NAOV NanoVibronix Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 14, 2025

 

NanoVibronix, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		001-36445		01-0801232
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

969 Pruitt Ave Tyler, Texas		77569
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (914) 233-3004

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, 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 13(a) of the Exchange Act. ☐

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.001 per share		NAOV		Nasdaq Capital Market

 

 

 

Item 1.01.

Entry into a Material Definitive Agreement.

 

Merger with ENvue Medical Holdings, Corp.

 

Agreement and Plan of Merger

 

On February 14, 2025, Nanovibronix, Inc., a Delaware corporation (the “Company”) entered into that certain Agreement and Plan of Merger (the “Merger Agreement”) with NVEH Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), NVEH Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”) and ENvue Medical Holdings, Corp. (“ENvue”). Pursuant to the terms of the Merger Agreement, the Company and ENvue effected (i) a merger of First Merger Sub with and into ENvue, with the First Merger Sub ceasing to exist and ENvue becoming a wholly-owned subsidiary the Company (the “First Effective Time”) and (ii) the merger of ENvue with and into Second Merger Sub (the “Second Merger” and such effective time, the “Second Effective Time” and, the Second Merger together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger (“Surviving Entity”). At the Second Effective Time, the certificate of formation of the Surviving Entity was amended and restated to, among other things, to change the name of the Surviving Entity to “ENvue Medical Holdings LLC.” In connection with the Merger Agreement, the Company issued (i) 1,734,995 shares (the “Merger Shares”) of common stock, par value $0.001 per share (the “Common Stock”) to the holders of ENvue, which such number of shares represented no more than 19.9% (the “Exchange Cap”) of the outstanding shares of Common Stock immediately prior to the First Effective Time and (ii) 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”), as further described below, in excess of the Exchange Cap to the holders of ENvue in consideration for 100% of ENvue. Each share of Series X Preferred Stock will be convertible into 1,000 shares of Common Stock, subject to and contingent upon the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at a meeting of stockholders of Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of shares of Common Stock to the stockholders of ENvue upon conversion of any and all shares of Series X Preferred Stock in accordance with the terms of the Series X Certificate of Designations (as defined herein). The Merger was consummated and completed on February 14, 2025.

 

After giving effect to the Merger, pursuant to the terms and conditions of the Merger Agreement: (i) the holders of the outstanding equity of ENvue immediately prior to the First Effective Time own 19.9% of the Common Stock of the Company and 85.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following Merger Stockholder Approval will allow the Series X Preferred Stock to convert to Common Stock of the Company which may result in the holders of ENvue to own 85% of the Common Stock of the Company, and (ii) the holders of the Company’s outstanding equity immediately prior to the First Effective Time own 80.1% of the Common Stock of the Company and 15.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following Merger Stockholder Approval which will allow the Series X Preferred Stock to convert to Common Stock of the Company which may result in our holders owning 15% of Common Stock of the Company.

 

Pursuant to the Merger Agreement, the Company has agreed to hold a meeting of stockholders as soon as practicable following the date of the Merger Agreement to submit to its stockholders for their consideration: (i) the approval of the conversion of the Series X Preferred Stock into shares of Common Stock pursuant to the Series X Certificate of Designations (as defined herein) in accordance with rules of the Nasdaq Stock Market, LLC, (ii) the adoption of a new incentive plan (the “New Incentive Plan”) or amendment to the Company’s 2024 Long-Term Incentive Plan, pursuant to which shares of Common Stock, comprising an amount equal to 10% of the fully-diluted, outstanding equity interests of the Company immediately following the Merger and Debenture Financing (as defined herein) will be reserved for issuance by the Company pursuant to, and in accordance with, the terms and conditions of such stock incentive plan, to employees, directors, consultants and other service providers of the Company and its subsidiaries, and (iii) the authorization of an amendment of the Company’s certificate of incorporation to authorize sufficient shares of Common Stock to be issued in connection with (x) the conversion of the Series X Preferred Stock issued pursuant to the Merger Agreement and (y) the New Incentive Plan (collectively, the “Stockholder Proposals” and approval of the Stockholder Proposals, the “Merger Stockholder Approval”). In connection with these matters, the Company intends to file with the Securities and Exchange Commission (the “SEC”) a proxy statement and other relevant materials as soon as practicable following the date of the Merger Agreement.

 

The Board of Directors of the Company (the “Board”) approved the Merger Agreement on and the related transactions on February 12, 2025, and the consummation of the Merger was not subject to approval of the Company stockholders.

 

 

The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to provide any other factual information about the Company or ENvue. The Merger Agreement contains representations, warranties and covenants that the Company and ENvue made to each other as of specific dates. The assertions embodied in those representations, warranties and covenants were made solely for purposes of the Merger Agreement between the Company and ENvue and may be subject to important qualifications and limitations agreed to by the Company and ENvue in connection with negotiating its terms, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Merger Agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to investors or securityholders, or may have been used for the purpose of allocating risk between the Company and ENvue rather than establishing matters as facts. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures. For the foregoing reasons, no person should rely on the representations and warranties as statements of factual information at the time they were made or otherwise.

 

Series X Non-Voting Convertible Preferred Stock

 

On February 14, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series X Non-Voting Convertible Preferred Stock with the Secretary of State of the State of Delaware (the “Series X Certificate of Designations”) in connection with the Merger referenced in Item 1.01 above. The Series X Certificate of Designations provides for the issuance of shares of the Series X Preferred Stock issued in the Merger.

 

Conversion Rights. The conversion price for each share of Series X Preferred Stock shall be $0.6063. The conversion ratio (the “Conversion Ratio”) for each share of Series X Preferred Stock is determined by dividing the Stated Value (as defined in the Series X Certificate of Designations) of each share of Series X Preferred Stock, initially valued at $606.3756, divided by the conversion price which provides an implied Conversion Ratio of 1,000 shares of Common Stock issuable upon the conversion of each share of Series X Preferred Stock, subject to adjustment as provided in the Series X Certificate of Designations.

 

Effective as of 5:00 p.m. Eastern Time on the fourth (4^th) business day after the Stockholder Approval (as defined below), each share of Series X Preferred Stock then outstanding shall automatically convert into a number of shares of Common Stock equal to the Conversion Ratio, subject to applicable beneficial ownership limitations. Subject the terms of the Series X Certificate of Designations, the Series X Preferred Stock is also convertible, at the option of the holder, at any time and from time to time following 5:00 p.m. Eastern Time on the third (3^rd) business day after the date that the Stockholder Approval, into a number of shares of Common Stock equal to the Conversion Ratio, subject to the applicable beneficial ownership limitations.

 

Series X Stockholder Approval. Pursuant to the terms of the Merger Agreement, the issuance of shares of Common Stock to the stockholders upon conversion of any and all shares of the Series X Preferred Stock in accordance with the terms of the Series X Certificate of Designations is subject to and contingent upon the affirmative vote of a majority of the Common Stock present or represented and entitled to vote at a meeting of stockholders of the Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of such shares of Common Stock (the “Stockholder Approval” and such date the Stockholder Approval is obtained, the “Stockholder Approval Date”).

 

Dividend Rights. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series X Preferred Stock, based on the Stated Value, at a rate of eight percent (8%) per annum, commencing on the three (3) month anniversary of the Original Issue Date (as defined in the Series X Certificate of Designations) until the date the Company obtains the Series X Stockholder Approval. Such dividends can be paid in the form of cash or additional issuances of shares of Series X Preferred Stock based on the Stated Value, with such type of payment determined in the sole discretion of the Company, and accrue and be compounded daily on the basis of a 360-day year and twelve (12) 30-day months and shall be paid the earlier of: (i) promptly after conversion of the Series X Preferred Stock or (ii) quarterly starting on the six (6) month anniversary of the Original Issue Date. No other dividends shall be paid on shares of Series X Preferred Stock.

 

 

Voting Rights. Except as otherwise provided in the Series X Certificate of Designations, or as required by the DGCL, the Series X Preferred Stock shall have no voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company shall not, without the affirmative vote or written approval, agreement or waiver of the holders of seventy percent (70%) of the then outstanding shares of the Series X Preferred Stock, among other things, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Series X Certificate of Designations, (ii) issue further shares of Series X Preferred Stock in excess of 57,720 or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, (iii) prior to the Stockholder Approval, consummate either: (A) any Fundamental Transaction (as defined in the Series X Certificate of Designations) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the voting power of the capital stock of the Company or such other entity immediately after such transaction, (iv) enter into any agreement with respect to any of the foregoing that is not expressly conditioned upon Stockholder Approval, (v) prior to the Stockholder Approval: (A) pay a stock dividend or otherwise make a distribution or distributions on shares of Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon the issuance of the Conversion Shares), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, (vi) grant, issue or sell any capital stock or rights to purchase stock, warrants, securities or other securities of the Company or (vii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets.

 

Rank; Liquidation. Except to the extent that the requisite number of Series X Preferred Stock holders expressly consent to the creation of parity stock or senior preferred stock (as defined below), all shares of Common Stock and all shares of capital stock of the Company authorized or designated after the date of the designation of the Series X Preferred Stock shall be junior in rank to the Series X Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Prior to the Stockholder Approval, upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the holders shall be entitled to receive out of the assets, whether capital or surplus, of the Company the greater of the following amounts: (a) twice the aggregate stated value of the Series X Preferred Stock; or (b) the amount the holder would be entitled to receive if the Series X Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock. In addition, in the case of either (a) or (b) above, the holders will be entitled to the payment of all accrued and unpaid dividends on the Series X Preferred Stock and, in the event any of such dividends are payable in shares of Common Stock, the cash value of such shares of Common Stock upon Liquidation.

 

Cash Settlement. Prior to the Stockholder Approval, if the Company breaches any of its obligations or covenants as set forth in the Series X Certificate of Designation (including but not limited to failure to obtain the requisite approval of the Series X Preferred Stock holders prior to taking any of the actions described under “Voting Rights” above, then the Company shall, at the request of the requisite holders Series X Preferred Stock (the “Settlement Request”), pay, out of funds legally available therefor, and prior to any payment in satisfaction of any redemption rights of any other class or series of capital stock of the Company, an amount in cash equal to the stated value of the shares of Series X Preferred Stock held by each holder, with such payment to be made within two (2) Business Days from the date of Settlement Request, and upon payment in full of the stated value for such shares of Series X Preferred Stock, such shares shall be redeemed, retired and no longer be outstanding.

 

The foregoing description of the Series X Preferred Stock does not purport to be complete and is qualified in its entirety by reference to the Series X Certificate of Designations, which is filed hereto as Exhibit 3.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Support Agreements

 

In connection with the execution of the Merger Agreement, the Company and ENvue entered into that certain Parent Stockholder Support Agreement (the “Support Agreements”), dated as of February 14, 2025, with certain of the Company’s officers and directors. The Support Agreements provide that, among other things, each of the parties thereto has agreed to vote or cause to be voted all of the shares of Common Stock owned by such stockholder in favor of the Stockholder Proposals at the Company meeting of stockholders to be held in connection therewith.

 

 

The foregoing description of the Support Agreements does not purport to be complete and is qualified in its entirety by reference to the form of the Support Agreement, which is included as Exhibit C to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Debenture Financing

 

Senior Convertible Debenture and Securities Purchase Agreement

 

On February 13, 2025, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”), pursuant to which the Company sold in a private placement, a senior convertible debenture (the “Debenture”) due the earlier of (i) the date that is the 30-day anniversary of the effective date of stockholder approval (the “Debenture Stockholder Approval”) of the issuance of the shares of Common Stock upon the conversion of the debentures (the “Debenture Financing”) and (ii) the date that is nine months following the date of issuance of the Debenture (“Maturity Date”), having an aggregate principal amount of $500,000.

 

The closing of the Debenture Financing occurred on February 14, 2025.

 

On the Maturity Date, the Company shall pay the Investor in cash or, at the option of the Investor, in the form of conversion shares, or a combination thereof, the entire outstanding principal amount of the Debenture, together with accrued and unpaid interest thereon, the applicable exit fee and any other amounts due thereunder. Following the receipt of Debenture Stockholder Approval, the Debenture shall be convertible, in whole or in part, into shares of Common Stock, at the option of the Investor, at the initial conversion price of $0.4446 (the “Conversion Price”), which is subject to customary anti-dilution adjustments, and which such Conversion Price shall not be lower than the floor price of $0.088920. The Debenture bears interest at the rate of 8.0% per annum, payable on the Maturity Date.

 

Registration Rights Agreement

 

On February 13, 2025, in connection with the Purchase Agreement and issuance of the Debenture, the Company entered into that certain Registration Rights Agreement (the “Registration Rights Agreement”) with the Investor. Pursuant to the Registration Rights Agreement, the Company is required to prepare and file a resale registration statement with the SEC within 30 calendar days following the closing date of the Debenture Financing (the “Filing Deadline”). The Company shall use its commercially reasonable efforts to cause this registration statement to be declared effective by the SEC within 60 calendar days of the Filing Deadline (or within 90 calendar days if the SEC reviews the resale registration statement).

 

The Registration Rights Agreement additionally contains certain representations and warranties of the Company, including indemnification provisions, customary for transactions of this type.

 

The Debenture Financing is exempt from registration pursuant to Section 4(a)(2) of the Securities Act promulgated thereunder, as a transaction by an issuer not involving a public offering, and Rule 506 of Regulation D. The Investor has acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends have been affixed to the securities issued in this transaction.

 

The foregoing descriptions of the Purchase Agreement, Debenture and Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the forms of Purchase Agreement, Debenture and Registration Rights Agreement, which are filed as Exhibits 10.1, 4.1 and 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 2.01

Completion of Acquisition or Disposition of Assets

 

On February 14, 2025, the Company completed its business combination with ENvue. The information contained in Item 1.01 of this Current Report on Form 8-K as related to the Merger and Merger Agreement, and transactions contemplated thereunder, is incorporated by reference into this Item 2.01.

 

 

Item 2.03

Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

 

On February 13, 2025, pursuant to the Purchase Agreement, the Company issued the Debenture to the Investor. The information contained in Item 1.01 of this Current Report on Form 8-K as related to the Debenture and the Debenture Transaction is incorporated by reference into this Item 2.03.

 

Item 3.02

Unregistered Sales of Equity Securities

 

The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. The Debenture was offered and sold in a transaction exempt from registration under the Securities Act, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. The Investor represented that it was an “accredited investor,” as defined in Regulation D, and is acquiring the Debenture and the shares of Common Stock issuable upon the conversion thereunder for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The Debenture and the shares of Common Stock issuable upon conversion of the Debenture, if any, have not been registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. Neither this Current Report on Form 8-K nor any of the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy shares of Common Stock or any other securities of the Company.

 

Pursuant to the Merger Agreement, the Company issued the Merger Shares and shares of Series X Preferred Stock in the Merger. The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02. Such issuances were exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

 

Item 3.03

Material Modification to Rights of Security Holders.

 

The matters described in Item 1.01 of this Current Report on Form 8-K related to the Series X Preferred Stock and the filing of the Certificate of Designations are incorporated herein by reference.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Resignation of Directors

 

In accordance with the Merger Agreement, on February 14, 2025, immediately after the Second Effective Time, Harold Jacob, Maria Schroeder and Michael Ferguson resigned from the Board and any respective committees thereto of which they were members. The resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices.

 

Appointment of Directors

 

In accordance with the Merger Agreement, on February 14, 2025, immediately after the Second Effective Time, Doron Besser, M.D., and Zeev Rotstein, M.D. were appointed to the Board as directors.

 

Doron Besser is the CEO and President of ENvue Medical. Prior to ENvue, Dr. Besser served as CEO of Angioslide Ltd., a company specializing in innovative, cost-effective angioplasty products. Dr. Besser guided the company through its infancy stages, which included complicated animal and human trials, to FDA clearance, CE approval and initial market penetration in Europe and the US. Dr. Besser also served as VP of Clinical and Marketing and VP of Business Development at superDimension, a leader in minimally-invasive pulmonology devices. Dr. Besser helped lead superDimension from its inception, serving on the core team that identified opportunities within the pulmonology market. In 2012, Covidien acquired superDimension for approximately $300 million. As a seasoned entrepreneur, Dr. Besser specializes in identifying breakthrough technologies and developing them throughout all product development phases, including international sales and marketing activities. Dr. Besser holds a Doctor of Medicine degree from Munich’s Ludwig-Maximilians University. Dr. Besser’s experience in the healthcare industry provides him the appropriate experience to serve on the Board.

 

 

Professor Rotstein is an internationally recognized cardiologist and expert in health management systems, with decades of experience across consultancy and academia. Professor Rotstein worked for 36 years at Sheba Medical Center (“Sheba”) in Tel Hashomer, Israel. He started as a senior cardiologist in 1977, served as Deputy Director during 1988 to 1999, served as Director of Sheba’s Acute Care Hospital during 1999-2004, and served as Director General, during 2004-2016, at which time Sheba was considered one of the top hospitals in the world. During 2016-2021, Prof. Rotstein was the CEO and Director General of the Hadassah Medical Center in Jerusalem. Professor Rotstein graduated from the Sackler School of Medicine at Tel Aviv University. He received his Master of Health Administration (MHA) from the Leon Recanti Graduate School of Business Administration at Tel Aviv University and was certified by the Israel Ministry of Health as a specialist in Health Systems Management. Additionally, he has held fellowships at the New York Department of Health, Tufts University, and the School of Hygiene and Public Health of Johns Hopkins Bloomberg School of Public Health. Professor Rotstein’s experience and knowledge of the health management industry provide him the appropriate experience to serve on the Board.

 

There are no arrangements or understandings between either of Dr. Besser or Professor Rotstein and any other person pursuant to which he was appointed as a director of the Company. Neither of Dr. Besser nor Professor Rotstein is a party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

 

Audit Committee

 

In connection with the consummation of the Merger, Professor Rotstein and Aurora (Rori) Cassirer, a current director of the Board, were appointed to the Audit Committee of the Board. Our Board has determined each of Professor Rotstein and Ms. Cassirer to be financially literate and qualify as an independent director under Sections 5605(a)(2) and 5605(c)(2) of the Nasdaq Rules and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Indemnification Agreements

 

In connection with Professor Rotstein’s and Dr. Besser’s appointments as directors, each of Professor Rotstein and Dr. Besser will enter into the Company’s standard form of indemnification agreement, a copy of which was filed as Exhibit 10.16 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on March 6, 2014.

 

Item 5.03.

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

The matters described in Item 1.01 of this Current Report on Form 8-K related to the filing of the Certificate of Designations are incorporated herein by reference.

 

Item 7.01.

Regulation FD Disclosure.

 

On February 14, 2025, the Company issued a press release announcing its entry into the Merger Agreement and the consummation of the Merger. A copy of the press release is furnished as Exhibit 99.4 to this Current Report on Form 8-K.

 

The information in Item 7.01 of this Current Report on Form 8-K, including the information in the press release attached as Exhibit 99.4 to this Current Report on Form 8-K, is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information in Item 7.01 of this Current Report on Form 8-K, including the information in the press release attached as Exhibit 99.4 to this Current Report on Form 8-K, shall not be deemed to be incorporated by reference in the filings of the Company under the Securities Act of 1933, as amended.

 

 

Forward Looking Statements

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: stockholder approval of the shares of Common Stock issuable upon conversion of the Series X Preferred Stock, stockholder approval of the shares of Common Stock issuable upon conversion of the Debenture, if any, approval of the Stockholder Proposals, and the filing of a resale registration statement pursuant to the Registration Rights Agreement. The use of words such as, but not limited to, “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” and similar words expressions are intended to identify forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on the Company’s current beliefs, expectations and assumptions regarding the future of its business, future plans and strategies, its clinical results and other future conditions. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. No representations or warranties (expressed or implied) are made about the accuracy of any such forward-looking statements. The Company may not actually achieve the forecasts disclosed in our forward-looking statements, and you should not place undue reliance on forward-looking statements. Such forward-looking statements are subject to a number of material risks and uncertainties including but not limited to those set forth under the caption “Risk Factors” in the Company’s most recent Annual Report on Form 10-K filed with the SEC, as supplemented by its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as discussions of potential risks, uncertainties, and other important factors in the Company’s subsequent filings with the SEC. Any forward-looking statement speaks only as of the date on which it was made. Neither the Company, nor its affiliates, advisors or representatives, undertake any obligation to publicly update or revise any forward-looking statement, whether as result of new information, future events or otherwise, except as required by law. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date hereof.

 

Item 9.01 - Financial Statements and Exhibits.

 

(a) Financial Statements of Business Acquired.

 

In accordance with Item 9.01(a), ENvue’s audited consolidated financial statements for the year ended December 31, 2023, and 2022, are attached to this Current Report on Form 8-K as Exhibit 99.1. ENvue’s unaudited consolidated financial statements for the nine months ended September 30, 2024, are attached to this Current Report on Form 8-K as Exhibit 99.2.

 

(b) Pro Forma Financial Information.

 

In accordance with Item 9.01(b), the unaudited pro forma condensed combined financial statements for the nine months ended September 30, 2024, and the year ended December 31, 2023, for the Company are attached to this Current Report on Form 8-K as Exhibit 99.3.

 

 

(d) Exhibits

 

Exhibit Number		Description
2.1+		Agreement and Plan of Merger, dated February 14, 2025, by and among NanoVibronix, Inc., NVEH Merger Sub I, Inc., NVEH Merger Sub II, LLC and ENvue Medical Holdings, Corp.
3.1		Certificate of Designations of Preferences, Rights and Limitations of Series X Non-Voting Convertible Preferred Stock, dated February 14, 2025.
4.1		Form of Senior Convertible Debenture, issued on February 13, 2025.
10.1		Form of Securities Purchase Agreement, dated as of February 13, 2025, by and between NanoVibronix, Inc. and the purchaser named therein.
10.2		Form of Registration Rights Agreement, dated as of February 13, 2025, by and between NanoVibronix, Inc. and the purchaser named therein.
23.1		Consent of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global – Independent Auditor for ENvue Medical Holdings, Corp.
99.1		Audited Consolidated Financial Statements of ENvue Medical Holdings, Corp. for the year ended December 31, 2023.
99.2		Unaudited Consolidated Financial Statements of ENvue Medical Holdings, Corp. for the nine months ended September 30, 2024.
99.3		Unaudited Pro Forma Condensed Combined Financial Statements for the nine months ended September 30, 2024, and the year ended December 31, 2023.
99.4		Press Release, dated February 14, 2025 (furnished herewith pursuant to Item 7.01).
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

+ Certain of the schedules (and similar attachments) to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K under the Securities Act because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. The Company hereby agrees to furnish a copy of all omitted schedules (or similar attachments) to the SEC upon its request.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: February 14, 2025	NANOVIBRONIX, INC.
	By:	/s/ Brian Murphy
		Brian Murphy
		Chief Executive Officer

 

 

 

Exhibit 2.1

 

Execution Version

 

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

NANOVIBRONIX, INC.,
a Delaware corporation;

 

NVEH MERGER SUB I, INC.,
a Delaware corporation;

 

NVEH MERGER SUB II, LLC,
a Delaware limited liability company;

 

and

 

ENVUE MEDICAL HOLDINGS, CORP.,
a Delaware corporation

 

 

Dated as of February 14 , 2025

 

 

Table of Contents

 

			Page
ARTICLE I DESCRIPTION OF TRANSACTION			2
	Section 1.1	The Merger	2
	Section 1.2	Effects of the Merger	3
	Section 1.3	Closing; First Effective Time; Second Effective Time	3
	Section 1.4	Certificate of Designation; Certificate of Incorporation and Bylaws; Directors and Officers.	3
	Section 1.5	Merger Consideration; Effect of Merger on Company Capital Stock	4
	Section 1.6	Conversion of Shares	5
	Section 1.7	Closing of the Company’s Transfer Books	6
	Section 1.8	Exchange of Shares.	6
	Section 1.9	Appraisal Rights.	7
	Section 1.10	Further Action	8
	Section 1.11	Withholding	8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY			8
	Section 2.1	Organization and Qualification; Charter Documents.	8
	Section 2.2	Capital Structure.	9
	Section 2.3	Authority; Non-Contravention; Approvals	10
	Section 2.4	Anti-Takeover Statutes Not Applicable.	11
	Section 2.5	Financial Statements.	11
	Section 2.6	Absence Of Certain Changes Or Events	12
	Section 2.7	Taxes	13
	Section 2.8	Compliance with Legal Requirements	14
	Section 2.9	Legal Proceedings; Orders	16
	Section 2.10	Brokers’ and Finders’ Fees	16
	Section 2.11	Company Contracts.	16
	Section 2.12	FDA and Regulatory Matters.	18
	Section 2.13	Books And Records	21
	Section 2.14	Interested Party Transactions	22
	Section 2.15	Solvency	22
	Section 2.16	Books And Records	22
	Section 2.17	Disclaimer of Other Representations and Warranties	22

 

 

Table of Contents

(Cont’d)

 

ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS			22
	Section 3.1	Organization and Qualification.	22
	Section 3.2	Capital Structure.	23
	Section 3.3	Authority; Non-Contravention; Approvals.	24
	Section 3.4	Anti-Takeover Statutes Not Applicable	26
	Section 3.5	SEC Filings; Parent Financial Statements; No Undisclosed Liabilities	26
	Section 3.6	Absence Of Certain Changes Or Events	27
	Section 3.7	Taxes.	28
	Section 3.8	Intellectual Property	29
	Section 3.9	Compliance with Legal Requirements.	29
	Section 3.10	Legal Proceedings; Orders	32
	Section 3.11	Brokers’ and Finders’ Fees	33
	Section 3.12	Employee Benefit Plans.	33
	Section 3.13	Title to Assets; Real Property.	34
	Section 3.14	Environmental Matters.	35
	Section 3.15	Labor Matters.	35
	Section 3.16	Parent Contracts.	36
	Section 3.17	Insurance.	38
	Section 3.18	Interested Party Transactions	38
	Section 3.19	No Business Activities by Merger Sub	39
	Section 3.20	Solvency	39
	Section 3.21	Shell Company Status	39
	Section 3.22	Valid Issuance	39
	Section 3.23	Opinion of Financial Advisor	39
	Section 3.24	Absence of Liabilities	39
	Section 3.25	Disclaimer of Other Representations and Warranties	39
ARTICLE IV ADDITIONAL AGREEMENTS OF THE PARTIES			39
	Section 4.1	Parent Stockholders’ Meeting.	39
	Section 4.2	SEC Filings.	40
	Section 4.3	Reservation of Parent Common Stock; Issuance of Shares of Parent Common Stock	41
	Section 4.4	Indemnification of Officers and Directors.	41
	Section 4.5	Additional Agreements	43
	Section 4.6	Listing	43
	Section 4.7	Tax Matters	43
	Section 4.8	Legends	44
	Section 4.9	Directors and Officers	45
	Section 4.10	Section 16 Matters	45
	Section 4.11	Cooperation	45
	Section 4.12	Closing Certificates.	46
	Section 4.13	Takeover Statutes	46
	Section 4.14	Obligations of Merger Subs	46
	Section 4.15	Private Placement	46
	Section 4.16	Incentive Plan	47
	Section 4.17	Public Announcements	47
	Section 4.18	Company RSU	47

 

 

Table of Contents

(Cont’d)

 

ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY			48
	Section 5.1	No Restraints	48
	Section 5.2	Certificate of Designation	48
	Section 5.3	Parent Financing	48
	Section 5.4	Stock Exchange Listing	48
ARTICLE VI CLOSING DELIVERIES OF THE COMPANY			48
	Section 6.1	Documents	48
	Section 6.2	FIRPTA Certificate	49
ARTICLE VII CLOSING DELIVERIES OF PARENT			49
	Section 7.1	Documents	49
	Section 7.2	Parent Lock-Up Agreements	49
	Section 7.3	Parent Support Agreement	49
ARTICLE VIII MISCELLANEOUS PROVISIONS			50
	Section 8.1	Non-Survival of Representations and Warranties	50
	Section 8.2	Amendment	50
	Section 8.3	Waiver.	50
	Section 8.4	Entire Agreement; Counterparts; Exchanges by Electronic Transmission	50
	Section 8.5	Applicable Law; Jurisdiction	50
	Section 8.6	Attorneys’ Fees	51
	Section 8.7	Assignability	51
	Section 8.8	Notices	51
	Section 8.9	Cooperation	52
	Section 8.10	Severability	52
	Section 8.11	Other Remedies; Specific Performance	52
	Section 8.12	No Third-Party Beneficiaries	52
	Section 8.13	Construction.	53
	Section 8.14	Expenses	53

 

Exhibits:

 

Exhibit A Definitions

Exhibit B Form of Certificate of Designation

Exhibit C Form of Parent Support Agreement

 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of February 14 , 2025, by and among NanoVibronix, Inc., a Delaware corporation (“Parent”), NVEH Merger Sub I, Inc., a Delaware corporation and direct wholly owned subsidiary of Parent (“First Merger Sub”), NVEH Merger Sub II, LLC, a Delaware limited liability company and direct wholly owned subsidiary of Parent (“Second Merger Sub” and together with First Merger Sub, “Merger Subs”), and ENvue Medical Holdings, Corp., a Delaware corporation (the “Company”). Certain capitalized terms used in this Agreement are defined in Exhibit A.

 

RECITALS

 

WHEREAS, Parent and the Company intend to effect a merger of First Merger Sub with and into the Company (the “First Merger”) in accordance with this Agreement and the DGCL. Upon consummation of the First Merger, First Merger Sub will cease to exist and the Company will become a wholly owned subsidiary of Parent.

 

WHEREAS, immediately following the First Merger and as part of the same overall transaction as the First Merger, the Company will merge with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger;

 

WHEREAS, the Parties intend that, (i) the First Merger and the Second Merger, taken together, will constitute an integrated transaction described in Rev. Rul. 2001-46, 2001-2 C.B. 321 that qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, and (ii) this Agreement will constitute, and is hereby adopted as, a plan of reorganization within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a).

 

WHEREAS, the Parent Board has (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of Parent and its stockholders, (ii) approved and declared advisable this Agreement and the Contemplated Transactions, including the issuance of the Parent Common Stock Payment Shares and the Parent Preferred Stock Payment Shares to the stockholders of the Company pursuant to the terms of this Agreement, and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the stockholders of the Parent vote to approve the Parent Stockholder Matters at the Parent Stockholders’ Meeting to be convened following the Closing.

 

WHEREAS, the First Merger Sub Board has (i) determined that the Contemplated Transactions are fair to, advisable, and in the best interests of First Merger Sub and its sole stockholder, (ii) approved and declared advisable this Agreement and the Contemplated Transactions and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the stockholder of First Merger Sub votes to adopt this Agreement and thereby approve the Contemplated Transactions.

 

WHEREAS, the sole member of the Second Merger Sub has (i) determined that the Contemplated Transactions are fair to, advisable, and in the best interests of Second Merger Sub and its sole member, (ii) approved and declared advisable this Agreement and the Contemplated Transactions and (iii) determined to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the sole member of Second Merger Sub votes to adopt this Agreement and thereby approve the Contemplated Transactions.

 

 

WHEREAS, the Company Board has (i) determined that the Contemplated Transactions are fair to, advisable and in the best interests of the Company and its stockholders, (ii) approved and declared advisable this Agreement and the Contemplated Transactions and (iii) recommended, upon the terms and subject to the conditions set forth in this Agreement, that the stockholders of the Company vote to approve the Company Stockholder Matters (the “Board Approval”).

 

WHEREAS, subsequent to the Board Approval, but prior to the execution and delivery of this Agreement, the requisite Company stockholders by written consent and in accordance with the Company’s certificate of incorporation, the Company’s bylaws and the DGCL (i) approved and adopted this Agreement and the Contemplated Transactions, (ii) acknowledged that the approval given thereby is irrevocable and that such stockholder is aware of its rights to demand appraisal for its shares pursuant to Section 262 of the DGCL, a true and correct copy of which was attached thereto, and that such stockholder has received and read a copy of Section 262 of the DGCL, and (iii) acknowledged that by its approval of the Merger it is not entitled to appraisal rights with respect to its shares in connection with the Merger and thereby waives any rights to receive payment of the fair value of its capital stock under the DGCL (such matters, the “Company Stockholder Matters” and the consent, the “Stockholder Written Consent”), and the Stockholder Written Consent is to become effective by its terms immediately following the execution of this Agreement by the parties hereto.

 

WHEREAS, concurrently with the execution and delivery of this Agreement, certain investors have executed a Securities Purchase Agreement among Parent and the Persons named therein (representing an aggregate commitment no less than the Note Concurrent Investment Amount of $500,000), pursuant to which such Persons will have agreed to purchase a number of convertible notes as set forth therein concurrently with the Closing in connection with the Parent Financing (the “Securities Purchase Agreement”).

 

WHEREAS, concurrently with the execution and delivery of this Agreement, the Parent shall file with the SEC a registration statement on Form S-1 pursuant to the Securities Act (the (“Public Offering Registration Statement”).

 

WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to the Company’s willingness to enter into this Agreement, certain stockholders set forth on Section A-2 of the Parent Disclosure Schedule (solely in their capacity as stockholders) are executing support agreements in favor of the Company in substantially the form attached hereto as Exhibit C (the “Parent Support Agreement”), pursuant to which such Persons have, subject to the terms and conditions set forth therein, agreed to vote all of their shares of capital stock of Parent in favor of the Parent Stockholder Matters.

 

WHEREAS, immediately following the execution and delivery of this Agreement, but prior to the filing of the Certificate of Merger, Parent will file the Certificate of Designation with the office of the Secretary of State of the State of Delaware.

 

AGREEMENT

 

The Parties, intending to be legally bound, agree as follows:

 

Article I

 

DESCRIPTION OF TRANSACTION

 

Section 1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the First Effective Time, First Merger Sub shall be merged with and into the Company, and the separate existence of First Merger Sub shall cease. As a result of the First Merger, the Company will continue as the surviving corporation in the First Merger (the “First Step Surviving Corporation”). Upon the terms and subject to the conditions set forth in this Agreement, at the Second Effective Time, the First Step Surviving Corporation will merge with and into Second Merger Sub, and the separate existence of the First Step Surviving Corporation shall cease. As a result of the Second Merger, Second Merger Sub will continue as the surviving entity in the Second Merger (the “Surviving Entity”).

 

 

Section 1.2 Effects of the Merger. At and after the First Effective Time, the First Merger shall have the effects set forth in this Agreement, the First Certificate of Merger and in the applicable provisions of the DGCL. As a result of the First Merger, the First Step Surviving Corporation will become a wholly owned subsidiary of Parent. At and after the Second Effective Time, the Second Merger shall have the effects set forth in this Agreement, the Second Certificate of Merger and in the applicable provisions of the DGCL and the DLLCA.

 

Section 1.3 Closing; First Effective Time; Second Effective Time. The consummation of the Merger (the “Closing”) is being consummated remotely via the electronic exchange of documents and signatures substantially simultaneously with the execution and delivery of this Agreement, or at such other time, date and place as Parent and the Company may mutually agree in writing. The date on which the Closing actually takes place is referred to as the “Closing Date.” At the Closing, (i) the Parties shall cause the First Merger to be consummated by executing and filing with the Secretary of State of the State of Delaware a certificate of merger with respect to the First Merger, satisfying the applicable requirements of the DGCL and in form and substance to be agreed upon by the Parties (the “First Certificate of Merger”) and (ii) the Parties shall cause the Second Merger to be consummated by executing and filing with the Secretary of State of the State of Delaware a certificate of merger with respect to the Second Merger, satisfying the applicable requirements of the DGCL and the DLLCA and in form and substance to be agreed upon by the Parties (the “Second Certificate of Merger” and together with the First Certificate of Merger, the “Certificates of Merger”). The First Merger shall become effective at the time of the filing of such First Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such First Certificate of Merger with the consent of Parent and the Company (the time as of which the First Merger becomes effective being referred to as the “First Effective Time”). The Second Merger shall become effective at the time of the filing of such Second Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such Second Certificate of Merger with the consent of Parent and the Company (the time as of which the Second Merger becomes effective being referred to as the “Second Effective Time”).

 

Section 1.4 Certificate of Designation; Certificate of Incorporation and Bylaws; Directors and Officers.

 

(a) Prior to the First Effective Time, Parent will file the Certificate of Designation with the office of the Secretary of State of the State of Delaware.

 

(b) At the First Effective Time:

 

(i) the certificate of incorporation of the First Step Surviving Corporation shall be the certificate of incorporation of the Company as in effect immediately prior to the Second Effective Time, until thereafter amended as provided by the DGCL and such certificate of incorporation;

 

(ii) the bylaws of the First Step Surviving Corporation shall be the bylaws of the Company as in effect immediately prior to the First Effective Time, until thereafter amended as provided by the DGCL and such bylaws; and

 

 

(iii) the directors and officers of the First Step Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the First Step Surviving Corporation, shall be such persons as shall be mutually agreed upon by Parent and the Company.

 

(c) At the Second Effective Time:

 

(i) the certificate of formation of the Surviving Entity shall be the certificate of formation of Second Merger Sub as in effect immediately prior to the Second Effective Time, until thereafter amended as provided by the DLLCA and such certificate of formation; provided, however, that at the Second Effective Time (as part of the Second Certificate of Merger), the certificate of formation shall be amended to (A) change the name of the Surviving Entity to “ENvue Medical Holdings LLC,” and (B) comply with Section 4.4;

 

(ii) the limited liability company agreement of the Surviving Entity shall be amended and restated in its entirety to read identically to the limited liability company agreement of Second Merger Sub as in effect immediately prior to the Second Effective Time, until thereafter amended as provided by the DLLCA and such limited liability company agreement; provided, however, that following the Second Effective Time (but as soon thereafter as practicable), the limited liability company agreement shall be amended to (A) comply with Section 4.4 and (B) change the name of the Surviving Entity to “ENvue Medical Holdings LLC”;

 

( iii ) the managers and officers of the Surviving Entity, each to hold office in accordance with the certificate of formation and limited liability company agreement of the Surviving Entity, shall be such persons as shall be mutually agreed upon by Parent and the Company.

 

Section 1.5 Merger Consideration; Effect of Merger on Company Capital Stock. The aggregate merger consideration (the “Merger Consideration”) to be paid by Parent for all of the outstanding shares of Company Capital Stock at the Closing shall be (a) 1,734,995 shares of Parent Common Stock (“Parent Common Stock Payment Shares”), which shall represent a number of shares equal to no more than 19.9% of the outstanding shares of Parent Common Stock as of immediately before the First Effective Time (the “Parent Common Stock Consideration Cap”), and (b) in the event the aggregate number of shares of Parent Common Stock Payment Shares issued to any Company stockholder at Closing would result in the issuance of shares of Parent Common Stock in an amount in excess of the Parent Common Stock Consideration Cap, Parent shall issue to such Company stockholders shares of Parent Common Stock up to the Parent Common Stock Consideration Cap and shall issue the remaining balance to such stockholders a total of 57,720 shares of Parent Convertible Preferred Stock (“Parent Preferred Stock Payment Shares”). Each Parent Preferred Stock Payment Share shall be convertible into 1,000 shares of Parent Common Stock, subject to and contingent upon the affirmative vote of a majority of the Parent Common Stock present or represented and entitled to vote at a meeting of stockholders of Parent to approve, for purposes of the NASDAQ Rules, the issuance of shares of Parent Common Stock to the stockholders of the Company upon conversion of any and all shares of Parent Convertible Preferred Stock in accordance with the terms of the Certificate of Designation in substantially the form attached hereto as Exhibit B (the “Preferred Stock Conversion Proposal”). The Parent Common Stock Payment Shares and Parent Preferred Stock Payment Shares shall be allocated among the stockholders of the Company pursuant to the Exchange Ratio as set forth on the Allocation Certificate.

 

 

Section 1.6 Conversion of Shares

 

(a) At the First Effective Time, by virtue of the First Merger and without any further action on the part of Parent, Merger Subs, the Company or any stockholder of the Company or Parent:

 

(i) any shares of Company Common Stock held as treasury stock or held or owned by the Company or any wholly owned Subsidiary of the Company immediately prior to the First Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor; and

 

(ii) subject to Section 1.5 and Section 1.6(b), each share of Company Capital Stock outstanding immediately prior to the First Effective Time (excluding shares to be canceled pursuant to Section 1.6(a)(i)) shall be automatically converted in accordance with the Company’s certificate of incorporation solely into the right to receive a number of Parent Common Stock Payment Shares and/or Parent Preferred Stock Payment Shares pursuant to the Allocation Certificate.

 

(b) If any shares of Company Common Stock outstanding immediately prior to the First Effective Time are subject to a repurchase option or a risk of forfeiture under any applicable restricted stock purchase agreement or other similar agreement with the Company, such shares of Company Common Stock shall no longer be subject to any right of repurchase, risk of forfeiture or other such conditions.

 

(c) No fractional shares of Parent Common Stock and Parent Convertible Preferred Stock shall be issued in connection with the First Merger, and no certificates or scrip for any such fractional shares shall be issued and no cash shall be paid for any such fractional shares. Any fractional shares of Parent Common Stock that a holder of Company Common Stock would otherwise be entitled to receive shall be aggregated with all fractional shares of Parent Common Stock issuable to such holder or a fraction of a share of Parent Convertible Preferred Stock issuable to such holder and any remaining fractional shares shall be rounded up to the nearest whole share.

 

(d) At the First Effective Time, by virtue of the First Merger and without any further action on the part of Parent, Merger Subs, the Company or any member of the Company or stockholder of Parent, each share of common stock of First Merger Sub issued and outstanding immediately prior to the First Effective Time shall be converted into and exchanged for one share of common stock of the First Step Surviving Corporation. If applicable, each stock certificate of First Merger Sub evidencing ownership of any such shares shall, as of the First Effective Time, evidence ownership of such shares of common stock of the First Step Surviving Corporation.

 

 

(e) If, between the date of this Agreement and the First Effective Time, the outstanding shares of Company Common Stock or Parent Common Stock or Parent Convertible Preferred Stock shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or other like change, the Allocation Certificate shall, to the extent necessary, be equitably adjusted to reflect such change to the extent necessary to provide the holders of Company Common Stock and Parent Common Stock and Parent Convertible Preferred Stock, with the same economic effect as contemplated by this Agreement prior to such stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares or other like change; provided, however, that nothing herein will be construed to permit the Company or Parent to take any action with respect to Company Common Stock or Parent Common Stock or Parent Convertible Preferred Stock, respectively, that is prohibited or not expressly permitted by the terms of this Agreement.

 

(f) At the Second Effective Time, by virtue of the Second Merger and without any action on the part of Parent, the First Step Surviving Corporation, Second Merger Sub or their respective stockholders, each share of the First Step Surviving Corporation issued and outstanding immediately prior to the Second Effective Time shall be canceled and extinguished without any conversion thereof and no payment or distribution shall be made with respect thereto.

 

Section 1.7 Closing of the Company’s Transfer Books. At the First Effective Time: (a) all holders of (i) certificates representing shares of Company Capital Stock and (ii) book-entry shares representing shares of Company Capital Stock (“Book-Entry Shares”), in each case, that were outstanding immediately prior to the First Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company Capital Stock outstanding immediately prior to the First Effective Time. No further transfer of any such shares of Company Capital Stock shall be made on such stock transfer books after the First Effective Time. If, after the first Effective Time, a valid certificate previously representing any shares of Company Capital Stock outstanding immediately prior to the First Effective Time (a “Company Stock Certificate”) is presented to the Exchange Agent or to the Surviving Entity, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.6 and Section 1.8.

 

Section 1.8 Exchange of Shares.

 

(a) At the First Effective Time, Parent shall deposit with VStock Transfer, LLC (the “Exchange Agent”) certificates or evidence of book-entry shares representing the Parent Common Stock and Parent Convertible Preferred Stock issuable pursuant to Section 1.6(a). The Parent Common Stock and Parent Convertible Preferred Stock so deposited with the Exchange Agent, together with any dividends or distributions received by the Exchange Agent with respect to such shares, are referred to collectively as the “Exchange Fund.”

 

(b) As soon as reasonably practicable after the record date on or after the First Effective Time, the Exchange Agent shall issue book-entry shares representing the Parent Common Stock and Parent Convertible Preferred Stock (in a number of whole shares of Parent Common Stock and Parent Convertible Preferred Stock) that each holder of Company Common Stock has the right to receive pursuant to the provisions of Section 1.6(a) and each Company Stock Certificate or Book-Entry Share formerly held by each such holder shall be deemed, from and after the First Effective Time, to represent only the right to receive book-entry shares of Parent Common Stock and Parent Convertible Preferred Stock representing the Merger Consideration and, following issuance of book-entry shares representing the Merger Consideration, shall be canceled. The Merger Consideration and any dividends or other distributions as are payable pursuant to (d) shall be deemed to have been in full satisfaction of all rights pertaining to Company Capital Stock formerly represented by such Company Stock Certificates or Book-Entry Shares.

 

 

(c) No dividends or other distributions declared or made with respect to Parent Common Stock or Parent Convertible Preferred Stock with a record date on or after the First Effective Time shall be paid to the holder of any unsurrendered Company Stock Certificate or Book-Entry Shares with respect to the shares of Parent Common Stock and/or Parent Convertible Preferred Stock that such holder has the right to receive in the Merger until such holder surrenders such Company Stock Certificate or transfers such Book-Entry Shares or provides an affidavit of loss or destruction in lieu thereof in accordance with this Section 1.8 (at which time such holder shall be entitled, subject to the effect of applicable abandoned property, escheat or similar Laws, to receive all such dividends and distributions, without interest).

 

(d) Any portion of the Exchange Fund that remains unclaimed by holders of shares of Company Capital Stock as of the date that is one year after the Closing Date shall be delivered to Parent upon demand, and any holders of Company Stock Certificates or Book-Entry Shares who have not theretofore surrendered their Company Stock Certificates or transferred their Book-Entry Shares in accordance with this Section 1.8 shall thereafter look only to Parent as general creditors for satisfaction of their claims for Parent Common Stock and Parent Convertible Preferred Stock and any dividends or distributions with respect to shares of Parent Common Stock and Parent Convertible Preferred Stock.

 

(e) No Party shall be liable to any holder of any shares of Company Capital Stock or to any other Person with respect to any shares of Parent Common Stock or Parent Convertible Preferred Stock (or dividends or distributions with respect thereto) or for any cash amounts delivered to any public official pursuant to any applicable abandoned property Law, escheat Law or similar Law. Any portion of the Exchange Fund that remains unclaimed by holders of shares of Company Capital Stock as of the date that is two years after the Closing Date (or immediately prior to such earlier date on which the related Exchange Funds (and all dividends or other distributions in respect thereof) would otherwise escheat to or become the property of any Governmental Body) shall, to the extent permitted by applicable Law, become the property of the Surviving Entity, free and clear of all claims or interest of any Person previously entitled thereto.

 

Section 1.9 Appraisal Rights.

 

(a) Notwithstanding any provision of this Agreement to the contrary, shares of Company Capital Stock that are outstanding immediately prior to the First Effective Time and which are held by stockholders who have exercised and perfected appraisal rights for such shares of Company Capital Stock in accordance with the DGCL (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration described in Section 1.5 attributable to such Dissenting Shares. Such stockholders shall be entitled to receive payment of the appraised value of such shares of Company Capital Stock held by them in accordance with the DGCL, unless and until such stockholders fail to perfect or effectively withdraw or otherwise lose their appraisal rights under the DGCL. All Dissenting Shares held by stockholders who shall have failed to perfect or shall have effectively withdrawn or lost their right to appraisal of such shares of Company Capital Stock under the DGCL (whether occurring before, at or after the First Effective Time) shall thereupon be deemed to be converted into and to have become exchangeable for, as of the First Effective Time, the right to receive its applicable portion of the Merger Consideration, without interest, attributable to such Dissenting Shares upon their surrender in the manner provided in Sections 1.6 and 1.8.

 

 

(b) The Company shall give Parent prompt written notice of any demands by dissenting stockholders received by the Company, withdrawals of such demands and any other instruments served on the Company and any material correspondence received by the Company in connection with such demands, and the Company shall have the right to direct all negotiations and proceedings with respect to such demands; provided that the Parent shall have the right to participate in such negotiations and proceedings. Neither the Parent nor the Company shall, except with the other party’s prior written consent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands, or approve any withdrawal of any such demands or agree to do any of the foregoing.

 

Section 1.10 Further Action. If, at any time after the First Effective Time, any further action is determined by the Surviving Entity to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Entity with full right, title and possession of and to all rights and property of the Company, then the officers and directors of the Surviving Entity shall be fully authorized, and shall use their and its reasonable best efforts (in the name of the Company, in the name of Merger Subs, in the name of the Surviving Entity and otherwise) to take such action.

 

Section 1.11 Withholding. The Parties and the Exchange Agent (each, a “Withholding Agent”) shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Capital Stock or any other Person such amounts as such Party or the Exchange Agent is required to deduct and withhold under the Code or any other Law with respect to the making of such payment; provided, however, that if a Withholding Agent determines that any payment to any stockholder of the Company hereunder is subject to deduction and/or withholding then, except with respect to any compensatory payments or as a result of a failure to deliver the certificate described in Section 6.2, such Withholding Agent shall (a) provide notice to such stockholders as soon as reasonably practicable after such determination (and no later than three (3) Business Days prior to undertaking such deduction and/or withholding) and (b) use commercially reasonable efforts to cooperate with such stockholder prior to Closing to reduce or eliminate any such deduction and/or withholding. To the extent that amounts are so withheld and paid over to the appropriate Governmental Body, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made.

 

Article II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Subject to Section 8.13(h), except as set forth in the disclosure schedule delivered by the Company to Parent (the “Company Disclosure Schedule”), the Company represents and warrants to Parent and Merger Subs as follows:

 

Section 2.1 Organization and Qualification; Charter Documents.

 

(a) Section 2.01(a) of the Company Disclosure Schedule identifies each Subsidiary of Company and indicates its jurisdiction of organization. Neither Company nor any of the Entities identified in Section 2.01(a) of the Company Disclosure Schedule owns any capital stock of, or any equity interest of any nature in, any other Entity, other than the Entities identified in Section 2.01(a) of the Company Disclosure Schedule. None of the Acquired Companies has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. No Acquired Company is, or has otherwise been a party to, member of, or participant in, any partnership, joint venture or similar Entity.

 

 

(b) Each of the Acquired Companies is a corporation, limited liability company or similar Entity duly organized, validly existing and, in jurisdictions that recognize the concept, in good standing under the laws of the jurisdiction of its incorporation, formation or other establishment, as applicable, and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Contracts by which it is bound.

 

(c) Each of the Acquired Companies (in jurisdictions that recognize the following concepts) is qualified to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification except where the failure to be so qualified would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(d) Company has made available to Parent accurate and complete copies of: (1) the certificate of incorporation, bylaws and other charter and organizational documents of each Acquired Company, including all amendments thereto; (2) the stock records of each Acquired Company; and (3) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of each Acquired Company, the board of directors of each Acquired Company and all committees of the board of directors of each Acquired Company. The books of account, stock records, minute books and other records of the Acquired Companies are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with prudent business practices.

 

Section 2.2 Capital Structure.

 

(a) The authorized capital stock of Company consists of: (i) 1,500,000 shares of Company Common Stock, par value $0.0001 per share, of which 1,425,750 shares are issued and outstanding. All outstanding shares of Company Common Stock (collectively the “Company Capital Stock”) are duly authorized, validly issued, fully paid and non-assessable and were issued in compliance with all applicable federal and state securities Legal Requirements. No shares of Company Capital Stock are held in Company’s treasury as of the date of this Agreement.

 

(b) As of the date of this Agreement, Company has 74,250 Company RSU’s outstanding. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and non-assessable. Section 2.02(b) of the Company Disclosure Schedule lists each director and officer of the Company who is a holder of Company Capital Stock, the number and type of shares of such stock held by such holder, and each outstanding Company RSU.

 

(c) (i) None of the outstanding shares of Company Capital Stock are entitled or subject to any preemptive right, right of repurchase or forfeiture, right of participation, right of maintenance or any similar right; (ii) none of the outstanding shares of Company Capital Stock are subject to any right of first refusal in favor of Company or any other Person for which a waiver of such right of first refusal has not been obtained; (iii) there are no outstanding bonds, debentures, notes or other indebtedness of the Acquired Companies having a right to vote on any matters on which the Company Stockholders have a right to vote; and (iv) there is no Contract to which the Acquired Companies are a party relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or from granting any option or similar right with respect to), any shares of Company Capital Stock. None of the Acquired Companies are under any obligation, or are bound by any Contract pursuant to which they may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of Company Capital Stock or other securities.

 

 

Section 2.3 Authority; Non-Contravention; Approvals:

 

(a) Company has the requisite corporate power and authority to enter into this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement to be executed by Company in connection with the Contemplated Transactions (the “Company Documents”) and, subject to the Stockholder Written Consent, to perform its obligations hereunder and to consummate the Contemplated Transactions. The execution and delivery of this Agreement by Company and the Company Documents, the performance by Company of its obligations hereunder and the consummation by Company of the Contemplated Transactions have been duly authorized by all necessary corporate action on the part of Company, subject only to the Stockholder Written Consent and the filing and recordation of the Certificate of Designation and Certificate of Merger pursuant to Delaware Law. The Stockholder Written Consent is the only vote/consent of the holders of any class or series of capital stock of Company necessary to adopt this Agreement and approve the Merger and the other Contemplated Transactions. This Agreement has been, and the Company Documents will be at or prior to the Closing, duly executed and delivered by Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, this Agreement constitutes, and the Company Documents when so executed and delivered will constitute, the valid and binding obligation of Company, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy and other similar laws and general principles of equity;

 

(b) The board of directors of Company (the “Company Board”), by resolutions duly adopted by vote at a meeting of directors of Company duly called and held, or by unanimous written Consent of the Company Board, and, as of the date of this Agreement, not subsequently rescinded or modified in any way, has, as of the date of this Agreement (i) approved this Agreement, the Company Documents and the Merger, and determined that this Agreement, the Company Documents and the Contemplated Transactions, including the Merger, are fair to, and in the best interests of the Company Stockholders, and (ii) resolved to recommend that the Company Stockholders adopt this Agreement and the Company Documents and approve the Merger and all other Contemplated Transactions and directed that such matters be submitted for consideration of the Company Stockholders;

 

(c) Subject to Stockholder Written Consent and compliance with the requirements set forth in Section 2.3(d) below, the execution and delivery of this Agreement or the Company Documents by Company does not, and the performance of this Agreement by Company will not, (i) conflict with or violate the certificate of incorporation or bylaws of Company or the equivalent organizational documents of any of its Subsidiaries, (ii) conflict with or violate any Legal Requirement applicable to any Acquired Company or by which any of their respective properties is bound or affected, except for any such conflicts or violations that would not, individually or in the aggregate, have a Company Material Adverse Effect or would not prevent or materially delay the consummation of the Merger, (iii) require an Acquired Company to make any filing with or give any notice to a Person, to obtain any Consent from a Person, or result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair Company’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or Encumbrance on any of the properties or assets of Company or any of its Subsidiaries pursuant to, any Company Contract (as defined below), except as would not, individually or in the aggregate, have a Company Material Adverse Effect or prevent or materially delay the Merger or (iv) result in the creation of any Encumbrance (other than Permitted Liens) on any of the properties or assets of any Acquired Company, except as would not, individually or in the aggregate, have a Company Material Adverse Effect or prevent or materially delay the Merger;

 

 

(d) No material Consent, approval, Order or authorization of, or registration, declaration or filing with any Governmental Body is required by or with respect to Company in connection with the execution and delivery of this Agreement, the Company Documents or the consummation of the Contemplated Transactions, except for (i) the filing of the Certificate of Merger and the Certificate of Designation with the Secretary of State of the State of Delaware; (ii) the filing of Proxy Statement/Prospectus with the Securities and Exchange Commission (“SEC”) in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (iii) such Consents, Orders, registrations, declarations and filings as may be required under applicable federal and state securities laws and (iv) such Consents, Orders, registrations, declarations, filings or approvals as may be required under applicable Legal Requirements that are designed or intended to prohibit, restrict, or regulate actions having the purpose or effect of monopolization or restraint of trade or significant impediments or lessening of competition or creation or strengthening of a dominant position through merger or acquisition (the “Antitrust Laws”), in any case that are applicable to the transactions contemplated by this Agreement.; or

 

Section 2.4 Anti-Takeover Statutes Not Applicable.

 

(a) The Company Board has taken all actions so that no state takeover statute or similar Legal Requirement applies or purports to apply to the execution, delivery or performance of this Agreement or to the consummation of the Merger or the other Contemplated Transactions. The Company Board has taken all action necessary to render inapplicable to this Agreement and the Contemplated Transactions any restrictions on business combinations under Delaware Law.

 

Section 2.5 Financial Statements.

