitation, the portion of this Agreement 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.

 

4.8                               Aggregation of Shares.  All Registrable Securities held or acquired by Permitted Transferees of a Holder shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Permitted Transferees may apportion such rights as among themselves in any manner they deem appropriate.

 

4.9                               Additional Investors. Subject to Section 2.10, if the Company issues additional Series E-1 Preferred Shares after the date hereof, any purchaser of such Series E-1 Preferred Shares shall become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” hereunder.

 

4.10                        Entire Agreement. (A) This Agreement (including any Schedules hereto and the preamble hereof which are integral parts hereof) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. (B) Upon the effectiveness of this Agreement, the Current IRA including without limitation, that certain Founders’ and Share Purchase Agreement entered into by and among the Company, Xenia Venture Capital Ltd., Noam Emanuel, Moshe Neuman and Shlomo Barak on March 16, 2008 shall be, and shall be deemed for all purposes, amended, restated, and superseded in its entirety for all purposes.

 

4.11                        Delays or Omissions.  No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.  All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

[Remainder of Page Intentionally Left Blank]

 

20


 

[EXECUTION PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Investors’ Rights Agreement as of the date set forth in the first paragraph hereof.

 

POLYPID LTD., an Israeli corporation

 

 

 

 

 

By:

 

 

Name: Amir Weisberg

 

Title: Chief Executive Officer

 

 

21


 

[EXECUTION PAGE TO AMENDED AND RESTATAED INVESTORS’ RIGHTS AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Investors’ Rights Agreement as of the date set forth in the first paragraph hereof.

 

INVESTOR:

 

 

 

 

 

By:

 

 

Name:

 

Title:

 

Entity Name (if applicable):

 

 

22


 

SCHEDULE 1

 

Existing Investors

 

Rice Inc.

Xenia Venture Capital Ltd.

Amir Weisberg

Prof. David Segal

Aharon Lukach

Yosef Dotan

Yehuda Nir

Uri Rabinovitz

Zvi Pugach

Rami Lerner

Yehiella Metzger

Yafit Shtark

Yechezkel Berenholtz

Shirat Hachaim Ltd.

Aurius Trade Limited

RB Holding Company S.A.

Friendly Angels Club L.P.

David Lichtblau

Max Pohl

Orit Har-Even

Yaniv Amos

Mega Bridge Ltd.

Ramon Gustilo

Amiram Peleg

Itzhak Poran

Ido Grinberg

Yosef (Ayalon) Nemesh

Giora Hagity

Israel Harel

Amos Vizer

Aurum Ventures

Dan Gelvan

Nevat Simon

Raz Dlugin & Co.

Market Bridges Ltd.

Stark Investments (D.H) Ltd.

Neveh-Oded (Kopatch family)

Trans Opera SARL

Guibor, S.A

Financiere Saint James

AW Equity S.A

AHG Polypid LLC

GK Manitoba, LLC

Shavit Capital Fund III (US), L.P.

Shavit Capital Fund 3 (Israel). L.P.

Gabriel Capital Fund (US), L.P.

 

23


 

Gabriel Capital Fund (Israel), L.P.

Gov Financial Holdings Ltd.

East Bayview Holdings, LLC.

The Trust Under the Will of Irene Horn

Arc Group Holdings LLC

Gabriel Menaged

Marc Joseph Irrevocable Trust

Collace Services Ltd.

Harry Grynberg

Yelin Lapidot Provident Funds Management Ltd. on behalf of the following provident funds under their management:

Yelin Lapidot - Provident Bonds with max 25% equity (Gemel Ad 25% Menayot )

Yelin Lapidot - Provident Equities (Gemel Menayatit)

Yelin Lapidot - Education Bonds max 25% equity (Hishtalmut Ad 25% Menayot)

Yelin Lapidot -Severance General (Pitzuim Klali)

Yelin Lapidot - Provident funds- between the ages 50 to 60.

Yelin Lapidot - Education General (Hishtalmut Klali)

Yelin Lapidot - Education Equities (Hishtalmut Menayatit)

Aurum Ventures

Dan Gelvan

Shirat Hachaim Ltd.

Mega Bridge Ltd.

Israel Harel

Yehuda Nir

Aurius Trade Limited

Market Bridges Ltd.

AHG Polypid LLC

GK Manitoba, LLC

Friendly Angels Club L.P.

Stark Investments (D.H) Ltd.

Financiere Saint James

Gary Leibler

CY Company

Master Toy Ltd.

RFG

Duotem Capital Limited

Galit and Avi Friedman

Hany Sualhi

Linda Yona Eligoulachvili

Alain Serge Eligoulachvili

Peradej Throngkitpaisan

Krits Pitimana-aree

Kanlaya Vimollohakarn

Orapin Tanapanpanit

Thanyaporn Supannarat

Vanessa Wang

Your Niece Limited

Brad and Alexandra Krawcyzk

Michelle Glasenberg

 

24


 

Miron Yakuel

Andre Rofe

Maya Halperin

Ronit Ben Hartzi

Galit Gallay Friedman

Benjawan Ekasingh

Mainfield Enterprises

Euro Asia Leasing Ltd.

Mirae Asset Daewoo Co.,Ltd (as a trustee on behalf of ARAM VIX 334AA Specialized Private Securities Investment Trust I-1)

Thamanat Promoow

 

25


 

SCHEDULE 2

 

Series E-1 Investors

 

Varda Burstein

Oded Gazit

Omer Gazit

[Shavit Entities]

Shirat Hachaim Ltd.

 

26


 

SCHEDULE 3

 

Capitalization Table

 

27




Exhibit 10.4

 

Lease Agreement

 

Made and executed in Tel Aviv on the  27th day of March, 2014

 

Between:

 

Ogen Yielding Real Estate Ltd.

 

 

Company No. 520033093

 

 

Whose address for the purpose of this Agreement is: 3 Har Sinai St., Tel Aviv

 

 

(Hereinafter: “the Lessor”)

 

 

 

 

 

The first party;

 

 

 

And between:

 

PolyPid Ltd.

 

 

Company No. 514105923

 

 

Whose address for the purpose of this Agreement is: 18 HaSivim St., PO Box 7126 Petah Tikva

 

 

(Hereinafter: “the Lessee”)

 

 

 

 

 

The second party;

 

Whereas:

 

The Lessor declares that it is the right holder in the Land and it is the registered holder in the Land (except for parcels 201 and 202), within their meaning in Section 202 hereunder, and the sole owner of the Land;

 

 

 

And whereas:

 

A project that includes office areas, commercial and industrial areas and a parking lot, including the Leased Premises within their meaning in Section 2 hereunder, is located on the Land;

 

 

 

And whereas:

 

The Lessee wishes to lease the Leased Premises from the Lessor in unprotected lease and to sign the Management Agreement, inter alia, as stated hereunder, and the Appendixes of this Agreement in accordance with the provisions set forth in this Agreement;

 


 

And whereas:

 

The Lessor agrees to lease to the Lessee the Leased Premises in unprotected lease in accordance with the provisions set forth in this Agreement;

 

 

 

And whereas:

 

The parties wish to define, regulate and formalize in writing their rights and obligations in connection with the lease of the Leased Premises as aforesaid in accordance with the provisions set forth in this Agreement;

 

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

 

1.                            Preamble and Appendixes

 

1.1.                                     The preamble to this Agreement and Appendixes thereof constitute an integral part hereof.

 

1.2.                                     The following are the Appendixes of this Agreement:

 

Appendix A

 

 

Blueprint of the Leased Premises

 

 

 

 

 

Appendix A1

 

 

Description of the part in the Leased Premises indicating the areas where the adjustment works will be performed and the rooms where the works will be performed, including acoustic insulation works in a manner compatible with executive rooms in the four offices that are marked.

 

 

 

 

 

Appendix B

 

 

Adjustment Works in the Leased Premises.

 

 

 

 

 

Appendix C

 

 

Electricity supply rules.

 

 

 

 

 

Appendix D

 

 

Management Agreement

 

 

 

 

 

Appendix E1

 

 

Insurance Appendix.

 

 

 

 

 

Appendix E2

 

 

Certificate of Insurance for the Lessee’s Works.

 

 

 

 

 

Appendix E3

 

 

Lessee’s Certificate of Insurance.

 

 

 

 

 

Appendix F

 

 

Special Conditions Appendix.

 

 

 

 

 

Appendix G

 

 

Canceled.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

2


 

Appendix H

 

 

Bank Guarantee.

 

 

 

 

 

Appendix I

 

 

Delivery protocol.

 

 

 

 

 

Appendix J

 

 

Hot work procedure.

 

2.                            Definitions

 

As used in this Agreement, the following terms shall have the respective meanings set forth beside them below:

 

“The Land”

 

 

The parcel of land known at the time of signing this Agreement as block 6368, parcels 12, 48, 49, 175, 176, 181, 182, 190, 201 (part of parcel) and 202 (part of parcel) in HaSivim St. in Kiryat Matalon in Petah Tikva.

 

 

 

 

 

“The Project”

 

 

The Project located on the Land and known by the name of “Ogen Park” and that includes, at the time of signing this Agreement, inter alia, office buildings, including the Leased Premises, commercial areas, an industrial building, storage areas and public areas, including additional buildings and/or areas and/or floors to the extent built in the future.

 

 

 

 

 

“The Building”

 

 

The building known as Tamar Building which is one of the buildings included in the Project and that includes the Leased Premises.

 

 

 

 

 

“The Leased Premises”

 

 

The unit in the Building marked in the blueprint enclosed as Appendix A and in an area as stated in the definition of the Area of the Leased Premises in Appendix F and parking spaces as stated

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

3


 

 

 

 

 

in Appendix F located in the Parking Lot within its meaning in Section 16.

 

 

 

 

 

“The Lessor”

 

 

Including anyone appointed by the Lessor from time to time to serve as its agent or representative regarding the Leased Premises and this Agreement in general or ad-hoc.

 

 

 

 

 

“Area of the Leased Premises”

 

 

As stated in Section 6 and in Appendix F of the Agreement and as marked in Appendix A1.

 

 

 

 

 

“The Bank”

 

 

Bank Leumi le-Israel Ltd.

 

 

 

 

 

“Index”

 

 

The consumer price index (general index) including fruits and vegetables published by the Central Bureau of Statistics. In case the Central Bureau of Statistics ceases the publication of this Index another identical or substantially similar index published by the Central Bureau of Statistics or by the Bank Trust Company or any other competent entity shall come in its place.

 

 

 

 

 

“Basic Index”

 

 

Within its meaning in Appendix F of this Agreement.

 

 

 

 

 

“Management Company”

 

 

Within its meaning in Section 15 of this Agreement and in the Management Agreement enclosed as Appendix D, including anyone lawfully appointed by the Management Company to serve as its agent or representative in general or ad-hoc.

 

 

 

 

 

“Public Areas”

 

 

Unless otherwise stated — all areas in the Project, including all structures, additions and modifications added thereto from time to time, and roofs, colonnades, basements, passageways, entries and exits, service areas and rooms

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

4


 

 

 

 

 

and/or service corridors, public toilets, common technical areas such as a power room, air conditioning and systems, loading and unloading areas, elevators, shafts, and any other area in the area of the Building and/or the floor that is designated to use or that is actually used all or part of the lessees in the Building and/or the public and/or a number of possessors and protected spaces (unless these were attached to a single lessee/user) except for the areas designated for lease and/or sale and/or operation as a parking lot.

 

 

 

 

 

“The Parking Lot”

 

 

Areas designated for parking in the Project, whether roof or unroofed.

 

 

 

 

 

“Linked,” “Linkage Differentials,” Linked Values,” and any similar expression -

 

 

The multiplication of the relevant sum by the rate of the ratio between the Index at the time of making the relevant calculation and/or the payment and the Basic Index or by the ratio between any other indexes, if stated expressly, provided that that in any event the Index at the time of making the calculation and/or the payment will not fall below the Basic Index.

 

 

 

 

 

“Term of Lease”

 

 

Within its meaning in Section 8 and in Appendix F of this Agreement and, unless otherwise stated expressly — both the First Term of Lease and the Additional Terms of Lease within their meaning in Appendix F.

 

 

 

 

 

“Rent”

 

 

Within its meaning in Section 9 hereunder, according to the rate specified in Appendix F of this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

5


 

“Management Fees”

 

 

All payments that the Lessee is obligated to pay to the Management Company in accordance with the provisions set forth in this Agreement and the Management Agreement.

 

 

 

 

 

“Lessee’s Payments”

 

 

All payments that the Lessee is obligated to pay in accordance with the provisions set forth in this Agreement and in accordance with the provisions set forth in any law, including payments to the Lessor and/or the Management Company and/or any governmental or municipal authority.

 

 

 

 

 

“Quarter”

 

 

Each calendric period of 3 months as follows: January to March, April to June, July to September and October to December in each calendric year.

 

 

 

 

 

“Delivery of Possession Date”

 

 

The date specified in Appendix F of the Agreement in which the Leased Premises are delivered to the Lessee solely as an authorized person for the purpose of performing the adjustment works in the Leased Premises by the Lessee as stated in Section 13 of the Agreement.

 

 

 

 

 

“Lease Commencement Date”

 

 

Within its meaning in Appendix F of the Agreement.

 

 

 

 

 

“The Architect”

 

 

Anekstein Architects & Urban Designers or whoever is appointed from time to time by the Lessor as the Architect of the Building.

 

 

 

 

 

“The Agreement”

 

 

This Lease Agreement including all Appendixes thereof, including the Management Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

6


 

“Hours of Activity in the Building”

 

 

Until the Management Company notifies otherwise the hours of activity in the Building shall be between 07:00 to 20:00 uninterruptedly on Sun. — Thurs. (weekdays) including, and on Fridays and eves of holiday from 08:00 to 13:00. It is clarified that the entry to and exit from the Building will be allowed 24 hours a day all days of the year however this shall not detract from the definition of the “Hours of Activity in the Building” as stated in the paragraph above, and anywhere in this Agreement and/or Appendixes thereof that includes a reference to the “Hours of Activity in the Building” the meaning is to the hours specified in the first part of this Section.

 

 

 

 

 

“Hours of Activity in the Parking Lot”

 

 

The Parking Lot operates 24 hours a day all days of the week subject to the procedures set forth by the Lessor and/or the Management Company that shall be entitled to change the hours of activity as stated above from time to time.

 

 

 

 

 

“Irregular Hours of Activity”

 

 

Hours of activity that exceed the Hours of Activity in the Building or the Hours of Activity in the Parking Lot, as the case may be.

 

3.                            The lease

 

The Lessor hereby undertakes to lease the Leased Premises to the Lessee and the Lessee hereby leases the Leased Premises from the Lessor as stated in this Lease Agreement.

 

4.                            Declarations of the Lessor

 

The Lessor hereby declares and undertakes as follows:

 

4.1.                                     It is the right holder in the Land and in the Leased Premises and possesses full rights of ownership in the Land except for parcels 201 and 202 that are owned by Petah Tikva Municipality.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

7


 

4.2.                                     There is no preclusion preventing its engagement in this Agreement with the Lessee subject to all terms, arrangements and provisions set forth in this Agreement.

 

4.3.                                     It is not aware of any preclusion preventing the Lessee from using the Leased Premises in accordance with the Purpose of Lease.

 

5.                            Declarations and undertakings of the Lessee

 

The Lessee hereby declares and undertakes as follows:

 

5.1.                                     It visited the Land, the Project, the Building and the Leased Premises and inspected their condition at the time of signing this Agreement, including their physical and statutory conditions and their plans and all rights attached thereto, it is aware of the details of the Urban Building Plan (UBP) applicable to the Land, including the zoning classification of the Leased Premises in accordance with the UBP, and saw and inspected the condition of the Leased Premises and their location in the Building and the Project, it received any information that appears to him relevant in connection with the Building and the Leased Premises, and found all of the above to its satisfaction and compatible in every respect to its requirements and specifications, and it hereby waives, subject to the provisions set forth in this Agreement, any claim regarding non-conformance in connection with any of the aforesaid matters, except for a latent defect.

 

5.2.                                     The Lessee declares that it is aware that in case a new UBP is approved and/or the UBP that is in effect at the time of signing this Agreement is amended and consequently additional construction rights are added to the Land, in such circumstances whether or not the additions are added in the Building, they shall not constitute part of the Leased Premises or the rights of the Lessee in the Leased Premises and these rights and/or exercise thereof and/or lease thereof shall not derogate from the obligation of the Lessee to fulfill all its undertakings in accordance with this Agreement.

 

In this regard the Lessee undertakes not to interfere, object or disrupt in any manner the design of the Land and/or the Building, in addition, the Lessee undertakes to avoid raising any claim against the Lessor and/or anyone acting on its behalf in connection therewith.

 

The Lessee is aware and agrees that it is possible that as a result of the decision of the competent authorities and/or the Lessor and/or the approval

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

8


 

of the new UBP and/or the amendment of the UBP that is in effect different modifications will be performed in the Building and the Leased Premises, including in the number of the floors in the Building and their zoning classification.

 

It is clarified that in case it is necessary to modify the Leased Premises as a result of the approval of any plan applicable to the Land, the Lessee shall be solely responsible for implementing the said modifications in the Leased Premises and at its expense.

 

5.3.                                     The Lessee is aware that during the Term of Lease additional construction works in the Land will continue and/or start and might cause noise, waste, traffic of workers, placement of different work equipment and/or work tools, including the placement of a crane. The Lessee undertakes not to interfere, object or disrupt in any manner the said construction works and not raise any claim and/or suit against the Lessor and/or anyone acting on its behalf in connection therewith, on the condition that the access roads to the Leased Premises and the reasonable use of the Lessee will not be impaired thereby.

 

5.4.                                     The Lessee read and it understands well all the declarations of the Lessor as stated above and finds them acceptable and all the declarations of the Lessee as stated above shall be read in light of the said, and there is no statutory and/or other preclusion preventing its engagement in this Agreement in accordance with its provisions.

 

5.5.                                     Without derogating from the declarations of the Lessee as stated above, the Lessee is aware that there are and/or there will be other lessees that are open to the public in the Project where the Leased Premises are located and that the Lessor is entitled to lease, inter alia, other areas in the Project to lessees that will be open to the public and the Lessee does not and will not and it hereby waives any objection to the said on the condition that the reasonable use of the Leased Premises in accordance with the Purpose of Lease will not be impaired thereby.

 

5.6.                                     The Lessee is aware and agrees that the Lessor shall be entitled to modify the entrance lobby to the Building, including its size, at its sole discretion, provided that after the modification the lobby will allow reasonable access and entry to the Leased Premises and the Lessee shall raise no claims and/or demands in connection therewith.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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6.                            Area of the Leased Premises

 

6.1.                                     The Area of the Leased Premises is the “gross Area of the Leased Premises” that includes the participation of the Lessee in the common use in the Leased Premises as specified in Appendix F.

 

6.2.                                     Regarding the obligation of the Lessee to pay Rent, Management Fees and all other payments the Lessee is obligated to pay in accordance with the provisions set forth in the Lease Agreement and in accordance with the provisions set forth in this Agreement and in accordance with the provisions set forth in any law, the Area of the Leased Premises shall be considered as the gross Area of the Leased Premises as stated in Appendix F above. The Lessee waives any claim against the Lessor regarding the Area of the Leased Premises.

 

7.                            Purpose of Lease

 

7.1.                                     The Lessee declares and undertakes that it leases the Leased Premises for the purpose as stated and as defined in Appendix F of this Agreement and solely for that purpose.

 

7.2.                                     The Lessee undertakes to use the Leased Premises solely in accordance with the Purpose of Lease without any violation of or deviation from the Purpose of Lease. Any modification or expansion of the Purpose of Lease are subject to the prior and written approval of the Lessor and the Lessor shall be entitled to reject any modification or expansion as aforesaid for reasonable reasons.

 

7.3.                                     Without derogating from the generality of the aforesaid, the Lessee confirms that it is aware that the operation of the Leased Premises in deviation from or in violation of the Purpose of Lease might cause breach of other lease agreements made between the Lessor and other lessees in the Building, except for constituting a fundamental breach of this Agreement, and therefore the Lessor shall be entitled, without derogating from its right to seek any other relief or remedy, in any event of use in deviation from or in violation of the Purpose of Lease, to obtain an injunction against such operation of the Leased Premises as aforesaid.

 

7.4.                                     The Lessee declares that it was not granted and did not receive any promise regarding exclusivity and/or exclusive use of the Leased Premises and the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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business conducted therein, if any, and the Lessor might lease units in the Project for the purpose of conducting similar, corresponding and even identical businesses to its business and the Lessee waives any claim and/or suit in connection therewith.

 

8.                            Term of Lease

 

The Term of Lease in accordance with this Agreement is as specified in Appendix F of this Agreement and shall expire on the date specified in Appendix F (hereinafter: “First Term of Lease”). Upon expiration of each Term of Lease (i.e., the First, Second Term of Lease and the like) and subject to the provisions set forth in Sections 8.1 and 8.2 hereunder, the Term of Lease shall be extended by an additional term/terms, one term at a time, as stated in Appendix F of this Agreement (hereinafter: “Additional Term of Lease”).

 

8.1.                                     The Lessee shall be entitled to extend the First Term of Lease by the Additional Term of Lease as stated in Section 8 hereinabove and hereunder and in Appendix F, on the condition that during the entire Term of Lease that preceded the extension the Lessee shall fulfill and observe fully and timely all its fundamental undertakings in accordance with the provisions set forth in the Lease Agreement towards the Lessor, the Management Company and any other entity.

 

It is clarified that to the extent that the Lessee failed to fulfill any of its fundamental undertakings in accordance with this Agreement and failed to cure the breach in 10 days as of the date the Lessee received written notice describing the breach, the Lessor shall have sole discretion regarding the extension of the Term of Lease.

 

Subject to the provisions set forth in Section 8.1 above, each Term of Lease, as stated in Appendix F, shall be extended automatically by Additional Terms of Lease as described in Appendix F, provided that the Lessor did not receive a written, unreserved and unconditional notice from the Lessee at least 120 days prior to expiration of the relevant Term of Lease, regarding the Lessee’s request to extend the Term of Lease.

 

8.2.                                     The Lessee shall not be entitled to terminate the lease and/or vacate the Leased Premises prior to expiration of the Term of Lease however the aforesaid shall not derogate from the rights of the Lessor in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, to instruct the Lessee to vacate the Leased

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Premises. If, notwithstanding the said, the Lessee vacates the Leased Premises prior to expiration of the Term of Lease, or ceases to use the Leased Premises, the Lessee shall be obligated to make all the payments applicable to it in accordance with the provisions set forth in the Lease Agreement, until expiration of the Term of Lease.

 

8.3.                                     The provisions set forth in this Agreement shall apply fully to all the Terms of Lease and subject to the specific provisions set forth in this Agreement relating solely to specific Terms of Lease.

 

8.4.                                     The Lessee shall be entitled to perform adjustment works in the Leased Premises as of the Delivery of Possession Date on the first floor as stated and defined in Appendix F of this Agreement. It is agreed that the Lessee shall be entitled to perform works on the first floor of the Leased Premises concurrent with the performance of the finishing works of the Lessor, and the Lessor shall be entitled to refuse the request of the Lessee to perform works for reasonable reason and/or approve the said works, and in the event the request is approved the Lessor shall be entitled to terminate the Lessee’s works for different periods of time according to the rate of progress of the finishing works of the Lessor and the Lessee shall raise no claims and/or demands towards the Lessor in the event of termination of the works as aforesaid.

 

9.                            Rent and parking fees

 

During the entire Term of Lease, the Lessee shall pay to the Lessor Rent for the Leased Premises according to its rate specified in Appendix F of this Agreement when the said amount is linked to the Basic Index as stated hereunder:

 

9.1.                                     The Linkage Differentials shall be deemed as part of the Rent for all intents and purposes. The said Rent, in addition to the Linkage Differentials, shall be referred hereinabove and hereinafter: “the Rent.”

 

9.2.                                     At the time of signing this Agreement the Lessee shall pay to the Lessor the Rent, parking fees and Management Fees in addition to VAT in respect whereof, for the period as of the Lease Commencement Date and until expiration of the subsequent quarter. In the beginning of each quarter afterwards the Lessee shall pay the Rent, parking fees and the Management Fees in addition to VAT in respect whereof for the subsequent quarter on the first business day of the month in which each payment is made.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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9.3.                                     In addition to the Rent and upon payment thereof, the Lessee undertakes to pay to the Lessor the parking fees, as stated in Appendix F of this Agreement. The entire provisions set forth in this Agreement regarding the Rent and the Leased Premises shall also apply to the parking spaces and the parking fees including, and without derogating from the generality of the aforesaid, the payment dates, linkage, increase of parking fees during the Additional Terms of Lease and payment of VAT. It is clarified that the parking spaces constitute part of the Leased Premises within their meaning in this Agreement including Appendixes thereof for all intents and purposes, including for the purpose of payment of the Rent, Management Fees and other payments. It is further clarified that the parking fees stated in Appendix F constitute the full payment paid in respect of the parking spaces (and no Management Fees, municipal taxes or additional payments shall be paid in connection with the parking spaces).

 

9.4.                                     For the avoidance of doubt, it is hereby clarified that the obligation to pay the Rent and all other payments due to the Lessor from the Lessee is an absolute obligation imposed on the Lessee even if the Lessee did not receive a bill for the said Rent or other payments, provided that the Lessee was aware of the existence of the debt (as opposed to its rate).

 

9.5.                                     The Lessee undertakes to pay the Rent and the Parking Fees to the Lessor and the Management Fees to the Lessor or the Management Company as stated in Section 15 hereunder during the entire Term of Lease, whether or not the Lessee used or did not use the Leased Premises for any reason.

 

9.6.                                     The Lessee undertakes to pay the Rent and the Management Fees by depositing in advance checks for the entire year of lease in the Term of Lease and the said checks shall be deposited at the time of signing this Agreement and for each year of lease during the Term of Lease 90 days prior to the commencement of the relevant year of lease.

 

9.7.                                     The provisions set forth in Sections 9.1-9.7 above are material and fundamental provisions in this Agreement and breach of any thereof shall constitute a fundamental breach of this Agreement.

 

10.                     Value added tax

 

The Lessee shall pay value added tax in respect of each of the payments that the Lessee is obligated to pay to the Lessor in accordance with the provisions set forth in this Agreement and that is chargeable with VAT, together with the said payment,

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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according to the VAT rate as determined periodically in accordance with the law and/or any tax and/or levy superseding the same and/or any tax that applies, according to the law imposing it, on any payment that the Lessee is obligated to pay in accordance with the provisions set forth in this Agreement hereinabove and hereinafter: “VAT” or “Value Added Tax”).

 

For the avoidance of doubt, VAT or any other tax applicable as aforesaid shall be deemed as the Rent in anything related to the obligation of the Lessee to make payments in accordance with this Agreement.

 

The Lessor shall deliver to the Lessee invoice for payment of VAT in 7 business days shortly after the date the relevant payment and VAT were paid.

 

11.                     Additional payments

 

During the entire Term of Lease, the Lessee shall pay, in addition to the Rent, all payments specified in all sub-sections of this Section 11 and all payments, levies, municipal taxes, taxes and other mandatory payments of any kind, whether municipal and/or governmental or other, including any fee, licensing fees and licenses of any kind relating to the Leased Premises and/or operation thereof and/or the maintenance of the Leased Premises.

 

The Lessee shall incur any tax and/or levy and/or fee in connection with the Leased Premises including their operation, maintenance, the business conducted therein or in connection with the Rent imposed in the future and that do not exist at the time of signing this Agreement. The Lessor shall incur the taxes and/or levies and/or fees in connection with the Leased Premises and that will be imposed (if and to the extent imposed) on the owner of the Leased Premises such as betterment levy.

 

11.1.                              Without derogating from the generality of the aforesaid, as of the Lease Commencement Date the Lessee shall incur all payments for the supply of water, electricity (in accordance with the provisions set forth in Appendixes C and L), telephone, municipal taxes (“Arnona”) (even if such payment is imposed by law on property owners) applicable to the Leased Premises, business tax imposed on the Lessee, signage tax for the signage installed by the Lessee (to the extent applicable), security expenses for the Leased Premises, to the extent that such expenses are required in accordance with the provisions set forth in any law and/or to the extent that there is any other expense relating to the maintenance and/or use and/or operation of the Leased Premises, whether or not the Lessee used the Leased Premises. As

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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of the Delivery of Possession Date in the ground floor, the Lessee shall incur payments for the supply of water and electricity to the part of the Leased Premises on the ground floor.

 

11.2.                              As of the Lease Commencement Date and during the entire Term of Lease the Lessee shall incur payment of any tax and/or fee and/or levy applicable and/or that will be imposed in the future on the use of the Leased Premises and any activity performed therein, except for a tax and/or a fee and/or a levy as aforesaid that are imposed on property owners.

 

11.3.                              As of the Lease Commencement Date the Lessee shall incur payments and/or taxes and/or fees and/or municipal taxes and/or levies applicable and/or that will be imposed on the Public Areas in the Building, if imposed, according to its relative part that will be determined according to the part of the Area of the Leased Premises in all the areas leased in the Building, as part of the total amount of the Management Fees that the Lessee will pay to the Lessor in accordance with the provisions set forth in Appendix F.

 

11.4.                              During the entire Term of Lease, the Lessee shall incur payments due for the maintenance and management of the Building, as stated in the provisions set forth in Section 15 hereunder, and for the management of the Parking Lot in accordance with the provisions set forth in Section 16 hereunder and for the insurances in accordance with the provisions set forth in Section 18 hereunder, as part of the total Management Fees that the Lessee will pay to the Lessor in accordance with the provisions set forth in Appendix F.

 

11.5.                              The parties undertake to cooperate and deliver written notice to the municipality and to the other relevant authorities regarding the lease of the Leased Premises by the Lessee. Shortly after the Lease Commencement Date the Lessee undertakes, if it receives written instructions from the Lessor in connection therewith, to transfer the name of the payer of the water and/or telephone and/or municipality bills and/or any other bill relating to any payment and/or tax applicable to the Leased Premises to the name of the Lessee. upon expiration of the Term of Lease the Lessee shall change the name of the payer of these bills to the name of the Lessor upon expiration of the Term of Lease.

 

11.6.                              Regarding the municipal taxes (“Arnona”) applicable to the Leased Premises the Lessee declares that it is aware that it may not request from

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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any entity an exemption from municipal taxes even if the Leased Premises are vacant and the Lessor shall be solely entitled to exercise this right.

In addition, the Lessor shall be entitled to instruct the Lessee to pay the municipal taxes to the Lessor or the Management Company that shall transfer the municipal taxes payments in respect of the Leased Premises to the municipality. In such circumstances as aforesaid, the parties shall make a calculation of the municipal taxes applicable to the Leased Premises in accordance with the municipal taxes order that is in effect and the Lessee shall deposit with the Lessor, together with the deposition of the annual Rent, 6 postdated checks for the purpose of paying the municipal taxes for the upcoming year of lease. For the avoidance of doubt, it is clarified that the said shall not derogate from the obligation of the Lessee in accordance with this Agreement to be registered as the possessor of the property in the municipality records.

 

11.7.                              The provisions set forth in this Section 11 shall not derogate from the obligations of the Lessee in accordance with the provisions set forth in Section 12 hereunder.

 

12.                     Construction works in the Building and in the Leased Premises

 

12.1.                              The Lessor shall be entitled, at any time, and without obtaining the approval of the Lessee, to perform any modification or addition or renovation in the Project and the Building, at its sole discretion, both prior to the Lease Commencement Date and thereafter, including, but not limited to, the addition and construction of floors to any of the buildings including a change of zoning classification and/or amendment of construction permits, different construction additions, conversion of Public Areas into areas used exclusively by different users, modification of openings and passageways and my other modification in the Project and/or the Building and/or the Building plans, at its sole discretion, provided that the reasonable use of the Lessee in the Leased Premises in accordance with the Purpose of Lease is not affected.

 

The Lessee undertakes not to interfere and not to object to any modification or addition as aforesaid for any reason, including, but not limited to, disruptions caused to the Lessee, if caused, during construction of the addition or the modification, provided that the performance of the modification or the addition shall not affect the reasonable use of the Leased Premises.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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12.2.                              The Lessor undertakes to perform the works that are specified hereunder in the Leased Premises at its expense and under its responsibility, and complete the said works until the Lease Commencement Date, save as provided in Section 12.2.1.3 hereunder (hereinafter: “Lessee’s Works”):

 

In the ground floor of the Leased Premises:

 

12.2.1.1.                             Modifications and repairs in the entrance lobby in the ground floor, in order to remove any signage of previous lessees. For the avoidance of doubt, it is clarified that the Lessor shall be entitled to place signage in the lobby at its sole discretion. It is further clarified that the Lessor shall be entitled to reduce the area of the entrance lobby in the ground floor;

 

12.2.1.2.                             Installation of a utility spot for water and sewage connection in a location to be agreed between the parties according to the architectural plans provided by the Lessee. It is clarified that the Lessee shall endeavor so that the said plan will include the installation of spots that are in compliance with the condition of the Leased Premises and the Lessor shall endeavor to install the connections in the necessary locations.

 

12.2.1.3.                             Separation of the Area of the Leased Premises from the other areas in the floor, including the dismantling of the entry staircase and the auditorium — these works, and only these works, shall be performed even prior to the Delivery of Possession Date of the ground floor;

 

12.2.1.4.                             Adjustment of the shell walls; the air conditioning system shall remain in its condition “as-is.” The installation of sprinklers according to a standard level (and to the extent that it is necessary to make special adjustments in light of the Purpose of Lease — the Lessee shall be responsible for such adjustment). The Lessor shall deliver a certificate regarding the working order of the sprinkler system after the system is installed by the Lessor. The Lessee shall be solely responsible for the installation of any sprinkler or detector that is required beyond the standard, and the Lessor shall not be responsible for these works, except for the certificate regarding the working order of the sprinklers that were installed by the Lessor, and the Lessee shall be

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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responsible for the maintenance of all the sprinklers and detectors in the Leased Premises.

 

12.2.1.5.                             Separate electricity feed to the Leased Premises;

 

In the first floor of the Leased Premises:

 

12.2.1.6.                             Adjustment of the part marked in         in the Blueprint of the Leased Premises hereby enclosed as Appendix A1 of the Lessee’s design (for the avoidance of doubt it is clarified that the Lessee shall be responsible for and shall incur all expenses in connection with the said design), when the specification of these works is in a level that is identical to the standard, finish and materials (including color and standard) of the other offices located on this floor of the Leased Premises in such manner that the offices that are located on the floor and the new offices will be indistinguishable. To the extent that the works cannot be performed in the said manner the Lessor and the Lessee shall coordinate between them the manner of performance of the works.

 

Acoustic insulation for the executive rooms in four offices whose location will be determined by the Lessee in the following manner:

 

Two dual-membrane gypsum slabs on each side when the vertical part of the gypsum wall is 7cm thick.

 

In addition, a 2” glass wool layer 24kg/m2 (provides approximately 45dB).

 

12.2.1.7.                             It is agreed that the existing curtains in the Leased Premises shall remain in the Leased Premises after performance of the Lessor’s Works in their condition “as-is.”

 

12.3.                              The Lessor shall be entitled, without obtaining the approval of the Lessee, to pass through the Building and through the Leased Premises (following advance coordination with the Lessee, if passed through the Leased Premises) and to install by itself or by anyone acting on its behalf or by any authority, institution or any other entity, all types of conduits, utilities, including air conditioning ducts, water pipes, sewage, gas, drainage, cables and electrical wires, TV and/or cellular and/or telephone communication cables and/or other cables, whether or not serving the Lessee and/or the Lessee and/or the other leases in the Building, and the Lessee undertakes to permit to the Lessor or anyone acting on its behalf to enter the Leased Premises for the purpose of performing the said works and/or for the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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purpose of maintaining the systems, with all ensuing consequences, subject to the provisions set forth in this Section. Upon completion of the Works as aforesaid, the Lessor shall restore the Leased Premises to their previous condition, to the extent applicable.

 

During the Term of Lease the Lessor shall notify the Lessee regarding its intention to perform the said works, a reasonable time in advance, according to circumstances, and shall coordinate with the Lessee the times of entry to the Leased Premises in a manner that will cause minimal harm to the use of the Lessee of the Leased Premises (works shall be performed in the early morning hours, inter alia, or in the late evening hours, to the extent possible), and during the period of the works the Lessor shall take strict measures to cause minimal disturbance and harm to the use of the Lessee of the Leased Premises.

 

12.4.                              The Lessee further declares that it is aware that the Lessor shall be entitled to install and/or installed communication facilities in the Building (however not in the Leased Premises) (hereinafter: “the Facilities”) and the Lessee hereby waives any objection of any kind in connection with the placement and/or operation of the Facilities, subject to the provisions set forth in Section 12.3 above.

 

12.5.                              It is hereby clarified that after the Lease Commencement Date the Lessee shall not be entitled to modify the Leased Premises in any manner and not to add any addition or remove any part thereof without obtaining the prior and written approval of the Lessor and the Lessor shall withhold approval for reasonable reasons only.

