As filed with the Securities and Exchange Commission on March 6, 2014.
SEC File No. 333-193784
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NANO VIBRONIX, INC.
(Exact name of registrant as specified in its charter)
Delaware | 3842 | 01-0801232 |
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
105 Maxess Road, Suite S124
Melville, NY 11747
(631) 574-4410
(Address, including
zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Ophir Shahaf
Chief Executive Officer
Nano Vibronix, Inc.
105 Maxess Road, Suite S124
Melville, NY 11747
(631) 574-4410
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
Rick A. Werner, Esq. Haynes and Boone, LLP 30 Rockefeller Plaza, 26th Floor New York, New York 10112 Tel. (212) 659-7300 Fax (212) 884-8234 |
Mitchell S. Nussbaum, Esq. Angela M. Dowd, Esq. Loeb & Loeb LLP 345 Park Avenue, 18th Floor New York, NY 10154 Tel. (212) 407-4000 Fax (212) 504-3013 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ | Smaller reporting company | x |
(Do not check if a smaller reporting company) |
CALCULATION OF REGISTRATION FEE
TITLE OF EACH
CLASS OF SECURITIES TO BE REGISTERED |
PROPOSED
MAXIMUM AGGREGATE OFFERING PRICE(1) |
AMOUNT OF
REGISTRATION FEE |
||||||
Units of common stock, par value $0.001 per share, and redeemable warrants (2)(3) | $ | 3,490,909 | $ | 449.63 | ||||
Common stock included in the units (3)(4)(5) | - | - | ||||||
Redeemable warrants included in the units (3)(4) | $ | - | $ | - | ||||
Common stock underlying the redeemable warrants included in the units (3)(5)(6) | $ | 2,181,818 | $ | 281.02 | ||||
Underwriter’s warrants (7) | $ | 218,182 | $ | 28.10 | ||||
Units of common stock and redeemable warrants included in underwriter’s warrants(2)(4) | $ | - | $ | - | ||||
Common stock included in the units underlying the underwriter’s warrants(4)(5) | $ | - | $ | - | ||||
Redeemable warrants included in the units underlying the underwriter’s warrants(4) | - | - | ||||||
Common stock underlying the redeemable warrants included in the units underlying the underwriter’s warrants (5)(6) | $ | 109,091 | $ | 14.05 | ||||
Total | $ | 6,000,000 | $ | 772.80 | (8) |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
(2) | The Units will consist of one share of common stock and one-half of one redeemable warrant to purchase one share of common stock. |
(3) | Includes shares and redeemable warrants that the underwriter has the option to purchase to cover over-allotments, if any. |
(4) | No fee required pursuant to Rule 457(g) under the Securities Act of 1933, as amended. |
(5) | Pursuant to Rule 416 under the Securities Act of 1933, as amended, the securities being registered hereunder include such indeterminate number of additional shares of common stock as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions. |
(6) | We have calculated the proposed maximum aggregate offering price of the common stock underlying the redeemable warrants and the underwriter’s warrants by assuming that such warrants are exercisable to purchase common stock at a price per share equal to 125% of the assumed price per share of the common stock being sold in this offering. |
(7) |
Represents 5% of the units to be sold in this offering including units that may be sold upon exercise of the underwriter’s over-allotment option.
|
|
(8) | Previously paid. |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 6, 2014
PRELIMINARY PROSPECTUS
Nano Vibronix, Inc.
Units
Each Consisting of One Share of Common Stock and One-Half of One Redeemable Warrant to Purchase One Share of Common Stock
_________________
This is the initial public offering of securities of Nano Vibronix, Inc. We are offering to sell units, each unit consisting of one share of our common stock and one-half of one redeemable warrant to purchase one share of our common stock. Each full redeemable warrant entitles the holder to purchase one share of our common stock at an exercise price equal to 125% of the offering price of the common stock underlying the units, subject to adjustment as described herein. Each redeemable warrant will become exercisable 45 days after the date of this prospectus and will expire on , 2019.
Prior to this offering, there has been no public market for our securities. The initial public offering price is expected to be between $ and $ per unit. We have applied to list our units, shares of common stock and redeemable warrants for quotation on the Nasdaq Capital Market under the symbols “NVBXU,” “NVBX” and “NVBXW,” respectively. No assurance can be given that our application will be approved. If the application is not approved, we will not complete this offering.