 

(a) The audited consolidated financial statements (including any related notes thereto) representing the financial condition of Company as of December 31, 2022 and December 31, 2023 and the unaudited financial statements (including the notes thereto) representing the financial condition of Company as of September 30, 2024 (collectively, the “Company Financials”) (i) were prepared in accordance with United States generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto), (ii) fairly presented the consolidated financial position of Company and its Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount, and (iii) are consistent with, and have been prepared from, the books and records of Company. The balance sheet of Company as of September 30, 2024 is hereinafter referred to as the “Company Balance Sheet.” Notwithstanding the foregoing, unaudited financial statements are subject to normal recurring year-end adjustments (the effect of which will not, individual or in the aggregate, be material) and the absence of footnotes.

 

 

(b) Each of Company and its Subsidiaries maintain a system of internal accounting controls designed to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Company and each of its Subsidiaries maintain internal controls over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

 

(c) Since January 1, 2021 (the “Company Lookback Date”), there have been no formal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer or general counsel of Company, the Company Board or any committee thereof. Since the Company Lookback Date, neither Company nor its independent auditors have identified (i) any significant deficiency or material weakness in the system of internal accounting controls utilized by Company, (ii) fraud, whether or not material, that involves Company’s management or other employees who have a role in the preparation of financial statements or the internal accounting controls utilized by Company, or (iii) any claim or allegation regarding any of the foregoing.

 

(d) Except as disclosed in the Company Financials, neither Company nor any of its Subsidiaries have any liabilities, Indebtedness, obligation, expense, claim, deficiency, guaranty, or endorsement of any kind, whether accrued, absolute, contingent, matured, or unmatured (whether or not required to be reflected in the financial statements under GAAP) (each, a “Liability”), except Liabilities: (i) identified in the Company Financials, (ii) incurred in connection with the Contemplated Transactions, (iii) described on Section 2.5(d) of the Company Disclosure Schedule, (iv) incurred since the date of the Company Balance Sheet in the ordinary course of business consistent with past practices, (v) set forth in any Company Contract or (vi) that would not have, individually or in the aggregate, a Company Material Adverse Effect.

 

Section 2.6 Absence Of Certain Changes Or Events. Since September 30, 2024, through the date of this Agreement and other than with respect to the negotiation, execution and performance of this Agreement and the Company Documents, each of the Acquired Companies has conducted its business only in the ordinary course of business consistent with past practice, and:

 

(a) there has not been any event that has had a Company Material Adverse Effect;

 

(b) there has not been any material change by Company in its accounting methods, principles or practices, except as required by concurrent changes in GAAP, applicable law, or as disclosed in the Company Financials;

 

(c) there has not been any revaluation of Company’s material assets;

 

(d) no Acquired Company has entered into or amended any material terms of any Contract, in each case providing for new obligations in excess of fifty thousand dollars ($50,000); and;

 

(e) no Acquired Company has incurred any Indebtedness (other than in the ordinary course);

 

 

Section 2.7 Taxes.

 

(a) Each income and other Tax Return that any Acquired Company was required to file under applicable Legal Requirements: (i) has been timely filed on or before the applicable due date (including any extensions of such due date) and (ii) is true and complete in all respects. All Taxes due and payable by Company or its Subsidiaries have been timely paid, except to the extent such amounts are being contested in good faith by an Acquired Company and are properly reserved for on the books or records of Company and its Subsidiaries. No extension of time with respect to any date on which a Tax Return was required to be filed by an Acquired Company is in force (except where such Tax Return was filed), and no waiver or agreement by or with respect to an Acquired Company is in force for the extension of time for the payment, collection or assessment of any Taxes, and no request has been made by an Acquired Company for any such extension or waiver (except, in each case, in connection with any request for extension of time for filing Tax Returns). There are no liens for Taxes on any asset of an Acquired Company other than liens for Taxes not yet due and payable, Taxes contested in good faith and reserved against in accordance with GAAP. No deficiency with respect to Taxes has been proposed, asserted or assessed in writing against Company or its Subsidiaries which has not been fully paid or adequately reserved or reflected in the Company Financials;

 

(b) No closing agreements, private letter rulings, technical advice memoranda or similar agreements or rulings have been entered into by any Acquired Company with any taxing authority or issued by any taxing authority to an Acquired Company. There are no outstanding rulings of, or request for rulings with, any Governmental Body addressed to an Acquired Company that are, or if issued would be, binding on an Acquired Company;

 

(c) No Acquired Company is a party to any Contract with any third party relating to allocating or sharing the payment of, or Liability for, Taxes or Tax benefits (other than pursuant to customary provisions included in credit agreements, leases, and agreements entered with employees, in each case, not primarily related to Taxes and entered into in the ordinary course of business). No Acquired Company has ever been part of a consolidated group (other than a consolidated group in which an Acquired Company is the parent) or has any Liability for the Taxes of any third party under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Legal Requirement) as a transferee or successor or otherwise by operation of Legal Requirements

 

(d) Except as set forth on Section 2.07(d) of the Company Disclosure Schedule, none of the Acquired Companies is a “controlled foreign corporation” within the meaning of Section 957 of the Code or “passive foreign investment company” within the meaning of Section 1297 of the Code

 

(e) No Acquired Company has participated in, or is currently participating in, a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2). Company has disclosed on its respective United States federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of United States federal income Tax within the meaning of Section 6662 of the Code.

 

(f) Each Acquired Company is not (and has not been for the five-year period ending at the First Effective Time) a “United States real property holding corporation” as defined in Section 897(c)(2) of the Code and the applicable Treasury Regulations.

 

 

(g) No Acquired Company has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

 

(h) No Acquired Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any Tax period (or portion thereof) beginning after the Closing Date as a result of obtaining an advance of a credit with respect to Taxes on or prior to the Closing Date that was not otherwise available on or prior to the Closing Date, including, but not limited to, the delay of payment of employment Taxes under Section 2302 of the CARES Act, the advance refunding of credits under Section 3606 of the CARES Act, and any delay in the payment of estimated Taxes

 

Section 2.8 Compliance with Legal Requirements.

 

(a) Company and its Subsidiaries are not and have not been at any time in violation of (i) any Legal Requirement, Order, judgment or decree applicable to Company or any of its Subsidiaries or by which Company or any of its Subsidiaries are bound or affected, or (ii) any Contract to which Company or any of its Subsidiaries is a party or by which Company or any of its Subsidiaries or its or any of their respective properties is bound or affected, except for any immaterial conflicts, defaults or violations. No investigation or review by any Governmental Body is pending or, to the knowledge of Company, threatened against any Acquired Company or any product of Company, nor has any Governmental Body indicated to an Acquired Company or its parent in writing an intention to conduct the same.

 

(b) Company and its Subsidiaries hold all material permits, licenses, registrations, authorizations, variances, exemptions, Orders and approvals from Governmental Bodies which are necessary to the operation of the business of Company and its Subsidiaries taken as a whole (collectively, the “Company Permits”). Company and its Subsidiaries are in compliance in all material respects with the terms of the Company Permits. No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending or, to the knowledge of Company, threatened, which seeks to revoke or limit any Company Permit. Company has made available to Parent all Company Permits.

 

(c) Since the Company Lookback Date, no product of the Acquired Companies has at any time been recalled, withdrawn, suspended or discontinued (whether voluntarily or otherwise).

 

 

(d) Each of the Acquired Companies (i) is, and since the Company Lookback Date, has been, in compliance in all material respects with (A) all written policies of Company and each of its Subsidiaries pertaining to the logical and physical security of electronic data stored or used by the Acquired Companies (the “Company Privacy Policy”), (B) all applicable laws pertaining to privacy, data protection, user data or Company Personal Information; (C) the requirements of any industry standard or self-regulatory organization by which Company or any of its Subsidiaries is bound; and (D) contractual commitments by which Company or any of its Subsidiaries is bound and (ii) has implemented and maintained commercially reasonable and appropriate administrative, technical, organizational and physical safeguards to protect such Company Personal Information against unauthorized access and use. There has been no loss, damage or unauthorized access, disclosure, use or breach of security of Company Personal Information maintained by or on behalf of Company or any of its Subsidiaries, except in each case as would not, individually or in the aggregate, reasonably be likely to result in a Company Material Adverse Effect. No Person (including any Governmental Body) has made any written claim or commenced any action with respect to unauthorized access, disclosure or use of Company Personal Information maintained by or on behalf of any of Company or any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be likely to result in a Company Material Adverse Effect. None of (1) the execution, delivery, or performance of this Agreement or (2) the consummation of any of the transactions contemplated by this Agreement, including the Merger, will violate any Company Privacy Policy or any law pertaining to privacy, data protection user data or Company Personal Information. “Company Personal Information” means all data or information controlled, owned, stored, used or processed by Company or any of its Subsidiaries regarding or capable of being associated with an individual person or device, including, but not limited to, (a) information that identifies, could be used to identify or is otherwise identifiable with an individual or a device or household, including name, physical address, telephone number, email address, financial information, financial account number or government-issued identifier, medical, health, or insurance information, gender, date of birth, educational or employment information, and any other data used or intended to be used to identify, contact or precisely locate an individual (e.g., geolocation data), (b) information or data bearing on an individual person’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living, (c) any data regarding an individual’s activities online or on a mobile device or other application (e.g., searches conducted, web pages or content visited or viewed), whether or not such information is directly associated with an identifiable individual, and (d) internet protocol addresses, device identifiers or other persistent identifiers. Company Personal Information also includes any information maintained in association with the foregoing information. Company Personal Information may relate to any individual, including a current, prospective or former customer or employee, and includes information in any form, including paper, electronic and other forms.

 

(e) Since the Company Lookback Date, there has been no (i) material security incident, breach, or successful ransomware, denial of access attack, denial of service attack, hacking, or similar event with respect to any Company IT Asset, nor (ii) any material unauthorized, accidental, or unlawful access to, or destruction, loss, alteration disclosure, or other Processing of, Company Data (each, in the case of (i) and (ii), a “Company Security Incident”). None of the Acquired Companies, nor, to the knowledge of Company, all vendors, partners or other third parties that Process Company Personal Information on behalf of, or that otherwise share Company Personal Information with, the Acquired Companies (in the case of such vendors, partners, and other third parties, relating to the Acquired Companies) (“Company Data Partners”), have been required to make, any disclosure or notification to any Person under any Company privacy obligation in connection with any Company Security Incident. None of the Acquired Companies has received any material notification from any Governmental Body or other Person of any material Action relating to the data privacy, data security, data protection, or the Processing of Company Data, or alleging any violation of any Company privacy obligation. To the knowledge of Company, there has never been any audit, investigation or enforcement action (including any fines or other sanctions) by any Governmental Body or other Person relating to any Company Security Incident or material violation of any Company privacy obligation.

 

 

Section 2.9 Legal Proceedings; Orders.

 

(a) Except as set forth in Section 2.9(a) of the Company Disclosure Schedule, there is no pending Legal Proceeding, and no Person has, to the knowledge of Company, threatened in writing to commence any Legal Proceeding: (i) that involves any of the Acquired Companies, any business of any of the Acquired Companies or any of the assets owned, leased or used by any of the Acquired Companies or any present or former officer, director or employee of the Acquired Companies in such individual’s capacity as such; (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other Contemplated Transactions or (iii) that involves any product of the Acquired Companies. Except as set forth in Section 2.9(a) of the Company Disclosure Schedule, no Legal Proceeding has had or, if adversely determined, would reasonably be expected to have or result in a Company Material Adverse Effect. To the knowledge of Company, no event has occurred, and no claim, dispute or other condition or circumstance exists, that would reasonably be expected to give rise to or serve as a basis for the commencement of any Legal Proceeding of the type described in clause (i) or clause (ii) of the first sentence of this Section 2.9(a).

 

(b) There is no Order to which any of the Acquired Companies, or the assets owned or used by any of the Acquired Companies (including, without limitation, any product of the Acquired Companies), is subject. To the knowledge of Company, no officer or other key employee of any of the Acquired Companies is subject to any Order that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the business of any of the Acquired Companies

 

Section 2.10 Brokers’ and Finders’ Fees. Except for Palladium Capital Group, LLC, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other Contemplated Transactions based upon arrangements made by or on behalf of any of the Acquired Companies.

 

Section 2.11 Company Contracts.

 

(a) Except for Excluded Contracts or as set forth in Section 2.11(a) of the Company Disclosure Schedule, neither Company nor any of its Subsidiaries is a party to or is bound by:

 

(i) any management, employment, severance, retention, transaction bonus, change in control, consulting, relocation, repatriation or expatriation agreement or other similar Contract between: (i) any of the Acquired Companies, and (ii) any active, retired or former employees, directors or consultants of any Acquired Company, other than any such Contract that is terminable “at will” (or following a notice period imposed by applicable Legal Requirements or, in the case of consulting agreements, following the notice period required in the Contract), or without any obligation on the part of any Acquired Company to make any severance, termination, change in control or similar payment or to provide any benefit, other than severance payments required to be made by any Acquired Company under applicable Legal Requirements.

 

(ii) any Contract with any distributor, reseller or sales representative with an annual value in excess of fifty thousand dollars ($50,000);

 

(iii) any Contract with any manufacturer, vendor, or other Person for the supply of materials or performance of services by such third party to Company in relation to the manufacture of Company’s products or product candidates with an annual value in excess of fifty thousand dollars ($50,000);

 

(iv) any agreement or plan providing equity benefits to current or former employees of an Acquired Company, including, without limitation, any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the Contemplated Transactions or the value of any of the benefits of which will be calculated on the basis of any of the Contemplated Transactions;

 

 

(v) any Contract incorporating or relating to any guaranty, any warranty, any sharing of liabilities or any indemnity not entered into in the ordinary course of business, including any indemnification agreements between Company or any of its Subsidiaries and any of its officers or directors;

 

(vi) any Contract imposing, by its express terms, any material restriction on the right or ability of any Acquired Company: (A) to compete with any other Person; (B) to acquire any product or other asset or any services from any other Person; or (C) to develop, sell, supply, distribute, offer, support or service any product or any technology or other asset to or for any other Person;

 

(vii) any Contract relating to the disposition or acquisition of assets not in the ordinary course of business or any ownership interest in any corporation, partnership, joint venture or other business enterprise, other than Contracts in which the applicable disposition or acquisition has been consummated and there are no material ongoing obligations;

 

(viii) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit in excess of fifty thousand dollars ($50,000);

 

(ix) any joint marketing or development agreement;

 

(x) any commercial Contract that would reasonably be expected to have a material effect on the ability of Company to perform any of its material obligations under this Agreement, or to consummate any of the transactions contemplated by this Agreement, that is not set forth on Section 2.11(a)(x) of the Company Disclosure Schedule;

 

(xi) any Contract that provides for: (A) any right of first refusal, right of first negotiation, right of first notification or similar right with respect to any securities or assets of any Acquired Company for which a waiver of such right has not been obtained; or (B) any “no shop” provision or similar exclusivity provision with respect to any securities or assets of any Acquired Company;

 

(xii) any Contract that contemplates or involves the payment or delivery of cash or other consideration in an amount or having a value in excess of fifty thousand dollars ($50,000) or more in the aggregate, or contemplates or involves the performance of services having a value in excess of fifty thousand dollars ($50,000) or more in the aggregate, in each case, following the date of this Agreement, other than any arrangement or agreement expressly contemplated or provided for under this Agreement; or

 

(xiii) any Contract that does not allow Company or any of its Subsidiaries to terminate the Contract for convenience with not more than sixty (60) days prior notice to the other party and without the payment of any rebate, chargeback, penalty or other amount to such third party in connection with any such termination in an amount or having a value in excess of fifty thousand dollars ($50,000) in the aggregate.

 

 

(b) Company has made available to Parent an accurate and complete copy of each Contract listed or required to be listed in Section 2.11(b) of the Company Disclosure Schedule (any such Contract, a “Company Contract”). Neither Company nor any of its Subsidiaries, nor to Company’s knowledge, any other party to a Company Contract, has, since the Company Lookback Date, breached or violated in any material respect or materially defaulted under, or received written notice that it has breached, violated or defaulted under, any of the terms or conditions of any of the Company Contracts. To the knowledge of Company, no event has occurred, and, no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to: (i) result in a violation or breach in any material respect of any of the provisions of any Company Contract or (ii) give any Person the right to declare a default in any material respect under any Company Contract, except for any immaterial violations, breaches or defaults. Each Company Contract is in full force and effect and is the legal, valid and binding obligation of Company and its Subsidiaries and, to the knowledge of Company, of the other parties thereto, enforceable against Company and its Subsidiaries and, to the knowledge of Company, such other parties in accordance with its terms, except as enforceability may be limited by bankruptcy and other similar laws and general principles of equity.

 

Section 2.12 FDA and Regulatory Matters.

 

(a) The Company and its Subsidiaries hold, and have held at all times since the Company Lookback Date, all of the Company Permits of all Governmental Bodies required under applicable healthcare laws, including all such permits required under the Federal Food, Drug and Cosmetic Act of 1938, as amended (the “FDCA”), and the regulations of the U.S. Food and Drug Administration (the “FDA”) promulgated thereunder, necessary for the lawful operation of the businesses of the Company and its Subsidiaries as currently conducted or as have been conducted since the Company Lookback Date, and all such Company Permits required for the operation of the businesses as currently conducted are valid and in full force and effect. Since the Company Lookback Date, there has not occurred any material violation of, default (with or without notice or lapse of time or both) under any such Company Permit. The Company and each of its Subsidiaries are in compliance in all material respects with the terms of all such Company Permits required for the operation of the businesses as currently conducted. Since the Company Lookback Date, neither the Company nor any of its Subsidiaries has received written notice of any pending or threatened claim, suit, proceeding, hearing, enforcement, audit, investigation, arbitration or other action from any Governmental Body alleging that any operation or activity of the Company or any of its Subsidiaries is in material violation of any healthcare law or Company Permit.

 

(b) Since the Company Lookback Date, all of the Company’s and its Subsidiaries’ products that are subject to the jurisdiction of the FDA or other Governmental Body under applicable healthcare laws are being researched, manufactured, imported, exported, processed, developed, labeled, stored, tested and distributed by or on behalf of the Company or any of its Subsidiaries in all material respects in compliance with all applicable requirements under any Company Permit or applicable healthcare law, including applicable statutes and implementing regulations administered or enforced by the FDA or comparable Governmental Body. Since the Company Lookback Date, all applications, notifications, submissions, information, claims, reports and data utilized by the Company or its Subsidiaries as the basis for, or submitted by or on behalf of the Company or its Subsidiaries in connection with, any and all requests for the Company Permits relating to the Company or any of its Subsidiaries when submitted to the FDA or other Governmental Body, were true and correct in all material respects as of the date of submission, and any material updates, changes, corrections or modification to such applications, notifications, submissions, information, claims, reports and data required under applicable healthcare laws have been submitted to the FDA or other Governmental Body.

 

 

(c) Since the Company Lookback Date, neither the Company nor any of its Subsidiaries have committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA or any other Governmental Body to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” or other similar healthcare laws. Neither the Company, any of its Subsidiaries, nor, to the Company’s knowledge, any of their respective officers, employees, or to the Company’s actual knowledge, contractors, suppliers or agents performing research or work on behalf of the Company or any of its Subsidiaries is or, since the Company Lookback Date, has been subject to any kind of consent decree, individual integrity agreement, deferred prosecution agreement, or other similar form of agreement with any Governmental Body or convicted of any crime that has resulted, or would reasonably be expected to result, in debarment under applicable law, including 21 U.S.C. Section 335a. No claims, Actions, proceedings or investigations that would reasonably be expected to result in such a debarment or exclusion are pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or, to the Company’s knowledge, any of their respective officers, employees, or to the Company’s actual knowledge, contractors, suppliers, or agents performing research or work on behalf of the Company or any of its Subsidiaries.

 

(d) Since the Company Lookback Date, the manufacture of products by or on behalf of the Company and its Subsidiaries has been and is being conducted in material compliance with all applicable laws. Since the Company Lookback Date, none of the Company, any of its Subsidiaries, or, to the knowledge of the Company, any of their respective contract manufacturers for products, has received any (i) FDA Form 483, (ii) warning letter, (iii) untitled letter, (iv) requests or requirements to make changes to the Company’s or any of its Subsidiaries’ products, manufacturing processes or procedures related to any product that would be adverse in any material respect to the Company or its Subsidiaries, or (v) other similar written correspondence or written notice from the FDA or any other Governmental Body alleging or asserting material noncompliance with any applicable healthcare laws or the Company Permits with respect to any product. Since the Company Lookback Date, no manufacturing site owned by the Company, its Subsidiaries, or, to the knowledge of the Company, any of their respective contract manufacturers for products, is or has been subject to a shutdown or import or export prohibition imposed or requested by FDA or another Governmental Body with respect to the Company’s or its Subsidiaries’ products.

 

(e) Since the Company Lookback Date, all studies, tests and preclinical and clinical trials being conducted by or on behalf of the Company or its Subsidiaries have been and are being conducted in material compliance with applicable healthcare laws, including the requirements of Good Laboratory Practices or Good Clinical Practices, as applicable. Since the Company Lookback Date, the Company and its Subsidiaries have not received any written or oral notices, correspondence or communication from any Review Board, the FDA or any other Governmental Body, recommending or requiring the termination, suspension or material adverse modification of any ongoing or planned clinical trials conducted by, or on behalf of, the Company or its Subsidiaries.

 

 

(f) To the extent required by applicable laws, since the Company Lookback Date, all clinical trials conducted by or on behalf of the Company or any of its Subsidiaries and the results of all such clinical trials have been registered and disclosed in all material respects in accordance with such applicable laws.

 

(g) Since the Company Lookback Date, to the extent required by applicable laws, and except as would not be material to the Company, there have been no adverse events with respect to any product that should have been reported by the Company or a Subsidiary of the Company, but were not reported, to the FDA or other Governmental Body or Review Board.

 

(h) The Company has made available to Parent and its advisors true and correct copies of the following materials in the possession of the Company or any of its Subsidiaries as of the date of this Agreement: (i) each active investigational new drug or marketing application, or non-United States equivalent, submitted to regulatory authorities (including the FDA, the European Medicines Agency (“EMA”) and any other Governmental Body performing functions similar to those performed by the FDA or EMA) by or on behalf of the Company or any of its Subsidiaries, including any supplements thereto, relating to the products, (ii) all material correspondence (excluding, for the avoidance of doubt, non-substantive e-mails in the ordinary course of business) to or from the FDA or any other Governmental Body, or any minutes or similar summary documentation with respect to meetings with the FDA or any other Governmental Body, in each case in this clause (ii) held by the Company or any of its Subsidiaries concerning (A) any product, (B) the Company’s and its Subsidiaries’ compliance with applicable laws regarding the products, and (C) the likelihood or timing of, or requirements for, regulatory approval of any product and (iii) all material information requested by Parent concerning the safety, efficacy, side effects, toxicity, or manufacturing quality and controls of the products.

 

(i) Since the Company Lookback Date, the Company and its Subsidiaries have not either voluntarily or involuntarily, initiated, conducted or issued, or caused to be initiated, conducted or issued, any replacement, safety alert, warning, investigator notice, or other similar notice or action relating to an alleged lack of safety or efficacy or material regulatory compliance of any product.

 

(j) The Company and its Subsidiaries and, to the knowledge of the Company, any Collaboration Partner to the extent related to any product, are, and at all times since the Company Lookback Date have been, in material compliance with all applicable healthcare laws.

 

(k) Neither the Company, any of its Subsidiaries nor any of their respective directors, officers or employees, nor, to the knowledge of the Company, any other Representative or other Person acting on behalf of the Company or any of its Subsidiaries has since the Company Lookback Date (i) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, any applicable law enacted in any jurisdiction in connection with or arising under the OECD Convention Combating Bribery of Foreign Public Officials in International Business Transactions, any provision of the UK Bribery Act of 2010 or any other applicable law relating to bribery, corruption, fraud or improper payments (the “Anti-Corruption Laws”); (ii) made, offered to make, promised to make, facilitated or authorized the payment or giving of, directly or indirectly, any bribe, rebate, payoff, influence payment, kickback or other unlawful advantage or payment or gift of money or anything of value, regardless of form or amount, to any Person for the purpose of securing an unlawful advantage, inducing the recipient to violate an official or lawful duty, reward the recipient for an unlawful advantage already given, or for any other improper purpose; (iii) requested, agreed to receive, or accepted a payment, gift or hospitality from a Person if it is known or suspected that it is offered with the expectation that it will obtain an unlawful business advantage for them; (iv) established or maintained, or is maintaining, any unlawful fund of corporate monies or other properties; (v) to the knowledge of the Company, been or is, under administrative, civil, or criminal investigation, indictment, information, suspension, debarment, or audit by any party, in connection with alleged or possible violations of any Anti-Corruption Laws; (vi) since the Company Lookback Date, received written notice from, or made a voluntary disclosure to, any Governmental Body with regard to any alleged or potential violations of any Anti-Corruption Laws; or (vii) violated or is in violation of any other applicable laws regarding use of funds for political activity or commercial bribery. None of the Representatives of the Company are (A) an employee of any Governmental Body, (B) an employee of any commercial enterprise that is owned or controlled by a Governmental Body, including any state-owned or controlled university or medical facility, (C) an employee of any public international organization, such as the International Monetary Fund, the United Nations or the World Bank, (D) a Person acting as the director of or in an official capacity for any Governmental Body, enterprise, or organization identified above, or (E) any official of a political party or candidate for political office.

 

 

(l) Since the Company Lookback Date, none of the Company, its Subsidiaries or their respective directors, officers or employees, or, to the knowledge of the Company, any other Representative or Person acting at the direction of or on behalf of the Company or any of its Subsidiaries with respect to any product: (i) has been charged with or convicted of any criminal offense relating to the delivery of an item or service under any Federal Health Care Program, (ii) has been debarred, excluded or suspended from participation in any Federal Health Care Program, (iii) has had a civil monetary penalty assessed against it, him or her under 42 U.S.C. §1320a-7a, (iv) is currently listed on the list of parties excluded from federal procurement programs and non-procurement programs as maintained in the Government Services Administration’s System for Award Management or other federal agencies, (v) has received written notice that it is the target of any investigation relating to any Federal Health Care Program-related offense or (vi) to the actual knowledge of the Company, has engaged in any activity that is in violation of, or is cause for civil penalties, debarment or mandatory or permissive exclusion under federal or state laws.

 

(m) None of the Company, any of its Subsidiaries, any officer, director or, to the knowledge of the Company, any employee of the Company, any of its Subsidiaries, or any other Representative acting at the direction of or on behalf of the Company or any of its Subsidiaries, is a Person that is (i) a Sanctioned Person or (ii) organized or resident in a Sanctioned Country. Since the Company Lookback Date, the Company and its Subsidiaries have been in compliance in all material respects with all applicable Sanctions and Trade Control Laws.

 

(n) All products, where required, are being marketed under and consistent with, in all material respects, valid clearances under Section 510(k) of the FDCA (or similar Governmental approvals required by international drug regulatory bodies). In each case in which the Company or any of its Subsidiaries has determined that 510(k) clearance is not required with respect to any product, the Company and/or its Subsidiaries have documented that no 510(k) clearance is required, have marketed such product in compliance in all material respects with all applicable laws, and have not taken any action that would require a 510(k) clearance.

 

Section 2.13 Books And Records. The minute books of the Acquired Companies made available to Parent or counsel for Parent are the only minute books of the Acquired Companies and contain accurate summaries, in all material respects, of all meetings of directors (or committees thereof) and stockholders or actions by written Consent since the time of incorporation of Company or such Subsidiaries, as the case may be. The books and records of Company accurately reflect in all material respects the assets, liabilities, business, financial condition and results of operations of Company and have been maintained in accordance with good business and bookkeeping practices.

 

 

Section 2.14 Interested Party Transactions. Except as set forth on Section 2.14 of the Company Disclosure Schedule, no event has occurred during the past three (3) years that would be required to be reported by Company as a certain relationship or related transaction pursuant to Item 404 of Regulation S-K, if Company were required to report such information in periodic reports pursuant to the Exchange Act.

 

Section 2.15 Solvency. Immediately after giving effect to the Contemplated Transactions, Company and its Subsidiaries will be Solvent. No transfer of property is being made, and no obligation is being incurred in connection with the Contemplated Transactions with the intent to hinder, delay or defraud either present or future creditors of Company or any of its Subsidiaries.

 

Section 2.16 Books And Records. The minute books of the Acquired Companies made available to Parent or counsel for Parent are the only minute books of the Acquired Companies and contain accurate summaries, in all material respects, of all meetings of directors (or committees thereof) and stockholders or actions by written Consent since the time of incorporation of Company or such Subsidiaries, as the case may be. The books and records of Company accurately reflect in all material respects the assets, liabilities, business, financial condition and results of operations of Company and have been maintained in accordance with good business and bookkeeping practices.

 

Section 2.17 Disclaimer of Other Representations and Warranties. Except for the representations and warranties previously set forth in this Section 2.17 (as modified by the applicable part of the Company Disclosure Schedule), Company makes no representation or warranty, express or implied, at law or in equity, with respect to any of its assets, Liabilities, or operations, and any such other representations and warranties are hereby expressly disclaimed and specifically that Company makes no representation or warranty with respect to anything provided or made available to Acquiring Companies or their respective Representatives in certain “data rooms” or management presentations in expectation of the transactions contemplated by this Agreement.

 

Article III

 
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBS

 

Subject to Section 8.13(h), except (a) as set forth in the corresponding sections or subsections of the disclosure schedule delivered by Parent to the Company (the “Parent Disclosure Schedule”) or (b) as disclosed in the Parent SEC Documents filed with the SEC from and after January 1, 2023 but prior to the date hereof (but (i) without giving effect to any amendment thereof filed with, or furnished to the SEC on or after the date hereof, and (ii) excluding any disclosures contained under the heading “Risk Factors” and any disclosure of risks included in any “forward-looking statements” disclaimer or in any other section to the extent they are forward-looking statements or cautionary, predictive or forward-looking in nature), it being understood that any matter disclosed in Parent SEC Documents (x) shall not be deemed disclosed for the purposes of Section 3.1, Section 3.2, and Section 3.3 and (y) shall be deemed to be disclosed in a section of the Parent Disclosure Schedule only to the extent that it is readily apparent from a reading of such Parent SEC Document that it is applicable to such section of the Parent Disclosure Schedule, Parent and Merger Subs represent and warrant to Company as follows

 

Section 3.1 Organization and Qualification.

 

(a) Section 3.1(a) of the Parent Disclosure Schedule identifies each Subsidiary of Parent and indicates its jurisdiction of organization. Neither Parent nor any of the Entities identified in Section 3.1(a) of the Parent Disclosure Schedule owns any capital stock of, or any equity interest of any nature in, any other Entity, other than the Entities identified in Section 3.1(a) of the Parent Disclosure Schedule. No Acquiring Company is, or has otherwise been, a party to, member of or participant in any partnership, joint venture or similar Entity. None of the Acquiring Companies has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity.

 

 

(b) Each of the Acquiring Companies is a corporation, limited liability company, or similar Entity duly organized, validly existing and, in jurisdictions that recognize the concept, in good standing under the laws of the jurisdiction of its incorporation, formation or other establishment, as applicable, and has all necessary corporate power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Contracts by which it is bound.

 

(c) Each of the Acquiring Companies (in jurisdictions that recognize the following concepts) are qualified to do business as a foreign corporation, and are in good standing, under the laws of all jurisdictions where the nature of their businesses require such qualification, except as would not have and would not reasonably be expected to have or result in a Parent Material Adverse Effect.

 

(d) The copies of the certificate of incorporation and bylaws of Parent which are incorporated by reference as exhibits to Parent’s Annual Report on Form 10-K for the year ended December 31, 2023 are complete and correct, and copies of such documents contain all amendments thereto as in effect on the date of this Agreement. Parent has made available accurate and complete copies of the articles of incorporation, bylaws, and other charter and organizational documents of each of its direct and indirect Subsidiaries.

 

Section 3.2 Capital Structure.

 

(a) The authorized capital stock of Parent consists of (i) 40,000,000 shares of Parent Common Stock, $0.001 par value, of which 6,981,332 shares are issued and outstanding, as of the close of business on the day prior to the date hereof; and (ii) 11,000,000 shares of Parent preferred stock, $0.001 par value (“Parent Preferred Stock”), of which 0 shares are issued and outstanding, as of the close of business on the day prior to the date hereof, and 0 shares of common stock are held in Parent’s treasury. All outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid and non-assessable and were issued in compliance with all applicable federal and state securities Legal Requirements.

 

(b) As of the date of this Agreement, Parent has reserved an aggregate of 600,000 shares of Parent Common Stock, net of exercises, for issuance to employees, consultants and non-employee directors pursuant to the Parent Stock Option Plans, under which 495,650 options are outstanding. 2,028,461 shares of Parent Common Stock, net of exercises, are reserved for issuance to holders of warrants to purchase Parent Common Stock upon their exercise. All shares of Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, would be duly authorized, validly issued, fully paid and non-assessable. Section 3.2(b) of the Parent Disclosure Schedule lists each outstanding option to purchase shares of Parent Common Stock (a “Parent Option”), and the name of the holder thereof, the number of shares subject thereto, the exercise price thereof, the vesting schedule and post-termination exercise period thereof and whether the exercisability of such Parent Option will be accelerated in any way by the Contemplated Transactions, indicating the extent of acceleration, if any. In addition, Section 3.2(b) of the Parent Disclosure Schedule lists each outstanding warrant to purchase shares of Parent Common Stock (a “Parent Warrant”), and the name of the holder thereof, the number of shares subject thereto, the exercise price thereof, the terms of exercise thereof, the exercise date thereof, and whether the exercisability of such warrant will be accelerated in any way by the Contemplated Transactions, indicating the extent of acceleration, if any.

 

 

(c) The shares of Parent Common Stock and Parent Series X Preferred Stock issuable as Merger Consideration, upon issuance on the terms and conditions contemplated in this Agreement, will be, as of the date of such issuance, duly authorized, validly issued, fully paid and non-assessable.

 

(d) Except as set forth in Section 3.2(d) of the Parent Disclosure Schedule: (i) none of the outstanding shares of Parent Common Stock are entitled or subject to any preemptive right, right of repurchase or forfeiture, right of participation, right of maintenance or any similar right; (ii) none of the outstanding shares of Parent Common Stock are subject to any right of first refusal in favor of Parent or any other Person for which a waiver of such right of first refusal has not been obtained; (iii) there are no outstanding bonds, debentures, notes or other indebtedness of the Acquiring Companies having a right to vote on any matters on which the stockholders of Parent have a right to vote; and (iv) there is no Contract to which the Acquiring Companies are a party relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or from granting any option or similar right with respect to), any shares of Parent Common Stock. Except as set forth in Section 3.02(d) of the Parent Disclosure Schedule, none of the Acquiring Companies are under any obligation, or are bound by any Contract pursuant to which they may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of Parent Common Stock or other securities.

 

Section 3.3 Authority; Non-Contravention; Approvals.

 

(a) Parent has the requisite corporate power and authority to enter into this Agreement and each other agreement, document, instrument or certificate contemplated by this Agreement to be executed by Parent in connection with the Contemplated Transactions (the “Parent Documents”) and to perform its obligations hereunder and to consummate the Contemplated Transactions, except for the Parent Stockholder Matters which are subject to approval at the Parent Stockholder Meeting. The execution and delivery by Parent of this Agreement and the Parent Documents, the performance by Parent of its obligations hereunder and the consummation by Parent of the Contemplated Transactions have been duly authorized by all necessary corporate action on the part of Parent and Merger Subs to adoption of this Agreement by Parent as sole stockholder of First Merger Sub immediately following the execution hereof, the filing and recordation of the Parent Charter Amendment and the filing and recordation of the Certificate of Merger and the Certificate of Designation pursuant to Delaware Law. The affirmative vote of the holders of a majority in voting power of the shares of Parent Common Stock outstanding on the applicable record date is the only vote of the holders of any class or series of Parent Common Stock necessary to adopt or approve the Parent Stockholder Matters. This Agreement has been, and the Parent Documents will be at or prior to the Closing, duly executed and delivered by Parent and Merger Subs, as applicable, and, assuming the due authorization, execution and delivery of this Agreement by Company, this Agreement constitutes, and the Parent Documents when so executed and delivered will constitute, the valid and binding obligation of Parent and Merger Subs, as applicable, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy and other similar laws and general principles of equity.

 

 

(b) The Parent Board, by resolutions duly adopted by a vote at a meeting of directors of Parent duly called and held, or by unanimous written Consent of the Parent Board, and, as of the date of this Agreement, not subsequently rescinded or modified in any way, has, as of the date of this Agreement (i) approved this Agreement, the Parent Documents and the Merger, and determined that this Agreement, the Parent Documents and the Contemplated Transactions, including the Merger, are fair to, and in the best interests of Parent’s Stockholders, and (ii) resolved to recommend that Parent’s Stockholders approve the Parent Stockholder Matters and directed that such matters be submitted for consideration of the stockholders of Parent at the Parent Stockholders’ Meeting. The First Merger Sub Board (by unanimous joint written consent with Parent as the sole stockholder) has: (x) determined that the Contemplated Transactions are fair to, advisable and in the best interests of First Merger Sub and its sole stockholder and (y) deemed advisable and approved this Agreement and the Contemplated Transactions. The sole member of Second Merger Sub (by unanimous written consent) has: (A) determined that the Contemplated Transactions are fair to, advisable, and in the best interests of Second Merger Sub and the sole member; and (B) deemed advisable and approved this Agreement and the Contemplated Transactions. This Agreement has been duly executed and delivered by Parent and Merger Subs and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of Parent and Merger Subs, enforceable against each of Parent and Merger Subs in accordance with its terms.

 

(c) Except as set forth in Section 3.03(c) of the Parent Disclosure Schedule, the execution and delivery of this Agreement and the Parent Documents by Parent and Merger Subs, as applicable, does not, and the performance of this Agreement and the Parent Documents by Parent or Merger Subs, as applicable, will not, (i) conflict with or violate the certificate of incorporation or bylaws of any Acquiring Company, (ii) subject to obtaining approval of the Parent Stockholder Matters and compliance with the requirements set forth in Section 3.3(d) below, conflict with or violate any Legal Requirement applicable to any Acquiring Company or by which their respective properties are bound or affected, except for any such conflicts or violations that would not have a Parent Material Adverse Effect or would not prevent or materially delay the consummation of the Merger, (iii) require an Acquiring Company to make any filing with or give any notice to or obtain any Consent from a Person pursuant to any Parent Contract, result in any breach of or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or impair Parent’s rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or Encumbrance on any of the properties or assets of Parent pursuant to, any Parent Contract, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect or prevent or materially delay the Merger or (iv) result in the creation of any Encumbrance (other than Permitted Liens) on any of the properties or assets of any Acquiring Company, except as would not, individually or in the aggregate, have a Parent Material Adverse Effect or prevent or materially delay the Merger.

 

(d) No material Consent, approval, Order or authorization of, or registration, declaration or filing with any Governmental Body, is required by or with respect to Parent in connection with the execution and delivery of this Agreement, the Parent Documents or the consummation of the Contemplated Transactions, except for (i) the filing with the SEC of any outstanding periodic reports due under the Exchange Act, (ii) the filing of the Certificate of Merger and the Certificate of Designation with the Secretary of State of the State of Delaware, (iii) the filing of the S-4 Registration Statement and the Proxy Statement/Prospectus with the SEC in accordance with the Exchange Act, (iv) the filing of Current Reports on Form 8-K with the SEC within four (4) Business Days after the execution of this Agreement and the Closing Date, (v) the filing of the Parent Charter Amendment with the Secretary of State of the State of Delaware (vi) such Consents, Orders, registrations, declarations, filings or approvals as may be required under applicable federal or state securities or “blue sky” laws or the rules and regulations of Nasdaq or other applicable national securities exchange or over-the-counter market and (vii) such Consents as may be required under the Antitrust Laws, in any case that are applicable to the transactions contemplated by this Agreement.

 

 

Section 3.4 Anti-Takeover Statutes Not Applicable. The Parent Board and the First Merger Sub Board have taken all actions so that no state takeover statute or similar Legal Requirement applies or purports to apply to the execution, delivery or performance of this Agreement or to the consummation of the Merger or the other Contemplated Transactions. The Parent Board and the First Merger Sub Board have taken all action reasonably necessary to render inapplicable to this Agreement and the Contemplated Transactions any restrictions on business combinations under Delaware Law.

 

Section 3.5 SEC Filings; Parent Financial Statements; No Undisclosed Liabilities.

 

(a) Parent has made available to Company accurate and complete copies of all registration statements, proxy statements, Certifications (as defined below) and other statements, reports, schedules, forms and other documents filed by Parent with or furnished by Parent to the SEC since January 1, 2023 (such date, the “Parent Lookback Date,” and such documents, the “Parent SEC Documents”), other than such documents that can be obtained on the SEC’s website at www.sec.gov (the “SEC Website”). All Parent SEC Documents have been timely filed and, as of the time a Parent SEC Document was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the Parent SEC Documents complied in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act (as the case may be) and (ii) none of the Parent SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each of the certifications and statements relating to the Parent SEC Documents required by: (1) the SEC’s Order dated June 27, 2002 pursuant to Section 21(a)(1) of the Exchange Act (File No. 4-460); (2) Rule 13a-14 or 15d-14 under the Exchange Act; or (3) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act) is accurate and complete (the “Certifications”), and complied as to form and content with all applicable Legal Requirements in effect at the time such Parent Certification was filed with or furnished to the SEC. As used in this Section 3.5(a), the term “file” and variations thereof will be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

 

(b) Except as set forth in Section 3.5(b) of the Parent Disclosure Schedule, Parent has not received any comment letter from the SEC or the staff thereof or any correspondence from the Nasdaq or the staff thereof relating to the delisting or maintenance of listing of the Parent Common Stock on the Nasdaq. As of the date of this Agreement, Parent has no outstanding or unresolved SEC comments. As of the date of this Agreement, except as set forth in Section 3.5(b) of the Parent Disclosure Schedule, Parent is in compliance in all material respects with the applicable listing and governance rules and regulations of the Nasdaq.

 

(c) Since the Parent Lookback Date, there have been no formal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer, chief financial officer or general counsel of Parent, the Parent Board or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act.

 

 

(d) Parent is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act that are effective as of the date of this Agreement.

 

(e) Parent and its Subsidiaries maintain disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the Exchange Act. Such disclosure controls and procedures are designed to ensure that all material information (both financial and non-financial) required to be disclosed by Parent in the reports that it files, submits or furnishes under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such information is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and to make the Certifications.

 

(f) The financial statements (including any related notes) contained or incorporated by reference in the Parent SEC Documents (the “Parent Financials”): (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with GAAP (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that are not reasonably expected to be material in amount) applied on a consistent basis unless otherwise noted therein throughout the periods indicated; (iii) fairly present the consolidated financial position of Parent as of the respective dates thereof and the consolidated results of operations and cash flows of Parent for the periods covered thereby. Parent has not effected any securitization transactions or “off-balance sheet arrangements” (as defined in Item 303(c) of SEC Regulation S-K). Parent is not a party to any off-balance sheet partnerships, joint ventures, or similar arrangements. Other than as expressly disclosed in the Parent SEC Documents filed prior to the date hereof, there has been no material change in Parent’s accounting methods or principles that would be required to be disclosed in Parent Financials in accordance with GAAP.

 

(g) Except as disclosed in the Parent Financials, neither Parent nor any of its Subsidiaries have any Liabilities, except Liabilities (i) identified in the Parent Financials, (ii) incurred in connection with the Contemplated Transactions, (iii) disclosed in Section 3.5(g) of the Parent Disclosure Schedule, (iv) set forth in any Parent Contract, (v) incurred since the date of the Parent Unaudited Interim Balance Sheet in the ordinary course of business consistent with past practices or (vi) that would not have, individually or in the aggregate, a Parent Material Adverse Effect.

 

Section 3.6 Absence Of Certain Changes Or Events. Since the date of the most recent periodic report on Form 10-Q filed by Parent with the SEC through the date of this Agreement, and other than with respect to the negotiation, execution and performance of this Agreement and the Parent Documents, each of the Acquiring Companies has conducted its business in the ordinary course of business, and, except as set forth in Section 3.6 of the Parent Disclosure Schedule:

 

(a) there has not been any event that has had a Parent Material Adverse Effect;

 

(b) no Acquiring Company has entered into or amended any material terms of any Contract, in each case providing for new obligations in excess of fifty thousand dollars ($50,000);

 

(c) there has not been any revaluation of any Acquiring Companies’ material assets; and

 

(d) no Acquiring Company has incurred any Indebtedness.

 

 

Section 3.7 Taxes.

 

(a) Each of the income and other Tax Returns that any Acquiring Company was required to file under applicable Legal Requirements: (i) has been timely filed on or before the applicable due date (including any extensions of such due date) and (ii) is true and complete in all material respects. All Taxes due and payable by Parent or its Subsidiaries have been timely paid, except to the extent such amounts are being contested in good faith by Parent or are properly reserved for on the books or records of Parent and its Subsidiaries. No extension of time with respect to any date on which a Tax Return was required to be filed by an Acquiring Company is in force (except where such Tax Return was filed), and no waiver or agreement by or with respect to an Acquiring Company is in force for the extension of time for the payment, collection or assessment of any Taxes, and no request has been made by an Acquiring Company in writing for any such extension or waiver (except, in each case, in connection with any request for extension of time for filing Tax Returns). There are no liens for Taxes on any asset of an Acquiring Company other than liens for Taxes not yet due and payable, Taxes contested in good faith or that are otherwise not material and reserved against in accordance with GAAP. No deficiency with respect to Taxes has been proposed, asserted or assessed in writing against Parent or its Subsidiaries which has not been fully paid or adequately reserved or reflected in the SEC Documents.

 

(b) No closing agreements, private letter rulings, technical advice memoranda or similar agreements or rulings have been entered into by any Acquiring Company with any taxing authority or issued by any taxing authority to an Acquiring Company. There are no outstanding rulings of, or request for rulings with, any Governmental Body addressed to an Acquiring Company that are, or if issued would be, binding on any Acquiring Company.

 

(c) No Acquiring Company is a party to any Contract with any third party relating to allocating or sharing the payment of, or Liability for, Taxes or Tax benefits (other than pursuant to customary provisions included in credit agreements, leases, and agreements entered with employees, in each case, not primarily related to Taxes and entered into in the ordinary course of business). No Acquiring Company has any Liability for the Taxes of any third party under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Legal Requirement) as a transferee or successor or otherwise by operation of Legal Requirements.

 

(d) None of the Acquiring Companies is a “controlled foreign corporation” within the meaning of Section 957 of the Code or “passive foreign investment company” within the meaning of Section 1297 of the Code.

 

(e) No Acquiring Company has participated in, or is currently participating in, a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2). Parent has disclosed on its respective United States federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of United States federal income Tax within the meaning of Section 6662 of the Code.

 

(f) No Acquiring Company has distributed stock of another Person, or has had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

 

 

(g) No Acquiring Company has taken or agreed to take any action that would prevent the Merger from constituting a reorganization qualifying under Section 368 of the Code. No Acquiring Company is aware of any agreement, plan or other circumstance that would prevent the Merger from qualifying as a reorganization under Section 368 of the Code.

 

Section 3.8 Intellectual Property. Parent and its Subsidiaries own, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade dress, trade secrets, know-how, software, inventions, Copyrights, licenses and other intellectual property rights that are necessary or required for, or used in connection with their respective businesses as presently conducted (collectively, the “Parent Owned IP Rights”). Neither Parent nor any of its Subsidiaries has received any written notice of a claim or otherwise has any knowledge of any claim that any Parent Owned IP Right, or that the manufacture, sale, offer for sale, development, use or importation of any product, product candidate or service by or on behalf of Parent or its Subsidiaries, violates, misappropriates or infringes upon rights of any Person, except as would not have or reasonably be expected to have a Parent Material Adverse Effect.

 

Section 3.9 Compliance with Legal Requirements.

 

(a) Parent and its Subsidiaries are not and have not been at any time in violation of (i) any Legal Requirement, Order, judgment or decree applicable to Parent or any of its Subsidiaries or by which Parent or any of its Subsidiaries are bound or affected, or (ii) any Contract to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or its or any of their respective properties is bound or affected, except for any immaterial conflicts, defaults or violations. No investigation or review by any Governmental Body is pending or, to the knowledge of Parent, threatened against Parent or its Subsidiaries or any product of Parent, nor has any Governmental Body indicated to an Acquiring Company or its parent in writing an intention to conduct the same.

 

(b) Except for matters regarding the FDA or other comparable Governmental Authority responsible for regulation of the development, testing, manufacturing, processing, storage, labeling, sale, marketing, advertising, distribution and importation or exportation of drug or medical device products (“Drug/Device Regulatory Agency”), Parent and its Subsidiaries hold all permits, licenses, registrations, authorizations, variances, exemptions, Orders and approvals from Governmental Bodies which are necessary to the operation of the business of Parent and its Subsidiaries taken as a whole (collectively, the “Parent Permits”). Parent and its Subsidiaries are in compliance in all material respects with the terms of the Parent Permits. No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending or, to the knowledge of Parent, threatened, which seeks to revoke or limit any Parent Permit. The rights and benefits of each Parent Permit will be available to the Surviving Entity immediately after the First Effective Time on terms substantially identical to those enjoyed by Parent immediately prior to the First Effective Time. Parent has made available to Company all Parent Permits.

 

(c) There are no Legal Proceedings pending or, to the Knowledge of Parent, threatened with respect to an alleged violation by Parent or any of its Subsidiaries of the FDCA, the Public Health Service Act (“PHSA”), FDA regulations adopted thereunder, the Controlled Substances Act or any other similar Law promulgated by a Drug/Device Regulatory Agency.

 

 

(d) Each of Parent and its Subsidiaries holds all required Governmental Authorizations issuable by any Drug/Device Regulatory Agency necessary for the conduct of the business of Parent and Merger Subs as currently conducted, and, as applicable, the development, testing, manufacturing, processing, storage, labeling, sale, marketing, advertising, distribution and importation or exportation, as currently conducted, of any of its product candidates (the “Parent Product Candidates”) (the “Parent Regulatory Permits”) and no such Parent Regulatory Permit has been (i) revoked, withdrawn, suspended, cancelled or terminated or (ii) modified in any adverse manner other than immaterial adverse modifications. Section 3.9(d) of the Parent Disclosure Schedule identifies each Parent Regulatory Permit. Parent has timely maintained and is in compliance in all material respects with the Parent Regulatory Permits and neither Parent nor or any of its Subsidiaries has, since January 1, 2023, received any written notice or correspondence or, to the Knowledge of Parent, other communication from any Drug/Device Regulatory Agency regarding (A) any material violation of or failure to comply materially with any term or requirement of any Parent Regulatory Permit or (B) any revocation, withdrawal, suspension, cancellation, termination or material modification of any Parent Regulatory Permit. Parent has made available to the Company all information requested by the Company in Parent’s or its Subsidiaries’ possession or control relating to material Parent Product Candidates and the development, testing, manufacturing, processing, storage, labeling, sale, marketing, advertising, distribution and importation or exportation of the Parent Product Candidates, including, but not limited to, complete copies of the following (to the extent there are any): (x) adverse event reports; pre-clinical, clinical and other study reports and material study data; inspection reports, notices of adverse findings, untitled letters, warning letters, filings and letters and other written correspondence to and from any Drug/Device Regulatory Agency; and meeting minutes with any Drug/Device Regulatory Agency and (y) similar reports, material study data, notices, letters, filings, correspondence and meeting minutes with any other Governmental Authority. All such information are accurate and complete in all material respects.

 

(e) All clinical, pre-clinical and other studies and tests conducted by or on behalf of, or sponsored by, Parent or its Subsidiaries, in which Parent or its Subsidiaries or their respective product candidates, including the Parent Product Candidates, have participated were, since January 1, 2023, and, if still pending, are being conducted in accordance in all material respects with standard medical and scientific research procedures, and in compliance in all material respects with the applicable regulations of the Drug/Device Regulatory Agencies and other applicable Law, including 21 C.F.R. Parts 11, 50, 54, 56, 58, 312 and 812. Since January 1, 2023, neither Parent nor any of its Subsidiaries has received any written notices, correspondence, or other communications from any Drug/Device Regulatory Agency requiring or, to the Knowledge of Parent, any action to place a clinical hold order on, or otherwise terminate, delay or suspend any clinical studies conducted by or on behalf of, or sponsored by, Parent or any of its Subsidiaries or in which Parent or any of its Subsidiaries or its current product candidates, including the Parent Product Candidates, have participated. Further, no clinical investigator, researcher or clinical staff participating in any clinical study conducted by or, to the Knowledge of Parent, on behalf of Parent or any of its Subsidiaries has been disqualified from participating in studies involving the Parent Product Candidates, and to the Knowledge of Parent, no such administrative action to disqualify such clinical investigators, researchers or clinical staff has been threatened or is pending.

 

(f) Neither Parent nor any of its Subsidiaries and, to the Knowledge of Parent, any contract manufacturer with respect to any Parent Product Candidate is the subject of any pending or, to the Knowledge of Parent, threatened investigation in respect of its business or products by the FDA pursuant to its “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” Final Policy set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or by any other Drug/Device Regulatory Agency under a comparable policy. Neither Parent nor any of its Subsidiaries and, to the Knowledge of Parent, any contract manufacturer, nor their respective officers, employees or agents, with respect to any Parent Product Candidate has committed any acts, made any statement or failed to make any statement, in each case in respect of its business or products that would violate FDA’s “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” Final Policy, and any amendments thereto. None of Parent, any of its Subsidiaries, and to the Knowledge of Parent, any contract manufacturer with respect to any Parent Product Candidate, or any of their respective officers, employees or agents is currently or has been debarred, convicted of any crime or is engaging or has engaged in any conduct that could result in a material debarment or exclusion under (i) 21 U.S.C. Section 335a or (ii) any similar applicable Law. To the Knowledge of Parent, no material debarment or exclusionary claims, actions, proceedings or investigations in respect of their business or products are pending or threatened against Parent, any of its Subsidiaries, and to the Knowledge of the Parent, any contract manufacturer with respect to any Parent Product Candidate, or any of its officers, employees or agents.

 

 

(g) All manufacturing operations conducted by, or to the Knowledge of Parent, for the benefit of, Parent or its Subsidiaries in connection with any Parent Product Candidate, since January 1, 2023, have been and are being conducted in compliance in all material respects with applicable Laws, including the FDA’s standards for current good manufacturing practices, including applicable requirements contained in 21 C.F.R. Parts 210 and 211, and the respective counterparts thereof promulgated by Governmental Authorities in countries outside the United States.

 

(h) None of Parent, any of its Subsidiaries, and to the Knowledge of Parent, any manufacturing site of a contract manufacturer or laboratory, with respect to any Parent Product Candidate, (i) is subject to a Drug/Device Regulatory Agency shutdown or import or export prohibition or (ii) has received any Form FDA 483, notice of violation, warning letter, untitled letter or similar correspondence or notice from the FDA or other Drug/Device Regulatory Agency alleging or asserting noncompliance with any applicable Law, in each case, that have not been complied with or closed to the satisfaction of the relevant Drug/Device Regulatory Agency, and, to the Knowledge of Parent, neither the FDA nor any other Drug/Device Regulatory Agency is considering such action

 

(i) None of the Acquiring Companies, and to the knowledge of Parent, no Representative of any of the Acquiring Companies on their behalf with respect to any matter relating to any of the Acquiring Companies, has: (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended or (iii) made any other unlawful payment.

 

(j) Since January 1, 2023, no product of the Acquiring Companies has at any time been recalled, withdrawn, suspended or discontinued (whether voluntarily or otherwise).