 

12.6.                              As of the Delivery of Possession Date of the ground floor and the first floor in accordance with the provisions set forth in Section 8.4 above regarding the works in the ground floor and in accordance with and subject to obtaining the approval of the Lessor regarding the works in the first floor, the Lessor undertakes to allow the Lessee to perform the works specified in Appendix B of this Agreement and in Section 12.7 hereunder, subject to and in accordance with the provisions set forth in Appendix B. In addition, during the Term of Lease the Lessor shall be entitled to refuse to the performance of the works in accordance with the plans that will be submitted to the Lessor by the Lessee and/or any part thereof, for reasonable reasons only (hereinafter: “Lessee’s Works”). The approval of the Lessor for the performance of the Lessee’s Works as stated above shall be provided

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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on the condition that the Lessee acts in accordance with the all of the following provisions:

 

12.6.1.1.                             The Lessee shall be solely responsible for the performance of the Works in accordance with the Lessor’s approval, during hours that will be defined by the Management Company, and under its sole responsibility and at its expense, and while protecting the Project and grounds thereof, and while preventing noise and waste, and after obtaining all the approvals and permits as required in accordance with the provisions set forth in any law, and while causing minimal disturbance, under the circumstances of the case, to the regular activities in the Project and/or the activities of other lessees and/or possessors in the Project.

 

12.6.1.2.                             The performance of all works shall be coordinated in advance and in writing with the Management Company of the Project.

 

12.6.1.3.                             The Lessee undertakes to perform the Lessee’s Works in accordance with the provisions set forth in any permit and/or license that are required in connection therewith and in full compliance with the provisions set forth in any law and by lawfully licensed contractors.

 

12.6.1.4.                             The Lessee shall incur all expenses associated with and/or deriving from the performance of the Lessee’s Works after obtaining the approval of the Lessor as stated above and the approval of the Lessor as aforesaid shall not impose on the Lessor any responsibility for the design and/or performance of the Lessee’s Works.

 

12.6.1.5.                             The Lessee shall be held liable for any deficiency and/or any damage of any kind caused to the Leased Premises and/or the Project and/or any part thereof and/or grounds thereof as a result of acts and/or omissions of the Lessee and/or anyone acting on its behalf during the performance of the works and/or the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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modifications. The Lessee shall indemnify the Lessor immediately upon its demand for any expense and/or payment the Lessor shall be obligated to incur and/or pay and for which the Lessee is held liable as stated above.

 

12.6.1.6.                             Without derogating from the liability of the Lessee in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, prior to the commencement date of the Lessee’s Works, the Lessee undertakes to take out and maintain a contractor insurance in the name of the Lessee, contractors and subcontractors, the Lessor and the Management Company, and to furnish to the Lessor a proper certificate of insurance and in accordance with the provisions set forth in Appendix E1 and E2 enclosed with this Agreement.

 

12.7.                              Without derogating from the provisions set forth in Section 12.6 above, the Lessee shall be entitled to install an exterior flue for the laboratory and a generator as stated hereunder. The Lessor agrees that the Lessee’s Works as stated in this Section shall be performed concurrently with the Lessor’s Works, as of the Delivery of Possession Date of the ground floor, without causing any disturbance to the Lessor’s Works in the Leased Premises. To the extent that the Lessee’s Works disturb the Lessor’s Works, the Lessor shall be entitled to cease the Lessee’s Works for a period of time stated by the Lessor and the Lessee shall raise no claims and/or demands in connection therewith:

 

12.7.1.1.                             The flue will be installed on the southern exterior wall of the Building according to the plans enclosed with this Agreement that were approved by the Architect of the Building before signing the Agreement. After the installation of the flue, the Lessee shall be obligated to furnish to the Lessor all the relevant approvals that are required by the authorities and/or in accordance with the provisions set forth in any law.

 

12.7.1.2.                             The generator shall be operated as a safety measure and only in the event of power outages and shall be used

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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solely in the Leased Premises; the generator will have an internal fuel tank. To the extent that the operation of the generator will cause a disturbance to the lessees in the Building, the Lessee undertakes to soundproof the generator for the purpose of eliminating this disturbance immediately upon receiving the demand of the Lessor to that effect.

 

12.7.1.3.                             The Lessee may install the generator after it met all the conditions listed in Section 12.6 above. After the installation of the generator, the Lessee shall act for the purpose of obtaining the necessary approvals in accordance with the relevant standards from an external inspector and the HVAC engineer and/or from any authority and/or in accordance with the provisions set forth in any law.

 

12.7.1.4.                             It is agreed that the Lessee and/or anyone acting on its behalf shall be obligated to notify the Lessor and/or anyone acting on its behalf prior to climbing to the roof of the Building.

 

12.7.1.5.                             The Lessee may replace the windows in the laboratory as may be required for the purpose of installing a louvre and/or a blower. In the event the Lessor demands to dismantle the louvre and/or the blower upon expiration of the Term of Lease, the Lessee shall be obligated to follow the said instruction.

 

12.7.1.6.                             The Lessee may install an access control system at the entrance of the toilets in the first floor of the Leased Premises. In the event that upon expiration of the Term of Lease the Lessor demands the dismantling of the access control system and/or the louvre, the Lessee shall be obligated to follow this instruction.

 

12.8.                              For the avoidance of doubt, it is hereby clarified that the performance of the works in the Leased Premises by the Lessee, to the extent that such works are performed after the Lease Commencement Date, shall not detract from any liability and/or obligation and/or payment (including payment of the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Rent, parking fees and Management Fees) applicable to the Lessee in accordance with this Agreement and Appendixes thereof during the period of performance of the works. It is further clarified that during the performance of the works in the Leased Premises by the Lessee prior to the Lease Commencement Date, the Lessee shall incur the expenses for electricity and water consumption on the ground floor in the Leased Premises.

 

Electricity and water

 

12.9.                              The amounts charged from the Lessee for the supply of electricity to the Public Areas and to the Leased Premises and for the air-conditioning system in the Building and in the Public Areas are included as part of the Management Fees. It is clarified that the Leased Premises are connected to the electricity and air-conditioning system in the Building. The sums charged from the Lessee or the Management Company in respect of the supply of electricity services as aforesaid shall be based on the distribution of the costs among the different lessees in the Building, as stated in the Management Agreement enclosed as Appendix D of this Agreement.

 

12.10.                       The Lessee declares that it is aware that the Lessor is the holder of exclusive rights towards Israel Electric Corp. Ltd. (hereinafter: “IEC”) regarding the supply and use of electricity to the different areas of the Building, including in the Public Areas and the air-conditioning system in the Building and in the Leased Premises. The Lessee hereby waives absolutely and irrevocably its right to sign with IEC an electricity supply contract as stated above, and the Lessee undertakes to act in accordance with the provisions set forth in Appendix C of this Agreement.

 

12.11.                       The amounts charged for the supply of electricity and auxiliary services (to the extent necessary, for the purpose of supplying the electricity) and that are provided by the Lessor and/or the Management Company and/or IEC to the Lessee and the rules in connection with the supply of electricity and auxiliary services as aforesaid are specified in Appendix C of this Agreement.

 

12.12.                       The Lessee undertakes to pay to the Management Company for the use of the electricity services that will be supplied by the Lessor and/or the Management Company directly to the Leased Premises, all the bills in respect of the Leased Premises that will be issued by the Management Company on the dates and according to the rates determined by the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Management Company in accordance with the time of use low voltage rates charged by IEC, as of the Delivery of Possession Date of the ground floor (and with respect to the ground floor) or as of the Lease Commencement Date with respect to the remaining part of the Leased Premises, as the case may be, and according to the reading of the secondary electricity meter that will be installed by the Lessor and/or anyone acting on its behalf until the relevant Delivery of Possession Date. It is clarified that except for the use of the electricity and water services in the Leased Premises and the provisions set forth in Section 11.1 above, the Lessee shall not pay to the Lessor any payment in respect of the period commencing on the Delivery of Possession Date and until the Lease Commencement Date.

 

12.13.                       The Lessee declares that it is aware that there are shafts in the Building passing through the floor of the Leased Premises and that systems that are common to all the lessees in the Building might pass through these shafts.

 

13.                     Delivery of possession and delivery protocol

 

13.1.                              The Delivery of Possession Date of the ground floor in the Leased Premises shall be as stated in Appendix F (hereinafter: “Delivery of Possession Date of the Ground Floor”), the Delivery of Possession Date of the first floor of the Leased Premises and the parking spaces shall be on the Lease Commencement Date, within the meaning of this term in Appendix F (hereinafter: “Delivery of Possession Date of the Remaining Part of the Leased Premises” or the “Lease Commencement Date”). Possession in the ground floor shall be delivered when the Leased Premises are in their condition “as-is” at the time of signing this Agreement and after performance of the Lessee’s Works in the ground floor of the Leased Premises as stated only in Section 12.2.1.3. The Delivery of Possession Date of the Remaining Part of the Leased Premises shall occur when the Leased Premises are in their condition “as-is” at the time of signing this Agreement and after performance of the Lessor’s Works. As of the Delivery of Possession Date of the Ground Floor or the Delivery of Possession Date of the Remaining Part of the Leased Premises, as the case may be, the Lessee shall be entitled to perform adjustment works on the ground floor or the first floor, as the case may be, subject to the provisions set forth in Appendix B. It is clarified that as of the Delivery of Possession Date of the Ground Floor and during the period of performance of the adjustment works and until the Lease Commencement Date, at the latest (the Delivery of Possession Date of the Remaining Part of the Leased Premises) the Lessee shall be deemed

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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as an authorized person in the Leased Premises solely for the purpose of performing its works.

 

13.2.                              The Lease Commencement Date shall be as stated in Appendix F (hereinafter: “Lease Commencement Date”).

 

13.3.                              The Lessee undertakes to appear on the Delivery of Possession Date of the Ground Floor and on the Delivery of Possession Date of the Remaining Part of the Leased Premises and receive possession in the ground floor and the remaining part of the Leased Premises, as the case may be, and fulfill all the undertakings the Lessee is obligated to fulfill until the said dates, provided that on the Delivery of Possession Date of the Ground Floor the Lessor completed the Lessor’s Works as stated solely in Section 12.2.1.3 and that on the Delivery of Possession Date of the Remaining Part of the Leased Premises the Lessor completed all the Lessor’s Works. In the event the Lessee failed to appear to receive possession on the said dates, this shall not exempt the Lessee from all its undertakings in accordance with the provisions set forth in the Lease Agreement.

 

13.4.                              The Leased Premises shall be deemed as ready for delivery and the Lessee shall be obligated to receive possession therein on the said dates even if the landscape works were not completed yet, provided that the Leased Premises can be used in accordance with the Purpose of Lease as stated in this Agreement, on the Delivery of Possession Date of the Ground Floor — the Lessor’s Works as detailed in Section 12.2.1.3 only were completed, and the Lessor’s Works were completed on the Delivery of Possession Date of the Remaining Part of the Leased Premises in accordance with the provisions set forth in Section 12.2 above, and there is reasonable access to and from the Leased Premises.

 

13.5.                              The Lessor shall not be held liable for any postponement or delay in the delivery of possession of the ground floor or the remaining part of the Leased Premises caused due to a delay in the delivery of the plans that the Lessee is obligated to deliver to the Lessor until 30.4.2014 [assuming that the Agreement will be signed until 1.4], or due to the failure of the Lessee to meet the requirements set forth in Appendix B, provided that such a delay as aforesaid was not caused due to an act or omission of the Lessor or as a result of circumstances in which the Lessor failed to complete the necessary works in accordance with the provisions set forth in Section 12.2 above (unless the delay was caused as a result of a delay caused by the Lessee as

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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stated in the first part of this Section). In addition, the Lessor shall not be held liable for any postponement or delay in the completion of the adjustment works of the Lessee in the Leased Premises, to the extent that the said delay was not caused due to an act or omission of the Lessor or a delay in the performance of the works that are performed by the Lessor as stated above (unless the delay was caused as a result of the delay by the Lessee as stated in the first part of this Section). Without derogating from any relief or remedy granted to the Lessor in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, the Lessee shall pay the Lessee and shall incur all other payments it is obligated to incur in accordance with this Agreement and all its other undertakings in accordance with the provisions set forth in the Lease Agreement even if the Delivery of Possession Date of the Ground Floor or the Delivery of Possession Date of the Remaining Part of the Leased Premises is delayed due to the circumstances described in the first part of this Section and/or the adjustment works of the Lessee are not completed until the Lease Commencement Date, as of the date set as the Lease Commencement Date as stated in Appendix F. In addition, the Lessee shall indemnify the Lessor and/or the Management Company for any damage caused to them as a result of the aforesaid.

 

14.                     The business activities in the Building and in the Leased Premises

 

14.1.                              The Lessee is aware that opening hours of the businesses conducted in the Building shall be during the Hours of Activity in the Building, within their meaning above, subject to the provisions set forth in any law and in accordance with the procedures set forth from time to time by the Management Company (whether with respect to a specific business or a certain type of businesses), as stated in Section 15 hereunder. Notwithstanding the said, it is agreed that the Lessee may use the Leased Premise during any hour of the day, including on weekends and in hours other than the Hours of Activity in the Building, and there is no restriction imposed on the Lessee or anyone acting on its behalf to act in the said manner. In addition, it is agreed that the entry of the Lessee, its employees and guests to the Building shall be from the main façade of the Building.

 

14.2.                              The Lessee declares that it is aware that part of the areas in the Project are used, inter alia, for commercial activities and will include, inter alia, cafés, restaurants, kiosks, food stands, a drugstore and other shops that might operate in hours other than the Hours of Activity in the Building. The Lessee

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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declares and undertakes that it shall not raise any claim in connection therewith, to the extent that the said activities do not disrupt the regular and reasonable course of business of Lessee in the Leased Premises.

 

14.3.                              This Section is a fundamental section in the Agreement and breach of any of its provisions shall be deemed a fundamental breach of this Agreement.

 

15.                     Management of the Building

 

15.1.                              The Lessor shall be entitled to form or appoint a corporation that will engage in the management and the maintenance of the Building (hereinabove and hereinafter: “Management Company”). As long as the said corporation was not appointed or formed or as long as the said corporation did not start to engage in the management and maintenance of the Building or in the event its appointment was terminated as aforesaid, the Lessor shall serve as the Management Company for the purpose of this Agreement including Appendixes thereof.

 

15.2.                              At the time of signing this Agreement or on any other date as instructed by the Lessor, the Lessee undertakes to sign the Management Agreement enclosed as Appendix D of this Agreement. The Management Company shall determine from time to time the arrangements and procedures relating to the management of the Project and/or the Building and maintenance thereof and shall set out bylaws that will apply to all the users of the Project and/or the Building or the type of businesses conducted therein, and shall supervise their performance. The Lessee undertakes to observe all the provisions and terms set forth in the Management Agreement as part of its undertakings in accordance with this Agreement towards the Lessor.

 

15.3.                              The Lessee shall pay the Management Fees according to the dates, rates and keys as stated in the Management Agreement.

 

15.4.                              The signature of the Lessee on this Agreement constitutes a direct undertaking towards the Management Company, when formed or appointed, if formed, to the extent that this is related to the Management Company, and an undertaking of the Lessee towards the Lessor to observe all its undertakings towards the Management Company, whether as stated in this Agreement and whether as stated in the Management Agreement, and breach of the Management Agreement shall constitute a breach of this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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15.5.                              For the avoidance of doubt, any claim that the Lessee may have against the Management Company, including a claim by virtue of the Management Agreement, shall not give rise to a cause of action by the Lessee against the Lessor, unless the Lessor serves as the Management Company.

 

15.6.                              The provisions set forth in this Section 15 shall be deemed as material and fundamental provisions in this Agreement and breach of any thereof shall be deemed as a fundamental breach of this Agreement.

 

16.                     Parking Lot

 

16.1.                              The Lessor declares that there is a parking lot in the Project (hereinafter: “the Parking Lot”). The Lessor will lease to the Lessee parking spaces in accordance with the conditions set forth in Appendix F, in accordance with the provisions set forth in this Agreement and the Management Agreement. It is clarified that the parking spaces constitute part of the Leased Premises within their meaning in this Agreement including Appendixes thereof for all intents and purposes, including for the purpose of payment of the Rent, Management Fees, municipal taxes and other payments.

 

16.2.                              The Lessor and/or the Management Company and/or any other company that is appointed by the Lessor and/or the Management Company to manage the Parking Lot shall operate and manage the Parking Lot at their absolute and sole discretion subject to the provisions set forth in any law and subject to the following provisions:

 

16.2.1.1.                             The Lessor shall be entitled to operate the Parking Lot, whether by itself and whether by the Management Company or by a contractor or a subcontractor, in any manner, whether in return for full or partial payment, according to any method, including by way of sale of subscriptions and whether free of charge.

 

The Lessor shall be entitled to allocate special parking areas in which subscribers shall be entitled to park their vehicles, according to a method set out by the Lessor and/or the Management Company, whether for full-time or part-time subscribers, at its sole discretion.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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16.2.1.2.                             The Lessor shall be entitled to change the location of the parking spaces leased to the Lessee or a part thereof upon delivery of a 30 days’ prior notice, including a change in the level of the parking spaces or a part thereof (with respect to the parking spaces that were in that level), in such manner that the number of original parking spaces in the external Parking Lot and the original number of parking spaces in the two-floor Parking Lot shall remain unchanged (including the number of the roofed parking spaces) and shall be identical. Notwithstanding the said, the Lessee is aware that in the near future different works that will change the location of the parking spaces will be performed when during performance of these works the location of the parking spaces will be changed for the purpose of performing these works, and upon completion of these works the parking spaces will return to their original location. The Lessor and/or the Management Company, as the case may be, shall be entitled to lay down the procedures for the management, use, entry, exit and operation of the Parking Lot from time to time and amend them from time to time.

 

The Lessor undertakes that as long as it did not notify otherwise to the Lessee, the Parking Lot shall be open during the Hours of Activity in the Parking Lot, subject to the procedures laid down by the Lessor and/or the Management Company and the Lessor and/or the Management Company shall be entitled to change the Hours of Activity in the Parking Lot as stated above from time to time provided that the hours of entry and exit of the Lessee in the Parking Lot are not limited.

 

16.3.                              The Lessee undertakes to uphold any instruction as aforesaid and all the arrangements and technical procedures set out by the Lessor or the Management Company for the purpose of this matter and that will be published as aforesaid.

 

The Lessee undertakes to pay to the Lessor, during the entire Term of Lease, the parking fees as stated in Appendix F and the Management Fees and

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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other payments applicable in accordance with the provisions set forth in this Agreement and Appendixes thereof.

 

16.4.                              The provisions set forth in this Section constitute a direct undertaking of the Lessee towards the Lessor and/or the Management Company and/or any other person and/or entity operating the Parking Lot from time to time, as the case may be.

 

16.5.                              Liability for damages in the Parking Lot

 

16.5.1.1.                             The Lessee declares that it shall be solely responsible for the use of the Parking Lot and the means of entry to the Parking Lot and that the Lessor and/or the Management Company and/or the Parking Lot operator are under no responsibility to protect the vehicles in the Parking Lot and/or for their content and/or external integrity and the Lessor and/or the Management Company and/or the Parking Lot operator shall not be held liable for any damage, loss or deficiency caused to any vehicle, person, or chattel in the Parking Lot for any reason, including, and without derogating from the generality of the aforesaid, as a result of fire, smoke, earthquake, hostile activities, war, flood, flooding, theft, break-in, impact by other vehicles.

 

16.5.1.2.                             The Lessee hereby exempts the Lessor and/or the Management Company and/or the Parking Lot operator from any liability for damage as aforesaid, provided that the damage was not caused due to a negligent act or omission of the Lessor and/or anyone acting on its behalf. The Lessee undertakes to indemnify the Lessor and/or the Management Company and/or the Parking Lot operator in 7 days as of the date of receiving their first demand for any expense and/or damage caused to the Lessor and/or in respect of any sum that the Lessor is obligated or required to pay due to a suit and/or damage, loss or deficiency as aforesaid.

 

16.5.1.3.                             The Lessee shall be solely liable for any damage caused by the Lessee to the Parking Lot and facilities thereof and/or to the Lessor and/or the Management Company

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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and/or the Parking Lot operator and/or any third-party as a result of an act or omission of the Lessee and/or anyone acting on its behalf.

 

16.5.1.4.                             The Lessee declares that it is aware that the payment of the parking fees is made solely for the right of parking and does not include any guarding services and that the presence of supervisors and/or attendants and/or ushers and/or cashiers at the entries and exits to the Parking Lot is intended solely for the purpose of collecting payment and enabling parking in the Parking Lot. The parties agree that the provisions set forth in the Bailees Law, 5727-1967 shall not apply to this Agreement and/or the parking of the vehicles in the Parking Lot and use thereof.

 

16.6.                              The Lessee undertakes to use the Parking Lot in a manner that will not harm the other users, and will not obstruct roads and will park only in areas designated for parking, park vehicles only between the lines that are marked and designated for the parking of vehicles and will not cause any damage to the Parking Lot and the equipment therein.

 

17.                     Liability and indemnity

 

17.1.                              The Lessor and/or anyone acting on its behalf and/or acting in its name shall not be held liable in any manner for any damage and/or harm caused to the Lessee and/or to the business conducted in the Leased Premises and/or to equipment and/or facilities therein or surroundings thereof, except for damage and/or harm as aforesaid caused as a direct result of an act or omission caused negligently or maliciously by the Lessor and/or anyone acting on its behalf.

 

17.2.                              Without derogating from the said in sub-section 17.1 above, the Lessor and/or anyone acting on its behalf and/or in its name shall not be held liable in any manner for bodily harm and/or damage to property of any kind caused to the Lessee and/or its employees and/or anyone acting on its behalf, including its agents, representatives, contractors, customers and any other person staying in the Leased Premises and surroundings thereof, or in any other area held by the Lessee.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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17.3.                              For the avoidance of doubt, the Lessee shall be solely responsible for any damage including bodily harm and/or damage to property and/or to the reputation and/or business interruption caused to the Lessor and/or to a third-party in connection with the negligence of the Lessee and/or anyone acting on its behalf and for any wrong that is committed — in connection with the possession of the Leased Premises and/or the use that the Lessee makes in the Leased Premises and anyone acting on its behalf in the Leased Premises and/or in the Public Areas, except for damage and/or harm as aforesaid caused as a direct result of a negligent or malicious act or omission of the Lessor and/or anyone acting on its behalf (including in connection with the works that are performed by the Lessor in accordance with the provisions set forth in the Lease Agreement).

 

17.4.                              The Lessee shall indemnify the Lessor and/or the Management Company for any damage and/or claim and/or charge the Lessor and/or the Management Company are obligated to pay in connection with damage and/or a wrong for which the Lessee is held liable as aforesaid, immediately upon receiving the first written demand of the Lessor in connection therewith.

 

18.                     Insurance

 

18.1.                              Without derogating from the responsibility and undertakings of the Lessee in accordance with this Agreement and in accordance with the provisions set forth in any law, the Lessee undertakes to purchase at its expense and to keep in effect during the entire Term of Lease the insurances specified in Appendix E1 and Appendix E3 and the insurances specified in Appendix E2 during the period of performance of the adjustment works (hereinafter: “Insurances of the Leased Premises”) with a legally licensed and reputable insurance company.

 

18.2.                              Without derogating from the foregoing, the Lessee undertakes to incur its relative part in the insurance costs with respect to the insurance that will be taken out for the Public Areas in the Project and/or the Building, as decided by the Lessor and/or the Management Company.

 

18.3.                              Breach of the provisions set forth in this Section 18 including any sub-section thereof by the Lessee shall constitute a fundamental breach of this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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19.                     Permits

 

19.1.                              The Lessee declares that it is familiar and knowledgeable of the business it intends to conduct in the Leased Premises and in anything related to the licenses and permits that are necessary for the purpose of conducting such a business as aforesaid, and the Lessee undertakes to obtain at its expense all permits and licenses that are necessary for the purpose of conducting its business in the Leased Premises and conduct its business in accordance with the terms set forth in the permits and keep these permits in effect during the entire Term of Lease, and not to make any non-conforming use of the Leased Premises and not to conduct in the Leased Premises businesses that are not permitted in accordance with any applicable law in the present or the future.

 

Without derogating from the said, the Lessee declares that it read and understood the entire provisions set forth in the UBP applicable to the Land, the Project and the Building, and it is aware that to the extent that a permit and/or a license is required and/or in order to use the Leased Premises in accordance with the Purpose of Lease the Lessee shall be solely responsible for obtaining the said permit or license and the Lessor shall not be responsible for obtaining any of the said permits or licenses.

 

19.2.                              At the request of the Lessor the Lessee undertakes to sign any document and/or application that are necessary for the purpose of obtaining a business license and/or any other permit that is necessary for the purpose of operating the business in accordance with the Purpose of Lease, by virtue of the law and subject to the provisions set forth in this Agreement and the law, provided that no responsibility and/or monetary or other liability is imposed on the Lessor in connection therewith. For the avoidance of doubt, it is clarified that this undertaking of the Lessor shall not derogate from the liability and undertaking of the Lessee to obtain the said license or permit.

 

19.3.                              The Lessor undertakes that the works it will perform will be performed in accordance with the instructions set forth by the safety consultant on behalf of the Lessor that will inspect the compliance of the fire suppression system (sprinklers and detectors) located in the Area of the Leased Premises with the requirements set forth by the authorities, the law and the standard, and the Lessor undertakes to obtain the approval of a certified electrical inspector regarding the electricity system in the Leased Premises, when the said actions shall be performed after the performance of the Lessor’s Works stated in Section 12.2 above, and the Lessor shall furnish the said approvals

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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to all the competent authorities to the extent required, and no later than the date specified in Appendix F. In addition, the Lessor declares that the fire detection and the fire suppression systems were installed in the Leased Premises and in the Building in accordance with the relevant standards and that it obtained the approval of the Fire and Rescue Services Authority.

 

Failure to furnish the approvals as aforesaid shall not give rise to grounds to delay the Lease Commencement Date and/or delay of any of the payments and/or undertakings applicable to the Lessee in accordance with this Agreement.

 

19.4.                              As a condition for opening the Leased Premises, the Lessee undertakes to submit the interior division plans of the Leased Premises for the approval of the Fire and Rescue Services Authority and to invite their representatives at its expense to conduct an inspection of the Leased Premises, obtain their approval and furnish the said approval to the Lessor. Failure to furnish the said approval shall not give rise to grounds for a delay of the Lease Commencement Date and/or delay of any of the payments and/or undertakings applicable to the Lessee in accordance with this Agreement.

 

19.5.                              Without derogating from the foregoing, the Lessee undertakes to conduct its business and fulfill all the requirements set forth by virtue of the safety laws and regulations, the Business Licensing Law 5728-1968 (hereinafter: “the Law”), to the extent applicable under the circumstances of the case, and obtain any license and permit that is necessary by law for the purpose of conducting the business of the Lessee in the Leased Premises in accordance with the Purpose of Lease, and to renew the said license from time to time as required by law.

 

19.6.                              The Lessee shall be solely responsible for any breach and/or violation of the law in the Leased Premises deriving from an act and/or omission of the Lessee and/or anyone acting on its behalf.

 

19.7.                              The Lessee shall incur solely any fine or penalty imposed for conducting the business and/or using the Leased Premises by the Lessee and/or its employees and/or agents and/or customers without permit and/or in violation of a permit and/or a plan, whether imposed on the Lessor or the Management Company and whether imposed on the Lessee.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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19.8.                              None of the provisions set forth above shall be deemed as authorization of the Lessor to the Lessee to use the Leased Premises and/or to conduct in the Leased Premises business without a permit and/or in violation of a permit and/or a plan.

 

19.9.                              The parties agree that failure to obtain any license that is necessary for the Lessee for the purpose of using the Leased Premises shall not release the Lessee from fulfilling any of its undertakings in accordance with this Agreement.

 

For the avoidance of doubt, it is clarified that any demand made by a competent authority for the modification of the interior part of the Leased Premises in accordance with the Purpose of Lease and beyond the details specified in Appendix B1 for any reason shall apply to the Lessee, except for the modification of detectors and sprinklers in accordance with the provisions set forth in Section 12.2.1.4 above and provided that these apply to the Lessor.

 

19.10.                       The provisions set forth in this Section shall be deemed as fundamental and material provisions in this Agreement and breach of any thereof shall be deemed as a fundamental breach of this Agreement.

 

20.                     Possession and management of the Leased Premises

 

20.1.                              The Lessee undertakes to conduct its business and to use the Leased Premises and grounds thereof in a manner that will not cause any disturbance to the other lessees in the Building and their enjoyment from their leased premises while maintaining the area adjacent to the Leased Premises clean. Without derogating from the aforesaid, the Lessee undertakes not to use the Leased Premises or any part thereof in such manner that will cause noises, odors, pollution, vibrations or any other nuisance in violation of the permitted standard, and in accordance with the provisions set forth in any law applicable to the said and without causing any nuisance that is in violation of the permitted standard in accordance with the law, including, but not limited to, noise, crowdedness, vibrations, odors (including the operation of fume hoods), pollution, and shall not cause any disturbance or nuisance to the possessors and/or the users of the remaining parts of the Building and the Project. The Lessor declares that it is aware that the Lessee intends to install and operate a laboratory, a generator and a flue in the Leased Premises and that the Lessor and anyone acting on its behalf and the other lessees in the Project do not and will not raise any

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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objection in connection therewith. The Lessor further declares that it is aware that the Lessee may install an access control system at the entrance to the toilets during the Term of Lease.

 

The Lessee shall take action immediately after receiving the demand of the Lessor to cease any activity that causes a nuisance such as noise and/or waste and/or odors and/or vibrations and/or any other safety nuisance.

 

Without derogating from the generality of the aforesaid, the Lessee undertakes not to operate a PA system and/or loudspeakers in the Leased Premises or their surroundings in such manner that might disturb the other lessees in the Building, and to keep a high standard of cleaning and maintenance in the Leased Premises and surroundings thereof.

 

20.2.                              The Lessee undertakes not to conduct its business in the Public Areas and not to keep any goods and/or inventory and/or other chattel (hereinafter collectively: “Chattel”) in the Public Areas, however solely upon obtaining the prior and written approval of the Lessor and the Management Company. In any event in which Chattel belonging to the Lessee is found outside the Leased Premises as aforesaid, the Lessor or the Management Company shall be entitled to remove this Chattel from the premises at the expense of the Lessee, after delivery of a 48 hours’ written notice, and in the event the breach was not cured, and the Lessor or the Management Company shall not be held liable for the integrity or damages that were caused to the Lessee in connection therewith, if any.

 

20.3.                              The Lessee shall use the Leased Premises in strict compliance with all the procedures and the instructions set forth by the Management Company by virtue of its powers, as stated in Section 15 above including all sub-sections thereof.

 

20.4.                              The Lessee undertakes to avoid causing any damage or breakdown to the Leased Premises and/or any part thereof and/or nearby surroundings and/or to facilities and/or equipment installed in the Leased Premises including, and without derogating, during the Lessee’s Works and repair immediately and at its expense any damage caused to the Leased Premises and/or to the equipment and/or to facilities therein by the Lessee and/or by anyone acting on its behalf and/or by any of its visitors except for damage caused by reasonable use and reasonable wear provided that the repair is not required due to a negligent or malicious act or omission of the Lessor and/or the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Management Company, and in such circumstances as aforesaid the Lessor and/or the Management Company shall be responsible for the repair. The Lessee undertakes to keep the Leased Premises in good and operable condition during the entire Term of Lease. In case the Lessee fails to take action in 14 days as of the date it became aware of the occurrence of the damage and/or the breakdown, the Lessor and/or the Management Company shall be entitled, however not obligated, to enter the Leased Premises and perform the said actions instead of the Lessee and the provisions set forth in Section 28 of the Agreement shall apply, provided that the Lessor delivered written notice at least 7 days in advance and the Lessee failed to repair the damage and/or the breakdown.

 

For the avoidance of doubt, the Lessor shall not be responsible for repairing wear in the Leased Premises and/or systems thereof, except for damage and/or breakdown in the utilities of the Leased Premises — in respect of the electricity and water systems, the detectors and the sprinklers that reach the boundary of the Leased Premises and in respect of the air-conditioning system — also inside the Leased Premises. It is clarified that the Lessor shall be responsible for all the existing systems only until the boundary of the Leased Premises in the event of damage or breakdown that does not derive from works or modifications that were implemented by the Lessee. The Lessee shall be responsible for all the systems installed in the Leased Premises, except for the air-conditioning system in the Leased Premises for which the Lessor shall be responsible (except for damages and/or defects deriving from an act and/or omission of the Lessee and/or anyone acting on its behalf).

 

The Lessor and/or the Management Company shall be responsible for repairing the common systems of the Building, including wear thereof, provided that the repair was not required due to a negligent or malicious act or omission of the Lessee, and in such circumstances as aforesaid the Lessee shall be responsible for the repair, and the Management Company shall maintain these systems and shall repair them even if part of these systems is located in the Leased Premises and not in the Public Areas.

 

The Lessor undertakes that any repair imposed on the Lessor shall be performed at the earliest opportunity as of the date of receiving the demand of the Lessee to that effect.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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20.5.                              The Lessor and/or the Management Company shall be entitled to enter the Leased Premises from time to time, at reasonable times, after advance coordination with the Lessee, for the purpose of inspecting the performance of this Lease Agreement and/or for the purpose of performing works and repairs, whether for the Leased Premises and whether for other leased premises, on the condition that they will cause minimal disturbance to the Lessee and, in the event of repairs — after restoring the Leased Premises to their previous condition, in a reasonable manner and to the extent possible.

 

The Lessor and/or the Management Company shall deliver notice to the Lessee, to the extent possible, regarding their intention to enter the Leased Premises a reasonable time in advance, under the circumstances of the case.

 

20.6.                              The Lessee shall not attach and/or install signs or ads on the exterior walls of the Leased Premises or the Building and/or the windows of the Leased Premises however only after obtaining the prior and written approval of the Lessor. Notwithstanding the aforesaid, it is agreed that the Lessee shall be entitled to install signage bearing the name of the Lessee and signage inside the Area of the Leased Premises. The signage shall be installed on the edge of the roof of the Building after the Lessor approves its location as displayed in a simulation presented by the Lessee. Any exterior signage shall be installed by the Management Company in the designated locations in the Project.

 

20.7.                              Signage in the designated places in the Project and/or the Building shall be installed solely in accordance with the instructions set forth by the signage consultant of the Lessor and the instructions set forth by the Management Company. The Lessee shall incur its share in the signage expenses and/or in modifications and/or renovation and/or repairs in the signage during the Term of Lease. Without derogating from the said, the Lessee shall be entitled to place signage on the Building in accordance with and subject to the approval of the Lessor.

 

20.8.                              The Lessee and/or anyone acting on its behalf undertake to avoid parking and/or placing and/or allowing the loading and unloading of goods of any kind of any vehicle including a motor scooter, in the Public Areas of the Project, except for the designated loading and unloading areas and in accordance with the instructions set forth by the Management Company.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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20.9.                              The Lessee undertakes to observe the provisions set forth in the law, including the municipal bylaws relating to the prevention of noise, smoke, vibrations, waste and odor nuisance as a result of the operation of the Leased Premises. The Lessee shall incur any fine and all legal costs in case a suit is brought against the Lessee or in case the Lessee files suit against the Lessor and/or the Management Company by any entity, in respect of any act or omission that caused the said nuisances.

 

20.10.

 

20.10.1.1.                      To the extent that the Area of the Leased Premises also includes floor protected spaces (hereinafter: “Floor Protected Space”) the Lessee declares and affirms that it is aware and it understands that the Floor Protected Space is designated to serve as a floor protected space and/or as a shelter and that its use for any purpose other than a shelter during emergencies is prohibited however only upon obtaining the approval of the competent authority in accordance with the provisions set forth in any law and in accordance with the provisions set forth in the Civil Defense Rules 5711-1951.

 

The Lessee declares that it will not use the Floor Protected Space without obtaining all the licenses as required in accordance with the provisions set forth in any law including the Civil Defense Law 5711-1951.

 

The Lessee declares that it shall be exclusively responsible for obtaining all the licenses that are required in accordance with the provisions set forth in any law for the purpose of using the Floor Protected Space and the Lessee shall not raise any claims and/or demands and/or suits against the Lessor in case the Lessee fails to obtain the said licenses.

 

It is hereby clarified that the right of use of the Floor Protected Space is subject to the instructions set forth by the Home Front Command and the provisions set forth in any law. Without derogating from the generality of the aforesaid, the Lessee undertakes to maintain the Floor Protected Space and use it in accordance with the provisions set forth in any law, the instructions

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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set forth by the Home Front Command and the instructions set forth by the Management Company deriving from any law.

 

During emergencies the Lessee undertakes to vacate the Floor Protected Space immediately and make its available to the public. It is clarified that during the period in which the Floor Protected Space is delivered to the public, the Lessee shall not incur any payment relating to the Floor Protected Space as stated in this Agreement and in the Management Agreement, provided that the Floor Protected Space was made available to the public following issuance of an official order by a competent authority.

 

The Lessee shall be entitled to lock the Floor Protected Space at its discretion, provided that that in such circumstances as aforesaid the Lessee shall provide to the Management Company a key that will allow entry to the Floor Protected Space only during emergencies or for the purpose of conducting inspections, after advance coordination.

 

20.10.1.2.                      To the extent that there are floor protected spaces outside the Leased Premises, the Lessee declares that it is aware that the Lessor may, at its sole discretion, grant to third-parties rights therein and the Lessee shall raise no claim and/or suit against the Lessor in connection therewith.

 

21.                     Transfer of rights

 

21.1.                              The Lessee shall not transfer the Leased Premises or any part thereof to another and shall not deliver possession thereof or in any part thereof to another and shall not allow to another to use the Leased Premises or any part thereof, whether or not for consideration, and shall not charge, assign or mortgage any of its rights in accordance with this Agreement. Notwithstanding the said, it is agreed that the Lessee shall be entitled to transfer the Lease Agreement to a substitute lessee that will step in and take over the Lessee for the purpose of this Agreement and that will engage in this Agreement with the Lessor however solely after obtaining the prior and written approval of the Lessor and the Lessor shall withhold approval for reasonable considerations only. In addition, the parties agree that the Lessee shall be entitled to lease the Leased Premises in sublease to any other person or entity provided that the Lessee shall continue to be held liable towards

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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the Lessor for the Leased Premises in accordance with the provisions set forth in this Agreement.

