Compensation Policy PolyPid Ltd. (the "Company") Compensation Policy for Officers and Directors of the Company Table of Contents 1. Background 1 2. Compensation Objectives 1 3. Compensation policy 2 3.1. Officers' Compen

Compensation Policy for Officers and Directors

Amendment No. 20 to the Israeli Companies

Law, 5759-1999 (the "Companies Law") was enacted on December 12, 2012. This amendment mandates the adoption of a compensation

policy for Officers and Directors in publicly traded companies, and defines a special procedure for authorizing employment terms for Officers

The purpose of the Compensation Policy

is to describe PolyPid's overall compensation strategy for Officers and Directors and to provide guidelines for setting compensation

of its Officers and Directors.

The Compensation Policy is a multi-year

policy which initially shall be in effect for a period of five years from the date that the Company becomes a public company, and thereafter

will need to be approved by the Company's shareholders every three years.

The Compensation Committee and the Board

of Directors (the "Board" or "Board of Directors") shall review the Compensation Policy from time

to time, as required by the Companies Law. The Compensation Policy shall be brought for reconsideration as required by the Companies Law.

For purposes of this Policy, "Officers"

shall mean "office holders" as such term is defined in the Companies Law, excluding, unless otherwise expressly indicated

herein, PolyPid non-executive directors or Chairman (the "Directors").

This Policy is not intended to affect

current agreements nor affect obligating customs (if applicable) between the Company and its Officers or Directors as such may exist prior

to the approval of this Compensation Policy.

Nothing in this Compensation Policy

shall obligate the Company to grant any particular type or amount of compensation to any Officer, unless expressly stated otherwise, nor

shall it derogate from approval procedures mandated by the Companies Law.

Any amendment to this Compensation

Policy shall require the approvals as set forth in the Companies Law.

Strong and effective leadership is fundamental

to PolyPid's continued growth and success. This requires the ability to attract, retain, reward and motivate highly skilled officers

in international, competitive labor markets.

The Compensation Policy is intended to

align between the need to incentivize officers to succeed in achieving the Company's Objectives and their assigned goals and the

need to assure that the compensation structure meets PolyPid's interests and its overall strategic and financial objectives.

In support of this goal, the compensation

elements granted to PolyPid's Officers are designed to meet the following objectives:

Officers' compensation packages

will generally (but is not limited to) be comprised of the following elements:

The "mix" of the elements

that will be provided to each Officer will be structured in order to support the Company's philosophy of compensating Officers for

Company and individual performance and aligning their interests with stakeholders' interests, while recognizing that the mix may

vary from period to period and from Officer to Officer.

Generally, some or all of the following

parameters will be considered when reviewing the compensation terms of an Officer:

Notwithstanding the foregoing, the

maximum value of the variable compensation components (excluding the termination payments, Special Bonus and Lump sum sign up bonus) shall

be up to 450% of each Officer's total fixed compensation as specified in section 3.1.1., on an annual basis.

Base salary is a fixed compensation

element which provides compensation to an Officer for performance of his or her standard duties and responsibilities taking into account

the parameters described in section 3.2 above (the "Base Salary").

The Base Salary for newly hired Officers

will be set taking the following considerations into account:

When deciding on increasing an Officer's

Base Salary, the following considerations, in addition to the abovementioned, shall be applied: Changes to the Officer's scope of

responsibilities and business challenges, the need to retain the Officer, inflation since the last Base Salary update and updated market

Adjustments to Base Salary may be

periodically reviewed, considered and approved in accordance with the law. Such review will be conducted by the Company itself, or by

an external advisor, at the Company's discretion.

The following benefits and perquisites

may be granted to the Officers in order, among other things, to comply with legal requirements:

PolyPid may offer additional benefits

and perquisites to the Officers, which will be comparable to customary market practices, such as, but not limited to: company car benefits

(including coverage or related tax expenses); company cellular phone (including coverage or related tax expenses); complementary health

insurance; medical check-ups; meals; etc.; provided however, that such additional benefits and perquisites shall be determined in accordance

with PolyPid's policies and procedures.

Non-Israeli Officers may receive similar,

comparable or customary benefits and perquisites as applicable in the jurisdiction in which they are employed.

The compensation derived from the

benefits and perquisites set forth in this Section 3.5 shall not be deemed part of the Maximum Monthly Base Salary and shall be added

PolyPid's short term incentive

scheme will be based on a variable monetary bonus paid annually, designed to reward Officers based on the Company and/or their individually

defined results (the "Bonus").

During the first calendar quarter

of each calendar year (or for new hired Officers during each calendar year, no more than three months following his/her employment), the

Compensation Committee and the Board will determine the following for each Officer as well as the formula for calculating the bonus payment

at the end of the year:

Maximum Bonus (cap):

The maximum bonus is the maximum amount an Officer will be entitled to receive upon overachievement. The maximum bonus of each Officer

shall not exceed the amount of 9 monthly base salaries, or with respect to the Chief Executive Officer, 12 monthly base salaries.

Objectives: The Company

Objectives and Individual Objectives will be determined based on pre-defined measurable and quantified considerations.

The Bonus may include (but is not limited

to) any one or more of the following criteria:

Both Company Objectives and Individual

Objectives may combine quantitative and qualitative goals, provided that, there is a clear and measurable index for each goal.

The Board may set targets for a period

of more than one year, in which case either: (a) the Officer will be entitled to the bonus (per each year included in such multi-year

period) only upon achieving such targets at the end of such period; or (b) the Officer shall be entitled to a relative portion/milestone

of such bonus, according to the estimated progress to date, in each case, as determined in advance.

Discretionary Component:

The bonus may include a discretionary component of up to 20% of the Officer's annual cash target Bonus and with respect to the CEO

up to 30% of the CEO's annual cash target Bonus but not more than 3 monthly salaries (without the need of shareholders' approval),

based on the evaluation of such Officer's supervisors, or the Board of Directors in the case of the CEO.

Discretionary bonuses must be supported

by rationale clearly articulating the individual contributions or circumstances warranting additional compensation beyond predetermined

Thresholds: Subject to

the last paragraph below, the Compensation Committee and the Board may, with respect to any period or Officer, determine one or more thresholds

for the payment of the annual cash bonus or any components thereof, in such manner that if the threshold is not achieved, the annual cash

bonus or the particular component thereof, with respect to which the threshold was not achieved, will not be paid.

The Compensation Committee and the

Board of Directors alone may decide to change the measurable targets applicable to an Officer at any time during the year, if the change

is for the best interest of the Company and for special circumstances (for example: change of job description, regulatory changes, other

material events), that the Compensation Committee and Board of Directors believes that justify making such change (including retroactive