The redeemable warrants and shares of common stock will trade together as units only during the first 45 days of trading, and thereafter, the units will automatically separate and the shares of common stock and redeemable warrants will trade separately, unless Chardan Capital Markets LLC determines that an earlier date is acceptable based on its assessment of the relative strengths of the securities markets and small capitalization companies in general, and the trading pattern of, and demand for, our securities in particular.
While the redeemable warrants are exercisable, we may redeem the outstanding redeemable warrants in whole but not in part at a price of $0.01 per redeemable warrant upon a minimum of 30 days’ prior written notice of redemption if, and only if, the last sale price of our common stock on the exchange on which our securities may be traded equals or exceeds $ per share for any 10 trading days within a 30 trading day period ending three business days before we send the notice of redemption.
Investing in our securities is highly speculative and involves a high degree of risk. See “Risk Factors” beginning on page 7 of this prospectus before making a decision to purchase our securities.
We qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or JOBS Act and, as such, may elect to comply with certain reduced public company reporting requirements for future filings. Please read the related disclosure contained on pages 17 and 28 of this prospectus.
Per Unit | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions (1) | $ | $ | ||||||
Proceeds, before expenses, to Nano Vibronix, Inc. | $ | $ |
(1) The underwriter will receive compensation in addition to the underwriting discount, as set forth in the section entitled “Underwriting” beginning on page 69 upon the closing of this offering, which consists of three-year compensation warrants entitling the underwriter to purchase 5.0% of the aggregate number of units issued in this offering, including units issued pursuant to the exercise of the over-allotment option, with an exercise price equal to 125% of the price per unit sold in this offering. We have also agreed to reimburse the underwriter for certain expenses incurred by the underwriter up to an amount not to exceed $25,000 for all expenses other than legal fees plus $125,000 for legal fees upon completion of this offering. See the heading entitled “Underwriting” on page 69 of this prospectus for additional disclosure regarding compensation to the underwriter payable by us.
We have granted the underwriter an option, exercisable one or more times in whole or in part, to purchase up to additional units from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments, if any. If the underwriter exercises the option in full, the total underwriting discounts and commissions payable will be $ , and the total proceeds to us, before expenses, will be $ . Prior to separation of the units, any exercise of the over-allotment will be settled in units, and subsequent to the separation of the units will be settled in shares of common stock and warrants, as applicable.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The underwriter expects to deliver the units against payment in New York, New York on , 2014.
The date of this prospectus is , 2014
______________________________________
Chardan Capital Markets, LLC
______________________________________
TABLE OF CONTENTS
PROSPECTUS SUMMARY | 1 |
RISK FACTORS | 7 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 21 |
USE OF PROCEEDS | 23 |
CAPITALIZATION | 24 |
DILUTION | 25 |
DIVIDEND POLICY | 26 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 26 |
BUSINESS | 31 |
MANAGEMENT | 53 |
EXECUTIVE COMPENSATION | 57 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 60 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 62 |
DESCRIPTION OF SECURITIES | 65 |
SHARES ELIGIBLE FOR FUTURE ISSUANCE | 69 |
UNDERWRITING | 71 |
LEGAL MATTERS | 74 |
EXPERTS | 74 |
WHERE YOU CAN FIND ADDITIONAL INFORMATION | 74 |
INDEX TO FINANCIAL STATEMENTS | F-1 |
You should rely only on the information contained in this prospectus. We have not authorized any other person to provide you with information different from or in addition to that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted.
Until , 2014 (the 25 th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Industry and Market Data
In this prospectus, we rely on and refer to information and statistics regarding our industry. We obtained this statistical, market and other industry data and forecasts from publicly available information. While we believe that the statistical data, market data and other industry data and forecasts are reliable, we have not independently verified the data.
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should read the entire prospectus carefully, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
When used herein, unless the context requires otherwise, references to the “Company,” “Nano,” “we,” “our” and “us” refer to Nano Vibronix, Inc., a Delaware corporation, and, where appropriate, its consolidated subsidiaries.