 

21.2.                              The Lessor shall be entitled at any time to sell and/or charge and/or mortgage and/or transfer and/or assign its rights in accordance with this Agreement in whole or in part, and shall be entitled to perform all the said actions with respect to other parts in the Building, including lease thereof, without obtaining the approval of the Lessee and the Lessee shall not be entitled to object to the said, on the condition that the rights of the Lessee in accordance with this Agreement shall not be impaired thereby. The Lessee undertakes to cooperate and sign any document that is required, if any, by the Lessor for the purpose of approving and/or performing the said in this Section, including its approval to assign the rights of the Lessor in accordance with the provisions set forth in the Lease Agreement.

 

21.3.                              The Lessee confirms that it is aware that the rights in the Land on which the Building is built are mortgaged and charged in favor of the Bank or that the Lessor might mortgage and charge these rights in favor of the Bank as aforesaid and/or in favor of another bank and/or another financial institution at the absolute and sole discretion of the Lessor, provided that the rights of the Lessee in accordance with this Lease Agreement shall not be impaired thereby. The Lessor shall be entitled to give to the Lessee an irrevocable instruction to pay all sums and payments due to the Lessor from the Lessee in accordance with the provisions set forth in the Lease Agreement to the bank account as instructed by the Lessor to the Lessee and demand from the Lessee to sign any confirmation towards the Bank regarding receipt of such notice as aforesaid.

 

22.                     Reliefs and remedies

 

In case a party to this Agreement breached any of its provisions, the injured party shall be entitled to all the reliefs set forth in the Contracts Law (Remedies for Breach of Contract), 5731-1970 even in the event this Agreement grants a specific relief or remedy for the said breach, and without derogating from the provisions set forth in this Agreement or any law.

 

22.1.                              Without derogating from its right to damages for a higher rate or any other relief, in the event of a fundamental breach of this Agreement by the Lessee, the Lessor shall be entitled to pre-estimated liquidated damages in an amount equal to the Rent, the parking fees and the Management Fees in

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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addition to VAT, for one month, when the said amount is linked to the Basic Index and until the Index known at the time of payment, whether the Lessor decided to perform the Agreement and whether the Lessor decided to terminate this Agreement.

 

The parties declare that they consider the said sum as agreed and adequate compensation for the damage that the parties envision as the probable damage caused by a fundamental breach of this Agreement by the Lessee.

 

22.2.                              Breach of any of the provisions set forth hereunder of this Agreement shall be deemed as a fundamental breach of this Agreement:

 

22.2.1.1.                             Breach of any of the provisions set forth in Sections 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26 of this Agreement including all sub-sections thereof.

 

22.2.1.2.                             Default in any payment the Lessee is obligated to pay in accordance with this Agreement for a period greater than seven (7) days.

 

22.3.                              In any event in which the Lessee ceases the use of the Leased Premises or the Lease Agreement for any reason, the Lessee shall be obligated to pay all payments applicable to the Lessee by virtue of this Agreement until expiration of the Term of Lease.

 

22.4.                              The Lessor shall be entitled, however not obligated, to terminate this Agreement, notwithstanding any provision in the Agreement regarding the Term of Lease, and demand from the Lessee to vacate forthwith the Leased Premises upon delivery of a ten (10) days’ prior and written notice (hereinafter: “Termination Notice”) and return possession in the Leased Premises to the Lessor as stated in this Section 22 and in Section 23 of this Agreement upon the occurrence of any of the following events:

 

22.4.1.1.                             The Lessee committed a fundamental breach of this Agreement or any of its fundamental provisions and failed to cure the breach in 14 days as of the date of receiving written notice from the Lessor demanding to cure the breach.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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22.4.1.2.                             The Lessee breached this Agreement and the breach is immaterial and failed to cure the breach in 30 days as of the date the Lessee received written notice from the Lessor demanding to cure the breach.

 

22.4.1.3.                             A motion was filed with the competent court for the liquidation of the Lessee, for the appointment of a trustee, liquidator, temporary liquidator, a receiver for a material part of its assets and/or the imposition of an attachment on material part of its assets and an order was issued in accordance with this motion or the motion was not dismissed or canceled in 90 days as of the date of filing thereof with the court and/or in case the Lessee filed an application for its liquidation or its declaration as bankrupt and/or for conducting a composition with creditors.

 

22.4.1.4.                             The guarantees and/or the other securities that were provided in accordance with the provisions set forth in Section 24, in whole or in part, for the purpose of performing this Agreement, to the extent provided, expired, were canceled or were declared as null and void by the competent court for any reason.

 

22.5.                              In the event a Termination Notice was delivered, the provisions set forth in Sections 22-23 hereunder shall apply and the following provisions shall take effect:

 

22.5.1.1.                             The Lessee shall be responsible for returning to the Lessor and the Management Company, immediately upon receiving a peremptory judgment, all expenses, damages and losses that were caused to the Lessor and the Management Company due to the breach of the Agreement by the Lessee, as ruled in the judgment.

 

22.5.1.2.                             The Lessee shall not be entitled to object in any manner and/or try and delay and/or prevent an engagement between the Lessor and any other Lessee and/or try and prevent or delay the lease of the Leased Premises or a part thereof to another substitute lessee. The aforesaid provisions shall apply both with respect to the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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relationship between the Lessor and the Lessee and with respect to the relationship between the Lessee and the substitute lessee and shall be deemed, inter alia, as contractual provisions made in favor of a third-party.

 

22.6.                              Any default in payment by any party, beyond the period specified in since 22.1.1.2, shall incur interest at the maximum rate permissible by law at the time, and in case there is no limitation by law on the interest rate, interest in arrears at the maximum rate as instructed by the Bank for overdraft at the time for the period of default, without derogating from the right of the entitled party to compensation at a higher rate or any other relief.

 

23.                     Vacating the Leased Premises

 

23.1.                              The Lessee undertakes to vacate the Leased Premises upon expiration of the Term of Lease or upon shortening thereof or following the termination or the expiration of this Lease Agreement, whichever is earlier and as the case may be, and return the Leased Premises to the sole possession of the Lessor when the Leased Premises include all the additions and/or works and/or improvements attached thereto that were performed by the Lessee and/or the Lessor in the Leased Premises, for no consideration, and subject to reasonable wear, however in any event when the Leased Premises are in good and operable condition. Notwithstanding the said, it is agreed that the Lessee shall not be obligated to leave in the Leased Premises electrical cabinets that will be installed by the Lessee in the ground floor, provided that the removal of the said electrical cabinets from the Leased Premises shall not cause any damage or breakdown and the Lessee shall perform any repair that is necessary after their removal so that the Leased Premises shall be returned when they are in good and operable condition.

 

Subject to the provisions set forth above, the Lessee shall return the Leased Premises when the Leased Premises are free from any person and article and at the expense of the Lessee.

 

23.2.                              In 30 days as of the date of vacating the Leased Premises for any reason, the Lessee shall furnish to the Lessor the approvals from any municipal and/or governmental and/or other authority and/or from any entity that the Lessee undertook in this Agreement to make direct payments to, and evidencing that the Lessee made all payments relating to the Term of Lease, and that the Lessee has no debt or obligation towards any of the said entities.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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For the avoidance of doubt, in case the Lessee fails to furnish all the approvals as aforesaid on time, the Lessee shall be deemed for the purpose of this Agreement as if it did not make the said payments and the Lessor shall have all rights in connection therewith, including the right to enforce the securities that were provided to the Lessor for the purpose of assuring the fulfillment of the undertakings of the Lessee or any part thereof.

 

23.3.                              The Lessee shall pay to the Lessor pre-estimated liquidated damages in an amount equal to the Rent due to the Lessor in respect of the last month of lease divided by 15 and subject to the provisions set forth regarding Linkage as stated in this Agreement, for each day of delay in vacating the Leased Premises. In case the delay in vacating the Leased Premises was greater than 30 days, the Lessee shall pay to the Lessor pre-estimated liquidated damages in an amount equal to the Rent due to the Lessor for the last month of lease as aforesaid, divided by 10, for each day of delay in vacating the Leased Premises.

 

23.4.                              The parties declare that the said amount constitutes adequate and agreed compensation for the damage that the parties envision as a probable outcome of a delay in vacating the Leased Premises as aforesaid, without derogating from the right of the Lessor to seek any other relief and/or compensation for a higher rate, including compensation imposed on the Lessor, if any, towards any substitute lessee.

 

23.5.                              For the avoidance of doubt, and without derogating from the aforesaid, the Lessee shall be obligated the pay any payment of the Rent and the Management Fees in respect of the period of the delay in vacating the Leased Premises, including and in particular the payments for which the Lessee is obligated to furnish approvals as stated in Section 23 above.

 

24.                     Securities

 

24.1.                              As a security for the fulfillment of all its undertakings in accordance with this Lease Agreement and the Management Agreement, no later than the date of signing this Agreement the Lessee shall furnish to the Lessor an unconditional, assignable bank guarantee, made in favor of the Lessor, payable in installments and duly stamped, at the expense of the Lessee, in the form hereby enclosed as Appendix H of this Agreement and that shall be in effect for one year and the said guarantee shall be extended each time

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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in such manner that out shall apply during the entire Term of Lease, as stated in Section 24.3 hereunder, and up to 60 days after expiration of the Term of Lease and for the amount specified in Appendix F and in accordance with  the Linkage terms as stated in Appendix F, in the amount of the Rent and the Management Fees for 3 (three) months of lease (hereinafter: “the Bank Guarantee” or “the Securities”).

 

24.2.                              The Lessee shall incur all costs in connection with the Bank Guarantee, if and to the extent that there are any. The Lessor shall be entitled, at its sole discretion, and after delivery of a 14 days’ prior and written notice as a minimum, and in the event the breach was not cured during this period, to enforce the Bank Guarantee, in any event of breach of this Lease Agreement by the Management Company or in any event in which any sums are due to the Lessor and/or the Management Company from the Lessee and these sums were not paid on time.

 

24.3.                              In 60 days after expiration of the Term of Lease or the Additional Term(s) of Lease, as the case may be, the Securities shall be returned to the Lessee, provided that the Lessee fulfilled all its material undertakings in accordance with the provisions set forth in this Agreement.

 

24.4.                              For the avoidance of doubt, the delivery of the Securities and/or enforcement thereof by the Lessor and/or the Management Company shall not derogate from the right of the Lessor and/or the Management Company to collect any sum due from the Lessee in any other manner or release the Lessee from any of its obligations in accordance with this Agreement or the Management Agreement, or limit the amount of the compensation and/or the damages that the Lessor and/or the Management Company are entitled to collect from the Lessee.

 

24.5.                              In the event the Securities were enforced, the Lessee undertakes to make good immediately the amount of the Securities in such manner that the said amount shall be equal to their amount prior to their enforcement.

 

25.                     Non-applicability of tenancy protection laws

 

The parties agree that the provisions set forth in the Tenant Protection Law [Consolidated Version] 5732-1972 and other tenancy protection laws including all regulations and orders promulgated thereunder (hereinafter: “the Law”) shall not apply to the Leased Premises and/or to Lease Agreement and that any law that grants

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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to the Lessee the status of a protected tenant or that entitles the Lessee not to vacate the Leased Premises upon the occurrence of the events and at the times in which the Lessee is obligated to vacate the Leased Premises in accordance with this Agreement.

 

The parties declare expressly and confirm that the Leased Premises are located in a building whose construction was completed/will be completed after 20/8/1968 and that this lease is made on the express condition that the Law shall not apply to the lease. The Lessee declares that it did not pay and will not pay to the Lessor any key money or any other consideration other than the Rent and/or Management Fees in connection with this Agreement and that the Lessee or anyone acting on its behalf, including any member thereof and/or shareholders therein, shall not be a protected tenant in the Leased Premises in accordance with the provisions set forth in any law and the Lessee shall be precluded from raising any suits or claims in connection with its status as a protected tenant or argue that it has more rights in the Leased Premises than the rights granted to the Lessee expressly in this Agreement.

 

The Lessee declares that all the investments it will make in the Leased Premises shall be made solely for its own purposes and the Lessee shall be precluded from arguing the these investments constitute key money or a substitute for key money or payment made in accordance with the provisions set forth in Section 82 of the Law or any payment that grants the Lessee any rights in the Leased Premises and the Lessee shall be precluded from demanding from the Lessor any participation or reimbursement, in whole or in part, in respect of the said investments and the provisions set forth in Section 21 above shall take effect.

 

26.                     Crediting of payments and lack of right of setoff

 

26.1.                              In any event in which the Lessee owes a number of payments in accordance with this Agreement, the Lessor shall be entitled to determine, at the time of making payment, and at its sole discretion, the order of allocation of the different payments. As long as the Lessor does not notify the Lessee otherwise, the payment shall be allocated first to the Rent, followed by parking fees, followed by Management Fees, followed by electricity, and finally for the other expenses seriatim.

 

26.2.                              For the avoidance of doubt, the Lessee shall not be entitled to offset from the Lessee’s Payments any sums that are due to the Lessee from the Lessor and/or the Management Company, if any.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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26.3.                              The Lessee declares that it is aware that Section 26 is a fundamental section in the Agreement and that its breach shall be deemed as a fundamental breach of this Agreement.

 

27.                     Force majeure

 

The Lessee declares and undertakes that the Lessor shall not be deemed to have breached this Agreement or shall not be deemed to have failed to perform any of its conditions and the Lessee shall not be entitled to obtain any relief vis-à-vis the Lessor, if the reason for the breach of the Agreement or failure to fulfill the condition derived from circumstances over which the Lessor has no control, including due to fire, explosion, a natural disaster, a strike of an authority whose action is necessary and relevant for the purpose of this matter, war, terrorist activities, or stop-work orders issued by the authorities provided that such orders as aforesaid were not issued due to the negligence of the Lessor or the breach of the provisions set forth in the law by the Lessor.

 

28.                     Performance of undertakings instead of another party

 

Whenever the Lessee is obligated to perform any action or work or make any payment in accordance with this Agreement or make any payment and the Lessee failed to perform the said action or work or payment until the date set for this purpose in the Agreement or in accordance with the provisions set forth in any law, and in the absence of such a date as aforesaid — until the date designated for that purpose in a written demand the Lessee receives from the Lessor — the Lessor and/or the Management Company shall be entitled, however not obligated, to perform the said action or work or payment instead of the Lessee and at its expense, whether by themselves and whether by others.

 

In such circumstances as aforesaid the Lessee shall be obligated to pay to the Lessor, immediately upon receiving its demand, all the sums or losses or damages that the Lessor or the Management Company paid or incurred in connection with the performance of the action or the work or the said payment, with the addition of 15% of the said sums for general expenses and with the addition of VAT and Linkage Differentials to the Index and the interest specified in Section 22.6 above, as of the date in which the Lessor and/or the Management Company incurred the said expense and until the date the Lessee returned the full amount.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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29.                     Miscellaneous

 

29.1.                              This Agreement including Appendixes thereof express the entire, full and exclusive relationship, rights and obligations between the Lessor and the Lessee.

 

29.2.                              Upon signing this Agreement that constitutes the entire and full agreement between the parties, any contract and/or memorandum of understanding and/or agreement and/or declaration and/or prospectus and/or assurance and/or publication that were made, if any, by the Lessor or its representatives or anyone acting on its behalf are hereby null and void and the Lessor shall not be bound by any thereof.

 

29.3.                              The parties hereby declare that they sign this Agreement after conducting all necessary inquiries and inspections and that no party relied on any information unless the information stated expressly in this Agreement.

 

29.4.                              The headings of the sections will serve for the purpose of orientation and convenience only, and will not serve for the purpose of interpreting the Agreement.

 

29.5.                              None of the provisions and terms set forth in this Agreement including Appendixes thereof shall detract from any other term or provision set forth in this Agreement however shall add thereto.

 

29.6.                              Any modification and/or waiver and/or deviation from the provisions set forth in this Agreement shall be null and void unless executed in writing and signed by the parties.

 

29.7.                              The consent of one of the parties to deviate from the provisions set forth in this Agreement in particular circumstances shall not constitute precedent and no similar conclusions shall be drawn with respect to other circumstances. In case a party to this Agreement did not exercise a right granted to it in accordance with this Agreement in particular circumstances, this shall not be deemed as waiver of the said right in these circumstances and/or in any other similar or different circumstances and no conclusion regarding the waiver of that party shall be drawn therefrom. No similar conclusions shall be drawn from a waiver made in particular circumstances with respect to other circumstances.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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29.8.                              This Agreement shall not give rise to a relationship of partnership and/or agency between the parties and shall not grant rights to any third-party that is not specified in the Agreement and this Agreement shall not derogate or affect any obligation or undertaking of any third-party.

 

29.9.                              For the avoidance of doubt, it is clarified that the rights that are granted to the Lessee in accordance with this Agreement, to the extent that such rights are granted to the Lessee, are granted to the Lessee solely with respect to the Leased Premises and the Lessee does not and will not have any rights in connection with existing or additional construction rights and/or existing and/or additional construction areas that will be approved and built by the Lessor or by any third-party and/or in connection with any use in any part of the Building, whether existing and whether constructed in the future that is not part of the Area of the Leased Premises, including roofs, passageways and the like. The Lessee approves in advance any action and/or use as aforesaid and shall not be entitled to object in any manner to any thereof.

 

For the avoidance of doubt, it is further clarified that the Lessee shall not be entitled to at any time to register a caveat and/or any other property right and/or contractual right by virtue of its rights in accordance with this Agreement in any register.

 

29.10.                       The parties shall incur stamp duty in connection with this Agreement, to the extent applicable.

 

29.11.                       The addresses of the parties for the purpose of this Agreement are as stated in the preamble to this Agreement and any notice delivered by one party to the other in registered mail according to the addresses specified above shall be deemed to have reached its recipient in 72 hours from the time of its delivery from the post office, and if delivered in person — at the time of its delivery, unless a party notified the other party regarding change of address.

 

For the purpose of this matter the Leased Premises shall also be deemed as the address for delivery of notices to the Lessee.

 

29.12.                       The parties submit to the jurisdiction of the competent courts in the city of Tel Aviv as having sole and exclusive jurisdiction in anything relating to and arising out of this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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In Witness Whereof The Parties Hereto Have Hereunto Set Their Hands And Seal On The Day, Month And Year First Hereinabove Written:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

 

 

 

By the Messrs.

 

By the Messrs.

 

I, the undersigned,                          Adv. of                        St., hereby confirm that the Messrs.                               (ID. No.                     ) and                     (ID. No.                  ), who are entitled to sign in the name of the Lessee on this Agreement, in such manner that their joint signature binds the Lessee for all intents and purposes, appeared before me and signed this Agreement.

 

And in witness hereof I am hereby undersigned:

 

 

 

, Adv.

 

 

On the            day in the month of                   in the year                

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

52


 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

53


 

Appendix C — Electricity

 

1.                            Electricity

 

1.1.                                     Definitions

 

In this section:                                  The Engineer” — electrical engineer or a certified electrician who are responsible for the electricity system in the Project on behalf of the Lessor.

 

Electricity Services” — the supply of electricity, including operation, maintenance, and insurance of electrical facilities and control systems that will be installed in the Project and in the Leased Premises by the Lessee.

 

1.2.                                     General:

 

1.2.1.                           The Lessee declares that it is aware that the Lessor is the right holder vis-à-vis IEC and any other entity in anything related to the electricity utilities provided to the Project and that the said rights are the exclusive property of the Lessor. The right granted to the Lessee in accordance with this Agreement is a temporary right of use for the Term of Lease and subject to any other condition and provision set forth in this Agreement.

 

1.3.                                     Supply in bulk

 

The Lessee declares that it is aware that the Lessor engaged with IEC in an agreement for the supply of electricity in bulk (hereinafter: “Electricity Supply Agreement”) in accordance with the customary rules in IEC and it undertakes and declares that:

 

1.3.1.                           The Lessee shall not be entitled to request direct and/or separate supply of electricity from IEC and/or from any other entity except for the Lessor and shall not be entitled to request from Israel Electric Corp. to install a separate meter for the Lessee or to make direct payment to IEC.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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1.3.2.                           The Lessee hereby waives any claim and/or suit on any grounds against IEC in respect of failure to supply electricity and/or disruption in the electricity supply. The Lessee undertakes to indemnify IEC for any expense and damage caused to IEC as a result of a suit due to failure to supply electricity and/or disruptions in its supply when the said suit is filed against IEC by an invitee and/or an authorized person on behalf of the Lessee.

 

1.3.3.                           Without derogating from the aforesaid, in case the Lessee installs any electronic or electrical equipment, the Lessee shall not be entitled to raise any claims and suits against the IEC due to the termination of electricity supply and/or disruptions in its supply.

 

1.3.4.                           The Lessee shall not be entitled to produce, supply and/or sell electricity and/or provide any electricity services to anyone acting on its behalf and/or to any third party whether or not for consideration and whether directly or indirectly.

 

2.                            The Lessee is aware that IEC is entitled to amend the electricity contract and it agrees in advance to any amendment made in the terms set forth in this contract as a result of a demand for alterations made by the electricity supplier.

 

3.                            Electricity supply

 

3.1.                                     The supply of electricity to the Leased Premises shall be made in the capacity specified in Appendix B1 of the Agreement, in alternating current in a frequency of 50 cycles per second, 230V between phase to zero and 400V between one phase to the other. Supply will be single phase or three phase including safety with semi-automatic circuit breakers that are designated for the nominal current of the Leased Premises. The Lessee is prohibited from replacing the said circuit breakers without obtaining the approval of the Management Company.

 

3.1.1.                           The Lessee is prohibited from extending and/or altering and/or making any additions to the electrical facilities provided to the Leased Premises and the Lessor shall be entitled to disconnect and/or remove immediately any extension, alteration, addition and the like that were implemented without obtaining the approval of the Lessor, at the expense of the Lessee, and without derogating

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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from the liability of the Lessee for any damage caused to the electricity supply facilities as a result of such work as aforesaid.

 

3.1.2.                           In case the Lessee is interested to receive electricity in addition to the amount of electricity supplied to the Leased Premises in accordance with provisions set forth above, the Lessor shall inquire the possibility to increase the electricity supply to the Leased Premises according to the electricity capacity in the Project and shall be entitled to reject or accept the said request at its absolute and sole discretion. It is agreed that the electricity supply to the laboratory area in the Leased Premises shall not fall below 63 ampere.

 

The Lessee hereby declares that it is aware that the Lessor is not obligated to supply electricity beyond the amounts specified in the Technical Specification of the Leased Premises and shall raise no claims or suits towards the Lessor in case the Lessor rejects its request.

 

The Lessee shall incur payment for an additional electricity connection as stated above in 7 days as of the date of receiving the demand of the Lessor. The Lessee shall be solely responsible for the installation of any wiring or additional systems that require the addition of electrical capacity as aforesaid and these shall be performed solely at the expense and under the responsibility of the Lessee.

 

4.                            Prior to the Lease Commencement Date and after completion of the Lessee’s Works, the Lessor undertakes to conduct an inspection of the electrical facilities by a certified electrical engineer that will grant his approval regarding the connection of the Leased Premises to the electricity services prior to and as a condition for connecting the Leased Premises to the network supplying electricity in bulk. The Lessee is required to deliver to the Lessor the certificate of a certified electrical inspector for the electrical connections in the laboratory in the ground floor and the Lessee undertakes to conduct an inspection of the electrical facilities once a year by a certified electrical engineer on its behalf, that will approve the electrical connections in the Leased Premises prior to and as a condition for the connection of the Leased Premises to the network of electricity in bulk.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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5.                            Safety

 

5.1.                                     The Lessor and/or the Engineer and/or anyone acting on their behalf shall be entitled to visit the Leased Premises at any reasonable time without delivery of advance notice and inspect any electrical facilities installed in the Leased Premises in order to inspect its safety and compliance with the customary safety standards.

 

5.2.                                     In case the Engineer is of the opinion that any electrical facility that was installed in the Leased Premises by the Lessee might cause damage to the general electricity supply system in the Project and/or that it may constitute a safety nuisance and obstacle and/or fails to meet customary safety standards and/or the load it imposes on the electricity system might disrupt the system — the Engineer shall be entitled to demand the repair and/or replacement and/or modification of the facility and the Lessee undertakes to take all measures that are required for the purpose of meeting the demands of the Engineer in 14 days.

 

5.3.                                     The Lessee shall be held liable for any damage caused to electrical equipment and/or electrical facilities in the Leased Premises and/or in the electricity system located outside the Leased Premises as a result of the operation of a defective electrical facility, as specified above.

 

6.                            Maintenance of electrical facilities

 

6.1.                                     The Lessor will grant access to authorized employees on behalf of the Lessor at any reasonable time and upon advance coordination, to any electrical facility in the Leased Premises for the purpose of testing, inspecting, installing, repairing and replacing defective parts, including the removal, dismantling, assembly and other works that the Lessor deems necessary in the electrical facilities that supply electricity services to the Leased Premises. The Lessee shall assure to remove and/or move any facility that may disrupt the implementation of such works as specified above.

 

6.2.                                     For the purpose of performing the said works the Lessor shall be entitled to disconnect temporarily the electricity supply to the Leased Premises, following advance coordination with the Lessee, and for the required period of time, and provided that the period of time in which the electricity supply

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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to the Leased Premises is disconnected is reasonable, taking into account the type of work implemented in the Leased Premises.

 

7.                            Electrical facilities

 

7.1.                                     Any device, accessory and any other piece of equipment that are connected to the electricity supply system (hereinafter: “Electrical Facilities”) are the exclusive property of the Lessor.

 

7.2.                                     The Lessee shall be prohibited from performing any work of any kind in the Electrical Facilities without obtaining the prior and written approval of the Lessor to perform such works as aforesaid not by the Lessor and/or anyone acting on its behalf.

 

8.                            Limitation of liability of the Lessor in the event of power outage or failures in its supply

 

The Lessor shall be entitled to discontinue or restrict the supply of electricity to the Leased Premises and to other places in the Project upon the occurrence of the following events:

 

8.1.                                     In any event of power outage or limited power supply deriving from an internal malfunction and/or an external malfunction in the main electricity services system in the Project, such as national or regional power outages deriving from the systems of IEC or in the internal electricity system of the Project (hereinafter: “Power Outage”).

 

8.2.                                     In any event of danger to the body or property and/or in any other event in which the Engineer instructs that it is necessary to have such Power Outage.

 

8.3.                                     In any event in which it is possible to notify the Lessee regarding a predictable Power Outage the electricity supply to the Lessee shall not be terminated before the Lessor and/or the Management Company deliver written notice to the Lessee a reasonable time in advance in connection therewith.

 

8.4.                                     The Lessor shall not be held liable and shall not incur any damage, whether directly or indirectly, caused to the Lessee due to the Power Outage in the circumstances specified above and/or in any other circumstances over which the Lessor have no control.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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9.                            Unforeseen changes

 

If as a result of a law, regulation, order, decision, standard or action prescribed by a competent authority it is necessary, at the discretion of the Lessor, to perform any modifications in the electricity supply system to the Leased Premises, the Lessor shall perform the said modifications on the condition the Lessor delivered to the Lessee a prior and written notice to the Lessee a reasonable time in advance.

 

10.                     In the event of a fundamental breach of this Agreement, including and in particular in the event the Lessee failed to pay the Rent or the Management Fees due from the Lessee, the Lessor shall be entitled to disconnect the electricity supply to the Leased Premises after delivery of 7 days’ prior and written notice to the Lessee. In the event of a power outage as aforesaid, the Lessee shall solely incur all costs, damages and losses in respect of the said power outage.

 

11.                     Termination of supply in bulk

 

Notwithstanding the aforesaid, after obtaining the approval of IEC the Lessor and/or the Management Company shall be entitled to instruct the Lessee to connect to the power network and the electricity supply that are provided by IEC on the condition that they deliver prior and written notice to the Lessee in connection therewith and in such circumstances as aforesaid the provisions and rules set forth by the IEC shall apply in connection with the engagement and the supply of electricity to the Lessee. The Lessee shall solely incur all expenses in connection with the engagement with IEC as aforesaid and following the connection of the Leased Premises to the electricity network of IEC.

 

12.                     Payment for electricity services

 

12.1.                              The Lessor shall install at its expense and under its responsibility a secondary electricity meter and a secondary water meter in the Leased Premises (the electricity meter installed by the Lessor shall operate according to time of use metering).

 

12.2.                              Once a month, and no later than the 14th of each month, the Lessor shall submit to the Lessee a bill for the electricity and water consumption in the Leased Premises according to the readings of the said electricity and water meters. The rate charged from the Lessee in respect of the consumption of electricity in the Leased Premises according to the reading of the said meter

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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shall be the customary rate from time to time charged by IEC for consumption of electricity according to time of use meeting for low voltage.

 

12.3.                              The Lessee undertakes to pay to the Lessor in respect of electricity consumption during the Term of Lease according to the bills delivered by the Lessor and according to low voltage, time of use metering method. The Lessee confirms and agrees that the Lessor shall be entitled to disconnect the electricity supply to the Leased Premises both due to failure to pay the debt in respect of the supply of electricity and in respect of any fundamental breach of this Agreement, on the condition the Lessor delivers to the Lessee a 7 days’ prior and written notice in connection therewith. The Lessee declares that it is aware that the payments in respect of the consumption of electricity shall be made in addition to and not instead of other payments in accordance with this Agreement.

 

13.                     The Lessee declares that it is aware that there is a private substation that is active in the Project and all auxiliary facilities and/or all facilities that are related to the said substation and the Lessee waives any claim and/or suit, including claims regarding noises and/or nuisances against the Lessor and against IEC regarding the said substation and its operation in the project.

 

14.                     The Lessor shall not be held liable and shall not incur any damage, whether direct or indirect damage, caused to the Lessee in respect of the said in this Appendix C or in any other circumstances over which the Lessor has no control.

 

15.                     It is clarified that anywhere in this Appendix that the term “Lessor” is used this shall also mean the Lessor and/or the Management Company.

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Appendix D

 

Management Agreement

 

Made and executed in Tel Aviv on the     day of            , 2017

 

Between

 

Ogen Yielding Real Estate Ltd.

Of 3 Har Sinai St., Tel Aviv

(Hereinafter: “the Management Company”)

 

The first party;

 

And between:

 

PolyPid Ltd.

Company No. 514105923

Whose address for the purpose of this Agreement is:

(Hereinafter: “the Lessee”)

(After delivery of possession the address of the Lessee shall also be in the Leased Premises, within their meaning hereunder)

 

The second party;

 

Whereas:

The Lessee signed a Lease Agreement with the Lessor with respect to the Leased Premises, within the meaning of these terms hereunder;

 

 

And whereas:

The Lessee undertook to sign this Management Agreement following its signature and as stated in the Lease Agreement, within its meaning hereunder;

 

 

And whereas:

The Lessor, within its meaning hereunder, appointed the Management Agreement, to manage and operate the Building and to perform the services, within their meaning hereunder;

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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And whereas:

The Building will include offices, commercial areas and parking lots that require central management and standard rules of conduct;

 

 

And whereas:

The Lessee agrees that the exclusive management and performance of the services shall be provided by the Management Agreement in accordance with the provisions set forth and for the consideration specified hereunder and in accordance with the provisions set forth in this Agreement;

 

 

And whereas:

This Agreement clarifies the mutual obligations between the parties regarding the management and performance of the Services in the Building;

 

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

 

1.                            Preamble, definitions and interpretation

 

1.1.                                     The preamble hereto shall be deemed an integral part of this Agreement.

 

1.2.                                     As used in this Agreement, the following terms shall have the respective meanings set forth beside them below:

 

“The Building”

Within its meaning in the Lease Agreement.

 

 

 

“The Lease Agreement”

The Unprotected Lease Agreement signed between the Lessor and the Lessee on 27.3.14 with respect to the Leased Premises, within their meaning hereunder.

 

 

 

“The Lessor”

Within its meaning in the Lease Agreement.

 

 

 

“The Leased Premises”

Within their meaning in the Lease Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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“Area of the Leased Premises”

Within its meaning in Appendix F of the Lease Agreement.

 

 

 

“The Units” or “Leased Areas”

All parts of the Building and/or areas therein that will be leased and/or made available to and/or for the use and/or that will be delivered by the Lessor to different possessors for different purposes and goals at the discretion of the Lessor, except for the Public Areas.

 

 

 

“The Parking Lot”

Areas designated for parking in two floors and areas designated for parking in the ground floor on the Land.

 

 

 

“Public Areas”

Unless otherwise stated — all areas in the Building, including all structures, additions and modifications added thereto from time to time, and a colonnade, roofs, basements, passageways, entries and exits, service rooms and areas and/or service corridors, toilets, technical areas such a power rooms, air conditioning and systems, loading and unloading areas, elevators, stairs and any other area in the Building designated for the use or that is actually used by the public and/or a number of lessees and protected spaces, unless the said areas designated for lease and/or sale and/or operation as a parking lot.

 

The Lessor and/or the Management Company shall be entitled to add to the Public Areas or exclude therefrom any part of the Building, the passageways, the corridors, entries and any other area that is not part of the Units and in particular the roofs and attach the said areas to specific Units and deliver to the use of any entity all or part of the said areas, without exception, from the

 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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common property, provided that the reasonable use of the Leased Premises by the Lessee in accordance with the Purpose of Lease including access to the Leased Premises shall not be impaired thereby.

 

 

 

“Lessor’s Engineer”

An engineer or an architect that will be appointed by the Lessor from time to time for the purpose of filling the functions and exercising the authorities granted to him in accordance with this Agreement.

 

 

 

“The Services”

The services provided by the Management Company as stated in Section 3.1 hereunder, in whole or in part, at the discretion of the Lessor.

 

 

 

“Special Services”

Additional services, even if not customary in office buildings such as the Building such as: cleaning and maintenance of the Units themselves or any system therein, installation of facilities and/or air-conditioning systems in leased areas and/or for these areas, renovations, courier services and the like at the sole discretion of the Management Company. It is clarified that the Management Company shall be entitled to convert part of the Special Services and turn them into standard services at its sole discretion, if the said Special Services are provided to the majority of the lessees in the Building.

 

 

 

“Effective Date”

The Lease Commencement Date, as stated in the Lease Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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“The Lessee” or “the Tenant” or “the Possessor”

The Lessee and anyone that is from time to time the possessor and/or the user of the Leased Premises — jointly and severally.

 

 

 

“The Management Company”

Including its representative, agent or any legal entity coming in its place as instructed by the Management Company from time to time, at its sole discretion, and as long as the Management Company is not appointed or as long as the Management Company did not start the management and maintenance of the Building or in the event the said appointment was terminated as aforesaid, the Lessor shall serve as the Management Company.

 

 

 

“The Expenses”

All expenses (in gross values) associated with the management and performance of the Services, excluding special services, including management expenses, collection, overhead and funding associated with the operation of the Management Company, including taxes, depreciation fund for the purpose of replacing and retrofitting equipment and systems that serve the Lessees in the Building or their majority.

 

 

 

“Management Fees”

The Management Company shall be entitled to Management Fees as stated in Appendix F of the Lease Agreement.

 

 

 

“Hours of Activity in the Building”

Within their meaning in the Lease Agreement.

 

 

 

“Hours of Activity in the Parking Lot”

The Parking Lot operates 24 hours a day all days of the week subject to the procedures set forth by the Lessor and/or the Management Company that shall be

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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entitled to change the said hours of activity from time to time.

 

 

 

“Irregular Hours of Activity”

Within their meaning in the Lease Agreement.

 

1.3.                                     All other terms as defined in this Agreement shall have the meaning assigned to them in the Lease Agreement and the definitions assigned in the Lease Agreement shall be deemed to be incorporated in this Agreement unless another interpretation or definition were assigned to them for the purpose of this Agreement.

 

1.4.                                     This Agreement constitutes an appendix of the Lease Agreement and shall add to the Lease Agreement however shall not derogate therefrom.

 

1.5.                                     It is hereby clarified that at the sole discretion of the Lessor, the Lessor, within its meaning in the Lease Agreement, or anyone acting on its behalf, and the Management Company within its meaning in this Agreement, or any other competent entity that obtained the approval of the Lessor, may sign this Agreement in the name of the Management Company.

 

1.6.                                     Anywhere in the Lease Agreement that grants a right to the Management Company, the said right shall be deemed as the right of the Management Company in accordance with this Agreement.

 

1.7.                                     The headings of the sections will serve for the purpose of orientation and convenience only, and will not serve for the purpose of interpreting the Agreement.

 

2.                            The management

 

2.1.                                     The Management Company undertakes and warrants to manage and perform the Services in proper level and standard and the Lessee agrees to the said and consents to the exclusive management and performance of the Services. The Lessee waives any right to manage the Building, including by a tenants’ association and it grants all authorities granted to such a representation to the Management Company and undertakes to act in accordance with the provisions set forth in this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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2.2.                                     The management period in accordance with this Agreement shall commence on the Effective Date.

 

3.                            The Management Fees

 

3.1.                                     The Management Company shall be entitled to the Management Fees as stated in Appendix F of the Lease Agreement and therefore the provisions set forth in this Management Agreement relating to the estimate of the costs of the management expenses and/or the manner of their collection shall not apply thereto.