 

 

(k) Each of the Acquiring Companies (i) is, and since January 1, 2023, has been, in compliance in all material respects with (A) all written policies of Parent and each of its Subsidiaries pertaining to the logical and physical security of electronic data stored or used by the Acquiring Companies (the “Parent Privacy Policy”), (B) all applicable laws pertaining to privacy, data protection, user data or Parent Personal Information; (C) the requirements of any industry standard or self-regulatory organization by which Parent or any of its Subsidiaries is bound; and (D) contractual commitments by which Parent or any of its Subsidiaries is bound and (ii) has implemented and maintained commercially reasonable and appropriate administrative, technical, organizational and physical safeguards to protect such Parent Personal Information against unauthorized access and use. There has been no loss, damage or unauthorized access, disclosure, use or breach of security of Parent Personal Information maintained by or on behalf of Parent or any of its Subsidiaries, except in each case as would not, individually or in the aggregate, reasonably be likely to result in a Parent Material Adverse Effect. No Person (including any Governmental Body) has made any written claim or commenced any action with respect to unauthorized access, disclosure or use of Parent Personal Information maintained by or on behalf of any of Parent or any of its Subsidiaries, except as would not, individually or in the aggregate, reasonably be likely to result in a Parent Material Adverse Effect. None of (1) the execution, delivery, or performance of this Agreement or (2) the consummation of any of the transactions contemplated by this Agreement, including the Merger, will violate any Parent Privacy Policy or any law pertaining to privacy, data protection user data or Parent Personal Information. “Parent Personal Information” means all data or information controlled, owned, stored, used or processed by Parent or any of its Subsidiaries regarding or capable of being associated with an individual person or device, including, but not limited to, (a) information that identifies, could be used to identify or is otherwise identifiable with an individual or a device or household, including name, physical address, telephone number, email address, financial information, financial account number or government-issued identifier, medical, health, or insurance information, gender, date of birth, educational or employment information, and any other data used or intended to be used to identify, contact or precisely locate an individual (e.g., geolocation data), (b) information or data bearing on an individual person’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living, (c) any data regarding an individual’s activities online or on a mobile device or other application (e.g., searches conducted, web pages or content visited or viewed), whether or not such information is directly associated with an identifiable individual, and (d) internet protocol addresses, device identifiers or other persistent identifiers. Parent Personal Information also includes any information maintained in association with the foregoing information. Parent Personal Information may relate to any individual, including a current, prospective or former customer or employee, and includes information in any form, including paper, electronic and other forms.

 

(l) Since January 1, 2023, there has been no (i) material security incident, breach, or successful ransomware, denial of access attack, denial of service attack, hacking, or similar event with respect to any Parent IT Asset, nor (ii) any material unauthorized, accidental, or unlawful access to, or destruction, loss, alteration, disclosure, or other Processing of, Parent Data (each, in the case of (i) and (ii), a “Parent Security Incident”). None of the Acquiring Companies, nor, to the knowledge of Parent, all vendors, partners or other third parties that Process Parent Personal Information on behalf of, or that otherwise share Parent Personal Information with, the Acquiring Companies (in the case of such vendors, partners, and other third parties, relating to the Acquiring Companies) (“Parent Data Partners”), or been required to make, any disclosure or notification to any Person under any Parent privacy obligation in connection with any Parent Security Incident. None of the Acquiring Companies has received any notification from any Governmental Body or other Person of any material Action relating to the data privacy, data security, data protection, or the Processing of Parent Data, or alleging any violation of any Parent privacy obligation. To the knowledge of Parent, there has never been any audit, investigation or enforcement action (including any fines or other sanctions) by any Governmental Body or other Person relating to any Parent Security Incident or violation of any Parent privacy obligation.

 

Section 3.10 Legal Proceedings; Orders.

 

(a) There is no pending Legal Proceeding, and no Person has, to the knowledge of Parent, threatened in writing to commence any Legal Proceeding: (i) that involves any of the Acquiring Companies, any business of any of the Acquiring Companies or any of the assets owned, leased or used by any of the Acquiring Companies or to the knowledge of Parent any present or former officer, director or employee of the Acquiring Companies in such individual’s capacity as such; (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of the other Contemplated Transactions or (iii) that involves any product of the Acquiring Companies. No Legal Proceeding has had or, if adversely determined, would reasonably be expected to have or result in a Parent Material Adverse Effect. To the knowledge of Parent, no event has occurred, and no claim, dispute or other condition or circumstance exists, that would reasonably be expected to give rise to or serve as a basis for the commencement of any Legal Proceeding of the type described in clause (i) or clause (ii) of the first sentence of this Section 3.10(a).

 

 

(b) There is no Order to which any of the Acquiring Companies, or the assets owned or used by any of the Acquiring Companies (including, without limitation, any product of the Acquiring Companies), is subject. To the knowledge of Parent, no officer or other key employee of any of the Acquiring Companies is subject to any Order that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the business of any of the Acquiring Companies.

 

Section 3.11 Brokers’ and Finders’ Fees. Except as set forth in Section 3.11 of the Parent Disclosure Schedule, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other Contemplated Transactions based upon arrangements made by or on behalf of any of the Acquiring Companies.

 

Section 3.12 Employee Benefit Plans.

 

(a) Section 3.12(a) of the Parent Disclosure Schedule sets forth, as of the date of this Agreement, a complete and accurate list of each material Employee Benefit Plan that is currently sponsored, maintained, contributed to, or required to be contributed to or with respect to which any potential liability is borne by any Acquiring Company or any of their ERISA Affiliates (collectively, the “Parent Employee Plans”). Neither Parent nor, to the knowledge of Parent, any other Person, has made any commitment to modify, change or terminate any Parent Employee Plan, other than with respect to a modification, change or termination required by Legal Requirements. With respect to each material Parent Employee Plan, Parent has made available to Company, accurate and complete copies of the following documents: (i) the plan document and any related trust agreement, including amendments thereto; (ii) any current summary plan descriptions and other material communications to participants relating to the plan; (iii) each plan trust, insurance, annuity or other funding contract or service provider agreement related thereto; (iv) the most recent plan financial statements and actuarial or other valuation reports prepared with respect thereto, if any; (v) the most recent Internal Revenue Service determination or opinion letter, if any; (vi) copies of the most recent plan year nondiscrimination and coverage testing results for each plan subject to such testing requirements; and (vii) the most recent annual reports (Form 5500) and all schedules attached thereto for each Parent Employee Plan that is subject to ERISA and Code reporting requirements.

 

(b) Each Parent Employee Plan is being, and has been, administered in accordance with its terms and in compliance with the requirements prescribed by any and all Legal Requirements (including ERISA and the Code), in all material respects. No Acquiring Company is in material default under or material violation of, and has no knowledge of any material defaults or material violations by any other party to, any of Parent Employee Plans. All contributions required to be made by any Acquiring Company or any their ERISA Affiliates to any Parent Employee Plan have been timely paid or accrued on the most recent Parent Financials on file with the SEC, if required under GAAP. Any Parent Employee Plan intended to be qualified under Section 401(a) of the Code has either obtained from the Internal Revenue Service a favorable determination letter or opinion letter as to its qualified status under the Code, and to the knowledge of Parent, no event has occurred and no condition exists with respect to the form or operation of such Parent Employee Plan that would cause the loss of such qualification.

 

 

(c) Each Parent Employee Plan is being, and has been, administered in accordance with its terms and in compliance with the requirements under Section 102 of the Israeli Income Tax Ordinance 1961 in all material respects. Parent and the Acquiring Company shall immediately after signing approach the Israeli tax authorities for the purpose of obtaining a tax ruling for the deferral of tax applicable to Israeli employees participating in the Plan and for the continuous application of Section 102 on the assumed Awards.

 

(d) No Parent Employee Plan provides retiree medical or other retiree welfare benefits to any person, except as required by COBRA. No suit, administrative proceeding or action has been brought, or to the knowledge of Parent, is threatened against or with respect to any such Parent Employee Plan, including any audit or inquiry by the Internal Revenue Service or the United States Department of Labor (other than routine claims for benefits arising under such plans).

 

(e) No Acquiring Company nor any of their ERISA Affiliates has, during the past six (6) years from the date hereof, maintained, established, sponsored, participated in or contributed to, or is obligated to contribute to, or otherwise incurred any obligation or liability (including any contingent liability) under, any “multiemployer plan” (as defined in Section 3(37) of ERISA) or any “pension plan” (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code. No Acquiring Company nor any of their ERISA Affiliates has, as of the date of this Agreement, any actual or potential withdrawal liability (including any contingent liability) for any complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan.

 

(f) Except as set forth in Section 3.12(f) of the Parent Disclosure Schedule, consummation of the Merger will not (i) entitle any current or former employee or other service provider of an Acquiring Company or any of their ERISA Affiliates to severance benefits or any other payment (including unemployment compensation, golden parachute, bonus or benefits under any Parent Employee Plan); (ii) accelerate the time of payment or vesting of any such benefits or increase the amount of compensation due any such employee or service provider; (iii) result in the forgiveness of any indebtedness; (iv) result in any obligation to fund future benefits under any Parent Employee Plan; or (v) result in the imposition of any restrictions with respect to the amendment or termination of any of Parent Employee Plans. No benefit payable or that may become payable by an Acquiring Company pursuant to any Parent Employee Plan in connection with the Contemplated Transactions will constitute an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code) subject to the imposition of an excise Tax under Section 4999 of the Code or the deduction for which would be disallowed by reason of Section 280G of the Code.

 

Section 3.13 Title to Assets; Real Property.

 

(a) The Acquiring Companies own, and have good, valid and marketable title to, or, in the case of leased assets, valid leasehold interests in or other rights to use, all tangible assets purported to be owned or leased by them, in each case, that are material to the Acquiring Companies taken as a whole. All of said assets are owned or, in the case of leased assets, leased by the Acquiring Companies, in each case, free and clear of any Encumbrances, except for Permitted Liens. Each of the Acquiring Companies has complied with the material terms of all leases to real and personal property to which it is a party, and all such leases are in full force and effect, except for any such noncompliance or failure to be in full force and effect that, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. The Acquiring Companies enjoy peaceful and undisturbed possession under all such leases, except for any such failure to do so that, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect.

 

 

(b) Section 3.13(b) of the Parent Disclosure Schedule sets forth a true and complete list of (i) all real property owned by the Acquiring Companies and (ii) all real property leased for the benefit of the Acquiring Companies.

 

(c) All material items of equipment and other tangible assets owned by or leased to the Acquiring Companies are adequate for the uses to which they are being put, are in good condition and repair (ordinary wear and tear excepted) and are adequate for the conduct of the business of the Acquiring Companies in the manner in which such businesses are currently being conducted immediately prior to the First Effective Time. The Acquiring Companies do not own and have not, since the Parent Lookback Date, owned any real property or any interest in real property, except for the leaseholds created under the real property leases identified in Section 3.13(b) of the Parent Disclosure Schedule.

 

(d) Nothing in this Section 3.13 relates to Intellectual Property, which is covered with respect to the Acquiring Companies solely by Section 3.8.

 

Section 3.14 Environmental Matters.

 

(a) No hazardous material has been released as a result of the deliberate actions of Parent or any of its Subsidiaries, or, to the knowledge of Parent, as a result of any actions of any third party or otherwise, in, on or under any property, including the land and the improvements, ground water and surface water thereof, that Parent or any of its Subsidiaries currently owns, operates, occupies or leases, in such quantities as would cause a Parent Material Adverse Effect.

 

(b) Neither Parent nor any of its Subsidiaries has engaged in Hazardous Material Activities in material violation of any Legal Requirement in effect on or before the date hereof.

 

(c) Parent and its Subsidiaries currently hold all environmental approvals, permits, licenses, clearances and Consents (the “Parent Environmental Permits”) necessary for the conduct of Parent’s and its Subsidiaries’ Hazardous Material Activities and other businesses of Parent and its Subsidiaries as such activities and businesses are currently being conducted.

 

(d) No material action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or to the knowledge of Parent, threatened concerning any Parent Environmental Permit, hazardous material or any Hazardous Material Activity of Parent or any of its Subsidiaries

 

Section 3.15 Labor Matters.

 

(a) To the knowledge of Parent, no key employee or group of key employees has threatened to terminate employment with any Acquiring Company or has plans to terminate such employment.

 

 

(b) No Acquiring Company is a party to or bound by any collective bargaining agreement, nor has it experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes.

 

(c) Except as set forth in Section 3.15(c) of the Parent Disclosure Schedule, no Acquiring Company is a party to any written or oral: (i) agreement with any current or former employee the benefits of which are contingent upon, or the terms of which will be materially altered by, the consummation of the Merger or other Contemplated Transactions; (ii) agreement with any current or former employee of Parent providing any term of employment or compensation guarantee extending for a period longer than one (1) year from the date hereof or for the payment of compensation in excess of one hundred thousand dollars ($100,000) per annum; or (iii) agreement or plan the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, upon the consummation of the Merger.

 

Section 3.16 Parent Contracts.

 

(a) Except for Excluded Contracts or as set forth (x) in the most recent exhibit list on Parent’s Form 10-K for the year ended December 31, 2023 or subsequently filed with the SEC pursuant to any current or periodic report and available on the SEC Website or (y) in Section 3.16(a) of the Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries is a party to or is bound by:

 

(i) any management, employment, severance, retention, transaction bonus, change in control, consulting, relocation, repatriation or expatriation agreement or other similar Contract between: (A) any of the Acquiring Companies and (B) any active, retired or former employees, directors or consultants of any Acquiring Company, other than any such Contract that is terminable “at will” (or following a notice period imposed by applicable Legal Requirements or, in the case of consulting agreements, following the notice period required in the Contract), or without any obligation on the part of any Acquiring Company to make any severance, termination, change in control or similar payment or to provide any benefit, other than severance payments required to be made by any Acquiring Company under applicable Legal Requirements;

 

(ii) any Contracts identified or required to be identified in Section 3.13(b) of the Parent Disclosure Schedule;

 

(iii) any Contract with any distributor, reseller or sales representative with an annual value in excess of fifty thousand dollars ($50,000);

 

(iv) any Contract with any manufacturer, vendor, or other Person for the supply of materials or performance of services by such third party to Parent in relation to the manufacture of Parent’s products or product candidates with an annual value in excess of fifty thousand dollars ($50,000);

 

(v) any agreement or plan providing equity benefits to current or former employees of an Acquiring Company, including, without limitation, any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the Contemplated Transactions or the value of any of the benefits of which will be calculated on the basis of any of the Contemplated Transactions;

 

 

(vi) any Contract incorporating or relating to any guaranty, any warranty, any sharing of liabilities or any indemnity not entered into in the ordinary course of business, including any indemnification agreements between Parent or any of its Subsidiaries and any of its officers or directors;

 

(vii) any Contract imposing, by its express terms, any material restriction on the right or ability of any Acquiring Company: (A) to compete with any other Person; (B) to acquire any product or other asset or any services from any other Person; or (C) to develop, sell, supply, distribute, offer, support or service any product or any technology or other asset to or for any other Person;

 

(viii) any Contract relating to the disposition or acquisition of assets not in the ordinary course of business or any ownership interest in any corporation, partnership, joint venture or other business enterprise (other than Contracts in which the applicable disposition or acquisition has been consummated and there are no material ongoing obligations);

 

(ix) any mortgages, indentures, loans or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit in excess of fifty thousand dollars ($50,000);

 

(x) any joint marketing or development agreement;

 

(xi) any commercial Contract that would reasonably be expected to have a material effect on the ability of Parent to perform any of its material obligations under this Agreement, or to consummate any of the transactions contemplated by this Agreement, that is not set forth on Section 3.16(a)(xi) of the Parent Disclosure Schedule;

 

(xii) any Contract that provides for: (A) any right of first refusal, right of first negotiation, right of first notification or similar right with respect to any securities or assets of any Acquiring Company for which a waiver of such right has not been obtained; or (B) any “no shop” provision or similar exclusivity provision with respect to any securities or assets of any Acquiring Company;

 

(xiii) any Contract that contemplates or involves the payment or delivery of cash or other consideration in an amount or having a value in excess of fifty thousand dollars ($50,000) or more in the aggregate, or contemplates or involves the performance of services having a value in excess of fifty thousand dollars ($50,000) or more in the aggregate, in each case following the date of this Agreement, other than any arrangement or agreement expressly contemplated or provided for under this Agreement; or

 

(xiv) any Contract that does not allow Parent or any of its Subsidiaries to terminate the Contract for convenience with no more than sixty (60) days prior notice to the other party and without the payment of any rebate, chargeback, penalty or other amount to such third party in connection with any such termination in an amount or having a value in excess of fifty thousand dollars ($50,000) in the aggregate.

 

 

(b) Parent has made available to Company an accurate and complete copy of each Contract listed or required to be listed in Section 3.16 of the Parent Disclosure Schedule (any such Contract, including any Contract that would be listed in Section 3.16 of the Parent Disclosure Schedule but for its inclusion in the most recent exhibit list of Parent’s Form 10-K for the year ended December 31, 2023 or as an exhibit to any current or periodic report subsequently filed with the SEC, but excluding Excluded Contracts, a “Parent Contract”). Neither Parent nor any of its Subsidiaries, nor to the knowledge of Parent any other party to a Parent Contract, has, since the Parent Lookback Date, materially breached or violated in any material respect or materially defaulted under, or received written notice that it has breached, violated or defaulted under, any of the terms or conditions of any of the Parent Contracts. To the knowledge of Parent, no event has occurred, and, no circumstance or condition exists, that (with or without notice or lapse of time) would reasonably be expected to: (i) result in a violation or breach in any material respect of any of the provisions of any Parent Contract or (ii) give any Person the right to declare a default in any material respect under any Parent Contract, except for any immaterial violations, breaches or defaults. Each Parent Contract is in full force and effect and is the legal, valid and binding obligation of Parent and its Subsidiaries and, to the knowledge of Parent, of the other parties thereto, enforceable against Parent and its Subsidiaries and, to the knowledge of Parent, such other parties in accordance with its terms, except as enforceability may be limited by bankruptcy and other similar laws and general principles of equity.

 

Section 3.17 Insurance.

 

(a) Section 3.17(a) of the Parent Disclosure Schedule sets forth each material insurance policy (the “Parent Insurance Policies”) to which Parent or its Subsidiaries is a party. Parent or its Subsidiaries maintain all Parent Insurance Policies in such amounts, with such deductibles and against such risks and losses that are reasonably adequate for the operation of Parent’s and its Subsidiaries’ businesses in all material respects. To the knowledge of Parent, such Parent Insurance Policies are in full force and effect, maintained with reputable companies against loss relating to the business, operations and properties and such other risks as companies engaged in similar business as the Acquiring Companies would, in accordance with good business practice, customarily insure. Since the Parent Lookback Date, all premiums due and payable under such Parent Insurance Policies have been paid on a timely basis and each Acquiring Company is in compliance in all material respects with all other terms thereof. True, complete and correct copies of such Parent Insurance Policies, or summaries of all terms material thereof, have been made available to Company.

 

(b) There are no material claims pending under any Parent Insurance Policies as to which coverage has been questioned, denied or disputed. Since the Parent Lookback Date, all material claims thereunder have been filed in a due and timely fashion and no Acquiring Company has been refused insurance for which it has applied or had any policy of insurance terminated (other than at its request), nor has any Acquiring Company received written notice from any insurance carrier that: (i) such insurance will be canceled or that coverage thereunder will be reduced or eliminated; or (ii) premium costs with respect to such insurance will be increased, other than premium increases in the ordinary course of business applicable on their terms to all holders of similar policies

 

Section 3.18 Interested Party Transactions. No event has occurred since the Parent Lookback Date that would be required to be reported by Parent as a certain relationship or related transaction pursuant to Item 404 of Regulation S-K, if Parent were required to report such information in periodic reports pursuant to the Exchange Act.

 

 

Section 3.19 No Business Activities by Merger Sub. Except as set forth in the Parent SEC Documents filed prior to the date of this Agreement, since the date of Parent’s last proxy statement filed on July 28, 2023 with the SEC, no event has occurred that would be required to be reported by Parent pursuant to Item 404 of Regulation S-K. Section 3.19 of the Parent Disclosure Schedule identifies each Person who is (or who may be deemed to be) an Affiliate of Parent as of the date of this Agreement.

 

Section 3.20 Solvency. Except as set forth in Section 3.20 of the Parent Disclosure Schedule, immediately after giving effect to the Contemplated Transactions, Parent and its Subsidiaries will be Solvent. No transfer of property is being made, and no obligation is being incurred in connection with the Contemplated Transactions, with the intent to hinder, delay or defraud either present or future creditors of Parent or its Subsidiaries.

 

Section 3.21 Shell Company Status. Parent is not, and never has been, an issuer identified in Rule 144(i)(1)(i) of the Securities Act.

 

Section 3.22 Valid Issuance. The Parent Common Stock and Parent Series X Preferred Stock to be issued in the Merger will, when issued in accordance with the provisions of this Agreement, be validly issued, fully paid and non-assessable.

 

Section 3.23 Opinion of Financial Advisor. The Parent Board has received an opinion of Gemini Partners dated on or about the date of the Agreement, to the effect that, as of the date of such opinion and subject to the assumptions, qualifications, limitations and other matters set forth therein, the Merger Consideration (as specified in such opinion) is fair, from a financial point of view, to Parent.

 

Section 3.24 Absence of Liabilities. Immediately after giving effect to the Contemplated Transactions there will be no material debts, liabilities or obligations of any nature, whether accrued, absolute, contingent, or otherwise, on the Parent except for the obligations related to this Agreement, and the Parent’s corporate affairs arising after the Closing as specifically set forth in Section 3.24 of the Parent Disclosure Schedule. Immediately after the approval of the Parent Stockholders Matters, the Parent will terminate the employment of all of the employees of the Parent, subject to any fulfillment of any obligations or payments owed by the Parent to such employees pursuant to their employment agreements or other employment obligations entered into prior to the date hereof, provided, however, for the avoidance of doubt this shall not include an obligation to terminate any of the employees of Surviving Entity.

 

Section 3.25 Disclaimer of Other Representations and Warranties. Except for the representations and warranties previously set forth in this Section 3.25 (as modified by the applicable Parent Disclosure Schedule and, subject to the introduction to this Section 3.25, the Parent SEC Documents filed with the SEC from and after January 1, 2023), Parent makes no representation or warranty, express or implied, at law or in equity, with respect to any of its assets, Liabilities, or operations, and any such other representations and warranties are hereby expressly disclaimed and specifically that Parent makes no representation or warranty with respect to anything provided or made available to Acquired Companies or their respective Representatives in certain “data rooms” or management presentations in expectation of the transactions contemplated by this Agreement

 

Article IV

ADDITIONAL AGREEMENTS OF THE PARTIES

 

Section 4.1 Parent Stockholders’ Meeting.

 

(a) As promptly as practicable following the execution of this Agreement, Parent shall take all action necessary under applicable Law to call, give notice of and hold a meeting of the holders of Parent Common Stock for the purpose of seeking:

 

(i) approval of the Preferred Stock Conversion Proposal;

 

 

(ii) approval of the New Incentive Plan;

 

(iii) authorization of an amendment of Parent’s certificate of incorporation to authorize sufficient Parent Common Stock to be issued in connection with (x) the conversion of the Parent Convertible Preferred Stock issued pursuant to this Agreement and (y) the New Incentive Plan (the “Charter Amendment Proposal”) (the matters contemplated by the clauses 4.1(a)(i)–(iii) are referred to as the “Parent Stockholder Matters,” and such meeting, the “Parent Stockholders’ Meeting”).

 

(b) Parent agrees to use reasonable best efforts to call and hold the Parent Stockholders’ Meeting as soon as practicable after the date hereof. If the approval of the Parent Stockholder Matters is not obtained at the Parent Stockholders’ Meeting or if on a date preceding the Parent Stockholders’ Meeting, Parent reasonably believes that (i) it will not receive proxies sufficient to obtain the Required Parent Stockholder Vote, whether or not quorum would be present or (ii) it will not have sufficient shares of Parent Common Stock represented (whether in person or by proxy) to constitute a quorum necessary to conduct the business of the Parent Stockholders’ Meeting, then, in each case, Parent will use its reasonable best efforts to adjourn the Parent Stockholders’ Meeting one or more times to a date or dates no more than thirty (30) days after the scheduled date for such meeting, and to obtain such approvals at such time. If the Parent Stockholders’ Meeting is not so adjourned, and/or if the approval of the Parent Stockholder Matters is not then obtained, Parent will use its reasonable best efforts to obtain such approvals as soon as practicable thereafter, and in any event to obtain such approvals at the next occurring annual meeting of the stockholders of Parent or, if such annual meeting is not scheduled to be held within four months after the Parent Stockholders’ Meeting, a special meeting of the stockholders of Parent to be held within four months after the Parent Stockholders’ Meeting. Parent will hold an annual meeting or special meeting of its stockholders, at which a vote of the stockholders of Parent to approve the Parent Stockholder Matters will be solicited and taken, at least once every four (4) months until Parent obtains approval of the Parent Stockholder Matters.

 

(c) Parent agrees that: (i) the Parent Board shall recommend that the holders of Parent Common Stock vote to approve the Parent Stockholder Matters and shall use its reasonable best efforts to solicit and obtain such approval within the time frames set forth in Section 4.2(c) and (ii) the Proxy Statement shall include a statement to the effect that the Parent Board recommends that the Parent’s stockholders vote to approve the Parent Stockholder Matters.

 

(d) The Company and Parent acknowledge that, under the NASDAQ Rules, the Parent Common Stock Payment Shares and the Parent Preferred Stock Payment Shares will not be entitled to vote on the Preferred Stock Conversion Proposal.

 

Section 4.2 SEC Filings.

 

(a) As promptly as practicable after the Closing Date, Parent shall prepare and file with the SEC a proxy statement relating to the Parent Stockholders’ Meeting to be held in connection with the Parent Stockholder Matters (together with any amendments thereof or supplements thereto, the “Proxy Statement”). Parent shall use its commercially reasonable efforts to (i) cause the Proxy Statement to comply with applicable rules and regulations promulgated by the SEC and (ii) respond promptly to any comments or requests of the SEC or its staff related to the Proxy Statement.

 

 

(b) Parent covenants and agrees that the Proxy Statement (and the letters to stockholders, notice of meeting and form of proxy included therewith) will (i) comply as to form in all material respects with the requirements of applicable U.S. federal securities Laws and the DGCL, and (ii) not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

(c) Parent shall use commercially reasonable efforts to cause the definitive Proxy Statement to be mailed to Parent’s stockholders as promptly as practicable after either (i) the SEC has indicated that it does not intend to review the Proxy Statement or that its review of the Proxy Statement has been completed or (ii) at least ten (10) days shall have passed since the Proxy Statement was filed with the SEC without receiving any correspondence from the SEC commenting upon, or indicating that it intends to review, the Proxy Statement, all in compliance with applicable U.S. federal securities laws and the DGCL. If Parent, First Merger Sub, Second Merger Sub or the Surviving Entity (A) become aware of any event or information that, pursuant to the Securities Act or the Exchange Act, should be disclosed in an amendment or supplement to the Proxy Statement, (B) receives notice of any SEC request for an amendment or supplement to the Proxy Statement or for additional information related thereto, or (C) receives SEC comments on the Proxy Statement, as the case may be, then such party, as the case may be, shall promptly inform the other parties thereof and shall cooperate with such other parties in Parent filing such amendment or supplement with the SEC and, if appropriate, in mailing such amendment or supplement to the Parent stockholders.

 

(d) As promptly as practicable after the Closing Date, Parent shall file with the SEC, (and in any event, on or prior to the date that is 30th calendar day following the Closing Date ) a registration statement on Form S-3 (or any successor form), if available, or if not available, a registration statement on Form S-1 (or any successor form) for use by Parent, with respect to the Parent Common Stock Payment Shares and shares of Parent Common Stock issuable upon conversion of Parent Preferred Stock Payment Shares, to the extent necessary to register such shares for resale under the Securities Act.

 

Section 4.3 Reservation of Parent Common Stock; Issuance of Shares of Parent Common Stock. Parent covenants that at all times after receipt of the approval of the Parent Stockholder Matters obtained at the Parent Stockholders’ Meeting, for as long as any Parent Convertible Preferred Stock remain outstanding, Parent shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Parent Common Stock or shares of Parent Common Stock held in treasury by Parent, for the purpose of effecting the conversion of the Parent Convertible Preferred Stock, the full number of shares of Parent Common Stock then issuable upon the conversion of all Parent Convertible Preferred Stock then outstanding. All shares of Parent Common Stock delivered upon conversion of the Parent Convertible Preferred Stock shall be newly issued shares or shares held in treasury by Parent, shall have been duly authorized and validly issued and shall be fully paid and nonassessable, and shall be free from preemptive rights and free of any Encumbrance.

 

Section 4.4 Indemnification of Officers and Directors.

 

(a) From the First Effective Time through the seventh (7^th) anniversary of the date on which the First Effective Time occurs, each of Parent and the Surviving Entity shall indemnify and hold harmless each person who is now, or has been at any time prior to the date hereof, or who becomes prior to the First Effective Time, a director or officer of Parent or the Company or any of their respective Subsidiaries, respectively (the “D&O Indemnified Parties”), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements, incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that the D&O Indemnified Party is or was a director or officer of Parent or of the Company, or any Subsidiary thereof, asserted or claimed prior to the First Effective Time, in each case, to the fullest extent permitted under applicable Law. Except in the case of fraud and willful misconduct, each D&O Indemnified Party will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from each of Parent and the Surviving Entity, jointly and severally, upon receipt by Parent or the Surviving Entity from the D&O Indemnified Party of a request therefor; provided that any such person to whom expenses are advanced provides an undertaking to Parent, to the extent then required by the DGCL or DLLCA, as applicable, to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

 

 

(b) The provisions of the certificate of incorporation and bylaws of Parent with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of Parent that are presently set forth in the certificate of incorporation and bylaws of Parent shall not be amended, modified or repealed for a period of seven years from the First Effective Time in a manner that would adversely affect the rights thereunder of individuals who, at or prior to the First Effective Time, were officers or directors of Parent, unless such modification is required by applicable Law. The certificate of formation and limited liability company agreement of the Surviving Entity shall contain, and Parent shall cause the certificate of formation and limited liability company agreement of the Surviving Entity to so contain, provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers as those presently set forth in the certificate of incorporation and bylaws of Parent.

 

(c) From and after the First Effective Time, (i) the Surviving Entity shall fulfill and honor in all respects the obligations of the Company to its D&O Indemnified Parties as of immediately prior to the Closing pursuant to any indemnification provisions under the Company’s Organizational Documents and pursuant to any indemnification agreements between the Company and such D&O Indemnified Parties, with respect to claims arising out of matters occurring at or prior to the First Effective Time and (ii) Parent shall fulfill and honor in all respects the obligations of Parent to its D&O Indemnified Parties as of immediately prior to the Closing pursuant to any indemnification provisions under Parent’s Organizational Documents and pursuant to any indemnification agreements between Parent and such D&O Indemnified Parties, with respect to claims arising out of matters occurring at or prior to the First Effective Time.

 

(d) From and after the First Effective Time, Parent shall continue to maintain directors’ and officers’ liability insurance policies, with an effective date as of the Closing Date, on commercially available terms and conditions and with coverage limits customary for U.S. public companies similarly situated to Parent. From and after the First Effective Time, Parent shall pay all expenses, including reasonable attorneys’ fees, that are incurred by the persons referred to in this Section 4.4 in connection with their successful enforcement of the rights provided to such persons in this Section 4.4.

 

(e) The provisions of this Section 4.4 are intended to be in addition to the rights otherwise available to the current and former officers and directors of Parent and the Company by Law, charter, statute, bylaw or agreement, and shall operate for the benefit of, and shall be enforceable by, each of the D&O Indemnified Parties, their heirs and their representatives.

 

 

(f) In the event Parent or the Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Entity, as the case may be, shall succeed to the obligations set forth in this Section 4.4. Parent shall cause the Surviving Entity to perform all of the obligations of the Surviving Entity under this Section 4.4.

 

Section 4.5 Additional Agreements. The Parties shall use reasonable best efforts to cause to be taken all actions necessary to consummate the Contemplated Transactions. Without limiting the generality of the foregoing, each Party to this Agreement: (a) shall make all filings and other submissions (if any) and give all notices (if any) required to be made and given by such Party in connection with the Contemplated Transactions; (b) shall use reasonable best efforts to obtain each Consent (if any) reasonably required to be obtained (pursuant to any applicable Law or Contract, or otherwise) by such Party in connection with the Contemplated Transactions or for such Contract to remain in full force and effect; (c) shall use reasonable best efforts to lift any injunction prohibiting, or any other legal bar to, the Contemplated Transactions; and (d) shall use reasonable best efforts to satisfy the conditions precedent to the consummation of this Agreement.

 

Section 4.6 Listing. Parent shall use its reasonable best efforts to (a) maintain its existing listing on NASDAQ; (b) prepare and submit to NASDAQ a notification form for the listing of the shares of Parent Common Stock Payment Shares; and (c) to the extent required by NASDAQ rules and regulations, file an initial listing application for the Parent Common Stock on NASDAQ (the “NASDAQ Listing Application”), which NASDAQ Application shall be prepared in cooperation with the Company, and to cause such NASDAQ Listing Application to be conditionally approved prior to the First Effective Time. The Parties will use reasonable best efforts to coordinate with respect to compliance with NASDAQ rules and regulations. Each Party will promptly inform the other Party of all verbal or written communications between NASDAQ and such Party or its representatives. The Company will cooperate with Parent as reasonably requested by Parent with respect to the NASDAQ Listing Application and promptly furnish to Parent all information concerning the Company and its stockholders that may be required or reasonably requested in connection with any action contemplated by this Section 4.6.

 

Section 4.7 Tax Matters. For U.S. federal income Tax purposes, (i) the Parties intend that the First Merger and the Second Merger, taken together, constitute an integrated transaction described in Rev. Rul. 2001-46, 2001-2 C.B. 321 that qualifies as a “reorganization” within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder (the “Intended Tax Treatment”), and (ii) this Agreement is intended to be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and Treasury Regulations Sections 1.368-2(g) and 1.368-3(a), to which the Parent, Merger Subs and the Company are parties under Section 368(b) of the Code. The Parties shall treat and shall not take any tax reporting position (including during the course of any audit, litigation or other proceeding with respect to Taxes) inconsistent with the treatment of the Merger as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal, state and other relevant Tax purposes, unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code. The Parties shall (and shall cause their Affiliates to) will not take any action or cause any action to be taken, or fail to take or cause to be taken any action, which action or failure to act would reasonably be expected to prevent the Merger from qualifying, for the Intended Tax Treatment.

 

 

Section 4.8 Legends.

 

(a) Parent shall be entitled to place appropriate legends, including the legend noted in Section 4.15, on the book entries and/or certificates evidencing any shares of Parent Common Stock or Parent Convertible Preferred Stock to be received in the Merger by equity holders of the Company who may be considered “affiliates” of Parent for purposes of Rules 144 and 145 under the Securities Act reflecting the restrictions set forth in Rules 144 and 145 and to issue appropriate stop transfer instructions to the transfer agent for Parent Common Stock and Parent Convertible Preferred Stock.

 

(b) Any holder (a “Holder”) of Parent Common Stock Payment Shares and Parent Preferred Stock Payment Shares (“Parent Securities”) may request that Parent remove, and, to the extent such Holder delivers to Parent or its Transfer Agent its legended certificate representing such shares of Parent Securities (or a request for legend removal, in the case of Parent Securities issued in book-entry form) together with such other customary letters of representation as Parent may reasonably request, Parent agrees to cause the removal of, any legend from such Parent Securities: (i) if there is an effective registration statement covering the resale of such Parent Securities (the date of effectiveness thereof, the “Registration Statement Effective Date”), (ii) if such Parent Securities are sold or transferred pursuant to Rule 144, (iii) if such Parent Securities are eligible for sale under Rule 144(b)(1), (iv) if at any time on or after the date hereof such Holder certifies that it is not an “affiliate” of Parent (as such term is used under Rule 144) and that such Holder’s holding period for purposes of Rule 144 is at least six (6) months, or (v) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC), in each case of the foregoing, provided that any contractual lock-up period applicable to such Holder’s Parent Securities (if any) has expired (collectively, the “Unrestricted Conditions”). If a legend removal request is made pursuant to the foregoing, Parent will, no later than the Standard Settlement Period following the delivery by a Holder to Parent or Parent’s Transfer Agent of a legended certificate representing such Parent Securities (or a request for legend removal, in the case of Parent Securities issued in book-entry form) together with such other customary letters of representation as Parent may reasonably request (the “Unlegended Share Delivery Date”), deliver or cause to be delivered to such Holder a certificate representing such Parent Securities that is free from all restrictive legends, or an equivalent book-entry position, as requested by the Holder. If so requested by a Holder, Parent Securities free from all restrictive legends shall be transmitted by Parent’s Transfer Agent to a Holder by crediting the account of such Holder’s prime broker with the Depository Trust Company (“DTC”) through DTC’s Deposit/Withdrawal at Custodian system (“DWAC”), as directed by such Holder. If a Holder effects a transfer of the Parent Securities, Parent shall permit the transfer and shall promptly instruct its Transfer Agent to issue one or more certificates or credit the Parent Securities to the applicable balance accounts at DTC in such name and in such denominations as specified by such Holder to effect such transfer. Without limiting the obligations of Parent pursuant to the foregoing, (i) upon the occurrence of the Registration Statement Effective Date, Parent shall remove, and cause Transfer Agent to remove, all restrictive legends, including the legend set forth in Section 4.15 below (or, in the event that shares of Parent Common Stock issuable upon conversion of Parent Preferred Stock Conversion Shares following the Registration Statement Effective Date, such shares shall be issued without restrictive legends), and (ii) if required by the Transfer Agent, Parent shall cause its counsel to issue a blanket legal opinion to its Transfer Agent promptly after the Registration Statement Effective Date, or at such other time as any of the Unrestricted Conditions has been met, to effect the removal of restrictive legends hereunder. If Parent shall fail to issue to any Holder (other than a failure caused by incorrect, incomplete or untimely information provided by the Holder to Parent or its Transfer Agent), by the applicable Unlegended Share Delivery Date, a certificate, or a book-entry statement, as applicable, representing such Parent Securities without restrictive legend or to issue such Parent Securities to such Holder without restrictive legend through DWAC to the applicable balance account at DTC, as applicable, and after the Unlegended Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) or such Holder or such Holder’s brokerage firm otherwise purchases the Parent Securities to deliver in satisfaction of a sale by such Holder of the Parent Securities which such Holder anticipated receiving without restrictive legend (a “Buy-In”), then Parent shall pay in cash to such Holder the amount by which (if any) (X) such Holder’s total purchase price (including brokerage commissions, if any) for the Parent Securities so purchased in the Buy-In exceeds (Y) the amount obtained by multiplying (I) the number of shares of the Parent Securities that Parent was required to deliver without restrictive legend to such Holder on the Unlegended Share Delivery Date multiplied by (II) the price at which the sell order giving rise to such purchase obligation was executed. Nothing herein shall limit any Holder’s right to pursue any other remedies available to it hereunder or otherwise at law or in equity, including a decree of specific performance and/or injunctive relief, with respect to Parent’s failure to timely deliver the Parent Securities without restrictive legend as required pursuant to the terms hereof. Each Holder hereby agrees that the removal of the restrictive legend pursuant to this Section 4.8(b) is predicated upon Parent’s reliance that such Holder will sell any such Parent Securities pursuant to either the registration requirements of the Securities Act, or an exemption therefrom. Any fees (with respect to Parent’s Transfer Agent, Parent counsel or otherwise) associated with the issuance of any required opinion or the removal of such restrictive legend shall be borne by Parent. Parent shall not be responsible for any fees incurred by the Holders in connection with the delivery of such Unlegended Parent Securities.

 

 

Section 4.9 Directors and Officers.

 

(a) The Parties shall take all necessary action so that immediately after the Second Effective Time, (a) the Parent Board is comprised of seven members: (i) five such members designated by Parent who are Brian Murphy, Christopher Fashek, Martin Goldstein, Thomas Mika, Aurora Cassirer and (ii) two such members designated by the Company which are Doron Besser and Zeev Rotstein.

 

(b) The Parties shall take all necessary action so that immediately after approval of the Preferred Stock Conversion Proposal at the Parent Stockholders’ Meeting, (a) the Parent Board is comprised of five members as follows: (i) one such members designated by Parent who shall be determined by Brian Murphy and Steve Brown with consultation from Doron Besser and (ii) four such members designated by the Company who are Doron Besser, Zeev Rotstein, Yaron Itzhari, David Ian Johnson, (b) Dr. Doron Besser shall be elected CEO of Parent and Rita Silberberg shall be elected/appointed, as applicable, VP of Corporate Finance and (c) Parent will amend and restate its certificate of incorporation and take all other actions necessary to cause its name to be changed to “ENvue Medical, Inc.”.

 

Section 4.10 Section 16 Matters. Prior to the First Effective Time, Parent and the Company shall take all such steps as may be required (to the extent permitted under applicable Laws) to cause any acquisitions of Parent Common Stock, restricted stock awards to acquire Parent Common Stock and any Parent Options and Parent Warrants to purchase Parent Common Stock in connection with the Contemplated Transactions, by each individual who is reasonably expected to become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act.

 

Section 4.11 Cooperation. Each Party shall cooperate reasonably with the other Party and shall provide the other Party with such assistance as may be reasonably requested for the purpose of facilitating the performance by each Party of its respective obligations under this Agreement and to enable the combined entity to continue to meet its obligations following the First Effective Time.

 

 

Section 4.12 Closing Certificates.

 

(a) The Company will prepare and deliver to Parent prior to the Closing a certificate signed by the President of the Company in a form reasonably acceptable to Parent setting forth, as of immediately prior to the First Effective Time: (i) each holder of Company Common Stock; (ii) such holder’s name and address; (iii) the number of Company Capital Stock held as of immediately prior to the First Effective Time for each such holder; and (iv) the number of shares of Parent Common Stock, Parent Convertible Preferred Stock to be issued to such holder, pursuant to this Agreement in respect of the Company Common Stock held by such holder as of immediately prior to the First Effective Time (the “Allocation Certificate”).

 

(b) Parent will prepare and deliver to the Company prior to the Closing a certificate signed by the Chief Financial Officer of Parent in a form reasonably acceptable to the Company, setting forth, as of immediately prior to the Reference Date: (A) the number of Parent Common Stock outstanding and (B) (i) each record holder of Parent Common Stock, Parent Options and Parent Warrants, (ii) such record holder’s name and address, and (iii) the number of shares of Parent Common Stock underlying each of the Parent Options and Parent Warrants as of the First Effective Time for such holder (the “Parent Outstanding Shares Certificate”).

 

Section 4.13 Takeover Statutes. If any Takeover Statute is or may become applicable to the Contemplated Transactions, each of the Company, the Company Board, Parent and the Parent Board, as applicable, shall grant such approvals and take such actions as are necessary so that the Contemplated Transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise act to eliminate or minimize the effects of such statute or regulation on the Contemplated Transactions.

 

Section 4.14 Obligations of Merger Subs. Parent will take all action necessary to cause Merger Subs to perform their obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement.

 

Section 4.15 Private Placement. Each of the Company and Parent shall take all reasonably necessary action on its part such that the issuance of Parent Common Stock Payment Shares and Parent Preferred Stock Payment Shares pursuant to this Agreement constitutes a transaction exempt from registration under the Securities Act in compliance with Rule 506 of Regulation D promulgated thereunder. Each certificate and/or book-entry statement representing Parent Common Stock Payment Shares and the Parent Preferred Stock Payment Shares comprising Merger Consideration shall, until such time that such shares are not so restricted under the Securities Act, bear a legend identical or similar in effect to the following legend:

 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. ACCORDINGLY, THIS SECURITY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF 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. THE COMPANY AND ITS TRANSFER AGENT SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND THE TRANSFER AGENT THAT SUCH REGISTRATION IS NOT REQUIRED. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

 

Section 4.16 Incentive Plan. As soon as administratively practicable following (i) the approval of the Parent Stockholder Matters by stockholders of Parent and (ii) the amendment of Parent’s certificate of incorporation to authorize sufficient Parent Common Stock, Parent shall adopt or cause to be adopted a new stock incentive plan, or amend the current 2024 Long-Term Incentive Plan (such plan, the “New Incentive Plan”), in form and substance reasonably satisfactory to Parent and Company, pursuant to which shares of Parent Common Stock, comprising an amount equal to ten percent (10%) of the fully-diluted, outstanding equity interests of Parent immediately following the Merger and Parent Financing will be reserved for issuance by Parent pursuant to, and in accordance with, the terms and conditions of such stock incentive plan, to employees, directors, consultants and other service providers of Parent and its Subsidiaries.

 

Section 4.17 Public Announcements. No Party shall issue any press release or make any public statement relating to this Agreement or the Contemplated Transactions without the prior written consent of, in the case of Parent, First Merger Sub or Second Merger Sub, the Company, and in the case of the Company, Parent; provided that: (a) such consent shall not be unreasonably withheld or delayed and (b) any Party may make any public disclosure if, on the advice of legal counsel, it is required to do so by applicable Law or pursuant to any listing agreement with any national securities exchange or stock market (in which case the Party required to make the disclosure shall consult with the other Party to the extent possible and allow reasonable time to comment thereon prior to issuance or release).

 

Section 4.18 Company RSU. At the First Effective Time, each Company RSU that is outstanding immediately prior to the First Effective Time under the Company Incentive Plan will be exchanged for restricted shares of Parent Common Stock that shall have, and be subject to, the same terms and conditions (including vesting terms) set forth in the Company Incentive Plan and the applicable Company Restricted Stock Unit Award agreements relating thereto, as in effect immediately prior to the First Effective Time, in an amount equal to the number of Company RSU outstanding with respect to such Company Restricted Stock Unit Award immediately prior to the First Effective Time multiplied by the Exchange Ratio, with the result rounded down to the nearest whole number of shares of Parent Common Stock. Parent shall file with the SEC, promptly after the First Effective Time, a registration statement on Form S-8 (or any successor or alternative form), relating to the shares of Parent Common Stock issuable with respect to the Company RSU’s assumed by Parent in accordance with this Section 4.18. All exchanged restricted shares of Parent Common Stock pursuant to this Section 4.18, shall be granted to Israeli participants pursuant to Section 102 of the Income Tax Ordinance 1961 (“Section 102”) assumed by Parent and shall be allocated or issued to a trustee as determined by the Parent (the “Trustee”) who shall serve as Section 102 trustee and shall hold such exchanged restricted shares of Parent Common Stock, issued shares of Parent Common Stock and other deliverables, for the benefit of the Israeli participants for such period of time as required by Section 102. The Parent shall make any necessary arrangement to (i) enter into an agreement with the Trustee, (ii) take any and all actions required to deliver the exchanged restricted shares of Parent Common Stock and any consideration received from the sale of the Parent Common Stock, to the Trustee and (iii) take all necessary to apply for a tax ruling to the Israeli tax authorities, prior to the Effective Date, for the continued Section 102 tax treatment to the exchanged restricted shares of Parent Common Stock.

 

 

Article V

CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY

 

The obligations of each Party to effect the Merger and otherwise consummate the Contemplated Transactions to be consummated at the Closing are subject to the satisfaction or, to the extent permitted by applicable Law, the written waiver by each of the Parties, at or prior to the Closing Date, of each of the following conditions:

 

Section 5.1 No Restraints. No temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Contemplated Transactions shall have been issued by any court of competent jurisdiction or other Governmental Body of competent jurisdiction and remain in effect and there shall not be any Law which has the effect of making the consummation of the Contemplated Transactions illegal.

 

Section 5.2 Certificate of Designation. Parent shall have filed the Certificate of Designation with the Secretary of State of the State of Delaware.

 

Section 5.3 Parent Financing. The Securities Purchase Agreement shall be in full force and effect or will take effect substantially simultaneously with the Closing, and cash proceeds not less than the Note Concurrent Investment Amount shall have been received by Parent, or will be received by Parent substantially simultaneously with the Closing, in connection with the consummation of the transactions contemplated by the Securities Purchase Agreement.

 

Section 5.4 Stock Exchange Listing. The Parent Common Stock Payment Shares and the shares of Parent Common Stock issuable upon conversion of the Parent Preferred Stock Payment Shares to be issued in connection with the Contemplated Transactions shall have been authorized for listing on the NASDAQ, subject to official notice of issuance.

 

Section 5.5 Public Offering Registration Statement. The Public Offering Registration Statement shall be filed with the SEC simultaneously or immediately after the Closing.

 

Article VI

CLOSING DELIVERIES OF THE COMPANY

 

The obligations of Parent and Merger Subs to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by Parent, at or prior to the Closing, of each of the following conditions:

 

Section 6.1 Documents. Parent shall have received the following documents, each of which shall be in full force and effect:

 

(a) the Allocation Certificate; and

 

 

(b) all necessary consents, notices, waivers and approvals of parties, in a form reasonably acceptable to the Parent, in each case, to any Contract set forth on Schedule 6.2(c) attached hereto.

 

Section 6.2 FIRPTA Certificate. Parent shall have received (i) an original signed statement from the Company that the Company is not, and has not been at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a “United States real property holding corporation,” as defined in Section 897(c)(2) of the Code, conforming to the requirements of Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h), and (ii) an original signed notice to be delivered to the IRS in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2), together with written authorization for Parent to deliver such notice to the IRS on behalf of the Company following the Closing, each dated as of the Closing Date, duly executed by an authorized officer of the Company, and in form and substance reasonably acceptable to Parent; provided, that the Parent’s sole remedy for the Company’s failure to deliver such documentation shall be to withhold pursuant to Section 1.11.

 

Article VII

CLOSING DELIVERIES OF PARENT

 

The obligations of the Company to effect the Merger and otherwise consummate the transactions to be consummated at the Closing are subject to the satisfaction or the written waiver by the Company, at or prior to the Closing, of each of the following conditions:

 

Section 7.1 Documents. The Company shall have received the following documents, each of which shall be in full force and effect:

 

(a) the Parent Outstanding Shares Certificate;

 

(b) a written resignation, in a form reasonably satisfactory to the Company, dated as of the Closing Date and effective as of the Closing, executed by each of the officers and directors of Parent who are not to continue as officers or directors, as the case may be, of Parent after the Closing pursuant to Section 4.9 hereof;

 

(c) certified copies of the resolutions duly adopted by the Parent Board and in full force and effect as of the Closing authorizing the appointment of the directors and officers set forth in Section 4.9; and

 

(d) all necessary consents, notices, waivers and approvals of parties, in a form reasonably acceptable to the Company, in each case, to any Contract set forth on Schedule 7.1(e) attached hereto.

 

Section 7.2 Parent Support Agreement. The Company shall have received the Parent Stockholder Support Agreements duly executed by each of the stockholders set forth on Section A-2 of the Parent Disclosure Schedule, each of which shall be in full force and effect.

 

 

Article VIII

MISCELLANEOUS PROVISIONS

 

Section 8.1 Non-Survival of Representations and Warranties. The representations and warranties of the Company, Parent and Merger Subs contained in this Agreement or any certificate or instrument delivered pursuant to this Agreement shall terminate at the First Effective Time, and only the covenants that by their terms survive the First Effective Time and this Section 8 shall survive the First Effective Time.

 

Section 8.2 Amendment. This Agreement may be amended with the approval of the respective boards of directors (or managers as applicable) of the Surviving Entity and Parent at any time; provided, however, that after any such approval of this Agreement by a Party’s stockholders, no amendment shall be made which by Law requires further approval of such stockholders without the further approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the Surviving Entity and Parent.

 

Section 8.3 Waiver.

 

(a) No failure on the part of any Party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any Party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

 

(b) No Party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such Party and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

 

Section 8.4 Entire Agreement; Counterparts; Exchanges by Electronic Transmission. This Agreement and the other schedules, exhibits, certificates, instruments and agreements referred to in this Agreement constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among or between any of the Parties with respect to the subject matter hereof and thereof; provided, however, that the Confidentiality Agreement shall not be superseded and shall remain in full force and effect in accordance with its terms. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

Section 8.5 Applicable Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding between any of the Parties arising out of or relating to this Agreement or any of the Contemplated Transactions, each of the Parties: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the District of Delaware or, to the extent that neither of the foregoing courts has jurisdiction, the Superior Court of the State of Delaware; (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with clause (a) of this Section 8.5; (c) waives any objection to laying venue in any such action or proceeding in such courts; (d) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any Party; (e) agrees that service of process upon such Party in any such action or proceeding shall be effective if notice is given in accordance with Section 8.8 of this Agreement; and (f) irrevocably and unconditionally waives the right to trial by jury.

 

 

Section 8.6 Attorneys’ Fees. In any action at law or suit in equity to enforce this Agreement or the rights of any of the Parties, the prevailing Party in such action or suit (as determined by a court of competent jurisdiction) shall be entitled to recover its reasonable out-of-pocket attorneys’ fees and all other reasonable costs and expenses incurred in such action or suit.

 

Section 8.7 Assignability. This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the Parties and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of a Party’s rights or obligations hereunder may be assigned or delegated by such Party without the prior written consent of the other Party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by such Party without the other Party’s prior written consent shall be void and of no effect.

 

Section 8.8 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly delivered and received hereunder (a) one Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable international overnight courier service, (b) upon delivery in the case of delivery by hand, or (c) on the date delivered in the place of delivery if sent by email (with a written or electronic confirmation of delivery) prior to 5:00 p.m. Pacific Time, otherwise on the next succeeding Business Day, in each case to the intended recipient as set forth below:

 

(i)

if to Parent or Merger Subs:

 

NanoVibronix, Inc.
969 Pruitt Place

Tyler, TX 75703

Attention: Brian Murphy, CEO
Email Address: bmurphy@nanovibronix.com

 

with a copy (which shall not constitute notice) to:

 

Pierson Ferdinand LLP

1270 Avenue of the Americas

7^th Floor- 1050

New York, NY 10020

Attention: Ira A. Greenstein
Email Address: ira.greenstein@pierferd.com

 

(ii)

if to the Company:

 

ENvue Medical Holdings, Corp.
762 W. Algonquin Road
Arlington Heights, IL 60005
Attention: Dr. Doron Besser, President and CEO
Email Address: doronb@envizionmed.com

 

with a copy (which shall not constitute notice) to:

 

Haynes and Boone LLP

30 Rockefeller Plaza

26^th Floor

New York, NY 10112

Attention: Rick A. Werner; Simin Sun; Alla Digilova

Email Address: rick.werner@haynesboone.com;

simin.sun@haynesboone.com; alla.digilova@haynesboone.com

 

 

Section 8.9 Cooperation. Each Party agrees to cooperate fully with the other Party and to execute and deliver such further documents, certificates, agreements and instruments and to take such other actions as may be reasonably requested by the other Party to evidence or reflect the Contemplated Transactions and to carry out the intent and purposes of this Agreement.

 

Section 8.10 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the Parties agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the Parties agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

 

Section 8.11 Other Remedies; Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a Party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any Party does not perform the provisions of this Agreement (including failing to take such actions as are required of it hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breaches such provisions. Accordingly, the Parties acknowledge and agree that the Parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity. Each of the Parties agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that any other Party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity. Any Party seeking an injunction or injunctions to prevent breaches of this Agreement shall not be required to provide any bond or other security in connection with any such order or injunction.

 

Section 8.12 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person (other than the Parties and the D&O Indemnified Parties to the extent of their respective rights pursuant to Section 4.4) any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

 

Section 8.13 Construction.

 

(a) References to “cash,” “dollars” or “$” are to U.S. dollars.

 

(b) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine genders.

 

(c) The Parties have participated jointly in the negotiating and drafting of this Agreement and agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of this Agreement, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.

 

(d) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

 

(e) Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits and Schedules to this Agreement, respectively.

 

(f) Any reference to legislation or to any provision of any legislation shall include any modification, amendment, re-enactment thereof, any legislative provision substituted therefore and all rules, regulations, and statutory instruments issued or related to such legislations.

 

(g) The bold-faced headings and table of contents contained in this Agreement are for convenience of reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in connection with the construction or interpretation of this Agreement.

 

(h) The inclusion of any information in the Company Disclosure Schedule or Parent Disclosure Schedule shall not be deemed an admission or acknowledgment to any third party, in and of itself and solely by virtue of the inclusion of such information in the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable, that such information is required to be listed in the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable, that such items are material to the Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a whole, as the case may be, or that such items have resulted in a Company Material Adverse Effect or a Parent Material Adverse Effect. The Parties agree that each of the Company Disclosure Schedule and the Parent Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Agreement. The disclosures in any section or subsection of the Company Disclosure Schedule or the Parent Disclosure Schedule shall qualify other sections and subsections in this Agreement to the extent it is readily apparent on its face from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

(i) Each of “delivered” or “made available” means, with respect to any documentation, that (i) prior to 11:59 p.m. (Eastern Time) on the date that is two (2) Business Days prior to the date of this Agreement (A) a copy of such material has been posted to and made available by a Party to the other Party and its Representatives in the electronic data room maintained by such disclosing Party or (B) such material is disclosed in the Parent SEC Documents filed with the SEC prior to the date hereof and publicly made available on the SEC’s Electronic Data Gathering Analysis and Retrieval system or (ii) delivered by or on behalf of a Party or its Representatives via electronic mail or in hard copy form prior to the execution of this Agreement.

 

(j) Whenever the last day for the exercise of any privilege or the discharge of any duty hereunder shall fall upon a Saturday, Sunday, or any date on which banks in New York, New York are authorized or obligated by Law to be closed, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular Business Day.

 

Section 8.14 Expenses. Except as otherwise expressly provided in this Agreement, all expenses incurred in connection with this Agreement and the Contemplated Transactions will be paid by the Party incurring such expenses.

 

(Remainder of page intentionally left blank)

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first above written.