The Company
We are a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our products currently consist of:
· | WoundShield TM , a patch-based therapeutic ultrasound device that facilitates tissue regeneration and wound healing by using ultrasound to increase local capillary perfusion, which is the flow of blood to beds of extremely small blood vessels, and tissue oxygenation, which is the increase in the concentrations of oxygen within the tissue; |
· | NanoVibronix NPWT (Negative Pressure Wound Therapy), a small, lightweight pump with features that allow contamination-free handling of infected wound exudate (fluid) and enhanced patient mobility; |
· | PainShield TM , a disposable patch-based therapeutic ultrasound technology to treat pain, muscle spasm and joint contractures (permanent shortening of a joint) by delivering a localized ultrasound effect to treat pain and induce soft tissue healing in a targeted area; and |
· | UroShield TM , an ultrasound-based product that is designed to prevent biofilm (a matrix of microorganisms required for bacteria to grow and cause infections) in urinary catheters, increase antibiotic efficacy and decrease pain and discomfort associated with urinary catheter use. |
Each of our WoundShield, PainShield and UroShield products employs a small, disposable transducer (a device that converts a signal in one form of energy to another form of energy) that transmits low frequency, low intensity ultrasound acoustic waves that seek to repair and regenerate tissue, musculoskeletal and vascular structures and increase antibiotic efficacy. Through their size, effectiveness and ease of use, these products are intended to eliminate the need for technicians and medical personnel to manually administer ultrasound treatment through large transducers, thereby promoting patient independence and enabling more cost-effective home-based care. Our NanoVibronix NPWT is based on an existing standard of care for wound therapy treatment and employs a technology that drains open cavity wounds and seeks to accelerate wound healing.
PainShield and NanoVibronix NPWT are currently approved for marketing in the U.S. by the U.S. Food and Drug Administration and all of our products, except for NanoVibronix NPWT, have CE Mark approval in the European Union. We anticipate that we will apply for CE Mark approval for NanoVibronix NPWT within six months after the closing of the offering to which this prospectus relates. We have a Canadian medical device license for PainShield and UroShield, a certificate allowing us to sell PainShield, WoundShield and UroShield in Israel, a certificate allowing us to sell PainShield in Australia, and we are able to sell PainShield, WoundShield and UroShield in India and Ecuador based on our CE Mark. In addition, our distributor in Korea has applied for approval to sell PainShield and UroShield, and our distributor in Chile has applied for approval to sell PainShield. We generally apply, through our distributor, for approval in a particular country for a particular product only when we have a distributor in place with respect to such product.
In addition to the need to obtain regulatory approvals, as described above, we anticipate that sales volumes and prices of our WoundShield and PainShield products will depend in large part on the availability of coverage and reimbursement for self-administered use from third party payers. Third party payers include governmental programs such as Medicare and Medicaid in the U.S., private insurance plans and workers’ compensation plans. We do not currently have reimbursement codes for self-administered use or clinical use of WoundShield in any of the markets in which we have regulatory authority to sell WoundShield. Of the markets in which we have regulatory authority to sell PainShield, we have reimbursement codes in the United States (i.e., Current Procedural Terminology codes or “CPT codes”) for clinical use only, but do not have such reimbursement codes for self-administered use of the product. NanoVibronix NPWT is generally reimbursed by governmental and other third-party payers in the U.S. With respect to UroShield, which will be used primarily in a clinical setting, we do not currently have reimbursement codes in any of the markets in which we have regulatory authority to sell UroShield. We anticipate that we will begin to seek reimbursement codes for self-administered and clinical use of our products in the markets in which we have regulatory authority to sell such products after the closing of this offering, however, there is no guarantee that we will be successful in obtaining such codes quickly, or at all.
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Assuming we are able to obtain adequate financing, including through this offering, we plan to continue to work on the further commercialization of WoundShield and further marketing of NanoVibronix NPWT. We intend to integrate our WoundShield ultrasound technology into NanoVibronix NPWT, which we believe would make NanoVibronix NPWT a superior product within the negative pressure wound therapy market. We also intend to conduct ongoing clinical trials of our PainShield product, with the aim of obtaining a favorable reimbursement code. With respect to our UroShield product, we are currently seeking a strategic partner that is active in the urology market and would be interested in integrating UroShield into its range of products. If we locate such a partner, we anticipate that we would continue to pursue U.S. Food and Drug Administration approval of UroShield.