 

3.2.                                     Notwithstanding the said, it is agreed that during the Second Term of Lease (within its meaning in Appendix F) the Lessor and/or the Management Company shall be entitled to change the amount of the Management Fees in such manner that the Management Fees shall be at a rate of 15% (fifteen percent) of the expenses that shall be added to all the expenses associated with the management and performance of the Services in the Building. In addition, the Management Fees in the Parking Lot, to the extent that the Parking Lot constitutes part of the Leased Premises, shall be at a rate of 15% (fifteen percent) of the expenses that shall be added to all the expenses associated with the management and maintenance of the Parking Lot. In case the Management Fees were changed as aforesaid, the provisions set forth in this Appendix shall take effect, mutatis mutandis, including with respect to the calculation of the Management Fees expenses, the obligation of the Management Company to keep proper records regarding the estimate of the management expenses in the complex and the manner of distribution of the expenses among all the lessees in the complex.

 

3.3.                                     Notwithstanding the said anywhere else in this Agreement, it is agreed that in the event the Lessor changes the Management Fees in such manner that the Management Fees are at a rate of 15% (fifteen percent) of the expenses that shall be added to all the expenses associated with the management and performance of the Services (as stated above), in such circumstances the amount of the said Management Fees might change during the Term of Lease, and the Lessee shall raise no claim and/or demand and/or suit in connection therewith against the Lessor and/or the Management Company, provided that the Management Fees that the Lessee is obligated to pay shall not be greater than 5% a year compared to the fixed Management Fees (in accordance with the provisions set forth in Appendix F) that were paid in the previous month prior to the change of the Management Fees as stated in

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Section 3.2 above, except for circumstances of increase of the minimum wages in the market and/or the electricity costs and/or linkage differentials to the Basic Index, and in such circumstances as aforesaid the Lessor shall be entitled to increase the Management Fees that the Lessee will actually pay accordingly and without the limitation specified above.

 

3.4.                                     The Lessee declares and warrants that it shall raise no claims and/or demands and/or suits against the Lessor and/or the Management Company in connection with the change of the Management Fees as stated in this Section.

 

4.                            Functions and responsibilities of the Management Company

 

4.1.                                     Functions of the Management Company

 

The functions of the Management Company as part of the performance of the Services in accordance with this Agreement shall be as follows, inter alia:

 

4.1.1.                           Management, operation, repair, guarding, preservation, renovation (including general renovation), landscaping, improvement (including upgrade), maintenance, inspection, retrofitting, whitewashing, painting, waterproofing, tarring, cleaning, waste disposal, fumigation, inspection, lighting, touring, and control of persons entering and exiting the Building, dwelling and systems insurances, including insurance for the Public Areas and equipment, systems, facilities and areas in the Building and in the Parking Lot that serve and/or are used by part or all of the Units in the Building and/or the lessees in the Building, or a part thereof, and that are not owned and/or leased and/or under the responsibility of any lessee including: generators, electrical equipment, PA system, TV, intercom, electricity systems, lighting, communication systems, plumbing systems, sewage system, drainage systems, waste disposal and trash disposal systems, gas systems and containers, elevators and the like.

 

4.1.2.                           Gardening and landscaping of the gardens and the vegetation in the Public Areas, if and to the extent that there are any.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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4.1.3.                           Inspection, repair, improvement (including upgrade) and current maintenance of the Building systems (air conditioning, electricity, fire suppression, plumbing and the like).

 

4.1.4.                           Maintenance, warranty, repair and waterproofing of the roofs and basements in the Building.

 

4.1.5.                           Installation, maintenance, inspection, improvement (including upgrade) and repair of directional and informational signage in the Public Areas.

 

4.1.6.                           Taking out the insurances specified in Appendix E1 of the Lease Agreement.

 

For the avoidance of doubt, it is clarified that the Lessor and/or the Management Company shall be entitled, at their sole discretion, to increase the scope of the said insurance coverage and/or add an insurance coverage that is not specified above. In addition, the Management Company shall be entitled to avoid taking out insurances other than the ones specified above and/or decrease their scope at its discretion and subject to obtaining the approval of the insurance consultant of the Building (provided that the dwelling insurance and the third-party liability insurance shall not fall below the scope of coverage stated in Section 1.19 of Appendix E1).

 

4.1.7.                           Collection of municipal and governmental taxes applicable to the Public Areas, to the extent applicable, including the Parking Lot areas.

 

4.1.8.                           Collection of all expenses and payments, including the legal expenses, applicable to the Management Company in connection with the breach of the undertakings of the Lessee and/or other lessees in the Building and/or the enforcement of any thereof.

 

4.1.9.                           Collection of Management Fees, electricity bills in respect of the Public Areas and common systems and all other payments the Lessee owes or will owe in accordance with the Lease Agreement and/or in accordance with this Agreement, even by institution of proceedings of any kind.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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4.1.10.                    Collection of usage fees for electricity as stated in Appendix C of the Lease Agreement, and to the extent that the Lessee is not obligated to pay the said payments directly to Israel Electric Corp. in accordance with the provisions set forth in the Lease Agreement.

 

4.1.11.                    Publication of bylaws, procedures, daily instructions and any amendment, update, addition or correction thereof in anything related to the use of the Building and strict performance of the said instructions. The Management Company shall set out from time to time, as part of the performance of this Section, procedures and instructions for the purpose of assuring the regular, proper and organized operation of the Building.

 

The bylaws shall include, inter alia, instructions in connection with the entry and exit procedures, safety, access, traffic of the public and vehicles, transportation of equipment to and from the Units, including from the Leased Premises, prevention of nuisances and disturbances, dates and times of performance of Services in the Building, the use of the Parking Lot and the Public Areas, operation of HVAC systems in the Public Areas in the Building and/or in the Units, operation of sound or PA systems in the Building, signage, placement of adds or signs and the like.

 

The bylaws, procedures and instructions as aforesaid shall bind the Lessee and the Lessee undertakes to observe strictly their provisions.

 

The Management Company shall be entitled to compel the Lessee to observe these practices, procedures and instructions in accordance with the Lease Agreement and this Agreement.

 

4.1.12.                    Signing contracts and agreements with external entities for the purpose of performing the Services, supervision, collection and enforcement of the undertakings of external entities.

 

4.2.                                     Authorities of the Management Company

 

4.2.1.                           From time to time the Management Company shall be entitled, at its sole discretion, to set the scope of the Services, their type, nature, the part of the Services provided to the Building or certain

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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parts thereof, if any, and the manner and period of their performance, provided that the Management Services that are essential for the proper operation of the Building shall be provided at all times.

 

4.2.2.                           The Management Company shall manage and perform the Services whether by itself and/or part by itself and/or part by others on its behalf. Without derogating from the foregoing, it is hereby agreed that the Management Company shall be entitled to engage from time to time with any other entity in agreements regarding the performance of maintenance services to systems, facilities and areas in the Building or the performance of other works for the Building and/or the Management Company, in accordance with the conditions set forth by the Management Company, provided that upon the occurrence of all these circumstances the Management Company shall be responsible vis-à-vis the Lessee for the performance of the Services, unless the Management Company and the Lessor agree in advance and in writing that part of the said Services is excluded from the responsibilities of the Management Company and that the Management Company shall not receive payment for the said part.

 

4.2.3.                           The Management Company shall be entitled, from time to time and at any time, to perform modifications or additions to the structure of the Building or any part thereof, in the interior division and design of the Building or any part thereof, and the Lessee shall raise no demand, claim or suit against the Management Company due to such modifications or additions as aforesaid, provided that the said modifications and/or additions shall not affect the reasonable use the Lessee makes in the Leased Premises in accordance with the Purpose of Lease, including access roads thereto.

 

4.2.4.                           The Lessee shall not be entitled to disconnect from meters or systems and shall not be entitled to operate or avoid from the operation of the HVAC systems and any other system contrary to the instructions set forth by the Management Company even if the system is in the Area of the Leased Premises and even if the Lessee owns the system and is not part of the common property, unless such an action or avoidance from action as aforesaid might cause

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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damage to property and/or the business of the Lessee and in any event after obtaining the prior and written approval of the Lessor.

 

4.2.5.                           The Management Company shall set out procedures, rules and conditions regarding the supply of electricity in the Building and the Leased Premises. The Management Company shall set the rates in connection with the electricity services to the Leased Areas, the Public Areas and to common systems in the Building, according to low voltage time of use rates charged by IEC, and the manner of distribution of the electricity supply expenses among the different lessees in the Building.

 

4.2.6.                           In order to enable to the Management Company to exercise its authorities in accordance with this Section, the Management Company shall be entitled, and the Lessee undertakes to allow to it, to enter the Leased Premises at any time and perform the following actions, inter alia: open walls, floors, ceilings and other parts; replace and repair plumbing fixtures and pipes and connect thereto, perform any electricity and communication works and perform any other work that the Management Company deems as necessary for the purpose of exercising the authorities granted to it in this Agreement. In any event of performance of such work as aforesaid the Management Company shall coordinate with the Lessee in advance the times of entry of its employees to the Leased Premises and shall endeavor that the disturbance to the Lessee shall be as small as possible, unless the circumstances require immediate response and in such circumstances there shall be no need to coordinate the works of the Management Company in advance.

 

4.2.7.                           In case the Lessee fails to terminate any action and/or omission that might cause and/or the constitute a safety nuisance and/or an obstacle within a reasonable time, after receiving the demand of the Management Company and/or the Lessor, the Management Company shall be entitled to cause the termination and/or elimination of the nuisance and/or the obstacle in any manner it deems fit and for that purpose the Management Company shall be entitled to enter the Leased Premises and perform in the Leased Premises all actions in connection therewith and the Lessee shall raise no claims in connection therewith.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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5.                            Bylaws, procedures and activities in the Building

 

The Management Company shall lay down bylaws, procedures and instructions regarding the management and performance of the Services, in any manner it deems fit, and shall be entitled to add, modify and update these bylaws, procedures and instructions from time to time and at its sole discretion, and the Lessee undertakes to act in accordance with the said bylaws, procedures and instructions set out by the Management Company, provided that the said procedures and instructions do not impair the reasonable use of the Lessee in the Leased Premises in accordance with the Purpose of Lease, including access roads thereto.

 

5.1.                                     The Lessee hereby declares and affirms that it is aware that different businesses will be conducted in the Building in accordance with any permitted use or as permitted by the UBP that is in effect or in accordance with the law, and the Lessee waives any claim for the purpose of this matter against the Management Company.

 

5.2.                                     The Lessee hereby declares and affirms that it is aware that other lessees in the Building, in whole or in part, will conduct their businesses in the hours and the days at their discretion, and subject to the approval of the authorities and in accordance with the provisions set forth in the different lease agreements. The Lessee declares and affirms that it does not and will not raise any demands, claims or objections in connection therewith against the Management Company and/or the Lessor and/or any other right holder in the Building.

 

5.3.                                     The Lessee hereby declares and affirms that it does not and will not raise any demands, claims or objection against the Management Company and/or the Lessor and/or any other right holder in the Building in connection with the hours of activity of the businesses in the Building, whether in general and whether with respect to the particular hours of activity of particular businesses, the entry and exit arrangements from the Building (provided that the entry and exit from the Building will be allowed 24 hours a day and 7 days a week) and/or from the businesses, and in connection with noises, vibrations, odors and/or any other inconvenience that might be caused to the business that the Lessee conducts in the Leased Premises, except for irregular and unreasonable nuisances.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Without derogating from the aforesaid, the Lessee shall contact the Management Company in any event of a claim or a demand that concerns an irregular and unreasonable nuisance. The Management Company shall inquire the claim within a reasonable time and in case it finds the claim proper and justified it will take action for the purpose of eliminating the nuisance, in any manner it deems fit.

 

5.4.                                     The Lessee declares and affirms that it is aware that to the extent that it requests to operate the air-conditioning system in the Leased Premises and/or to use the common services and/or systems beyond the Hours of Activity in the Building (i.e., on weekdays from 07:00 to 20:00) as stated in Section 4.6 hereunder, and as updated periodically by the Management Company, and such use as aforesaid is approved by the Lessor and/or the Management Company, the Lessee shall incur additional costs of the operation of the relevant service, as stated by the Management Company and/or the Lessor, provided that the Lessee shall be entitled to demand from the Lessor to install a split air conditioning unit in one of the rooms of the Leased Premises, and in case the Lessor acts in the  said manner, the Lessor shall install such an air conditioning unit in 10 days as of the date of receiving a request to that effect, and at the expense of the Lessor. The Lessee shall deliver written notice to the Lessor and the Management Company regarding its wish to receive the said services, as early as possible, however in any event no less than twenty-four hours in advance. The Lessee is aware that the aforesaid shall not oblige the Lessor and/or the Management Company in advance to provide the requested service beyond the Hours of Activity in the Building.

 

5.5.                                     The Management Company and anyone acting on its behalf and in its name shall not be held liable in any manner for any damage or harm caused to the Lessee or its property or to any bodily harm and/or loss and/or damage to property of any kind caused to the Lessee and/or its employees and/or its workers and/or its agents and/or its customers and/or its visitors and/or to any other person that stays in the Leased Premises or in any other area that is lawfully possessed by the Lessee, and the Lessee shall be held fully liable for any damage as aforesaid and undertakes to compensate and indemnify the Management Company immediately upon receiving a demand from the Management Company against any damages the Management Company might be obligated to pay or that the Management Company will be obligated to pay due to such damage and against any expense that the Management Company expends in connection with such damage, unless the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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said damage was caused as a result of an act and/or omission of the Management Company and/or anyone acting on its behalf.

 

The Management Company and/or its employees and/or anyone acting on its behalf or acting in its name shall not be held liable in any manner for any damage of any kind caused to the Lessee as a result of the entry of the Management Company or its representatives to the Leased Premises for any of the purposes specified in this Agreement, unless the damage was caused as a result of direct negligence of the Management Company or its workers.

 

5.6.                                     Until the Management Company notifies otherwise, the Management Company shall provide the Services to the Building during the Hours of Activity in the Building and to the Parking Lot — during the Hours of Activity in the Parking Lot, within their meaning in the Lease Agreement, and only during these hours.

 

6.                            Employment of workers and contractors

 

6.1.                                     For the purpose of performing its work in accordance with this Agreement, the Management Company shall employ technical, professional, administrative and other workers for the purpose of performing the works required in connection with the management and performance of the Services, and shall be entitled to manage and perform the Services, in whole or in part, by contractors, subcontractors or in any other manner, as decided by the Management Company, including part-time or full-time employment under a special contract or under any other conditions as the Management Company deems fit, and with respect to the persons that Management Company deems fit to employ from time to time.

 

6.2.                                     Without derogating from the provisions set forth in sub-section 5.1 above, the Management Company shall be entitled, however not obligated, to lease in the Building offices and storage rooms, including furniture and equipment and to employ, in return for payment, in part-time or full-time job scopes under a special contract or under other reasonable and customary conditions, managers, clerks, accountants, bookkeepers, lawyers, architects, engineers, consultants, an advertising agency, vendors, contractors, subcontractors, workers, cleaners, craftsmen, professionals, security personnel and other persons and entities for the purpose of performing all works and services that the Management Company undertook to perform in accordance with this Agreement.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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7.                            Signage and mailboxes

 

The Lessee hereby agrees that the Management Company shall be solely entitled to determine anything related to the signage and/or marking in the Building and/or the common property including placing, hanging, laying, positioning or any other form of marking and signage and any modification thereof, in accordance with the instructions set forth by the Lessor. The aforesaid provisions shall apply also with respect to the placement or installation of mailboxes, mutatis mutandis. The Lessee shall incur all costs in connection therewith, as decided by the Management Company.

 

The Lessee undertakes not to place signage and advertisements however solely upon obtaining the approval of the Management Company and in accordance with the rules set out by the Management Company and upon obtaining the approval of the Lessor from time to time.

 

It is agreed that the Lessee shall be entitled to install signs in accordance with the relevant provisions set forth in the Lease Agreement.

 

Undertakings of the Lessee

 

The Lessee declares and undertakes as follows:

 

7.1.                                     To engage with the Management Company in all matters relating to the management and performance of the Services in accordance with this Agreement and to participate in the expenses associated with the performance and the management of the Services in respect of its rights in the Leased Premises, based on the keys and the criteria or the instructions set forth from time to time by the Management Company, as stated in Sections 8 and 9 hereunder, and to follow the instructions of the Management Company in connection with the performance of the Services and the use of the Building facilities, provided that these shall not harm the reasonable use of the Lessee in accordance with the Purpose of Lease including in systems such as heating and cooling systems, whether as part of the common property and whether in the Leased Premises and/or the Units — and to keep the said systems in good and operable condition all days of the year.

 

7.2.                                     To receive the Services, in whole or in part, solely by the Management Company. The Lessee shall not be entitled to receive any of the Services or

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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any similar services by anyone other than the Management Company. The Lessee shall not be entitled to cease the performance of the Services and/or delay and/or postpone the receipt of any of the Services.

 

7.3.                                     The Lessee, and anyone acting on its behalf and in its name, shall cooperate with the Management Company and shall assist the Management Company in all circumstances in which such cooperation or assistance are necessary, so as to allow the Management Company to manage and perform the Services properly and as required.

 

7.4.                                     To notify the Management Company at the earliest opportunity regarding any malfunction that requires an action by the Management Company and of which the Lessee is aware.

 

7.5.                                     To act in accordance with the provisions set forth in the Lease Agreement regarding the business activities in the Leased Premises and in the Building and the hours of its performance and in connection with other matters that are related to the manner of use of the Leased Premises and maintenance thereof including, but not limited to, the rules of conduct in the Building, or causing safety nuisances and/or obstacles, maintaining the Area of the Leased Premises and surroundings thereof clean while avoiding from leaving equipment or waste in the Public Areas, except for the areas designated for that purpose, failure to remove equipment outside the Leased Premises, attachment of signage of any kind in violation of the manner set out in the Lease Agreement and failure to respond to the demands made by the Management Company and/or the Lessor regarding these issues, immediately upon receiving the demand of any thereof and/or the demand of anyone acting in their name.

 

7.6.                                     The Lessee undertakes to avoid performing by itself or by another, except for the Management Company, any work or service that were delivered in accordance with this Agreement exclusively to the Management Company, unless the Management Company agreed in writing to the said and prior to the performance of the said work or service or, if an event that might cause direct damage to the Leased Premises occurs and the event requires an emergency repair that the Management Company cannot perform or in the event the Lessee received the prior and written approval of the Lessor and/or the Management Company to perform the repair.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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7.7.                                     The Lessee undertakes not to cause damage in the Leased Premises and the Building and to perform any work, renovation, transportation of equipment, installation of any facility and anything related to the works in the Leased Premises and that is permitted in accordance with the Lease Agreement, in a manner that will not cause a continuous and unreasonable disturbance to the Lessor and/or the Management Company and/or to any of the users, and after obtaining the prior and written approval for the purpose of performing these works from the Lessor and the Management Company.

 

7.8.                                     The Lessee hereby undertakes to observe fully all the provisions set forth in the Building Bylaws and the instructions that are published periodically by the Management Company.

 

8.                            Expenses and Management Fees

 

8.1.                                     The Lessee undertakes to pay to the Management Company its part in the Management Fees, as stated hereunder and to add statutory VAT in respect whereof.

 

8.2.                                     The part of the Lessee in the Management Fees shall be determined according to the key and criteria that will be applied by the Management Company and subject to the provisions set forth hereunder.

 

It is clarified that the Management Company intends, to the extent possible, to charge from the lessees of the Units the expenses that are caused exclusively by the units in the commercial areas (hereinafter: “Commercial Areas”), and charge the expenses that are not caused exclusively by the Units other than the Commercial Areas from the users of these Units, and the expenses that cannot be attributed exclusively to the lessees in the  Commercial Areas or the lessees in the Units other than Commercial Areas or the lessees of the parking spaces in the Building from all the lessees in the Building, according to the ratio that will be determined for the purpose of this matter, and at the sole discretion of the Management Company.

 

It is clarified that the lessees of the parking spaces shall incur the expenses for the purpose of maintaining the Parking Lot in accordance with the provisions set forth in Section 8.5 and Section 8.6 hereunder.

 

8.3.                                     The Management Company shall act in the following manner when distributing the expenses among the different lessees in the Building:

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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8.3.1.                           The Management Company shall set the basis for the distribution of the expenses among the lessees in the Building according to one or more of the following criteria:

 

A.                          The ratio between the Area of the Leased Premises and the total area of all areas in the Building designated for lease.

 

B.                          The type, nature, number and cost of the Services that are provided to specific leased premises or a particular type of leased premises that, by their very own nature, consume more or less Services than other leased premises in the Building, whether relatively and whether according to the type of businesses or according to the type of customers or their number.

 

C.                          Additional or other data that are relevant, at the sole discretion of the Management Company.

 

8.3.2.                           The Management Company shall have sole discretion to determine and to change the ratio of distribution of the expenses among the lessees that was set by the Management Company from time to time and to bill different lessees for any special expense that the Management Company deems was expended in connection with the business of that lessee.

 

8.3.3.                           For the avoidance of doubt, it is clarified that the Management Company shall be entitled, however not obligated, from time to time and at its sole discretion, and to the extent possible, to allocate a certain part of the expenses to a particular type of leased premises (hereinafter: “the Allocation”) and to impose the said expenses solely on that particular type of leased premises.

 

In case a certain expense or certain expenses were allocated to a certain type of leased premises or to part of the leased premises as aforesaid, the expense shall be divided among the leased premises to which the expense was allocated, among themselves, in accordance with the provisions set forth in this Section 8.3 above including subsections thereof, and in Sections 8.4 and 8.5 hereunder.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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The Lessee declares and affirms that it does not and will not raise any demands, claims or suits in connection with the Allocation of the expenses as aforesaid against the Management Company and/or the Lessor and the Lessee shall raise no demand to reduce its part in the Management Fees, provided that the Management Company exercised reasonable considerations in making the said decision.

 

8.4.                                     The Management Company shall be entitled, however not obligated, at its sole discretion, to provide special Services to any of the lessees in the Building and/or users thereof, and in such circumstances as aforesaid the said lessee or use shall be solely responsible for the payment for the said Services, if provided.

 

8.5.                                     The calculation of the relative part of the Lessee in the Management Fees shall be performed as follows: the expenses that were allocated to a particular type of leased premises or to part of the leased premises shall be subtracted from the total amount of the expenses, and the balance shall be divided among the other lessees in the Building, including the Lessee, according to the ratio that will be determined in accordance with the provisions set forth in Sections 8.2 and 8.3 above.

 

The calculation of the relative part of the Lessee in the expenses for the management and maintenance of the Parking Lot shall be performed as follows: the expenses that were allocated to a certain leased premises or to a certain type of leased premises shall be subtracted from the total amount of the expenses for the management and maintenance of the Parking Lot, and the balance shall be divided among the remaining users of the parking spaces and according to the ratio between the number of parking spaces that are used by the Lessee and the total number of parking spaces that can be used for the purpose of parking vehicles.

 

8.6.                                     Notwithstanding the aforesaid, if at least 80% of the areas designated for lease in the Building were leased and/or are leased (excluding the Commercial Areas and the parking areas) all lessees in the Building shall incur the management expenses of the entire Building.

 

As long as 80% of the areas designated for lease in the Building were not leased and/or are leased, the Lessor shall incur the management expenses with respect to the difference between the areas that are leased in the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Building and 80% of the areas designated for lease in the Building, in accordance with the provisions set forth in the first part of this sub-section.

 

Notwithstanding the aforesaid, if at least 80% of the parking spaces in the Parking Lot were leased/are leased, all the lessees of the parking spaces shall incur the management expenses of the entire Parking Lot.

 

As long as 80% of the parking spaces in the Parking Lot were not leased and/or are leased, the Lessor shall incur the management expenses with respect to the difference between the parking spaces that were leased in the Parking Lot and 80% of the parking spaces in the Parking Lot, in accordance with the provisions set forth in the first part of this sub-section.

 

8.7.                                     In order to assure that the expenses that are necessary from time to time for the purpose of adding or replacing or retrofitting or upgrading the Building and/or facilities and/or equipment and/or systems and/or accessories that are used by all or part of the users in the Building are covered, or for the purpose of performing material repairs, the Management Company included in the Management Fees sums designated for the retrofitting and/or replacing and/or upgrading the equipment and/or the facilities and/or systems and/or the accessories as aforesaid, in accordance with the instructions set forth by the accountant of the Management Company (hereinafter: “Equipment Replacement”) in whole or in part.

 

The sums that will be collected as aforesaid shall be collected regularly from the lessees as part of the Management Fees and shall be deposited in an equipment renewal and/or replacement and/or upgrade fund. These sums shall be invested by the Management Company in solid investments and shall not be returned to the Lessee.

 

8.8.                                     The parties agree expressly that the Management Company shall be entitled to provide services also to other areas or entities. In case the Management Company provides the Services in accordance with the provisions set forth in the Lease Agreement and/or additional or other services also to other areas or projects, the Management Company shall maintain a separation in its books of account for the purpose of paying the expenses and the Management Fees and solely for that purpose, in accordance with the instructions and the calculations that will be prepared by the accountants of the Management Company, in such manner that the lessees in the Building will not be required to incur excessive payments in light of the said.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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The Lessee hereby declares and affirms that it does not and will not raise any demand or claim against the Management Company and/or the Lessor in connection therewith. The Lessee shall not demand, inter alia, any reduction in the Management Fees applicable to the Lessee in accordance with the provisions set forth in the Lease Agreement as a result of the said.

 

8.9.                                     It is further clarified that the Lessor shall be entitled, at its sole discretion, to operate the Parking Lot, in whole or in part, whether by itself or by another entity other than the Management Company, and to lay down procedures for the use, operation, entry and exit and the payments and the provisions set forth in the Lease Agreement shall apply for the purpose of this matter.

 

8.10.                              For the avoidance of doubt, the Management Company shall be entitled to transfer the Management Fees, in whole or in part, to the Lessor and/or to whoever the Lessor instructs.

 

9.                            Bills

 

9.1.                                     The Lessee undertakes to pay to the Management Company its estimated part in the expenses and the Management Fees, including the Replacement of Equipment included therein, according to the bills delivered to the Lessee by the Management Company on the payment dates and concurrent with the payment of the Rent or in any other period as determined by the Management Company and that shall be based on an estimate of the expenses, as prepared by the Management Company.

 

9.2.                                     For the avoidance of doubt, it is hereby declared that the duty to pay the Management Fees and all other payments due to the Management Company from the Lessee are imposed on the Lessee in an absolute manner even if the Lessee did not receive a bill in respect of the said Management Fees or the other payments. The Management Company shall deliver to the Lessee an invoice for Management Fees and all other payments due to the Management Company from the Lessee in 7 business days as of the date the Lessee made payment.

 

In the beginning of the first quarter after the Lease Commencement Date the Lessee shall pay the Management Fees until the end of the quarter.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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9.3.                                     At the time of signing this Agreement the Lessee shall provide a check for the Management Fees for the three months commencing on the Lease Commencement Date. During the entire Term of Lease, the Management Fees shall be paid for each quarter, within its meaning in the Lease Agreement, on the first business day of each first month in a quarter.

 

All payments that the Lessee is obligated to pay to the Management Company shall be deposited in the account of the Management Company in the manner and according to the method determined by the Management Company from time to time.

 

9.4.                                     The Lessee hereby undertakes to pay to the Management Company the Management Fees, whether the Lessee leases the Leased Premises by itself, whether it delivered the Leased Premises to the use of another, and whether it does not actually lease the Leased Premises.

 

9.5.                                     Within a period that shall not be greater than six (6) months as of the end of each calendric year, the Management Company shall draw up a final bill of the management expenses and the expenses in connection with the performance of the Services (including Replacement of Equipment and Management Fees) for the said calendric year (hereinafter: “Annual Bill”) when the said account shall be audited and approved by the accountant of the Management Company and shall serve as conclusive and decisive proof regarding the management expenses and the expenses for the performance of the Services, and the duty of the Lessee to pay in accordance with the said bill.

 

9.6.                                     The Lessee hereby undertakes to pay to the Management Company the differences, if any, between the sums that were actually paid on account of its estimated part in the expenses and the amounts of the expenses that are stated in the Annual Bill and subject to the provisions set forth in Section 3 above. Payment shall be made in fourteen (14) days as of the date the Management Company delivers the Annual Bill to the Lessee.

 

If, according to the Annual Bill, there are outstanding sums in favor of the Lessee, the said sums shall be subtracted from the next regular payments due from the Lessee in respect of the Management Fees in linked values as of the Index known on the date of the last payment that the Lessee paid on account of the Management Fees and until the Index known on the first date

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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of payment on account of the Management Fees after making the said calculation.

 

In the event the final bill that is drawn up upon expiration of the said Term of Lease in accordance with the Lease Agreement there are outstanding sums in favor of the Lessee as aforesaid, the said sums shall be returned to the Lessee no later than 90 days after expiration of the fiscal year after expiration of the Term of Lease in linked values as stated above, provided that until that time the Lessee fulfilled its undertakings in accordance with this Agreement and the Lease Agreement.

 

9.7.                                     The Lessee shall pay to the Management Company value added tax (or any other tax that is added or replaces the said tax) in connection with any payment the Lessee owes in accordance with the provisions set forth in the Lease Agreement, together with the said payment, according to the applicable VAT rate at the time of making payment, and shall receive an invoice from the Management Company in connection with the said payment.

 

9.8.                                     The Management Company shall be entitled to invest any excess amount in its possession, whether from funds or from sums in deposits and whether from any other source, at its sole discretion, including in solid investment tracks.

 

9.9.                                     During the first calendric year of lease in the Term of Lease the Management Company shall be entitled, at its sole discretion, to deliver an annual bill relating to the period commencing on the Effective Date and expiring at the end of that calendric year, or add the annual bills relating to this period to the next calendric year. In the last year of lease the annual bill as aforesaid shall be drawn up with respect to the part of the calendric year that expires upon expiration of the Term of Lease.

 

10.                     Term of Agreement

 

10.1.                              This Agreement shall be in effect as of the date of signing hereof and until the expiration of the Term of Lease and/or the additional terms of lease — as the case may be, within their meaning in the Lease Agreement, subject to the provisions set forth in Section 12 hereunder.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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10.2.                              The Management Company shall be entitled, at its discretion, to cease the performance of the Services and/or any part thereof and/or to terminate the performance of the Services, in whole or in part, to the Building and/or to parts thereof, by delivery of at least 90 (ninety) days’ advance written notice to the lessees in the Building.

 

11.                     Commencement date of the Lessee’s undertakings

 

The Lessee undertakes to incur all payments and liabilities imposed on the Lessee in accordance with the provisions set forth in the Lease Agreement as of the Effective Date.

 

12.                     Assignment of rights and obligations by virtue of this Agreement

 

In any event of assignment of rights, the provisions set forth in the Lease Agreement for the purpose of this matter shall apply respectively.

 

13.                     Transfer of rights by the Management Company

 

The Management Company shall be entitled at any time and upon obtaining the prior and written approval of the Lessor to transfer the performance of the Services including anything associated therewith, including all its rights and obligations in accordance with this Agreement, to another Management Company or to any other legal entity whether existing or formed for the purpose of this matter, provided that the other Management Company or the said designated entity undertake to fulfill all the undertakings of the Management Company in accordance with the provisions set forth in the Lease Agreement.

 

It is clarified that the termination of the performance of the Services in accordance with the provisions set forth in Sections 10.2 above and 14 hereunder, shall not be deemed as transfer of rights to which the provisions set forth in this Section shall apply.

 

14.                     Breach of the Agreement by the Lessee

 

The provisions set forth in the Lease Agreement shall apply to breach of this Agreement by the Lessee, mutatis mutandis.

 

15.                     Books of the Management Company as conclusive evidence

 

The management records and books of account of the Management Company and documents thereof shall be deemed at any time by the Lessee as final and conclusive proof regarding the sums that the Lessee paid to the Management Company, the expenses, Replacement of the Equipment and any other matter specified and recorded in the management records and books of account.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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The Lessee, by its accountant, shall be entitled to inspect the books of account of the Management Company, at its expense, and following advance coordination and according to the procedures that will be set for the purpose of this matter by the Management Company.

 

16.                     Use and restrictions on use

 

16.1.                              Notwithstanding anything stated in this Agreement and/or in the Lease Agreement, the Lessee shall not be entitled to use the Leased Premises for any purpose that causes a nuisance of any kind such as: noise, vibrations, odors, pollution and the like or for any purpose that might harm the Building, or the use of the other leases premises in the Building, or the value of the Building and its level of activity.

 

16.2.                              The Lessee shall be entitled to operate its business and/or any part thereof solely in accordance with the purpose that was set in the Lease Agreement and not for any other purpose.

 

17.                     Condominium bylaws

 

The authorities of the Management Company and any instruction and limitation with respect to any leased premises in the Building shall be noted as binding instructions in the Condominium Bylaws, in case the Lessor decides, at its sole discretion, to register the Building in the Condominiums Register.

 

18.                     Miscellaneous

 

18.1.                              The provisions, interpretations and definitions as stated in the Lease Agreement shall apply in any event or matter in respect of which there are no provisions, interpretations and definitions in this Agreement.

 

18.2.                              In the event of discrepancy between the provisions set forth in the Lease Agreement and/or Appendix F and the provisions set forth in this Management Agreement, the provisions set forth in the Lease Agreement and Appendix F shall take precedence.

 

18.3.                              Any delay and/or postponement and/or lack of response and/or lack of action and/or lack of measures applied by any of the parties shall not be deemed and shall not be construed as waiver of a right granted to the parties

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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in accordance with the Lease Agreement and/or in accordance with the provisions set forth in the Lease Agreement including, and without derogating from the generality of the aforesaid, in connection with any continuing or additional breach by any of the parties.

 

18.4.                              The Lessee shall not be entitled to offset sums it owes to the Lessor and/or the Management Company against sums owed to the Lessee, if any, from the Management Company, and shall not be entitled to offset sums that are due to the Lessee from the Lessor against sums the Lessee owes to the Management Company.

 

19.                     The Lessee shall not be entitled to terminate and/or stipulate and/or withhold payment of the Rent in accordance with the Lease Agreement in any event of a demand or claim against the Management Company in connection with the performance of the Services by the Management Company and/or in connection with any other demand and/or claim against the Management Company. The Lessee shall not be entitled to terminate and/or stipulate and/or withhold any payment of the Management Fees in accordance with the provisions set forth in the Lease Agreement in any event of a demand or claim against the Lessor regarding the performance of the Lease Agreement.

 

19.1.                              Notwithstanding anything to the contrary, it is agreed that breach of any of the provisions set forth in this Agreement by the Lessee that is not cured in seven days as of the date of receiving notice by the Lessee in connection therewith, shall be deemed as a fundamental breach of the Lease Agreement and this Agreement, with all ensuing consequences, in accordance with the Lease Agreement and/or in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law.

 

19.2.                              The parties submit to the sole and exclusive jurisdiction of the competent courts in the city of Tel Aviv in anything relating to and arising out of this Agreement.

 

19.3.                              The Lessee shall not be entitled in any event to register a caveat by virtue of this Agreement, irrespective of the identity of the Management Company and/or the Term of Lease.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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20.                     Default in payments

 

20.1.                              In the event the Lessee defaulted in making any of the payments the Lessee is obligated to pay in accordance with this Agreement by more than 7 days, the Lessee shall pay to the Management Company interest in arrears for the amount in default according to the customary rate in Bank Leumi le-Israel Ltd for unauthorized overdrafts in current loan accounts. Interest shall be calculated for the period taking effect as of the day in which the Lessee was obligated to pay the amount in default and until the date payment is made.

 

In case the Management Company paid to a third-party interest and/or penalty for delay due to the default in payment by the Lessee, the said interest and penalty for delay shall be deemed as part of the debt principal that the Lessee is obligated to return to the Management Company.

 

It is hereby clarified that default in paying any sum that is greater than 15 days shall constitute breach of this Section and shall constitute a fundamental breach of this Agreement.

 

20.2.                              In case the collection of any sum as aforesaid requires expenses or attorney fees on behalf of the Management Company, any sum that was paid as aforesaid shall be allocated first on account of reimbursement of the expenses and only afterwards on account of the principal, linkage differentials and interest.

 

20.3.                              Payment of interest in accordance with this Section shall not derogate from the right of the Management Company to seek any other relief set forth in this Agreement and the law and this shall not be construed as waiver of the Management Company of any other relief it may seek.

 

21.                     Securities

 

The securities as stated in Section 24 of the Lease Agreement shall be used as a security for the fulfillment of all the undertakings of the Lessee in accordance with this Management Agreement, and the provisions set forth in the Lease Agreement shall apply.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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22.                     Addresses and notices

 

The addresses of the parties for the purpose of this Agreement are as stated in the preamble to this Agreement, however after the Effective Date the addresses of the parties shall be in the Building itself.

 

Any notice delivered in registered mail to the aforesaid addresses shall be deemed to have reached its recipient in three (3) days from the time of its delivery, and if delivered in person — at the time of its delivery. The Management Company shall be entitled to deliver notice by attaching the notice to the door of the Leased Premises or by placing the said notice in the Lessee’s mailbox and the confirmation of the manager of the Management Company regarding this delivery method shall constitute final and conclusive confirmation.

 

And in witness hereof the parties are hereby undersigned:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Management Company

 

The Lessee

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Appendix E1

 

Insurance Appendix

 

(1)                       Insurance

 

(1.1)                                Without derogating from the liability of the Lessee in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, prior to the commencement date of the Lessee’s works in the Leased Premises, to the extent that the said works the performed, the Lessee undertakes to take out and maintain, whether by itself and whether by a contractor on its behalf, a contractor insurance in the name of the Lessee, contractors and subcontractors, the Lessor and the Management Company, as stated in the Certificate of Insurance enclosed with this Agreement and constituting an integral part thereof and marked as Appendix E2 (hereinafter: “Certificate of Insurance for the Lessee’s Works”).