 

	ENVUE MEDICAL HOLDINGS, CORP.
	By:	/s/ Dr. Doron Besser
	Name:	Dr. Doron Besser
	Title:	Chief Executive Officer

 

	NVEH MERGER SUB I, INC.
	By:	/s/ Brian Murphy
	Name:	Brian Murphy
	Title:	Chief Executive Officer

 

	NVEH MERGER SUB II, LLC
	By:	/s/ Brian Murphy
	Name:	Brian Murphy
	Title:	Chief Executive Officer

 

	NANOVIBRONIX, INC.
	By:	/s/ Brian Murphy
	Name:	Brian Murphy
	Title:	Chief Executive Officer

 

 

EXHIBIT A

CERTAIN DEFINITIONS

 

For purposes of this Agreement (including this Exhibit A)

 

“2014 Incentive Plan” means that 2014 Long-Term Incentive Plan of Parent, as disclosed in Parent SEC Documents.

 

“2024 Incentive Plan” means that 2024 Long-Term Incentive Plan of Parent, as disclosed in Parent SEC Documents.

 

“Acquired Company” or “Acquired Companies” mean Company and its direct and indirect Subsidiaries.

 

“Acquiring Company” or “Acquiring Companies” mean Parent and its direct and indirect Subsidiaries.

 

“Affiliate” mean, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” means the Agreement and Plan of Merger to which this Exhibit A is attached, as it may be amended from time to time.

 

“Allocation Certificate” has the meaning set forth in Section 4.12(a).

 

“Antitrust Laws” has the meaning set forth in Section 2.3(d).

 

“Anti-Corruption Laws” has the meaning set forth in Section 2.12(k).

 

“Board Approval” has the meaning set forth in the Recitals.

 

“Book-Entry Shares” has the meaning set forth in Section 1.7.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which banks in New York, New York, are authorized or obligated by Law to be closed.

 

“Buy-In” has the meaning set forth in Section 4.8(b).

 

“Certificate of Designation” means the Certificate of Designation of Preferences, Rights and Limitations of Parent Convertible Preferred Stock in the form attached hereto as Exhibit B.

 

“Certificates of Merger” has the meaning set forth in Section 1.3.

 

“Certifications” has the meaning set forth in Section 3.5(a).

 

“Charter Amendment Proposal” has the meaning set forth in Section 4.1(a)(iii).

 

 

“Closing” has the meaning set forth in Section 1.3.

 

“Closing Date” has the meaning set forth in Section 1.3.

 

“COBRA” means the health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 and the regulations thereunder or any state Legal Requirement governing health care coverage extension or continuation.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collaboration Partners” means any of the Company’s or any of its Subsidiaries’ licensees or licensors or any third party with which the Company or any of its Subsidiaries has entered into a Contract that relates to the research, development, supply, manufacturing, testing, distribution, import, export or commercialization of any product.

 

“Company” has the meaning set forth in the Preamble.

 

“Company Balance Sheet” has the meaning set forth in Section 2.5(a).

 

“Company Board” has the meaning set forth in Section 2.3(b).

 

“Company Capital Stock” has the meaning set forth in Section 2.2(a).

 

“Company Common Stock” means the Common Stock, $0.0001 par value per share, of the Company.

 

“Company Contract” has the meaning set forth in Section 2.11(b).

 

“Company Data” means all data and information Processed by or for the Company or any of its Subsidiaries.

 

“Company Data Partners” has the meaning set forth in Section 2.8(e).

 

“Company Disclosure Schedule” has the meaning set forth in Article II.

 

“Company Documents” has the meaning set forth in Section 2.3(a).

 

“Company Financials” has the meaning set forth in Section 2.5(a).

 

“Company Incentive Plan” means the Company’s 2024 Equity Incentive Plan.

 

“Company IP” means all Intellectual Property Rights that are owned or purported to be owned by, assigned to, or exclusively licensed by, the Company.

 

“Company IT Assets” means with respect to the Acquired Companies, the computers, software, servers, workstations, routers, hubs, switches, circuits, networks, data communications lines and all other information technology equipment.

 

“Company Lookback Date” has the meaning set forth in Section 2.5(c).

 

 

“Company Material Adverse Effect” means any Effect that, considered together with all other Effects that have occurred prior to the date of determination of the occurrence of a Company Material Adverse Effect, has or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company, taken as a whole; provided, however, that Effects arising or resulting from the following shall not be taken into account in determining whether there has been a Company Material Adverse Effect: (a) general business or economic conditions affecting the industry in which the Company and its Subsidiaries operate, (b) acts of war, armed hostilities or terrorism, acts of God or comparable events, epidemic, pandemic or disease outbreak (including the COVID-19 virus) or any worsening of the foregoing, or any declaration of martial law, quarantine or similar directive, policy or guidance or Law or other action by any Governmental Body in response thereto, (c) changes in financial, banking or securities markets, (d) any change in, or any compliance with or action taken for the purpose of complying with, any Law or GAAP (or interpretations of any Law or GAAP), (e) resulting from the announcement of this Agreement or the pendency of the Contemplated Transactions; provided, that this clause (e) shall not apply to any representation or warranty (or condition to the consummation of the Merger relating to such representation or warranty) to the extent the representation and warranty expressly addresses the consequences resulting from the execution and delivery of this Agreement or the consummation of the Contemplated Transactions, or (f) resulting from the taking of any action required to be taken by this Agreement; except in each case with respect to clauses (a) through (c), to the extent disproportionately affecting the Company, taken as a whole, relative to other similarly situated companies in the industries in which the Company operates.

 

“Company Permits” has the meaning set forth in Section 2.8(b).

 

“Company Personal Information” has the meaning set forth in Section 2.8(d).

 

“Company Privacy Policy” has the meaning set forth in Section 2.8(d).

 

“Company RSU” means a share of Company Common Stock that is subject to repurchase by, or forfeiture to, Company pursuant to restricted stock or similar agreements with Company.

 

“Company Security Incident” has the meaning set forth in Section 2.8(e).

 

“Company Signatories” has the meaning set forth in the Recitals.

 

“Company Stock Certificate” has the meaning set forth in Section 1.7.

 

“Company Stockholder Matters” has the meaning set forth in the Recitals.

 

“Company Unaudited Interim Balance Sheet” means the unaudited balance sheet of the Company as of September 30, 2024 provided to Parent prior to the date of this Agreement.

 

“Confidentiality Agreement” means that that certain Mutual Nondisclosure Agreement, dated as of December 19, 2024, between the Parties.

 

“Consent” means any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

 

“Contemplated Transactions” means the Merger, Parent Support Agreements, the Securities Purchase Agreement, the filing of the Public Offering Registration Statement and the other transactions and actions contemplated by this Agreement to be consummated at or prior to the Closing (but not, for the avoidance of doubt, the actions proposed to be taken as the Parent Stockholders’ Meeting following the Closing pursuant to Section 4.1).

 

 

“Contract” means, with respect to any Person, any written or oral agreement, contract, subcontract, lease (whether for real or personal property), mortgage, license, sublicense or other legally binding commitment or undertaking of any nature to which such Person is a party or by which such Person or any of its assets are bound or affected under applicable Law.

 

“Convertible Note” means the convertible promissory notes listed on Schedule 2.6(d) of the Company Disclosure Schedule.

 

“Copyrights” mean all copyrights and copyrightable works (including without limitation databases and other compilations of information, mask works and semiconductor chip rights), including all rights of authorship, use, publication, reproduction, distribution, performance, transformation, moral rights and rights of ownership of copyrightable works and all registrations and rights to register and obtain renewals, modifications, and extensions of registrations, together with all other interests accruing by reason of international copyright.

 

“D&O Indemnified Parties” has the meaning set forth in Section 4.4(a).

 

“Data Processing Policy” means each policy, statement, representation, or notice of the Company, Parent or their respective Subsidiaries relating to the Processing of Company Data or Parent Data (as applicable), privacy, data protection, or security.

 

“DGCL” means the General Corporation Law of the State of Delaware.

 

“DLLCA” means the Delaware Limited Liability Company Act.

 

“Dissenting Shares” has the meaning set forth in Section 1.9(a).

 

“Drug/Device Regulatory Agency” has the meaning set forth in Section 3.9(b).

 

“DTC” has the meaning set forth in Section 4.8(b).

 

“DWAC” has the meaning set forth in Section 4.8(b).

 

“Effect” means any effect, change, event, circumstance, or development.

 

“EMA” has the meaning set forth in Section 2.12(h).

 

“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, security interest, lease, license, option, easement, reservation, servitude, adverse title, claim, infringement, interference, option, right of first refusal, preemptive right, community property interest or restriction or encumbrance of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

 

 

“Enforceability Exceptions” means the (a) Laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

“Entity” means any corporation (including any non-profit corporation), partnership (including any general partnership, limited partnership or limited liability partnership), joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity, and each of its successors.

 

“Environmental Law” means any federal, state, local or foreign Law relating to pollution or protection of human health (as it relates to exposure to Hazardous Materials) or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any Law or regulation relating to emissions, discharges, releases or threatened releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“Exchange Act” has the meaning set forth in Section 2.3(d).

 

“Exchange Agent” has the meaning set forth in Section 1.8(a).

 

“Exchange Fund” has the meaning set forth in Section 1.8(a).

 

“Exchange Ratio” means 41.7009.

 

“Excluded Contracts” means (i) any non-exclusive Contract concerning “off-the-shelf” or similar computer software that is available on commercially reasonable terms, (ii) standard non-disclosure, confidentiality and material transfer Contracts granting non-exclusive rights to Company Owned IP Rights or Parent Owned IP Rights (as applicable) and entered into in the ordinary course of business, (iii) Contracts that have expired on their own terms or were terminated and for which there are no material outstanding obligations, and (iv) purchase orders and associated terms and conditions for which the underlying goods or services have been delivered or received.

 

“FDA” has the meaning set forth in Section 2.12(a).

 

“FDCA” has the meaning set forth in Section 2.12(a).

 

“First Certificate of Merger” has the meaning set forth in Section 1.3.

 

“First Effective Time” has the meaning set forth in Section 1.3.

 

“First Merger” has the meaning set forth in the Recitals.

 

“First Merger Sub” has the meaning set forth in the Preamble.

 

“First Merger Sub Board” means the board of directors of First Merger Sub.

 

“First Step Surviving Corporation” has the meaning set forth in Section 1.1.

 

 

“GAAP” has the meaning set forth in Section 2.5(a).

 

“Governmental Authorization” means any: (a) permit, license, certificate, franchise, permission, variance, exception, approval, exemption, order, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law; or (b) right under any Contract with any Governmental Body.

 

“Governmental Body” means any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, bureau, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal, and for the avoidance of doubt, any taxing authority); or (d) self-regulatory organization (including NASDAQ).

 

“Hazardous Materials” means any pollutant, chemical, substance and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable or flammable chemical, or chemical compound, or hazardous substance, material or waste, whether solid, liquid or gas, that is subject to regulation, control or remediation under any Environmental Law, including without limitation, crude oil or any fraction thereof, and petroleum products or byproducts.

 

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act (42 U.S.C. § 17921 et seq.).

 

“Holder” has the meaning set forth in Section 4.8(b).

 

“Indebtedness” means (i) all obligations for borrowed money and advancement of funds; (ii) all obligations evidenced by notes, bonds, debentures or similar instruments, contracts or arrangements (whether or not convertible), (iii) all obligations for the deferred purchase price of property or services (including any potential future earn-out, purchase price adjustment, releases of “holdbacks” or similar payments, but excluding any such obligations to the extent there is cash being held by a third party in escrow exclusively for purposes of satisfying such obligations) (“Deferred Purchase Price”); (iv) all obligations arising out of any financial hedging, swap or similar arrangements;(v) all obligations as lessee that would be required to be capitalized in accordance with GAAP, whether or not recorded; (vi) all obligations in connection with any letter of credit, banker’s acceptance, guarantee, surety, performance or appeal bond, or similar credit transaction; (vii) interest payable with respect to Indebtedness referred to in clause (i) through (vi), and (viii) the aggregate amount of all prepayment premiums, penalties, breakage costs, “make whole amounts,” costs, expenses and other payment obligations of such Person that would arise (whether or not then due and payable) if all such items under clauses (i) through (vii) were prepaid, extinguished, unwound and settled in full as of such specified date. For purposes of determining the Deferred Purchase Price obligations as of a specified date, such obligations shall be deemed to be the maximum amount of Deferred Purchase Price owing as of such specified date (whether or not then due and payable) or potentially owing at a future date.

 

“Intellectual Property Rights” means and includes all intellectual property or other proprietary rights under the laws of any jurisdiction in the world, including, without limitation: (a) rights associated with works of authorship, including exclusive exploitation rights, copyrights, moral rights, software, databases, and mask works; (b) trademarks, service marks, trade dress, logos, trade names and other source identifiers, domain names and URLs and similar rights and any goodwill associated therewith; (c) rights associated with trade secrets, know how, inventions, invention disclosures, methods, processes, protocols, specifications, techniques and other forms of technology; (d) patents and industrial property rights; (e) other similar proprietary rights in intellectual property of every kind and nature; (f) rights of privacy and publicity; and (g) all registrations, renewals, extensions, statutory invention registrations, provisionals, continuations, continuations-in-part, provisionals, divisions, or reissues of, and applications for, any of the rights referred to in clauses (a) through (f) above (whether or not in tangible form and including all tangible embodiments of any of the foregoing, such as samples, studies and summaries), along with all rights to prosecute and perfect the same through administrative prosecution, registration, recordation or other administrative proceeding, and all causes of action and rights to sue or seek other remedies arising from or relating to the foregoing, including for past, present or future infringement of any of the foregoing.

 

 

“Intended Tax Treatment” has the meaning set forth in Section 4.7.

 

“IRS” means the United States Internal Revenue Service.

 

“Israeli Employees” has the meaning set forth in Section 3.18(a).

 

“Knowledge” means, with respect to an individual, that such individual is actually aware of the relevant fact or such individual would reasonably be expected to know such fact in the ordinary course of the performance of such individual’s employment responsibilities. Any Person that is an Entity shall have Knowledge if any officer or director of such Person as of the date such knowledge is imputed has Knowledge of such fact or other matter.

 

“Law” means any federal, state, national, foreign, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (including under the authority of NASDAQ or the Financial Industry Regulatory Authority).

 

“Legal Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

 

“Liability” has the meaning set forth in Section 2.5(d).

 

“Merger” has the meaning set forth in the Recitals.

 

“Merger Consideration” has the meaning set forth in Section 1.5.

 

“Merger Subs” has the meaning set forth in the Preamble.

 

“New Incentive Plan” has the meaning set forth in Section 4.16.

 

“NASDAQ” means the Nasdaq Capital Market.

 

“NASDAQ Listing Application” has the meaning set forth in Section 4.6.

 

“Note Concurrent Investment Amount” means $500,000 as contemplated by the Securities Purchase Agreement.

 

 

“Ordinance” means the Israeli Income Tax Ordinance New Version, 5721-1961, as amended, and the rules and regulations promulgated thereunder.

 

“Ordinary Course of Business” means, in the case of each of the Company and Parent, such actions taken in the ordinary course of its normal operations and consistent with its past practices.

 

“Organizational Documents” means, with respect to any Person (other than an individual), (a) the certificate or articles of association or incorporation or organization or limited partnership or limited liability company, and any joint venture, limited liability company, operating or partnership agreement and other similar documents adopted or filed in connection with the creation, formation or organization of such Person and (b) all bylaws, regulations and similar documents or agreements relating to the organization or governance of such Person, in each case, as amended or supplemented.

 

“Parent” has the meaning set forth in the Preamble.

 

“Parent Associate” means any current or former employee, independent contractor, officer or director of Parent.

 

“Parent Balance Sheet” means the unaudited balance sheet of Parent as of December 31, 2024 (the “Parent Balance Sheet Date”) provided to the Company prior to the date of this Agreement.

 

“Parent Board” means the board of directors of Parent.

 

“Parent Common Stock” means the Common Stock, $0.001 par value per share, of Parent.

 

“Parent Common Stock Consideration Cap” has the meaning set forth in Section 1.5.

 

“Parent Common Stock Payment Shares” has the meaning set forth in Section 1.5.

 

“Parent Contract” has the meaning set forth in Section 3.16(b).

 

“Parent Convertible Preferred Stock” means Parent’s non-voting convertible preferred stock, par value $0.001 per share, with the rights, preferences, powers and privileges specified in the Certificate of Designation.

 

“Parent Data” means all data and information Processed by or for Parent or any of its Subsidiaries.

 

“Parent Data Partners” has the meaning set forth in Section 3.9(l).

 

“Parent Disclosure Schedule” has the meaning set forth in Article III.

 

“Parent Documents” has the meaning set forth in Section 3.3(a).

 

“Parent Environmental Permits” has the meaning set forth in Section 3.14(c).

 

“Parent Employee Plans” has the meaning set forth in Section 3.12(a).

 

“Parent Financials” has the meaning set forth in Section 3.5(f).

 

 

“Parent Financing” means an acquisition of convertible notes of Parent to be consummated concurrently with the Closing pursuant to the Securities Purchase Agreement with aggregate gross cash proceeds to Parent of at least the Note Concurrent Investment Amount.

 

“Parent Insurance Policies” has the meaning set forth in Section 3.17(a).

 

“Parent IP” means all Intellectual Property Rights that are owned or purported to be owned by, assigned to, or exclusively licensed by, Parent or its Subsidiaries.

 

“Parent Lookback Date” has the meaning set forth in Section 3.5(a).

 

“Parent Material Adverse Effect” means any Effect that, considered together with all other Effects that have occurred prior to the date of determination of the occurrence of a Parent Material Adverse Effect, has or would reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise), assets, liabilities or results of operations of Parent; provided, however, that Effects arising or resulting from the following shall not be taken into account in determining whether there has been a Parent Material Adverse Effect: (a) general business or economic conditions affecting the industry in which Parent operates, (b) acts of war, armed hostilities or terrorism, acts of God or comparable events, epidemic, pandemic or disease outbreak (including the COVID-19 virus) or any worsening of the foregoing, or any declaration of martial law, quarantine or similar directive, policy or guidance or Law or other action by any Governmental Body in response thereto, (c) changes in financial, banking or securities markets, (d) the taking of any action required to be taken by this Agreement, (e) any change in the stock price or trading volume of Parent Common Stock (it being understood, however, that any Effect causing or contributing to any change in stock price or trading volume of Parent Common Stock may be taken into account in determining whether a Parent Material Adverse Effect has occurred, unless such Effects are otherwise excepted from this definition); (f) any change in, or any compliance with or action taken for the purpose of complying with, any Law or GAAP (or interpretations of any Law or GAAP); (g) resulting from the announcement of this Agreement or the pendency of the Contemplated Transactions; provided, that this clause (e) shall not apply to any representation or warranty (or condition to the consummation of the Merger relating to such representation or warranty) to the extent the representation and warranty expressly addresses the consequences resulting from the execution and delivery of this Agreement or the consummation of the Contemplated Transactions; or (h) resulting from the taking of any action or the failure to take any action, by Parent that is required to be taken by this Agreement, except in each case with respect to clauses (a) through (c), to the extent disproportionately affecting Parent relative to other similarly situated companies in the industries in which Parent operates.

 

“Parent Material Contract(s)” has the meaning set forth in Section 3.13(a).

 

“Parent Option” has the meaning set forth in Section 3.2(b).

 

“Parent Outstanding Shares Certificate” has the meaning set forth in Section 4.12(b).

 

“Parent Owned IP Rights” has the meaning set forth in Section 3.8.

 

“Parent Permits” has the meaning set forth in Section 3.9(b).

 

“Parent Personal Information” has the meaning set forth in Section 3.9(k).

 

 

“Parent Preferred Stock” has the meaning set forth in Section 3.2(a).

 

“Parent Preferred Stock Payment Shares” has the meaning set forth in Section 3.2(a).

 

“Parent Privacy Policy” has the meaning set forth in Section 3.9(k).

 

“Parent Product Candidates” has the meaning set forth in Section 3.9(d).

 

“Parent Regulatory Permits” has the meaning set forth in Section 3.9(d).

 

“Parent SEC Documents” has the meaning set forth in Section 3.5(a).

 

“Parent Securities” has the meaning set forth in Section 4.8(b).

 

“Parent Security Interest” has the meaning set forth in Section 3.9(l).

 

“Parent Signatories” has the meaning set forth in the Recitals.

 

“Parent Stock Plans” means collectively the 2014 Incentive Plan and the 2024 Incentive Plan, each as may be amended from time to time.

 

“Parent Stockholder Matters” has the meaning set forth in Section 4.1(a)(iii).

 

“Parent Stockholders’ Meeting” has the meaning set forth in Section 4.1(a)(iii).

 

“Parent Support Agreements” has the meaning set forth in the Recitals.

 

“Parent Warrant” has the meaning set forth in Section 3.2(b).

 

“Party” or “Parties” means the Company, First Merger Sub, Second Merger Sub and Parent.

 

“Permitted Encumbrance” means: (a) any Encumbrance for current Taxes not yet due and payable or for Taxes that are being contested in good faith and, in each case, for which adequate reserves have been made on the Company Unaudited Interim Balance Sheet or the Parent Balance Sheet, as applicable, in accordance with GAAP; (b) minor liens that have arisen in the Ordinary Course of Business and that do not (in any case or in the aggregate) materially detract from the value of the assets or properties subject thereto or materially impair the operations of the Company or any of its Subsidiaries or Parent, as applicable; (c) liens to secure obligations to landlords, lessors or renters under leases or rental agreements; (d) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by Law; (e) non-exclusive licenses of Intellectual Property Rights granted by the Company or any of its Subsidiaries or Parent, as applicable, in the Ordinary Course of Business and that do not (in any case or in the aggregate) materially detract from the value of the Intellectual Property Rights subject thereto; and (f) statutory liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies the payment for which is not delinquent.

 

“Person” means any individual, Entity or Governmental Body.

 

“PHSA” has the meaning set forth in Section 3.9(c).

 

“Public Offering Registration Statement” has the meaning set forth in the Recitals.

 

 

“Preferred Stock Conversion Proposal” has the meaning set forth in Section 1.5.

 

“Principle Trading Market” means the trading market on which Parent Common Stock is primarily listed on and quoted for trading, which, as of the date of this Agreement and the Closing Date, shall be NASDAQ.

 

“Privacy and Data Processing Requirements” means any applicable (i) Law relating to privacy, data protection, or security, including without limitation the data privacy and security provisions of HIPAA, (ii) Data Processing Policy, or (iii) requirement of any self-regulatory organization, industry standard (including, as applicable, the Payment Card Industry Data Security Standard), or Contract by which the Company, Parent or their respective Subsidiaries are bound relating to the Processing of Company Data or Parent Data (as applicable), privacy, data protection, or security, including, in each case of (i) through (iii), in connection with direct marketing or the initiation, transmission, monitoring, interception, recording, or receipt of communications.

 

“Process” means, with respect to any data, information, or information technology system, any operation or set of operations performed thereon, whether or not by automated means, including access, adaptation, alignment, alteration, collection, combination, compilation, consultation, creation, derivation, destruction, disclosure, disposal, dissemination, erasure, interception, maintenance, making available, organization, recording, restriction, retention, retrieval, storage, structuring, transmission, and use, and security measures with respect thereto.

 

“Proxy Statement” has the meaning set forth in Section 4.2(a).

 

“Reference Date” means February 10, 2025.

 

“Registered IP” means all Intellectual Property Rights that are registered or issued under the authority of, with or by any Governmental Body, including all patents, registered copyrights, registered mask works, and registered trademarks, service marks and trade dress, and all applications for any of the foregoing.

 

“Registration Statement Effective Date” has the meaning set forth in Section 4.8(b).

 

“Representatives” means directors, officers, employees, agents, attorneys, accountants, investment bankers, advisors and representatives.

 

“Required Parent Stockholder Vote” means the affirmative vote of (A) a majority of the shares present in person or represented by proxy at the Parent Stockholders’ Meeting and entitled to vote on the proposal to approve the proposals described in Section 4.1(a)(i) and Section 4.1(a)(ii) and (B) a majority of the votes cast is the only vote of the holders of any class or series of Parent’s capital stock necessary to approve the proposal in Section 4.1(a)(iii).

 

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002.

 

“SEC” has the meaning set forth in Section 2.3(d).

 

“SEC Website” has the meaning set forth in Section 3.5(a).

 

 

“Second Certificate of Merger” has the meaning set forth in Section 1.3.

 

“Second Effective Time” has the meaning set forth in Section 1.3.

 

“Second Merger” has the meaning set forth in the Recitals.

 

“Second Merger Sub” has the meaning set forth in the Preamble.

 

“Second Merger Sub Board” means the board of managers of Second Merger Sub.

 

“Securities Act” has the meaning set forth in Section 3.5(a).

 

“Section 102” has the meaning set forth in Section 4.18.

 

“Securities Purchase Agreement” has the meaning set forth in the Recitals.

 

“Stockholder Written Consent” has the meaning set forth in the Recitals.

 

“Subsidiary” An entity shall be deemed to be a ‘subsidiary’ of a Person if such Person directly or indirectly owns or purports to own, beneficially or of record, (a) an amount of voting securities or other interests in such entity that is sufficient to enable such Person to elect at least a majority of the members of such entity’s board of directors or other governing body, or (b) at least 50% of the outstanding equity, voting, beneficial or financial interests in such Entity.

 

“Surviving Entity” has the meaning set forth in Section 1.1.

 

“Standard Settlement Period” means the standard settlement period for the Principle Trading Market, expressed in a number of trading days, as in effect on the applicable date, which as of the date of this Agreement is “T+2.”

 

“Takeover Statute” means any “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover Law.

 

“Tax” means any (i) federal, state, local, foreign or other tax, including any income, capital gain, gross receipts, capital stock, profits, transfer, estimated, registration, stamp, premium, escheat, unclaimed property, customs duty, ad valorem, occupancy, occupation, alternative, add-on, windfall profits, value added, severance, property, business, production, sales, use, license, excise, franchise, employment, payroll, social security, disability, unemployment, workers’ compensation, national health insurance, withholding or other taxes, duties, fees, assessments or governmental charges, surtaxes or deficiencies thereof in the nature of a tax, however denominated (whether imposed directly or through withholding and whether or not disputed), and including any fine, penalty, addition to tax, or interest or additional amount imposed by a Governmental Body with respect thereto (or attributable to the nonpayment thereof) and (ii) any liability for payment of amounts described in clause (i), whether as a result of transferee or successor liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, pursuant to a Contract, through operation of Law or otherwise.

 

“Tax Return” means any return (including any information return), report, statement, declaration, claim for refund, estimate, schedule, notice, notification, form, election, certificate or other document, and any amendment or supplement to any of the foregoing, filed with or submitted to, or required to be filed with or submitted to, any Governmental Body (or provided to a payee) in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of, or compliance with, any Law relating to any Tax.

 

 

“Transaction Costs” means the aggregate amount of costs and expenses of a Person or any of its Subsidiaries incurred in connection with the negotiation, preparation and execution of this Agreement and the related documentation as applicable, and the consummation of the Contemplated Transactions, for (a) any brokerage fees and commissions, finders’ fees or financial advisory fees, any fees and expenses of counsel or accountants payable by such Person or any of its Subsidiaries and any transaction bonuses or similar items in connection with the Contemplated Transactions, (b) any bonus, severance, change-in-control payments or similar payment obligations (including payments with “single-trigger” provisions triggered at and as of the consummation of the Contemplated Transactions) that become due or payable to any director, officer, employee or consultant of such Person in connection with the consummation of the Contemplated Transactions and, (c) any payments to third parties under any Contract to which such Person or its Subsidiaries are a party triggered by the consummation of the Contemplated Transactions, or any payment or consideration arising under or in relation to obtaining any Consents, waivers or approvals of any third party under any Contract to which such Person or its Subsidiaries are a party required to be obtained in connection with the consummation of the Contemplated Transactions in order for any such Contract to remain in full force and effect following the Closing or resulting from agreed-upon modification or early termination of any such Contract, in each case with respect to the foregoing matters (a)-(c), to the extent unpaid.

 

“Transfer Agent” means VStock Transfer, LLC, the current transfer agent of the Parent, or any successor transfer agent for the Parent.

 

“Treasury Regulations” means the United States Treasury regulations promulgated under the Code.

 

“Trustee” has the meaning set forth in Section 4.18.

 

“Unlegended Share Delivery Date” has the meaning set forth in Section 4.8(b).

 

“Unrestricted Conditions” has the meaning set forth in Section 4.8(b).

 

“WARN Act” means the Worker Adjustment Retraining and Notification Act of 1988, as amended, or any similar state or local plant closing mass layoff statute, rule or regulation.

 

“Withholding Agent” has the meaning set forth in Section 1.11.

 

 

EXHIBIT B

 

FORM OF CERTIFICATE OF DESIGNATION

 

[See attached.]

 

 

EXHIBIT C

 

 

FORM OF PARENT STOCKHOLDER SUPPORT AGREEMENT

 

This Support Agreement (this “Agreement”) is made and entered into as of February 13, 2025, by and among ENvue Medical Holdings, Corp., a Delaware corporation (the “Company”), NanoVibronix, Inc., a Delaware corporation (“Parent”), and the undersigned holder (the “Stockholder”) of Shares (as defined below) of Parent. Capitalized terms used herein but not otherwise defined shall have the respective meanings ascribed to such terms in the Merger Agreement (as defined below).

 

RECITALS

 

WHEREAS, concurrently with the execution and delivery hereof, Parent, the Company, NVEH Merger Sub I, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (the “First Merger Sub”) and NVEH Merger Sub II, LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent (the “Second Merger Sub”) and together with the First Merger Sub the “Merger Subs”), have entered into an Agreement and Plan of Merger, dated of even date herewith (as such agreement may be amended or supplemented from time to time pursuant to the terms thereof, the “Merger Agreement”), pursuant to which (i) First Merger Sub will merge with and into the Company, with the Company surviving the merger as the surviving corporation and a wholly owned subsidiary of Parent (the “First Merger”) and (ii) the Company will merge with and into Second Merger Sub with Second Merger Sub surviving the merger as the surviving corporation and a wholly owned subsidiary of Parent (the “Second Merger” and together with the First Merger the “Merger”) upon the terms and subject to the conditions set forth in the Merger Agreement.

 

WHEREAS, as of the date hereof, the Stockholder is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) and has sole or shared voting power with respect to such number of Shares, and holds Parent Options or Parent Warrants to acquire the number of Shares, as indicated in Appendix A.

 

WHEREAS, as an inducement and a condition to the willingness of the Company to enter into the Merger Agreement, each Stockholder has agreed to enter into and perform this Agreement.

 

NOW, THEREFORE, in consideration of, and as a condition to, Parent entering into the Merger Agreement, each Stockholder, Parent and the Company agree as follows:

 

1. Certain Definitions. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. For all purposes of this Agreement, the following terms shall have the following respective meanings:

 

 

(a) “Constructive Sale” means, with respect to any security, a short sale with respect to such security, entering into or acquiring a derivative contract with respect to such security, entering into or acquiring a futures or forward contract to deliver such security or entering into any other hedging or other derivative transaction that has the effect of either directly or indirectly materially changing the economic benefits or risks of ownership of such security.

 

(b) “Shares” means (i) all shares of Parent Capital Stock owned, beneficially or of record, by the Stockholder as of the date hereof, (ii) all additional shares of Parent Capital Stock acquired by the Stockholder, beneficially or of record, during the period commencing with the execution and delivery of this Agreement and expiring on the Expiration Date (as defined below) and (iii) any shares of capital stock or other equity securities of Parent that such Stockholder acquires or with respect to which such Stockholder otherwise acquires sole or shared voting power (including any proxy) after the execution and delivery of this Agreement and expiring on the Expiration Date, whether by exercise of any Parent Options or Parent Warrants or otherwise, including, without limitation, by gift, succession, in the event of a stock split or as a dividend or distribution of any Shares.

 

(c) “Transfer” or “Transferred” means, with respect to any security, the direct or indirect assignment, sale, transfer, tender, exchange, pledge or hypothecation, or the grant, creation or suffrage of a lien, security interest or encumbrance in or upon, or the gift, grant or placement in trust, or the Constructive Sale or other disposition of such security (including transfers by testamentary or intestate succession, by domestic relations order or other court order, or otherwise by operation of law) or any right, title or interest therein (including any right or power to vote to which the holder thereof may be entitled, whether such right or power is granted by proxy or otherwise), or the record or beneficial ownership thereof, the offer to make such a sale, transfer, Constructive Sale or other disposition, and each agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing.

 

2. Transfer and Voting Restrictions. The Stockholder covenants to the Company and Parent as follows:

 

(a) Except as otherwise permitted by Section 2(c), during the period commencing with the execution and delivery of this Agreement and expiring on the Expiration Date, the Stockholder shall not Transfer any of the Stockholder’s Shares, or publicly announce its intention to Transfer any of its Shares.

 

(b) Except as otherwise permitted by this Agreement or otherwise permitted or required by order of a court of competent jurisdiction or a Governmental Body, the Stockholder will not commit any act that would restrict the Stockholder’s legal power, authority and right to vote all of the Shares held by the Stockholder or otherwise prevent or disable the Stockholder from performing any of his, her or its obligations under this Agreement. Without limiting the generality of the foregoing, except for this Agreement, and as otherwise permitted by this Agreement, the Stockholder shall not enter into any voting agreement with any person or entity with respect to any of the Stockholder’s Shares, grant any person or entity any proxy (revocable or irrevocable) or power of attorney with respect to any of the Shares, deposit any Shares in a voting trust or otherwise enter into any agreement or arrangement with any person or entity limiting or affecting the Stockholder’s legal power, authority or right to vote the Stockholder’s Shares in favor of the Parent Stockholder Matters and against any competing proposals.

 

(c) Except as otherwise permitted by this Agreement or otherwise permitted or required by order of a court of competent jurisdiction or a Governmental Body, the Stockholder will not enter into any Contract, option, commitment or other arrangement or understanding with respect to the direct or indirect Transfer of any right, title or interest (including any right or power to vote to which the holder thereof may be entitled whether such right or power is granted by proxy or otherwise) to any Shares or take any action that would reasonably be expected to make any representation or warranty of such Stockholder contained herein untrue or incorrect or have the effect of restricting the Stockholder’s legal power, authority and right to vote all of the Shares or would otherwise prevent or disable such Stockholder from performing any of such Stockholder’s obligations under this Agreement.

 

 

(d) Notwithstanding anything else herein to the contrary, the Stockholder may, at any time, Transfer Shares (i) by will or other testamentary document or by intestacy, (ii) to any investment fund or other entity controlled or managed by the Stockholder or the investment adviser or general partner of the Stockholder, or an entity under common control or management with the Stockholders (in each case, directly or indirectly), (iii) to any member of the Stockholder’s immediate family (or, if the Stockholder is a corporation, partnership or other entity, to an immediate family member of a beneficial owner of the Shares held by the Stockholder), (iv) to any trust or other entity for the direct or indirect benefit of the Stockholder or the immediate family of the Stockholder (or, if the Stockholder is a corporation, partnership or other entity, for the direct or indirect benefit of an immediate family member of a beneficial owner of the Shares held by the Stockholder) or otherwise for estate tax or estate planning purposes, (v) in the case of a Stockholder who is not a natural person, by pro rata distributions from the Stockholder to its members, partners, or shareholders pursuant to the Stockholder’s organizational documents, (vi) with respect to such Stockholder’s Parent Options or Parent Warrants (and any Shares underlying such Parent Options or Parent Warrants) which expire on or prior to the Expiration Date, Transfers of Shares to Parent (or effecting a “net exercise” of a Parent Option or Parent Warrant) as payment for the (a) exercise price of such Stockholder’s Parent Options or Parent Warrants and (b) taxes applicable to the exercise of such Stockholder’s Parent Options or Parent Warrants, (vii) transfers to another holder of capital stock of Parent that has signed a support agreement that is reasonably acceptable to the Company, (viii) transfers, sales or other dispositions as the Company may otherwise agree in writing in its sole discretion; provided, that in the cases of clauses (i)-(viii), (1) such Transferred Shares shall continue to be bound by this Agreement and (2) the applicable direct transferee (if any) of such Transferred Shares shall have executed and delivered to Parent and the Company a support agreement substantially identical to this Agreement upon consummation of the Transfer, (ix) purchased from Parent on or about the Closing Date but prior to the Closing or (x) to the extent required by applicable Law.

 

(e) Notwithstanding anything to the contrary herein, nothing in this Agreement shall obligate the Stockholder to exercise any option or any other right to acquire any shares of Parent Common Stock.

 

3. Agreement to Vote Shares. The Stockholder covenants to the Company and Parent as follows:

 

(a) Until the Expiration Date, at any meeting of the stockholders of Parent, however called, and at every adjournment or postponement thereof, and on every action or approval by written consent of the stockholders of Parent, the Stockholder shall (i) appear at such meeting as present (in person or by proxy) for purposes of calculating a quorum and (ii) vote, or exercise its right to consent with respect to, all Shares held by the Stockholder (A) in favor of the Parent Stockholder Matters, and (B) against any agreement, transaction or other matter that is intended to, or would reasonably be expected to impede, interfere with, delay, postpone or materially and adversely affect the Parent Stockholder Matters or the conversion of the Series X Preferred Stock (the “Contemplated Transactions”). Stockholder shall not take or commit or agree to take any action inconsistent with the foregoing.

 

 

(b) If the Stockholder is the beneficial owner, but not the record holder, of Shares, the Stockholder agrees to take all actions necessary to cause the record holder and any nominees to be present (in person or by proxy) and vote all the Stockholder’s Shares in accordance with this Section 3.

 

(c) In the event of a stock split, stock dividend or distribution, or any change in the capital stock of Parent by reason of any split-up, reverse stock split, recapitalization, combination, reclassification, reincorporation, exchange of shares or the like, the term “Shares” shall be deemed to refer to and include such shares as well as all such stock dividends and distributions and any securities into which or for which any or all of such shares may be changed or exchanged or which are received in such transaction.

 

4. Action in Stockholder Capacity Only. The Stockholder is entering into this Agreement solely in the Stockholder’s capacity as a record holder and/or beneficial owner, as applicable, of its Shares and not in the Stockholder’s capacity as a director or officer of Parent. Nothing herein shall limit or affect the Stockholder’s ability to act as an officer or director of Parent.

 

5. Irrevocable Proxy. The Stockholder hereby revokes (or agrees to cause to be revoked) any proxies that the Stockholder has heretofore granted with respect to its Shares. In the event and to the extent that the Stockholder fails to vote the Shares in accordance with Section 3 at any applicable meeting of the stockholders of Parent or pursuant to any applicable written consent of the stockholders of Parent, the Stockholder shall be deemed to have irrevocably granted to, and appointed, Parent, and any individual designated in writing by it, and each of them individually, as his, her or its proxy and attorney-in-fact (with full power of substitution), for and in its name, place and stead, to vote his, her or its Shares in any action by written consent of Parent stockholders or at any meeting of Parent’s stockholders called with respect to any of the matters specified in, and in accordance and consistent with, Section 3 of this Agreement. Parent agrees not to exercise the proxy granted herein for any purpose other than the purposes described in this Agreement and the Stockholder affirms that the proxy set forth in this Section 5 is given in connection with, and granted in consideration of, and as an inducement to the Company, Parent and Merger Sub to enter into the Merger Agreement and that such proxy is given to secure the obligations of the Stockholder under Section 3. Except as otherwise provided for herein, the Stockholder hereby affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked and that such irrevocable proxy is executed and intended to be irrevocable. The irrevocable proxy and power of attorney granted herein shall survive the death or incapacity of such Stockholder and the obligations of such Stockholder shall be binding on such Stockholder’s heirs, personal representatives, successors, transferees and assigns. Notwithstanding any other provisions of this Agreement, the irrevocable proxy granted hereunder shall automatically terminate upon the termination of this Agreement.

 

6. [Reserved].

 

 

7. Documentation and Information. The Stockholder shall permit and hereby authorizes Parent and the Company to publish and disclose in all documents and schedules filed with the SEC, and any press release or other disclosure document that Parent or the Company reasonably determines to be necessary in connection with the Merger and any of the Contemplated Transactions, a copy of this Agreement, the Stockholder’s identity and ownership of the Shares and the nature of the Stockholder’s commitments and obligations under this Agreement. Each of Parent and the Company is an intended third-party beneficiary of this Section 7.

 

8. Representations and Warranties of the Stockholder. The Stockholder hereby represents and warrants to Parent and the Company as follows:

 

(a) (i) The Stockholder is the beneficial or record owner of the shares of Parent Capital Stock, Parent Options, and or Parent Warrants indicated in Appendix A (each of which shall be deemed to be “held” by the Stockholder for purposes of Section 3 unless otherwise expressly stated with respect to any shares in Appendix A), free and clear of any and all Encumbrances (except for any Encumbrance that may be imposed pursuant to this Agreement, and Encumbrances arising under applicable securities or community property laws); and (ii) the Stockholder does not beneficially own any securities of Parent other than the shares of Parent Common Stock and rights to purchase shares of Parent Common Stock set forth in Appendix A.

 

(b) With respect to any Stockholder that is an entity, the Stockholder is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation and is qualified to conduct its business in those jurisdictions necessary to perform this Agreement.

 

(c) Except as otherwise provided in this Agreement, the Stockholder has full power, legal capacity and authority to (i) make, enter into and carry out the terms of this Agreement and (ii) vote all of its Shares in the manner set forth in this Agreement without the consent or approval of, or any other action on the part of, any other person or entity (including any Governmental Body). Without limiting the generality of the foregoing, the Stockholder has not entered into any voting agreement (other than this Agreement) with any person with respect to any of the Stockholder’s Shares, granted any person any proxy (revocable or irrevocable) or power of attorney with respect to any of the Stockholder’s Shares, deposited any of the Stockholder’s Shares in a voting trust or entered into any arrangement or agreement with any person limiting or affecting the Stockholder’s legal power, authority or right to vote the Stockholder’s Shares on any matter contemplated by this Agreement.

 

(d) This Agreement has been duly and validly executed and delivered by the Stockholder and (assuming the due authorization, execution and delivery by the other parties hereto) constitutes a valid and binding agreement of the Stockholder enforceable against the Stockholder in accordance with its terms, except as enforceability may be limited by bankruptcy and other similar laws and general principles of equity. The execution and delivery of this Agreement by the Stockholder and the performance by the Stockholder of the agreements and obligations hereunder will not result in any breach or violation of or be in conflict with or constitute a default under any term of any Contract or if applicable any provision of an organizational document (including a certificate of incorporation) to or by which the Stockholder is a party or bound, or any applicable law to which the Stockholder (or any of the Stockholder’s assets) is subject or bound, except for any such breach, violation, conflict or default which, individually or in the aggregate, would not reasonably be expected to materially impair or adversely affect the Stockholder’s ability to perform its obligations under this Agreement.

 

 

(e) The execution, delivery and performance of this Agreement by the Stockholder do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any Governmental Body, except for any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain, individually or in the aggregate, has not and would not materially impair the Stockholder’s ability to perform its obligations under this Agreement.

 

(f) The Stockholder has had the opportunity to review the Merger Agreement and this Agreement with counsel of the Stockholder’s own choosing. The Stockholder has had an opportunity to review with its own tax advisors the tax consequences of the Merger and the other Contemplated Transactions. The Stockholder understands that it must rely solely on its advisors and not on any statements or representations made by Parent, the Company or any of their respective agents or representatives with respect to the tax consequences of the Merger and the other Contemplated Transactions. The Stockholder understands that such Stockholder (and not Parent, the Company, or the Surviving Corporation) shall be responsible for such Stockholder’s tax liability that may arise as a result of the Merger or the other Contemplated Transactions. The Stockholder understands and acknowledges that the Company, Parent and Merger Sub are entering into the Merger Agreement in reliance upon the Stockholder’s execution, delivery and performance of this Agreement.

 

(g) With respect to the Stockholder, as of the date hereof, there is no action, suit, investigation or proceeding pending against, or, to the knowledge of the Stockholder, threatened against, the Stockholder or any of the Stockholder’s properties or assets (including the Shares) that would reasonably be expected to prevent or materially delay or impair the ability of the Stockholder to perform its obligations hereunder or to consummate the transactions contemplated hereby.

 

9. Termination. This Agreement shall terminate and shall cease to be of any further force or effect on the six (6) month anniversary from the date hereof (the “Expiration Date”).

 

10. Miscellaneous Provisions.

 

(a) Amendments. No amendment of this Agreement shall be effective against any party unless it shall be in writing and signed by each of the parties hereto.

 

(b) Entire Agreement; Counterparts; Exchanges by Electronic Transmission or Facsimile. This Agreement constitutes the entire agreement between the parties to this Agreement and supersedes all other prior agreements, arrangements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. The exchange of a fully executed Agreement (in counterparts or otherwise) by all parties by facsimile or electronic transmission in PDF format shall be sufficient to bind the parties to the terms and conditions of this Agreement.

 

 

(c) Applicable Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding between any of the parties arising out of or relating to this Agreement, each of the parties: (i) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the state court of the State of New York or, to the extent such court does not have subject matter jurisdiction, the United States District Court for the Southern District of New York, (ii) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with clause (i) of this Section 10(c), (iii) waives any objection to laying venue in any such action or proceeding in such courts, (iv) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any party, (v) agrees that service of process upon such party in any such action or proceeding shall be effective if notice is given in accordance with Section 10(h) of this Agreement and (vi) irrevocably and unconditionally waives the right to trial by jury.

 

(d) Assignment. This Agreement shall be binding upon, and shall be enforceable by and inure solely to the benefit of, the parties and their respective successors and permitted assigns; provided, however, that neither this Agreement nor any of a party’s rights or obligations hereunder may be assigned or delegated (except by Merger) by such party without the prior written consent of the other party, and any attempted assignment or delegation of this Agreement or any of such rights or obligations by such party without the other party’s prior written consent shall be void and of no effect.

 

(e) No Third Party Rights. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

(f) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions of this Agreement or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If a final judgment of a court of competent jurisdiction declares that any term or provision of this Agreement is invalid or unenforceable, the Parties agree that the court making such determination shall have the power to limit such term or provision, to delete specific words or phrases or to replace such term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be valid and enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the Parties agree to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term or provision.

 

(g) Specific Performance. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. The parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms (including failing to take such actions as are required of it hereunder to consummate this Agreement) or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof the state court of the State of New York or, to the extent such court does not have subject matter jurisdiction, the United States Southern District Court for the District of New York, this being in addition to any other remedy to which they are entitled at law or in equity, and each of the parties waives any bond, surety or other security that might be required of any other party with respect thereto. Each of the parties further agrees that it will not oppose the granting of an injunction, specific performance or other equitable relief on the basis that any other party has an adequate remedy at law or that any award of specific performance is not an appropriate remedy for any reason at law or in equity.

 

 

(h) Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) one (1) Business Day after being sent for next Business Day delivery, fees prepaid, via a reputable international overnight courier service, (ii) upon delivery in the case of delivery by hand or (iii) on the date delivered in the place of delivery if sent by email or facsimile (with a written or electronic confirmation of delivery) prior to 6:00 p.m. (New York City time), otherwise on the next succeeding Business Day, (A) if to the Company or Parent, to the address, electronic mail address or facsimile provided in Section 8.8 of the Merger Agreement, including to the persons designated therein to receive copies; and/or (B) if to the Stockholder, to the Stockholder’s address, electronic mail address or facsimile shown below Stockholder’s signature to this Agreement.

 

(i) Confidentiality. Except to the extent required by applicable Law or regulation, the Stockholder shall hold any non-public information regarding the Company, this Agreement, the Merger Agreement and the Merger in strict confidence and shall not divulge any such information to any third person until the Company and Parent have publicly disclosed their entry into the Merger Agreement and this Agreement; provided, however, that the Stockholder may disclose such information to its Affiliates, attorneys, accountants, consultants, and other advisors (provided that such Persons are subject to confidentiality obligations at least as restrictive as those contained herein). Neither the Stockholder nor any of its Affiliates (other than Parent, whose actions shall be governed by the Merger Agreement), shall issue or cause the publication of any press release or other public announcement with respect to Parent, this Agreement, the Merger, the Merger Agreement or the other transactions contemplated hereby or thereby without the prior written consent of the Company and Parent, except as may be required by applicable Law in which circumstance such announcing party shall make reasonable efforts to consult with the Company and Parent to the extent practicable.

 

(j) Interpretation. The words “hereof,” “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. References to Sections and Appendixes are to Sections and Appendixes of this Agreement unless otherwise specified. Any capitalized terms used in any Appendix but not otherwise defined therein shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular, the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include masculine and feminine gender. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” whether or not they are in fact followed by those words or words of like import. The word “or” is not exclusive. “Writing,” “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or Contract are to that agreement or Contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. References to any Person include the successors and permitted assigns of that Person. References to any statute are to that statute and to the rules and regulations promulgated thereunder, in each case as amended, modified, re-enacted thereof, substituted, from time to time. References to “$” and “dollars” are to the currency of the United States. All accounting terms used herein will be interpreted, and all accounting determinations hereunder will be made, in accordance with GAAP unless otherwise expressly specified. References from or through any date shall mean, unless otherwise specified, from and including or through and including, respectively. All references to “days” shall be to calendar days unless otherwise indicated as a “Business Day.” Except as otherwise specifically indicated, for purposes of measuring the beginning and ending of time periods in this Agreement (including for purposes of “Business Day” and for hours in a day or Business Day), the time at which a thing, occurrence or event shall begin or end shall be deemed to occur in the Eastern time zone of the United States. The Parties agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of this Agreement.

 

[Remainder of Page Left Intentionally Blank]

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.

 

COMPANY:
ENVUE MEDICAL HOLDINGS, CORP.
By:	Dr. Doron Besser
Title:	President

 

[Signature Page to Parent Stockholder Support Agreement]

 

 

PARENT:
NANOVIBRONIX, INC.
By:	Brian Murphy
Title:	Chief Executive Officer

 

[Signature Page to Parent Stockholder Support Agreement]

 

 

[STOCKHOLDER],
in his/her capacity as the Stockholder:

 

Signature: _______________________________

 

[Signature Page to Parent Stockholder Support Agreement]

 

 

Appendix A

 

Name of Stockholder		Address of Stockholder		Email Address of Stockholder		Shares of Parent Capital Stock		Shares Underlying Parent Options		Shares Underlying Parent Warrants

 

 

 

Exhibit 3.1

 

NANOVIBRONIX, INC.

 

CERTIFICATE OF DESIGNATION OF PREFERENCES,

 

RIGHTS AND LIMITATIONS

 

OF

 

SERIES X NON-VOTING CONVERTIBLE PREFERRED STOCK

 

Pursuant to Section 151 of the

 

Delaware General Corporation Law

 

The undersigned, Brian Murphy, does hereby certify that:

 

	1.	He is the Chief Executive Officer of NanoVibronix, Inc., a Delaware corporation (the “Corporation”).
	2.	The Corporation is authorized to issue 11,000,000 shares of preferred stock.
	3.	The following resolutions were duly adopted by the board of directors of the Corporation (the “Board of Directors”):

 

WHEREAS, the Amended and Restated Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, consisting of 11,000,000 shares, $0.001 par value per share, issuable from time to time in one or more series;

 

WHEREAS, the Board of Directors is authorized to provide for the issuance of the shares of preferred stock in series and to establish, from time to time, the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereon;

 

WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of preferred stock, which shall consist of, up to 57,720 shares of the Series X Non-Voting Convertible Preferred Stock (the “Preferred Stock”) which the Corporation has the authority to issue, as follows:

 

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of preferred stock for shares of NanoVibronix, Inc. pursuant to that certain Agreement and Plan of Merger, dated February 14, 2025, by and among the Corporation, NVEH Merger Sub I, Inc., NVEH Merger Sub II, LLC and ENvue Medical Holdings, Corp. as follows:

 

TERMS OF PREFERRED STOCK

 

1. Definitions. For the purposes hereof, the following terms shall have the following meanings:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

 

“Alternate Consideration” shall have the meaning set forth in Section 7.3.

 

“Attribution Parties” shall have the meaning set forth in Section 6.4.

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 6.4.

 

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in the City of New York, State of New York are authorized or required by law to remain closed; provided that banks shall not be deemed to be authorized or obligated to be closed due to a “shelter in place,” “non-essential employee” or similar closure of physical branch locations at the direction of any governmental authority if such banks’ electronic funds transfer systems (including for wire transfers) are open for use by customers on such day.

 

“Buy-In” shall have the meaning set forth in Section 6.5.3(b).

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Conversion Amount” means the sum of the Stated Value at issue.

 

“Conversion Date” shall have the meaning set forth in Section 6.1.

 

“Conversion Price” shall have the meaning set forth in Section 6.3.

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Preferred Stock in accordance with the terms hereof.

 

“Distribution” shall have the meaning set forth in Section 7.2.

 

“Dividend Termination Date” shall have the meaning set forth in Section 3.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Fundamental Transaction” shall have the meaning set forth in Section 7.3.

 

“GAAP” means United States generally accepted accounting principles.

 

“Holder(s)” shall have the meaning set forth in Section 2.

 

“Junior Stock” shall have the meaning set forth in Section 8.

 

 

“Liquidation” shall have the meaning set forth in Section 5.

 

“New York Courts” shall have the meaning set forth in Section 9.4.

 

“Notice of Conversion” shall have the meaning set forth in Section 6.1.

 

“Original Issue Date” means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates which may be issued to evidence such Preferred Stock.

 

“Parity Stock” shall have the meaning set forth in Section 8.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Preferred Stock” shall have the meaning set forth in Section 2.

 

“Required Holders” shall have the meaning set forth in Section 8.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Senior Preferred Stock” shall have the meaning set forth in Section 8.

 

“Share Delivery Date” shall have the meaning set forth in Section 6.5.

 

“Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, for the Corporation’s primary trading market or quotation system with respect to the Common Stock that is in effect on the date of delivery of an applicable Notice of Conversion, which as of the original issuance date was ‘T+2.’

 

“Stated Value” shall have the meaning set forth in Section 2.

 

“Subsidiary” means any direct or indirect subsidiary of the Corporation as set and shall, where applicable, also include any direct or indirect subsidiary of the Corporation formed or acquired after the date Original Issue Date.

 

“Successor Entity” shall have the meaning set forth in Section 7.3.

 

“Trading Day” means a day on which the principal Trading Market is open for business.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

 

“Transfer Agent” means VStock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598, whose telephone number is (212) 828-8436, and any successor transfer agent of the Corporation.

 

 

2. Designation, Amount and Par Value. The series of preferred stock shall be designated as its Series X Non-Voting Convertible Preferred Stock and the number of shares so designated shall be 57,720 (which shall not be subject to increase without the written consent of all of the holders of the Preferred Stock (each, a “Holder” and collectively, the “Holders”)). Each share of Preferred Stock shall have a par value of $0.001 per share and a stated value equal to $606.3756 (the “Stated Value”).

 

3. Dividends. Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Preferred Stock, based on the Stated Value, at a rate of eight percent (8%) per annum, commencing on the three (3) month anniversary of the Original Issue Date until the date the Corporation obtains Stockholder Approval (as defined below) (the “Dividend Termination Date”). Such dividends can be paid in the form of cash or additional issuances of shares of Preferred Stock based on the Stated Value, with such type of payment determined in the sole discretion of the Corporation, and accrue and be compounded daily on the basis of a 360-day year and twelve (12) 30-day months and shall be paid the earlier of: (i) promptly after conversion of the Preferred Stock or (ii) quarterly starting on the six (6) month anniversary of the Original Issue Date. No other dividends shall be paid on shares of Preferred Stock.

 

4. Voting Rights.

 

4.1 Except as otherwise provided herein or as otherwise required by the DGCL, Preferred Stock shall have no voting rights. However, as long as any shares of Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote or written approval, agreement or waiver of the holders of seventy percent (70%) of the then outstanding shares of the Preferred Stock (the “Requisite Series X Holders”): (i) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation or Amended and Restated Bylaws of the Corporation, or file any articles of amendment, certificates of designation, preferences, limitations and relative rights of any series of Preferred Stock, in each case if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Preferred Stock in excess of 57,720 or increase or decrease (other than by conversion) the number of authorized shares of Preferred Stock, (iii) prior to the Stockholder Approval (as defined below), consummate either: (A) any Fundamental Transaction (as defined below) or (B) any merger or consolidation of the Corporation with or into another entity or any stock sale to, or other business combination in which the stockholders of the Corporation immediately before such transaction do not hold at least a majority of the voting power of the capital stock of the Corporation or such other entity immediately after such transaction, (iv) enter into any agreement with respect to any of the foregoing that is not expressly conditioned upon Stockholder Approval (as defined below), (v) prior to the Stockholder Approval (as defined below): (A) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon the issuance of the Conversion Shares), (B) subdivide outstanding shares of Common Stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of shares of the Common Stock any shares of capital stock of the Corporation, (vi) grant, issue or sell any capital stock or rights to purchase stock, warrants, securities or other securities of the Corporation or (vii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets, provided, however the Corporation shall not be required to obtain Requisite Series X Holders approval for (vi) or (vii) if the primary reason the Corporation conducts the actions in (vi) or (vii) is to finance the operations of Envue Medical Holdings LLC. Holders of shares of Common Stock acquired upon the conversion of shares of Preferred Stock shall be entitled to the same voting rights as each other holder of Common Stock, except that such holders may not vote such shares upon the proposal for Stockholder Approval (as defined below) in accordance with the applicable rules and regulations of the Nasdaq Capital Market.