Since our formation, we have had recurring losses and negative cash flows from operating activities. For the year ended December 31, 2013, we had a net loss of $1,989,000, with revenues of $211,000. As of December 31, 2013, we had an accumulated deficit of $14,203,000 and a total stockholders’ deficit of $3,297,000. Because we have had recurring losses and negative cash flows from operating activities, substantial doubt exists regarding our ability to remain in operation at the same level we are currently performing. Further, the report of Kost Forer Gabbay & Kasierer, a member firm of Ernst & Young Global, our independent registered public accounting firm, with respect to our financial statements at December 31, 2013 and 2012 and the years ended December 31, 2013 and 2012, includes an explanatory paragraph as to our potential inability to continue as a going concern.
Ultrasound Technology and Our Products
As noted above, each of our products, other than NanoVibronix NPWT, is based on the use of low frequency ultrasound, which delivers energy through mechanical vibrations in the form of sound waves. Ultrasound has long been used in physical therapy, physical medicine, rehabilitation and sports medicine. Moreover, there is a growing body of research that supports the positive biological effects of ultrasound.
Our proprietary technology consists of a small, thin (1 millimeter) transducer that is capable of transmitting ultrasonic acoustic waves onto treatment surfaces with a radius of up to 10 centimeters. This technology allows us to treat wounds by implanting our transducers into a small, portable self-adhering acoustic patch, thereby eliminating the need for technicians and medical personnel to manually administer ultrasound therapy, which should reduce the cost of therapy. Moreover, we believe that the delivery of ultrasound through our portable devices is more effective than existing products, as our technology is better positioned to target the affected areas of the body.
While there are currently a number of products on the market that treat pain through ultrasound therapy, we believe that our products differentiate themselves because they are portable, without the requirement to be plugged into an outlet and they have a frequency of 100kHz (in contrast to other devices, which have a frequency of 1MHz), which means they do not produce heat that can damage tissue. They can therefore be self-administered by the patient without the need to be moved about the treated area by the patient or a clinician, they can be applied for a significantly longer period without the risk of tissue damage and they do not require the use of gel. We are aware of one product under U.S. Food and Drug Administration review and with CE Mark approval that we understand does not need to be plugged in and operates at a frequency of 3 MHz, which its manufacturer claims overcomes the need for movement around the treated area and allows for a longer treatment period. We understand that this product does not generate surface acoustic waves as our products do, which means that the treatment area is generally limited to that of the transducer’s diameter, that the use of transmission gel is still required and that the transducer thickness is significantly greater than ours (approximately 1.5cm). We are also aware of a small clinical study, for which results were reported in August 2013, in which a small ultrasound device showed positive results in the treatment of venous ulcers, a type of chronic wound. Based upon currently available information about this device, we believe it will be at least five years before this device is available on the market. We understand that this product also does not generate surface acoustic waves, as our products do, and would likely be heavier and thicker than our products. However, given the early stage of development of this potential device, we cannot say with certainty how our products would compare.
Markets for Our Products
We believe our products compete and/or will compete in the markets described below:
· | Wound-Healing Devices Market. Our WoundShield, NanoVibronix NPWT and integrated product are aimed at the market for wound-healing devices. The global wound care device market is continuously growing and expected to reach $20.3 billion by 2015 (“Anticipated market in 2015, Wound Care Products: A Global Strategic Business Report,” September 2011). The negative pressure wound therapy market is expanding, in light of recent approvals in Japan and a growing diabetes patient pool and currently is estimated at approximately $2 billion (“Negative Pressure Wound Therapy Market to 2017,” GBI Research , June 2012). |
· | Pain Market. Our PainShield product is aimed at the pain treatment market. Pain is one of the most common conditions that hinder quality of life of vast populations of patients on a regular basis. According to Bonica’s Management of Pain (2001), a work considered current in the industry based on available industry data, and Landro L, “New Ways to Treat Pain: Tricking the Brain, Blocking the Nerves in Patients When all Else Has Failed,” Wall Street Journal, May 11, 2010, approximately 25% of the U.S. population, 75 million people, suffer from chronic pain. We estimate that approximately 150 million individuals globally suffer from chronic pain. |
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· | Catheter Market. Our UroShield product is complementary to products in the catheter market. According to Urological Catheters – A Global Strategic Business Report, Global Industry Analysis Inc. 2003, over 55 million indwelling urinary catheters are sold annually worldwide. |