 

(1.2)                                The Lessee undertakes to furnish to the Leased Premises, no later than the commencement date of the works in the Leased Premises, to the extent that such works are performed, the Certificate of Insurance for the Lessee’s Works signed by its insurer. The Lessee declares that it is aware that furnishing the Certificate of Insurance for the Lessee’s Works as aforesaid is a condition precedent and a prerequisite for the performance of works in the Leased Premises, and the Lessee shall be entitled to prevent from the Lessee to perform works in the Leased Premises in case the said certificate was not furnished prior to the commencement date of the works.

 

(1.3)                                The liability limits in the third-party liability insurance that is taken out by the Lessee as stated in Section (2) of the Certificate of Insurance for the Lessee’s Works (Appendix E2) is in the amount of USD 1,000 multiplied by the Area of the Leased Premises, a minimum of USD 500,000 and a maximum of USD 2,000,000 per event and cumulatively for the insurance term; the provisions set forth above shall apply subject to the provisions set forth in Section (1.18) hereunder. Notwithstanding the aforesaid, it is agreed that with respect to adjustment works in the ground floor of the Leased Premises that will be performed as of 12.06.2014, for an amount that shall not be greater than NIS 200,000, the liability limits as stated in Section (2) of the Certificate of Insurance for the Lessee’s Works (Appendix E2) shall be $500,000 per event and for the insurance term in respect of these works.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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(1.4)                                Without derogating from the liability of the Lessee in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, during the term of this Agreement the Lessee undertakes to take out and maintain the insurances specified in the Lessee’s Certificate of Insurance hereby enclosed with this Agreement and constituting an integral part thereof and marked as Appendix E3 (hereinafter: “Lessee’s Certificate of Insurance”) with a legally licensed and reputable insurance company (hereinafter: “Lessee’s Insurances”). It is clarified that the provisions set forth in Section (1.9) hereunder shall apply to this Section.

 

(1.5)                                Without receiving any demand from the Lessor, and no later than the date of opening the Lessee’s business in the Leased Premises, or before the date of entry of any property to the Leased Premises (except for property that is listed in the works insured under Section (1.1) above) — whichever is earlier - the Lessee undertakes to furnish to Lessor the Lessee’s Certificate of Insurance as aforesaid, signed by its insurer. The Lessee declares that it is aware that furnishing and/or updating the Lessee’s Certificate of Insurance is a condition precedent and a prerequisite for opening the business of the Lessee in the Leased Premises and/or for the entry of any property of the Leased Premises (except for property listed in the works that are insured under Section (1.1) above) and the Lessor shall be entitled to prevent from the Lessee to open its business in the Leased Premises and/or bring any property as aforesaid in the event the certificate was not furnished prior to the date specified above.

 

(1.6)                                The liability limits in a third-party liability insurance taken out by the Lessee as stated in Section (2) of the Lessee’s Certificate of Insurance (Appendix E3) are in the amount of NIS 5,000,000 per event and cumulatively for an annual insurance term; the provisions set forth above shall be subject to the provisions set forth in Section (1.18) hereunder).

 

(1.7)                                It is agreed that the Lessee may not take out property and/or consequential loss insurance in whole or in part, as stated in Section (4) of the Lessee’s Certificate of Insurance (Appendix E3) however the said in Section (1.11) hereunder shall apply to damage to property and/or any loss of income as aforesaid as of the insurance in respect whereof was fully arranged.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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(1.8)                                It is agreed that the Lessee may not take out glass breakage insurance as required in Section (1) of the Lessee’s Certificate of Insurance (Appendix E3) however the said in Section (1.11) hereunder shall apply with respect to any loss or damage caused by glass breakage as if the insurance in respect whereof was fully arranged.

 

(1.9)                                If the Lessee deems that it is necessary to take out an additional and/or supplemental insurance in addition to the Lessee’s insurances as stated above, the Lessee undertakes that a clause regarding waiver of the right of subrogation as stated in Section 1 of Appendix E3 shall be incorporated in each additional or supplemental insurance of the Lessee’s insurances as aforesaid, made in favor of the Lessor and the Management Company and anyone acting on their behalf.

 

(1.10)                         The Lessee undertakes to update periodically the sums insured in respect of the insurances that are arranged under Sections (1) and (4) of the Lessee’s Certificate of Insurance (Appendix E3), in such manner that they will always reflect the full value of the subject matter of their insurance.

 

(1.11)                         The Lessee declares that it shall not raise any claim and/or demand and/or suit against the Lessor, the Management Company and anyone acting on their behalf and against the other right holders in the Project whose lease agreements or any other agreement that grants them rights in the Project includes a corresponding exemption vis-à-vis the Lessee in respect of damage for which the Lessee is entitled to indemnity in respect whereof (or for which it was entitled to indemnity but for the policyholder’s contribution set out in the policy) in accordance with the insurances that are arranged under Section (1) of the Certificate of Insurance for the Lessee’s Works (Appendix E2) and Sections (1) and (4) of the Lessee’s Certificate of Insurance (Appendix E3) and the Lessee hereby exempts the said entities from any liability for which the Lessee is entitled to indemnity as aforesaid, provided that the exemption from liability shall not apply to any person who causes malicious damage.

 

(1.12)                         For the avoidance of doubt, it is clarified that failure to furnish the Certificate of Insurance on time as stated in Sections (1.2) and (1.5) above shall not affect the undertaking of the Lessee in accordance with this Agreement including, and without derogating from the generality of the aforesaid, any payment duty applicable to the Lessee. The Lessee undertakes to uphold all its undertakings in accordance with the Agreement

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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even if it is denied from performing the works and/or receiving possession in the Leased Premises and/or bringing property to the Leased Premises and/or opening its business in the Leased Premises due to failure to furnish the certificates on time.

 

(1.13)                         On the expiration date of the Lessee’s insurances the Lessee undertakes to deposit with the Lessor the Certificate of Insurance as stated in Section (1.5) above in respect of the extension of their effect for an additional period. The Lessee undertakes to repeat and deposit the Certificate of Insurance on the said dates upon expiration of each insurance term and as long as this Agreement is in effect.

 

(1.14)                         The Lessor shall be entitled to inspect the Certificates of Insurance that are furnished by the Lessee as stated in Sections (1.2), (1.5) (1.13) above, and the Lessee undertakes to perform any modification or amendment that is necessary for the purpose of making the Certificates of Insurance compliant with the undertakings of the Lessee as stated in this Section (1). The Lessee declares that the right of inspection of the Lessor with respect to the Certificates of Insurance and its right to instruct the amendment of the Lessee’s insurances as stated above shall not impose on the Lessor or anyone acting on its behalf any obligation and any liability in connection with the Certificates of Insurance as aforesaid including their standard, scope and effect or lack thereof, and shall not derogate from any liability imposed on the Lessee in accordance with this Agreement.

 

(1.15)                         The Lessee undertakes to fulfill the conditions set forth in the insurance policies the Lessee takes out, make full and timely payment of the insurance premiums and assure that the Lessee’s insurances are extended periodically as may be required and are in effect during the entire Term of Lease.

 

(1.16)                         The Lessee undertakes to observe the safety procedures that are published periodically by the Lessor and/or the Management Company and undertakes not to use and/or permit knowingly any act or omission in the Leased Premises and/or the Project that might cause an explosion and/or a fire and/or that might risk human lives or the Project.

 

(1.17)                         The Lessee warrants that if the Lessor and/or the Management Company are obligated to pay additional insurance premiums beyond customary due to the activities of the Lessee that deviate materially from the Purpose of Lease, the Lessee shall pay to the Lessor and/or the Management Company, as the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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case may be, the said addition, immediately upon receiving their first demand.

 

(1.18)                         For the avoidance of doubt, it is hereby agreed that setting the liability limits as stated in Sections (1.3) and (1.6) above is a minimal requirement imposed on the Lessee. The Lessee declares and affirms that it shall be precluded from raising any claim and/or demand against the Lessor and/or the Management Company and/or anyone acting on their behalf regarding the minimal liability limits as aforesaid.

 

(1.19)                         The Lessor undertakes to take out and maintain, whether by itself and whether by the Management Company, and during the Term of Agreement, the insurances specified in this Section hereunder (hereinafter: “Project Insurances”) with a legally licensed and reputable insurance company:

 

(1.19.1)               Dwelling insurance for the Project in full replacement value, against loss or damage caused by the customary risks in extended fire insurance. The said insurance shall include a clause regarding waiver of the right of subrogation vis-à-vis the Lessee, provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage. It is agreed expressly that for the purpose of this Section the term “Project Structure” shall not include the contents of the lease premises and shall not include any addition, improvement or extension implemented in the Leased Premises by and/or for the Lessees (not by the Lessor and/or the Management Company).

 

(1.19.2)               Third-party liability insurance providing insurance coverage for the statutory liability of the Lessor and the Management Company for injury or damage to the body and/or property of any person and/or entity, in a liability limit of $5,000,000 (five million U.S. dollars) per event and cumulatively for the insurance term. The insurance will be extended to indemnify the Lessee for its liability for the acts and/or omissions of the Lessor and/or the Management Company and/or anyone acting on their behalf subject to cross-liability clause stipulating that the insurance shall be deemed to have been arranged separately for each of the members of the insured.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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(1.19.3)               Employers’ liability insurance providing insurance coverage for the liability of the Lessor and the Management Company towards their workers for injury caused in the course of and following their employment by the Lessor and/or the Management Company and/or anyone acting on their behalf in a liability limit of $5,000,000 per claimant, per event and cumulatively during the insurance term.

 

(1.19.4)               Loss of Rent, Management Fees and parking fees insurance (to the extent that there are any) due to damage caused to the structure of the Project and/or the insured property as stated in Section 1.19.1 above, due to the risks detailed in Section 1.19.1 above, for an indemnity period of 12 months. The said insurance shall include an express clause regarding waiver of the right of subrogation towards the Lessee and anyone acting on its behalf provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

Notwithstanding the aforesaid, it is hereby agreed that the Lessor and/or the Management Company shall be entitled not to take out the insurance specified in this sub-section 1.19.4 above, in whole or in part, provided that the said exemption as stated in Section 1.20 hereunder shall apply as if the insurance was fully arranged.

 

It is hereby agreed expressly that the arrangement of the insurances specified above shall not add to the liability of the Lessor and/or the Management Company beyond the provisions set forth in the Lease Agreement and/or the Management Agreement and/or derogate from the liability of the Lessee in accordance with the said agreement (except for the provisions set forth in Section (1.20) hereunder).

 

(1.20)                         The Lessor declares, in its name and in the name of the Management Company, that they shall raise no claims and/or demands and/or suits against the Lessee and anyone acting on its behalf in respect of damage for which they are entitled to indemnity (or for which they were entitled to indemnity but for the policyholder’s contribution set out in the policy) in accordance with the insurances they take out as stated in Sections (1.19.1) and (1.19.4) above, and they hereby exempt the Lessee and anyone acting on its behalf from any liability for such damage as aforesaid. The provisions set forth above regarding exemption from liability shall not apply to any person who causes malicious damage.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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(1.21)                         The Lessor hereby exempts the Lessee from liability for damage for which it is entitled to indemnity in accordance with the property chapter in the contractor insurance that is arranged as stated above (or for which it was entitled to indemnity but for the policyholder’s contribution set out in the policy). Nevertheless, the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

[Signature and Stamp:
Ogen Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Appendix E2

 

Certificate of Insurance for the Lessee’s Works

 

Date:            

 

To

Ogen Yielding Real Estate Ltd. (hereinafter: “the Lessor”)

3 Har Sinai St.

Tel Aviv

 

Dear Sir/Madam,

 

Re:                            Certificate of Insurance regarding an agreement dated               (hereinafter: “the Agreement”) between you and              (hereinafter: “the Lessee”) for the lease of property in Ogen Park in Petah Tikva (hereinafter respectively: “the Leased Premises” and “the Project”)

 

We hereby respectfully confirm that as of          and until             (hereinafter: “Insurance Term”) our company took out contractor insurance in the name of the Lessee, contractors and subcontractors, the Lessor and the Management Company, providing insurance coverage for the works that are performed by the Lessee and/or anyone acting on its behalf as stated hereunder, when the scope of coverage granted under the said insurance is in accordance with the “Bit” 2013 insurance policy or any other corresponding form:

 

1.                            Chapter 1 — all-risk insurance providing insurance coverage for loss or damage caused to the Lessee’s works in full value and loss or damage caused to the equipment used for the purpose of performing the said works. This chapter includes a clause regarding waiver of the right of subrogation vis-à-vis the Lessor and/or the Management Company and anyone acting on their behalf and towards the other right holders in the Project on the condition that the insurance of the other right holders in the  project including a corresponding clause regarding waiver of the right of subrogation towards the Lessee, provided that the said regarding waiver of the right of subrogation shall not apply to any person who causes malicious damage.

 

The chapter includes an extension regarding property being worked upon and/or surrounding property in a liability limit that shall not fall below $50,000 (fifty thousand U.S. dollars).

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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2.                            Chapter 2 — third-party liability insurance in a liability limit as stated hereunder. The said chapter includes a cross-liability clause stipulating that the insurance shall be deemed to have been arranged separately for each of the members of the insured.

 

Liability limit $           per event and cumulatively for the Insurance Term.

 

The said chapter shall not include any limitation regarding the following issues:

 

A.                          Claims of subrogation by the National Insurance Institute.

 

B.                          Bodily harm deriving from the use of heavy equipment that is a motorized vehicle whose compulsory insurance is not mandatory.

 

C.                          Liability for damage caused by vibrations and weakening of supports in a liability limit of $250,000 per event (and cumulatively for the insurance term).

 

3.                            Chapter 3 — employers’ liability insurance in respect of the liability towards workers employed in the performance of the works and in a liability limit of $5,000,000 (five million dollars) per claimant, per event and cumulatively for an annual insurance term. This insurance does not include any limitation regarding works in height and in depth, hours of work, baits and poisons, contractors, subcontractors and their workers and youth employment.

 

The insurance specified above includes an express condition stipulating that it is a primary insurance and precedes any insurance that was taken out by the Lessor and/or the Management Company and we waive any claim and/or demand regarding participation of the insurances of the Lessor and/or the Management Company. In addition, we undertake that the said insurance shall not be diminished or terminated during the insurance term unless the Lessor receives a 60 days’ prior and written notice in registered mail. We further confirm that the Lessee shall be solely responsible for payment of the insurance premiums and the deductible amounts for the insurance as stated above.

 

Subject to the terms and exclusions specified in the original policies to the extent that they were not expressly modified in accordance with the provisions set forth hereinabove.

 

 

 

 

 

 

 

 

(Stamp of
Insurer)

 

(Signature of the
Insurer)

 

(Name of
Signatory)

 

(Position of

Signatory)

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Appendix E3

 

Lessee’s Certificate of Insurance

 

Date:            

 

To

Ogen Yielding Real Estate Ltd. (hereinafter: “the Lessor”)

3 Har Sinai St.

Tel Aviv

 

Dear Sir/Madam,

 

Re:                            Certificate of Insurance regarding an agreement dated               (hereinafter: “the Agreement”) between you and              (hereinafter: “the Lessee”) for the lease of property in Ogen Park in Petah Tikva (hereinafter respectively: “the Leased Premises” and “the Project”)

 

We hereby respectfully confirm that as of          and until             (hereinafter: “Insurance Term”) our company took out the insurances specified hereunder in the name of the Lessee, regarding the Leased Premises in the Project (hereinafter: “Lessee’s Insurances”):

 

1.                            Contents insurance providing insurance coverage for the contents of the Leased Premises and equipment serving the Leased Premises that is owned and/or under the responsibility of the Lessee and that is located outside the Leased Premises and in the area of the Project, in full value, and any modification and addition in the Leased Premises that were performed and/or that will be performed by the Lessee and/or anyone acting on its behalf, against loss or damage due to the customary risks in extended fire insurance, including fire, smoke, lighting, explosion, earthquake, storm and tempest, flood, damage caused by fluids and splitting of pipes, impact caused by a vehicle, impact caused by an aircraft, strikes, disorderly conduct, malicious damage, glass breakage and break-in. The insurance includes an express condition stipulating that the insurer waives any right of subrogation towards the Lessor, the Management Company and anyone acting on their behalf and towards the other right holders in the Project (whose property insurance includes a corresponding clause regarding waiver of the right of subrogation towards the Lessee) provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

2.                            Third-party liability insurance, providing insurance coverage for the statutory liability of the Lessee in accordance with the provisions set forth in any law for

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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damage or injury to the body and/or property of any person and/or entity in the liability limits as stated hereunder. The insurance is not subject to any limitation regarding liability arising out of fire, explosion, panic, hoisting, loading and unloading apparatuses, defective sanitary fixtures, poisoning, anything harmful in foods and beverages, liability in respect of and towards contractors, subcontractors and their workers, strikes and lockouts and claims of subrogation by the National Insurance Institute. The insurance is extended to indemnify the Lessor and the Management Company for their liability for the acts and/or omissions of the Lessee and anyone acting on its behalf subject to a cross-liability clause stipulating that the insurance shall be deemed to have been arranged separately for each of the members of the insured.

 

Minimum liability limit: NIS 5,000,000 per event and cumulative for an annual insurance term.

 

3.                           Employers’ liability insurance providing insurance coverage for the liability of the Lessee towards its employees employed by the Lessee for bodily harm or illness caused to any thereof in the course of and following their employment, in a liability limit of $5,000,000 (five million U.S. dollars) per claimant, per event and cumulatively for an annual insurance term. This insurance does not include any limitation regarding works in height and in depth, hours of work, contractors, subcontractors and their workers (in case the Lessee is considered as their employer), baits and poisons and youth employment. The said insurance is extended to indemnify the Lessor and the Management Company in case it is stated, regarding the occurrence of any occupational accident, that they are held liable as an employer towards any of its employees. The insurance includes waiver of the right of subrogation in favor of the Lessor and/or the Management Company and/or anyone acting on their behalf, provided that the said waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

4.                            Consequential loss insurance, providing insurance coverage for loss of gross earnings caused to the Lessee as a result of loss or damage to the building of the Project and/or the structure of the Leased Premises and/or the contents of the Leased Premises and/or due to the demolition of any thereof, due to the risks detailed in Section 1 above, for an indemnity period of 12 months as a minimum. The insurance includes an express provision stipulating that the insurer waives any right of subrogation towards the Lessor, the Management Company and anyone acting on their behalf and towards the other right holders in the  Project (on the condition that the consequential loss insurance of the other right holders in the Project includes a corresponding clause regarding waiver of the right of subrogation towards the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

100


 

Lessee), provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

The insurances specified above include an express provision stating that they shall take precedence over any insurance that the Lessor and/or the Management Company arrange and we waive any claim and/or demand regarding the participation in the insurances of the Lessor and/or the Management Company. In addition, we undertake that the aforesaid insurance shall not be adversely modified and shall not be terminated during the Insurance Term unless the Lessor receives a 30 days’ prior notice in registered mail in connection therewith. In addition, we confirm that the Lessee shall be solely responsible for the payment of the insurance premiums and the deductible amounts in respect of the insurances specified above.

 

Subject to the terms and exclusions specified in the original policies to the extent that they were not expressly modified in accordance with the provisions set forth hereinabove.

 

Sincerely,

 

 

 

 

 

 

 

 

(Stamp of
Insurer)

 

(Signature of the
Insurer)

 

(Name of
Signatory)

 

(Position of
Signatory)

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

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Appendix F — Special Conditions

 

Between:

 

Ogen Yielding Real Estate Ltd.

Company No. 5200330933

Har Sinai St., Tel Aviv

(Hereinafter: “the Lessor”)

 

The first party;

 

 

 

And between:

 

PolyPid Ltd.

Company No. 514105923

Whose address for the purpose of this Agreement is: PO Box 7126 Petah Tikva

(Hereinafter: “the Lessee”)

 

The second party;

 

The said by the Sections indicated in this Appendix hereunder shall supplement and add the said in the corresponding Sections in the Lease Agreement dated 27.3.14 that was signed between the parties (hereinafter: “the Lease Agreement”) and the said in this Appendix shall take precedence over the said in the Lease Agreement. The other terms set forth in the Lease Agreement shall remain in full force and effect.

 

All terms used in this Appendix shall have the meaning assigned to them in the Lease Agreement, unless otherwise stated expressly.

 

Section 2 — Definitions

 

“The Leased Premises”

 

 

The Leased Premises comprise of the following areas:

 

(1)         An area of approximately 1,200sqm net with the addition of 15% for the Public Areas in the Building, i.e., 1,380sqm gross in the first floor of the Tamar Building located in 18 HaSivim St. in Petah Tikva;

 

(2)         An area of approximately 250sqm net with the addition of 15% for the Public Areas in the Building, i.e. 287.5sqm gross, in the ground floor of the Tamar Building located in 18

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

102


 

 

 

 

 

HaSivim St. in Petah Tikva (hereinafter: “the Ground Floor”);

 

(3)         20 parking spaces according to the following distribution: 4 marked parking spaces in the exterior parking lot; 8 marked parking spaces in the Ground Floor of the two-floor parking lot, and 8 marked parking spaces in the first floor of the two-floor parking lot.

 

 

 

 

 

“Delivery Date of the Ground Floor”

 

 

June 12, 2014 and subject to the provisions set forth in Section 13 of the Lease Agreement and on the condition that the securities and the Certificates of Insurance were delivered to the Lessor in accordance with the provisions set forth in the Lease Agreement. During the period between the Delivery Date of the Ground Floor and until the Lease Commencement Date the Lessee shall be considered solely as an authorized person in order to perform the adjustment works in the Ground Floor of the Leased Premises. During this period the Lessee shall be entitled to perform the adjustment works even in the first floor of the Leased Premises subject to obtaining the prior and written approval of the Lessor, and in the event the Lessee’s works disrupt the performance of the Lessor’s works in the first floor the Lessor shall be entitled to cease the Lessee’s works and the Lessee shall raise no claims and/or demands in connection therewith.

 

 

 

 

 

“Lease Commencement Date”

 

 

September 7, 2014, on the condition that the Lessor received checks for the Rent, Management Fees and parking fees in respect of the Leased Premises in accordance with the provisions set forth in the Lease Agreement. This date also constitutes the Delivery of Possession Date of the Remaining Leased Premises that include the entire Leased Premises except for the Ground Floor that will be delivered to the Lessee on the Delivery Date of the Ground Floor.

 

 

 

 

 

“Basic Index”

 

 

The index of February 2014.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

103


 

Section 7 — Purpose of Lease

 

The Purpose of Lease is offices and laboratory only.

 

Section 8 — Term of Lease

 

 

 

 

A period of 64 months commencing on the Lease Commencement Date, within its meaning above, and that will expire on 11.1.2020 (hereinafter: “First Term of Lease”).

 

 

 

 

 

 

 

 

The second Term of Lease shall commence upon expiration of the First Term of Lease and shall expire 60 months thereafter (hereinafter: “Second Term of Lease”).

 

 

 

 

 

 

 

 

The First and/or Second Term of Lease shall be referred hereinabove and hereinafter: “Terms of Lease.”

 

Section 9 — Rent

 

 

 

 

During the Term of Lease, the Lessee shall pay to the Lessor Rent as follows:

 

An amount of NIS 50 (fifty new Israeli shekels) for each 1sqm of the gross Area of the Leased Premises per month, in addition to statutory VAT and linkage differentials (hereinafter: “Rent”).

 

 

 

 

 

 

 

 

During the Second Term of Lease, monthly Rent shall be increased automatically in an amount in new Israeli shekels at a rate of 3.5% of the Rent that will be paid in the last month of the First Term of Lease (hereinafter: “Rent for the Second Term of Lease”).

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

104


 

 

 

 

Notwithstanding the aforesaid, it is agreed that as of the Lease Commencement Date the Lessee shall have a grace period of four months (hereinafter: “the Grace Period”), i.e., until 12.1.2015, in which the Lessee shall be exempt solely from payment of the Rent, however during this period the Lessee shall incur all other payments applicable to the Lessee in accordance with the Agreement including payment of Management Fees, municipal taxes, electricity and the like.

 

 

 

 

 

 

 

 

For the avoidance of doubt, it is clarified that after expiration of the Grace Period the Rent payments shall be added to the said payments in accordance with the provisions set forth in this Section above.

 

 

 

 

 

 

 

 

It is agreed that in the event the Lessee wishes to terminate the lease upon expiration of the First Term of Lease and not to extend the lease by the Second Term of Lease within its meaning above, in such circumstances as aforesaid the Lessee shall enclose with its notice regarding avoidance from extending the Term of Lease by the Second Term of Lease a cashier’s check in the amount of the Rent for the Grace Period. To the extent that the Lessee fails to enclose the check with the notice regarding avoidance from extension of the Term of Lease by the Second Term of Lease, the notice regarding avoidance of extension of the Term of Lease shall be deemed as null and void.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

105


 

Section 9.3 — Rent for parking spaces

 

 

 

 

 

During the entire Term of Lease, the Lessee shall pay to the Lessor monthly parking fees as follows:

 

 

 

 

 

 

 

 

(1) An amount of NIS 300 (three hundred new Israeli shekels) in addition to statutory VAT and linkage differentials for 4 parking spaces in the exterior parking lot;

 

 

 

 

 

 

 

 

(2) For each marked parking space in the two-floor parking lot, monthly parking fees in the amount of NIS 250 (two hundred and fifty hundred new Israeli shekels).

 

 

 

 

 

 

 

 

In total the Lessee shall pay to the Lessor for the parking spaces monthly parking fees in the amount of NIS 4,400 (four thousand and four hundred new Israeli shekels) in addition to statutory VAT and linkage differentials (hereinafter: “Parking Fees”). It is clarified that the Parking Fees include the Management Fees and the municipal taxes applicable to the parking spaces and all other payments that are relevant for parking. For the avoidance of doubt, it is clarified that as of 19:00 the marked parking spaces will be made available to the public.

 

The Parking Fees will be paid on the payment dates of the Rent.

 

The Lessee undertakes to pay the Parking Fees even if it did not actually use the parking spaces, in whole or in part, during the entire Term of Lease or a part thereof, and as long as this Agreement is in effect, unless the Lessee delivers to the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

106


 

 

 

 

 

Lessor a 30 days’ prior notice regarding its wish to reduce the number of parking spaces it leases. In addition, in case the Lessee notifies the Lessor regarding its wish to lease additional parking spaces, the Lessor shall allow this to the Lessee to the extent that it has available parking spaces and according to the rates that are customary at the time.

 

For the avoidance of doubt, it is clarified that the payment of the Parking Fees for the parking spaces constitutes a prerequisite for parking in the Parking Lot.

 

Section 15 — Management of the Building:

 

 

 

 

 

During the First Term of Lease, Management Fees shall be in the amount of NIS 12 (twelve new Israeli shekels) for each 1sqm of the gross Area of the Leased Premises per month in addition to statutory VAT and linkage differentials (hereinafter: “Management Fees”).

 

During the First Term of Lease, the Lessor shall be entitled to decide, at its sole discretion, whether to keep the Management Fees unchanged as stated in this Section above, or change the Management Fees in accordance with the provisions set forth in Section 3 of the Management Agreement.

In the event of discrepancy between the said and the provisions set forth in the Management Agreement, the said above shall take precedence.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

107


 

 

Section 24 — Securities:

 

 

 

 

 

Without derogating from the said in Section 24 of the Agreement, the Lessee shall provide to the Lessor the following securities:

At the time of signing the Agreement the Lessee shall provide to the Lessor a bank guarantee in an amount equal to the Rent and the Management Fees, in respect of 3 months of lease, in addition to statutory VAT and linkage differentials, i.e., an amount of NIS 365,983 (three hundred and sixty-five thousand and nine hundred and eighty-three new Israeli shekels).

During the Option Term, the bank guarantee shall be updated in such manner that during the entire Term of Lease it shall be in an amount equal to the Rent, the Management Fees and the Parking Fees for three months of lease in addition to linkage differentials and VAT in respect whereof.

 

And in witness hereof the parties are hereby undersigned:

 

[Signature and Stamp:
Ogen Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

108


 

Appendix H

 

Bank Guarantee

 

Of a Lease Agreement Made and executed in Tel Aviv on the 27th day of March, 2014

 

Between:

 

Ogen Yielding Real Estate Ltd.
Company No. 520033093
Whose address for the purpose of this Agreement is: 3 Har Sinai St., Tel Aviv
(Hereinafter: “the Lessor”)

 

 

 

And between:

 

PolyPid Ltd.
Company No. 514105923
Whose address for the purpose of this Agreement is: 18 HaSivim St., PO Box 7126 Petah Tikva
(Hereinafter: “the Lessee”)

 

Date: March 27, 2014

 

To

Ogen Yielding Real Estate Ltd.

 

Dear Sir/Madam,

 

Re: Bank Guarantee no.

 

1.                            We hereby guarantee towards you to pay any amount up to a total amount of NIS 365,983 (three hundred and sixty-five thousand and nine hundred and eighty-three new Israeli shekels) (hereinafter: “Guarantee Amount”) that you will demand from PolyPid Ltd., Company No.  514105923 (hereinafter: “the Debtor”) in connection with the Lease Agreement made between the Lessor and the Debtor on March 27, 2014 (hereinafter: “the Agreement”).

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

109


 

2.                            The Guarantee Amount shall be linked to the consumer price index as published by the Central Bureau of Statistics from time to time in accordance with the following terms of linkage:

 

The Basic Index for the purpose of this Guarantee shall be the index of February 2014 that will be published on March 15, 2014.

 

The New Index for the purpose of this Guarantee shall be the index that was published shortly before and prior to receiving your demand in accordance with this Guarantee.

 

The linkage differentials for the purpose of this Guarantee shall be calculated as follows: if it transpires that the New Index increased compared to the Basic Index, the linkage differentials shall be — the amount equal to the product of the difference between the New Index and the Basic Index multiplied by the amount of the demand, divided by the Basic Index. If the New Index falls below the Basic Index, we will pay you the amount stated in your demand up to the Guarantee Amount, without any linkage differentials.

 

3.                            Upon receiving your first written demand and no later than seven days as of the date we received your demand to our address as stated hereunder, we will pay you any amount specified in the demand provided that the said amount is not greater than the Guarantee Amount together with the linkage differentials, without imposing on you any obligation to prove or substantiate your demand and you will not be required to demand the payment first from the Debtor.

 

4.                            This Guarantee shall be in effect until the       day in the month of          in the year          (including) only, and shall be null and void after the said date.

 

Any demand made in accordance with this Guarantee shall be delivered to us in writing and shall be received by us no later than the aforesaid date.

 

5.                            This Guarantee is transferable and/or assignable.

 

6.                            This Guarantee may be paid in installments.

 

 

Sincerely,

 

 

 

                             Bank Ltd.

 

 

 

Bank address:                                     

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

110


 

Appendix I

 

Delivery protocol

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

111


 

Appendix J

 

Hot work Procedure

 

The Lessee and all contractors working on its behalf shall be obligated to work solely in accordance with the instructions set forth in the following Procedure:

 

1.                            No hot work shall be performed in the area of the Leased Premises and the Project however solely in accordance with the instructions set forth in this Procedure:

 

2.                            The term “hot works” shall mean — the performance of any work that requires welding and/or cutting by the application of heat or the use of an open flame.

 

3.                            Any contractor or subcontractor acting on behalf of the Lessee and that performs hot work shall appoint a supervisor on its behalf (hereinafter: “the Supervisor”) who will be responsible to assure that hot works are performed solely in accordance with the instructions set forth in this Procedure.

 

4.                            Prior to start of any hot works the Supervisor shall inspect the area designated for the work and shall assure that any flammable materials are removed from the premises in a radius of at least 10m, when fixed and irremovable flammable objects will be covered with a fire-retardant cover.

 

5.                            The Supervisor shall appoint a person who will serve as a fire observer (hereinafter: “Fire Observer”) that will hold proper fire extinguishing measures corresponding to the type of flammable materials that are in the premises of performing the hot work. The Fire Observer shall be solely responsible for observing the performance of the hot works and taking immediate action for the purpose of extinguishing any kindling caused as a result of performance of the hot work.

 

6.                            The Fire Observer shall be present in the premises where the hot work is performed as of start of its performance and until 30 minutes after their completion so as to assure that there are no possible sources of kindling in the premises.

 

For the avoidance of doubt, it is hereby clarified that failure to follow this procedure by the Lessee and/or any contractor on its behalf might affect the insurance coverage stated in the insurance policies that were taken out in respect of the performance of the works in the Leased Premises and the Project.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Signed]

 

112




Exhibit 10.4.1

 

First Addendum of Lease Agreement dated March 27, 2014

 

Made and executed in Tel Aviv on the : 1s day of July, 2014

 

Between:

 

Ogen Yielding Real Estate Ltd., Company No. 52-003309-3

 

 

Of 3 Har Sinai St., Tel Aviv

 

 

(Hereinafter: “the Lessor”)

 

 

 

 

 

The first party;

 

 

 

And between:

 

PolyPid Ltd., Company No. 514105923

 

 

Of 18 HaSivim St., Petah Tikva

 

 

(Hereinafter: “the Lessee”)

 

 

 

 

 

The second party;

 

 

 

Whereas:

 

On March 27, 2014 the Lessee and the Lessor signed a lease agreement according to which the Lessee leased the Leased Premises, within their meaning in the Lease Agreement, located in HaSivim St. in Petah Tikva (hereinafter respectively: “the Agreement” and “the Leased Premises”);

 

 

 

And whereas:

 

The Lessee requested from the Lessor to lease an additional area of approximately 377sqm gross, located in the ground floor in Tamar Building, according to the blueprint hereby enclosed as Appendix A (hereinafter: “Additional Leased Premises”);

 

 

 

And whereas:

 

The Lessor granted the request of the Lessee in accordance with the provisions set forth in this Addendum hereunder;

 

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

 

1.                            Preamble

 

1.1.                                     The preamble hereto shall be deemed an integral part of this Addendum.

 

1.2.                                     All definitions used in this Addendum shall have the meaning assigned to them in the Lease Agreement.

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 


 

1.3.                                     The provisions set forth in the Lease Agreement shall continue to apply to the parties, mutatis mutandis, except for the provisions set forth in this Addendum in respect of which the parties agreed as stated hereunder.

 

1.4.                                     The provisions set forth in this Addendum shall be construed as adding to the said in the Lease Agreement and shall not derogate therefrom. Notwithstanding the said, in the event of discrepancy between the provisions set forth in the Lease Agreement and the provisions set forth in this Addendum, the provisions set forth in this Addendum shall take precedence and shall be binding.

 

2.                            The Additional Leased Premises

 

2.1.                                     Subject to the provision of the updated guarantee and the certificates of insurance (as stated hereunder) by the Lessee to the Lessor, the Additional Leased Premises shall be added to the Leased Premises.

 

2.2.                                     The purpose lease of the Additional Leased Premises is identical to the Purpose of Lease set forth in the Agreement. For the avoidance of doubt, it is clarified that no additional modifications shall be performed in the Additional Leased Premises.

 

3.                            Term of Lease

 

3.1.                                     It is agreed that the Additional Leased Premises shall be delivered to the Lessee on June 12, 2014 (hereinafter: “Delivery Date”). As of the Delivery Date the Lessor and the Lessee shall perform adjustment works in the Additional Leased Premises (as stated hereunder) in coordination and cooperation between the parties, subject to the fulfillment by the Lessee of all its undertakings in the Agreement and in this Addendum, including the cumulative fulfillment of the following conditions: the Lessee furnished to the Lessor the updated guarantee (within its meaning in Section 5 hereunder) and the certificates of insurance specified in Section 6 hereunder.

 

3.2.                                     The Term of Lease of the Additional Leased Premises shall commence on September 7, 2014 and shall expire according to the expiration of the Term of Lease of the Leased Premises as stated in the Agreement, i.e. on January 11, 2020 (hereinafter: “Term of Lease of the Additional Leased Premises”). For the avoidance of doubt, it is clarified that the entire

 

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

2


 

provisions set forth in the Agreement regarding the Second Term of Lease shall also apply to the Additional Leased Premises.

 

3.3.                                     For the avoidance of doubt, it is hereby clarified that to the extent that the Agreement is lawfully terminated by the parties, such termination as aforesaid shall apply also with respect to the Additional Leased Premises and in such circumstances as aforesaid the Term of Lease of the Additional Leased Premises shall be terminated early, and the Lessee shall vacate the Additional Leased Premises in accordance with the provisions set forth in the Agreement, without derogating and/or detracting from any right and/or relief the parties may seek in accordance with the provisions set forth in any agreement and/or in accordance with the provisions set forth in any law.

 

4.                            Rent and Management Fees

 

4.1.                                     During the Term of Lease of the Additional Leased Premises the Lessee undertakes to pay to the Lessor for the Additional Leased Premises Rent in the amount of NIS 50 (fifty new Israeli shekels) for each 1sqm gross of the area of the Additional Leased Premises, in addition to statutory VAT, and in addition to linkage differentials in accordance with the provisions set forth in Section 4.6 hereunder (hereinafter: “Rent for the Additional Leased Premises”). For the avoidance of doubt, it is clarified that during the Second Term of Lease the Rent in the Additional Leased Premises shall increase in accordance with the provisions set forth in the Second Term of Lease in Appendix F of the Agreement.

 

4.2.                                     Notwithstanding the said, it is agreed that as of commencement of the Term of Lease of the Additional Leased Premises, the Lessee shall have a grace period of 4 (four) months with respect to the Leased Premises (hereinafter: “Grace Period in the Additional Leased Premises”) during which the Lessee shall be exempt solely from the payment of the Rent for the Additional Leased Premises and during this period the Lessee shall incur all other payments in respect of the Additional Leased Premises, including municipal taxes, electricity, water and Management Fees for the management of the Additional Leased Premises (within the meaning of this term in Section 4.2 hereunder). It is further agreed that with respect to the part of the Additional Leased Premises that is designated to be used as clean rooms and laboratories (except for the dining room), that constitutes an area of approximately 300sqm gross, the grace period that shall be granted shall be two additional months (2 months) (beyond the said period of 4 months

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

3


 

as aforesaid) however only in the event the operation of these rooms is delayed and during this period the Lessee shall be exempt solely from payment of the Rent for an area of 300sqm gross as aforesaid.