 

 

4.2 Any vote or written approval, agreement or waiver required or permitted under Section 4.1 may be taken at a meeting of the Holders or through a written consent executed by the Requisite Series X Holders.

 

5. Liquidation. Prior to the Stockholder Approval, upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation the greater of the following amounts:

 

	(a)	twice the aggregate Stated Value of the Preferred Shares; or
	(b)	the amount the Holder would be entitled to receive if the Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to Common Stock which amounts shall be paid pari passu with all holders of Common Stock.

 

In addition, in the case of either (a) or (b) above, the Holders will be entitled to the payment of all accrued and unpaid dividends on the Preferred Stock and, in the event any of such dividends are payable in shares of Common Stock, the cash value of such shares of Common Stock upon Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than forty-five (45) days prior to the payment date stated therein, to each Holder.

 

6. Conversion.

 

6.1 Automatic Conversion on Stockholder Approval. Effective as of 5:00 p.m. Eastern time on the fourth (4^th) Business Day after the date that the Corporation’s stockholders approve the conversion of the Preferred Stock into shares of Common Stock in accordance with the listing rules of the Nasdaq Capital Market, as set forth in Section 5.1 of the Merger Agreement (such approval, the “Stockholder Approval” and such date, the “Automatic Conversion Deadline”), each share of Preferred Stock then outstanding shall automatically convert into a number of shares of Common Stock equal to the Conversion Ratio (as defined below), subject to the Beneficial Ownership Limitation (the “Automatic Conversion”). The Corporation shall (i) inform each Holder of the occurrence of the Stockholder Approval and (ii) confirm to each Holder the effective date of the Automatic Conversion, in each case, within one (1) Business Day of such Stockholder Approval. In determining the application of the Beneficial Ownership Limitations solely with respect to the Automatic Conversion, the Corporation shall calculate beneficial ownership for each Holder assuming beneficial ownership by such Holder of: (x) the number of shares of Common Stock issuable to such Holder in such Automatic Conversion, plus (y) any additional shares of Common Stock for which a Holder has provided the Corporation with written notice of beneficial ownership within two (2) Business Days of the occurrence of such Stockholder Approval (a “Beneficial Ownership Statement”) and assuming the conversion of all shares of Preferred Stock held by all other Holders less the aggregate number of shares of Preferred Stock held by all other Holders that will not convert into shares of Common Stock on account of the application of any Beneficial Ownership Limitations applicable to any such other Holders. If a Holder fails to provide the Corporation with a Beneficial Ownership Statement within two (2) Business Days of the occurrence of such Stockholder Approval, then the Corporation shall presume the Holder’s beneficial ownership of Common Stock (excluding the Conversion Shares) to be 19.9%. The shares of Preferred Stock that are converted in the Automatic Conversion are referred to as the “Converted Stock.” For the avoidance of doubt, any shares of Preferred Stock that are not automatically converted pursuant to the Automatic Conversion as a result of a Beneficial Ownership Limitation shall remain outstanding until such shares of Preferred Stock are converted pursuant to Section 6.2. The Conversion Shares shall be issued as follows:

 

 

6.1.1 Converted Stock that is registered in book entry form shall be automatically cancelled upon the Automatic Conversion and converted into the corresponding Conversion Shares, which shares shall be issued in book entry form and without any action on the part of the Holders and shall be delivered to the Holders within one (1) Business Day of the effectiveness of the Automatic Conversion.

 

6.1.2 Converted Stock that is issued in certificated form shall be deemed converted into the corresponding Conversion Shares on the date of Automatic Conversion and the Holder’s rights as a holder of such shares of Converted Stock shall cease and terminate on such date, excepting only the right to receive certificates representing the Conversion Shares within two (2) Business Days of the effectiveness of the Automatic Conversion. The Holder shall tender to the Corporation (or its designated agent) within three (3) Trading Days of the date of the Automatic Conversion, the stock certificate(s) (duly endorsed) representing such certificated Converted Stock.

 

6.1.3 Notwithstanding the cancellation of the Converted Stock upon the Automatic Conversion, Holders of Converted Stock shall continue to have any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In all cases, the Holder shall retain all of its rights and remedies for the Corporation’s failure to convert the Converted Stock.

 

6.2 Conversion at Option of Holder. Subject to Section 6.1, and Section 6.4, each share of Preferred Stock then outstanding shall be convertible, at any time and from time to time following 5:00 p.m. Eastern time on the third (3^rd) Business Day after the date that the Stockholder Approval is obtained by the Corporation, at the option of the Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio, subject to the Beneficial Ownership Limitation (each, an “Optional Conversion”). Holders shall effect conversions by providing the Corporation with the form of conversion notice attached hereto as Annex A (a “Notice of Conversion”), duly completed and executed. Provided the Corporation’s transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program, the Notice of Conversion may specify, at the Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “DWAC Delivery”). The date on which an Optional Conversion shall be deemed effective (the “Conversion Date”) shall be the Trading Day that the Notice of Conversion, completed and executed, is sent via email to, and received on or prior to 5:30 p.m., New York City Time on such Trading Day by, the Corporation. The Holder shall not be required to physically surrender any stock certificate to the Corporation until the Holder has converted all of the Preferred Stock represented by such certificate in full without regard to any Beneficial Ownership Limitation, in which case the Holder shall surrender its original certificate(s) (if any) representing such shares of Preferred Stock being converted, duly endorsed, within three (3) Trading Days of the date the final Notice of Conversion is delivered to the Corporation. Execution and delivery of a Notice of Conversion shall have the same effect as cancellation of the original certificates and issuance of a new stock certificate evidencing the right to purchase the remaining number of Conversion Shares, if any. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.

 

6.3 Conversion Price and Conversion Ratio. The conversion price for the Preferred Stock shall equal $0.6063 (the “Conversion Price”), subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the Original Issue Date as set forth in 7 hereof. The “Conversion Ratio” for each share of Preferred Stock shall be the Stated Value divided the Conversion Price issuable upon the conversion (the “Conversion”) of each share of Preferred Stock, subject to adjustment as provided herein.

 

 

6.4 Beneficial Ownership Limitation. Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of any share of Preferred Stock, including pursuant to Section 6.1, and a Holder shall not have the right to convert any portion of the Preferred Stock pursuant to Section 6.2, to the extent that, after giving effect to such attempted conversion set forth on an applicable Notice of Conversion with respect to the Preferred Stock, such Holder (together with any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) or Section 16 of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Holder is a member (the foregoing, “Attribution Parties”)) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of the Preferred Stock subject to the Notice of Conversion or the Automatic Conversion, as applicable, with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Preferred Stock beneficially owned by such Holder or any of its Attribution Parties, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including any warrants) beneficially owned by such Holder or any of its Attribution Parties that are subject to and would exceed a limitation on conversion or exercise similar to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section 6.4, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, and the terms “beneficial ownership” and “beneficially own” have the meanings ascribed to such terms therein. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. For purposes of this Section 6.4, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Corporation’s most recent periodic or annual filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation that is filed with the Commission, or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Holder setting forth the number of shares of Common Stock then outstanding. Upon the written request of a Holder (which may be by email), the Corporation shall, within three (3) Trading Days thereof, confirm in writing to such Holder (which may be via email) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual conversion or exercise of securities of the Corporation, including shares of Preferred Stock, by such Holder or its Attribution Parties since the date as of which such number of outstanding shares of Common Stock was last publicly reported or confirmed to the Holder. The “Beneficial Ownership Limitation” shall initially be set at the discretion of each Holder to a percentage designated by such Holder between 0% and 19.9% of the number of shares of the Common Stock outstanding or deemed to be outstanding as of the applicable measurement date, and such percentage shall be set at 19.9% for any Holder that does not make such designation. The Corporation shall be entitled to rely on representations made to it by the Holder in any Notice of Conversion regarding its Beneficial Ownership Limitation. Notwithstanding the foregoing, by written notice to the Corporation (which may be by email), (i) which will not be effective until the sixty-first (61^st) day after such written notice is delivered to the Corporation, the Holder may reset the Beneficial Ownership Limitation percentage to a higher percentage, not to exceed 19.9%, to the extent applicable, and (ii) which will be effective immediately after such notice is delivered to the Corporation, the Holder may reset the Beneficial Ownership Limitation percentage to a lower percentage. Upon such a change by a Holder of the Beneficial Ownership Limitation, not to exceed 19.9%, the Beneficial Ownership Limitation may not be further amended by such Holder without first providing the minimum notice required by this Section 6.4. The provisions of this Section 6.4 shall be construed, corrected and implemented in a manner so as to effectuate the intended Beneficial Ownership Limitation herein contained and the shares of Common Stock underlying the Preferred Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.

 

6.5 Mechanics of Conversion.

 

6.5.1 Delivery of Certificate or Electronic Issuance. Upon Conversion (as defined below) not later than the lesser of two (2) Trading Days and the number of Trading Days comprising the Standard Settlement Period, or if the Holder requests the issuance of physical certificate(s), not later than the lesser of two (2) Trading Days and the number of Trading Days comprising the Standard Settlement Period after receipt by the Corporation of the original certificate(s) or Lost Certificate Affidavit (as defined below), as applicable, representing such shares of Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion (the “Share Delivery Date”), the Corporation shall either: (a) deliver, or cause to be delivered, to the converting Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Preferred Stock, or (b) in the case of a DWAC Delivery (if so requested by the Holder), electronically transfer such Conversion Shares by crediting the account of the Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion, such certificate or certificates for the Conversion Shares are not delivered to or as directed by or, in the case of a DWAC Delivery, such shares are not electronically delivered to or as directed by, the applicable Holder by the Share Delivery Date, the applicable Holder shall be entitled to elect to rescind such Notice of Conversion by written notice to the Corporation at any time on or before its receipt of such certificate or certificates for Conversion Shares or electronic receipt of such shares, as applicable, in which event the Corporation shall promptly return to such Holder any original Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation any Common Stock certificates or otherwise direct the return of any shares of Common Stock delivered to the Holder through the DWAC system, representing the shares of Preferred Stock unsuccessfully tendered for conversion to the Corporation.

 

6.5.2 Obligation Absolute. Subject to Section 6.4 and subject to Holder’s right to rescind a Notice of Conversion pursuant to Section 6.5.1, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares. Subject to Section 6.4 and subject to Holder’s right to rescind a Notice of Conversion pursuant to Section 6.5.1, in the event a Holder shall elect to convert any or all of its Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Preferred Stock of such Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Preferred Stock which is subject to such injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall, subject to Section 6.4 and subject to Holder’s right to rescind a Notice of Conversion pursuant to Section 6.5.1, issue Conversion Shares upon a properly noticed conversion.

 

 

6.5.3 Failure to Timely Deliver Certificates.

 

a) If the Corporation fails to deliver to a Holder the applicable certificate or certificates or to effect a DWAC Delivery, as applicable, by the Automatic Conversion Deadline pursuant to Section 6.1 or the Share Delivery Date pursuant to Section 6.5.1, as applicable (other than a failure caused by materially incorrect or incomplete information provided by Holder to the Corporation or the application of the Beneficial Ownership Limitation), the Corporation shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Preferred Stock subject to such conversion (based on the volume-weighted average price of the Common Stock on the date of the applicable Notice of Conversion), $10 per Trading Day (increasing to $20 per Trading Day on the third (3^rd) Trading Day after the Share Delivery Date) for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion.

 

b) If the Corporation fails to deliver to a Holder the applicable certificate or certificates or to effect a DWAC Delivery, as applicable, by the Automatic Conversion Deadline pursuant to Section 6.1 or the Share Delivery Date pursuant to Section 6.5.1 as applicable (other than a failure caused by materially incorrect or incomplete information provided by Holder to the Corporation or the application of the Beneficial Ownership Limitation), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount by which (x) such Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Preferred Stock equal to the number of shares of Preferred Stock submitted for conversion or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6.5.1. For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Preferred Stock with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice, within three (3) Trading Days after the occurrence of a Buy-In, indicating the amounts payable to such Holder in respect of such Buy-In together with applicable confirmations and other evidence reasonably requested by the Corporation. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Preferred Stock as required pursuant to the terms hereof or the cash settlement remedy set forth in Section 6.7; provided, however, that the Holder shall not be entitled to both (i) require the reissuance of the shares of Preferred Stock submitted for conversion for which such conversion was not timely honored and (ii) receive the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6.5.1.

 

 

6.5.4 Reservation of Shares Issuable Upon Conversion. After the Stockholder Approval, subject to the following sentence, the Corporation covenants that at all times it will reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders of the Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section 7) upon the conversion of all outstanding shares of Preferred Stock. If at any time there shall be insufficient authorized and unissued shares of Common Stock to permit the conversion of all outstanding shares of Preferred Stock, the Corporation will reserve and keep available for such purpose the maximum number of shares of Common Stock as are then authorized and unissued, and the Corporation shall take all action permitted by applicable law, including calling meetings of stockholders of the Corporation and soliciting proxies for any necessary vote of the stockholders of the Corporation, to amend the Certificate of Incorporation to increase the number of authorized and unissued shares of Common Stock to reserve for and permit the conversion of all outstanding shares of Preferred Stock, provided, however, the foregoing limitation shall not prevent the Corporation from issuing options or equity securities pursuant to the Corporation’s 2024 Long Term Incentive Plan or any newly adopted stock incentive plan. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and non-assessable.

 

6.5.5 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock, no certificates or scrip for any such fractional shares shall be issued and no cash shall be paid for any such fractional shares. Any fractional shares of Common Stock that a Holder of Preferred Stock would otherwise be entitled to receive shall be aggregated with all fractional shares of Common Stock issuable to such Holder and any remaining fractional shares shall be rounded up to the nearest whole share. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the Holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

 

6.5.6 Transfer Taxes. The issuance of certificates for shares of the Common Stock upon conversion of the Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the registered Holder(s) of such shares of Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

 

6.6 Status as Stockholder. Upon each Conversion Date, (i) the shares of Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a holder of such converted shares of Preferred Stock shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In all cases, the Holder shall retain all of its rights and remedies for the Corporation’s failure to convert Preferred Stock. In no event shall the Preferred Stock convert into shares of Common Stock prior to the Stockholder Approval.

 

6.7 Cash Settlement. Prior to the Stockholder Approval, if the Corporation breaches any of its obligations or covenants as set forth in this Certificate of Designation (including but not limited to failure to obtain the Requisite Series X Holders approval prior to taking any of the actions set forth in the Section 4.11(v)), then the Corporation shall, at the request of the Requisite Series X Holders (the “Settlement Request”), pay, out of funds legally available therefor, and prior to any payment in satisfaction of any redemption rights of any other class or series of capital stock of the Corporation, an amount in cash equal to the Stated Value of the shares of Preferred Stock held by each Holder, with such payment to be made within two (2) Business Days from the date of Settlement Request, and upon payment in full of the Stated Value for such shares of Preferred Stock, such shares shall be redeemed, retired and no longer be outstanding.

 

 

7. Certain Adjustments.

 

7.1 Stock Dividends and Stock Splits. If the Corporation, at any time while this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section 7.1 shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.

 

7.2 Pro Rata Distributions. During such time as this Preferred Stock is outstanding, if the Corporation declares or makes any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common 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 Preferred Stock, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Preferred Stock (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

 

7.3 Fundamental Transaction. If, at any time while this Preferred Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Corporation with or into another Person, (ii) the Corporation, directly or indirectly, effects any 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 Corporation or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Corporation, 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 whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common 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, upon any subsequent conversion of this Preferred Stock, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 6.4 on the conversion of this Preferred Stock), the number of shares of Common Stock of the successor or acquiring corporation or of the Corporation, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 6.4 on the conversion of this Preferred Stock). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The Corporation shall cause any successor entity in a Fundamental Transaction in which the Corporation is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Corporation under this Certificate of Designation in accordance with the provisions of this Section 7.3 pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in exchange for this Preferred Stock a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Preferred Stock which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Preferred Stock (without regard to any limitations on the conversion of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Preferred Stock 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 Certificate of Designation referring to the “Corporation” shall refer instead to the Successor Entity), and may exercise every right and power of the Corporation and shall assume all of the obligations of the Corporation under this Certificate of Designation with the same effect as if such Successor Entity had been named as the Corporation herein.

 

7.4 Calculations. All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7 the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

 

 

7.5 Notice to the Holders.

 

7.5.1 Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each record Holder by facsimile or email a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

7.5.2 Notice to Allow Conversion by Holder. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be filed at each office or agency maintained for the purpose of conversion of this Preferred Stock, and shall cause to be delivered by facsimile or email to each record Holder at its last facsimile number or email address as it shall appear upon the stock books of the Corporation, at least twenty (20) 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 Common 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 Common Stock of record shall be entitled to exchange their shares of the Common 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. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of the Subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert the Conversion Amount of this Preferred Stock (or any part hereof) during the twenty- (20-) day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

8. Ranking. Except to the extent that the Requisite Series X Holders expressly consent to the creation of Parity Stock (as defined below) or Senior Preferred Stock (as defined below), all shares of Common Stock and all shares of capital stock of the Corporation authorized or designated after the date of the designation of the Preferred Stock shall be junior in rank to the Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (such junior stock is referred to herein collectively as “Junior Stock”). Without limiting any other provision of this Certificate of Designation, without the prior express consent of the Requisite Series X Holders, voting separate as a single class, the Corporation shall not hereafter authorize or issue any additional or other shares of capital stock that is (i) of senior rank to the Preferred Stock in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “Senior Preferred Stock”) or (ii) of pari passu rank to the Preferred Stock in respect of the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Corporation (collectively, the “Parity Stock”).

 

 

9. Miscellaneous.

 

9.1 Notices. Any and all notices or other communications or deliveries to be provided by the Holders or the Corporation hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service, addressed to (i) the Corporation with Attention: Chief Executive Officer, at such email address or address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section 9 or (ii) the applicable Holder at the most current address for such Holder, in the Corporation’s records, or such other email address or address as such Holder may specify for such purposes by notice to the Corporation delivered in accordance with this Section 9. Any and all notices or other communications or deliveries to be provided by the Corporation or the Holders hereunder shall be in writing and delivered personally, by email, or sent by a nationally recognized overnight courier service addressed to each record Holder or at the email address or address of such Holder appearing on the books of the Corporation or to the Corporation at the address set forth above. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email at the email address set forth in this Section 9 prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email at the email address set forth in this Section 9 on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

9.2 Absolute Obligation. Except as expressly provided herein, no provision of this Certificate of Designation shall alter or impair the obligation of the Corporation, which is absolute and unconditional, to pay liquidated damages and accrued dividends, as applicable, on the shares of Preferred Stock at the time, place, and rate, and in the coin or currency, herein prescribed

 

9.3 Lost or Mutilated Preferred Stock Certificate. If a Holder’s Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership hereof reasonably satisfactory to the Corporation.

 

 

9.4 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Certificate of Designation shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. All legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Certificate of Designation (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). The Corporation and each Holder hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. The Corporation and each Holder hereby irrevocably waive 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 Certificate of Designation and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. The Corporation and each Holder hereto hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Certificate of Designation or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Certificate of Designation, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

9.5 Waiver. Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation on any other occasion. Any waiver by the Corporation or a Holder must be in writing.

 

9.6 Severability. If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law

 

9.7 Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

9.8 Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

 

9.9 Status of Converted or Redeemed Preferred Stock. If any shares of Preferred Stock shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Preferred Stock.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate this 14^th day of February, 2025.

 

	NANOVIBRONIX, INC.
	By:	/s/ Brian Murphy
	Name:	Brian Murphy
	Title:	Chief Executive Officer

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

(To be Executed by the Registered Holder

 

in order to Convert Shares of Preferred Stock)

 

The undersigned hereby elects to convert the number of shares of Series X Non-Voting Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”), of NanoVibronix, Inc., a Delaware corporation (the “Corporation”), according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be required by the Corporation in accordance with the Corporation’s Certificate of Designation of Preferences, Rights and Limitations of Series X Non-Voting Convertible Preferred Stock. No fee will be charged to the Holders for any conversion, except for any such transfer taxes.

 

CONVERSION CALCULATIONS
Date to Effect Conversion:		☐
Number of shares of Preferred Stock owned prior to Conversion:		☐
Number of shares of Preferred Stock to be Converted:		☐
Stated Value share of Preferred Stock to be Converted:		☐
Number of shares of Common Stock to be Issued:		☐
Number of shares of Preferred Stock subsequent to Conversion:		☐
Address for delivery:		☐

 

OR:

 

DWAC INSTRUCTIONS
Broker No:		☐
Account No:		☐

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the undersigned has executed this Notice of Conversion this [__] day of [__], 2025.

 

	[HOLDER]
	By:
	Name:	[______________]
	Title:	[______________]

 

 

 

Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE 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 CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: February 13, 2025

 

$500,000

 

SENIOR CONVERTIBLE DEBENTURE DUE the earlier

of the trigger date and November 13, 2025

 

THIS SENIOR CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued Senior Convertible Debentures of NanoVibronix, Inc., a Delaware corporation (the “Company”), having its principal place of business at 969 Pruitt Avenue, Tyler, Texas 77569, designated as its Senior Convertible Debenture due the earlier of the Trigger Date and November 13, 2025 (this debenture, the “Debenture” and, collectively with the other debentures of such series, the “Debentures”) and is issued pursuant to the Purchase Agreement (as defined below).

 

FOR VALUE RECEIVED, the Company promises to pay to Alpha Capital Anstalt or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $500,000 the earlier to occur of the Trigger Date and November 13, 2025 (such earlier date, “Maturity Date”) or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:

 

Section 1.Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

 

“Bankruptcy Event” means any of the following events: (a) the Company or any Subsidiary thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Subsidiary thereof, (b) there is commenced against the Company or any Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, (g) the Company or any Subsidiary thereof admits in writing that it is generally unable to pay its debts as they become due, (h) the Company or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

 

“Base Conversion Price” shall have the meaning set forth in Section 5(b).

 

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).

 

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally are open for use by customers on such day.

 

“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 33% of the voting power of the Company (other than by means of conversion of the Debentures and the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 33% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company (and all of its Subsidiaries, taken as a whole) sells or transfers all or substantially all of its assets to another Person, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with the terms hereof.

 

“Debenture Register” shall have the meaning set forth in Section 2(b).

 

“Delaware Courts” shall have the meaning set forth in Section 10(d).

 

“Disqualified Stock” shall mean, with respect to any person, any Equity Interests of such person that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable) or upon the happening of any event or condition (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (b) is redeemable at the option of the holder thereof, in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock.

 

“Effectiveness Date” shall have the meaning set forth in the Registration Rights Agreement.

 

“Effectiveness Period” shall have the meaning set forth in the Registration Rights Agreement.

 

“Equity Conditions” means, during the applicable period, (a) the Company shall have duly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing to the Holder in respect of this Debenture, (c)(i) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares of Common Stock issuable pursuant to the Transaction Documents (and the Company believes, in good faith, that such effectiveness will continue uninterrupted for the foreseeable future) or (ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares issuable in lieu of cash payments of interest) may be resold pursuant to Rule 144 without volume or manner-of-sale restrictions or current public information requirements as determined by the counsel to the Company as set forth in a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the Holder, (d) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Transaction Documents, (f) there is no existing Event of Default and no existing event which, with the passage of time or the giving of notice, would constitute an Event of Default, (g) the shares issuable upon conversion in full of the Prepayment Amount to the Holder would not violate the limitations set forth in Section 4(d), (h) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction (other the Merger Transaction) that has not been consummated, and (i) the applicable Holder is not in possession of any information provided by the Company, any of its Subsidiaries, or any of their officers, directors, employees, agents or Affiliates, that constitutes, or may constitute, material non-public information.

 

 

“Event of Default” shall have the meaning set forth in Section 8(a).

 

“Floor Price” means $0.08892 per share.

 

“Indebtedness” of a Person shall include (a) all obligations for borrowed money or the deferred purchase price of property or services (excluding trade accounts payable incurred in the ordinary course of business), (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, surety bonds, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps or other financial products, (c) all capital lease obligations (as determined in accordance with GAAP), (d) all obligations or liabilities secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed by such Person, (e) any obligation arising with respect to any other transaction that is the functional equivalent of borrowing but which does not constitute a liability on the balance sheets of such Person, (f) Disqualified Stock, and (g) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other Person.

 

“Interest Payment Date” shall have the meaning set forth in Section 2(a).

 

“Investments” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition (including by merger) of Equity Interests of another Person, (b) a loan, advance or capital contribution to, guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit or all or a substantial part of the business of, such Person.

 

“Late Fees” shall have the meaning set forth in Section 2(c).

 

“Mandatory Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, plus all accrued and unpaid interest hereon, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or (ii) 115% of the outstanding principal amount of this Debenture, plus 100% of accrued and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debentures.

 

“Permitted Indebtedness” means (a) the Indebtedness evidenced by the Debentures, (b) the Indebtedness existing on the Original Issue Date and disclosed to the Holder prior to the date hereof, (c) lease obligations and purchase money indebtedness of up to $50,000, in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, (d) other unsecured Indebtedness not exceeding $50,000 in aggregate principal amount outstanding, and (e) Indebtedness that (1) is expressly subordinate to the Debentures pursuant to a written subordination agreement with the Purchasers that is acceptable to each Purchaser in its sole and absolute discretion and (2) matures at a date later than the 91^st day following the Maturity Date.

 

“Permitted Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clauses (a) and (b) thereunder, (d) Liens incurred in connection with Permitted Indebtedness under clause (c) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased, (e) easements, rights of way, restrictions, minor defects or irregularities in title and other similar Liens, in each case, not interfering in any material respect with the ordinary conduct of the Company’s business, and (f) Liens existing on the date hereof and disclosed to the Holder prior to the date hereof.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of February 13, 2025, among the Company and the original Holders, as amended, modified or supplemented from time to time in accordance with its terms.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

 

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).

 

“Trigger Date” means the date that is the 30-day anniversary of the Nasdaq Stockholder Approval.

 

Section 2.Payments.

 

(a)Payment of Interest. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 8.0% per annum, payable on the Maturity Date (the “Interest Payment Date”) (if the Interest Payment Date is not a Business Day, then the payment shall be due on the next succeeding Business Day), in cash or, provided that no Event of Default has occurred or is continuing and subject to Section 4(d) hereof, at the option of the Holder, in the form of Conversion Shares in accordance with Section 4 hereof, or a combination thereof.

 

(b)Interest Calculations. Interest shall be calculated on the basis of a 360-day year and the actual number of days elapsed, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made. Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the “Debenture Register”).

 

(c)Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue daily from the date such interest is due hereunder through and including the date of actual payment in full.

 

 

(d)Prepayment. With the prior written consent of the Holder, the Company may deliver a written notice (a “Prepayment Notice” and the date that such Prepayment Notice is delivered the “Prepayment Notice Date”) to the Holder of its irrevocable election to prepay all or a portion of the outstanding principal amount of this Debenture plus (i) accrued and unpaid interest thereon, plus (ii) the Exit Fee (as defined below), and plus (iii) all other sums, if any, that shall have become due and payable (collectively, the “Prepayment Amount”) for cash on the 5th Trading Day (or such period up to the 30th Trading Day as extended with the consent of the Holder) after the Prepayment Notice Date (the “Prepayment Date” and such 5 to 30 Trading Day period, the “Prepayment Period” and such prepayment, the “Prepayment”). The Company may only effect a Prepayment if each of the Equity Conditions shall have been met (unless waived in writing by the Holder) on each Trading Day during the period commencing on the Prepayment Notice Date through to the Prepayment Date and through and including the date payment of the Prepayment Amount is actually made in full. If any of the Equity Conditions shall cease to be satisfied at any time during the Prepayment Period, then the Holder may elect to nullify the Prepayment Notice by notice to the Company within three (3) Trading Days after the first day on which any such Equity Condition has not been met in which case the Prepayment Notice shall be null and void, ab initio. For the avoidance of doubt, the Holder may elect to convert all or a portion of the outstanding principal amount of this Debenture pursuant to Section 4 at any time, and from time to time, prior to actual payment in cash of the Prepayment under this Section 2(d) by the delivery of a Notice of Conversion to the Company. For the further avoidance of doubt, the Company shall honor all conversions occurring by virtue of one or more Notices of Conversion of the Holder during the Prepayment Period.

 

(e)Maturity Date. On the Maturity Date, the Company shall pay to the Holder in cash or, at the option of the Holder, in the form of Conversion Shares in accordance with Section 4 hereof, or a combination thereof, the entire outstanding principal amount of this Debenture, together with all accrued and unpaid interest thereon, the applicable Exit Fee and any other amounts due hereunder.

 

(f)Mandatory Redemption.

 

	1.	In the event the Company or any of its Subsidiaries conducts a public offering of its securities pursuant to a registration statement on Form S-1 following the consummation of the Merger Transaction (a “Public Offering”), the Company shall, at the option of the Holder, concurrently with the receipt of the proceeds of such Public Offering, apply 100% of such gross proceeds towards the redemption (each, a “Public Offering Mandatory Redemption”) of the principal amount of this Debenture.
	2.	Any principal amount of this Debenture redeemed pursuant to a Public Offering Mandatory Redemption shall be applied against the last principal amount of this Debenture scheduled to be redeemed hereunder, in reverse time order from the Maturity Date.

 

Section 3. Registration of Transfers and Exchanges.

 

(a)Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

 

(b)Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations.

 

(c)Reliance on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 4.Conversion.

 

(a)Voluntary Conversion. At any time after the date of Nasdaq Stockholder Approval until this Debenture is no longer outstanding, this Debenture shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d)). The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted in which case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such conversion without delaying the Company’s obligation to deliver the shares on the Share Delivery Date. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.

 

 

(b)Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $0.4446, subject to adjustment as provided herein (the “Conversion Price”); provided, that the Conversion Price will at no time be lower than the Floor Price.

 

(c)Mechanics of Conversion.

 

(i)Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price.

 

(ii)Delivery of Conversion Shares Upon Conversion. Not later than the earlier of (i) one (1) Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) the Conversion Shares which, on or after the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the Effectiveness Date, shall be free of restrictive legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares being acquired upon the conversion of this Debenture and (B) a certified check (or wire transfer) in the amount of accrued and unpaid interest. On or after the earlier of (i) the six-month anniversary of the Original Issue Date or (ii) the Effectiveness Date, the Company shall deliver any Conversion Shares required to be delivered by the Company under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing similar functions. 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 with respect to the Common Stock as in effect on the date of delivery of the Notice of Conversion.

 

(iii)Failure to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the Company at any time on or before its receipt of such Conversion Shares, to rescind such Notice of Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the Conversion Shares issued to such Holder pursuant to the rescinded Notice of Conversion.

 

(iv)Obligation Absolute. The Company’s obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares required to be delivered hereunder in accordance with the terms hereof. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 8 for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

 

(v)Compensation for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery Date pursuant to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Conversion Shares upon conversion of this Debenture as required pursuant to the terms hereof.

 

(vi)Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Debenture. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such Registration Statement (subject to such Holder’s compliance with its obligations under the Registration Rights Agreement).

 

(vii)Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, 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 Conversion Price or round up to the next whole share.

 

(viii)Transfer Taxes and Expenses. The issuance of Conversion Shares on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion Shares, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Conversion Shares.

 

 

(d)Holder’s Conversion Limitations. The Company shall not effect any conversion of this Debenture, and a Holder shall not have the right to convert any portion of this Debenture, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any other Persons 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 Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other Debentures) 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 4(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(d) applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determination of whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates or Attribution Parties) and which principal amount of this Debenture is convertible, 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 4(d), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common 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 Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture. The Holder, upon notice to the Company, may decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation provisions of this Section 4(d) shall continue to apply. Any decrease in the Beneficial Ownership Limitation will not be effective until the 5^th Business Day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture.

 

 

(e)Holder of Record of Conversion Shares. The Person in whose name any Conversion Share is issuable or deliverable upon conversion of this Debenture will be deemed for all corporate purposes to hold such share as of the close of business on the date of receipt by such Person of the Conversion Shares for such conversion.

 

Section 5.Certain Adjustments.

 

(a)Stock Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled 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)Subsequent Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the Conversion Price shall be reduced to equal the Base Conversion Price, provided that the Base Conversion Price shall not be less than the Floor Price (subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions following the date of the Purchase Agreement). Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion.

 

 

(c)Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

(d)Pro Rata Distributions. During such time as this Debenture 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 Common 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 Debenture, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture (without regard to any limitations on conversion hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

 

(e)Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

(f)Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company (and all of its Subsidiaries, taken as a whole) 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 Common Stock is converted into other securities, cash or property or (E) 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 filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty (20) 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 Common 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 Common Stock of record shall be entitled to exchange their shares of the Common 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. To the extent that any notice provided hereunder 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 a Current Report on Form 8-K. For the avoidance of doubt, the Holder shall remain entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

(g)Fundamental Transaction. If, at any time while this Debenture 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 (and all of its Subsidiaries, taken as a whole), directly or indirectly, effects any 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 Common 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 Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common 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, merger 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 Common Stock (not including any shares of Common 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, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(d)), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(d)). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. 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 Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(g) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Debenture 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 Debenture 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 Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein

 

(h)Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

(i)Nasdaq Stockholder Approval. Notwithstanding anything to the contrary in this Debenture or the Purchase Agreement, prior to the receipt of Nasdaq Stockholder Approval, the Holder shall not be permitted to convert any portion of this Debenture for any Conversion Shares.

 

 

Section 6.Exit Fee. Upon any prepayment by the Company in cash of all or any of the principal amount of this Debenture (whether on or prior to the Maturity Date), the Company shall pay to the Holder concurrently with such prepayment an exit fee in an amount equal to 15% of the principal amount of this Debenture being prepaid (an “Exit Fee”).

 

Section 7.Covenants.

 

(a)Negative Covenants. As long as any portion of this Debenture remains outstanding, the Company shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

(i)other than Permitted Indebtedness, except with the prior written consent of the Holder, enter into, create, incur, assume, guarantee or suffer to exist any Indebtedness of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

(ii)other than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;

 

(iii)amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially and adversely affects any rights of the Holder;

 

(iv)repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than as to (i) the Conversion Shares as permitted or required under the Transaction Documents, and (ii) repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such repurchases shall not exceed an aggregate of $50,000 for all officers and directors during the term of this Debenture;

 

(v)repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist or occur;

 

(vi)pay cash dividends or distributions on any equity securities of the Company;

 

(vii)assign, sell, transfer, license, lease or otherwise dispose of any its assets other than (a) sales of inventory in the ordinary course of business, and (b) other dispositions not to exceed $50,000 in the aggregate per year;

 

 

(viii)make or hold any Investments other than: (a) Investments existing on the date of the Purchase Agreement and that are disclosed in the SEC Reports (provided, for clarity, that neither the Company nor any Subsidiary shall increase the size of its Investment in any such Investment existing on the date of the Purchase Agreement other than in accordance with this Debenture and the other Transaction Documents), (b) Investments in cash and cash equivalents held in deposit accounts at U.S. banks, (c) Investments in Subsidiaries; and (e) other Investments that do not exceed $50,000 in the aggregate per calendar year;

 

(ix)enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even if less than a quorum otherwise required for board approval); or

 

(x)enter into any agreement with respect to any of the foregoing.

 

(b)Affirmative Covenants. As long as any portion of this Debenture remains outstanding, the Company shall, and shall cause each of its Subsidiaries to:

 

(i)preserve and maintain its legal existence, rights, franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified as a foreign business entity in each jurisdiction in which qualification is necessary in view of its business and operations or the ownership of its properties and where failure maintain or qualify could reasonably be expected to have a Material Adverse Effect;

 

(ii)provide to the Holder, promptly upon becoming aware thereof (and in any event within one (1) day after the occurrence thereof), a notice of each Event of Default known to an executive officer of the Company, together with a statement of such executive officer setting forth the details of such Event of Default and the actions which the Company has taken and proposes to take with respect thereto;

 

(iii)(a) pay and discharge as the same shall become due and payable: (i) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings diligently conducted (which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien) and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (ii) all lawful claims which, if unpaid, would by law become a Lien upon its property, unless the same are being contested in good faith by appropriate proceedings diligently conducted (which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien) and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; and (iii) all Indebtedness, as and when due and payable, but subject to the terms of this Debenture; and (b) timely file all material tax returns required to be filed (subject to any valid extension);

 

 

(iv)(a) maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect;

 

(v)comply in all material respects with the requirements of all applicable laws and all orders, writs, injunctions and decrees applicable to it or to its business or property;

 

(vi)[reserved];

 

(vii)maintain (a) insurance with financially sound and reputable insurance companies in at least the amounts (and with only those deductibles) customarily maintained, and against such risks as are typically insured against, by Persons of comparable size engaged in the same or similar business as the Company and its Subsidiaries; and (b) all worker’s compensation, employer’s liability insurance or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business; and

 

(viii)use reasonable efforts to cause the Company to remain eligible to use Form S-3 for a delayed or continuous offering pursuant to Rule 415(a)(1)(x) promulgated under the Securities Act of 1933, as amended.

 

Section 8.Events of Default.

 

(a)“ Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i)any default in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Trading Days;

 

(ii)the Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause (xii) below) or in any Transaction Document, which failure is not cured, if possible to cure, within the earlier to occur of (A) five (5) Trading Days after notice of such failure sent by the Holder or by any other Holder to the Company and (B) ten (10) Trading Days after the Company has become or should have become aware of such failure;

 

 

(iii)a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary is obligated (and not covered by clause (vi) below);

 

(iv)any representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

 

(v)the Company or any Subsidiary shall be subject to a Bankruptcy Event;

 

(vi)the Company or any Subsidiary shall default on any of its obligations under any Indebtedness, that (a) involves an obligation greater than $100,000, whether such Indebtedness now exists or shall hereafter be created, and (b) results in such Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

(vii)the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five Trading Days;

 

(viii)the Company (and all of its Subsidiaries, taken as a whole) shall be a party to any (A) Change of Control Transaction or shall agree to sell or dispose of all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction) or (ii) Fundamental Transaction, in each case, other than the Merger Transaction;

 

(ix)any Person shall breach any agreement delivered to the initial Holders pursuant to Section 2.2 of the Purchase Agreement;

 

(x)the Initial Registration Statement (as defined in the Registration Rights Agreement) shall not have been (x) filed on or prior to the Filing Deadline (as defined in the Registration Rights Agreement) or (y) declared effective by the Commission on or prior to the Effectiveness Deadline (as defined in the Registration Rights Agreement) or the Company does not meet the current public information requirements under Rule 144 in respect of the Registrable Securities (as defined in the Registration Rights Agreement);

 

 

(xi)if, during the Effectiveness Period (as defined in the Registration Rights Agreement), either (a) the effectiveness of the Registration Statement lapses for any reason or (b) the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement for a period of more than 20 consecutive Trading Days or 30 non-consecutive Trading Days during any 12 month period;

 

(xii)the Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;

 

(xiii)the electronic transfer by the Company of shares of Common Stock through the Depository Trust Company or another established clearing corporation is no longer available or is subject to a “chill”;

 

(xiv)any monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;

 

(xv) [reserved]; or

 

(xvi)the occurrence of a Material Adverse Effect.

 

(b)Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the outstanding principal amount of this Debenture, the Mandatory Default Amount, plus accrued but unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash; provided that such acceleration shall be automatic, without any notice or other action of the Required Holders required, in respect of an Event of Default occurring pursuant to clause (v) of Section 8(a). Commencing 5 days after the occurrence and continuance of any Event of Default, the interest rate on this Debenture shall accrue at an interest rate equal to the lesser of 18.0% per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

 

Section 9. [RESERVED].

 

Section 10.Miscellaneous.

 

(a)Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email attachment, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 10(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by email attachment, or sent by a nationally recognized overnight courier service addressed to each Holder at the email address or address of the Holder appearing on the books of the Company, or if no such email attachment or address appears on the books of the Company, at the principal place of business of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via email attachment to the email address set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via email attachment to the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

 

(b)Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.

 

(c)Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory to the Company.

 

 

(d)Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the State of Delaware (the “Delaware Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Delaware Courts 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 any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such Delaware Courts, or such Delaware Courts are improper or 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 Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

(e)Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing.

 

(f)Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

 

(g)Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Debenture shall be cumulative and in addition to all other remedies available under this Debenture and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Debenture. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Debenture.

 

(h)Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

(i)Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof.

 

Section 11. [RESERVED].

 

Section 12. Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Debenture, in the event that the Company believes that such notice contains material, non-public information relating to the Company or its Subsidiaries, the Company shall so indicate in such notice that it contains material, non-public information relating to the Company or its Subsidiaries and, simultaneously with the delivery of such notice to the Holder, the Company shall publicly disclose the contents of such notice in a Current Report on Form 8-K filed with the Commission. If the Company does not indicate to the Holder with delivery of such notice that it contains material, non-public information relating to the Company or its Subsidiaries, the Holder shall be allowed to presume that all matters set forth in such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.

 

*********************

 

(Signature Page Follows)

 

 

IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

 

	NanoVibronix, Inc.
	By:
	Name:
	Title:

 

 

ANNEX A

 

NOTICE OF CONVERSION

 

Reference is made to the Senior Convertible Debenture due the earlier to occur of the Trigger Date and November 13, 2025 (the “Debenture”) of NanoVibronix, Inc., a Delaware corporation (the “Company”).

 

The undersigned hereby elects to convert principal under the Debenture into shares of common stock of the Company (the “Common Stock”) according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all issue, stamp, transfer and similar taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such issue, stamp, transfer and similar taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange Act.

 

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

 

Conversion calculations:

 

Date to Effect Conversion:

Principal Amount of Debenture to be Converted:

Payment of Interest in Common Stock __ yes __ no

If yes, $_____ of Interest Accrued on Account of Conversion at Issue.

 

Number of shares of Common Stock to be issued:

 

Signature:

 

Name:

 

Address for Delivery of Common Stock Certificates:

 

Or

 

DWAC Instructions:

 

DTC Participant Number: ________________

DTC Participant Name: _________________

________________________Account Number: ___________________

 

 

Exhibit 10.1

 

Securities PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of February 13, 2025, between NanoVibronix, Inc., a Delaware corporation (the “Company”), and Alpha Capital Anstalt (including its successors and assigns, each a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act (as defined below), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.
DEFINITIONS

 

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement: (a) capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Debentures (as defined herein), and (b) the following terms have the meanings set forth in this Section 1.1:

 

“Acquiring Person” shall have the meaning ascribed to such term in Section 4.7.

 

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Board of Directors” means the board of directors of the Company or any duly authorized committee thereof.

 

“Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed; provided, however, for clarification, commercial banks shall not be deemed to be authorized or required by law to remain closed due to “stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or restrictions or the closure of any physical branch locations at the direction of any governmental authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in The City of New York are generally open for use by customers on such day.

 

“Closing” means the closing of the purchase and sale of the Debentures pursuant to Section 2.1.

 

 

“Closing Date” means the Trading Day on which all conditions precedent set forth in Sections 2.2 and 2.3 to (i) the Purchaser’s obligations to pay the Subscription Amount for the Debentures and (ii) the Company’s obligations to deliver the Debentures, in each case, have been satisfied or waived.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company Counsel” means Pierson Ferdinand, LLP with offices located at 1270 Avenue of the Americas, 7th Floor—1050, New York, NY 10020.

 

“Conversion Price” shall have the meaning ascribed to such term in the Debentures.

 

“Debentures” means the Senior Debentures due, subject to the terms therein, the earlier of the Trigger Date (as defined therein) and November 13, 2025, issued by the Company to the Purchasers hereunder on the Closing Date, in the form of Exhibit A attached hereto.

 

“Disclosure Schedules” shall have the meaning ascribed to such term in Section 3.1.

 

“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.

 

“Effective Date” means the earlier of the date that (a) the initial Registration Statement has been declared effective by the Commission or (b) the Underlying Shares have been sold pursuant to Rule 144.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder

 

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, officers, or directors of the Company pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the Company, (b) securities upon the exchange of or conversion of any Securities issued hereunder and any securities upon exercise of securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations or pursuant to the terms thereof) or to extend the term of such securities, (c) securities issued pursuant to acquisitions, mergers, consolidations, purchases of all or substantially all of the securities or assets of a corporation or other entity or strategic transactions approved by a majority of the disinterested directors of the Company, provided that such securities are issued as “restricted securities” (as defined in Rule 144) and provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) securities issued pursuant to the Merger Transaction.

 

“FDA” shall have the meaning ascribed to such term in Section 3.1(jj).

 

“FDCA” shall have the meaning ascribed to such term in Section 3.1(jj).

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

“GAAP” means generally accepted accounting principles in the United States in effect from time to time, consistently applied; provided that notwithstanding anything in any Transaction Document to the contrary, for purposes of all definitions and covenants under the Transaction Documents, any obligations of a Person in respect of leases that would have been treated as operating leases, or are exempt from application under an available practical expedient, in accordance with Accounting Standards Codification 840 (regardless of whether or not then in effect) shall be treated as operating leases for purposes of all financial definitions, calculations and covenants, without giving effect to Accounting Standards Codification 842 requiring operating leases to be recharacterized or treated as capital leases.

 

“Indebtedness” of a Person shall include (a) all obligations for borrowed money or the deferred purchase price of property or services (excluding trade credit and accounts payable incurred in the ordinary course of business), (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, surety bonds, bankers acceptances, currency swap agreements, interest rate hedging agreements, interest rate swaps or other financial products, in each case, to the extent the foregoing would appear on a balance sheet of such person as a liability, (c) all capital lease obligations (as determined in accordance with GAAP), (d) all obligations or liabilities secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed by such Person, and (e) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other Person.

 

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).

 

“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

“Merger Agreement” means the definitive agreement relating to the consummation of the Merger Transaction.

 

“Merger Transaction” means any acquisition, merger, consolidation, purchases of all or substantially all of the securities or assets of a corporation or other entity or a strategic transaction approved by the Purchasers and a majority of the disinterested directors of the Company.

 

“Nasdaq Stockholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the stockholders of the Company with respect to the issuance of shares of Common Stock upon the conversion of the Debentures, pursuant to the terms thereof.

 

“Permitted Lien” shall have the meaning ascribed to such term in the Debentures.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Pharmaceutical Product” shall have the meaning ascribed to such term in Section 3.1(jj).

 

 

“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Debenture Principal Amount,” in United States Dollars, which shall equal such Purchaser’s Subscription Amount, provided that the aggregate Principal Amount of all Purchasers for the Debentures shall be $500,000.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

“Public Information Failure” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Public Information Failure Payments” shall have the meaning ascribed to such term in Section 4.3(b).

 

“Purchaser Party” shall have the meaning ascribed to such term in Section 4.10.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated on or about the date hereof, among the Company and the Purchasers, substantially in the form of Exhibit B hereto.

 

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale of the Underlying Shares by each Purchaser as provided for in the Registration Rights Agreement.

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Required Minimum” means, as of any date, the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future pursuant to the Transaction Documents, including any Underlying Shares issuable upon conversion in full of all Debentures (including Underlying Shares issuable as payment of interest on the Debentures), ignoring any conversion limits set forth therein, and assuming that the Conversion Price is at all times on and after the date of determination 75% of the then Conversion Price on the Trading Day immediately prior to the date of determination.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Debentures and the Underlying Shares.

 

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Debentures purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.

 

“Subsidiary” means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in the Transaction Documents shall refer to a direct or indirect Subsidiary or Subsidiaries of the Company.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the New York Stock Exchange, the NYSE MKT, the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, OTCQB Venture Market or OTCQX Best Market and any successors to any of the foregoing.

 

“Transaction Documents” means this Agreement, the Debentures, the Registration Rights Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed by the Company in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means VStock Transfer, LLC, the current transfer agent of the Company, and any successor transfer agent of the Company.

 

“Underlying Shares” means the shares of Common Stock issued and issuable pursuant to the terms of the Debentures, without respect to any limitation or restriction on the conversion of the Debentures.

 

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common 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 Venture Market (“OTCQB”) or OTCQX Best Market (“OTCQX”) is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market operated by OTC Markers, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

ARTICLE II.
PURCHASE AND SALE

 

2.1 Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, for an aggregate Subscription Amount of $500,000 the Debentures with an aggregate principal amount of $500,000. Upon satisfaction of the covenants and conditions set forth in Sections 2.2(a) and 2.3(a), the Closing shall take place remotely by electronic transfer of the Closing documentation.

 

2.2 Deliveries.

 

(a)

On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

i.

this Agreement duly executed by the Company;

 

ii.

the Registration Rights Agreement duly executed by the Company;

 

iii.

a Debenture with a principal amount equal to such Purchaser’s Debenture Principal Amount, registered in the name of such Purchaser;

 

iv.

the Company’s wire instructions, on Company letterhead and executed by the Chief Executive Officer or Chief Financial Officer;

 

v.

a legal opinion of Company Counsel, substantially in form and substance reasonably satisfactory to the Purchasers;

 

vi.

a certificate, executed on behalf of the Company, dated as of the Closing Date, certifying the resolutions adopted by the Board of Directors of the Company for the Company, approving the transactions contemplated by this Agreement and the other Transaction Documents, as applicable, certifying the current versions of the Company’s, certificate or articles of incorporation and bylaws and certifying as to the signatures and authority of Persons signing this Agreement and the other Transaction Documents, as applicable, and related documents on behalf of the Company; and

 

 

vii.

a certificate, executed on behalf of the Company by its Chief Executive Officer or its Chief Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Section 2.3(a)(ii).

 

(b)

On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company, as applicable, the following:

 

i.

immediately available funds, via wire transfer, equal to such Purchaser’s Subscription Amount with respect to the Debenture as set forth on the signature page hereto executed by such Purchaser;

 

ii.

this Agreement duly executed by such Purchaser;

 

iii.

the Registration Rights Agreement duly executed by such Purchaser; and

 

iv.

a duly executed Internal Revenue Service (“IRS”) Form W-9 or appropriate IRS Form W-8, as applicable.

 

2.3 Closing Conditions.

 

(a)

The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

i.

the Merger Agreement shall have been duly executed;

 

ii.

the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) as of such date);

 

iii.

all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

 

 

iv.

the delivery by each Purchaser of the items set forth in Section 2.2(a)(ii) of this Agreement.

 

(b)

The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met, provided, however that such conditions may be waived, modified or amended by the Purchaser:

 

i.

the Merger Agreement shall have been duly executed;

 

ii.

the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects or, to the extent representations or warranties are qualified by materiality or Material Adverse Effects, in all respects) as of such date);

 

iii.

all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

iv.

the delivery by the Company of the items set forth in Section 2.2(a)(i) of this Agreement;

 

v.

there shall have been no Material Adverse Effect with respect to the Company; and

 

vi.

from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Company. Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens (other than restrictions contained in the organizational documents of the Company or its Subsidiaries and restrictions arising from applicable securities laws), and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities. If the Company has no subsidiaries, all other references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.

 

(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”), and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

 

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien (other than a Permitted Lien) upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clause (i), (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required pursuant to Section 4.6 of this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights Agreement, (iii) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Underlying Shares for trading thereon in the time and manner required thereby, (iv) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws, and (v) Nasdaq Stockholder Approval (collectively, the “Required Approvals”).

 

 

(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Underlying Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Underlying Shares at least equal to the Required Minimum on the date hereof.

 

(g) Capitalization. The capitalization of the Company as of the date hereof is as set forth on Schedule 3.1(g), which Schedule 3.1(g) shall also include the number of shares of Common Stock owned beneficially, and of record, by Affiliates of the Company as of the date hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of stock options under the Company’s incentive stock plans, the issuance of shares of Common Stock pursuant to the Company’s incentive stock plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents that has not been waived by the relevant Person or that the Company cannot cancel. Except as set forth on Schedule 3.1(g), there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock or the capital stock of any Subsidiary, or written contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or capital stock of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers). There are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary. There are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom stock” agreements or any similar agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities (other than the Required Approvals). There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

 

(h) SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Company is not currently, and has not been in the prior 12-months, an issuer subject to Rule 144(i) under the Securities Act. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock incentive plans. The Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, prospects, properties, operations, assets or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date that this representation is made.

 

 

(j) Litigation. Except as set forth on Schedule 3.1(j), there is no action, suit, inquiry, notice of violation, or proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”). None of the Actions set forth on Schedule 3.1(j), (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k) Labor Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or any Subsidiary, is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to environmental protection, occupational health and safety, product quality and safety and employment and labor matters, applicable to the Company, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.

 

 

(m) Environmental Laws. The Company and its Subsidiaries (i) are in material compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”) and (ii) have obtained and are in compliance with all material permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses.

 

(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Permitted Liens and (ii) Liens as do not materially affect the value of such property and do not materially interfere with the use made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance in all material respects.

 

(p) Intellectual Property. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person, except as would not have or reasonably be expected to not have a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

 

(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without a material increase in cost.

 

(r) Transactions with Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements or restricted stock agreements under any stock incentive plan of the Company.

 

(s) Sarbanes-Oxley; Internal Accounting Controls. Except as disclosed in its SEC Reports, the Company and the Subsidiaries are in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries maintain a system of internal accounting controls designed to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

 

(t) Certain Fees. Other than with respect to Palladium Capital Group, LLC, no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(u) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

 

(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(w) Registration Rights. Other than each of the Purchasers, no Person has any right to cause the Company or any Subsidiary to effect the registration under the Securities Act of any securities of the Company or any Subsidiaries.

 

(x) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as disclosed in its SEC Reports, the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. Except as disclosed in its SEC Reports, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in material compliance with all such listing and maintenance requirements applicable to the Company. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.

 

 

(y) Application of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s certificate of incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

 

(z) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and when made, not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.2 hereof.

 

(aa) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

 

(bb) Indebtedness. Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, consolidated and projected capital requirements and capital availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdictions within one year from the Closing Date. Schedule 3.1(bb) sets forth all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

(cc) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes of the Company or its Subsidiaries in any material amount claimed in writing to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

(dd) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

 

(ee) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA.

 

(ff) Accountants. Zwick CPA, PLLC is the Company’s accounting firm and to the Company’s knowledge Zwick CPA, PLLC (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ended December 31, 2024.

 

(gg) Seniority. As of the Closing Date, no Indebtedness or other claim against the Company is senior to the Debentures in right of payment, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby).

 

(hh) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

(ii) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

 

(jj) FDA. As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged, labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration, investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices, good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports, except where the failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge, complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of, requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the aggregate, would have a Material Adverse Effect. The properties, business and operations of the Company have been and are being conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA. The Company has not been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of any product proposed to be developed, produced or marketed by the Company nor has the FDA expressed any concern as to approving or clearing for marketing any product being developed or proposed to be developed by the Company.

 

(kk) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company.

 

(ll) Form S-3 Eligibility. The Company is eligible to register the resale of the Underlying Shares for resale by the Purchasers on Form S-3 promulgated under the Securities Act.

 

(mm) Stock Option Plans. Each stock option granted by the Company under the Company’s stock option plans was granted (i) in accordance with the terms of the Company’s 2004 Global Share Option Plan, as amended, or 2014 Long-Term Incentive Plan, as amended, as applicable, and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s stock option plans has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

 

(nn) Cybersecurity. (i)(x) To the knowledge of the Company, there has been no material security breach or other compromise of or relating to any of the Company’s or any Subsidiary’s information technology and computer systems, networks, hardware, software, data (including the data of its respective customers, employees, suppliers, vendors and any third party data maintained by or on behalf of it), equipment or technology (collectively, “IT Systems and Data”) and (y) to the knowledge of the Company, the Company and the Subsidiaries have not been notified of any event or condition that would reasonably be expected to result in, any material security breach or other compromise to its IT Systems and Data; (ii) the Company and the Subsidiaries are presently in compliance with all applicable laws or statutes and all applicable judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Data and to the protection of such IT Systems and Data from unauthorized use, access, misappropriation or modification, except as would not, individually or in the aggregate, have a Material Adverse Effect; (iii) the Company and the Subsidiaries have implemented and maintained commercially reasonable safeguards to maintain and protect its material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and Data; and (iv) the Company and the Subsidiaries have implemented backup and disaster recovery processes consistent with industry standards and practices.

 

(oo) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department.

 

(pp) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge of the Company or any Subsidiary, threatened.

 

(qq) No Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

 

 

(rr) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.