Risks Associated with Our Business
Our ability to operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled “Risk Factors,” including, without limitation:
· | The timing of clinical studies and eventual U.S. Food and Drug Administration approval of WoundShield and our other product candidates. |
· | Regulatory actions that could adversely affect the price of or demand for our approved products. |
· | Market acceptance of existing and new products. |
· | Favorable or unfavorable decisions about our products from government regulators, insurance companies or other third-party payers. |
· | Our intellectual property portfolio. |
· | We are not currently meeting the minimum sales requirements necessary to prevent our license agreement related to NanoVibronix NPWT from terminating in August 2014, and even if we meet such sales requirements, the license will no longer be exclusive after such date. |
· | Our ability to recruit and retain qualified regulatory and research and development personnel. |
· | Unforeseen changes in healthcare reimbursement for any of our approved products. |
· | Lack of financial resources to adequately support our operations. |
· | Difficulties in maintaining commercial scale manufacturing capacity and capability. |
· | Our ability to generate internal growth. |
· | Changes in our relationship with key collaborators. |
· | Our failure to comply with regulatory guidelines. |
· | Uncertainty in industry demand and patient wellness behavior. |
· | General economic conditions and market conditions in the medical device industry. |
Corporate and Other Information
We were organized as a Delaware corporation on October 20, 2003. Our principal executive offices are located at 105 Maxess Road, Suite S124, Melville, NY 11747. Our telephone number is (631) 574-4410. Our website address is www.nanovibronix.com. Information accessed through our website is not incorporated into this prospectus and is not a part of this prospectus.
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The Offering
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The number of shares of common stock outstanding after this offering is based on shares outstanding on , after giving effect to a one-for- reverse stock split of our common stock effected on and excludes:
· | 1,842,106 shares of common stock issuable upon the exercise of warrants with an exercise price of $0.38 per share; |
· | 2,319,062 shares of common stock issuable upon the exercise of warrants with an exercise price of $0.199 per share; |
· | 2,525,704 shares of common stock issuable upon the exercise of currently outstanding options with a weighted average exercise price of $1.23; |
· |
274,296 shares of common stock available for future issuance under our 2004 Global Share Option Plan;
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· | 5,000,000 shares of common stock available for future issuance under our 2014 Long-Term Incentive Plan; | |
· | the shares of common stock issuable upon the exercise of the redeemable warrants offered hereby; | |
· | the shares of common stock included in the units issuable upon exercise of the underwriter’s compensation warrants; and | |
· | the shares of common stock issuable upon the exercise of the warrants included in the units issuable upon exercise of the underwriter’s compensation warrants. |
Except as otherwise indicated, information in this prospectus reflects or assumes:
· | a one-for- reverse split of our common stock, which will occur prior to the pricing of this offering; |
· | the conversion of all outstanding shares of our convertible preferred stock into an aggregate of shares of common stock, which will occur automatically upon the effectiveness of this registration statement; |
· | the conversion of all outstanding convertible indebtedness into an aggregate of shares of common stock and shares of series C preferred stock, which will occur automatically upon the effectiveness of this registration statement, and assuming a conversion date; |
· | the exchange of all outstanding warrants to purchase preferred stock into warrants to purchase an aggregate of shares of common stock with an exercise price of $ per share, which will occur automatically upon the effectiveness of this registration statement; |
· | the filing of our amended and restated certificate of incorporation and the effectiveness of our restated bylaws, which will occur immediately prior to the completion of this offering; and |
· | that the underwriter does not exercise its over-allotment option. |
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Summary Consolidated Financial Information
(in thousands, except per share data)
The following summary consolidated financial data should be read in conjunction with the consolidated financial statements and the related notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. We derived the statement of operations data for the years ended December 31, 2013 and 2012 and balance sheet data as of December 31, 2013 and 2012 from the audited consolidated financial statements in this prospectus. Those consolidated financial statements were audited by Kost Forer Gabbay & Kasierer, a member firm of Ernst & Young Global, our independent registered public accounting firm. Our historical results are not necessarily indicative of the results that may be expected in any future period.