 

4.3.                                     It is clarified that beyond the period of 6 months the Rent shall be paid in accordance with the provisions set forth in the Agreement, even if the operation of the said area is delayed. In the event the Lessee starts to use the Additional Leased Premises until 7.9.2014, Grace Period in the Additional Leased Premises shall be shortened to 4 months.

 

4.4.                                     During the Term of Lease of the Additional Leased Premises the Lessee undertakes to pay to the Lessor for the Additional Leased Premises Management Fees in the amount of NIS 12 (twelve new Israeli shekels) for each 1sqm gross of the area of the Additional Leased Premises, in addition to statutory VAT, and in addition to linkage differentials (hereinafter: “Management Fees for the Additional Leased Premises”). For the avoidance of doubt, it is clarified that the Management Fees during the Second Term of Lease shall increase in accordance with the provisions set forth in Appendix F of the Agreement.

 

4.5.                                     The manner of payment of the Rent for Additional Leased Premises and the Management Fees for the Additional Leased Premises shall be as stated in Section 9 of the Agreement.

 

4.6.                                     For the avoidance of doubt, it is clarified that the Basic Index, within its meaning in the Agreement, is the consumer price index of February 2014 that was published on 15.3.2014.

 

4.7.                                     The Lessee undertakes to pay for the Additional Leased Premises the full amount of the Rent for the Additional Leased Premises, Management Fees for the Additional Leased Premises and taxes and payments as stated in Section 11 of the Agreement, even if the Lessee vacates the Additional Leased Premises and/or did not use the Additional Leased Premises and/or made partial use of the Additional Leased Premises, for whatever reason.

 

5.                            Securities

 

The Lessee undertakes to update the amount of the bank guarantee that was provided to the Lessor in a manner that an amount equal to the Rent for the Additional Leased Premises and the Management Fees of the Leased Premises shall be added for 3 months of lease, in addition to statutory VAT and linkage differentials (hereinafter:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

4


 

Updated Guarantee”). It is agreed that a condition for delivery of possession in the Additional Leased Premises is provision of the Updated Guarantee to the Lessor on the Delivery Date.

 

6.                            Insurance and liability

 

Each of the parties undertakes to fulfill the undertakings applicable to it regarding the insurances in accordance with the provisions set forth in the Agreement and the insurance appendixes enclosed therewith also with respect to the Additional Leased Premises.

 

7.                            Adjustment works

 

It is agreed that the Lessor shall perform adjustment works in the Additional Leased Premises as stated hereunder, until the Lease Commencement Date of the Additional Leased Premises:

 

7.1.                                     Adjustment of peripheral walls and entries to the Leased Premises according to the architectural plans of the Lessee that will be approved by the Lessor; the Lessor undertakes to withhold approval for reasonable considerations;

 

7.2.                                     Modification of the air-conditioning system and the fire detection and fire suppression system as customary in the offices. For the avoidance of doubt, it is clarified that the Lessee shall be solely responsible for any modification and/or adjustment that are necessary (if any) in the said systems, in light of the use made of the Additional Leased Premises (as opposed to the use of offices).

 

7.3.                                     Water and drainage in delivery pipes operated by an electrical pump in accordance with the architectural plans and the existing circumstances in the field.

 

7.4.                                     The Lessee undertakes to obtain from the authorities all the approvals that are necessary for the purpose of operating the Additional Leased Premises, to the extent that such approvals are necessary.

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

5


 

In Witness Whereof The Parties Hereto Have Hereunto Set Their Hands And Seal On The Day, Month And Year First Hereinabove Written:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp: PolyPid
Ltd.]

The Lessor

 

The Lessee

 

6




Exhibit 10.4.2

 

Second Addendum of Lease Agreement dated March 27, 2014

 

Made and executed in Tel Aviv on the 23rd day of July, 2017

 

Between:

 

Ogen Yielding Real Estate Ltd., Company No. 520033093

 

 

Of 3 Har Sinai St., Tel Aviv

 

 

(Hereinafter: “the Lessor”)

 

 

 

 

 

The first party;

 

 

 

And between:

 

PolyPid Ltd., Company No. 514105923

 

 

By its authorized signatories

 

 

Of 18 HaSivim St., Petah Tikva

 

 

(Hereinafter: “the Lessee”)

 

 

 

 

 

The second party;

 

 

 

Whereas:

 

On March 27, 2014 the Lessee and the Lessor signed a lease agreement [hereinafter: “the Original Agreement”] according to which the Lessee leases the Leased Premises within their meaning in the Original Agreement;

 

 

 

And whereas:

 

The Lessor and the Lessee signed the first Addendum of the Original Agreement on July 1, 2014 [hereinafter: “First Addendum”] according to which the Lessee leases from the Lessor an additional area of approximately 377sqm gross, located on the ground floor in the Tamar Building [the Leased Premises, within their meaning in the Original Agreement and the additional area that was leased to the Lessee in accordance with the First Addendum shall be referred hereinafter collectively: “the Leased Premises” as stated in the First Addendum [the Original Agreement and the First Addendum shall be referred hereinafter: “the Lease Agreement”];

 

 

 

And whereas:

 

The Lessee requested from the Lessor to lease, in addition to the Leased Premises within their meaning above, the “Additional Area” within its meaning hereunder and the Lessor agreed to the request of the Lessee as aforesaid and to set out additional conditions in connection with the Leased Premises, in accordance

 


 

 

 

with the subject to the provisions set forth in this Addendum hereunder;

 

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

 

1.                            Preamble

 

1.1.                                     The preamble hereto shall be deemed an integral part of this Addendum.

 

1.2.                                     All definitions used in this Addendum shall have the meaning assigned to them in the Lease Agreement except for the definitions assigned in this Addendum that are different from and in compliance with the agreements specified in this Addendum.

 

1.3.                                     The provisions set forth in the Lease Agreement shall continue to apply to the parties, mutatis mutandis, except for the provisions set forth in this Addendum in respect of which the parties agreed as stated in the Addendum and that shall take precedence over the provisions set forth in the Lease Agreement regarding their subject matter and in particular with respect to understandings regarding commercial and/or engineering and/or planning issues that are relevant to this Addendum.

 

1.4.                                     The provisions set forth in this Addendum shall be construed as adding to the said in the Lease Agreement and shall not derogate therefrom. Notwithstanding the said, in the event of discrepancy between the provisions set forth in the Lease Agreement and the provisions set forth in this Addendum, the provisions set forth in this Addendum shall take precedence.

 

List of Appendixes in this Addendum:

 

Appendix A — Blueprint of the Additional area

Appendix B — Blueprint of the roof

Appendix C — Blueprint of the generator in the yard

Appendix D — Adjustment Works Appendix

Appendix E — Principal plans

Appendix F — Facility manual

Appendix G — Insurance Appendixes

Appendix H — Contractor undertaking Appendix

Appendix I — Guarantee

Appendix J — Blueprint of the cable layout

Appendix K — Feed cable specification

 


 

Appendix L — Authorization to debit bank account (“Masav”)

 

2.                            The Additional Area

 

2.1.                                     In accordance with the provisions set forth in this Addendum, an additional area of approximately 751sqm net shall be added to the area of the Leased Premises (including a storage room in an area of approximately 9sqm marked in green, and that includes office toilets marked in the blueprint in purple, and the office are marked in red) with an addition of 15% for the Public Areas within their meaning in the Lease Agreement, i.e., an area of approximately 684sqm gross, located on the first floor in the Alon Building in the complex, whose boundaries are marked in the blueprint hereby enclosed as Appendix A of this Addendum (hereinafter: “the Additional Area”).

 

2.2.                                     It is clarified that the Additional Area comprises of two areas — the office area of the Lessee, including the toilet and the storage room as aforesaid (in an area of approximately 100sqm gross, marked in the colors as stated above) (hereinafter: “Office Area”). And the area of clean rooms (in the area of the remaining Additional Area, and that is marked in light blue in the blueprint hereby enclosed as Appendix A of this Addendum (hereinafter: “Clean Rooms Area”).

 

It is clarified that the payment specified hereunder for the Lessee’s Works as stated in Section 2 in Appendix D of this Addendum refers solely to the Office Area. Except for the budget allocated for the Adjustment Works as stated in Appendix D of this Addendum, the other provisions set forth in this Addendum shall apply to the entire Additional Area.

 

2.3.                                     It is clarified that anywhere in this Addendum that refers to the areas of the Additional Area (including parts thereof, and including the division in the interior area of the Lease Agreement), these shall be measured in 3 months by a licensed surveyor and shall be updated by the parties upon consent — including a retroactive update, to the extent required, of the different sums that are charged in accordance with this Agreement, according to the actual scope of the areas.

 

2.4.                                     The Purpose of Lease of the Additional Area shall be the construction and operation of a production facility, a clean room and offices and storage (in the storage room area).

 


 

Adjustment Works by the Lessee

 

2.4.1.                           The Additional Area, as marked in the blueprint hereby enclosed as Appendix A, shall be delivered to the Lessee on July 23, 2017 in its condition “as-is” at the time of signing this Addendum, and the Lessee shall raise no claims and/or demands and/or suits towards the Lessor and/or anyone acting on its behalf in connection therewith, unless the Lessor knew of a latent defect or failure and did not disclose the said information to the Lessee, or a latent defect or failure that was detected in the course of performance of the works, including in anything related to the performance of the Lessee’s works in the Additional Area, within their meaning hereunder, and in their condition as stated above.

 

It is further agreed that the Adjustment Works shall be performed solely by the Lessee in the Additional Area [hereinafter: “Lessee’s Works”] at the sole expense and under the sole responsibility of the Lessee, and the Lessee shall incur the following costs, including however without limitation, all costs related to and/or deriving the performance of the Lessee’s Works as stated hereunder and except for the budget specified in Appendix D of this Addendum, subject to the approval of the principal plans of the Additional Area with respect to the Additional Area by the Lessor (and/or anyone acting on its behalf). The Adjustment Works in the Additional Area shall be performed in accordance with the plans enclosed as Appendix E that the Lessee delivered to the Lessor in principle and that the Lessor accepted in principle [hereinafter: “Lessee’s Works Plans”] and subject to the comments and future approval of the Lessor that shall be provided in accordance with the provisions set forth in this Addendum and shall not affect the agreement in principle however shall refer later on to the specific construction plan only, to the extent that the Lessor deems fit.

 

For the avoidance of doubt, the specific performance of the works in the Additional Area shall be permitted to the Lessee solely on the condition that the work plans in principle of the Lessee are approved by the Lessor unless they deviate materially from the agreement in principle or deviate from the provisions set forth in the law.

 

For the avoidance of doubt, the approval of the Lessor to perform the Lessee’s Works shall not impose on the Lessor any liability for the planning of the works unless the Lessor provided incorrect declarations or data (in writing only) regarding the Additional Area and its features, and on which the Lessee relied. It is hereby clarified that the Lessee shall be entitled to perform modifications in the Works not in accordance with the

 


 

main sections (that were approved previously and in advance by the Lessor) however in any event the Lessee may not perform the following works without obtaining the prior and written approval of the Lessor: (1) connection and/or disconnection from the systems in the Building; (2) works that can affect the façades of the Building; (3) performing any constructive change in the Building; (4) works that may cause excess load on the floor of the Building and/or a change in the plans of the Leased Premises, from a safety aspect and without obtaining the prior and written approval of the Lessor in connection therewith.

 

2.4.2.                           The Lessee is obligated to furnish to the Lessor all the securities and the Lessee’s certificates of insurance as stated in this Addendum prior to delivery of possession in the Additional Area and prior to commencement of performance of the Adjustment Works in the Additional Area, as stated in this Addendum.

 

2.4.3.                           It is clarified that the actual commencement of the Lessee’s Works in the Leased Premises shall be coordinated with the Lessor and the Management Company, and the Lessee shall be responsible for obtaining their approval prior to the commencement of the Lessee’s Works as aforesaid.

 

In addition, it is clarified that the Lessee shall incur all expenses as aforesaid with and/or deriving from the performance of the Works (except for the budget specified in Section 2, Appendix D) that shall be performed by the Lessee as stated above, and the approval of the Lessor shall not impose on the Lessee any responsibility for the design and/or the performance of the Lessee’s Works, unless the Lessee provided incorrect declarations or data (in writing only) regarding the Additional Area and its features. Despite the obligation to obtain approvals in principle and other approvals as stated in this Addendum and Appendixes thereof, the Lessee shall be obligated in every respect to inspect the compliance of the Works with all the contractual provisions in connection with this Addendum and the Lease Agreement (mutatis mutandis) and with any binding standard, any law and any other relevant instruction of the authorities and the Lessor (unless the Lessor delivered in writing incorrect data or declarations), including upon completion of the Adjustment Works and shall deliver to the Lessor (and/or anyone acting on its behalf) As-Made plans and all the documents that are necessary in accordance with the Facility Manual table enclosed as Appendix F.

 


 

2.4.4.                           In addition, the Lessee undertakes to sign the contractor(s) that will perform the Lessee’s Works in the Leased Premises on an Undertaking enclosed with this Addendum, as stated in the provisions set forth in Appendix H enclosed with this Addendum, and as a prerequisite for the performance of the Works as stated above in the Leased Premises. In addition, the Lessee shall sign an Insurance Appendix in connection with the Works and undertakes to uphold its provisions in connection with the works that will be performed by the Lessee in the Leased Premises, including presentation of all the relevant certificate in connection with the arrangement of the insurances, as stated in Appendixes G1-G3 enclosed with this Addendum.

 

2.4.5.                           The Lessee agrees that to the extent that as a result of performance of the Lessee’s Works by the Lessee any damages and/or defects are caused to the Lessor and/or other lessees and/or visitors and/or passersby and any third-party and/or to the Additional Area and/or to any other area of the areas of the Leased Premises and/or to other leased premises, these damages shall be repaired by the Lessee in 7 business days, unless the Lessee proved that that it or anyone acting on its behalf was not responsible for the cause of the damage and in such circumstances the Lessor shall inquire the cause of the damage. In addition, it is clarified that during the inquiry/investigation the count of the days as aforesaid shall not be taken into account. To the extent that it is found that the Lessee is not responsible for such damages and/or defects as aforesaid, the Lessee shall not be obligated to make repairs including with respect to the dates specified above — without derogating from any other relief the Lessor and/or any other relevant third-party are entitled to in respect of the damages and/or the costs incurred by the Lessor due to the occurrence of the damages as aforesaid and subject to the quality of the required works.

 

2.4.6.                           It is further clarified that in case the damage and/or the defect were caused by the Lessee subject to the provisions set forth in Section 2.4.5 above, and consequently the Lessor receives any suit and/or demand, the Lessee undertakes to act in order to handle the said demand and/or suit and arrange everything necessary in 7 days and take action for the purpose of settling this matter at the earliest opportunity. It is clarified that the said shall not apply to urgent matters (that, by their very own nature, prevent the regular operations in the Additional Area) — and these will be settled immediately after the Lessee receives notice and when the identity of the cause of the damage cannot be determined immediately. To the extent that the Lessee

 


 

failed to take the said action solely with respect to urgent repairs as stated above and the Lessor was required to pay any amount and/or incur any obligation in respect of the said, the Lessee shall indemnify the Lessor for any damage and/or payment and/or cost the Lessor incurred, immediately upon receiving its first notice, and without derogating from any other relief the Lessor may seek against the Lessee in respect of breach of the provisions set forth in this Addendum and/or by virtue of any law.

 

2.4.7.                           The parties agree that the Lessor will allow the Lessee to install cameras in the Additional Area during the period of performance of the works as stated above, so as to avoid disputes regarding the cause of the damage. The Lessor permits the Lessee to install cameras at the expense of the Lessee in the Additional Area solely during the period of performance of the works, to the extent that the Lessee wishes.

 

2.4.8.                           The Lessee (and anyone acting on its behalf) undertakes during the period of performance of the Lessee’s Works in the Additional Area, to keep to a minimum the disturbance caused to the other leases and undertakes to keep the area of the Leased Premises and the nearby areas clean and orderly and follow the instructions of the Lessor and/or the Management Company in connection therewith. It is further clarified that the Lessee may perform works that cause excessive noise [such as excavations and/or drilling in the floor and/or the ceiling of the Leased Premises and the like] as part of the performance of the Lessee’s Works, solely until 08:00 and after 17:00 on Sun. — Thurs. and on Fridays from 13:00 [hereinafter: “Extraordinary Works”] however even in such circumstances as aforesaid the Lessee undertakes to follow the instructions set forth by the Management Company, provided that the performance of the said Works is not denied however only for reasonable reasons, and to perform the Extraordinary Works while keeping the Additional Area and surroundings thereof clean. It is clarified that the permission granted to perform the Extraordinary Works shall not derogate from any responsibility of the Lessee in connection with the Additional Area in accordance with the provisions set forth in the Lease Agreement and/or this Addendum. In addition, the Lessee undertakes to mitigate to the extent possible the inconvenience caused to the other lessees in the Project due to the performance of the Extraordinary Works.

 

2.4.9.                           It is clarified that the Adjustment Works in the entire area of the Additional Area shall be performed by the Lessee in full cooperation with the Lessor.

 


 

2.4.10.                    In addition, it is clarified and agreed that all the Lessee’s Works that will be performed in the Additional Area shall be the sole property of the Lessor however, for the avoidance of doubt, the clean rooms and the ancillary systems and equipment that can be dismantled — shall become the property of the Lessor (hereinafter: “Dismantling of the Clean Rooms”). The Lessee shall not be entitled, under any circumstances, to dismantle the said Adjustment Works without obtaining the prior and written approval of the Lessor (except for the Dismantling of the Clean Rooms) and on the condition that the Lessee returns the Additional Area to the Lessor upon expiration of the Term of Lease in its condition as delivered to the Lessee on the Delivery of Possession Date or upon completion of the Adjustment Works (at the discretion of the Lessor) when the Additional Area is in good and operable condition and subject to reasonable wear, together with all the additions and/or improvements that were built and/or installed therein by the Lessee, except for equipment that is not attached to the Leased Premises [hereinafter: “Portable Equipment”], that the Lessee will remove under its responsibility and at its expense,. It is clarified that damage that does not derive from the dismantling of the Portable Equipment from the Leased Premises caused to the Leased Premises shall be repaired at the expense of the Lessee and under its sole responsibility until the date of vacating the Additional Area or on any other agreed date. In case the Lessee failed to act in the said manner, this shall be deemed as breach of the provisions set forth in this Addendum with all ensuing consequences, and the Lessor shall be entitled to forfeit the securities that the Lessor holds in accordance with the provisions set forth in this Addendum, and without derogating from any other of the provisions set forth in the Lease Agreement regarding the circumstances of forfeiture of the securities. Notwithstanding the said, the Lessor shall deliver to the Lessee written notice 14 business days prior to performance of the said forfeiture, and after affording to the Lessee an opportunity to repair the said damage in 10 business days.

 

2.4.11.                    Upon completion of performance of the Adjustment Works and prior to occupancy the Lessee shall submit to the Lessor an approval in principle from the safety consultant evidencing that the safety plans (that include, inter alia, safety and hygiene issues) were performed in accordance with the principal plans that were submitted in advance in accordance with the provisions set forth in Appendix E of this Addendum.

 


 

Without derogating from the aforesaid, in 6 months (at the latest, unless the said date was delayed as a result of reasons that are not contingent on the Lessee) as of the date of occupancy the Lessee shall complete all the approvals that are necessary for the Facility Manual in accordance with the table enclosed as Appendix F of this Addendum and that constitute an integral part thereof.

 

It is clarified that the Lessee shall be responsible for the quality and standard of the Adjustment Works and their compliance with the provisions set forth in any law and shall also be held liable towards the Lessor in accordance with the provisions set forth in the Sale (Apartments) Law 5733-1973 (including Schedule 2 thereof) with respect to contractor’s warranty period and the warranty period provided that the contractor’s warranty period shall not be greater than a period of one year as of the date of completion of the Adjustment Works.

 

3.                            Term of Lease in the Additional Area

 

3.1.                                     The Term of Lease in connection with the Additional Area shall be in accordance with the following provisions:

 

3.1.1.                           The Term of Lease in connection with the Additional Area shall commence on July 23, 2017 and shall expire on July 22, 2022 (hereinafter: “Term of Lease of the Additional Area”). The entire provisions set forth in the Lease Agreement, to the extent that they were not modified expressly in this Addendum, shall also apply to the Additional Area during the entire Term of Lease of the Additional Area.  For the avoidance of doubt, failure to deliver specific work plans in connection with the Lessee’s Works and/or failure to approve the said plans shall not release the Lessee from any of its undertakings in accordance with the provisions set forth in this Addendum and, accordingly, as of the commencement of the Term of Lease of the Additional Area the Lessee shall be obligated to fulfill all its undertakings with respect to the  Additional Area in accordance with the provisions set forth in the Lease Agreement and in accordance with the provisions set forth in this Addendum, including, however not limited to, payment of the Rent, Management Fees, municipal taxes, and all other payments the Lessee shall be obligated to pay in connection with the Additional Area until expiration of the Term of Lease of the Additional Area.

 


 

3.2.                                     It is agreed that without derogating from the provisions set forth in Section 3.1 above, full possession in the Additional Area shall be delivered on July 23, 2017 on the condition that the principal plans were submitted by the Lessee to the Lessor and to the Lessor’s consultants as stated above and were approved in principle and that only the Lessee furnished all the securities, insurances, and appendixes that the Lessee is obligated to furnish to the Lessor as stated in this Addendum.

 

3.3.                                     However, and for the avoidance of doubt, the entire commitments of the Lessee in accordance with the provisions set forth in the Lease Agreement and this Addendum with respect to the Additional Area shall apply as of the commencement date of the Term of Lease in the Additional Area even if the Lessee failed to deliver to the Lessor all the other approvals and/or securities in connection with the Additional Area in accordance with the provisions set forth in this Addendum, and in any event the Lessee shall be obligated to fulfill all its undertakings as of the commencement date of the Term of Lease in the Additional Area, including, however not limited to, payment of the Rent, Management Fees, and all other payments applicable to the Lessee in accordance with the provisions set forth in this Addendum.

 

4.                            Extension of the Term of Lease in the Additional Area

 

In addition to the aforesaid, the parties agree that upon expiration of the Term of Lease in the Additional Area and subject to the full and timely fulfillment of all the undertakings of the Lessee and in accordance with the provisions set forth in this Addendum [including, however not limited to, provision of all the securities in accordance with this Addendum, presentation of all the proper certificates of insurance and the fulfillment of all the other undertakings of the Lessee], the Term of Lease in the Additional Area shall be extended for an additional period of 60 additional months as of expiration of the Term of Lease in the Additional Area within its meaning above, i.e., from July 23, 2022 and until July 22, 2027, in accordance with the provisions set forth in this Addendum [hereinafter: “Additional Term of Lease”], unless the Lessee delivered to the Lessor notice regarding its wish not to lease the Additional Area during the Additional Term of Lease, until and no later than 6 months prior to expiration of the Term of Lease of the Additional Area.

 

5.                            Rent and additional payments for the Additional Area

 

5.1.                                     During the entire Term of Lease of the Additional Area, the Lessee undertakes to pay to the Lessor for the lease of the Additional Area an amount of NIS 42 per 1sqm gross, in addition to VAT and linkage differentials in accordance with the Basic Index within its meaning in the Original Agreement [hereinafter: “Rent for the Additional Area”].

 


 

5.2.                                     Notwithstanding the said, the parties agree the Lessee shall have a grace period of 2 months only with respect to the Additional Area, as of the Delivery of Possession Date from July 23, 2017 [hereinafter: “Grace Period”] during which the Lessee shall be exempt from the payment of Rent for the Additional Area, however during this period the Lessee shall incur all the other payments in respect of the Additional Area including, however not limited to, municipal taxes, electricity, water, payment of 50% of the total Management Fees solely during the Grace Period with respect to the Additional Area only, and any other payment applicable to the Lessee in accordance with the provisions set forth in the Lease Agreement and this Addendum in respect of the Leased Premises (and in compliance with the Additional Area). For the avoidance of doubt, it is clarified that upon expiration of the Grace Period, the Lessee shall incur the full amount of the Rent and the Management Fees with respect to the entire Additional Area even if the use of the Additional Area is delayed for any reason.

 

5.3.                                     The Lessor shall transfer to the Lessee the Adjustment Works Budget (within its meaning in Appendix D) subject to the provisions set forth in this Addendum and Appendixes thereof, and subject to all the conditions and the relevant dates for the purpose of its release.

 

5.4.                                     During the entire Term of Lease of the Additional Area, the Lessee undertakes to pay to the Lessor for the Additional Area [except for the Grace Period within its meaning above, in which the Lessee shall pay only 50% of the Management Fees], Management Fees in the amount of NIS 13 per 1sqm gross of the Additional Area, in addition to VAT and linkage differentials in accordance with the Basic Index within its meaning in the Lease Agreement [hereinafter: “Management Fees for the Additional Area”].

 

5.5.                                     Rent for the Additional Area and the Management Fees for the Additional Area shall be paid in the beginning of each quarter and in a Banks’ Clearing House (Masav) transfer by the form hereby enclosed as Appendix L of this Addendum.

 

5.6.                                     For the avoidance of doubt, and without derogating from the aforesaid and/or the provisions set forth in the Lease Agreement regarding the Management Fees for all the areas leased to the Lessee, it is clarified that the Management Fees set forth in this Addendum [in respect of all the areas  that are leased to the Lessee in accordance with the provisions set forth in the Lease Agreement and in accordance with the provisions set forth in this Addendum] are estimated and based on the estimate of the Lessor in accordance with the data that the Lessor holds as of the

 


 

date of signing this Addendum however this shall not give rise to any representation regarding the Management Fees that the Lessee is obligated to pay and it is possible that the Management Fees that will be actually charged shall be higher and/or lower than the estimated Management Fees as aforesaid and the Lessee shall have no claim and/or demand and/or suit against the Lessor and/or the Management Company and/or anyone acting on their behalf on the condition that the Management Fees that the Lessee is obligated to pay shall not be greater than 5% of the Management Fees specified in the Lease Agreement and/or this Addendum with respect to the leased areas to the Lessee [as the case may be], except for circumstances of increase of the minimum wages in the market and/or the electricity costs and/or the linkage differentials to the index and in such circumstances as aforesaid the Lessor shall be entitled to increase the Management Fees that the Lessee will pay according to the effect of the increase of the said components on the management expenses [and without derogating from the manner of distributing the Management Fees among all the lessees in the Building in accordance with the provisions set forth in the Management Agreement].

 

5.7.                                     The parties agree that upon expiration of the Term of Lease in the Additional Area and upon commencement of the Additional Term of Lease within its meaning above, the Rent with respect to the entire area of the Leased Premises paid by the Lessee shall be updated in accordance with the provisions set forth in this Addendum by an addition of approximately 3.5% of the relevant Rent with respect to each and every area in accordance with the provisions set forth in this Addendum.

 

6.                            Provisions regarding the lease of additional areas

 

6.1.                                     The parties hereby agree that the Lessee is granted the right to lease an area of approximately 170sqm net with 15% load in respect of the Public Areas when the said area adjoins the Additional Area in the Alon Building, marked in brown in the blueprint hereby enclosed as Appendix A of the Agreement [hereinafter: “Ancillary Area”] for a period of 6 months that shall commence on July 23, 2017 and that shall expire on December 22, 2017 [hereinafter: “Availability Period of the Area”] in accordance with the following provisions:

 

6.1.1.                           To the extent that the during the Availability Period of the Area the Lessee notified the Lessor that it does not wish to lease the Ancillary Area [hereinafter: “Lessee’s Notice”] or in the event the Lessee did not deliver to the Lessor any notice during the Availability Period of the Area regarding its wish to lease the Ancillary Area, in such circumstances, as of the date of the Lessee’s Notice or as of expiration of the Availability Period

 


 

of the Area, whichever is earlier, the right of the Lessee to lease the Ancillary Area shall expire and the Lessor may lease this area to any third-party and the Lessee shall have no claims and/or demands and/or suits in connection therewith.

 

6.1.2.                           To the extent that the Lessee notifies the Lessor during the Availability Period of the Area that it wishes to lease the Ancillary Area in such circumstances as aforesaid the Lessee shall receive possession in the Ancillary Area in 7 workdays as of the date of delivering the Lessee’s Notice [hereinafter: “Delivery Date of the Ancillary Area”].

 

6.1.3.                           The parties agree that the Term of Lease in the Ancillary Area shall commence on the Delivery Date of the Ancillary Area and shall expire upon expiration of the Term of Lease of the Additional Area, i.e., on July 22, 2022 [hereinafter: “Term of Lease of the Ancillary Area”].

 

6.1.4.                           The parties agree that to the extent that the Lessee leases the Ancillary Area in accordance with the provisions set forth in this Section, the Ancillary Area shall be delivered to the Lessee in its condition “as-is” at the time of signing this Agreement and the  Lessee hereby waives any claim and/or demand and/or suit against the Lessor in connection therewith, unless the Lessor was aware of a latent defect or failure and failed to disclose the said information to the Lessee, or a latent defect or failure that was detected during the performance of the Adjustment Works.

 

6.1.5.                           The parties further agree that the Adjustment Works in the Ancillary Area shall be performed by the Lessee and at its expense. The entire provisions set forth in this Addendum with respect to the Lessee’s Works in the Additional Area shall also apply to the Ancillary Area, mutatis mutandis.

 

6.1.6.                           In addition, the parties agree that the other relevant provisions in the Lease Agreement and this Addendum shall apply to the Additional Area, mutatis mutandis. The Lessee shall incur payment of the Rent, Management Fees and the other payments in respect of the Ancillary Area in accordance with the provisions set forth in Section 6 above, during the entire Term of Lease of the Ancillary Area except for the Grace Period and the Additional Period as stated hereunder. It is emphasized that the provisions set forth in Section 5.2 above shall not apply to the Ancillary Area, however solely with respect to the Ancillary Area the Lessee shall be exempt from payment of Rent and Management Fees only for a period of 6 months as

 


 

of the delivery of the Ancillary Area [hereinafter: “Grace Period in the Ancillary Area”]. After expiration of the Grace Period in the Ancillary Area the Lessee shall pay the full amount of the Rent in respect of the Ancillary Area.

 

6.1.7.                           After expiration of the Grace Period in the Ancillary Area, the Ancillary Area shall be delivered to the Lessee in return for Rent (in addition to any Rent and/or Management Fees specified in this Addendum) in the amount of NIS 20 per 1sqm (in connection with the Ancillary Area) for six months only, with the addition of municipal taxes for this area, that shall be paid directly to the Lessor (hereinafter: “Additional Term”). Notwithstanding the said, it is clarified that at any stage during the Additional Term the Lessor shall be entitled to receive offers from potential lessees and notify the Lessee regarding the evacuation of the Ancillary Area in 30 days at most, even prior to expiration of the Additional Term of six months. Nevertheless, during the Additional Term the Lessee shall have right of first refusal (i.e., the Lessee shall be entitled to keep for itself the Additional Area until expiration of the Additional Term, in return for payment of the full amount of the Rent, Management Fees and municipal taxes (and from this stage henceforth municipal taxes shall be paid directly to the municipality) in accordance with the provisions set forth in the Lease Agreement (mutatis mutandis) and as customary with respect to the other Leased Premises (and not for the price indicated in this paragraph above.

 

6.1.8.                           It is clarified that upon expiration of the Additional Term the Ancillary Area shall be returned to the Lessor unless 90 days at the latest prior to expiration of the Additional Term the Lessee delivered written notice to the Lessor and announced that it intended to add the Ancillary Area to the remaining parts of the Leased Premises within their meaning hereunder, and in such circumstances as aforesaid — the entire provisions set forth in this Addendum shall apply to this Ancillary Area, including the obligation to pay the Rent, Management Fees, municipal taxes and the like in accordance with the mechanisms set out in Section 6 hereunder (including sub-sections thereof) and according to the rates applicable to the remaining Additional Area as of expiration of the Additional Term henceforth.

 

6.1.9.                           It is clarified that to the extent that the Lessee leases the Ancillary Area in accordance with the provisions set forth in this Section, all adjustments that are necessary for the purpose of adding the Ancillary Area to the Additional Area and/or to any other area that the Lessee leases and/or will

 


 

lease in the future, including, however not limited to, breaking of walls and/or removal and/or adjustment of walls, adjustment works in the corridors in the Ancillary Area and/or the Additional Area and/or in the corridors located outside the Ancillary Area and/or the Additional Area, installation of signage and any other work that is necessary for the purpose of adding the Ancillary Area to the areas that are leased and/or that will be leased to the Lessee in accordance with the provisions set forth in this Section shall be performed solely under the responsibility and at the expense of that Lessee. The entire provisions set forth in this Addendum with respect to the Lessee’s Works in the Additional Area shall also apply to the works stated in this Section, mutatis mutandis.

 

7.                            Insurance

 

The Lessee undertakes to extend at its expense and to keep in effect during the entire Term of Lease in the Additional Area and the Ancillary Area [to the extent that the Lessee leases the Ancillary Area in accordance with the provisions set forth in Section 6 above] the insurance policies specified in the Lease Agreement and enclosed as Appendixes G-1 to G-3 also with respect to the Additional Area and the Ancillary Area (to the extent that the Ancillary Area is held/leased by the Lessee) respectively, and to furnish to the Lessor the certificates of insurance in accordance with the provisions set forth in the Lease Agreement in such manner that they shall also apply to the Additional Area and the Ancillary Area (to the extent relevant) as of the relevant Delivery of Possession Date and as a condition thereof.

 

8.                            Securities

 

The Lessee undertakes to provide a bank guarantee in an amount that is equal to the Rent for the Additional Area and the Management Fees in the Additional Area for 3 months of lease in addition to VAT and linkage differentials to the Basic Index within its meaning in the Original Agreement, and in a total amount of NIS 166,795 (in words: one hundred and sixty-six thousand and seven hundred and ninety-five new Israeli shekels) [hereinafter: “Guarantee for this Addendum”]. It is agreed that a condition for the delivery of possession in the Additional Area is the provision of the additional guarantee to the Lessor in 20 business days as of the date of signing this Addendum. The provisions set forth in this Section shall also apply to the Ancillary Area, mutatis mutandis, to the extent that the Lessee leases the said area and as of this date henceforth. It is clarified and agreed between the parties that the additional guarantee that is provided in respect of this Addendum is provided solely in connection with this Addendum and the Lessor shall not be entitled to use this guarantee for the purpose of assuring the fulfillment of the undertakings of the Lessee in accordance with the Lease Agreement or the First Addendum of the Lease Agreement. It is further clarified that the guarantees that Lessor holds in respect of the Primary Lease Agreement may not be used as a security for the fulfillment of the undertakings of the Lessee

 


 

as stated in this Addendum. Notwithstanding the said, at the time of signing this Agreement the Lessee shall deliver to the Lessor a security check on behalf of the Lessee that will be deposited with the Lessor until 17.8.2017 or until the date of furnishing the bank guarantee specified in this Section, whichever is earlier. In case the Lessee failed to provide the guarantee as aforesaid, on 17.8.2017 the Lessor shall be entitled to deposit and cash this check and as of this date henceforth the amount paid shall be used as a guarantee/security for this Agreement (including any relevant definition or reference in the Agreement). To the extent that the guarantee is not provided and the security check is cashed until the date specified in this sub-section, the Lessee shall be entitled to convert the security check to a bank guarantee as aforesaid on a later date.

 

9.                            Using the area of the roof in the Alon Building and the development work north of the Building for the purpose of placing technical equipment in connection with the Additional Area

 

9.1.                                     The parties agree that a designated area shall be allocated in the roof of the Alon Building, as marked in the blueprint hereby enclosed as Appendix C of this Addendum, for the purpose of placing technical equipment [hereinafter: “the Technical Equipment”] and the Lessee shall place a generator in the yard of the Lessor, according to a location that will be determined later on (the estimated location shall be in the northern part of the Alon Building when the final location shall be determined with the consent and cooperation between the parties and after obtaining all the approvals of the professional entities on behalf of the parties to this Addendum and shall be marked accordingly in the blueprint) and that will be used by the Additional Area [hereinafter: “Technical Equipment Area”]. Prior to placing the technical equipment as aforesaid in the Technical Equipment Area the Lessee shall take measures to obtain all relevant approvals from the competent authorities [to the extent necessary] in accordance with the provisions set forth in any law and standard.

 

9.2.                                     The Lessee undertakes to connect a sewage pump to the said generator in such manner that to the extent that there are disruptions in the supply of electricity and/or power outages in the electricity supplied to the Building where the Additional Area is located or to the Additional Area itself — the generator shall be used as backup for emergencies in such manner that will enable the discharge of sewage from the Additional Area.

 

9.3.                                     Without derogating from the foregoing, the Lessee shall be entitled to place the technical equipment in the Technical Equipment Area subject to obtaining the approval of the Lessor and consultants thereof [including, however not limited to,

 


 

the approval of a structure engineer, a safety consultant and any other consultant at the sole discretion of the Lessor] and for the purpose of obtaining such approval as aforesaid the Lessee undertakes to provide to the Lessor all particulars, plans, approvals and all the other documents that are required from the Lessor and its consultants in connection with the said equipment and its placement in the  Technical Equipment Area in 7 days at the latest prior to placing the technical equipment as aforesaid.