 

(ss) Notice of Disqualification Events. The Company will notify the Purchasers in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

(tt) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

3.2 Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):

 

(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on which it converts any Debentures it will be an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12), or (a)(13) under the Securities Act.

 

(d) Residency. Such Purchaser’s residence (if an individual) or offices in which its investment decision with respect to the Securities was made (if an entity) are located at the address immediately below such Purchaser’s name on such Purchaser’s signature page to this Agreement.

 

(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.

 

(f) Acknowledgement. The Purchasers acknowledges and agrees that neither the Company nor any Subsidiary makes or has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3.1 hereof. The Purchasers further represent to the Company that the Purchasers’ decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Purchasers and their representatives.

 

 

(g) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).

 

(h) Acknowledgment Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by each Purchaser that: (i) each of the Purchasers has been asked by the Company to agree, and each Purchaser has agreed, from the date hereof to the time that no Purchaser owns Securities to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term if such transaction would cause any Purchaser, individually or in the aggregate, to have a net “short” position in the Common Stock; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short” position in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period that the Securities are outstanding, including, without limitation, during the periods that the value of the Underlying Shares deliverable with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.

 

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1 Transfer Restrictions.

 

(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and the Registration Rights Agreement and shall have the rights and obligations of a Purchaser under this Agreement and the Registration Rights Agreement.

 

(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities, as applicable, in the following form:

 

[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE] HAS [NOT] 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 CONVERSION OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights Agreement) thereunder.

 

(c) Certificates evidencing the Underlying Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144 or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). Provided one or more of the preceding conditions are met, the Company shall cause the general counsel of the Company to issue a legal opinion to the Transfer Agent or the Purchaser promptly after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser, respectively. If all or any portion of a Debenture is converted at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission) then such Underlying Shares shall be issued free of all legends. The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c), it will, no later than the earlier of (i) one Trading Day and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined below) following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Underlying Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. 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 with respect to the Common Stock as in effect on the date of delivery of a certificate representing Underlying Shares, as applicable, issued with a restrictive legend.

 

 

(d) In addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, (i) as partial liquidated damages and not as a penalty, for each $1,000 of Underlying Shares (based on the VWAP of the Common Stock on the date such Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after the Legend Removal Date) for each Trading Day after the Legend Removal Date until such certificate is delivered without a legend and (ii) if the Company fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing the Securities so delivered to the Company by such Purchaser that is free from all restrictive and other legends and (b) if after the Legend Removal Date such Purchaser purchases (in an open market transaction or otherwise) shares of Common Stock delivered in satisfaction of a sale by such Purchaser of all or any portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of the number of shares of Common Stock that such Purchaser anticipated receiving from the Company without any restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A) such number of Underlying Shares that the Company was required to deliver to such Purchaser by the Legend Removal Date multiplied by (B) the lowest closing sale price of the Common Stock on any Trading Day during the period commencing on the date of the delivery by such Purchaser to the Company of the applicable Underlying Shares (as the case may be) and ending on the date of such delivery and payment under this clause (ii).

 

(e) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

 

4.3 Furnishing of Information; Public Information.

 

(a) Until the time that no Purchaser owns Securities, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act unless the Company is no longer subject to the reporting requirements of the Exchange Act.

 

(b) At any time during the period commencing from the six month anniversary of the date hereof and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144 and if a registration statement (including the Registration Statement) covering the resale of such Securities is not effective under the Securities Act, if the Company (i) shall fail for any reason to satisfy the current public information requirement under Rule 144(c) or (ii) shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Subscription Amount of such Purchaser’s Securities on the day of a Public Information Failure and on every 30^th day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

4.4 Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

 

4.5 Conversion Procedures. The form of Notice of Conversion included in the Debentures sets forth the totality of the procedures required of the Purchasers in order to convert the Debentures. Without limiting the preceding sentence, no ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required in order to convert the Debentures. No additional legal opinion, other information or instructions shall be required of the Purchasers to convert their Debentures. The Company shall honor conversions of the Debentures and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Transaction Documents.

 

 

4.6 Securities Laws Disclosure; Publicity. The Company shall (a) by the Disclosure Time, issue a press release disclosing the material terms of the transactions contemplated hereby and (b) file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agents in connection with the transactions contemplated by the Transaction Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees, Affiliates or agents, on the one hand, and any of the Purchasers or any of their Affiliates on the other hand, shall terminate and be of no further force or effect. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except (a) as required by federal securities law in connection with (i) any registration statement contemplated by the Registration Rights Agreement and (ii) the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted under this clause (b) and reasonably cooperate with such Purchaser regarding such disclosure.

 

4.7 Shareholder Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities under the Transaction Documents.

 

4.8 Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, which shall be disclosed pursuant to Section 4.6, the Company covenants and agrees that neither it, nor any other Person acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company reasonably believes constitutes, material, non-public information, unless prior thereto such Purchaser shall have consented in writing to the receipt of such information and agreed in writing with the Company to keep such information confidential. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company. To the extent that the Company, any of its Subsidiaries, or any of their respective officers, director, agents, employees, or Affiliates delivers any material, non-public information to a Purchaser without such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates, or agents, or a duty to the Company, any of its Subsidiaries or any of their respective officers, directors, employees, Affiliates or agents, not to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall simultaneously with the delivery of such notice file such notice with the Commission pursuant to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions in securities of the Company.

 

 

4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes.

 

4.10 Indemnification. Subject to the provisions of this Section 4.10, the Company will indemnify and hold each Purchaser and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless such action is solely based upon a material breach of such Purchaser Party’s representations, warranties or covenants under the Transaction Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such Purchaser Party of state or federal securities laws or any conduct by such Purchaser Party which is finally judicially determined to constitute fraud, gross negligence or willful misconduct). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and, the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of counsel a material conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach of any of the representations, other Transaction Documents. The indemnification required by this Section 4.10 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any liabilities the Company may be subject to pursuant to law.

 

 

4.11 Reservation and Listing of Securities.

 

(a) The Company shall maintain a reserve of the Required Minimum from its duly authorized shares of Common Stock for issuance pursuant to the Transaction Documents in such amount as may then be required to fulfill its obligations in full under the Transaction Documents.

 

(b) If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later than the 75th day after such date.

 

(c) The Company shall, if applicable: (i) in the time and manner required by the principal Trading Market, prepare and file with such Trading Market an additional shares listing application covering a number of shares of Common Stock at least equal to the Required Minimum on the date of such application, (ii) take all steps necessary to cause such shares of Common Stock to be approved for listing or quotation on such Trading Market as soon as possible thereafter, (iii) provide to the Purchasers evidence of such listing or quotation and (iv) maintain the listing or quotation of such Common Stock on any date at least equal to the Required Minimum on such date on such Trading Market or another Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer. In addition, the Company shall hold a special meeting of stockholders (which may also be at the annual meeting of stockholders) at the earliest practical date after the Closing Date for the purpose of obtaining Nasdaq Stockholder Approval, with the recommendation of the Company’s Board of Directors that such proposal be approved, and the Company shall solicit proxies from its stockholders in connection therewith in the same manner as all other management proposals in such proxy statement and all management-appointed proxyholders shall vote their proxies in favor of such proposal. The Company shall use its reasonable best efforts to obtain such Nasdaq Stockholder Approval. If the Company does not obtain Nasdaq Stockholder Approval at the first meeting, the Company shall call a meeting every three months thereafter to seek Nasdaq Stockholder Approval until the earlier of the date Nasdaq Stockholder Approval is obtained or the Debentures are no longer outstanding.

 

 

4.12 Subsequent Equity Sales.

 

(a) From the date hereof until ninety (90) days after the Effective Date, neither the Company nor any Subsidiary shall (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents or (ii) file any registration statement or any amendment or supplement thereto, in each case other than as contemplated pursuant to the Registration Rights Agreement.

 

(b) From the date hereof until such time as no Purchaser holds any of the Debentures, the Company shall be prohibited from effecting or entering into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversion price, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock or (ii) enters into, or effects a transaction under, any agreement, including, but not limited to, an equity line of credit or an “at-the-market offering”, whereby the Company may issue securities at a future determined price whereby the Company may issue securities at a future determined price regardless of whether shares pursuant to such agreement have actually been issued and regardless of whether such agreement is subsequently canceled. Any Purchaser shall be entitled to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

(c) Notwithstanding the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.

 

4.13 Intentionally Omitted.

 

4.14 Equal Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered to all of the parties to such Transaction Documents. Further, the Company shall not make any payment of principal or interest on the Debentures in amounts which are disproportionate to the respective principal amounts outstanding on the Debentures at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

 

 

4.15 Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will, directly or indirectly, execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant to the initial press release as described in Section 4.6, such Purchaser will maintain the confidentiality of the existence and terms of this transaction (other than as disclosed to its legal and other representatives). Notwithstanding the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.6 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company to the Company, any of its Subsidiaries, or any of their respective officers, directors, employees, Affiliates or agent after the issuance of the initial press release as described in Section 4.6. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.

 

4.16 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

4.17 Principal Market Limitation. Notwithstanding anything in this Agreement or the other Transaction Documents to the contrary, prior to the receipt of the Nasdaq Stockholder Approval, the Company shall not issue any shares of Common Stock pursuant to the Debentures unless the Company concludes, after consultation with outside counsel to the Company, that such approval is not required, which conclusion shall be reasonably satisfactory to the Purchasers.

 

 

4.18 Most Favored Nation. So long as the Debentures remain outstanding, each holder of the Securities shall have “most favored nation” status with respect to any debt or equity financing (including, without limitation, the issuance of convertible debt and equity securities of any nature) obtained by the Company (“Additional Financing”). In the event that the Company obtains any such Additional Financing that includes terms more favorable than those granted to any holder of the Securities, whether under this Agreement, any of the other Transaction Documents or otherwise, then, upon written demand by one or more of such holders, any such more favorable terms shall be made applicable to the then outstanding Debentures. The Company and such holders shall negotiate in good faith the appropriate form and substance of any such modification to be made to the Transaction Documents taking into account the totality of the circumstances and the terms of the Additional Financing. Any such modifications shall be approved by the holders of a majority of the then outstanding Debentures. Notwithstanding the foregoing, this Section 4.18 shall not apply in respect of an Exempt Issuance.

 

4.19 Participation in Future Financing.

 

(a) From the date hereof through the date that is twelve (12) months after the Maturity Date (as defined in the Debenture) of the Debenture, upon any issuance by the Company or any of its Subsidiaries of any Indebtedness (including but not limited to privately placed Indebtedness or equity-linked Indebtedness), any preferred stock, Common Stock, options or securities convertible into shares of Common Stock, in each case, for cash consideration, indebtedness or a combination thereof (a “Subsequent Placement”), the Purchasers shall have the right to purchase their respective Pro Rata Portion (as defined below) of the Participation Maximum (as defined below), on the same terms, conditions and price provided for in the Subsequent Placement. For purposes hereof “Participation Maximum” means 100% and “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.19 and (y) the sum of the aggregate Subscription Amount of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.19.

 

(b) In the case of a Subsequent Placement:

 

(i) At least five (5) Business Days prior to the closing of a Subsequent Placement, the Company shall deliver to each Purchaser a written notice asking the Purchaser if it consents to the receipt of material non-public information pursuant to this Section 4.19 (“Pre-Notice”). If a Purchaser consents to the receipt of material non-public information, it shall so notify the Company within two (2) Trading Days after receipt of the Pre-Notice. If such Purchaser so consents, the Company shall promptly, but no later than one (1) Trading Day after such consent, deliver the details of such proposed Subsequent Placement (the “Subsequent Placement Notice”) to such Purchaser. The Subsequent Placement Notice shall describe in reasonable detail the proposed terms of such Subsequent Placement, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Placement is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.

 

 

(ii) Any Purchaser desiring to participate in such Subsequent Placement shall provide written notice (the “Participation Notice”) to the Company by not later than 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after delivery of the Subsequent Placement Notice (the “Notice Deadline”), with such Participation Notice setting forth: (i) that such Purchaser is willing to participate in the Subsequent Placement and willing to execute the relevant transaction documents for the Subsequent Placement on the terms and conditions set forth in such transaction documents; (ii) the amount of such Purchaser’s participation; and (iii) each participating Purchaser’s representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Placement. If the Purchaser fails to deliver the Participation Notice to the Company by the Notice Deadline, such Purchaser shall forfeit its right to participate in the Subsequent Placement.

 

(iii) If by the Notice Deadline, the Company receives Participation Notices that are, in the aggregate, less than the Participation Maximum, then the Company may effect the remaining portion of such Subsequent Placement, including the difference between the amount to be purchased by Purchasers and the Participation Maximum, on the terms and with the Persons set forth in the Subsequent Placement.

 

4.20 Capital Changes. Except for a reverse stock split effected in connection with maintaining compliance with the rules of any Trading Market, until the one-year anniversary of the Closing Date, the Company shall not undertake a reverse or forward stock split or reclassification of the Common Stock without the prior written consent of the Purchasers holding a majority in principal amount outstanding of the Debentures.

 

4.21 Exclusivity. Prior to the Closing, the Company agrees not to, and shall cause its Subsidiaries not to, directly or indirectly, solicit, initiate, continue, or engage in any discussions or negotiations with, or enter into any agreement with, or encourage or respond to any inquiries or proposals by, or participate in any negotiations with, or provide any information to, or commence due diligence with respect to, or otherwise cooperate in any way, the issuance of any indebtedness of the Company or other convertible securities of the Company.

 

4.22 Commitment. If, following the closing of the Merger Transaction, the Company decides to seek additional financing through a public offering (the “Public Offering”) of its securities pursuant to a registration statement on Form S-1 to certain investors (the “Public Offering Investors”), provided that (i) the total amount of proceeds raised in the Public Offering equals or exceeds $7,000,000 and (ii) the Public Offering Investors, other than the Purchaser, purchase securities of the Company in such Public Offering for aggregate gross proceeds of at least $2,000,000, the Purchaser agrees to purchase in the Public Offering the number of securities sold in such Public Offering in the aggregate principal amount equal to $5,000,000 (the “Commitment Amount”); provided that if the Purchaser purchases the Commitment Amount, such Public Offering and the related transaction documents shall contain the following terms, unless otherwise waived by the Purchaser: (A) the Public Offering shall be deemed a “bona fide public offering” pursuant to the rules and regulations of The Nasdaq Stock Market LLC and shall be for (i) shares of preferred stock of the Company (“Preferred Shares”) that are convertible into shares of Common Stock (the “Conversion Shares”) at the option of the Purchaser subject to the terms and conditions to be identified in the documents governing such Preferred Shares and (ii) warrants to purchase shares of Common Stock (“Warrants”); (B) the number of shares of Common Stock issuable upon exercise of the Warrants shall equal 100% of the aggregate number of Conversion Shares; and (C) such Preferred Shares and Warrants shall contain full ratchet and other customary anti-dilution protections.

 

 

ARTICLE V.
MISCELLANEOUS

 

5.1 Termination. This Agreement may be terminated by (i) any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers and (ii) the Company, as to the Company’s obligations hereunder, by written notice to the other parties, if the Closing has not been consummated on or before February 13, 2025, provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2 Fees and Expenses. The Company has agreed to reimburse the Purchasers for their reasonable and documented legal fees and expenses up to $25,000, which may be increased with the written consent of the Company, which consent shall not unreasonably be withheld. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any conversion delivered by a Purchaser), stamp taxes and other similar taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3 Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4 Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via email attachment as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2^nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

 

5.5 Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and holders of at least a majority in interest of the Debentures based on the initial Subscription Amounts hereunder (or, prior to the Closing, the Company and each Purchaser) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers shall require the prior written consent of such adversely affected Purchaser. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

5.6 Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

5.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Debentures, provided that such transferee agrees in writing to be bound, with respect to the transferred Debentures by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8 No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10.

 

5.9 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, 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 and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the State of Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Delaware 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 any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such 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 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 thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

 

5.10 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.11 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof.

 

5.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however, that, in the case of a rescission of a conversion of a Debenture, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such rescinded conversion notice.

 

5.14 Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity against any claim that may be made against the Company with respect to the certificate alleged to have been mutilated, lost, stolen, or destroyed) associated with the issuance of such replacement Securities.

 

 

5.15 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16 Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

 

5.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience only, each Purchaser and its respective counsel have chosen to communicate with the Company through Haynes and Boone, LLP. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

5.19 Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.20 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 Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.21 Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22 Tax Matters. The Company and the Purchaser agree (i) to treat the Debentures as debt for all U.S. federal and state income tax purposes, and, in accordance with Section 385(c) of the Code, such characterization shall be binding upon the Purchasers and the Company (along with their successors and assigns) and (ii) not to take any position contrary to this Section 5.22 on any tax return, tax audit or other tax proceedings unless otherwise required by applicable law.

 

5.23 WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

NanoVibronix, Inc.			Address for Notice:
By:			Email:
Name:
Title:
With a copy to (which shall not constitute notice):

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASERS FOLLOWS]

 

 

[PURCHASER SIGNATURE PAGES TO NanoVibronix, Inc. Securities PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser:

 

Signature of Authorized Signatory of Purchaser:

 

Name of Authorized Signatory:

 

Title of Authorized Signatory:

 

Email Address of Authorized Signatory:

 

Address for Notice to Purchaser:

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

Subscription Amount:

 

Debenture Principal Amount:

 

[SIGNATURE PAGES CONTINUE]

 

 

EXHIBIT A

 

Form of Debenture

 

[attached]

 

 

EXHIBIT B

 

Form of Registration Rights Agreement

 

[attached]

 

 

 

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into as of February 13, 2025, between NanoVibronix, Inc., a Delaware corporation (the “Company”), and each of the several purchasers signatory hereto (each such purchaser, a “Purchaser” and, collectively, the “Purchasers”).

 

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of February 13, 2025 among the Company and each Purchaser (the “Purchase Agreement”).

 

The Company and each Purchaser hereby agrees as follows:

 

1. Definitions.

 

Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

“Advice” shall have the meaning set forth in Section 6(c).

 

“Effectiveness Date” means, with respect to the Initial Registration Statement required to be filed hereunder, the 60^th calendar day following the Closing Date (or, in the event of a “full review” by the Commission, the 90^th calendar day following the Closing Date) and with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the 60^th calendar day following the date on which an additional Registration Statement is required to be filed hereunder (or, in the event of a “full review” by the Commission, the 90^th calendar day following the date such additional Registration Statement is required to be filed hereunder); provided, however, that in the event the Company is notified by the Commission that one or more of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Effectiveness Date as to such Registration Statement shall be the fifth Trading Day following the date on which the Company is so notified if such date precedes the dates otherwise required above, provided, further, if such Effectiveness Date falls on a day that is not a Trading Day, then the Effectiveness Date shall be the next succeeding Trading Day.

 

“Effectiveness Period” shall have the meaning set forth in Section 2(a).

 

“Event” shall have the meaning set forth in Section 2(d).

 

“Event Date” shall have the meaning set forth in Section 2(d).

 

 

“Filing Date” means, with respect to the Initial Registration Statement required hereunder, the 30^th calendar day following the Closing Date and, with respect to any additional Registration Statements which may be required pursuant to Section 2(c) or Section 3(c), the earliest practical date on which the Company is permitted by SEC Guidance to file such additional Registration Statement related to the Registrable Securities.

 

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

 

“Indemnified Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

 

“Initial Registration Statement” means the initial Registration Statement filed pursuant to this Agreement.

 

“Losses” shall have the meaning set forth in Section 5(a).

 

“Plan of Distribution” shall have the meaning set forth in Section 2(a).

 

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated by the Commission pursuant to the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable Securities” means, as of any date of determination, (a) all Underlying Shares then issued and issuable upon exercise of the Debentures (assuming on such date the Debentures are exercised in full without regard to any conversion limitations therein), and (b) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing; provided, however, that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) for so long as (a) a Registration Statement with respect to the sale of such Registrable Securities is declared effective by the Commission under the Securities Act and such Registrable Securities have been disposed of by the Holder in accordance with such effective Registration Statement, (b) such Registrable Securities have been previously sold in accordance with Rule 144, or (c) such securities become eligible for resale without volume or manner-of-sale restrictions and without current public information pursuant to Rule 144 as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Transfer Agent and the affected Holders (assuming that such securities and any securities issuable upon exercise, conversion or exchange of which, or as a dividend upon which, such securities were issued or are issuable, were at no time held by any Affiliate of the Company), as reasonably determined by the Company, upon the advice of counsel to the Company.

 

 

“Registration Statement” means any registration statement required to be filed hereunder pursuant to Section 2(a) and any additional registration statements contemplated by Section 2(c) or Section 3(c), including (in each case) the Prospectus, amendments and supplements to any such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in any such registration statement.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“Selling Stockholder Questionnaire” shall have the meaning set forth in Section 3(a).

 

“SEC Guidance” means (i) any publicly-available written or oral guidance of the Commission staff, or any comments, requirements or requests of the Commission staff and (ii) the Securities Act.

 

2. Shelf Registration.

 

(a) On or prior to each Filing Date, the Company shall prepare and file with the Commission a Registration Statement covering the resale of all of the Registrable Securities that are not then registered on an effective Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415. Each Registration Statement filed hereunder shall be on Form S-3 (except if the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith, subject to the provisions of Section 2(e)) and shall contain (unless otherwise directed by the Required Holders) substantially the “Plan of Distribution” attached hereto as Annex A; provided, however, that no Holder shall be required to be named as an “underwriter” without such Holder’s express prior written consent. Subject to the terms of this Agreement, the Company shall use its best efforts to cause a Registration Statement filed under this Agreement (including, without limitation, under Section 3(c)) to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the applicable Effectiveness Date, and shall use its best efforts to keep such Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be sold without volume or manner-of-sale restrictions pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect, addressed and acceptable to the Transfer Agent and the affected Holders (the “Effectiveness Period”). The Company shall telephonically request effectiveness of a Registration Statement as of 5:00 p.m. (New York City time) on a Trading Day. The Company shall immediately notify the Holders via facsimile or by e-mail of the effectiveness of a Registration Statement on the same Trading Day that the Company telephonically confirms effectiveness with the Commission, which shall be the date requested for effectiveness of such Registration Statement. The Company shall, by 9:30 a.m. (New York City time) on the Trading Day after the effective date of such Registration Statement, file a final Prospectus with the Commission as required by Rule 424. Failure to so notify the Holder within one (1) Trading Day of such notification of effectiveness or failure to file a final Prospectus as foresaid shall be deemed an Event under Section 2(d).

 

 

(b) Notwithstanding the registration obligations set forth in Section 2(a), if the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Initial Registration Statement as required by the Commission, covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering, subject to the provisions of Section 2(e); with respect to filing on Form S-3 or other appropriate form, and subject to the provisions of Section 2(d) with respect to the payment of liquidated damages; provided, however, that prior to filing such amendment, the Company shall be obligated to use diligent efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including without limitation, Compliance and Disclosure Interpretation 612.09.

 

(c) Notwithstanding any other provision of this Agreement and subject to the payment of liquidated damages pursuant to Section 2(d), if the Commission or any SEC Guidance sets forth a limitation on the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater portion of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced as follows:

 

	a.	First, the Company shall reduce or eliminate any securities to be included other than Registrable Securities; and
	b.	Second, the Company shall reduce Registrable Securities represented by Underlying Shares and Debentures (applied, in the case that some Underlying Shares and Debentures may be registered, to the Holders on a pro rata basis based on the total number of unregistered Underlying Shares and Debentures held by such Holders).

 

In the event of a cutback hereunder, the Company shall give the Holder at least five (5) Trading Days prior written notice along with the calculations as to such Holder’s allotment. In the event the Company amends the Initial Registration Statement in accordance with the foregoing, the Company will use its best efforts to file with the Commission, as promptly as allowed by the Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Initial Registration Statement, as amended.

 

 

(d) If: (i) the Initial Registration Statement is not filed on or prior to its Filing Date (if the Company files the Initial Registration Statement without affording the Holders the opportunity to review and comment on the same as required by Section 3(a) herein, the Company shall be deemed to have not satisfied this clause (i)), or (ii) the Company fails to file with the Commission a request for acceleration of a Registration Statement in accordance with Rule 461 promulgated by the Commission pursuant to the Securities Act, within five Trading Days of the date that the Company is notified (orally or in writing, whichever is earlier) by the Commission that such Registration Statement will not be “reviewed” or will not be subject to further review, or (iii) prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within ten (10) calendar days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, or (iv) a Registration Statement registering for resale all of the Registrable Securities is not declared effective by the Commission by the Effectiveness Date of the Initial Registration Statement, or (v) after the effective date of a Registration Statement, such Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities included in such Registration Statement, or the Holders are otherwise not permitted to utilize the Prospectus therein to resell such Registrable Securities, for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days (which need not be consecutive calendar days) during any 12-month period (any such failure or breach being referred to as an “Event”, and for purposes of clauses (i) and (iv), the date on which such Event occurs, and for purpose of clause (ii) the date on which such five (5) Trading Day period is exceeded, and for purpose of clause (iii) the date which such ten (10) calendar day period is exceeded, and for purpose of clause (v) the date on which such ten (10) or fifteen (15) calendar day period, as applicable, is exceeded being referred to as “Event Date”), then, in addition to any other rights the Holders may have hereunder or under applicable law, on each such Event Date and on each monthly anniversary of each such Event Date (if the applicable Event shall not have been cured by such date) until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 2.0% multiplied by the aggregate Subscription Amount paid by such Holder pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated damages pursuant to this Section in full within seven days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. The partial liquidated damages pursuant to the terms hereof shall apply on a daily pro rata basis for any portion of a month prior to the cure of an Event.

 

(e) If Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the Commission.

 

(f) Notwithstanding anything to the contrary contained herein, in no event shall the Company be permitted to name any Holder or affiliate of a Holder as any underwriter without the prior written consent of such Holder.

 

 

3. Registration Procedures.

 

In connection with the Company’s registration obligations hereunder, the Company shall:

 

(a) Not less than five (5) Trading Days prior to the filing of each Registration Statement and not less than one (1) Trading Day prior to the filing of any related Prospectus or any amendment or supplement thereto (including any document that would be incorporated or deemed to be incorporated therein by reference), the Company shall (i) furnish to each Holder copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the review of such Holders, and (ii) cause its officers and directors, counsel and independent registered public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to each Holder, to conduct a reasonable investigation within the meaning of the Securities Act. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Required Holders shall reasonably object in good faith, provided that, the Company is notified of such objection in writing no later than five (5) Trading Days after the Holders have been so furnished copies of a Registration Statement or one (1) Trading Day after the Holders have been so furnished copies of any related Prospectus or amendments or supplements thereto.

 

(b) (i) Prepare and file with the Commission such amendments, including post-effective amendments, to a Registration Statement and the Prospectus used in connection therewith as may be necessary to keep a Registration Statement continuously effective as to the applicable Registrable Securities for the Effectiveness Period and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities, (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and, as so supplemented or amended, to be filed pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any comments received from the Commission with respect to a Registration Statement or any amendment thereto and provide as promptly as reasonably possible to the Holders true and complete copies of all correspondence from and to the Commission relating to a Registration Statement (provided that, the Company shall excise any information contained therein which would constitute material non-public information regarding the Company or any of its Subsidiaries), and (iv) comply in all material respects with the applicable provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by a Registration Statement during the applicable period in accordance (subject to the terms of this Agreement) with the intended methods of disposition by the Holders thereof set forth in such Registration Statement as so amended or in such Prospectus as so supplemented.

 

(c) If during the Effectiveness Period, the number of Registrable Securities at any time exceeds 100% of the number of shares of Common Stock then registered in a Registration Statement, then the Company shall file as soon as reasonably practicable, but in any case prior to the applicable Filing Date, an additional Registration Statement covering the resale by the Holders of not less than the number of such Registrable Securities.

 

 

(d) Notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (iii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible (and, in the case of (i)(A) below, not less than one (1) Trading Day prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one (1) Trading Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed, (B) when the Commission notifies the Company whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement, and (C) with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information, (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose, (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of a Registration Statement or Prospectus; provided, however, that in no event shall any such notice contain any information which would constitute material, non-public information regarding the Company or any of its Subsidiaries.

 

(e) Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

 

(f) Furnish to each Holder, without charge, at least one conformed copy of each such Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference to the extent requested by such Person, and all exhibits to the extent requested by such Person (including those previously furnished or incorporated by reference) promptly after the filing of such documents with the Commission, provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

 

(g) Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(d).

 

(h) Prior to any resale of Registrable Securities by a Holder, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by each Registration Statement, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction.

 

(i) If requested by a Holder, cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request.

 

(j) Upon the occurrence of any event contemplated by Section 3(d), as promptly as reasonably possible under the circumstances taking into account the Company’s good faith assessment of any adverse consequences to the Company and its stockholders of the premature disclosure of such event, prepare a supplement or amendment, including a post-effective amendment, to a Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither a Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Holders in accordance with clauses (iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus until the requisite changes to such Prospectus have been made, then the Holders shall suspend use of such Prospectus. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company shall be entitled to exercise its right under this Section 3(j) to suspend the availability of a Registration Statement and Prospectus, subject to the payment of partial liquidated damages otherwise required pursuant to Section 2(d), for a period not to exceed 60 calendar days (which need not be consecutive days) in any 12-month period.

 

 

(k) Otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission under the Securities Act and the Exchange Act, including, without limitation, Rule 172 under the Securities Act, file any final Prospectus, including any supplement or amendment thereof, with the Commission pursuant to Rule 424 under the Securities Act, promptly inform the Holders in writing if, at any time during the Effectiveness Period, the Company does not satisfy the conditions specified in Rule 172 and, as a result thereof, the Holders are required to deliver a Prospectus in connection with any disposition of Registrable Securities and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities hereunder.

 

(l) The Company shall use its best efforts to maintain eligibility for use of Form S-3 (or any successor form thereto) for the registration of the resale of Registrable Securities.

 

(m) The Company may require each selling Holder to furnish to the Company a certified statement as to the number of shares of Common Stock beneficially owned by such Holder and, if required by the Commission, the natural persons thereof that have voting and dispositive control over the shares. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities solely because any Holder fails to furnish such information within three Trading Days of the Company’s request, any liquidated damages that are accruing at such time as to such Holder only shall be tolled and any Event that may otherwise occur solely because of such delay shall be suspended as to such Holder only, until such information is delivered to the Company.

 

 

4. Registration Expenses. All fees and expenses incident to the performance of or compliance with, this Agreement by the Company shall be borne by the Company whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses of the Company’s counsel and independent registered public accountants) (A) with respect to filings made with the Commission, (B) with respect to filings required to be made with any Trading Market on which the Common Stock is then listed for trading, and (C) in compliance with applicable state securities or Blue Sky laws reasonably agreed to by the Company in writing (including, without limitation, fees and disbursements of counsel for the Company in connection with Blue Sky qualifications or exemptions of the Registrable Securities), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company, (v) Securities Act liability insurance, if the Company so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder. In no event shall the Company be responsible for any broker or similar commissions of any Holder or, except to the extent provided for in the Transaction Documents, any legal fees or other costs of the Holders.

 

5. Indemnification.

 

(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder, the officers, directors, members, partners, agents, brokers (including brokers who offer and sell Registrable Securities as principal as a result of a pledge or any failure to perform under a margin call of Common Stock), investment advisors and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each of them, each Person who controls any such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, members, stockholders, partners, agents and employees (and any other Persons with a functionally equivalent role of a Person holding such titles, notwithstanding a lack of such title or any other title) of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to (1) any untrue or alleged untrue statement of a material fact contained in a Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading or (2) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities law, or any rule or regulation thereunder, in connection with the performance of its obligations under this Agreement, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Company by such Holder expressly for use therein, or to the extent that such information relates to such Holder or such Holder’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement, such Prospectus or in any amendment or supplement thereto (it being understood that the Holder has approved Annex A hereto for this purpose) or (ii) in the case of an occurrence of an event of the type specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated, defective or otherwise unavailable Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated, defective or otherwise unavailable for use by such Holder and prior to the receipt by such Holder of the Advice contemplated in Section 6(c). The Company shall notify the Holders promptly of the institution, threat or assertion of any Proceeding arising from or in connection with the transactions contemplated by this Agreement of which the Company is aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such indemnified person and shall survive the transfer of any Registrable Securities by any of the Holders in accordance with Section 6(f).

 

(b) Indemnification by Holders. Each Holder shall, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, to the extent arising out of or based solely upon: any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading (i) to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by such Holder to the Company expressly for inclusion in such Registration Statement or such Prospectus or (ii) to the extent, but only to the extent, that such information relates to such Holder’s information provided in the Selling Stockholder Questionnaire or the proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by such Holder expressly for use in a Registration Statement (it being understood that the Holder has approved Annex A hereto for this purpose), such Prospectus or in any amendment or supplement thereto. In no event shall the liability of a selling Holder be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue statement or omission) received by such Holder upon the sale of the Registrable Securities included in the Registration Statement giving rise to such indemnification obligation.

 

 

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially and adversely prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses, (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding, or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

 

Subject to the terms of this Agreement, all reasonable fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten Trading Days of written notice thereof to the Indemnifying Party, provided that the Indemnified Party shall promptly reimburse the Indemnifying Party for that portion of such fees and expenses applicable to such actions for which such Indemnified Party is finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) not to be entitled to indemnification hereunder.

 

 

(d) Contribution. If the indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless for any Losses, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in this Agreement, any reasonable attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms.

 

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. In no event shall the contribution obligation of a Holder of Registrable Securities be greater in amount than the dollar amount of the proceeds (net of all expenses paid by such Holder in connection with any claim relating to this Section 5 and the amount of any damages such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission) received by it upon the sale of the Registrable Securities giving rise to such contribution obligation.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

 

 

6. Miscellaneous.

 

(a) Remedies. In the event of a breach by the Company or by a Holder of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. Each of the Company and each Holder agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy at law would be adequate.

 

(b) No Piggyback on Registrations. Neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statements other than the Registrable Securities.

 

(c) Discontinued Disposition. By its acquisition of Registrable Securities, each Holder agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue disposition of such Registrable Securities under a Registration Statement until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus (as it may have been supplemented or amended) may be resumed. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as promptly as is practicable. The Company agrees and acknowledges that any periods during which the Holder is required to discontinue the disposition of the Registrable Securities hereunder shall be subject to the provisions of Section 2(d).

 

(d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Required Holders, provided that, if any amendment, modification or waiver disproportionately and adversely impacts a Holder (or group of Holders), the consent of such disproportionately impacted Holder (or group of Holders) shall be required. If a Registration Statement does not register all of the Registrable Securities pursuant to a waiver or amendment done in compliance with the previous sentence, then the number of Registrable Securities to be registered for each Holder shall be reduced pro rata among all Holders and each Holder shall have the right to designate which of its Registrable Securities shall be omitted from such Registration Statement. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of a Holder or some Holders and that does not directly or indirectly affect the rights of other Holders may be given only by such Holder or Holders of all of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the first sentence of this Section 6(d). No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

 

 

(e) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be delivered as set forth in the Purchase Agreement.

 

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Holders of the then outstanding Registrable Securities. Each Holder may assign their respective rights hereunder in the manner and to the Persons as permitted under Section 5.7 of the Purchase Agreement.

 

(g) No Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of its Subsidiaries has previously entered into any agreement granting any registration rights with respect to any of its securities to any Person that have not been satisfied in full.

 

(h) Execution and Counterparts. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(i) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be determined in accordance with the provisions of the Purchase Agreement.

 

(j) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any other remedies provided by law.

 

(k) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(l) Headings. The headings in this Agreement are for convenience only, do not constitute a part of the Agreement and shall not be deemed to limit or affect any of the provisions hereof.

 

(m) Independent Nature of Holders’ Obligations and Rights. The obligations of each Holder hereunder are several and not joint with the obligations of any other Holder hereunder, and no Holder shall be responsible in any way for the performance of the obligations of any other Holder hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holders are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by this Agreement or any other matters, and the Company acknowledges that the Holders are not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or transactions. Each Holder shall be entitled to protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Holder to be joined as an additional party in any proceeding for such purpose. The use of a single agreement with respect to the obligations of the Company contained was solely in the control of the Company, not the action or decision of any Holder, and was done solely for the convenience of the Company and not because it was required or requested to do so by any Holder. It is expressly understood and agreed that each provision contained in this Agreement is between the Company and a Holder, solely, and not between the Company and the Holders collectively and not between and among Holders.

 

********************

 

(Signature Pages Follow)

 

 

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

	NanoVibronix, Inc.
	By:
	Name:
	Title:

 

[SIGNATURE PAGE OF HOLDERS FOLLOWS]

 

 

[SIGNATURE PAGE OF HOLDERS TO NAOV RRA]

 

 

Name of Holder: __________________________

 

Signature of Authorized Signatory of Holder: __________________________

 

Name of Authorized Signatory: _________________________

 

Title of Authorized Signatory: __________________________

 

 

[SIGNATURE PAGES CONTINUE]

 

 

Annex A

 

Plan of Distribution

 

Each Selling Stockholder (the “Selling Stockholders”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling securities:

 

	●	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	●	block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
	●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
	●	an exchange distribution in accordance with the rules of the applicable exchange;
	●	privately negotiated transactions;
	●	settlement of short sales;
	●	in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per security;
	●	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
	●	a combination of any such methods of sale; or
	●	any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.

 

 

In connection with the sale of the securities or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The Selling Stockholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

 

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

 

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

 

SELLING SHAREHOLDERS

 

The common stock being offered by the selling shareholders are those issuable to the selling shareholders upon conversion of the debentures. For additional information regarding the issuances of those debentures, see “Private Placement of Debentures” above. We are registering the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the debentures, the selling shareholders have not had any material relationship with us within the past three years.

 

The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of the debentures, as of ________, 2025, assuming conversion of the debentures held by the selling shareholders on that date, without regard to any limitations on conversions.

 

The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.

 

In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of the maximum number of shares of common stock issuable upon conversion of the debentures, determined as if the outstanding debentures were converted in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the conversion of the debentures. The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

 

Under the terms of the debentures, a selling shareholder may not convert the debentures to the extent such conversion would cause such selling shareholder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stock which would exceed 9.99% of our then outstanding common stock following such conversion, excluding for purposes of such determination shares of common stock issuable upon conversion of such debentures which have not been converted. The number of shares in the second and fourth columns do not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

 

Name of Selling Shareholder		Number of shares of Common Stock Owned Prior to Offering		Maximum Number of shares of Common Stock to be Sold Pursuant to this Prospectus		Number of shares of Common Stock Owned After Offering

 

 

 

Exhibit 23.1

 

Consent of Independent Auditor

 

We consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-274482, 333-273574, 333-251264, and 333-236000) and Form S-8 (File Nos. 333-259274 and 333-205577) of NanoVibronix, Inc. of our report dated February 14, 2025, with respect to the consolidated financial statements of ENvue Medical Holdings Corp. (formerly Envizion Medical Holding Corp.) included in NanoVibronix, Inc.’s Current Report on Form 8-K dated February 14, 2025, filed with the Securities and Exchange Commission.

 

/s/ KOST FORER GABBAY & KASIERER

 

A Member of Ernst & Young Global

 

Tel Aviv, Israel
February 14, 2025

 

 

Exhibit 99.1

 

ENVUE MEDICAL HOLDINGS, CORP. (FORMERLY ENVIZION HOLDINGS CORP.)

INDEX TO FINANCIAL STATEMENTS 

 

	Page
Audited Consolidated Financial Statements
Reports of Independent Auditors (PCAOB ID: 1281)	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-5
Consolidated Statements of Shareholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7
Notes to Consolidated Financial Statements	F-8

  

 

 

REPORT OF INDEPENDENT AUDITORS

To the Shareholders and the Board of Directors of

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD)

 

Opinion

 

We have audited the consolidated financial statements of Envue Medical Holdings Corp. (Successor) (the Company), which comprise the consolidated balance sheets as of December 31, 2023 (Predecessor) and 2022 (Predecessor), and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 (Predecessor) and 2022 (Predecessor), and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s Predecessor has suffered recurring losses and negative cash flows from operations, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

 

Responsibilities of Management for the Financial Statements

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

 

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

 

Auditor’s Responsibilities for the Audit of the Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

 

In performing an audit in accordance with GAAS, we:

 

●

Exercise professional judgment and maintain professional skepticism throughout the audit.

 

●

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

 

●

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

 

●

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 

●

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.

 

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

 

Tel-Aviv, Israel	KOST FORER GABBAY & KASIERER
February 14, 2025	A Member of Ernst & Young Global

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

		Predecessor
		December 31,
		2023				2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			103				290
Restricted cash			30				95
Account receivables (net of allowance for credit losses of $9 and $0 at December 31, 2023 and 2022, respectively)			167				277
Other account receivables			59				250
Inventory			307				1,287
Total current assets			666				2,199
LONG-TERM ASSETS:
Right-of-use assets			197				600
Property, plant and equipment, net			459				679
Total long-term assets			656				1,279
Total assets			1,322				3,478

 

The accompanying notes are an integral part of the consolidated financial statements

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

		Predecessor
		December 31,
		2023				2022
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Account payables			934				612
Other accounts payables			1,772				1,415
Current portion of lease liability			139				198
Short-term loans			2,260				-
Total current liabilities			5,105				2,225
LONG-TERM LIABILITIES:
Warrant liability			21				125
SAFE liability			92				-
Lease liability			22				372
Total long-term liabilities			135				497
COMMITMENTS AND CONTIGENCIES
SHAREHOLDERS’ EQUITY:
Predecessor Ordinary shares of NIS 0.01 par value - Authorized: 10,000,000 shares at December 31, 2023 and 2022; Issued and outstanding: 2,896,821 and 2,888,597 shares as of December 31, 2023 and December 31, 2022, respectively			8				8
Additional paid-in capital			27,334				26,974
Accumulated deficit			(31,260	)			(26,226	)
Total shareholders’ equity (deficit)			(3,918	)			756
Total liabilities and shareholders’ equity			1,322				3,478

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share and per share data)

 

		Predecessor
		Year ended December 31,
		2023				2022
Revenues			1,137				506
Cost of sales			(1,692	)			(788	)
Gross profit (loss)			(555	)			(282	)
Research and development			(1,704	)			(2,340	)
Selling and marketing			(1,922	)			(2,892	)
General and administrative			(1,961	)			(2,824	)
Operating income (loss)			(6,142	)			(8,338	)
Finance income (expense), net			1,121				963
Income (loss) before taxes on income			(5,021	)			(7,375	)
Taxes on income			(13	)			(22	)
Net loss			(5,034	)			(7,397	)
Basic and diluted loss per share			(1.74	)			(2.82	)
Weighted average number of ordinary share used in computing basic and diluted net loss per share			2,893,770				2,623,364

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

U.S. dollars in thousands

 

										Predecessor
		Ordinary shares								Additional paid-in				Accumulated				Total shareholders’
		Number				Amount				capital				deficit				equity (deficit)
Balance as of January 1, 2022			2,237,763			$	6			$	21,422			$	(18,829	)		$	2,599
Issuance of ordinary shares			650,834				2				5,214				-				5,216
Share-based payment			-				-				338				-				338
Net loss			-				-				-				(7,397	)			(7,397	)
Balance as of December 31, 2022			2,888,597			$	8			$	26,974			$	(26,226	)		$	756
Capital contributions from related parties			-				-				141				-				141
Exercise of warrants into ordinary shares			8,224				*)				207				-				207
Share-based payment			-				-				12				-				12
Net loss			-				-				-				(5,034	)			(5,034	)
Balance as of December 31, 2023			2,896,821			$	8			$	27,334			$	(31,260	)		$	(3,918	)

 

*) Represents an amount lower than $1.

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

 

		Predecessor Year ended December 31,
		2023				2022
Cash flows from operating activities:
Net loss			(5,034	)			(7,397	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			263				149
Remeasurement of embedded derivatives			(152	)			-
Finance expenses			764				235
Decrease in operating lease right-of-use assets			191				112
Decrease in operating lease liabilities			(197	)			(134	)
Share-based payment expense			12				338
Remeasurement of warrants liability			(953	)			(1,157	)
Remeasurement of SAFE liability			(792	)			-
Decrease (increase) in other account receivables			191				(91	)
Decrease (increase) in account receivables			110				(88	)
Decrease (increase) in inventory			964				(64	)
Increase in account payables			323				397
Increase in other account payables			357				493
Net cash used in operating activities			(3,953	)			(7,207	)
Cash flows from investing activities:
Purchase of Property, plant and equipment			(27	)			(589	)
Net cash used in investing activities			(27	)			(589	)
Cash flows from financing activities:
Exercise of warrants to ordinary shares			207				-
Capital contributions			141
Proceeds from short term loan			1,150				-
Proceeds from bifurcated embedded derivatives			516				-
Proceeds from issuance of SAFE liability			883
Proceeds from issuance of Warrants liability			849				665
Proceeds from issuance of ordinary shares			-				5,296
Net cash provided by financing activities			3,746				5,961
Exchange differences on balances of cash and cash equivalents			(18	)			(235	)
Increase in cash and cash equivalents and restricted cash			(252	)			(2,070	)
Cash and cash equivalents and restricted cash at the beginning of the year			385				2,455
Cash and cash equivalents and restricted cash at the end of the year			133				385
Supplemental disclosures of cash flows activities:
Non-cash activity:
Recognition (derecognition) of right-of-use asset and lease liability			(213	)			704
Cash paid during the year for:
Income taxes			4				2
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents			103				290
Restricted cash			30				95
			133				385

 

The accompanying notes are an integral part of the consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 1:- GENERAL

 

a.

ENvizion Medical Ltd. (hereinafter: the “Predecessor”) was incorporated and registered in Israel on October 1, 2017, and commenced its operations on November 1, 2017. The Predecessor was engaged in the research, development, marketing, and sale of medical equipment in the field of enteral feeding.

 

The Predecessor was a publicly traded company traded on the Tel-Aviv stock exchange under the ticker ENVM.

 

On January 31, 2024, the Predecessor filed a petition to initiate insolvency proceedings under the Israeli law. In March 2024, the Israeli court appointed a trustee to manage the operations of the Predecessor (see note 17).

 

On June 20, 2024, Alpha Capital Anstalt, by means of the Envue Medical Holdings Corp. (previously: Envizion Medical Holding Corp.) (the “Company”), completed the acquisition of the Predecessor’s key assets, mainly its technology (IP), customer relationships, inventory and its 100% holding of the shares of Envue Medical (USA) Inc. (previously: Envizion Medical (USA) Inc.), a wholly owned subsidiary which acted as a distributor of the Predecessor (collectively: “the Predecessor operation”). The Company was incorporated on June 5, 2024, under the laws of the State of Delaware.

 

b.

The Predecessor operation incurred significant losses and negative cash flows from operating activities since its inception. The Company’s ability to successfully execute its business plan is primarily dependent on its ability to raise additional funds to support its operations. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the date of issuance of these consolidated financial statements. The financial statements do not include any adjustments regarding asset values and their classification that might be required if the Company is unable to continue operating as a going concern.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

 

a.

Basis of presentation and Principles of consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of the Predecessor and its subsidiary. Intercompany accounts and transactions have been eliminated upon consolidation.

 

b.

Use of estimates:

 

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

c.

Segment Information

 

The Predecessor operates in one operating and reportable segment, and this segment is the only reporting unit. Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker, who is the Predecessor’s CEO, in deciding how to allocate resources and assessing performance. The Predecessor’s chief operating decision maker allocates resources and assesses performance based upon financial information at the consolidated level.

 

d.

Financial statements in U.S. dollars:

 

A majority of the revenues of the Predecessor are generated in U.S. dollars (“dollars”). In addition, a significant portion of the Predecessor and its subsidiary costs are incurred in dollars. The Predecessor’s management has determined that the dollar is the primary currency of the economic environment in which the Predecessor and its subsidiary principally operate. Thus, the functional and reporting currency of the Predecessor and its subsidiary is the dollar.

 

Accordingly, monetary accounts maintained in currencies other than the dollar are remeasured into dollars in accordance with ASC 830, “Foreign Currency Matters.” All transaction gains and losses from remeasurement of monetary balance sheet items are reflected in earnings as finance income or expense, as appropriate.

 

e.

Cash, Cash Equivalents and Restricted Cash:

 

Cash and cash equivalents consist of cash in banks and highly liquid investments with an original maturity of three months or less at the date of purchase. The Predecessor maintains certain cash amounts restricted as to its withdrawal or use. The Predecessor’s restricted cash primarily consists of bank deposits collateralizing the Predecessor’s operating leases and credit cards.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

f.

Account receivables:

 

Account receivables are recorded net of credit losses allowance for any potential uncollectible amounts. The Predecessor makes estimates of expected credit and collectability trends for the allowance for credit losses based upon its assessment of various factors, including historical collectability experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.

 

g.

Inventory:

 

Inventory costs include costs incurred to bring inventory to its current condition, including materials, manufacturing costs, inbound freight and other costs. The Predecessor values its inventory at cost, using a first in, first out basis. Net realizable value is estimated based upon assumptions made about future demand and market conditions. If the Predecessor determines that the estimated net realizable value of its inventory is less than the carrying value of such inventory, a charge to cost of revenue is recorded to reflect the lower of cost or net realizable value.

 

h.

Leases:

 

In accordance with ASC Topic 842, Leases, the Predecessor determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Predecessor obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Predecessor has a right to direct the use of the asset.

 

The Predecessor elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less.

 

ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease term, plus any initial direct costs incurred. The lease liability is initially measured at lease commencement date based on the discounted present value of lease payments over the lease term. The implicit rate within the operating leases is generally not determinable, therefore the Predecessor uses its Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Predecessor’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend or terminate the lease. An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Predecessor will exercise that option. An option to terminate is considered unless it is reasonably certain that the Predecessor will not exercise the option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components for its leases.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

i.

Property, plant and equipment:

 

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:

 

		%		Mainly %
Laboratory equipment		10		10
Computers, office furniture and equipment		6 - 33		33
Leasehold improvements				The shorter of term of the lease or the useful life of the asset

 

j.

Impairment of long-lived assets and ROU assets:

 

The Predecessor’s long-lived assets are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years 2023 and 2022, no impairment losses have been identified.

 

k.

Research and development costs:

 

Research and development costs are expensed as incurred. Research and development costs include payroll and personnel expenses, consulting costs, external contract research and development expenses.

 

l.

Revenue recognition:

 

The Predecessor recognizes revenue in accordance with ASC Topic 606, Revenue from contracts with customers (“ASC 606”) and determines revenue recognition through the following steps:

 

1.

Identification of the contract, or contracts, with a customer;

 

2.

Identification of the performance obligations in the contract;

 

3.

Determination of the transaction price;

 

4.

Allocation of the transaction price to the performance obligations in the contract; and

 

5.

Recognition of revenue when, or as, the performance obligations are satisfied.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

The Predecessor generates revenue from sales of its products which consists of insertion systems (“Systems”), Nasogastric tubes and customer training services. Revenue from product sales is recognized at a point in time when control of the product is transferred, which is generally upon shipment to the customer. Revenue from training services is recognized over time, while the Predecessor provide the services, which are usually completed in under a week. Payments are typically due within 30 days.

 

The Predecessor regularly sells its Systems and Nasogastric tubes on a stand-alone basis and therefore concluded these products are separate performance obligations. The Predecessor also concluded that training services are capable of being distinct and separately identifiable and therefore should be accounted for as a separate performance obligation. When a contract includes one of these products or services, the entire transaction price is allocated to that product or service. When a contract includes combination of products and services, the transaction price is allocated to each performance obligation on a stand-alone selling price basis. The stand-alone selling prices are generally determined based on the prices at which the Company separately sells the products and services.

 

The Predecessor’s contracts with its customers generally do not include rights of return. The Predecessor applied the practical expedient in ASC 606 and did not evaluate payment terms of one year or less for the existence of a significant financing component.

 

Revenue is recognized net of any taxes collected from customers which are subsequently remitted to governmental entities (e.g., sales tax and other indirect taxes). The Company elected to not disclose information about remaining performance obligations that have original expected durations of one year or less.

 

As part of its contracts, the Predecessor provides assurance type warranty services to its customers, in accordance with legal provisions or industry standards to ensure the quality of the products. As such, the Predecessor recognizes a provision for warranties in its financial statements as applicable. As of December 31, 2023 and 2022, the Predecessor’s provision for warranty amounted to $60 and $63, respectively.

 

o. Short term loans:

 

The Predecessor applies ASC 470, “Debt”. In accordance with ASC 470, the Predecessor first allocates the proceeds to freestanding financial instrument that are measured at fair value at each reporting date, based on their fair value. The remaining proceeds are allocated between the debt and any bifurcated embedded derivatives. In accordance with ASC 815 “Derivatives and Hedging” (“ASC 815”), the Predecessor bifurcates embedded derivatives that require bifurcation and accounts for them separately from the debt host.

 

The Predecessor applies ASC 815, “Derivatives and Hedging” to all features related to the debt. When features meet the definition of a derivative, are not clearly and closely related to the characteristics of the debt host, and do not qualify for any scope exceptions within ASC 815, they are required to be accounted for separately from the debt instrument and recorded as derivative instrument liabilities. The fair value assigned to the embedded derivative instruments is marked to market in each reporting period. The Predecessor has recorded embedded derivative liabilities related to its debt instruments. For further information regarding the debt instruments and the embedded derivatives, see Note 8.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

q.

Cost of revenues:

 

Cost of revenues comprise of costs paid to employees, production costs and inventory write-down, when applicable.

 

r.

Fair value measurement:

 

The Predecessor applies ASC No. 820, “Fair Value Measurements and Disclosures”, with respect to fair value measurements of all financial assets and liabilities.

 

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

 

Level 1 -

Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.

 

Level 2-

Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.

 

Level 3 -

Inputs are unobservable inputs based on the Predecessor’s own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The estimated fair value of cash equivalents, restricted cash, accounts receivable, trade payables, other accounts payable and accrued expenses approximate their carrying value as presented, due to their short term maturities. Liabilities related to warrants, SAFEs and embedded derivatives were classified as Level 3 fair value measurements as they are not traded in active markets and their fair value is measured using Level 3 inputs.

 

s.

Concentration of Credit Risk:

 

Financial instruments that potentially subject the Predecessor to credit risk primarily consist of cash and cash equivalents and accounts receivables.

 

For cash and cash equivalents, the Predecessor is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets exceed insured limits.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

The Predecessor places its cash and cash equivalents deposits with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts.

 

The Predecessor performs ongoing credit evaluations of its customers and, to date, has not experienced any significant losses.

 

As of December 31, 2023, and 2022 there were several customers that accounted for 10% or more of the Predecessor’s revenue.

 

		Year ended December 31,
		2023				2022
Customer A			9	%			17	%
Customer B			39	%			-
Customer C			6	%			13	%
Customer D			18	%			11	%

 

The Predecessor has no off-balance-sheet concentration of credit risk.

 

t.

Legal and other contingencies

 

The Predecessor accounts for its contingent liabilities in accordance with ASC 450, Contingencies (“ASC 450”). A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, the Predecessor reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Predecessor accrues a liability for the estimated loss. As of December 31, 2023, and 2022, the Predecessor is a party to a certain litigation, see also Note 16(2).

 

u.

Severance pay:

 

The Israeli Severance Pay Law, 1963 (“Severance Pay Law”), specifies that employees are entitled to severance payment, following the termination of their employment. Under the Severance Pay Law, the severance payment is calculated as one month salary for each year of employment, or a portion thereof.

 

The Predecessor’s liability for severance pay is covered by the provisions of Section 14 of the Severance Pay Law (“Section 14”). Under Section 14, employees are entitled to monthly deposits, at a rate of 8.33% of their monthly salary, made on behalf of the employee with insurance companies. Payments in accordance with Section 14 release the Predecessor from any future severance payments in respect of those employees.

 

As a result, the Predecessor does not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Predecessor’s balance sheet. Severance expenses for the years ended December 31, 2023, and 2022, amounted to $81 and $86, respectively.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

v.

Share-based payment transactions:

 

The Predecessor accounts for share-based compensation in accordance with ASC 718, “Compensation - Stock Compensation” (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model.

 

The value of the portion of the award is recognized as an expense over the requisite service periods in the Predecessor’s Consolidated Statements of Operations, based on the accelerated method. The Company recognizes forfeitures of awards as they occur.

 

The Predecessor has selected the Black-Scholes-Merton option-pricing model as the most appropriate fair value method for its share options granted.

 

The determination of the fair value of the Predecessor’s stock option awards is based on a variety of factors, mainly the Predecessor’s common stock price, expected volatility and the expected life of awards. The Company has limited option exercise history and has elected to estimate the expected life of the stock option awards using the “simplified method” with the continued use of this method extended until such time that the Company has sufficient exercise history. The expected volatility of the price of such stock is based on volatility of similar companies whose stock prices are publicly available over a historical period equivalent to the option’s expected term. There were no new grants during the years ended December 31 2023 and 2022.

 

w.