Years Ended | ||||||||
December 31, | ||||||||
2013 | 2012 | |||||||
Statement of Operations Data: | ||||||||
Revenue | $ | 211 | $ | 166 | ||||
Cost of revenues | 91 | 50 | ||||||
Gross profit | 120 | 116 | ||||||
Operating expenses: | ||||||||
Research and development, net | 620 | 572 | ||||||
Selling and marketing | 244 | 190 | ||||||
General and administrative | 366 | 128 | ||||||
Total operating expenses | 1,230 | 890 | ||||||
Operating loss | 1,110 | 774 | ||||||
Other income | 36 | - | ||||||
Financial expense, net | 880 | 501 | ||||||
Loss before taxes on income | 1,954 | 1,275 | ||||||
Taxes on income | 35 | - | ||||||
Net loss | $ | 1,989 | 1,275 | |||||
Total comprehensive loss | $ | 1,989 | 1,275 | |||||
Net basic and diluted loss per share | $ | (1.83 | ) | $ | (1.18 | ) | ||
Weighted average number of shares of common stock used in computing basic and diluted net loss per share |
1,085,060 | 1,085,060 | ||||||
Balance Sheet Data: | ||||||||
Cash and cash equivalents | $ | 94 | $ | 101 | ||||
Working capital (1) | (3,334 | ) | 90 | |||||
Total assets | 691 | 349 | ||||||
Total long-term liabilities | 430 | 2,086 | ||||||
Total stockholders’ deficiency | (3,297 | ) | (1,832 | ) |
(1) | Working capital is equal to the difference between total current assets and total current liabilities. |
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus, including the consolidated financial statements and the related notes appearing at the end of this prospectus, before purchasing our securities. If any of the following risks actually occur, they may materially harm our business and our financial condition and results of operations. In any such event, the market price of our securities could decline and you could lose all or part of your investment.
Risks Related to our Business
The report of our independent registered public accounting firm contains an explanatory paragraph as to our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.
Because we have had recurring losses and negative cash flows from operating activities, substantial doubt exists regarding our ability to remain in operation at the same level we are currently performing. Further, the report of Kost Forer Gabbay & Kasierer, a member firm of Ernst & Young Global, our independent registered public accounting firm, with respect to our financial statements at December 31, 2013 and 2012 and for the two years ended December 31, 2013, includes an explanatory paragraph as to our potential inability to continue as a going concern. This may adversely affect our ability to obtain new financing on reasonable terms or at all.
We have a history of losses and we expect to continue to incur losses and may not achieve or maintain profitability.
For the year ended December 31, 2013, we had a net loss of $1,989,000, with revenues of $211,000. As of December 31, 2013, we had an accumulated deficit of $14,203,000 and a total stockholders’ deficit of $3,297,000. We expect to incur losses for at least the next year, as we continue to incur expenses related to seeking U.S. Food and Drug Administration approval for our WoundShield product and seek market acceptance of our PainShield and NanoVibronix NPWT products, which will require costly clinical trials and research, further product development and professional fees associated with regulatory compliance. Even if we succeed in commercializing our new products, we may not be able to generate sufficient revenues to cover our expenses and achieve sustained profitability or be able to maintain profitability.
If we are unable to raise additional capital, our clinical trials and product development will be limited and our long-term viability will be threatened; however, if we do raise additional capital, your percentage ownership as a stockholder could decrease and constraints could be placed on the operations of our business.
We have experienced negative operating cash flows since our inception and have funded our operations primarily from proceeds of the sale of our securities, with only limited revenue being generated from our product sales. We will seek to obtain additional funds in the future through equity or debt financings, or strategic alliances with third parties, either alone or in combination with equity financings. These financings could result in substantial dilution to the holders of our common stock, or require contractual or other restrictions on our operations or on alternatives that may be available to us. If we raise additional funds by issuing debt securities, these debt securities could impose significant restrictions on our operations through the imposition of restrictive covenants and requiring us to pledge assets in order to secure repayment. In addition, if we raise funds through the sale of equity, we may issue equity securities with rights superior to our common stock, including voting rights, rights to proceeds upon our liquidation or sale, rights to dividends and rights to appoint board members. Any such required financing may not be available in amounts or on terms acceptable to us, and the failure to procure such required financing could have a material adverse effect on our business, financial condition and results of operations, or threaten our ability to continue as a going concern.