 

9.4.                                     For the avoidance of doubt, the Lessee, subject to and after obtaining the approval of the competent authorities and the Lessor and its consultants in connection with the technical equipment and its placement in the Technical Equipment Area as aforesaid, shall place the technical equipment in the Technical Equipment Area at its expense and under its sole responsibility. It is clarified that the Lessee shall be solely responsible for transporting the technical equipment and installing the technical equipment in the Technical Equipment Area and shall incur all costs associated therewith. For the avoidance of doubt, the Lessor shall not be held liable in any manner and shall not incur any costs in connection with the technical equipment and/or its placement and/or installation and/or operation and/or dismantling thereof and any other matter in connection therewith. It is clarified that to the best of knowledge of the Lessor the permitted load in the Building is 300kg per 1sqm. At the request of the Lessee and as a condition for the purpose of loading heavy machinery on the floor of the Building or the roof of the Building, the Lessor intends the conduct a loads test for the purpose of ascertaining this data. If it is found that the permitted load in the Building is lower than 300kg per 1sqm as declared by the Lessor in this Agreement, the Lessor shall perform all the strengthening works (whether temporary or permanent) and/or the required works at its expense and by manpower on its behalf so as to cause the Building to be in a condition that can withstand a load of 300kg per 1sqm. These works shall be completed on September 23, 2017 at the latest. If the strengthening works are necessary as aforesaid, these works shall be performed in full coordination with the Lessee and in a manner that will not cause a disruption to the works that the Lessee will perform in the Additional Area and subject to the instructions set forth by the supervisor on behalf of the Lessee. The Lessor shall be fully responsible for these works including for any damage caused to the Lessee as a result of and in connection with the strengthening works. In case the strengthening works are not completed on the date specified above, an additional period of 30 business days shall be granted for the purpose of performing and completing the said adjustments (hereinafter: “Additional Period”) and the date for the fulfillment of the mutual and relevant undertakings of the parties in this Agreement — shall be delayed respectively. Notwithstanding the said, to the extent that even during the Additional

 


 

Period the issue of the permitted loads in the Building was not settled as stated in this sub-section, in such circumstances as of the Additional Period the Lessor shall pay daily and agreed liquidated damages in an amount equal to 1.5 times of the amount of the daily Rent that the Lessee is obligated to incur in accordance with this Addendum for the Additional Area, and at the same time all the undertakings of the parties (including the undertaking of the Lessee to pay the Rent) — shall be delayed respectively. It is clarified that to the extent that any damage is caused to the Building [including, however not limited to, the roof of the Building, its systems, equipment and facilities installed therein and any other element of the Building] and/or to the Lessor and/or to other lessees and/or to any other third-party and it is proven that the said damage was caused as a result of placement of the technical equipment in the Technical Equipment Area and/or its transportation to the Technical Equipment Area and/or its installation in the premises of the Technical Equipment Area and/or its dismantling and/or the operation of the technical equipment, the Lessee undertakes to incur any cost and repair any damage immediately upon receiving the first demand of the Lessor in connection therewith. It is clarified that if the Lessor receives any demand and/or suit as a result of the transportation and/or placement and/or operation and/or dismantling of the technical equipment and/or any other matter related to the technical equipment, the Lessee undertakes to settle the suit and/or the demand as aforesaid in 7 business days as of the date of receiving the demand of the Lessor. It is further clarified that to the extent that the Lessor incurs any payment and/or obligation and/or cost in connection with the technical equipment and anything deriving therefrom, provided that it first requested from the Lessee to settle the payment and the Lessee failed to act in the said manner, the Lessee shall indemnify the Lessor for any obligation incurred by the Lessor immediately upon receiving the first demand of the Lessor, and without derogating from any relief the Lessor may seek for the breach of the provisions set forth in this Addendum and/or by virtue of any law. The provisions set forth in this Section shall not derogate from the other sections regarding the liability of the Lessee (including with respect to observation of safety and hygiene instructions and assurance of the performance of all the relevant statutory provisions and the standards) in accordance with the provisions set forth in this Addendum, and these shall also apply to the technical equipment, mutatis mutandis.

 

9.5.                                     It is clarified and agreed, and without derogating from the provisions set forth hereinabove and hereunder in connection with the technical equipment, that the Lessee shall solely incur all costs in connection with the operation of the technical equipment [including, however not limited to, direct operation costs and/or electricity and generator expenses and/or expenses for repairs and/or any other expense].

 


 

10.                     Additional adjustments

 

10.1.                              The Lessor grant to the Lessee extraordinary permission to pass electricity cables only above one window in the western part of the Building where the Leased Premises are located, in the second floor above the Additional Area, as marked in the plan, Appendix K of this Agreement.

 

10.2.                              Prior to commencement of the performance of the Adjustment Works, the Lessee undertakes to deliver a report from a radiation consultant that will present data regarding the predictable radiation from the distribution board. Upon completion of the electricity works in the entire Additional Area the Lessee undertakes to deliver to the Lessor a report detailing the compliance of the radiation in the Additional Area and ground floor thereof with the law, by a report approved by a licensed and certified radiation consultant.

 

10.3.                              During the Term of Lease of the Additional Area the Lessor undertakes to supply to the Lessee electricity as required in accordance with the electricity plans submitted to the Lessee and that were approved according to the capacities specified thereat. For the purpose of the electricity feed the Lessor undertakes to pass cables according to the outline detailed in Appendix K enclosed with this Addendum. For the purpose of calculating the costs imposed on the Lessee, the parties shall make a relative calculation according to the length of the cable, and the Lessor shall incur the costs up to the northern pier and with an additional 15sqm, and from this point onwards the Lessee shall incur the remaining costs (including the costs of the pipe and the costs of performance of the works) that are necessary for the purpose of pulling the cable up to the main distribution board in the Additional Area, in accordance with  the outline specified in Appendix K. The said cabling works shall be completed until October 30, 2017.

 

10.4.                              Separate electricity and water meters marked in purple in the blueprint hereby enclosed as Appendix A of this Addendum shall be installed in the toilet adjacent to the Additional Area and the Lessee shall be obligated to pay separate monthly bills in connection therewith, in addition to the Rent, Management Fees and the other current payments specified in this Addendum.

 

11.                     Miscellaneous

 

11.1.                              This Addendum constitutes an integral part of the Lease Agreement and all the relevant provisions in the Lease Agreement and that were not amended, modified

 


 

or added in this Addendum including: the area of the Leased Premises, the Term of Lease of the Additional Area and the Ancillary Area, the undertakings of the Lessee and the Lessor regarding the works in the Additional Area and the Ancillary Area, the securities and the entitlement to enforce the securities shall continue to apply the parties with respect to the lease of the Additional Area and the Ancillary Area, mutatis mutandis and as the case may be. In the event of discrepancy between the Primary Agreement (the Lease Agreement) and this Addendum, the provisions set forth in this Addendum shall take precedence.

 

11.2.                              For the avoidance of doubt it is clarified that the Lessee shall be solely responsible for obtaining all permits and/or approvals in connection with the operation of its business in the areas leased to the Lessee in accordance with this Addendum [including, however not limited to, in connection with a business license, certificates from the Fire and Rescue Services Authority, certificates from the municipality and any other certificate that instructions of use necessary in connection with operating its business in the Leased Premises] and without derogating from the other provisions set forth in the Lease Agreement in connection therewith.

 

And in witness hereof the parties are hereby undersigned:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

 


 

 


 

 


 

 


 

Appendix D

 

Adjustment Works in the Additional Area

 

1.                            The Additional Area, as marked in the blueprint hereby enclosed as Appendix A, will be delivered to the Lessee on July 23, 2017 in its condition “as-is” at the time of signing this Addendum, and the Lessee shall raise no claims and/or demands and/or suits against the Lessor and/or anyone acting on its behalf in connection therewith, unless the Lessor was aware of a latent defect or failure and did not disclose any information to the Lessee in connection therewith, or a latent defect or failure that was detected during the performance of the works, including in connection with anything related to the performance of the Lessee’s Works in the Additional Area, within their meaning hereunder, and in its condition as stated above.

 

2.                            The Lessor shall incur a one-time payment solely in connection with the construction expenses that the Lessee incurred in connection with the performance of the Adjustment Works in part of the Area of the Leased Premises (and only in the Office Area, within the meaning of this term in the Addendum) and within their meaning in this Addendum, and that shall be performed in accordance with and subject to the provisions set forth in this Addendum, for a total and one-time amount of NIS 230,000 (in words: two hundred and thirty thousand new Israeli shekels) in addition to VAT (hereinafter: “Adjustment Works Budget”) and, in addition to the said (and beyond the Grace Period specified in the Addendum itself) the Lessee shall be exempt from payment of the Rent solely in respect of the Additional Area for one month, and from payment of 50% only for the Management Fees for that month, solely in accordance with the conditions set forth hereunder, that will be filled fully and cumulatively by the Lessee:

 

2.1.                                     3 days prior to the payment date for the Adjustment Works Budget the Lessee shall provide to the Lessor proof evidencing the actual payment to the contractor on behalf of the Lessee in the Additional Area in the amount of NIS 4,000,000 for the performance of the entire works in the Additional Area (and not just for the performance of the Adjustment Works subject matter of the Adjustment Works Budget).

 

2.2.                                     A fundamental condition for the approval of the Adjustment Works Budget is evidence that was filmed by the Lessee and the Lessor together and approved by the Lessor regarding the actual performance of the works for which the Adjustment Works Budget will be paid in the Offices Area.

 

3.                            It is clarified that the Adjustment Works Budget shall not include costs that the Lessee incurred for the purchase of equipment, inventories and furniture for the Additional Area,

 


 

however expenses in respect of the construction expenses for the purpose of performing the Adjustment Works, including consultants and professionals solely in connection with the performance of the Adjustment Works, and for expenses that the Lessee incurred in respect of the purchase of fixtures and installation thereof in the Additional Area only, including fire extinguishing equipment, communication equipment and alarm systems that will remain in the area of the Additional Area upon expiration of the Term of Lease.

 

4.                            It is further clarified that any sum greater than the Adjustment Works Budget and that is necessary in connection with the performance of the Adjustment Works as stated above shall apply solely to the Lessee.

 

5.                            The Lessor shall pay the Adjustment Works Budget in one payment subject to the fulfillment of the conditions set out in Sections 2.1, 2.2 above and Section 6 hereunder (hereinafter: “Payment Dates”) and in accordance with the terms set forth in the Adjustment Works Budget.

 

6.                            It is clarified that during the performance of the Adjustment Works and prior to the occupancy of the Additional Area, the Lessor shall be entitled to ensure with an engineer and/or any other qualified professional on its behalf that the Adjustment Works that were actually performed are in compliance with the principal plans that were approved by the Lessor and are in compliance with the provisions set forth in any law.

 

7.                            In addition, it is clarified that the Lessor’s approval shall not impose on the Lessor any responsibility for the design and/or performance of the Lessee’s Works and subject to the provisions set forth in Section 10.3 of the Lease Agreement.

 

8.                            Subject to the provisions set forth in the Addendum, the Lessee shall perform the Adjustment Works in the Leased Premises by contractors on its behalf (hereinafter: “Lessee’s Contractors”) and at its expense. During the performance of the works the Lessee undertakes to work with contractors with experience of more than 10 years in the construction sector and to use standard materials of the highest quality. For the purpose of performing the works the Lessee shall obtain the prior approval in principle of the Lessor and the prior approval of the Lessor’s consultants for the purpose of the design of the works as stated in the Addendum (hereinafter: “Professional Consultants”).

 

9.                            The Lessee undertakes that it and/or anyone acting on its behalf (including contractors and subcontractors that are employed in the performance of the Adjustment Works) shall apply all necessary precautions and safety measures (including, however not limited to — fencing and signage as required by law) for the purpose of preventing any loss, damage or injury to the body and/or the property of any person and/or entity in connection with the performance of the works as aforesaid in accordance with the provisions set forth in the  law and the

 


 

relevant safety standards and in accordance with the provisions set forth in the Addendum. Without derogating from the foregoing, the Lessee undertakes that it and/or anyone acting on its behalf shall apply proper precautions and shall observe the provisions set forth in any law in connection with the performance of the Adjustment Works.

 

10.                     The Lessee and the Lessee’s Contractor undertake to follow any instruction of the Management Company regarding safety, including the immediate cessation of the works due to an immediate safety risk and/or any violation of the provisions set forth in the Undertaking of the Lessee’s Contractor as stated hereunder.

 

11.                     The Lessee undertakes to remove any waste and trash without delay according to the circumstances of the case, and, to the extent required, to dispose this waste to relevant landfills at its expense.

 

12.                     For the avoidance of doubt, the Lessee is the sole safety and hygiene supervisor for all the works that are performed by the Lessee and by anyone acting on its behalf in the Additional Area and the Lessee shall incur all liabilities by law in connection therewith.

 

13.                     The Lessee shall take measures to erect temporary toilet structures, including electricity and water connections for the convenience of the Lessee and/or the Lessee’s contractors and/or any other person acting on its behalf during the period of the Adjustment Works.

 

14.                     It is clarified that the Lessor and/or the Lessor’s representative and/or the representative on behalf of the Management Company shall be entitled to enter the Leased Premises during the construction period following advance coordination with the supervisor in the site and at reasonable times, unless the circumstances require, due to nature or substance, a visit that cannot be coordinated in advance, and in such case the supervisor shall receive advance notice to the extent possible.

 

The Lessor shall follow in general the customary instructions in construction sites.

 

15.                     Shortly before the year of the contractor’s warranty period expires (that will be counted as of the occupancy date of the Additional Area) or before expiration of the said period, the Lessor and the Lessee shall draw up a protocol of the defects and the Lessee undertakes to repair the said defects in 30 days (unless these are urgent repairs — that will be handled immediately).

 

16.                     It is agreed that during the period of performance of the Lessee’s works a supervisor on behalf of the Lessor will work in the site and will oversee the performance of the works on behalf of the Lessee and anyone acting on its behalf in the Additional Area and shall be entitled to deliver the supervisor on behalf of the Lessee any relevant instruction (and

 


 

especially regarding the compliance of the Lessee with the provisions set forth in the Addendum) regarding the performance of material deviations from the principal plans, however without derogating from and without imposing any liability on the Lessor and/or anyone acting on its behalf and without derogating and/or diminishing from the liability of the Lessee in any manner — and in this regard including, however not limited to, inter alia, the Lessee shall be responsible for any report and/or indictment that is served and for any fine imposed in connection with the aforesaid deviations against the Lessor and/or anyone acting on its behalf.

 

17.                     For the avoidance of doubt, it is clarified that no employer-employee relationship shall be maintained between the Lessor and the Lessee and/or the Lessee’s contractors and/or anyone acting on their behalf and no relationship of agency shall be maintained between the parties. To the extent that a suit and/or a judgment and/or an arbitration award and/or any other binding decision that is in contradiction to the said in this Section is made — the Lessee shall be obligated to compensate and indemnify the Lessor promptly in connection therewith.

 

18.                     Upon completion of the works in the Leased Premises the Lessee shall deliver to the Lessor 3 sets of As-Made plans of the Additional Area, in all fields, in DWG, PDF files and in a hard copy as part of the facility manual.

 

And in witness hereof the parties are hereby undersigned:

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

The Lessor

 

The Lessee

Ogen Yielding Real Estate Ltd.

 

 

 


 

List of plans submitted regarding Polypid, Phase B, Alon Building, and attached to the Agreement

 

Serial
No.

 

Name of Plan

 

File sent to print

 

Last date 
in Table of 
Changes

 

Effective 
transfer date to 
Oghen

 

Engineering 
comments to plan / 
booklet

 

Comments

 

 

 

 

 

 

 

 

 

 

 

 

 

Architecture

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Construction plan

 

1~281-Polypid - PD-0009-1-50.pdf

 

25.5.17

 

11.7.17
13.7.17

 

Approved in principle

 

Matches the background of marketing chart approved on 12.7.17.

Final update is possible during execution in light of mistakes in planning in the area of offices.

2

 

Floor plan

 

1~281-Polypid - PD-0013-1-50.pdf

 

28.5.17

 

13.7.17

 

Approved in principle

 

Does not match the background of 12.7.17 and the comments on construction plan.

Final update is possible during execution.

3

 

Ceiling plan

 

1~281-Polypid - PD-0011-1-50.pdf

 

25.5.17

 

13.7.17

 

Approved in principle

 

Matches partially the background of marketing chart approved on 12.7.17.
Final update is possible during execution.

4

 

Sections A-A and B-B

 

1~281-Polypid - PD-0012-1-50.pdf

 

28.5.17

 

13.7.17

 

Approved in principle

 

The air conditioning systems that are orientated toward east and north and that do not show the exit of the various systems to the outside air through the existing windows and not through holes in the walls or in the beams, were not yet embedded in the plans. Also, the subject of hanging the autoclaves was not mentioned yet. Final update is possible during execution.

5

 

Demolition plan

 

1~281-Polypid - PD-0034-1-50.pdf

 

28.5.17

 

13.7.17

 

Approved in principle

 

Does not match the background of 12.7.17 but it does not matter in this plan. Part of the demolition is not necessary according to the comments of the construction plan. Final update is possible during execution but it is not mandatory.

6

 

Carpentry lists

 

1~281-Polypid - PD-016-1-25.pdf

 

22.3.17

 

28.5.17

 

Approved

 

Irrelevant to Oghen after concluding the budget sum.

7

 

Locksmith’s work lists

 

1~281-Polypid - PD-057-1-25.pdf

 

7.5.17

 

28.5.17

 

Approved

 

Irrelevant to Oghen after concluding the budget sum.

 

 

 

 

 

 

 

 

 

 

 

 

 

Piping

 

8

 

Systems —  deployment of use locations (water, compressed air, nitrogen)

 

1~PD-0028.pdf

 

6.4.17

 

28.5.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17.

Final update is possible during execution.

9

 

Drainage system — piping route

 

1~PD-0029.pdf

 

4.5.17

 

Photography of plan given on 6.7.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17.To do changes according to Doron’s handwritten comments.

Final update is possible during execution.

10

 

Fire extinguishing, sprinklers system.
New situation.

 

1~PD-0030.pdf

 

30.3.17

 

13.7.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17.

Unapproved checking and drainage and checking location in the middle of the main lobby.

It is necessary to complete the sprinklers installation in the area of the added warehouse.

Final update is possible during execution.

11

 

Fire extinguishing, sprinklers system.
Execution details.

 

1~PD-0031.pdf

 

30.3.17

 

28.5.17

 

Approved in principle

 

I have not found any reference in the plans or in the specifications to a connection of the different fire detection systems to the park alarms; maybe it is irrelevant to this plan details itself but it must be written somewhere and it must be under the responsibility of the renter’s contractors. 

12

 

Cold water supply piping route,  water for laboratory and compressed air.

 

1~PD-0041.pdf

 

26.4.17

 

13.7.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17.

A final supply location must be determined for water to the rented property, the camel location and the arrival route.

It must be ensured that piping coming through passages are mounted in beams and / or bypass them from underneath — there is no reference to this in the plans.

Final update is possible during execution.

13

 

Drainage system. Drainage piping in the north frontage.

 

1~PD-0042.pdf

 

21.5.17

 

13.7.17

 

Approved in principle

 

In the meeting of 6.7.17 it was concluded that the air piping will be from within the building — the plan of 13.7.17 does not show this update. The piping cover element for hiding it and for plaster / spray according to the building texture was taken off the plan/s; it must be restored or be mentioned in one of them. Final update is possible during execution.

14

 

Fire extinguishing.Existing situation.

 

1~PD-0060.pdf

 

30.3.17

 

13.7.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17. Final update is possible during execution.

 

 

 

 

 

 

 

 

 

 

 

 

 

Safety

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

Fire safety plan

 

1~Approved Fire safety plan.pdf

 

27.6.17

 

28.6.17

 

Approved in principle

 

Does not match the background of drawing from 12.7.17. Does not include the overall floors reference and escape distances. Final update is possible during execution in cooperation with Rami Shaul.

 


 

Electricity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

Single line Polypid

 

1~2313B.pdf

 

10.5.17

 

13.7.17

 

Approved in principle

 

The power supply line will not be what is written in the plan but what the Oghen’s electricity network planer has determined, according to engineering considerations, including radiation, the size of the connection according to Polypid’s requirements.

Final update can be done during execution.

Note: Complete main electricity board plan and drain pump board must be completed.

17

 

Distribution panel B1 Room IT

 

1~2313B1-מחובר.pdf

 

10.5.17

 

28.5.17

 

Approved in principle

 

Irrelevant to Oghen after concluding the budget sum.

18

 

Distribution panel B2 offices

 

1~2313B2-מחובר.pdf

 

10.5.17

 

28.5.17

 

Approved in principle

 

Irrelevant to Oghen after concluding the budget sum.

19

 

Ducts and air conditioning plan

 

1~2313DC-06-C.pdf

 

19.6.17

 

13.7.17

 

Approved in principle

 

Does not match the background of 12.7.17.

Comments regarding air conditioning used as background, will be discussed separately.

Radiation protection was mentioned only partially; regarding the main electricity board, it is necessary to complete a report and a specification sheet and to update accordingly.

Final update is possible during execution.

Note: Regarding electricity ducts on the roof, there is no plan for it; it is necessary to do it or to expand the plan with an additional section.

20

 

Electricity plan

 

1~2313DE-09-E.pdf

 

19.6.17

 

13.7.17

 

Approved in principle

 

All comments regarding air conditioning ducts are relevant also here.

21

 

Lighting plan + …

 

1~2313DL-08-L.pdf

 

19.6.17

 

13.7.17

 

Approved in principle

 

As above.

22

 

Electricity ducts
plan western frontage

 

1~2313DT-02-T pdf

 

20.6.17

 

13.7.17

 

Approved in principle

 

The new duct width and its position must include also an area for laying the main electricity cables coming from the roof to the rented property according to the conclusions of meeting of 6.7.17; the position will obstruct another window.

All comments regarding air conditioning ducts are relevant also here.

 

 

 

 

 

 

 

 

 

 

 

 

 

Air conditioning

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

Single line air treatment unit AHU-1

 

1~69-AC-1-rev1-AHU-1.pdf

 

24.4.17

 

13.7.17

 

Approved in principle

 

Assuming that air treatment unit position is approved and resolved from the engineering point of view, the interior plan is irrelevant to Oghen.

24

 

Single line air treatment unit AHU-2

 

1~69-AC-1-rev1-AHU-2.pdf

 

24.4.17

 

13.7.17

 

Approved in principle

 

As above.

25

 

Single line air treatment unit AHU-3

 

1~69-AC-1-rev1-AHU-3.pdf

 

24.4.17

 

13.7.17

 

Approved in principle

 

As above.

26

 

Air conditioning unit
Equipment installation and ducts routing PD-0036

 

1~69-AC-2-rev2-AO.pdf

 

14.6.17

 

13.7.17

 

Approved in principle

 

Does not match the background of drawing of 12.7.17.

We had approved on 6.7.17 a split-unit air conditioner for the communication room in the offices area — it was not included in the plan yet.

Assuming that the air treatment unit position is approved and resolved from the engineering point of view, the interior plan is irrelevant to Oghen. Final update is possible during execution.

All systems exit openings from the floor will be made only in the approved places (see separately) and in windows passages.

The acoustic insulation must be executed according to noise prevention standards.

The offices plan must be connected to Polypid systems as agreed in the meeting of 6.7.17.

Final update is possible during execution.

 


 

27

 

Ceiling air conditioning unit and grills PD-0037

 

1~69-AC-2-rev2-cleanroom.pdf

 

14.6.17

 

Photography of plan given on 6.7.17

 

Approved in principle

 

Does not match the background of drawing of 12.7.17.

Repairs must be made according to Doron’s handwritten comments.

The building is not equipped with  public air and smoke exhaust systems of various types and this will be handled by Polypid as agreed in the meeting. The offices plan must be connected to Polypid systems as agreed in the meeting of 6.7.17. The air treatment unit position, which will be different, probably, has been discussed separately. Final update is possible during execution.

28

 

Roof air conditioning plan

 

1~69-AC-4-revr-roof.pdf

 

27.4.17

 

13.7.17

 

Approved

 

Final position will be determined according to the Structural Engineer examination, static calculations, beams position and approval of the allowed weights.


Details of piping and cables laying (water and electricity) in the roof are to be approved by the park so that it will not impair the sealing and its ongoing maintenance. The air emission in the roof must receive approvals that it does not require filtering. There are no air emission details for 2 m. and required direction.


Approvals for acoustics and vibrations are needed. Final update is possible during execution.

 

Structure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

Ramp plan for chillers in the building roof

 

1~pl-bama-2538-K-1.pdf

 

19.4.17

 

18.6.17

 

Approved in principle 

 

Final position and manner of load distribution to be determined according to the Structural Engineer examination, including static calculations, beams position and approval of the allowed weights. There is an approval in principle for concrete and roof sealing works, but according to details to be approved later. Final update is possible during execution.

30

 

Plan for positioning the autoclave

 

1~ pl-autoclub-2538-K-2.pdf

 

6.7.17

 

13.7.17

 

Approved in principle 

 

Static calculations must be completed first. No objection in general. It is possible that the works can be simplified after receiving the allowed weights report. Final update is possible during execution.

31

 

Plan for positioning air treatment unit lines in the floor

 

1~ pl-yeta-2538-K-3.pdf

 

19.4.17

 

18.6.17

 

Approved in principle 

 

Final position and manner of load distribution to be determined according to the Structural Engineer examination, including  static calculations, beams position and approval of the allowed weights. There is an approval in principle for concrete works, but according to details to be approved later. Final update is possible during execution.

32

 

Master plan for generator and diesel oil tank positioning

 

1~ pl-generator-2538-K-4.pdf

 

19.4.17

 

18.6.17

 

Approved in principle 

 

The approval in principle is for positioning the generator and the tank only within the  park development area. The location stated in the plan is not approved and it is necessary to comply with the positions according to the  drawing approved on 12 6.7.17 and in coordination with the park.


Erection details and foundations must be designed once again.


Final update is possible during execution.

 

Specifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33

 

Erecting new plant in Petakh Tikva (architecture)

 

1~281-POLYPID-ARCHITECTURE_SPEC.pdf

 

15.5.17

 

28.5.17

 

Approved in principle 

 

Irrelevant to Oghen after concluding the budget sum.


All works are under the responsibility of the various Polypid contractors. Additional comments will be made according to the response to the above mentioned plans. The agreement requirements regarding facility files, works, coordination and the rest of the agreement provisions related to Oghen, override contradicting directives, if any, in this specification sheet.

34

 

Furniture works specifications

 

1~.מפרט_עבודות_ריהוט_-_פוליפידpdf

 

22.5.17

 

28.5.17

 

Approved in principle 

 

As above.

35

 

Special technical specification for gas systems, plumbing fire extinguishing

 

1~מפרט_טכני_מערכות_אינסטלציה_גזים_וכיבוי_אש.pdf

 

April 17

 

28.5.17

 

Approved in principle 

 

As above.

36

 

Special specifications for electricity and lighting works

 

1~ מפרט_טכני_חשמל .pdf

 

May 17

 

28.5.17

 

Approved in principle 

 

As above.

37

 

Air conditioning system  technical specifications

 

1~69-HVAC_spec_and_equipment_data-revolution_1 .pdf

 

April 17

 

28.5.17

 

Approved in principle 

 

As above.

 


 

Rented property facility file status “                                “      18 Hasivim Str., Petakh Tikva                  as of    .    .17

 

Subjects

 

Status

 

Comments

 

 

 

 

 

 

 

a.

 

Plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

Architecture

 

Approved AS MADE designs.

 

 

 

 

 

 

2.

 

Electricity

 

Approved AS MADE designs.

 

 

 

 

 

 

3.

 

Sewage and drainage

 

Approved AS MADE designs.

 

 

 

 

 

 

4.

 

Sprinklers

 

Approved AS MADE designs.

 

 

 

 

 

 

5.

 

Air conditioning

 

Approved AS MADE designs.

 

 

 

 

 

 

6.

 

Safety

 

Fire Department approved AS MADE designs.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b.

 

Designers approvals / statements

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

Safety

 

Populating approval

 

 

 

 

 

 

2.

 

Architecture

 

Certification that the design was carried out in accordance with the Planning and Building Law

 

 

 

 

 

 

3.

 

Electricity

 

Certification that the design was carried out in accordance with the Electricity Law — 1954 (with the ulterior amendments and updates).

 

 

 

 

 

 

4.

 

 

 

Certification that the emergency light system was designed in accordance with the Israeli Law

 

 

 

 

 

 

5.

 

 

 

Certification that the public address system was designed in accordance with the law requirements.

 

 

 

 

 

 

6.

 

 

 

Certification that the electricity boards were designed in accordance with standard 61439-2.

 

 

 

 

 

 

7.

 

Air conditioning

 

Certification regarding compliance of design with IS 1001.

 

 

 

 

 

 

8.

 

Plumbing

 

Designer approval that the water supply system for fire extinguishing was carried out properly, according to plan.

 

 

 

 

 

 

9.

 

Non-ionizing radiation

 

Radiation consultant approval.

 

 

 

 

 

 

10.

 

Accessibility

 

Accessibility consultant approval.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c.

 

Laboratory certification and contractor statements

 

 

 

 

 

 

 

 

 

 

 

 

 

1.

 

Fire Department certification

 

Confirmation of business license issuance, or confirmation of connection to electricity grid, or confirmation regarding fire prevention.

 

 

 

 

 

 

2.

 

Integration

 

Confirmation from an accredited laboratory regarding compliance with standard 536.

 

 

 

 

 


 

 

 

3.

 

Electricity inspector

 

Confirmation from a qualified electricity inspector regarding examination of facility and its electricity boards and that connection to the electricity grid is allowed.

 

 

 

 

 

 

4.

 

 

 

Photocopy of the qualified inspector license

 

 

 

 

 

 

5.

 

Sprinklers

 

Confirmation from an accredited laboratory regarding compliance with IS 1596 of year 2012.

 

 

 

 

 

 

 

 

 

 

Executing contractor statement that he has carried out the work according to standard.

 

 

 

 

 

 

6.

 

Fire detection

 

Confirmation from an accredited laboratory regarding compliance with IS 1220 Part 3.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executing contractor statement that he has carried out the work according to standard.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executing contractor statement regarding workers training in use of fire and smoke detection equipment in accordance with IS 1220 Part 11.

 

 

 

 

 

 

7.

 

Electricity boards

 

Electricity boards manufacturer statement that the boards were manufactured in accordance with standard 61439-2.

 

 

 

 

 

 

8.

 

Materials durability

 

Compliance with standard 755 and / or 921 and / or 931 (according to case).

 

 

 

 

 

 

9.

 

Air conditioning and ventilation

 

Confirmation from an accredited laboratory regarding compliance with IS 1001 Part 1.

 

 

 

 

 

 

 

 

 

 

Executing contractor statement regarding execution of air conditioning works in accordance with the consultant plans.

 

 

 

 

 

 

10.

 

Fire doors

 

Confirmation from an accredited laboratory regarding compliance with IS 1212 Part 4 (doors installation).

 

 

 

 

 

 

11.

 

 

 

Confirmation from an accredited laboratory regarding compliance with IS 1212 Part 1 (doors standard).

 

 

 

 

 

 

12.

 

 

 

Doors supplier statement that the doors supplied comply to standard, were supplied and were installed in place.

 

 

 

 

 

 

13.

 

Smoke blowers

 

Israel Institute of Standards certification regarding their compliance with IS 1001 Part 7.

 

 

 

 

 

 

 

 

 

 

Confirmation from air conditioning consultant regarding blower model approved for installation.

 

 

 

 

 

 

 

 

 

 

Executing contractor statement regarding installation of blowers approved by the Israel Institute of Standards that they comply with standard and that it was done according to the consultant requirements.

 

 

 

 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

33


 

 

 

14.

 

Dampers

 

Israel Institute of Standards certification regarding their compliance with IS 1001 Part 3.

 

 

 

 

 

 

 

 

 

 

 

Confirmation from air conditioning consultant regarding blower model approved for installation.

 

 

 

 

 

 

 

 

 

 

 

Executing contractor statement regarding installation of blowers approved by the Israel Institute of Standards that they comply with standard and that it was done according to the consultant requirements.

 

 

 

 

 

 

15.

 

Fire extinguishing by gas

 

If there is such a system, it is necessary to obtain certification from an accredited laboratory regarding compliance with IS 1597 or NFPA 2001.

 

 

 

 

 

 

16.

 

Fire passages

 

If made, it is necessary to obtain the performing contractor statement regarding materials and sealing works executed and their proper working order.

 

 

 

 

 

 

17.

 

Fire walls

 

If made, it is necessary to obtain the executing contractor statement.

 

 

 

 

 

 

 

 

 

 

 

Laboratory test for the approved fire wall system regarding 120 minutes resistance (Orbond per 118 minutes — with the consultant’s prior approval)

 

 

 

 

 

 

18.

 

Public address system

 

If executed, it is necessary to obtain a qualified technician statement that it is in proper working order and that it is backed-up for operation during electricity outage.

 

 

 

 

 

 

19.

 

Network characteristics

 

Only if required.

 

 

 

 

 

 

20.

 

Fire extinguishing stations

 

If new stations are installed or there are stations belonging to the rented property, it is necessary to obtain a statement from the company.

 

 

 

 

 

 

 

 

 

 

 

The fire extinguishers were checked according to standard 129 and found in working order.

 

 

 

 

 

 

 

 

 

 

 

Fire hose rollers were checked according to standard 2206 and found in working order.

 

 

 

 

 

 

 

 

 

 

 

Fire hoses were checked according to standard 365 and found in working order.

 

 

 

 

 

 

 

 

 

 

 

The spouts were checked according to standard and found in working order.

 

 

 

 

 

 

 

 

 

 

 

The fire hydrants were checked according to standard 448 and found in working order.

 

 

 

 

 

 

 

 

 

 

 

All equipment is maintained, installed, and marked according to the Fire Department requirements.

 

 

 

 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

34


 

 

 

21.

 

Electrician statement

 

Statement that the work has been executed in accordance with the Electricity Law — 1954 (including ulterior amendments and updates).

 

 

 

 

 

 

22.

 

 

 

Statement that the emergency lighting system has been installed in accordance with standard and that it supplies 10 Lux.

 

 

 

 

 

 

23.

 

Non-ionizing radiation

 

Certification of compliance with radiation requirements if there are electricity boards supplying at least 100 A or in case of …

 

 

 

 

 

 

24.

 

Delivery protocol

 

Delivery protocol to renter.

 

 

 

 

 

 

25.

 

Technical materials and preventive maintenance

 

Plumbing — Delivery of warranty certificates, equipment details (detailed catalogues), technical description of operation and maintenance in particular.

 

 

 

 

 

 

 

 

 

 

 

Electricity - Delivery of warranty certificates, equipment details (detailed catalogues), technical description of operation and maintenance in particular.

 

 

 

 

 

 

 

 

 

 

 

Paving / tiling and cladding — List of finishing materials supplied, hues, catalogue numbers, and standard certificates.

 

 

 

 

 

 

 

 

 

 

 

Air conditioning - Delivery of warranty certificates, equipment details (detailed catalogues), technical description of operation and maintenance in particular.

 

 

 

 

 

 

 

 

 

 

 

Gypsum and ceilings — Certificate for standard for gypsum items, the cement boards, the acoustic ceiling elements.

 

 

 

 

 

 

 

 

 

 

 

Sprinklers and hydrants - Delivery of warranty certificates, equip details (detailed catalogues), technical description.

 

 

 

 

 

 

 

 

 

 

 

Fire detection - Delivery of warranty certificates, equipment details (detailed catalogues), technical description of operation and maintenance in particular.

 

 

 

 

 

 

26.

 

False ceilings

 

Accredited laboratory test for the installation of false ceilings in accordance with IS 5103 Parts 3 and 1.

 

 

 

 

 

 

27.

 

Contact information

 

Contact information of all designers working for the project.

 

 

 

 

 

 

28.

 

 

 

Contact information of all contractors, sub-contractors and suppliers taking part in the project.

 

 

 

 

 

 

29.

 

Workers training

 

Confirmation from the employer that the workers employed by him are familiar with the operation of the fire extinguisher and the hose roller.

 

 

 

 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

35


 

Legend:

 

Existent — The document itself exists or there is a similar confirmation serving as equivalent.

 

Under examination — An equivalent document has been submitted and it was not approved yet by the Fire Department.

 

Absent — The document is required but it does not exist, and it has to be obtained.

 

No document - The document is required but it does not exist, and it does not have to be obtained (it is necessary to add an explanation in the comments column).

 

Irrelevant — The system to be checked does not exist in the rented property.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

36


 

Appendix G1

 

Insurance Appendix

 

(1)                       Insurance

 

(1.1)                                Without derogating from the liability of the Lessee in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, prior to the commencement date of the Lessee’s works in the Leased Premises, to the extent that the said works the performed, the Lessee undertakes to take out and maintain, whether by itself and whether by a contractor on its behalf, a contractor insurance in the name of the Lessee, contractors and subcontractors, the Lessor and the Management Company, as stated in the Certificate of Insurance enclosed with this Agreement and constituting an integral part thereof and marked as Appendix B2 (hereinafter: “Certificate of Insurance for the Lessee’s Works”).

 

Notwithstanding the aforesaid, the Lessee shall be entitled not to take out contractor insurance as aforesaid for works in the Leased Premises whose value is not greater than NIS 250,000, provided that the Lessee furnishes the Lessee’s Certificate of Insurance that states that the insurances includes coverage for the works that are performed in the Leased Premises.