Taxes on income:

 

The Predecessor accounts for income taxes in accordance with ASC No. 740, “Income Taxes”, (“ASC 740”) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

 

The Predecessor provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

 

ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. As of December 31, 2023, and 2022, no liability for unrecognized tax benefits was recorded.

 

x.

Warrants and Simple Agreements for Future Equity (SAFE) liability:

 

The Predecessor accounts for warrants and SAFEs as either equity-classified or liability-classified instruments based on an assessment of the instrument specific terms and applicable authoritative guidance.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

The assessment considers whether the warrants and SAFEs are freestanding financial instruments, meet the definition of a liability under ASC 480, are indexed to the Predecessor’s own stock and whether the instruments are eligible for equity classification under ASC 815-40. This assessment is conducted at the time of instrument issuance and as of each subsequent reporting period end date while the instrument is outstanding.

 

Warrants and SAFEs that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Warrants and SAFEs that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter.

 

All the Predecessor’s warrants were classified as liabilities for all periods presented as their exercise price is denominated in New Israeli Shekels and therefore do not meet the requirements to be classified as equity under ASC 815-40.

 

The Predecessor’s SAFEs were classified as liabilities under ASC 480 since the SAFEs embody an obligation that is indexed to an obligation to repurchase the Predecessor’s shares as the Predecessor may be obligated to repurchase the SAFEs in cash if a change in control occurs, which is not under the Predecessor’s control.

 

y.

Basic and diluted earnings (loss) per share:

 

Basic and diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year.

 

Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Share”.

 

All outstanding share options, SAFEs and warrants for the years ended December 31, 2023 and 2022 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented.

 

The total number of shares related to outstanding options to Ordinary Shares and warrants for the years ended December 31, 2023 and 2022 excluded from the calculations of diluted net loss per share were as follows:

 

		Year ended December 31,
		2023				2022
SAFE			1,073,107				-
Options			291,844				465,068
Warrants			1,060,851				930,750
Total			1,352,695				1,395,818

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

z.

Recently adopted and recently issued accounting pronouncements:

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment.

 

This standard is effective for the Predecessor for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact on its financial statement disclosures.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid.

 

For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted.

 

The Company is currently evaluating the impact on its financial statement disclosures.

 

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure in the notes to the financial statements, of prescribed categories of expenses within relevant income statement captions.

 

The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

 

Early adoption is permitted. The Company is currently evaluating the impact on its financial statements disclosures.

 

NOTE 3:- INVENTORY

 

		Predecessor
		December 31,
		2023				2022
Raw materials			220				929
Finished goods			87				358
			307				1,287

 

(1)

Inventory write-down charged to the cost of sales amounted to $309 thousand and $43 thousand for the years 2023 and 2022, respectively, to reduce inventory to its net realizable value and for any excess or obsolete inventory.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 4:- PROPERTY, PLANT AND EQUIPMENT

 

		Predecessor
		December 31,
		2023				2022
Cost:
Computer and software			166				155
Office equipment and furniture			60				55
Leasehold improvements			489				481
Equipment			416				397
			1,131				1,088
Accumulated depreciation:			(672	)			(409	)
Property, plant and equipment, net			459				679

 

Depreciation expense amounted to $263 and $149 for the years ended December 31, 2023, and 2022, respectively.

 

NOTE 5:- OTHER ACCOUNTS PAYABLES

 

		Predecessor
		December 31,
		2023				2022
Accrued expenses			1,435				1,180
Employees and related			337				235
			1,772				1,415

 

 

NOTE 6: - WARRANT LIABILITY

 

The Predecessor warrants are classified as liabilities, measured at fair value through earnings as they do not meet all the equity classification criteria pursuant to ASC 815-40. The change in fair value of warrant liabilities was recorded in finance income, net in the consolidated statements of operations.

 

a.

In 2021, the Predecessor issued 177,560 Series 1 warrants and 177,560 Series 2 Warrants. Series 1 Warrants had an exercise price of NIS 79.06 and Series 2 Warrant NIS 94.88. The Series 1 warrants expired unexercised in May 2022. On May 16, 2023, 8,224 Series 2 warrants were exercised and the remaining warrants expired unexercised.

 

For the years ended December 31, 2023, and 2022, the Predecessor recognized remeasurement income of nil and $585, respectively.

 

The Predecessor used the Black-Scholes option pricing model to determine the fair value of the warrants. Below are the assumptions used for the fair value measurement:

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 6: - WARRANT LIABILITY (Cont.)

 

		December 31, 2022
Share price			NIS 18.21
Exercise price			NIS 94.88
Expected volatility in share prices (%)			59.77
Risk-free interest rate (%)			3.50
Contractual life of options for shares (years)			0.37

 

b.

On February 9, 2022, as part of share issuance (see also Note 11(b)(1)), the Predecessor issued 333,928 investor warrants exercisable over 30 months. The exercise price for each warrant was NIS 90.

 

As of December 31, 2023, no investor warrants were exercised.

 

The Predecessor used the Black-Scholes option pricing model to determine the fair value of the warrants. Below are the assumptions used for the fair value measurement:

 

December 31, 2023

December 31, 2022

February 9, 2022

Share price

NIS 3.13

NIS 18.21

NIS 33.13

Exercise price

NIS 90

NIS 90

NIS 90

Expected volatility in share prices (%)

82.08

57.42

55.03

Risk-free interest rate (%)

4.12

3.77

0.71

Contractual life of options for shares (years)

0.59

1.61

2.50

 

For the years ended December 31, 2023, and 2022, the Predecessor recorded $19 and $279 of remeasurement income, respectively.

 

c.

On August 4, 2022 the Predecessor issued 32,850 Series 3 warrants and 98,550 Series 4 warrants (see also Note 11(b)(2)). The exercise price for the Series 3 warrant was NIS 27 per share, and NIS 48 for the Series 4 warrant. On September 29, 2022, the Predecessor issued an additional 185,506 Series 3 warrants. The Series 3 warrants expired on February 1, 2023.

 

As of December 31, 2023, none of these warrants were exercised.

 

The fair value of both Series 3 and Series 4 warrants was estimated as of December 31, 2023 and 2022 using Black-Scholes option pricing model.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 6: - WARRANT LIABILITY (Cont.)

 

Below are the assumptions used for the fair value measurement:

 

December 31, 2023

December 31, 2022

December 31, 2022

Series 4

Series 4

Series 3

Share price

NIS 3.13

NIS 18.91

NIS 18.91

Exercise price

NIS 48

NIS 48

NIS 27

Expected volatility in share prices (%)

82.08

59.94

59.81

Risk-free interest rate (%)

4.12

3.58

3.46

Contractual life of options for shares (years)

0.50

1.50

0.08

 

		December 31, 2022				September 29, 2022
		Series 3 – additional warrants				Series 3 – additional warrants
Share price			NIS 18.91				NIS 23.31
Exercise price			NIS 34				NIS 34
Expected volatility in share prices (%)			69.56				69.61
Risk-free interest rate (%)			3.67				2.68
Contractual life of options for shares (years)			0.75				1

 

As of December 31, 2023, the fair value of the Series 4 warrants was approximately nil.

 

In the year ended December 31, 2023, and 2022, the Predecessor recognized remeasurement income of $106 and $272, respectively.

 

d.

In January, February and March 2023 the Predecessor issued SAFEs (Simple Agreements for Future Equity), and warrants as part of an investment agreement with 12 private investors, totaling approximately $1,732. The Predecessor issued 279,793 Series A warrants and 246,224 Series B warrants in these transactions(see Note 9).

 

The Predecessor concluded that the SAFEs and warrants were freestanding financial instruments and that the SAFEs and warrants should be classified as liabilities measured at fair value through earnings. As such, the Predecessor allocated the transaction consideration to the warrants and SAFEs at fair values of $849 and $883, respectively. As of December 31, 2023, none of these warrants and SAFEs were exercised or redeemed.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 6: - WARRANT LIABILITY (Cont.)

 

The Predecessor used the Black-Scholes option pricing model to determine the fair value of the Series A warrants and the Series B warrants. Below are the assumptions used for the valuation of Series A and Series B warrants at the issuance date and as of the reporting date:

 

		December 31, 2023				March, 2023				February 2023				January 2023
Share price			NIS 3.13				NIS 19.1				NIS 19.84				NIS 20.85
Exercise price			NIS 22-25				NIS 22-25				NIS 22-25				NIS 22-25
Expected volatility in share prices (%)			69.79-74.93				59.51				60.89				61.79
Risk-free interest rate (%)			3.82-3.64				4.52				3.65				3.68
Contractual life of options for shares (years)			2-4				2.9-4.9				2.9-4.9				2.9-4.9

 

 

Changes in the warrant liability balance

 

Below is the change in the warrants liability balance for the years ending December 31, 2023 and 2022:

 

		For the year ending December 31, 2023
Balance as of December 31, 2022			125
Issuance			849
Change in fair value			(953	)
Balance as of December 31, 2023			21

 

		For the year ending December 31, 2022
Balance as of December 31, 2021			617
Issuance			665
Change in fair value			(1,157	)
Balance as of December 31, 2022			125

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 7:- LEASE

 

The Predecessor entered into operating leases primarily for offices, vehicles and storage spaces. The leases have remaining lease terms of up to 3 years, some of which may include options to extend the leases for up to an additional 2 years. In July 2023, the Predecessor reassessed its lease liability since an option to extend the lease term for the Tel-Aviv offices was no longer reasonably certain to be exercised. The reassessment resulted in a decrease of $213 in its lease liability.

 

The components of operating lease costs were as follows:

 

		Year ended December 31,
		2023				2022
Operating lease cost		$	188			$	116
Total lease costs		$	188			$	116

 

Supplemental balance sheet information related to operating leases is as follows:

 

		December 31,
		2023				2022
Weighted average remaining lease term (in years)			1.03				3.77
Weighted average discount rate			18.6	%			8.7	%

 

Maturities of the Company’s operating lease liabilities as of December 31, 2023 were as follows:

 

		December 31, 2023
2024		$	149
2025			22
Total undiscounted lease payments			171
Less: imputed interest			(10	)
Present value of lease liabilities		$	161

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 8:- SHORT-TERM LOANS

 

1.

On April 30, 2023, Predecessor signed a short-term loan agreement with Covenant Group, a related party (see also Note 15), in the amount of $750. The fair value of loan as of April 30, 2023, was estimated at $619. As such, the difference between the proceeds received and the fair value of the loan in the amount of $131 was recorded as a capital contribution.

 

The loan principal bears an annual interest rate of 9% and was due for repayment on December 31, 2023. The agreement includes the following key provisions:

 

	a.	If the Predecessor defaults on payments payable under the loan agreement, the rate of the loan will be increase to 17%.
	b.	In the event of a liquidation (as defined in the loan agreement), the loan will be repaid at a multiple of three to six times the original loan amount.

 

The Predecessor has evaluated the loan for embedded derivatives required to be bifurcated and concluded that the increase in payments in the event of liquidation should be bifurcated from the debt host under ASC 815. Thus, the embedded derivatives were bifurcated from the debt host and accounted for at fair value through earnings.

 

The Predecessor allocated $95 to the embedded derivatives and the remaining consideration was allocated to the debt host. The debt host was measured at its amortized cost using the effective interest method. As of December 31, 2023, the carrying amount of the debt host and the accrued interest was $910.

 

As of December 31, 2023, the loan was not repaid and therefore bears interest of 17% from that date until full repayment.

 

For the year ended December 31, 2023, the Predecessor recorded finance expenses of $270 related to the debt host.

 

Below are the assumptions used for the valuation of the embedded derivatives at the issuance date and as of December 31, 2023:

 

		December 31, 2023				April 30, 2023
Probability of survival			22	%			50	%
Recovery rate parameter			36	%			36	%

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 8:- SHORT-TERM LOANS (Cont.)

 

2.

On August 16, 2023, the Predecessor signed a loan agreement for $80 (the “loan”) with the Predecessor’s CEO, who also serves as a director and is one of the Predecessor’s controlling shareholders(see also Note 15). The loan did not bear any interest. The loan was to be repaid within seven days from the date certain customer payments are actually received by the Predecessor, and in any case no later than September 30, 2023.

 

The fair value of loan as of August 16, 2023 was estimated at $70. As such, the difference between the proceeds received and the fair value of the loan at the amount of $10 was recorded as a capital contribution.

 

As of December 31, 2023, the loan was not repaid. As of December 31, 2023, the loan’s carrying amount was $80.

 

3.

In September and October, 2023, the Predecessor entered into loan agreements with Alpha Capital Anstalt (the “lender”) for an amount of $1,000 (which was transferred to the Predecessor in two installments of $333 and $667 in September 2023 and October 2023, respectively). The agreement includes the following key terms:

 

	a.	The loan will bear interest of 12%.
	b.	The maturity date was December 31, 2023.
	c.	If the Predecessor will not be involved in bankruptcy proceedings, the loan amount to be paid will increase by an “upside commission” in the amount of $1,000 by the maturity date.
	d.	If there is a default event, liquidation event or an equity financing event (As defined in the agreement) the loan and the upside commission will accelerate and will be payable.

 

The Predecessor has evaluated the loan for embedded derivatives required to be bifurcated and concluded that the payment of the upside commission and the acceleration of loan payment should be bifurcated from the debt host under ASC 815. Thus, the embedded derivatives were bifurcated from the debt host and accounted for at fair value through earnings.

 

As such, in September 2023, the Predecessor allocated $139 to the embedded derivatives and the reaming consideration was allocated to the debt host. In October 2023, the Predecessor allocated $280 to the embedded derivatives and the reaming consideration was allocated to the debt host. The debt host was measured at its amortized cost using the effective interest method. As of December 31, 2023, the carrying amount of the debt host and the accrued interest was $1,020. For the year ended December 31, 2023, the Predecessor recorded finance expenses of $441 related to the debt host.

 

Below are the assumptions used for the valuation of the embedded derivatives at the issuance date and as of the reporting date:

 

		December 31, 2023				September 30, 2023 and October 31, 2023
Probability of survival			22	%			40	%
Recovery rate parameter			47	%			47	%

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 8:- SHORT-TERM LOANS (Cont.)

 

4.

Below are the changes in the short-term loans line item (including embedded derivatives) for the year ended December 31, 2023:

 

		For the year ending December 31, 2023
Balance as of Dec. 31, 2022			-
Proceeds for short term loans			1,150
Proceeds for bifurcated embedded derivatives			516
Remeasurement of embedded derivatives			(152	)
Finance expenses			746
December 31, 2023			2,260

 

NOTE 9:- SAFE LIABILITY

 

In January, February and March 2023, the Predecessor entered a Simple Agreement for Future Equity (SAFE) investment agreements with 12 private investors.

 

The SAFEs will automatically convert upon the earlier of the following events:

 

	a.	A capital raise of at least $5 million in exchange for the issuance of Predecessor shares, where at least one investor contributes $500 (“Qualified Capital Raise”). At that time, the investment amount will be converted into Predecessor shares at a share price equal to 70% of the lowest share price in the Qualified Capital Raise (a 30% discount on the share price), or
	b.	December 31, 2024, where the conversion amount will be calculated at 65% of the average Predecessor share price over the 22 trading days preceding December 31, 2024 (a 35% discount).

 

In the event of a capital raise by the Predecessor that does not qualify as a Qualified Capital Raise, SAFE investors may convert their investment at a share price equal to 70% of the lowest share price in that capital raise (a 30% discount).

 

According to the terms of the SAFE agreement, upon the occurrence of any of the following events, the investment agreement will terminate, and the following provisions, among others, will apply:

 

(1) In the event of liquidation (whether voluntary or involuntary) before the end of the SAFE agreement period, the Predecessor will pay investors a total amount equal to twice the investment amount before the liquidation event and according to the priority set in the investment agreement.

 

(2) In the event of a liquidity event (which include a change in control) before the end of the investment agreement period, the Predecessor will pay investors a total amount equal to five times the investment amount before the completion of such liquidity event.

 

At the time of the issuance, the fair value of the SAFEs was estimated at $883.

 

 

NOTE 9:- SAFE LIABILITY (Cont.)

 

A summary of significant unobservable inputs (Level 3 inputs) used in measuring the SAFEs outstanding are as follows:

 

		December 31, 2023				January, February and March 2023
Principal amount		$	1,732				1,732
Implied discount rate			70.62%-79.35%				70.62%-79.35%
Term (years)			0.5				0.8
Fair value			92				883

 

As of December 31, 2023, the fair value of the SAFE liability was $92.

 

Below is the change in the SAFE Liability carrying amount for the Year Ended December 31, 2023:

 

		For the year ending December 31, 2023
Balance as of December 31, 2022			-
Fair value of SAFE at issuance			883
Change in fair value			(791	)
December 31, 2023			92

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 10:- FAIR VALUE MEASUREMENT

 

Financial liabilities

 

		December 31, 2023
		Level 1				Level 2				Level 3				Total
Liabilities measured at fair value:
Embedded derivatives			-				-				364				364
SAFE Liability			-				-				92				92
Warrants			-				-				21				21
Total			-				-				477				477

 

		December 31, 2022
		Level 1				Level 2				Level 3				Total
Liabilities measured at fair value:
Warrants			-				-				125				125
Total			-				-				125				125

 

NOTE 11:- SHAREHOLDERS EQUITY

 

	a.	Ordinary shares grant their holders the right to receive notice of and participate in shareholders’ meetings of the Predecessor and to vote therein, the right to appoint members of the Board of Directors, and the right to participate in the distribution of dividends and the distribution of surplus assets and funds upon the liquidation of the Predecessor.
	b.	Issuance of Ordinary Shares and Capital Raising:

 

	1.	On February 9, 2022, the general meeting approved a capital raising framework, which was approved by the Predecessor’s Board of Directors on December 27, 2021. The capital raise involved a private placement of approximately $3,760 from four investors. As part of the capital raise, the Predecessor issued 333,928 ordinary shares and 333,928 warrants to the investors, exercisable for a period of 30 months. The exercise price for each warrant is NIS 90 per share (see Note 6b). The issuance costs incurred by the Predecessor were $45. An amount of $42 was allocated to additional paid-in capital and the reminder at the amount of $3 was recognized in earnings.
	2.	On August 4, 2022, the Predecessor issued 131,400 ordinary shares and 32,850 Series 3 warrants and 98,550 Series 4 warrants in exchange for approximately $982 (see also Note 6(c)). The issuance costs incurred by the Predecessor were $27.

 

An amount of $21 was allocated to additional paid-in capital and the reminder at the amount of $6 was recognized in earnings.

 

 

NOTE 11:- SHAREHOLDERS EQUITY (Cont.)

 

c.

Share-Based Payment:

 

Under the Predecessor’s 2018 Share Incentive Plan, options can be granted to officers, directors, employees, and consultants of the Predecessor.

 

The option plan allows for the granting of options with a vesting period as determined by the Predecessor’s Board of Directors. The options have a lifespan of 10 years from the grant date unless otherwise specified by the Board.

 

In May 2021, the Predecessor granted 197,900 options to directors and officers, exercisable for 197,900 ordinary shares of the Predecessor. The options will vest in eight installments (every three months) over two years from the grant date.

 

The share-based compensation expense by line item in the accompanying Consolidated Statements of Operations is summarized as follows:

 

		Year ended December 31,
		2023				2022
Cost of sales		$	-			$	2
Research and development			2				53
Selling and marketing			2				55
General and administrative			8				228
			12				338

 

NOTE 11:- SHAREHOLDERS EQUITY (Cont.)

 

Summary of Predecessor’s Option Activity and Additional Information

 

						For the year ended December 31,
						2023																2022
		Amount of options				Weighted average exercise price				Weighted average Remaining contractual Term (in years)				Aggregate Intrinsic Value				Amount of options				Weighted average exercise price				Weighted average Remaining contractual Term (in years)				Aggregate intrinsic value
							$								$								$								$
Outstanding at beginning of period			465,068				7.03				7.64				-				467,751				8.15				8.64				-
Granted			-				-				-				-				-				-				-				-
Exercised			-				-				-				-				-				-				-				-
Forfeited			(173,224	)			-				-				-				(2,683	)			0.28				-				-
Outstanding at end of period			291,844				6.10				6.51								465,068				7.03				7.64				-
Vested at end of period			289,508				6.14				6.51								426,207				6.72				7.59

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 12: - BASIC AND DILUTED LOSS PER SHARE

 

		Year ended December 31,
		2023				2022
Numerator:
Net loss applicable to shareholders of ordinary shares		$	(5,034	)		$	(7,397	)
Denominator:
Number of ordinary shares used in computing basic and diluted net loss per share			2,893,770				2,623,364
Net loss per ordinary share, basic and diluted		$	(1.74	)		$	(2.82	)

 

NOTE 13:- INCOME TAXES

 

a.

Corporate tax in Israel and United States:

 

In Israel, ordinary taxable income is subject to a corporate tax rate of 23% for the years ended December 31, 2023 and 2022.

 

In the United States Federal tax rate was 21% for the years 2023 and 2022.

 

b.

Deferred income taxes -

 

Deferred taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts recorded for tax purposes. Significant components of the Predecessor’s deferred tax assets are as follows:

 

		Predecessor
		December 31,
		2023				2022
Deferred tax assets:
Operating loss carryforward			6,424				4,738
Reserves and allowance			156				82
Research and development			147				396
Operating lease liability			37				131
Gross deferred tax assets:			6,764				5,347
Less: Valuation allowance			(6,719	)			(5,209	)
Total deferred tax assets		$	45			$	138
Deferred tax liabilities: Operating lease right-of-use assets			(45	)			(138	)
Gross deferred tax liabilities:			(45	)			(138	)
Net deferred tax asset		$	-			$	-

 

As of December 31, 2023 and December 31, 2022, the Predecessor has provided a valuation allowance with respect to the deferred tax assets. Management believes that because the Predecessor has a history of losses, it is not more likely than not that the deferred tax assets will be realized.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 13:- INCOME TAXES (Cont.)

 

c.

Net operating loss carry-forwards:

 

The Predecessor has net operating loss carryforwards in Israel of approximately $27,900. The net operating losses in Israel are carried forward indefinitely.

 

d.

Tax assessments:

 

The Predecessor’s income tax return is subject to examination by federal, state and non-U.S. tax authorities. The Predecessor’s and its subsidiary in the United States were not subject to inspections from the inception date. As of December 31, 2023 the Predecessor’s tax years until 2019 are subject to statutes of limitation effective in Israel. For the U.S. subsidiary’s tax years until 2020, are subject to statutes of limitation.

 

e.

Effective income tax rate reconciliations:

 

In 2023 and 2022 the main reconciling item for the Predecessor’s tax rate is tax loss carryforwards and temporary differences, for which a valuation allowance was provided.

 

f.

Income taxes are comprised as follows:

 

		Year ended December 31,
		2023				2022
Current		$	13			$	22
Deferred			-				-
			13				22
Domestic			-				-
Foreign			13				22
			13				22

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 14:- GEOGRAPHIC INFORMATION AND SELECTED STATEMENTS OF INCOME DATA

 

a.

Summary information about geographic areas:

 

The Predecessor operates in one reportable segment (see Note 1 for a brief description of the Predecessor’s business). The total revenues are attributed to geographic areas based on the location of the Predecessor’s direct customers.

 

The following table presents total revenues and property and equipment, net, by geographic area:

 

1. Revenues based on location:

 

		For the year ending December 31
		2023				2022
Israel			-				54
US			1,137				452
Total revenues			1,137				506

 

2. Property and equipment, net and ROU assets:

 

		December 31,
		2023				2022
Israel			616				1,209
US			40				70
			656				1,279

 

b. Summary information about products:

 

The following table presents total revenues for the years ended December 31, 2023 and 2022 by products:

 

		Year ended December 31,
		2023				2022
Revenue from the sale of Nasogastric tubes			738				387
Revenue from the sale of Systems and related services			399				119
Total revenues			1,137				506

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 15: - RELATED PARTIES TRANSACTIONS

 

a. Balances with related parties

 

		Predecessor
		December 31
		2023				2022
		USD thousands
Other accounts payables			408				379
Short term loans			990				-
			1,398				379

 

b. Additional information

 

1. In February 2021, the Predecessor entered into new management agreements (the “New Management Agreements”) with companies controlled by the CEO and Chairman of the Board (“the Management Companies”). Under these agreements, effective from March 1, 2021, the management company controlled by the Predecessor’s CEO would be entitled to a monthly management fee of NIS 84,500 for its services, and the management company controlled by the Chairman of the Board would be entitled to a monthly management fee of NIS 76,000, representing 90% of a full-time position.

 

2. During 2023, Covenant Group (a company wholly owned by the Predecessor’s chairman of the Board of directors provided the Predecessor with a short-term loan (see also Note 8(1)).

 

3. During 2023, the Predecessor’s CEO provided the Predecessor with short-term loan (see also Note 8(2)).

 

NOTE 16: - CONTINGENT LIABILITIES, GUARANTEES AND COMMITMENT

 

1. Alpha Capital Anstalt has a first-degree lien on all current and future intellectual property rights of the Predecessor, without limitation on the amount, related to the loan provided in 2023 (see Note 8(3)). The Predecessor also has a second-degree lien up to the amount of the loan from the Predecessor’s CEO (see also Note 8(2)).

 

 

2. On September 28, 2023, the Predecessor received a lawsuit in the amount of approximately NIS 867 thousand, filed with the Tel Aviv-Jaffa District Labor Court by (1) Mr. Shay Tsuker, one of the controlling shareholders of the Predecessor who served as Chairman of the Board until March 2023, and (2) Shilutan Management and Holdings Ltd., owned by Mr. Tsuker (the “Management Company” and the “Plaintiffs”, respectively). The Plaintiffs claim that Mr. Tsuker was not paid in accordance with the management agreement between the Management Company and the Company, including payment for a notice period of approximately two and a half months (out of a 6-month notice period), a retirement bonus equivalent to 6 months’ management fees, and accrued vacation pay, plus linkage differentials and interest or compensation according to the Wage Protection Law, as applicable.

 

The Plaintiffs also allege that there was an employer-employee relationship between Mr. Tsuker and the Predecessor and that the management agreement between the Company and the Management Company was established to facilitate the payments. Adequate provision was included in the Predecessor consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

NOTE 17: - SUBSEQUENT EVENTS

 

The Company evaluated events occurring subsequent to December 31, 2023, through February 14, 2025, which is the date the consolidated financial statements were available to be issued.

 

1. On January 31, 2024, the Predecessor filed a petition for bankruptcy under the Israeli law to the Tel Aviv-Yafo District Court (in this section: the “Court”), the Predecessor also requested temporary relief, including permission for the Predecessor to make urgent payments, an order prohibiting the repayment of past debts of the Predecessor, a stay of all legal proceedings against it, and an order for the continuation of IT services for the Predecessor. The Court has granted the order to prohibit the repayment of past debts on February 1, 2024, and granted the request on February 5, 2024.

 

2. On March 27, 2024, the Court formally accepted the Predecessor’s petition and appointed a trustee for the Predecessor (hereinafter: the “Trustee”). The Court also granted a stay of all proceedings against the Predecessor in accordance with the provisions of Sections 25(3) and 29 of the Insolvency Law, a stay of all collection proceedings related to the Predecessor, and the suspension of the powers of the Board of Directors and officers of the Predecessor, including the CEO. The Court also granted the Trustee investigative powers in accordance with Sections 281(a) and (d) of the Insolvency Law.

 

3. On April 11, 2024, the Predecessor entered a “stalking horse” asset purchase agreement with Alpha Capital Anstalt (“Alpha”) to sell the Predecessor operation for the forgiveness of the short term loan provided to the Predecessor by Alpha and by providing additional financing to the Predecessor in the amount of $350 that would be forgiven if Alpha will be declared as the winning bidder. On April 17, 2024, the Court approved the “stalking horse” asset purchase agreement.

 

4. On May 15, 2024, the Court approved the proposal of Alpha as the winning bid for the purchase of the Predecessor operations and on June 20, 2024, the asset purchase agreement was closed and Alpha, by means of the Company, became the owner of the Predecessor operation.

 

5. During the period from its inception date and until December 31, 2024, the Company received loans from Alpha Capital Anstalt at the total amount of $2,217. During January and February 2025 an additional amount of $250 was received from Alpha Capital Anstalt. Based on the loan agreement, the loan bears no interest and is due and payable by demand of the lender.

 

6. On November 17, 2024, the Company submitted to the Israeli Tax Authorities a request to approve its new Equity Incentive Plan.

 

7. In November 2024 the Company filed a request to change its name from Envizion Holdings Corp. to ENvue Medical Holdings Corp., Change the name of Envizion Medical Inc to ENvue Medical (USA) Inc. and the name of Envizion Medical Israel Ltd. to ENvue Medical Israel Ltd. The names change was approved during January 2025.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

 

8. Merger with Nanovibronix, Inc.:

 

Agreement and Plan of Merger –

 

On February 14, 2025, ENvue Medical Holdings, Corp. (“the Company״ and ENvue”), NVEH Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), and NVEH Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”) entered into that certain Agreement and Plan of Merger (the “Merger Agreement”) with Nanovibronix, Inc., a Delaware corporation (the “Nano”).

 

NOTE 17: - SUBSEQUENT EVENTS (Cont.)

 

Pursuant to the terms of the Merger Agreement, Nano and the Company effected (i) a merger of First Merger Sub with and into the Company, with the First Merger Sub ceasing to exist and the Company becoming a wholly-owned subsidiary Nano (the “First Effective Time”) and (ii) the merger of the Company with and into Second Merger Sub (the “Second Merger” and such effective time, the “Second Effective Time” and, the Second Merger together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger (“Surviving Entity”). At the Second Effective Time, the certificate of formation of the Surviving Entity was amended and restated to, among other things, change the name of the Surviving Entity to “ENvue Medical Holdings LLC.” In connection with the Merger Agreement, Nano issued (i) 1,734,995 shares (the “Merger Shares”) of common stock, par value $0.001 per share (the “Common Stock”) to the holders of ENvue, which such number of shares represented no more than 19.9% (the “Exchange Cap”) of the outstanding shares of Common Stock immediately prior to the First Effective Time and (ii) 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”), as further described below, in excess of the Exchange Cap to the holders of ENvue in consideration for 100% of the Company. The Merger was consummated and completed on February 14, 2025.

 

Support Agreements –

 

In connection with the execution of the Merger Agreement, the Company and Nano entered into that certain Parent Stockholder Support Agreement (the “Support Agreements”), dated as of February 14, 2025, with certain of the Company’s officers and directors. The Support Agreements provide that, among other things, each of the parties thereto has agreed to vote or cause to be voted all of the shares of Common Stock owned by such stockholder in favor of the Stockholder Proposals at the Company meeting of stockholders to be held in connection therewith.

 

———————————————

 

 

Exhibit 99.2

 

Unaudited Consolidated Financial Statements

 

Interim Consolidated Balance Sheets	F-2
Interim Consolidated Statements of Operations	F-4
Interim Consolidated Statements of Stockholders’ Equity	F-5
Interim Consolidated Statements of Cash Flows	F-6
Notes to the Interim Consolidated Financial Statements	F-7

 

 

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
		Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents			133				103
Restricted cash			30				30
Account receivables (net of allowance for credit losses of $12 and $9 at September 30, 2024 and December 31, 2023, respectively)			30				167
Other account receivables			332				59
Inventory			326				307
Total current assets			851				666
LONG-TERM ASSETS:
Right-of-use assets			46				197
Property, plant and equipment, net			131				459
Intangible assets, net			1,145				-
Goodwill			279				-
Total long-term assets			1,601				656
Total assets			2,452				1,322

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
		Unaudited
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Account payables			140				934
Other account payables			685				1,772
Current portion of lease liability			43				139
Short-term loans			1,017				2,260
Total current liabilities			1,885				5,105
LONG-TERM LIABILITIES:
Warrant liability			-				21
SAFE liability			-				92
Lease liabilities			7				22
Total long-term liabilities			7				135
COMMITMENTS AND CONTIGENCIES
SHAREHOLDERS’ EQUITY (*):
Successor Common shares, $0.0001 value - Authorized: 1,500,000 shares at September 30, 2024; Issued and outstanding 1,500,000 shares at September 30, 2024; Predecessor Ordinary shares of NIS 0.01 par value - Authorized: 10,000,000 shares at December 31, 2023; Issued and outstanding: 2,896,821 shares as of December 31, 2023			-				8
Additional paid-in capital			1,490				27,334
Accumulated deficit			(930	)			(31,260	)
Total shareholders’ equity (deficit)			560				(3,918	)
Total liabilities and shareholders’ equity			2,452				1,322

 

(*) After giving effect to the Successor’s share split, see also note 13.

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

U.S. dollars in thousands (except share data)

 

		Successor				Predecessor
		Period commencing June 20, through September 30,				Period commencing January 1, through June 19,				Nine months ended September 30,
		2024				2024				2023
		Unaudited				Unaudited
Revenues			170				244				628
Cost of sales			(152	)			(167	)			(923	)
Gross profit (loss)			18				77				(295	)
Research and development			(216	)			(280	)			(1,492	)
Selling and marketing			(320	)			(300	)			(1,482	)
General and administrative			(334	)			(890	)			(1,564	)
Operating loss			(858	)			(1,393	)			(4,833	)
Reorganization items, net			-				(4,358	)			-
Finance income (expense), net			(67	)			337				1,169
Loss before taxes on income			(925	)			(5,414	)			(3,664	)
Taxes on income			(5	)			(1	)			(5	)
Net loss			(930	)			(5,415	)			(3,669	)
Basic and diluted loss per share (*)			(0.62	)			(1.87	)			(1.26	)
Weighted average number of common share (Successor) or ordinary share (Predecessor) used in computing basic and diluted net loss per share (*)			1,500,000				2,896,821				2,892,738

 

(*) After giving effect to the Successor’s share split, see also Note 13.

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

U.S. dollars in thousands

 

		Predecessor (unaudited)
		Ordinary shares								Additional paid-in				Accumulated				Total shareholders’ equity
		Number				Amount				capital				deficit				(deficit)
Balance as of December 31, 2022			2,888,597			$	8			$	26,974			$	(26,226	)		$	756
Capital contribution from related parties			-				-				141				-				141
Exercise of warrants into ordinary shares			8,224				*)				207				-				207
Share-based payment			-				-				12				-				12
Net loss			-				-				-				(3,669	)			(3,669	)
Balance as of September 30, 2023			2,896,821			$	8			$	27,334			$	(29,895	)		$	(2,553	)

 

		Predecessor (unaudited)
		Ordinary shares								Additional paid-in				Accumulated				Total shareholders’ equity
		Number				Amount				capital				deficit				(deficit)
Balance as of December 31, 2023			2,896,821			$	8			$	27,334			$	(31,260	)		$	(3,918	)
Net loss			-				-				-				(5,415	)			(5,415	)
Balance as of June 19, 2024			2,896,821			$	8			$	27,334			$	(36,675	)		$	(9,333	)

 

		Successor (unaudited)
		Common Shares								Additional paid-in				Accumulated				Total shareholders’
		Number (**)				Amount				capital				deficit				equity
Balance as of June 20, 2024			1,500,000			$	-			$	-			$	-			$	-
Capital contributions			-				-				1,490				-				1,490
Net loss			-				-				-				(930	)			(930	)
Balance as of September 30, 2024			1,500,000				-			$	1,490			$	(930	)		$	560

 

*) Represents an amount lower than $1.

(**) After giving effect to the Successor’s share split, see also Note 13.

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

U.S. dollars in thousands

 

		Successor				Predecessor
		Period commencing June 20, through September 30,				Period commencing January 1, through June 19,				Nine months ended September 30,
		2024				2024				2023
Cash flows from operating activities:
Net loss			(930	)			(5,415	)			(3,669	)
Adjustments to reconcile net loss to net cash provided from (used by) operating activities
Reorganization items, net			-				4,324				-
Depreciation and amortization			45				318				195
Remeasurement of embedded derivatives			-				(333	)			6
Finance expense			61				87				165
Share-based payment expense			-				-				12
Remeasurement of warrants liability			-				(15	)			(1,263	)
Remeasurement of SAFE liability			-				(46	)			113
Decrease in operating lease right-of-use assets			7				80				122
Decrease in operating lease liabilities			(3	)			(45	)			(116	)
Decrease (increase) in other account receivables			(289	)			(42	)			141
Decrease (increase) in account receivables			(20	)			158				66
Decrease (increase) in inventory			(22	)			123				415
Increase in account payables			27				264				136
Increase in other account payables			275				229				401
Net cash used in operating activities			(849	)			(313	)			(3,276	)
Cash flows from investing activities:
Cash received from business combination			32				-				-
Purchase of property and equipment			-				-				(39	)
Net cash used in investing activities			32				-				(39	)
Cash flows from financing activities:
Exercise of warrants into ordinary shares			-				-				207
Capital contributions			-				-				141
Proceeds from short term loan			980				387				926
Proceeds from bifurcated embedded derivatives			-				-				96
Proceeds from issuance of SAFE liability			-				-				883
Proceeds from issuance of Warrants liability			-				-				849
Net cash provided by financing activities			980				387				3,102
Exchange differences on balances of cash and cash equivalents			-				5				(13	)
Increase in cash and cash equivalents and restricted cash			163				79				(226	)
Cash and cash equivalents and restricted cash at the beginning of the period			-				133				385
Cash and cash equivalents and restricted cash at the end of the period			163				212				159
Supplemental disclosures of cash flows activities:
Non-cash activity:
Capital contribution from related party			61				-				-
Recognition (derecognition) of right-of-use asset and lease liability			53				(116	)			(213	)
Cash paid during the period for:
Income taxes			-				1				4
Reorganization items:
Legal fees paid			-				34				-
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents			133				182				121
Restricted cash			30				30				38
			163				212				159

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 1:- GENERAL

 

a.

ENvue Medical Holdings Corp. (previously: Envizion Medical Holding Corp.) (hereinafter: the “Company” or the “ Successor”) is a Delaware corporation incorporated June 5, 2024. The Company is 100% owned by Alpha Capital Anstalt (“Alpha”). The Company has two wholly owned subsidiaries: ENvue Medical (USA) Inc. (previously: Envizion Medical (USA) Inc.)and ENvue Medical Israel Ltd. (previously: Envizion Medical Israel Ltd.).

 

Envizion Medical Ltd. (hereinafter: the “Predecessor”) was incorporated and registered in Israel on October 1, 2017, and commenced its operations on November 1, 2017. The Predecessor was engaged in the research, development, marketing, and sale of medical equipment in the field of enteral feeding.

 

The Predecessor was a publicly traded company traded on the Tel-Aviv stock exchange under the ticker ENVM.

 

On January 31, 2024, the Predecessor filed a petition for insolvency under the Israeli law to the Tel Aviv-Yafo District Court (in this section: the “Court”), the Predecessor also requested temporary relief, including permission for the Predecessor to make urgent payments, an order prohibiting the repayment of past debts of the Predecessor, a stay of all legal proceedings against it, and an order for the continuation of IT services for the Predecessor. The Court has granted the order to prohibit the repayment of past debts on February 1, 2024 and granted the request on February 5, 2024.

 

On March 27, 2024, the Court formally accepted the Predecessor’s petition and appointed a trustee for the Predecessor (hereinafter: the “Trustee”). The Court also granted a stay of all proceedings against the Predecessor in accordance with the provisions of Sections 25(3) and 29 of the Insolvency Law, a stay of all collection proceedings related to the Predecessor, and the suspension of the powers of the Board of Directors and officers of the Predecessor, including the CEO. The Court also granted the Trustee investigative powers in accordance with Sections 281(a) and (d) of the Insolvency Law.

 

On April 11, 2024, the Predecessor entered a “stalking horse” asset purchase agreement with Alpha to sell the Predecessor operation for the forgiveness of the short term loan provided to the Predecessor by Alpha and by providing additional financing to the Predecessor in the amount of $350 that would be forgiven if Alpha will be declared as the winning bidder. On April 17, 2024, the Court approved the “stalking horse” asset purchase agreement.

 

On May 15, 2024, the Court decided to approve the proposal of Alpha as the winning bid for the purchase of the Predecessor’s operations and assets.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 1:- GENERAL (Cont.)

 

On June 20, 2024, Alpha Capital Anstalt, by means of the Company, completed the acquisition of the Predecessor’s key assets, mainly consisting of its technology (IP), customer relationships, inventory and its 100% holding of the shares of ENvue Medical (USA) Inc, a wholly owned subsidiary that acted as a distributor of the Predecessor (collectively: “the Predecessor operation”). See also Note 3.

 

b.

The Predecessor operation incurred significant losses and negative cash flows from operating activities since its inception. The Company’s ability to successfully execute its business plan is primarily dependent on its ability to raise additional funds to support its operations. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the date of issuance of these interim condensed consolidated financial statements. The financial statements do not include any adjustments regarding asset values and their classification that might be required if the Company is unable to continue operating as a going concern.

 

c.

The Predecessor concluded that filing for insolvency under the Israeli law is similar in all substantive respects to a Chapter 11 bankruptcy filing. As such, as a result of insolvency petition, during the Predecessor period, the Predecessor has applied ASC 852 “Reorganizations”. The petition date for ASC 852 purposes was determined to be January 31, 2024. ASC 852 requires that financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, realized gains and losses, and provisions for losses resulting from the reorganization and restructuring of the business shall be reported separately as reorganization items in the Company’s interim condensed consolidated statement of operations. In addition, ASC 852 require that prepetition obligations that could be impacted by the judicial reorganization proceedings to be classified on the balance sheet as liabilities subject to compromise. These liabilities are required to be reported as the amounts expected to be allowed by the Court, even if they could be settled for lesser amounts.

 

After filing for insolvency protection, the fair value measurement provisions of ASC 820 no longer are applicable to prepetition liabilities subject to compromise. As such, liabilities that were previously measured at fair value are measured as of the petition date at the expected amount of the allowed claim.

 

Reorganization items, net

 

ASC 852 requires that transactions and events directly associated with the reorganization be separately disclosed and distinguished from those of the ongoing operations of the business. The Company used the classification “Reorganization items, net” on the condensed consolidated statements of operations to reflect expenses, gains and losses that were the direct result of the reorganization of its business.

 

Below are the items related to the reorganization items for the applicable periods:

 

		Successor				Predecessor
		Period commencing June 20, through September 30,				Period commencing January 1, through June 19,				Nine months ended September 30,
		2024				2024				2023
Remeasurement of expected amounts of SAFE liability			-				2,769				-
Remeasurement of expected amounts of short term loans			-				1,555				-
Legal fees			-				34				-
Total reorganization items			-				4,358				-

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

The interim condensed consolidated balance sheets as of December 31, 2023, was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023.

 

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of September 30, 2024 (Successor), the Company’s condensed consolidated statements of operations, shareholders’ equity and cash flows for period from June 20, 2024 to September 30, 2024 (Successor),for the period from January 1, 2024 to June 19, 2024 (Predecessor) and the nine months ended September 30, 2023 (Predecessor). The results for the interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or any other future interim or annual period.

 

a.

Use of estimates:

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

b.

Principles of consolidation:

 

The consolidated financial statements include the accounts of the Company and its subsidiaries and the Predecessor and its subsidiary. Intercompany accounts and transactions have been eliminated upon consolidation.

 

c.

Significant Accounting Policies:

 

For a summary of the Company’s significant accounting policies refer to “Note 2. Significant Accounting Policies” of its Annual Report for the fiscal year ended December 31, 2023. There have been no material changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended December 31, 2023, included in the Annual Report other than those noted below. The Predecessor and the Company adopted the same accounting policies.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) 

 

d.

Business combination:

 

The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

 

When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired technology and acquired customer relationships from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

 

Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred (see also Note 3).

 

e.

Goodwill:

 

Goodwill has been recorded as a result of the acquisition. Goodwill represents the excess of the purchase price in a business combination over the fair value of identifiable net tangible and intangible assets acquired. Goodwill is not amortized, but rather is subject to an impairment test.

 

ASC No. 350, “Intangibles - Goodwill and other” (“ASC No. 350”) requires goodwill to be tested for impairment at the reporting unit level at least annually or between annual tests in certain circumstances and written down when impaired.

 

ASC No. 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the quantitative goodwill impairment test is performed. Alternatively, ASC No. 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the quantitative goodwill impairment test.

 

If the carrying value of a reporting unit exceeds its fair value, the Company recognizes an impairment of goodwill for the amount of this excess.

 

The Company performs the quantitative goodwill impairment test during the fourth quarter of each fiscal year, or more frequently if impairment indicators are present and compares the fair value of the reporting unit with its carrying value. As of September 30, 2024, no impairment losses have been identified.

 

f.

Intangible assets, net:

 

Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which is 8.5 years. These intangible assets consist of technology and customer relationship which are amortized over their estimated useful lives.

 

g.

Impairment of long-lived assets including intangible assets subject to amortization and ROU assets:

 

The Company’s long-lived assets are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of September 30, 2024 and December 31, 2023, no impairment losses have been identified.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

h.

Trade receivables:

 

Trade receivables are recorded net of credit losses allowance for any potential uncollectible amounts. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses based upon its assessment of various factors, including historical collectability experience, the age of the trade receivable balances, credit quality of its customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.

 

As of September 30, 2024, the allowance for credit losses of trade receivables was $12.

 

i.

Fair value measurement:

 

The Company applies ASC No. 820, “Fair Value Measurements and Disclosures”, with respect to fair value measurements of all financial assets and liabilities.

 

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

 

	Level 1 -	Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
	Level 2 -	Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
	Level 3 -	Inputs are unobservable inputs based on the Predecessor’s own assumptions used to measure assets and liabilities at fair value. The inputs require significant management judgment or estimation.

 

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

The estimated fair value of cash equivalents, restricted cash, accounts receivable, trade payables, other accounts payable and accrued expenses approximate their carrying value as presented, due to their short term maturities. Liabilities related to warrants, SAFEs and embedded derivatives were classified as Level 3 fair value measurements as they are not traded in active markets and their fair value is measured using Level 3 inputs.

 

j.

Concentration of Credit Risk:

 

Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, and accounts receivables.

 

For cash and cash equivalents, the Company is exposed to credit risk in the event of default by the financial institutions to the extent of the amounts recorded on the accompanying consolidated balance sheets exceed federally insured limits.

 

The Company places its cash and cash equivalents and short-term deposits with financial institutions with high-quality credit ratings and has not experienced any losses in such accounts.

The Company performs ongoing credit evaluations of its customers and, to date, has not experienced any significant losses.

 

For the period commencing June 20, 2024 through September 30, 2024 and for the period commencing January 1, 2024 through June 19, 2024 and for the nine months ended September 30, 2023, there were several customers that accounted for 10% or more of revenue.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

		Successor				Predecessor
		Period commencing June 20, through September 30, 2024				Period commencing January 1, through June 19, 2024				For the nine months ended September 30, 2023
Customer A			39	%			19	%			25	%
Customer B			-				33	%			-
Customer C			-				22	%			23	%

 

The Company has no off-balance-sheet concentration of credit risk.

 

k.

Warrants and SAFE liability:

 

The Company accounts for warrants and SAFEs as either equity-classified or liability-classified instruments based on an assessment of the instrument’s specific terms and applicable authoritative guidance. The assessment considers whether the warrants and SAFEs are freestanding financial instruments, meet the definition of a liability under ASC 480, are indexed to the Predecessor’s own stock and whether the warrants and SAFEs are eligible for equity classification under ASC 815-40. This assessment is conducted at the time of instrument issuance and as of each subsequent reporting period end date while the instrument is outstanding.

 

Instruments that meet all the criteria for equity classification, are required to be recorded as a component of additional paid-in capital. Instruments that do not meet all the criteria for equity classification, are required to be recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter.

 

All the Predecessor’s warrants were classified as liabilities for all periods presented as their exercise price is denominated in New Israeli Shekels and therefore do not meet the requirements to be classified as equity under ASC 815-40.

 

The Predecessor’s SAFEs were also classified as liabilities under ASC 480 since the SAFEs embody an obligation that is indexed to an obligation to repurchase the Predecessor’s shares as the Predecessor may be obligated to repurchase the SAFEs in cash if a change in control occurs, which is not under the Predecessor’s control.

 

l.

Basic and diluted earnings (loss) per share:

 

Basic and diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year.

 

Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Share”.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)

 

All outstanding share options, SAFEs and warrants for the nine-month period ended September 30, 2023 and the period from January 1, 2024 to June 19, 2024 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. For the period from June 20, 2024 to September 30, 2024, the Company had no outstanding potential dilutive securities.

 

The number of shares excluded from the calculations of diluted net loss per share were as follows (unaudited):

 

		Successor				Predecessor
		Period commencing June 20, 2024 through September 30, 2024				Period commencing January 1, 2024 through June 19, 2024				Nine months ended September 30, 2023
Options			-				291,844				291,844
Warrants			-				1,060,851				1,060,851
SAFEs			-				845,024				1,073,107
Total			-				2,197,719				2,425,802

 

m.

Recently adopted and recently issued accounting pronouncements:

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment.

 

This standard is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.

 

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure in the notes to the financial statements, of prescribed categories of expenses within relevant income statement captions. The amendments in this Update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements’ disclosures.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 3:- ACQUISITIONS

 

On June 20, 2024, Alpha Capital Anstalt’s, by means of the Company, completed the acquisition of the Predecessor key assets and operation, mainly its technology (IP), customer relationships, inventory and its 100% holding of the shares of ENvue Medical (USA) Inc., a wholly owned subsidiary which acted as a distributor of the Predecessor (collectively: the “Predecessor operation”). The purchase consideration included the forgiveness of the loan Alpha Capital Anstalt had previously provided to the Predecessor with a fair value of $1,079, the forgiveness of $350 additional financing and liability classified contingent consideration incurred by the Company to pay up to $75, which was resolved in October 2024, resulting in a total transaction price of $1,504.

 

The Company accounted for the transaction as a business combination and allocated the purchase consideration to assets acquired and liabilities assumed based on their estimated fair values.

 

The Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management.

 

During the measurement period, the fair values are subject to adjustment for up to one year after the close of the transaction as additional information is obtained.

 

Goodwill generated from this business combination is primarily attributable to synergies.

 

The preliminary purchase consideration consisted of the following:

 

Consideration:
Forgiveness of a loan and additional financing		$	1,429
Contingent consideration			75
		$	1,504
Less: Cash and Restricted Cash acquired			(32	)
Total consideration, net of cash and restricted cash acquired		$	1,472
Identifiable assets acquired and liabilities assumed:
Accounts receivable		$	9
Inventory			303
Other current assets			44
Property and equipment			141
Intangible assets			1,180
Goodwill			279
Liabilities assumed			(484	)
Total identifiable assets acquired and liabilities assumed		$	1,472

 

The following table presents components of the identified intangible assets acquired and their estimated useful lives as of the date of acquisition:

 

		Fair value (in thousands)				Useful Life (in years)
Developed technology			713				8.5
Customer relationships			467				8.5
Total intangible assets acquired			1,180

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 4:- INVENTORY

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Raw materials			251				220
Finished goods			75				87
			326				307

 

(1)

Inventory write-down charged to the cost of sales amounted to nil, nil and $68 for the period commencing June 20, 2024 through September 30, 2024 and for the period commencing January 1, 2024 through June 19, 2024 and nine month period ended September 30, 2023, respectively to reduce inventory to its net realizable value and for any excess or obsolete inventory.

 

NOTE 5:- PROPERTY, PLANT AND EQUIPMENT

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Cost:
Computer and software			30				166
Office equipment and furniture			52				60
Leasehold improvements			-				489
Equipment			59				416
			141				1,131
Accumulated depreciation:			(10	)			(672	)
Property, plant and equipment, net			131				459

 

Depreciation expense amounted to $195, $318 and $10 for the nine months ended September, 2023, for the period from January 1, 2024 to June 19, 2024 and for the period from June 20, 2024 to September 30, 2024, respectively.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 6:- GOODWILL AND INTANGIBLE ASSETS, NET

 

a.

Goodwill:

 

		Successor
		September 30, 2024
Balance as of June 20, 2024			-
Acquisition			279
			279

 

b.

Intangible assets, net:

 

				Successor
		Useful Life		September 30, 2024
Technology		8.5 years			692
Customer relationship		8.5 years			453
					1,145

 

Estimated amortization of intangible assets for the years ended:

 

		December 31,
2024 (remaining)			35
2025			139
2026			139
2027			139
2028 and thereafter			693
			1,145

 

NOTE 7:- OTHER ACCOUNTS PAYABLES

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Accrued expenses			658				1,435
Employees and related			27				337
			685				1,772

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 8: - WARRANT LIABILITY

 

The Predecessor’s outstanding warrants were not assumed as part as the business combination and therefore there are no outstanding warrants as of September 30, 2024.

 

The Predecessor has concluded that the warrants are freestanding financial instruments that do not meet all the equity classification criteria pursuant to ASC 815-40 as their exercise price is denominated in New Israeli Shekel and therefore should be classified as liabilities measured at fair value through earnings. The change in fair value of warrant liabilities was recorded in finance income, net in the interim condensed consolidated statements of operations. After the petition date, the liability was measured at the expected amount of the allowed claim, which was immaterial.

 

	a.	In 2021, the Predecessor issued 177,560 Series 1 Warrant and 177,560 Series 2 Warrants. Series 1 Warrants had an exercise price of NIS 79.06 and Series 2 Warrant NIS 94.88. The Series 1 warrants expired unexercised in May 2022. On May 16, 2023, 8,224 Series 2 warrants were exercised and the remaining warrants expired unexercised. For the nine month period ended September 30, 2023, the remeasurement was immaterial.
	b.	On February 9, 2022, as part of share issuance, the Predecessor issued 333,928 investor warrants exercisable over 30 months. The exercise price for each warrant was NIS 90 per warrant.

 

The Predecessor used the Black-Scholes option pricing model to determine the fair value of the warrants. Below are the assumptions used for the fair value measurement:

 

		September 30, 2023				December 31, 2023
Share price			NIS 4.55				NIS 3.13
Exercise price			NIS 90				NIS 90
Expected volatility in share prices (%)			87.64				82.08
Risk-free interest rate (%)			4.15				4.12
Contractual life of options for shares (years)			0.84				0.59

 

For the period from January 1, 2024 to January 31, 2024, and for the nine month period ended September 30, 2023 the Company recognized remeasurement income of nil and $19, respectively.

 

c.

On August 4, 2022, the Predecessor issued 32,850 Series 3 warrants (which expired in January 2023) and 98,550 Series 4 warrants (which expired in June 2024). The exercise price for the Series 3 warrant was NIS 27 per share, and NIS 48 for the Series 4 warrant. On September 29, 2022, the Predecessor issued an additional 185,506 Series 3 warrants (which expired in September 2023). As of June 19, 2024, none of these warrants were exercised.

 

The Predecessor used the Black-Scholes option pricing model to determine the fair value of the Series 4 warrants. Below are the assumptions used for the fair value measurement:

 

		September 30, 2023				December 31, 2023
Share price			NIS 4.55				NIS 3.13
Exercise price			NIS 48				NIS 48
Expected volatility in share prices (%)			91.58				82.08
Risk-free interest rate (%)			4.15				4.12
Contractual life of options for shares (years)			0.75				0.50

 

For the period between January 1, 2024 and January 31, 2024, and for the nine months period ended September 30, 2023, the Company recognized remeasurement income of nil and $105, respectively.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 8: - WARRANT LIABILITY (Cont.)

 

d.

In January, February and March 2023 the Predecessor issued SAFEs (Simple Agreements for Future Equity) and warrants as part of an investment agreement with 12 private investors, totaling approximately $1,732. The Predecessor issued 279,793 Series A warrants and 246,224 Series B warrants in these transactions, (see Note 11).

 

The Predecessor concluded that the SAFEs and warrants were freestanding financial instruments and that the SAFEs and warrants should be classified as liabilities measured at fair value through earnings. As such, the Predecessor allocated the transaction consideration to the warrants and SAFEs at fair value in the amount of $849 and $883, respectively.

 

For the period between January 1, 2024 and January 31, 2024, and for the nine month period ended September 30, 2023 the Company recognized remeasurement income of $15 and $786, respectively.