 

(1.2)                                The Lessee undertakes to furnish to the Leased Premises, no later than the commencement date of the works in the Leased Premises, to the extent that such works are performed, the Certificate of Insurance for the Lessee’s Works signed by its insurer. The Lessee declares that it is aware that furnishing the Certificate of Insurance for the Lessee’s Works as aforesaid is a condition precedent and a prerequisite for the performance of works in the Leased Premises, and the Lessee shall be entitled to prevent from the Lessee to perform works in the Leased Premises in case the said certificate was not furnished prior to the commencement date of the works.

 

(1.3)                                The liability limits in the third-party liability insurance that is taken out by the Lessee as stated in Section (2) of the Certificate of Insurance for the Lessee’s Works (Appendix E2) is in the amount of USD 1,000 multiplied by the Area of the Leased Premises, a minimum of USD 500 and a maximum of USD 1M per event and cumulatively for the insurance term;

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

37


 

the provisions set forth above shall apply subject to the provisions set forth in Section (1.18) hereunder.

 

(1.4)                                Without derogating from the liability of the Lessee in accordance with the provisions set forth in this Agreement and/or in accordance with the provisions set forth in any law, during the term of this Agreement the Lessee undertakes to take out and maintain the insurances specified in the Lessee’s Certificate of Insurance hereby enclosed with this Agreement and constituting an integral part thereof and marked as Appendix E3 (hereinafter: “Lessee’s Certificate of Insurance”) with a legally licensed and reputable insurance company (hereinafter: “Lessee’s Insurances”). It is clarified that the provisions set forth in Section (1.9) hereunder shall apply to this Section.

 

(1.5)                                No later than the date of opening the Lessee’s business in the Leased Premises, or before the date of entry of any property to the Leased Premises (except for property that is listed in the works insured under Section (1.1) above) — whichever is earlier - the Lessee undertakes to furnish to Lessor the Lessee’s Certificate of Insurance as aforesaid, signed by its insurer. The Lessee declares that it is aware that furnishing and/or updating the Lessee’s Certificate of Insurance is a condition precedent and a prerequisite for opening the business of the Lessee in the Leased Premises and/or for the entry of any property of the Leased Premises (except for property listed in the works that are insured under Section (1.1) above) and the Lessor shall be entitled to prevent from the Lessee to open its business in the Leased Premises and/or bring any property as aforesaid in the event the certificate was not furnished prior to the date specified above.

 

(1.6)                                The liability limits in a third-party liability insurance taken out by the Lessee as stated in Section (2) of the Lessee’s Certificate of Insurance (Appendix E3) are in the amount of USD 3,500 multiplied by the Area of the Leased Premises, a minimum of USD 250,000 and a maximum of USD 5,000,000 per event and cumulatively for not insurance term; the provisions set forth above shall be subject to the provisions set forth in Section (1.18) hereunder).

 

(1.7)                                It is agreed that the Lessee may not take out property and/or consequential loss insurance in whole or in part, as stated in Section (1) and (4) of the Lessee’s Certificate of Insurance (Appendix G3) however the said in Section (1.11) hereunder shall apply to damage to property and/or any loss

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

38


 

of income as aforesaid as of the insurance in respect whereof was fully arranged.

 

(1.8)                                It is agreed that the Lessee may not take out glass breakage insurance as required in Section (1) of the Lessee’s Certificate of Insurance (Appendix G3) however the said in Section (1.11) hereunder shall apply with respect to any loss or damage caused by glass breakage as if the insurance in respect whereof was fully arranged.

 

(1.9)                                If the Lessee deems that it is necessary to take out an additional and/or supplemental insurance in addition to the Lessee’s insurances as stated above, the Lessee undertakes that a clause regarding waiver of the right of subrogation as stated in Section 1 of Appendix G3 shall be incorporated in each additional or supplemental insurance of the Lessee’s insurances as aforesaid, made in favor of the Lessor and the Management Company and anyone acting on their behalf, however the said waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

(1.10)                         The Lessee undertakes to update the sums insured in respect of the insurances that are arranged under Sections (1) and (4) of the Lessee’s Certificate of Insurance (Appendix B3) periodically, in such manner that they will always reflect the full value of the subject matter of their insurance.

 

(1.11)                         The Lessee declares that it shall not raise any claim and/or demand and/or suit against the Lessor, the Management Company and anyone acting on their behalf and against the other right holders in the Project whose lease agreements or any other agreement that grants them rights in the Project includes a corresponding exemption vis-à-vis the Lessee in respect of damage for which the Lessee is entitled to indemnity in respect whereof (or for which it was entitled to indemnity but for the policyholder’s contribution set out in the policy) in accordance with the insurances that are arranged under Section (1) of the Certificate of Insurance for the Lessee’s Works (Appendix G2) and Sections (1) and (4) of the Lessee’s Certificate of Insurance (Appendix G3) and the Lessee hereby exempts the said entities from any liability for which the Lessee is entitled to indemnity as aforesaid, provided that the exemption from liability shall not apply to any person who causes malicious damage.

 

(1.12)                         For the avoidance of doubt, it is clarified that failure to furnish the Certificate of Insurance on time as stated in Sections (1.2) and (1.5) above

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

39


 

shall not affect the undertaking of the Lessee in accordance with this Agreement including, and without derogating from the generality of the aforesaid, any payment duty applicable to the Lessee. The Lessee undertakes to uphold all its undertakings in accordance with the Agreement even if it is denied from performing the works and/or receiving possession in the Leased Premises and/or bringing property to the Leased Premises and/or opening its business in the Leased Premises due to failure to furnish the certificates on time.

 

(1.13)                         On the expiration date of the Lessee’s insurances the Lessee undertakes to deposit with the Lessor the Certificate of Insurance as stated in Section (1.5) above in respect of the extension of their effect for an additional period. The Lessee undertakes to repeat and deposit the Certificate of Insurance on the said dates upon expiration of each insurance term and as long as this Agreement is in effect.

 

(1.14)                         The Lessor shall be entitled to inspect the Certificates of Insurance that are furnished by the Lessee as stated in Sections (1.2), (1.5) (1.13) above, and the Lessee undertakes to perform any modification or amendment that is necessary for the purpose of making the Certificates of Insurance compliant with the undertakings of the Lessee as stated in this Section (1). The Lessee declares that the right of inspection of the Lessor with respect to the Certificates of Insurance and its right to instruct the amendment of the Lessee’s insurances as stated above shall not impose on the Lessor or anyone acting on its behalf any obligation and any liability in connection with the Certificates of Insurance as aforesaid including their standard, scope and effect or lack thereof, and shall not derogate from any liability imposed on the Lessee in accordance with this Agreement.

 

The Lessee undertakes to fulfill the conditions set forth in the insurance policies the Lessee takes out, make full and timely payment of the insurance premiums and assure that the Lessee’s insurances are extended periodically as may be required and are in effect during the entire Term of Lease.

 

(1.15)                         The Lessee undertakes to observe the safety procedures that are published periodically by the Lessor and/or the Management Company and undertakes not to use and/or permit knowingly any act or omission in the Leased Premises and/or the Project that might cause an explosion and/or a fire and/or that might risk human lives or the Project. The Lessee undertakes that if the Lessor and/or the Management Company are obligated to pay

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

40


 

additional insurance premiums beyond customary due to the activities of the Lessee that deviate materially from the Purpose of Lease, the Lessee shall pay to the Lessor and/or the Management Company, as the case may be, the said addition, immediately upon receiving their first demand.

 

(1.16)                         For the avoidance of doubt, it is hereby agreed that setting the liability limits as stated in Sections (1.3) and (1.6) above is a minimal requirement imposed on the Lessee. The Lessee declares and affirms that it shall be precluded from raising any claim and/or demand against the Lessor and/or the Management Company and/or anyone acting on their behalf regarding the minimal liability limits as aforesaid.

 

(1.17)                         The Lessor undertakes to take out and maintain, whether by itself and whether by the Management Company, and during the Term of Agreement, the insurances specified in this Section hereunder (hereinafter: “Project Insurances”) with a legally licensed and reputable insurance company:

 

(1.17.1)               Dwelling insurance for the Project (including the Leased Premises) including all fixtures and systems thereof and any other property of the Lessor and/or the Management Company located in the Project and ground floor thereof in full replacement value, against loss or damage due to the customary risks in extended fire insurance. the said insurance shall include a clause regarding waiver of the right of subrogation vis-à-vis the Lessee and anyone acting on its behalf, provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage. It is agreed expressly that for the purpose of this Section the term “Project Structure” shall not include the contents of the lease premises and shall not include any addition, improvement or extension implemented in the Leased Premises by and/or for the Lessees (not by the Lessor and/or the Management Company).

 

(1.17.2)               Third-party liability insurance providing insurance coverage for the statutory liability of the Lessor and the Management Company for injury or damage to the body and/or property of any person and/or entity, in a liability limit of $5,000,000 (five million U.S. dollars) per event and cumulatively for the insurance term. The insurance will be extended to indemnify the Lessee for its liability for the acts and/or omissions of the Lessor and/or the Management Company and/or anyone acting on their behalf subject to cross-

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

41


 

liability clause stipulating that the insurance shall be deemed to have been arranged separately for each of the members of the insured.

 

(1.17.3)               Employers’ liability insurance providing insurance coverage for the liability of the Lessor and the Management Company towards their workers for injury caused in the course of and following their employment by the Lessor and/or the Management Company and/or anyone acting on their behalf in a liability limit of $5,000,000 per claimant, per event and cumulatively during the insurance term. The insurance is extended to indemnify the Lessee in case the Lessee is considered the employer of any of the workers of the Lessor and/or the Management Company.

 

(1.17.4)               Loss of Rent, Management Fees and parking fees insurance (to the extent that there are any) due to damage caused to the structure of the Project and/or the insured property as stated in Section 1.19.1 above, due to the risks detailed in Section 1.19.1 above, for an indemnity period of 12 months. The said insurance shall include an express clause regarding waiver of the right of subrogation towards the Lessee and anyone acting on its behalf provided that the said regarding waiver of the right of subrogation shall not apply in favor of a person who caused malicious damage.

 

Notwithstanding the aforesaid, it is hereby agreed that the Lessor and/or the Management Company shall be entitled not to take out the insurance specified in this sub-section 1.19.4 above, in whole or in part, provided that the said exemption as stated in Section 1.20 hereunder shall apply as if the insurance was fully arranged.

 

It is hereby agreed expressly that the arrangement of the insurances specified above shall not add to the liability of the Lessor and/or the Management Company beyond the provisions set forth in the Lease Agreement and/or the Management Agreement and/or derogate from the liability of the Lessee in accordance with the said agreement (except for the provisions set forth in Section 1.20 hereunder).

 

(1.18)                         The Lessor declares, in its name and in the name of the Management Company, that they shall raise no claims and/or demands and/or suits against the Lessee and anyone acting on its behalf in respect of damage for which they are entitled to indemnity (or for which they were entitled to indemnity but for the policyholder’s contribution set out in the policy) in accordance with the insurances they take out as stated in Sections (1.19.1)

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

42


 

and (1.19.4) above, and they hereby exempt the Lessee and anyone acting on its behalf from any liability for such damage as aforesaid. The provisions set forth above regarding exemption from liability shall not apply to any person who causes malicious damage.

 

Notwithstanding the aforesaid, in case an insured event that is insured under Sections 1.17.1 and 1.17.2 was caused in circumstances for which the Lessee is held liable in accordance with this Agreement and/or in accordance with the provisions set forth in any law, the Lessee shall incur the amount of the damage that was caused up to the amount of the deductible amounts in accordance with the said policies, provided that the said sum for each insured event shall not be greater than NIS 75,000.

 

[Signature and Stamp: Ogen
Yielding Real Estate Ltd.]

 

[Signature and Stamp:
PolyPid Ltd.]

 

The Lessor

 

The Lessee

 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

43


 

Appendix G2

 

Certificate of Insurance for the Lessee’s Works

 

Date: 18.7.2017

 

To

 

Ogen Yielding Real Estate Ltd. (hereinafter: “the Lessor”)

 

3 Har Sinai St.

 

Tel Aviv

 

Dear Sir/Madam,

 

Re:                            Certificate of Insurance regarding an agreement dated               (hereinafter: “the Agreement”) between you and PolyPid Ltd. (hereinafter: “the Lessee”) for the lease of property in Ogen Park in Petah Tikva (hereinafter respectively: “the Leased Premises” and “the Project”)

 

We hereby respectfully confirm that as of 16.7.2017 and until 31.7.2018 (hereinafter: “Insurance Term”) our company took out contractor insurance in the name of the Lessee, contractors and subcontractors, the Lessor and the Management Company, providing insurance coverage for the works that are implemented by the Lessee and/or anyone acting on its behalf as stated hereunder, when the scope of coverage granted under the said insurance is in accordance with the “Bit” insurance policy 2016 as stated in Policy No. 762336832

 

1.                            Chapter 1 — all-risk insurance providing insurance coverage for loss or damage caused to the Lessee’s works in full value and loss or damage caused to the equipment used for the purpose of performing the said works (and that constitutes an integral part of the works). This chapter includes a clause regarding waiver of the right of subrogation vis-à-vis the Lessor and/or the Management Company and anyone acting on their behalf and towards the other right holders in the Project on the condition that the insurance of the other right holders in the  project including a corresponding clause regarding waiver of the right of subrogation towards the Lessee, provided that the said regarding waiver of the right of subrogation shall not apply to any person who causes malicious damage.

 

The chapter includes an extension regarding property being worked upon and/or surrounding property in a liability limit of NIS 200,000.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

44


 

2.                            Chapter 2 — third-party liability insurance in a liability limit as stated hereunder. The said chapter includes a cross-liability clause stipulating that the insurance shall be deemed to have been arranged separately for each of the members of the insured. The liability limit is in the amount of NIS 10,000,000 per event and cumulatively for the Insurance Term.

 

The said chapter shall not include any limitation regarding the following issues:

 

A.                          Claims of subrogation by the National Insurance Institute.

 

B.                          Bodily harm deriving from the use of heavy equipment that is a motorized vehicle whose compulsory insurance is not mandatory up to the amount of NIS 4,000,000.

 

3.                            Chapter 3 — employers’ liability insurance for the liability towards workers employed in the performance of the works and in a liability limit of NIS 20,000,000 per claimant, per event and cumulatively for an annual insurance term. This insurance does not include any limitation regarding works in height and in depth, hours of work, baits and poisons, contractors, subcontractors and their workers and youth employment.

 

The insurance specified above includes an express condition stipulating that it is a primary insurance and precedes any insurance that was taken out by the Lessor and/or the Management Company and we waive any claim and/or demand regarding participation of the insurances of the Lessor and/or the Management Company. In addition, we undertake that the said insurance shall not be diminished or terminated during the insurance term unless the Lessor receives a 30 days’ prior and written notice in registered mail. We further confirm that the Lessee shall be solely responsible for payment of the insurance premiums and the deductible amounts for the insurance as stated above.

 

Subject to the terms and exclusions specified in the original policies to the extent that they were not expressly modified in accordance with the provisions set forth hereinabove.

 

signed

 

[Clal Insurance Co. Ltd.]

 

[Signed]

(Signature of Insurer)

(Position of Signatory)

 

(Signature of Insurer)

 

 

(Name of Signatory)

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

45


 

[Stamp: the insurance policies including the liability limits specified in this Certificate apply to all the activities of the entities detailed in the policies including, inter alia, the activity subject matter of the Certificate. The Certificate is issued subject to the terms set forth in the Policy to the extent that these were not modified therein]

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

46


 

Appendix H

 

Undertaking of the operating contractor on behalf of the Lessee

 

1.                            The Contractor hereby declares that it is familiar and it is aware of all the provisions set forth in the law and/or any regulation and/or standard and/or bylaw that were legislated by any competent authority by law and that relate to and/or are related to the performance of the work, including safety at work and in the work site, and it hereby undertakes to perform the work in strict and full compliance with these provisions.

 

2.                            The Contractor hereby declares that he visited in the site shortly before commencement of the works and inspected the site and the conditions therein and all details that are or that might be relevant to the performance of the work and found them fit for the purpose of performing the work.

 

3.                            The Contractor hereby declares that it is familiar with the methods and manners of performance of the work.

 

4.                            The Contractor declares that it is aware that different lessees occupy and/or will occupy the Building and the Project and it undertakes to perform all the works while causing minimal disturbance as possible to the activities of the Lessees in the Project and while preventing noise, waste and dust nuisance and the like. In addition, the Contractor undertakes to perform the works that cause excess noise only from 17:00 and until 08:00 on Sun. — Thurs. and on Friday until 13:00 and subject to the provisions set forth in any law.

 

5.                            The Contractor undertakes to perform the works in compliance with the principal plans that were delivered to the Contractor by the Lessee (and that were approved by the Lessor and subject to deviations therein) and in accordance with the provisions set forth in any law (including any standard).

 

6.                            The Contractor shall take out for itself, its workers and any third-party insurance against all the risks associated with the said undertakings and during the entire period of performance of the work for the sums insured as stated in the Insurance Appendix enclosed with the Agreement made between the Contractor and the Lessee.

 

7.                            Cleaning

 

The Contractor shall be responsible solely for the cleaning in the area of the works and the nearby area during the entire period of the work. The Contractor shall clean and remove the waste and materials from the site to an authorized site. In case the

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

47


 

Contractor fails to act in the said manner after receiving a 3 days’ prior notice, the Lessor shall be entitled to dispose the waste and demand the disposal costs.

 

Guarding

 

The Contractor shall be responsible for all the equipment and materials belonging to the Contractor in the site. The Management Company of the Building shall protect the site however shall not be held liable for theft, damages etc. that might be caused to the Contractor’s equipment and materials.

 

8.                            The Contractor shall sign a safety at work appendix as instructed to it by the Lessee upon its entry to the site.

 

9.                            The Contractor may not dig, excavate, chisel, drill or perform any work in the columns of the Building without obtaining the prior, express and written approval of the Lessee on behalf of the Lessor.

 

And in witness hereof the Contractor is hereby undersigned:

 

 

[Signature and Stamp: Ogen

Yielding Real Estate Ltd.]

 

 

 

[Signature and Stamp: Nir Tal]

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

48


 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

49


 

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

50


 

Appendix K

 

The cable will pass from the main power room in the ground floor through the southern pier to the roof of the Building.

 

From this point the cable will continue through the eastern façade up to the northern façade and from there along the northern façade and to the western façade.

 

The cable will then descend from the roof to the first floor on the western façade in a location that will be coordinated and will enter Leased Premises through the window.

 

The cable will end by the area of the main distribution board in the Leased Premises with an additional cable length, to the extent required by PolyPid, for the purpose of its independent connection to the distribution board.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

51


 

Appendix L

 

Application for authorization to debit account

 

Date:                                            

 

To

 

Bank                                                                

Branch               (        )

(“The Bank”)

 

Bank account number

 

Account type

 

Branch

 

Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name of in the (the Beneficiary) Ogen Yielding Real Estate Ltd.

 

oGeneral authorization, without limitations

In case the beneficiary transfers sums charged that fail to meet the limitations set out by the client, the Bank shall return the said sums, with all ensuing consequences.

 

Or —

 

 

 

·                  An authorization that includes one of the following limitations as a minimum:

 

o            Limitation of debit amount — NIS                                  

 

o            Authorization expiration date — on           /         /              

 

For your information: failure to check one of the alternatives above shall mean that you selected a general authorization that does not include any limitations.

 

1.                            We, the undersigned,                  ID. No./Company No.              (“the Clients”) (fill in the name of the account holders as stated in the books of the Bank)

 

Hereby request to give an authorization to debit our account whose details are as stated above (hereinafter: “the Account”) for the sums and on the dates as instructed to you periodically by the Beneficiary by the institution code, subject to the limitations indicated above (to the extent that there are any).

 

2.                            In addition, the following provisions shall apply:

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

52


 

A.                          We will receive from the Beneficiary the details that are necessary for the purpose of granting the application for an authorization to debit the Account.

 

B.                          This authorization may be canceled by delivery of written notice from us to the Bank that will take effect in one business day after the delivery of the notice to the Bank, and may be canceled in accordance with the provisions set forth in any law.

 

C.                          We shall be entitled to cancel a certain amount debited provided that we deliver a notice in connection therewith to the Bank no later than 3 business days after the debit date. To the extent that the cancellation notice was delivered after the debit date, the credit shall be performed according to the value of the date of the cancellation notice.

 

D.                          We shall be entitled to demand from the Bank, by delivery of written notice, to cancel a debit, if the debit does not comply with the expiration date that was set in the Authorization or the sums that were set in the Authorization, if any.

 

E.                           The Bank shall not be held liable regarding the transaction we perform with the Beneficiary.

 

F.                            The Bank shall not be held liable for the any transaction we perform with the Beneficiary.

 

G.                          Should you consent to our request, the Bank will act in accordance with the provisions set forth in this Authorization subject to the provisions set forth in any law and agreement made between us and the Bank.

 

H.                         The Bank shall be entitled to exclude us from the arrangement set out in this Authorization if it has a reasonable reason to act in the said manner, and shall notify about this action immediately after making the decision and shall provide the reasons for this decision.

 

3.                            We agree that the Beneficiary will deliver this Application to the Bank.

 

Signature of clients

 

 

 

For your information: You may submit the Application for an Authorization to Debit the Account also in the internet website of the Bank, without arriving to the branch.

 

[Signature and Stamp: Ogen Yielding Real Estate Ltd and Polypid Ltd.] [Initial Signatures]

 

53




Exhibit 10.4.3

 

Addendum to the Lease Agreement dated March 27, 2014

 

Made and executed in Petah Tikva on the 28th day of November, 2017

 

Between:

 

Ogen Yielding Real Estate Ltd., Company No. 520033093

 

 

Of 3 Har Sinai St., Tel Aviv

 

 

(Hereinafter: “the Lessor”)

 

 

 

 

 

The first party;

 

 

 

And between:

 

PolyPid Ltd., Company No. 514105923

 

 

By its authorized signatories

 

 

Of 18 HaSivim St., Petah Tikva

 

 

(Hereinafter: “the Lessee”)

 

 

 

 

 

The second party;

 

Whereas:

 

On March 27, 2014 the Lessee and the Lessor signed a lease agreement [hereinafter: “the Original Agreement”] according to which the Lessee leases the Leased Premises within their meaning in the Original Agreement;

 

 

 

And whereas:

 

On July 1, 2014 the Lessor and the Lessee signed the first Addendum of the Original Agreement [hereinafter: “First Addendum”] according to which the Lessee leases from the Lessor an additional area of approximately 377sqm gross, located in the ground floor in Tamar Building in the complex, as stated in the First Addendum [the Original Agreement and the First Addendum shall be referred hereinafter: “the Lease Agreement”];

 

 

 

And whereas:

 

On July 23, 2017 the Lessor and the Lessee signed a second addendum of the Original Agreement [hereinafter: “Second Addendum”] according to which the Lessee leases from the Lessor an additional area of approximately 864sqm gross, located in Alon Building in the complex, and additional provisions and conditions were set forth in connection with this area, as stated in the Second Addendum [the Original Agreement and the First and

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 


 

 

 

Second Addendum shall be referred hereinafter: “the Lease Agreement”];

 

 

 

 

 

[The Leased Premises, within their meaning in the Original Agreement, and the Additional Areas that were leased to the Lessee in accordance with the First and Second Addendum shall be referred hereinafter collectively: “the Leased Premises”];

 

 

 

And whereas:

 

The Lessee requested from the Lessor to lease the Additional Area within its meaning hereunder, in addition to the Leased Premises, and the Lessor granted the request of the Lessee as aforesaid, and set out additional conditions in connection with the Leased Premises, in accordance with the provisions set forth in this Addendum hereunder;

 

 

 

And whereas:

 

The Lessor declares that it is the owner of the Additional Area and is entitled to lease this area to the Lessee;

 

Therefore, it is Declared, Stipulated and Agreed between the Parties as Follows:

 

1.                           Preamble and interpretation

 

1.1.                                     The preamble to this Addendum and Appendixes thereof constitute an integral part hereof.

 

1.2.                                     The headings of the sections will serve for the purpose of orientation and convenience only, and will not serve for the purpose of interpreting this Addendum.

 

1.3.                                     Any modification or addition of this Addendum and the Lease Agreement shall be null and void unless executed in writing and signed by the parties.

 

2.                            The Additional Area

 

2.1.                                     In accordance with the provisions set forth in this Addendum, an additional area of approximately 650sqm net with additional 15% load in respect of the Public Areas in the Building within their meaning in the Lease Agreement, i.e., an area of approximately 747sqm gross shall be added to the Area of the Leased Premises, when the said area is located in the second

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

2


 

floor of the Tamar Building in the complex and whose boundaries are marked in the blueprint hereby enclosed as Appendix A of this Addendum and shall be delivered in its present condition “as-is” (hereinafter: “Additional Area”) except for the performance of all the Lessor’s Works in the Additional Area within their meaning hereunder.

 

Upon completion of the adjustment works in the Additional Area, a qualified surveyor shall measure the Additional Area according to the survey principles set forth hereunder, and after the survey the final net area of the Leased Premises shall be determined (hereinafter: “Final Net Area”). The gross Area of the Leased Premises is the Final Net Area of the Leased Premises in addition to 15% load for the Public Areas in the Building.

 

2.2.                                     The Additional Area, as marked in the blueprint hereby enclosed, shall be delivered to the Lessee in its condition “as-is” at the time of signing this Addendum and the Lessee shall raise no claim and/or demand and/or suit against the Lessor and/or anyone acting on its behalf in connection therewith, unless the Lessor was aware of a latent defect or failure and failed to disclose to the Lessee any information in connection therewith, or in the event of a latent defect or failure that was detected in the course of performance of the works, including in anything related to the performance of the Lessee’s Works in the Additional Area, within their meaning hereunder, and in its condition as stated above.

 

3.                            Purpose of Lease in the Additional Area

 

The Additional Area shall be used for office purposes subject to the provisions set forth in any law and/or the Original Agreement.

 

4.                            The Term of Lease in the Additional Area

 

4.1.                                     The Term of Lease in the Additional Area shall commence on April 1, 2018 and shall expire in 60 months as of the delivery of possession date in the Additional Area, i.e. on March 30, 2023 (hereinafter: “Term of Lease in the Additional Area”). Notwithstanding the said it is clarified that the Lessor shall have the exclusive right to notify the Lessee, by delivery of a 14 business days’ prior and written notice, that the Term of Lease in the Additional Area shall be forwarded in such manner that the said Term of Lease shall commence on March 1, 2018 and until March 30, 2018 and the Lessee shall raise no suits and/or demands in connection therewith

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

3


 

(hereinafter: “Bringing Forward the Delivery Date”). In the event the Delivery Date was brought forward by the Lessor — as of the date delivery of possession in the Leased Premises was brought forward the Lessee shall incur all payments applicable to it in accordance with the provisions set forth in this Addendum, and the commencement and expiration dates of the Term of Agreement shall be moved accordingly (in such manner that the entire term shall be 60 months of lease).

 

4.2.                                     Subject to the provisions set forth in the Original Agreement and this Addendum, the Lessee is hereby granted an option to extend the Term of Lease in the Additional Area by an additional period of 60 months as of the expiration of the Term of Lease in the Additional Area (hereinafter: “Option Term”). The terms of payment during the Option Term shall be — increase of 3.5% of the amount of the last payment in respect of the Rent and Management Fees (and in addition to statutory VAT, when the sums are linked to the Basic Index within its meaning in the Original Agreement). The Option Term in accordance with the said conditions shall take effect automatically unless the Lessee delivered to the Lessor written notice at least 120 (one hundred and twenty) days prior to expiration of the extended Term of Lease, stating that the Lessee wishes to terminate the engagement in connection with the Additional Area, on the condition that the Lessee fulfilled fully and timely all its material undertakings in accordance with this Addendum, and without derogating from its undertaking to provide securities and insurances as stated in this Addendum. The entire terms set forth in this Addendum shall apply to the parties during the Option Term, mutatis mutandis.

 

5.                            Rent and Management Fees for the Additional Area

 

5.1.                                     As of the delivery of possession date in the Additional Area and until expiration of the Term of Lease, the Lessee shall pay to the Lessor the following payments (in addition to the payments for the Leased Premises as stated above):

 

5.1.1.                           Monthly Rent for the Additional Area in the amount of NIS 45 (forty five new Israeli shekels) for each 1sqm gross of the Additional Area, in addition to linkage differentials to the Basic Index (within its meaning in the Original Agreement) and statutory VAT, and Management Fees in the amount of NIS 13 (thirteen new Israeli shekels) for each 1sqm gross of the Additional Area, in

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

4


 

addition to linkage differentials to the Basic Index (within its meaning in the Original Agreement) and statutory VAT — Rent and Management Fees shall be paid in advance for each quarter (three months of lease). Payments shall be made by an authorization to debit the account by the bank clearing house system (Masav) enclosed with this Addendum.

 

5.1.2.                           The Lessee shall incur all payments it is obligated to pay in connection with the Additional Area including to the municipality, and including payments for the supply of electricity in bulk vis-à-vis the Lessor, according to a low voltage time of use rates and according to the reading of the electricity meter that will be installed by the Lessor. In addition, the Lessee shall coordinate with the Lessor the supply and payment for water usage, according to the rates charged by the water corporation, based on the reading of a meter that will be installed by the Lessor. For that purpose, shortly after signing this Addendum the Lessee shall inform the municipality regarding its lease of the Additional Area.

 

5.1.3.                           Notwithstanding the said in Section 5.1.1 above, the Lessor grants a one-time exemption to the Lessee from payment of the Rent for the first two months of the Term of Lease in the Additional Area, however during this period the Lessee shall incur all other payments applicable to the Additional Area, as stated in this Addendum.

 

6.                            Lessor’s Works in the Additional Area:

 

6.1.                                     The Lessor agreed to perform solely the following works in the Additional Area by itself (and/or by anyone acting on its behalf) and at its expense:

 

6.1.1.                           Installation of a P.V.C. floor according to the customary standards in the Lessor and at its sole discretion, and in any event for final costs that shall not be greater than NIS 120 per 1sqm net (including VAT).

 

6.1.2.                           Painting the Additional Area in a uniform color at the discretion of the Lessee.

 

6.1.3.                           Repair or replacement of defective tiles of the acoustic ceiling as agreed between the parties.

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

5


 

6.1.4.                           Making the air conditioning units available and operable.

 

6.1.5.                           Creating of a common escape corridor in the third floor of the Additional Area.

 

6.1.6.                           Supplying separate electricity feed to the Additional Area.

 

6.1.7.                           Relocation of the communication room door in such manner that it will be located in the Additional Area, as marked in the blueprint, in accordance with the instructions set forth by a consultant/expert.

 

6.2.                                     All works specified in this Section shall be fully completed until the Delivery of Possession Date of the Leased Premises and no later than April 1, 2018. Without derogating from the foregoing, paint repair works shall not be deemed as preventing the entry of the Lessee to the Leased Premises.

 

7.                            Responsibility for maintenance of the air-conditioning systems in the Additional Area

 

7.1.                                     For a period of 24 months as of the delivery of possession date in the Additional Area, the Lessor shall be responsible for the working order and current maintenance (subject to reasonable wear) of the air-conditioning system in the Leased Premises, provided that no damage and/or malicious and/or negligent damage and/or misuse of the air-conditioning system are caused by the Lessee or anyone acting on its behalf, and in such circumstances the Lessee shall be held fully liable in connection therewith. As of 24 months as of delivery of possession date henceforth — the Lessee shall be solely responsible and in general for the maintenance of the air-conditioning system (including the performance of any repair and/or payment and/or addition and the like). Notwithstanding the said, the Lessor shall be responsible for repairing the following parts: A. The motor of the air-conditioning system; B. Compressor; C. The conduits reaching the air-conditioning system. In case the Lessor is responsible for the repair of a malfunction in accordance with the provisions set forth above, the malfunction shall be repaired in the following manner: in 24 hours (of a business day) as of the date the Lessor received the written notice of the Lessee regarding the malfunction — the Lessor shall dispatch a technician to inspect and repair the malfunction. If the malfunction is not repaired in 5 business days — the Lessee shall be entitled to deliver notice to the Lessor

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

6


 

regarding its attempt to repair the air-conditioning system independently and take action for the purpose of repairing the malfunction until the malfunction is repaired and in such circumstances the Lessor shall fully incur the repair costs provided that it complies with the following conditions cumulatively: A. The repair concerns solely the air-conditioning systems of the Additional Area and is not located in the Public Areas in the Building where the Additional Area is located; B. The repair cannot harm or modify adversely the condition of the entire system.

 

8.                            Securities and insurance

 

8.1.                                     At the time of signing this addendum The Lessee shall be obligated to furnish to the Lessor the securities specified hereunder. Notwithstanding the said, to the extent that the Lessee fails to furnish to the Lessor the securities specified hereunder, the securities that were provided by virtue of the Lease Agreement shall continue to apply also with respect to the Additional Area specified in this Addendum. Nevertheless, prior to the delivery of possession in the Additional Area and as a condition thereof — the Lessee shall furnish the following securities.

 

The following are the securities that the Lessee will furnish to the Lessor in accordance with this Addendum: a bank guarantee in an amount equal to the Rent and the Management Fees for 3 months of lease in addition to VAT and linkage differentials, in the amount of NIS 152,074 (one hundred and fifty-two thousand and seventy-four new Israeli shekels). The parties agree that the additional guarantee that is provided in respect of this Addendum is provided for the purpose of covering the undertakings of the Lessee solely in connection with this Addendum and the Lessor shall not be entitled to use this guarantee for the purpose of assuring the fulfillment of the undertakings of the Lessee in accordance with the Lease Agreement or the First and Second Addendum thereof. It is further clarified that the existing guarantees that the Lessor holds in respect of the Primary Agreement or addenda thereof may not be used as securities for the fulfillment of the undertakings of the Lessee in accordance with this Addendum.

 

8.2.                                     In addition, prior to the entry of the Lessee to the Leased Premises, and as a condition thereof, the Lessee undertakes to take out and increase the insurance coverage in the relevant insurances in accordance with the Insurance Appendix of the Original Agreement for the entire Term of Lease

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

7


 

in respect of the Additional Area, without derogating from the entire provisions set forth in the Lease Agreement regarding the Lessee’s insurances.

 

9.                            Option to lease an attached area

 

9.1.                                     The parties hereby agree that the Lessee is granted the option to start negotiations (according to the conditions decided between the parties) with the Lessor, for the purpose of leasing an area of approximately 256sqm gross with the addition of 15% load for the Public Areas, located in the second floor in Tamar Building and attached to the Additional Area, and marked in brown in the blueprint hereby enclosed as Appendix B of this Addendum [hereinafter: “Attached Area”] for a period of 14 days as of the date the Lessor delivers written notice to the Lessee shortly before expiration of the Term of Lease in the Attached Area (within the meaning of this term hereunder, and whichever is earlier) (hereinafter respectively: “Lessor’s Notice” and “Term of Notice”).

 

9.2.                                     The Lessee is aware that the Attached Area is leased to a third-party and that the Term of Lease in the Attached Area expires on September 8, 2021. The Lessee is further aware that it is possible that the Lessor and/or a third-party that leases the Attached Area at present might terminate the agreement in connection with the Attached Area earlier (the earlier of the two dates shall be referred hereinafter and as the case may be: “Expiration of the Term of the Current Lease in the Attached Area”).

 

9.3.                                     To the extent that during the Term of Notice the Lessee notified the Lessor regarding its refusal to lease the Attached Area [hereinafter: “Lessee’s Notice”] or in the event the Lessee did not deliver to the Lessor any notice during the Term of Notice regarding its wish to lease the Attached Area, in such circumstances, as of the expiration of the Term of Notice or the Lessor’s Notice, whichever is earlier, the right of the Lessee to lease the Attached Area shall expire and the Lessor may lease this area to any third-party and under any conditions, and the Lessee shall not raise any claims and/or demands and/or suits in connection therewith.

 

9.4.                                     To the extent that the Lessee notifies the Lessor during the period in which the Attached Area is available that it wishes to lease the Attached Area, the parties may conduct negotiations and will agree on the terms of lease in the Attached Area and will sign an addendum in connection therewith, within a

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

8


 

maximum period of 21 days as of expiration of the Term of Notice (hereinafter: “Signing of the Addendum in respect of the Attached Area”).

 

9.5.                                     It is clarified that the Lessor’s Notice and the Term of Notice are provided for one-time and shall be provided to the Lessor only shortly after the expiration of the Term of Lease in the Attached Area and to the extent that the Lessee’s Notice fails to meet the conditions set forth in Section 9.3 or, alternatively, is negative, and/or to the extent that in any event the Signing of the Addendum in respect of the Attached Area is not completed in accordance with the provisions set forth in Section 9.4, and in such circumstances the Lessor shall be free and shall be entitled to lease the Attached Area to any lessee and under any conditions, without any further obligation to deliver the Lessor’s Notice as stated above.

 

10.                     Miscellaneous

 

10.1.                              It is hereby agreed that all the provisions set forth in the Original Agreement, to the extent that they were not modified or amended expressly in this Addendum, shall have full force and effect and shall remain intact, and anywhere in the Original Agreement that includes a reference to the Leased Premises — the said reference shall be deemed to include also the Additional Area respectively, unless this Addendum includes a provision that modifies expressly the provisions set forth in the Original Agreement, and in such circumstances the provisions set forth in this Addendum shall take precedence. This Addendum shall be enclosed with the Original Agreement and shall constitute an integral part thereof.

 

And in witness hereof the parties are hereby undersigned:

 

[Signed]

 

[Signed]

Ogen Yielding Real Estate Ltd.

 

PolyPid Ltd.

 

9




Exhibit 21.1

 

PolyPid Ltd.

Subsidiaries of the Registrant

(as of December 31, 2019)

 

PolyPid Pharma SRL, a company organized and existing under the laws of Romania.

 

PolyPid Inc., a Delaware corporation.