 

The Company used the Black-Scholes option pricing model to determine the fair value of the warrants. Below are the assumptions used for the valuation of Series A and Series B warrants at the issuance date and as of the reporting date:

 

		September 30, 2023		March, 2023				February 2023				January 2023
Share price		NIS 4.55			NIS 19.1				NIS 19.84				NIS 20.85
Exercise price		NIS 22-25			NIS 22-25				NIS 22-25				NIS 22-25
Expected volatility in share prices (%)		71.98-72.79			59.51				60.89				61.79
Risk-free interest rate (%)		4.32-4.54			4.52				3.65				3.68
Contractual life of options for shares (years)		2.25-4.25			2.9-4.9				2.9-4.9				2.9-4.9

 

			January 31, 2024				December 31, 2023
Share price			NIS 1.17				NIS 3.13
Exercise price			NIS 22-25				NIS 22-25
Expected volatility in share prices (%)			85.82-97.19				69.79-74.93
Risk-free interest rate (%)			3.69-3.70				3.82-3.64
Contractual life of options for shares (years)			1.92-3.92				2-4

 

Changes in the warrant liability balance

 

Below is the change in the warrant liability balance for the nine month period ending September 30, 2023 and for the period from:

 

		For the nine month ending September 30, 2023
Balance as of December 31, 2022			125
Issuance			849
Change in fair value			(910	)
Balance as of September 30, 2023			64

 

		Period commencing January 1, through January 31, 2024
Balance as of December 31, 2023			21
Change in fair value			(15	)
Balance as of January 1, 2024			6

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 9:- LEASE

 

The Predecessor entered into operating leases primarily for offices, vehicles and storage spaces. The leases have remaining lease terms of up to 3 years, some of which may include options to extend the leases for up to an additional 2 years. In July 2023, the Predecessor reassessed its lease liability since an option to extend the lease term for the Tel-Aviv offices was no longer reasonably certain to be exercised. The remeasurement resulted in a decrease of $213 in its lease liability. As of the petition date, the Predecessor did not terminate its Tel-Aviv offices lease.

 

In August 2024, the Company entered into a new lease arrangement for offices in Tel-Aviv for 1.5 years, which resulted in the recognition of a ROU asset and a corresponding lease liability of $53.

 

The components of operating lease costs were as follows:

 

		Successor				Predecessor
		Period commencing June 20, through September 30, 2024				Period commencing January 1, through June 19, 2024				For the nine months ended September 30, 2023
Operating lease cost		$	7			$	50			$	141
Total lease cost			7				50				141

 

Supplemental balance sheet information related to operating leases is as follows:

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Weighted average remaining lease term (in years)			1.25				1.03
Weighted average discount rate			20.8	%			18.6	%

 

Maturities of the Company’s operating lease liabilities as of September 30, 2024 were as follows:,

 

		September 30, 2024
Remainder of 2024		$	7
2025			49
Total undiscounted lease payments			56
Less: imputed interest			(6	)
Present value of lease liabilities		$	50

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 10:- SHORT-TERM LOANS

 

The Predecessor outstanding short-term loans were not assumed as part as the business combination.

 

1.

On April 30, 2023, Predecessor signed a short-term loan agreement with Covenant Group, a related party, in the amount of $750. The fair value of loan as of April 30, 2023, was estimated at $619. As such, the difference between the proceeds received and the fair value of the loan at the amount of $131 was recorded as a capital contribution. The loan principal bears an annual interest rate of 9% and was due for repayment on December 31, 2023. The agreement includes the following key provisions:

 

	a.	If the Predecessor fails to repay the loan at maturity, the rate of the loan will be increase to 17% until full repayment.
	b.	In the event of a liquidation (as defined in the loan agreement), the loan will be repaid at a multiple of three to six times the original loan amount.

 

The Predecessor has evaluated the loan for embedded derivatives required to be bifurcated and concluded that the increase in payments in the event of liquidation should be bifurcated from the debt host under ASC 815. Thus, the embedded derivatives were bifurcated from the debt host and accounted for at fair value through earnings.

 

As such, the Predecessor allocated $95 to the embedded derivatives and the remaining consideration was allocated to the debt host. The debt host is measured at its amortized cost using the effective interest method. As of December 31, 2023, the carrying amount of the debt host and the accrued interest was $910. For the period from January 1, 2024 to January 31, 2024, and for the nine month period ended September 30, 2023 the Predecessor recorded finance expenses of $11 and $155 related to the debt host, respectively.

 

As of December 31, 2023, the loan was not repaid and therefore bears interest of 17% from that date until full repayment. As of January 31, 2024 the loan remained outstanding and was measured at the expected amount of the allowed claim, which was three times the original principal amount and accrued interest.

 

Below are the assumptions used for the valuation of the embedded derivative at the issuance date and as of the reporting date:

 

		January 31, 2024				December 31, 2023				April 30, 2023
Probability of survival			0	%			22	%			50	%
Recovery rate parameter			36	%			36	%			36	%

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 10:- SHORT-TERM LOANS (Cont.)

 

2.

On August 16, 2023, the Predecessor signed a loan agreement for $80 (the “loan”) with the Predecessor’s CEO, who also serves as a director and is one of the Predecessor’s controlling shareholders. The loan did not bear any interest. The loan was to be repaid within seven days from the date certain customer payments are actually received by the Predecessor, and in any case no later than September 30, 2023.

 

The fair value of loan as of August 16, 2023 was estimated at $70. As such, the difference between the proceeds received and the fair value of the loan at the amount of $10 was recorded as a capital contribution.

 

As of December 31, 2023, the loan was not repaid. As of December 31, 2023, the loan’s carrying amount was $80. As of June 19, 2024, the loan remained outstanding.

 

3.

In September and October, 2023, the Predecessor entered into loan agreements with Alpha Capital Anstalt (the “lender”) for an amount of $1,000 (which was transferred to the Predecessor in two installments of $333 and $667 in September 2023 and October 2023, respectively). The agreement includes the following key terms:

 

	a.	The loan will bear interest of 12%.
	b.	The maturity date was December 31, 2023.
	c.	If the Predecessor will not be involved in bankruptcy proceedings, the loan amount to be paid will increase by an “upside commission” in the amount of $1,000 by the maturity date.
	d.	If there is a default event, liquidation event or an equity financing event (As defined in the agreement) the loan and the upside commission will accelerate and will be payable.

 

The Predecessor has evaluated the loan for embedded derivatives required to be bifurcated and concluded that the payment of the upside commission and the acceleration of loan payment should be bifurcated from the debt host since they are not clearly and closely related to debt host, they meet the definition of derivative instruments and no scope exception under ASC 815 is applicable for these features. Thus, the embedded features were bifurcated from the debt host and are accounted for at fair value through earnings.

 

As such, in September 2023, the Predecessor allocated $139 to the embedded derivatives and the reaming consideration was allocated to the debt host. In October 2023, the Predecessor allocated $280 to the embedded derivatives and the reaming consideration was allocated to the debt host. The debt host is measured at its amortized cost using the effective interest method. As of December 31, 2023, the carrying amount of the debt host was $1,020. Interest expenses for period commencing January 1, 2024 through January 31, 2024, were $10.

 

As of January 31, 2024 the loan remained outstanding and was measured at the expected amount of the allowed claim, which was $1,079.

 

The loan was extinguished as part of the purchase of the Predecessor operation (see Note 3).

 

Below are the assumptions used for the valuation of the embedded derivatives at the issuance date and as of the reporting date:

 

		December 31, 2023				September 30, 2023 and October 31, 2023
Probability of survival			22	%			40	%
Recovery rate parameter			47	%			47	%

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 10:- SHORT-TERM LOANS (Cont.)

 

4.

During nine months ended September 30, 2024, the Company received a loan from Alpha Capital Anstalt (“the lender”) at the amount of $1,017, from which $37 was provided to the Predecessor prior to the acquisition and was assumed by the Company. The loan bears no interest and will be repaid upon demand by the lender. Since the loan was provided by the controlling entity and bears no interest, the Company recorded interest expenses based on its market interest rate with a corresponding amount recorded as capital contribution. For the period commencing June 20, 2024 through September 30, 2024, the Successor recorded a capital contribution at the amount of $61 in respect with the deemed interest.

 

Below are the changes in short-term loans line item for the nine-month ended September 30, 2023 the year ended December 31, 2023 and the period from January 1, 2024 to January 31, 2024:

 

		Predecessor
		For the nine month ending September 30, 2023
Balance as of December 31, 2022			-
Proceeds for short term loans			788
Proceeds from bifurcated embedded derivatives			234
Remeasurement of embedded derivatives			6
Finance expenses			166
September 30, 2023			1,194

 

 

		For the year ending December 31, 2023
Balance as of December 31, 2022			-
Proceeds for short term loans			1,150
Proceeds from bifurcated embedded derivatives			516
Remeasurement of embedded derivatives			(152	)
Finance expenses			746
December 31, 2023			2,260

 

		Predecessor
		Period commencing January 1, through January 31, 2024
Balance as of December 31, 2023			2,260
Embedded derivatives remeasurement			(333	)
Finance expenses			21
January 31, 2024			1,948

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 11:- SAFE LIABILITY

 

In January, February and March 2023, the Predecessor entered a Simple Agreement for Future Equity (SAFE) investment agreements with 12 private investors. The SAFEs were classified as liabilities pursuant to ASC 480, initially and subsequently measured at fair value through earnings. After the petition date, the liability was measured at the expected amount of the allowed claim.

 

The SAFEs will automatically convert upon the earlier of the following events:

 

	a.	A capital raise of at least $5,000 in exchange for the issuance of Predecessor shares, where at least one investor contributes $500 (“Qualified Capital Raise”). At that time, the investment amount will be converted into Predecessor shares at a share price equal to 70% of the lowest share price in the Qualified Capital Raise (a 30% discount on the share price), or
	b.	December 31, 2024, where the conversion amount will be calculated at 65% of the average Predecessor share price over the 22 trading days preceding December 31, 2024 (a 35% discount).

 

In the event of a capital raise by the Predecessor that does not qualify as a Qualified Capital Raise, SAFE investors may convert their investment at a share price equal to 70% of the lowest share price in that capital raise (a 30% discount).

 

According to the terms of the SAFE agreement, upon the occurrence of any of the following events, the investment agreement will terminate, and the following provisions, among others, will apply:

 

(1) In the event of liquidation (whether voluntary or involuntary) before the end of the SAFE agreement period, the Predecessor will pay investors a total amount equal to twice the investment amount before the liquidation event and according to the priority set in the investment agreement.

 

(2) In the event of a liquidity event (which include a change in control) before the end of the investment agreement period, the Predecessor will pay investors a total amount equal to five times the investment amount before the completion of such liquidity event.

 

A summary of significant unobservable inputs (Level 3 inputs) used in measuring the SAFEs are as follows:

 

		January 31, 2024				December 31, 2023				January, February and March 2023
Principal amount		$	1,732				1,732				1,732
Implied discount rate			70.62%-79.35%				70.62%-79.35%				70.62%-79.35%
Term (years)			0.5				0.5				0.8
Fair value			46				92				883

 

For the nine month period ended September 30, 2023 and for the period between January 1, 2024 and January 31, 2024, the Company recognized remeasurement income of $240 and $45, respectively.

 

As of January 31, 2024 the SAFEs were measured at the expected amount of the allowed claim, which was twice the investment amount.

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 11:- SAFE LIABILITY (Cont.)

 

Below is the change in the SAFE Liability carrying amount for relevant periods:

 

		Predecessor
		For the nine months ended September 30, 2023
Balance as of December 31, 2022			-
Fair value of SAFE at issuance			883
Change in fair value			(240	)
September 30, 2023			643

 

		Predecessor
		For the year ending December 31, 2023
Balance as of December 31, 2022			-
Fair value of SAFE at issuance			883
Change in fair value			(791	)
December 31, 2023			92

 

		Predecessor
		Period commencing January 1, through January 31, 2024
Balance as of December 31, 2023			92
Change in fair value			(46	)
January 31, 2024			46

 

NOTE 12:- FAIR VALUE MEASUREMENT

 

Financial Liabilities

 

		Predecessor
		December 31, 2023
		Level 1				Level 2				Level 3				Total
Liabilities measured at fair value:
Embedded derivatives			-				-				364				364
SAFE Liability			-				-				92				92
Warrants			-				-				21				21
Total			-				-				477				477

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 13:- SHAREHOLDER EQUITY

 

Predecessor

 

Ordinary shares grant their holders the right to receive notice of and participate in shareholders’ meetings of the Predecessor and to vote therein, the right to appoint members of the Board of Directors, and the right to participate in the distribution of dividends and the distribution of surplus assets and funds upon the liquidation of the Predecessor.

 

Successor

 

At inception, the Successor issued 1,500 common shares with no par value.

 

The common shares confer upon their holders the right to participate and vote in general shareholder meetings of the Company and to share in the distribution of dividends, if any, declared by the Company from legally available funds for the payment thereof, and rights to receive a distribution of assets upon liquidation.

 

On October 29, 2024 (after the reporting date), the Successor’s shareholders effected a share split of the issued and outstanding common shares at a ratio of one-for-1,000, pursuant to which holders of Successor’s shares received 1,000 share for every 1 share held.

 

For accounting purposes, all share and per share amounts for common shares and loss per share amounts have been adjusted to give retroactive effect to the share split for the relevant period presented in these financial statements.

 

NOTE 14: - BASIC AND DILUTED LOSS PER SHARE

 

		Successor				Predecessor
		Period commencing June 20, through September 30, 2024				Period commencing January 1, through June 19, 2024				Nine months ended September 30, 2023
						U.S. dollars in thousands, except share and per share date				U.S. dollars in thousands, except share and per share date
Numerator:
Net loss applicable to shareholders of ordinary shares		$	(930	)		$	(5,415	)		$	(3,669	)
Denominator:
Number of ordinary shares used in computing basic and diluted net loss per share			1,500,000				2,896,821				2,892,738
Net loss per share of ordinary share, basic and diluted			(0.62	)			(1.87	)		$	(1.26	)

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 15:- GEOGRAPHIC INFORMATION AND SELECTED STATEMENTS OF INCOME DATA

 

a.

Summary information about geographic areas:

 

The Predecessor operates in one reportable segment (see Note 1 for a brief description of the Predecessor’s business). The total revenues are attributed to geographic areas based on the location of the Predecessor’s direct customers.

 

The following table presents total revenues and property and equipment, net, by geographic area:

 

1.

Revenues based on location:

 

		Successor				Predecessor
		Period commencing June 20, through September 30,				Period commencing January 1, through June 19,				Nine months ended September 30,
		2024				2024				2023
US			170				244				628
Total revenues			170				244				628

 

2.

Property and equipment, net and ROU assets:

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Israel			158				616
US			19				40
			177				656

 

b.

Summary information about product line:

 

The Predecessor’s products can be classified by two main product lines. The following table presents total revenues for the years ended December 31, 2023 and 2022 by product lines:

 

		Successor				Predecessor
		Period commencing June 20, through September 30,				Period commencing January 1, through June 19,				Nine months ended September 30,
		2024				2024				2023
Revenue from the sale of accompanying products and Nasogastric tubes			170				241				273
Revenue from the sale of systems and related services			-				5				355
Total revenues			170				244				628

 

 

ENVUE MEDICAL HOLDINGS CORP. (AS SUCCESSOR TO ENVIZION MEDICAL LTD.)

 

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

U.S. dollars in thousands

 

NOTE 16: - RELATED PARTIES TRANSACTIONS

 

a.

Balances with related parties

 

		Successor				Predecessor
		September 30, 2024				December 31, 2023
Short term loans			1,017				990
Other accounts payables			-				408
			1,017				1,398

 

b.

Additional information

 

1.

During 2023, Covenant Group (a company wholly owned by the Predecessor’s Chairman of the Board of Directors, provided the Predecessor with a short-term loan (see also Note 10(1)). The Predecessor outstanding short-term loans were not assumed as part as the business combination.

 

2.

During 2023, the Predecessor’s CEO provided the Predecessor with short-term loan (see also Note 10(2)). The Predecessor outstanding short-term loans were not assumed as part as the business combination.

 

3.

The Company and its subsidiary signed a loan agreement with Alpha Capital Anstalt, the Company’s shareholder in a total amount of $1,017. The loans bear no interest and is due and payable by demand of the lender, (see also Note 10(4)).

 

NOTE 17: - CONTINGENT LIABILITIES, GUARANTEES AND COMMITMENT

 

1.

Alpha Capital Anstalt had a first-degree lien on all current and future intellectual property rights of the Predecessor, without limitation on the amount, related to the loan from October 2023 (see Note 10(3)). Following the acquisition, there is no longer lien on the Company’s assets.

 

2.

On September 28, 2023, the Predecessor received a lawsuit in the amount of approximately NIS 867 thousand, filed with the Tel Aviv-Jaffa District Labor Court by (1) Mr. Shay Tsuker, one of the controlling shareholders of the Predecessor who served as Chairman of the Board until March 2023, and (2) Shilutan Management and Holdings Ltd., owned by Mr. Tsuker (the “Management Company” and the “Plaintiffs”, respectively). The Plaintiffs claim that Mr. Tsuker was not paid in accordance with the management agreement between the Management Company and the Company, including payment for a notice period of approximately two and a half months (out of a 6-month notice period), a retirement bonus equivalent to 6 months’ management fees, and accrued vacation pay, plus linkage differentials and interest or compensation according to the Wage Protection Law, as applicable.

 

The Plaintiffs also allege that there was an employer-employee relationship between Mr. Tsuker and the Predecessor and that the management agreement between the Company and the Management Company was established to facilitate the payments.

 

Due to the insolvency proceedings, Mr. Shay Tsuker’s claim was dismissed in the Labor Court. His claim will be addressed as part of the debt claim he submitted under the creditors’ arrangement. Adequate provision was included in the Predecessor financial statements.

 

The Company did not assume any liability with respect to this lawsuit.

 

NOTE 18: - SUBSEQUENT EVENTS

 

The Company evaluated events occurring subsequent to September 30, 2024, through February 14, 2025, which is the date the condensed interim consolidated financial statements were available to be issued.

 

1.

During the period from October 1, 2024 and until December 31, 2024, the Company received additional loan from Alpha Capital Anstalt at the total amount of $1,200. During January and February 2025 an additional amount of $250 was revived from Alpha Capital Anstalt. Based on the loan agreement, the loan bears no interest and is due and payable by demand of the lender.

 

2.

On November 17, 2024, the Company submitted to the Israeli Tax Authorities a request to approve its new Equity Incentive Plan.

 

3.

In November 2024 the Company filed a request to change its name from Envizion Holdings Corp. to ENvue Medical Holdings Corp., Change the name of Envizion Medical Inc to ENvue Medical (USA) Inc. and the name of Envizion Medical Israel Ltd. to ENvue Medical Israel Ltd. The names change was approved during January 2025.

 

4.

Merger with Nanovibronix, Inc.:

 

Agreement and Plan of Merger –

 

On February 13, 2025, ENvue Medical Holdings, Corp. (“the Company״ and ENvue”), NVEH Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), and NVEH Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”) entered into that certain Agreement and Plan of Merger (the “Merger Agreement”) with Nanovibronix, Inc., a Delaware corporation (the “Nano”). Pursuant to the terms of the Merger Agreement, Nano and the Company effected (i) a merger of First Merger Sub with and into the Company, with the First Merger Sub ceasing to exist and the Company becoming a wholly-owned subsidiary Nano (the “First Effective Time”) and (ii) the merger of the Company with and into Second Merger Sub (the “Second Merger” and such effective time, the “Second Effective Time” and, the Second Merger together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger (“Surviving Entity”). At the Second Effective Time, the certificate of formation of the Surviving Entity was amended and restated to, among other things, change the name of the Surviving Entity to “ENvue Medical Holdings LLC.” In connection with the Merger Agreement, Nano issued (i) 1,734,995 shares (the “Merger Shares”) of common stock, par value $0.001 per share (the “Common Stock”) to the holders of ENvue, which such number of shares represented no more than 19.9% (the “Exchange Cap”) of the outstanding shares of Common Stock immediately prior to the First Effective Time and (ii) 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”), as further described below, in excess of the Exchange Cap to the holders of ENvue in consideration for 100% of the Company. The Merger was consummated and completed on February 13, 2025.

 

Support Agreements –

 

In connection with the execution of the Merger Agreement, the Company and Nano entered into that certain Parent Stockholder Support Agreement (the “Support Agreements”), dated as of February 13, 2025, with certain of the Company’s officers and directors. The Support Agreements provide that, among other things, each of the parties thereto has agreed to vote or cause to be voted all of the shares of Common Stock owned by such stockholder in favor of the Stockholder Proposals at the Company meeting of stockholders to be held in connection therewith.

 

 

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

You should read the unaudited pro forma condensed combined financial statements presented below in conjunction with NanoVibronix’s consolidated financial statements and related notes beginning on page F-1 of this prospectus and ENvue’s consolidated financial statements and related notes beginning on page F-34 of this prospectus. In addition, please see the section entitled “Risk Factors - The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, and future results of the combined company may differ materially from the unaudited pro forma financial statements presented in this joint proxy and consent solicitation statement/prospectus” for discussion of risks associated with the unaudited pro forma condensed consolidated financial statements.

 

The following unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X under the Securities Act. The unaudited pro forma condensed combined financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The pro forma condensed combined financial statements are presented for illustrative purposes only and do not purport to represent what the financial position or results of operations would have been if the proposed merger had been completed as of the dates indicated in the unaudited pro forma condensed combined financial statements or that will be realized upon the consummation of the proposed transaction.

 

You should read the unaudited pro forma condensed combined financial statements presented below in conjunction with NanoVibronix’s consolidated financial statements and related notes beginning on page F-1 of this prospectus and ENvue’s consolidated financial statements and related notes beginning on page F-34 of this prospectus.

 

On February 14, 2025, pursuant to the terms of that certain Agreement and Plan of Merger, dated as of February 14, 2025 (the “Merger Agreement”), by and among the Company, NVEH Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of NVEH Merger Sub I, Inc. (“First Merger Sub”), NVEH Merger Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Second Merger Sub”), and ENvue Medical Holdings, Corp. (“Predecessor ENvue”), the Company and Predecessor ENvue effected (i) a merger of First Merger Sub with and into Predecessor ENvue, with the First Merger Sub ceasing to exist and Predecessor ENvue becoming a wholly-owned subsidiary the Company and (ii) the merger of Predecessor ENvue with and into Second Merger Sub (the “Second Merger” and, together with the First Merger, the “Merger”), with Second Merger Sub being the surviving entity of the Second Merger (“Surviving Entity”). At the effective time of the Second Merger, the certificate of formation of the Surviving Entity was amended and restated to, among other things, to change the name of the Surviving Entity to “ENvue Medical Holdings LLC.” In connection with the Merger Agreement, we issued (i) 1,734,995 shares of common stock (the “Merger Shares”), which such number of shares represented no more than 19.9% (the “Exchange Cap”) of the outstanding shares of common stock as of immediately before the First Effective Time and (ii) 57,720 shares of Series X Preferred Stock in excess of the Exchange Cap to the holders of Predecessor ENvue in consideration for 100% of Predecessor ENvue. Each share of Series X Preferred Stock will be convertible into 1,000 shares of our common stock, subject to and contingent upon the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at a meeting of stockholders of Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of shares of our common stock to the stockholders of Predecessor ENvue upon conversion of any and all shares of Series X Preferred Stock in accordance with the terms of the Certificate of Designation for the Series X Preferred Stock.

 

The Merger was consummated and completed on February 14, 2025.

 

After giving effect to the Merger, pursuant to the terms and conditions of the Merger Agreement: (i) the holders of the outstanding equity of Predecessor ENvue immediately prior to the effective time of the First Merger (“First Effective Time”) own 19.9% of the common stock of the Company and 85.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval will allow the Series X Preferred Stock to convert to common stock of the Company which may result in the holders of Predecessor ENvue to own 85% of the common stock of the Company, and (ii) the holders of our outstanding equity immediately prior to the First Effective Time own 80.1% of the common stock of the Company and 15.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval which will allow the Series X Preferred Stock to convert to common stock of the Company which may result in our holders owning 15% of common stock of the Company.

 

Series X Non-Voting Convertible Preferred Stock

 

Conversion Rights

 

The conversion price for each share of Series X Preferred Stock shall be $0.6063. The conversion ratio (the “Conversion Ratio”) for each share of Series X Preferred Stock is determined by dividing the Stated Value of each share of Series X Preferred Stock, initially valued at $606.3756, divided by the conversion price which provides an implied Conversion Ratio of 1,000 shares of common stock issuable upon the conversion of each share of Series X Preferred Stock (the “Conversion Shares”), subject to adjustment as provided in the Certificate of Designations of the Series X Non-Voting Convertible Preferred Stock (the “Series X Certificate of Designations”).

 

Effective as of 5:00 p.m. Eastern Time on the fourth (4th) business day after the Series X Stockholder Approval (as defined below), each share of Series X Preferred Stock then outstanding shall automatically convert into a number of shares of common stock equal to the Conversion Ratio, subject to applicable beneficial ownership limitations. Subject the terms of the Series X Certificate of Designations, the Series X Preferred Stock is also convertible, at the option of the holder, at any time and from time to time following 5:00 p.m. Eastern Time on the third (3^rd) business day after the date that the Series X Stockholder Approval, into a number of shares of Common Stock equal to the Conversion Ratio, subject to the applicable beneficial ownership limitations.

 

Series X Stockholder Approval

 

Pursuant to the terms of the Merger Agreement, the issuance of shares of common stock to the stockholders upon conversion of any and all shares of the Series X Preferred Stock in accordance with the terms of the Series X Certificate of Designations is subject to and contingent upon the affirmative vote of a majority of the common stock present or represented and entitled to vote at a meeting of stockholders of the Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of such shares of common stock (the “Stockholder Approval” and such date the stockholder approval is effective, the “Stockholder Approval Date”).

 

Dividend Rights

 

Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series X Preferred Stock, based on the Stated Value, at a rate of eight percent (8%) per annum, commencing on the three (3) month anniversary of the Original Issue Date (as defined in the Series X Certificate of Designations) until the date the Company obtains the Stockholder Approval. Such dividends can be paid in the form of cash or additional issuances of shares of Series X Preferred Stock based on the Stated Value, with such type of payment determined in the sole discretion of the Company, and accrue and be compounded daily on the basis of a 360-day year and twelve (12) 30-day months and shall be paid the earlier of: (i) promptly after conversion of the Series X Preferred Stock or (ii) quarterly starting on the six (6) month anniversary of the Original Issue Date. No other dividends shall be paid on shares of Series X Preferred Stock.

 

Voting Rights

 

Except as otherwise provided in the Series X Certificate of Designations, or as required by the DGCL, the Series X Preferred Stock shall have no voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company shall not, without the affirmative vote or written approval, agreement or waiver of the holders of seventy percent (70%) of the then outstanding shares of the Series X Preferred Stock, among other things, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Series X Certificate of Designations, (ii) issue further shares of Series X Preferred Stock in excess of 57,720 or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, (iii) prior to the Stockholder Approval, consummate either: (A) any Fundamental Transaction (as defined therein) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the voting power of the capital stock of the Company or such other entity immediately after such transaction, (iv) enter into any agreement with respect to any of the foregoing that is not expressly conditioned upon Stockholder Approval, (v) prior to the Stockholder Approval: (A) pay a stock dividend or otherwise make a distribution or distributions on shares of common stock or any other equity or equity equivalent securities payable in shares of common stock (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon the issuance of the Conversion Shares), (B) subdivide outstanding shares of common stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of common stock into a smaller number of shares, or (D) issue by reclassification of shares of the common stock any shares of capital stock of the Company, (vi) grant, issue or sell any capital stock or rights to purchase stock, warrants, securities or other securities of the Company or (vii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets.

 

Rank; Liquidation.

 

Except to the extent that the requisite number of Series X Preferred Stock holders expressly consent to the creation of parity stock or senior preferred stock (as defined below), all shares of common stock and all shares of capital stock of the Company authorized or designated after the date of the designation of the Series X Preferred Stock shall be junior in rank to the Series X Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company Prior to the Stockholder Approval, upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation the greater of the following amounts: (a) twice the aggregate stated value of the Series X Preferred Stock; or (b) the amount the holder would be entitled to receive if the Series X Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to common stock which amounts shall be paid pari passu with all holders of common stock. In addition, in the case of either (a) or (b) above, the holders will be entitled to the payment of all accrued and unpaid dividends on the Series X Preferred Stock and, in the event any of such dividends are payable in shares of common stock, the cash value of such shares of common stock upon Liquidation.

 

Cash Settlement

 

Prior to the Stockholder Approval, if the Company breaches any of its obligations or covenants as set forth in the Series X Certificate of Designation (including but not limited to failure to obtain the requisite approval of the Series X Preferred Stock holders prior to taking any of the actions described under “˗Voting Rights” above, then the Company shall, at the request of the requisite holders Series X Preferred Stock (the “Settlement Request”), pay, out of funds legally available therefor, and prior to any payment in satisfaction of any redemption rights of any other class or series of capital stock of the Company, an amount in cash equal to the stated value of the shares of Series X Preferred Stock held by each holder, with such payment to be made within two (2) Business Days from the date of Settlement Request, and upon payment in full of the stated value for such shares of Series X Preferred Stock, such shares shall be redeemed, retired and no longer be outstanding.

 

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had NanoVibronix and Predecessor ENvue been a combined company during the specified period.

 

The unaudited pro forma adjustments represent the Company’s best estimates and are based upon available information and upon certain assumptions that the Company believes are reasonable, as described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements include: (1) the elimination of Predecessor ENvue’s ordinary shares (2) the issuance of the Debenture in the aggregate principal amount of $500,000 to Alpha Capital Anstalt, and (3) the issuance of (i) 1,734,995 shares of common stock and (ii) 57,720 shares of Series Preferred Stock for 100% of ENvue.

 

 

NanoVibronix, Inc. & ENvue Medical Holdings, Corp. (formerly ENvizion Holdings Corp., as Successor to ENvizion Medical LTD.) Pro Forma 2024 Financial Information

Consolidated Balance Sheets

As of September 30, 2024

(Amounts in thousands except share and per share data)

 

		NanoVibronix Inc.				ENvue Medical Holdings, Corp. Predecessor				Pro Forma Adjustments ENvue Medical Holdings, Corp. Predecessor				Pro Forma Adjustments NanoVibronix Inc.						Pro Forma Combined 2024
ASSETS:
Current assets:
Cash and cash equivalents		$	1,305			$	-			$	133			$	500			(A)		$	1,938
Restricted cash			-				-				30				-						30
Trade receivables, net			580				-				30				-						610
Other accounts receivable and prepaid expenses			242				-				332				-						574
Inventory			2,250				-				326				-						2,576
Total current assets			4,377				-				851				500						5,728
Non-current assets:
Fixed assets, net			9				-				131				-						140
Right of use assets			-				-				46				-						46
Goodwill			-				-				279				39,440			(B)			39,719
Intangible assets, net			-				-				1,145				-						1,145
Severance pay fund			170				-				-				-						170
Operating lease right-of-use assets, net			126				-				-				-						126
Total non-current assets			305				-				1,601				39,440						41,346
Total assets			4,682				-				2,452				39,940						47,074
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Trade payables			25				-				140										165
Other accounts payable and accrued expenses			2,420				-				685				2,065			(C)(D)			5,170
Deferred licensing income - current			27				-				-				-						27
Operating lease liabilities - current			49				-				43				-						92
Short-term loans			-				-				1,017				-						1,017
Convertible loan			-				-				-				500			(A)			500
Total current liabilities			2,521				-				1,885				2,565						6,971
Non-current liabilities:
Accrued severance pay			212				-				-				-						212
Operating lease liabilities, non-current			77				-				7				-						84
Total liabilities			2,810				-				1,892				2,565						7,267
Commitments and contingencies (Note 9)
Stockholders’ equity:
Series C Preferred stock of $0.001 par value - Authorized: 5,500,000 shares at September 30, 2024; Issued and outstanding: None at December 31, 2023 September 30, 2024			-				-				-				-						-
Series D Preferred stock of $0.001 par value - Authorized: 506 shares at September 30, 2024; Issued and outstanding: None at September 30, 2024			-				-				-				-						-
Series E Preferred stock of $0.001 par value - Authorized: 1,999,494 shares at September 30, 2024; Issued and outstanding: None at September 30, 2024			-				-				-				-						-
Series F Preferred stock of $0.01 par value - Authorized: 40,000 shares at September 30, 2024; Issued and outstanding: None at September 30, 2024			-				-				-				-						-
Series X Preferred stock of $0.001 par value - Authorized: 57,720 shares at September 30, 2024; Issued and outstanding: None at September 30, 2024			-				-				-				5			(B)			5
Common stock of $0.001 par value - Authorized: 40,000,000 shares at September 30, 2024, respectively; Issued and outstanding: 2,784,353 at September 30, 2024, respectively			3				-				-				2			(B)			5
Successor Common shares, $0.0001 value - Authorized: 1,500,000 shares at September 30, 2024; Issued and outstanding 1,500,000 shares at September 30, 2024; Predecessor Ordinary shares of NIS 0.01 par value - Authorized: 10,000,000 shares at December 31, 2023; Issued and outstanding: None at September 30, 2024			-				-				-				-						-
Additional paid in capital			70,314				-				1,490				38,298			(B)(D)			110,102
Accumulated other comprehensive income			(75	)			-				-				-						(75	)
Accumulated deficit			(68,370	)			-				(930	)			(930	)		(C)			(70,230	)
Total stockholders’ equity			1,872				-				560				37,375						39,807
Total liabilities and stockholders’ equity		$	4,682			$	-			$	2,452			$	39,940					$	47,074

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

 

NanoVibronix, Inc. & ENvue Medical Holdings, Corp. (formerly ENvizion Holdings Corp., as Successor to ENvizion Medical LTD.) Pro Forma 2024 Financial Information

Condensed Consolidated Statements of Operations (Unaudited)

For the Nine Months Ended September 30, 2024

(Amounts in thousands except share and per share data)

 

		NanoVibronix Inc.				ENvue Medical Holdings, Corp. Predecessor				ENvue Medical Holdings, Corp. Successor				Pro Forma Adjustments ENvue Medical Holdings, Corp.				Pro Forma Adjustments NanoVibronix Inc.				Pro Forma Combined
Revenues		$	2,114			$	244			$	170			$	-			$	-			$	2,528
Cost of revenues			889				153				166				-				-				1,208
Gross profit (loss)			1,225				91				4				-				-				1,320
Operating expenses:
Research and development			557				280				216				-				-				1,053
Selling and marketing			545				314				320				-				-				1,179
General and administrative			2,335				890				326				650				280	(D)			4,481
Total operating expenses			3,437				1,484				862				650				280				6,713
Loss from operations			(2,212	)			(1,393	)			(858	)			(650	)			(280	)			(5,393	)
Interest expense			(101	)			-				-				-				-				(101	)
Financial income (expense), net			53				337				(67	)			-				-				323
Reorganization items, net			-				(4,358	)			-				-				-				(4,358	)
Loss before taxes on income			(2,260	)			(5,414	)			(925	)			(650	)			(280	)			(9,529	)
Income tax benefit / (expense)			(14	)			(1	)			(5	)			-				-				(20	)
Net loss			(2,274	)			(5,415	)			(930	)			(650	)			(280	)			(9,549	)
Accrued dividends on Series X Convertible Preferred Stock			-				-				-				-				(1,351	)			(1,351	)
Net loss attributable to common shareholders		$	(2,274	)		$	(5,415	)		$	(930	)		$	(650	)		$	(1,631	)		$	(10,900	)
Basic and diluted net loss available for holders of common stock		$	(0.83	)		$	(1.99	)		$	(0.34	)		$	-			$	-			$	(4.05	)
Weighted average common shares outstanding:
Basic and diluted			2,712,836				2,712,836				2,712,836				-				-				2,712,836
Comprehensive loss:
Net loss available to common stockholders		$	(2,274	)		$	(5,415	)		$	(930	)		$	(650	)		$	(1,631	)			(10,900	)
Change in foreign currency translation adjustments			(12	)			-				-				-				-				(12	)
Less income tax effect			4				-				-				-				-				4
Comprehensive loss available to common stockholders		$	(2,282	)		$	(5,415	)		$	(930	)		$	(650	)		$	(1,631	)		$	(10,908	)

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements

 

 

NanoVibronix, Inc. & ENvue Medical Holdings, Corp. (formerly ENvizion Holdings Corp., as Successor to ENvizion Medical LTD., formerly ENvizion Holdings Corp.) Pro Forma 2024 Financial Information

Condensed Consolidated Statements of Operations (Unaudited)

For the Year Ended December 31, 2023

(Amounts in thousands except share and per share data)

 

		NanoVibronix Inc.				ENvue Medical Holdings, Corp. Predecessor				Pro Forma Adjustments ENvue Medical Holdings, Corp. Predecessor				Pro Forma Adjustments NanoVibronix Inc.				Consolidated
Revenues		$	2,283			$	1,137			$	-			$	-			$	3,420
Cost of revenues			746				1,692				-				-				2,438
Gross profit (loss)			1,537				(555	)			-				-				982
Operating expenses:
Research and development			185				1,704				-				-				1,889
Selling and marketing			864				1,922				-				-				2,786
General and administrative			3,924				1,961				-				-				5,885
Total operating expenses			4,973				5,587				-				-				10,560
Loss from operations			(3,436	)			(6,142	)			-				-				(9,578	)
Interest expense			(135	)			-				-				-				(135	)
Financial income (expense), net			(111	)			1,121				-				-				1,010
Reorganization items, net			-				-				-				-				-
Loss before taxes on income			(3,682	)			(5,021	)			-				-				(8,703	)
Income tax expense			(29	)			(13	)			-				-				(42	)
Net loss		$	(3,711	)		$	(5,034	)		$	-			$	-			$	(8,745	)
Basic and diluted net loss available for holders of common stock		$	(1.37	)		$	(1.86	)		$	-			$	-			$	(3.23	)
Weighted average common shares outstanding:
Basic and diluted			2,712,836				2,712,836				-				-				2,712,836
Comprehensive loss:
Net loss available to common stockholders		$	(3,711	)		$	(5,034	)		$	-			$	-			$	(8,745	)
Change in foreign currency translation adjustments			(12	)			-				-				-				(12	)
Less income tax effect			4				-				-				-				4
Comprehensive loss available to common stockholders		$	(3,719	)		$	(5,034	)		$	-			$	-			$	(8,753	)

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements

 

 

Note 1 – Basis of presentation

 

The NanoVibronix Merger is accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Based on an evaluation of the facts and circumstances, the Company was identified as the accounting acquirer at the time of close due to change of control not being given along nor majority voting rights. As the acquirer for accounting purposes, the Company has estimated the fair value of Predecessor ENvue’s assets acquired and liabilities assumed and conformed the accounting policies of Predecessor ENvue to its own policies. The unaudited pro forma condensed combined balance sheet as of September 30, 2024, is presented as if the Merger had been completed on September 30, 2024. The unaudited pro forma condensed combined statements of operations for the years ended December 31, 2023, and the nine months ended September 30, 2024, assumes that the Merger occurred on January 1, 2023, and combines the historical results of NanoVibronix and ENvue Medical Holdings, Corp.

 

Note 2 – Calculation of purchase consideration and preliminary purchase price allocation

 

The following table summarizes the fair value of purchase consideration that was transferred on the closing date of the Merger:

 

Value of the issuance of 1,735,155 shares of Common Stock and 57,720 shares of Series X Preferred Stock		$	40,000,000
Total purchase consideration		$	40,000,000
The Company has performed a preliminary valuation analysis of the fair market value of ENvue’s assets and liabilities. The following table summarizes the preliminary allocation of the purchase price as of September 30, 2024:
Cash			163
Receivables, inventory, prepaid expenses and other current assets		$	688
Long-term assets			456
Intangible assets			1,145
Goodwill			39,440
Accounts payable and accrued expenses			(868	)
Notes payable			(1,017	)
Long term liabilities			(7	)
Total consideration		$	40,000

 

This preliminary purchase price allocation has been used to prepare pro forma adjustments in the unaudited pro forma condensed consolidated financial statements. The final purchase price allocation will be determined when NanoVibronix has completed all detailed valuations and necessary calculations, which are expected to be finalized within the next twelve months. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (i) changes in identifiable net assets, (ii) changes in fair values of property, plant and equipment, and (iii) other changes to assets and liabilities. Intangible assets include the value on ENvue’s customer list and technology.

 

Note 3 – Pro forma adjustments

 

The pro forma adjustments are based on the NanoVibronix’s preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial statements:

 

	(A)	The issuance of the Debenture (as defined below) in the aggregate principal amount of $500,000.
	(B)	The issuance of an aggregate of (i) 1,734,995 shares of common stock and (ii) shares of 57,720 Series X Preferred Stock for 100% ownership of ENvue.
	(C)	Accruing transaction costs of the merger as of January 1, 2024 until September 30, 2024 of $650,000.
	(D)	Accruing deemed dividends on the Series X convertible preferred as if issued on January 1, 2024.

 

Note 4 – Senior Convertible Debenture

 

On February 13, 2025, we entered into a Securities Purchase Agreement (the “PIPE Purchase Agreement”) with an institutional investor, pursuant to which we sold in a private placement senior convertible debenture (the “Debenture”) due the earlier of (i) the date that is the 30-day anniversary of the effective date of stockholder approval of the issuance of the shares of common stock upon the conversion of the debentures and (ii) November 13, 2025 (the date that is nine months following the date of issuance of the Debenture) (“Maturity Date”), having an aggregate principal amount of $500,000 (the “Debenture Transaction”). On the Maturity Date, we shall pay the holder in cash or, at the option of the holder, in the form of conversion shares, or a combination thereof, the entire outstanding principal amount of the Debenture, together with accrued and unpaid interest thereon, the applicable exit fee and any other amounts due thereunder. Following the receipt of stockholder approval, the Debenture is convertible, in whole or in part, into shares of our common stock, at the option of the holder, at the initial conversion price of $0.4446, which is subject to customary anti-dilution adjustments, and which such conversion price shall not be lower than the floor price of $0.08892. The Debenture bears interest at the rate of 8.0% per annum, payable on the Maturity Date. The closing of the Debenture Transaction occurred on February 14, 2025.

 

Note 5 – Series X Non-Voting Convertible Preferred Stock

 

In connection with the Merger Agreement, we issued (i) 1,734,995 shares of common stock (the “Merger Shares”), which such number of shares represented no more than 19.9% (the “Exchange Cap”) of the outstanding shares of common stock as of immediately before the First Effective Time and (ii) 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”) in excess of the Exchange Cap to the holders of Predecessor ENvue in consideration for 100% of Predecessor ENvue. Each share of Series X Preferred Stock will be convertible into 1,000 shares of our common stock, subject to and contingent upon the affirmative vote of a majority of the shares of common stock present or represented and entitled to vote at a meeting of stockholders of Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of shares of our common stock to the stockholders of Predecessor ENvue upon conversion of any and all shares of Series X Preferred Stock in accordance with the terms of the Certificate of Designation for the Series X Non-Voting Convertible Preferred Stock. The terms of the Series X Preferred Stock are described below.

 

 

Conversion Rights

 

The conversion price for each share of Series X Preferred Stock shall be $0.6063. The conversion ratio (the “Conversion Ratio”) for each share of Series X Preferred Stock is determined by dividing the Stated Value (as defined in the Series X Certificate of Designations) of each share of Series X Preferred Stock, initially valued at $606.3756, divided by the conversion price which provides an implied Conversion Ratio of be 1,000 shares of common stock issuable upon the conversion of each share of Series X Preferred Stock (the “Conversion Shares”), subject to adjustment as provided in the Certificate of Designations of the Series X Non-Voting Convertible Preferred Stock (the “Series X Certificate of Designations”).

 

Effective as of 5:00 p.m. Eastern Time on the fourth (4th) business day after the Series X Stockholder Approval (as defined below), each share of Series X Preferred Stock then outstanding shall automatically convert into a number of shares of common stock equal to the Conversion Ratio, subject to applicable beneficial ownership limitations. Subject the terms of the Series X Certificate of Designations, the Series X Preferred Stock is also convertible, at the option of the holder, at any time and from time to time following 5:00 p.m. Eastern Time on the third (3^rd) business day after the date that the Series X Stockholder Approval, into a number of shares of Common Stock equal to the Conversion Ratio, subject to the applicable beneficial ownership limitations.

 

Series X Stockholder Approval

 

Pursuant to the terms of the Merger Agreement, the issuance of shares of common stock to the stockholders upon conversion of any and all shares of the Series X Preferred Stock in accordance with the terms of the Series X Certificate of Designations is subject to and contingent upon the affirmative vote of a majority of the common stock present or represented and entitled to vote at a meeting of stockholders of the Company to approve, for purposes of the Nasdaq Listing Rules, the issuance of such shares of common stock (the “Series X Stockholder Approval”).

 

Dividend Rights

 

Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series X Preferred Stock, based on the Stated Value, at a rate of eight percent (8%) per annum, commencing on the three (3) month anniversary of the Original Issue Date (as defined in the Series X Certificate of Designations) until the date the Company obtains the Stockholder Approval. Such dividends can be paid in the form of cash or additional issuances of shares of Series X Preferred Stock based on the Stated Value, with such type of payment determined in the sole discretion of the Company, and accrue and be compounded daily on the basis of a 360-day year and twelve (12) 30-day months and shall be paid the earlier of: (i) promptly after conversion of the Series X Preferred Stock or (ii) quarterly starting on the six (6) month anniversary of the Original Issue Date. No other dividends shall be paid on shares of Series X Preferred Stock.

 

Voting Rights

 

Except as otherwise provided in the Series X Certificate of Designations, or as required by the DGCL, the Series X Preferred Stock shall have no voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company shall not, without the affirmative vote or written approval, agreement or waiver of the holders of seventy percent (70%) of the then outstanding shares of the Series X Preferred Stock, among other things, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Series X Certificate of Designations, (ii) issue further shares of Series X Preferred Stock in excess of 57,720 or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, (iii) prior to the Stockholder Approval, consummate either: (A) any Fundamental Transaction (as defined therein) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the voting power of the capital stock of the Company or such other entity immediately after such transaction, (iv) enter into any agreement with respect to any of the foregoing that is not expressly conditioned upon Stockholder Approval, (v) prior to the Stockholder Approval: (A) pay a stock dividend or otherwise make a distribution or distributions on shares of common stock or any other equity or equity equivalent securities payable in shares of common stock (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon the issuance of the Conversion Shares), (B) subdivide outstanding shares of common stock into a larger number of shares, (C) combine (including by way of reverse stock split) outstanding shares of common stock into a smaller number of shares, or (D) issue by reclassification of shares of the common stock any shares of capital stock of the Company, (vi) grant, issue or sell any capital stock or rights to purchase stock, warrants, securities or other securities of the Company or (vii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for, the obligations of any person, or make any loans or advances, or intentionally grant any security interest in any of its assets.

 

Rank; Liquidation.

 

Except to the extent that the requisite number of Series X Preferred Stock holders expressly consent to the creation of parity stock or senior preferred stock (as defined below), all shares of common stock and all shares of capital stock of the Company authorized or designated after the date of the designation of the Series X Preferred Stock shall be junior in rank to the Series X Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company Prior to the Stockholder Approval, upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation the greater of the following amounts: (a) twice the aggregate stated value of the Series X Preferred Stock; or (b) the amount the holder would be entitled to receive if the Series X Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to common stock which amounts shall be paid pari passu with all holders of common stock. In addition, in the case of either (a) or (b) above, the holders will be entitled to the payment of all accrued and unpaid dividends on the Series X Preferred Stock and, in the event any of such dividends are payable in shares of common stock, the cash value of such shares of common stock upon Liquidation.

 

Cash Settlement

 

Prior to the Stockholder Approval, if the Company breaches any of its obligations or covenants as set forth in the Series X Certificate of Designation (including but not limited to failure to obtain the requisite approval of the Series X Preferred Stock holders prior to taking any of the actions described under “˗Voting Rights” above, then the Company shall, at the request of the requisite holders Series X Preferred Stock (the “Settlement Request”), pay, out of funds legally available therefor, and prior to any payment in satisfaction of any redemption rights of any other class or series of capital stock of the Company, an amount in cash equal to the stated value of the shares of Series X Preferred Stock held by each holder, with such payment to be made within two (2) Business Days from the date of Settlement Request, and upon payment in full of the stated value for such shares of Series X Preferred Stock, such shares shall be redeemed, retired and no longer be outstanding.

 

Note 6 - Loss Per Share

 

Basic loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted earnings per share are computed similarly to basic earnings per share except that the denominator is increased to include potentially dilutive securities. The Company’s diluted loss per share is the same as the basic loss per share for the pro forma periods ending September 30, 2024 and December 31, 2023 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

 

 

Exhibit 99.4

 

NanoVibronix, Inc. Announces Acquisition of ENvue Medical Holdings, Corp.

 

ELMSFORD, N.Y., February 14, 2025 (Business Wire) — NanoVibronix, Inc. (NASDAQ: NAOV) (the “Company”), a medical technology company specializing in non-invasive therapeutic devices, today announced the completion of the acquisition of ENvue Medical Holdings Corp. (“ENvue”) (the “Acquisition”), a privately-held, innovative leader in enteral feeding solutions. This strategic transaction will combine the strengths of both companies, creating a platform for growth and expanded market reach in the medical device sector. The Company believes that the Acquisition will strengthen the combined company’s market position in enteral feeding technology and therapeutic medical devices, as ENvue’s proprietary technology aligns with the Company’s commitment to patient safety and advanced medical solutions and the combined company is expected to benefit from a broader commercial platform, enhanced distribution and operational efficiencies.

 

Brian Murphy, CEO of NanoVibronix, Inc., stated: “This transaction represents a transformational opportunity for NanoVibronix and our shareholders. ENvue Medical has developed an innovative solution that directly addresses critical patient safety challenges in enteral feeding, and we are excited to integrate their technology into our portfolio. Together, we are positioned to accelerate growth, improve patient outcomes and create long-term value for our shareholders.”

 

Dr. Doron Besser, CEO of ENvue Medical Holdings, Corp., added: “Joining forces with NanoVibronix marks the beginning of an exciting new chapter for ENvue Medical. Our combined expertise, market presence and commitment to innovation will allow us to reach more hospitals and healthcare providers with life-saving solutions. We look forward to bringing our cutting-edge enteral feeding technology to a broader audience and making a meaningful impact in patient care.”

 

About the Acquisition and the Private Placement

 

The Acquisition of ENvue was structured as a stock-for-stock transaction pursuant to which all of ENvue’s outstanding equity interests were exchanged based on a fixed exchange ratio for consideration as a combination of 1,734,995 shares of the Company common stock, which such number of shares represented no more than 19.9% of the outstanding shares of Company common stock as of immediately before the effective time of the Acquisition, and 57,720 shares of Series X Non-Voting Convertible Preferred Stock (the “Series X Preferred Stock”) (or 57,720,000 shares of common stock on an as-converted-to-common basis). Subject to Company stockholder approval, each share of Series X Preferred Stock will automatically convert into 1,000 shares of common stock, subject to certain beneficial ownership limitations set by each holder.

 

After giving effect to Acquisition and pursuant to the terms and conditions of the merger agreement governing the Acquisition, (i) the holders of the outstanding equity of ENvue immediately prior to the effective time of the first merger (“First Effective Time”) own 19.9% of the common stock of the Company and 85.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval will allow the Series X Preferred Stock to convert to common stock of the Company, which may result in the holders of ENvue holding 85% of the common stock of the Company, and (ii) the holders of our outstanding equity immediately prior to the First Effective Time holding 80.1% of the common stock of the Company and 15.0% of the outstanding equity of the Company (assuming the Series X Preferred Stock is converting at a ratio of 1,000:1) immediately following the First Effective Time, which following stockholder approval will allow the Series X Preferred Stock to convert to common stock of the Company which may result in our holders holding 15% of common stock of the Company.

 

 

Following the consummation of the Acquisition, a successor-in-interest of ENvue will become a wholly-owned subsidiary of the Company. The Acquisition was approved by the Board of Directors of Company and the Board of Directors and stockholders of ENvue and was consummated on February 14, 2025.

 

Concurrently with the completion of the Acquisition, the Company consummated a private placement investment with an institutional investor, pursuant to which the Company sold in a private placement a senior convertible debenture (the “Debenture”) having an aggregate principal amount of $500,000 (the “Debenture Transaction”). Following the receipt of stockholder approval, the Debenture is convertible, in whole or in part, into shares of the Company’s common stock, at the option of the holder, at the initial conversion price of $0.4446, which is subject to customary anti-dilution adjustments, and which such conversion price shall not be lower than the floor price of $0.08892 (“Debenture Shares”).

 

Palladium Capital Group, LLC served as the exclusive advisor on the transaction. Haynes and Boone, LLP acted as legal advisor to ENvue. Pierson Ferdinand, LLP acted as legal advisor to the Company.

 

The securities to be sold in the private placement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or applicable state securities laws, and may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws. Pursuant to the terms of the merger agreement for the Acquisition and the registration right agreement governing the private placement, the Company has agreed to file a registration statement (the “Resale Registration Statement”) with the Securities and Exchange Commission (the “SEC”) registering the resale of Debenture Shares, the shares of Company common stock issued in the Acquisition, and the share of common stock issuable upon conversion of the Series X Preferred Stock issued in the Acquisition.

 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities of the Company in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.

 

Management and Organization

 

NanoVibronix and ENvue will continue to be led by its current management team, with the addition of Doron Besser of ENvue and Professor Zeev Rotstein as directors, and resignation of Harold Jacob, M.D., Maria Schroeder and Michael Ferguson from the board of directors of the Company. Following the Acquisition, the Company board of directors will be comprised of Brian Murphy, Christopher Fashek, Martin Goldstein, Thomas R. Mika, Aurora Cassirer, Doron Besser, M.D., and Professor Zeev Rotstein, M.D.

 

About NanoVibronix, Inc.

 

NanoVibronix, Inc. (NASDAQ: NAOV) is a medical device company headquartered in Tyler, Texas, with research and development in Nesher, Israel, focused on developing medical devices utilizing its patented low intensity surface acoustic wave (SAW) technology. The proprietary technology allows for the creation of low-frequency ultrasound waves that can be utilized for a variety of medical applications, including for disruption of biofilms and bacterial colonization, as well as for pain relief. The devices can be administered at home without the continuous assistance of medical professionals. The Company’s primary products include PainShield® and UroShield®, which are portable devices suitable for administration at home or in any care setting. Additional information about NanoVibronix is available at: www.nanovibronix.com.

 

 

About ENvue Medical Holdings Corp.

 

ENvue Medical Holdings Corp is a leader in electromagnetic navigation technology, providing real-time guidance for enteral feeding tube placement across critical care, step-down units, and general medical-surgical floors in hospitals. The FDA 510(k)-cleared ENvue System and feeding tube are designed to support precise and efficient placement, enabling clinicians to navigate feeding tubes with confidence, while reducing the risk of misplacement and complication. Already in use at numerous hospitals across the United States, ENvue improves workflow efficiency and enhances patient care by offering a reliable alternative to traditional blind placement methods.

 

Built on Enhanced Navigation (EN), ENvue isa platform technology system with the potential to expand beyond enteral feeding into areas such as vascular access, positioning the company for long-term growth in multiple medical applications.

 

With a strong foundation in clinical innovation and adoption in leading healthcare institutions, ENvue Medical is advancing the future of guided medical navigation. Additional information about the ENvue System and feeding tubes is available at: www.envuemed.com.

 

Forward-looking Statements

 

This press release contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. These forward-looking statements include, but are not limited to: future expectations, plans and prospects for the Company following the consummation of the acquisition and stockholder approval of the conversion of the Series X Preferred Stock. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified; consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with: (i) market acceptance of our existing and new products or lengthy product delays in key markets; (ii) negative or unreliable clinical trial results; (iii) inability to secure regulatory approvals for the sale of our products; (iv) intense competition in the medical device industry from much larger, multinational companies; (v) product liability claims; (vi) product malfunctions; (vii) our limited manufacturing capabilities and reliance on subcontractor assistance; (viii) insufficient or inadequate reimbursements by governmental and/or other third party payers for our products; (ix) our ability to successfully obtain and maintain intellectual property protection covering our products; (x) legislative or regulatory reform impacting the healthcare system in the U.S. or in foreign jurisdictions; (xi) our reliance on single suppliers for certain product components, (xii) the need to raise additional capital to meet our future business requirements and obligations, given the fact that such capital may not be available, or may be costly, dilutive or difficult to obtain; (xiii) our conducting business in foreign jurisdictions exposing us to additional challenges, such as foreign currency exchange rate fluctuations, logistical and communications challenges, the burden and cost of compliance with foreign laws, and political and/or economic instabilities in specific jurisdictions; and (xiv) market and other conditions. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (“SEC”), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s web site at: http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events, or otherwise, except as required by law.

 

Contact:

 

Brett Maas, Managing Principal, Hayden IR, LLC

brett@haydenir.com

(646) 536-7331

SOURCE: NanoVibronix, Inc.

 

 

v3.25.0.1

Cover	Feb. 14, 2025
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Feb. 14, 2025
Current Fiscal Year End Date	--12-31
Entity File Number	001-36445
Entity Registrant Name	NanoVibronix, Inc.
Entity Central Index Key	0001326706
Entity Tax Identification Number	01-0801232
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	969 Pruitt Ave
Entity Address, City or Town	Tyler
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77569
City Area Code	(914)
Local Phone Number	233-3004
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.001 per share
Trading Symbol	NAOV
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

---