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A variety of factors could impact the timing and amount of any required financings, including, without limitation:
· | unforeseen developments during our clinical trials; |
· | delays in our receipt of required regulatory approvals; |
· | delayed market acceptance of our products; |
· | unanticipated expenditures in our acquisition and defense of intellectual property rights, and/or the loss of those rights; |
· | the failure to develop strategic alliances for the marketing of some of our product candidates; |
· | unforeseen changes in healthcare reimbursement for any of our approved products; |
· | lack of financial resources to adequately support our operations; |
· | difficulties in maintaining commercial scale manufacturing capacity and capability; |
· | unanticipated difficulties in operating in international markets; |
· | unanticipated financial resources needed to respond to technological changes and increased competition; |
· | unforeseen problems in attracting and retaining qualified personnel; |
· | enactment of new legislation or administrative regulations; |
· | the application to our business of new regulatory interpretations; |
· | claims that might be brought in excess of our insurance coverage; |
· | the failure to comply with regulatory guidelines; and |
· | the uncertainty in industry demand. |
In addition, although we have no present commitments or understandings to do so, we may seek to expand our operations and product line through acquisitions or joint ventures. Any acquisition or joint venture would likely increase our capital requirements.
If we fail to obtain an adequate level of reimbursement for our approved products by third party payers, there may be no commercially viable markets for our approved products or the markets may be much smaller than expected.
The availability and levels of reimbursement by governmental and other third party payers affect the market for our approved products. The efficacy, safety, performance and cost-effectiveness of our product and product candidates, and of any competing products, will determine the availability and level of reimbursement. Reimbursement and healthcare payment systems vary significantly by country, and include both government sponsored healthcare and private insurance. To obtain reimbursement or pricing approval in some countries, we may be required to produce clinical data, which may involve one or more clinical trials, that compares the cost-effectiveness of our approved products to other available therapies. We may not obtain reimbursement or pricing approvals in markets we seek to enter in a timely manner, if at all. Our failure to receive reimbursement or pricing approvals in target markets would negatively impact market acceptance of our products in these jurisdictions, placing us at a material cost disadvantage to our competitors.
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Even if we obtain reimbursement approvals for our products, we believe that, in the future, reimbursement for any of our products or product candidates may be subject to increased restrictions both in the U.S. and in international markets. Future legislation, regulation or policies of third party payers that limit reimbursement may adversely affect the demand for our products currently under development and our ability to sell our products on a profitable basis. In addition, third party payers continually attempt to contain or reduce the costs of healthcare by challenging the prices charged for healthcare products and services.
In the U.S., specifically, health care providers, such as hospitals and clinics, generally rely on third-party payers. Third-party reimbursement is dependent upon decisions by the Centers for Medicare and Medicaid Services, contracted Medicare carriers or intermediaries, individual managed care organizations, private insurers, foreign governmental health programs and other payers of health care costs. Failure to receive or maintain favorable coding, coverage and reimbursement determinations for our products by these organizations could discourage medical practitioners from using our products due to their costs. In addition, with recent federal and state government initiatives directed at lowering the total cost of health care, the U.S. Congress and state legislatures will likely continue to focus on health care reform including the reform of the Medicare and Medicaid entitlement programs, and on the cost of medical products and services, which could limit reimbursement. Additionally, third-party payers are increasingly challenging the prices charged for medical products and services. We may be unable to sell our products on a profitable basis if third-party payers deny coverage, provide low reimbursement rates or reduce their current levels of reimbursement.
The medical device and therapeutic product industries are highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are safer and more effective than any products we may develop, our commercial opportunities will be reduced or eliminated.
Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products. We face competition from established medical device companies, such as Misonix Inc., Celleration Inc., Kinetic Concepts, Inc. and Smith & Nephew plc, manufacturers of certain portable ultrasound devices capable of self-administered use, as well as from academic institutions, government agencies, and private and public research institutions in the U.S. and abroad. Most, if not all, of our principal competitors have significantly greater financial resources and expertise than we do in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, marketing approved products, protecting and defending their intellectual property rights and designing around the intellectual property rights of others. Other small or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements, or mergers with, or acquisitions by, large and established companies, or through the development of novel products and technologies.
The industry in which we operate has undergone, and we expect it to continue to undergo, rapid and significant technological change, and we expect competition to intensify as technological advances are made. Our competitors may be able to respond to changes in technology or the marketplace faster than us. Our competitors may develop and commercialize medical devices that are safer or more effective or are less expensive than any products that we may develop. We also compete with our competitors in recruiting and retaining qualified scientific and management personnel, in establishing clinical trial sites and patient registration for clinical trials, and in acquiring technologies complementary to our programs or advantageous to our business. Given our small size and lack of resources, we are often at a disadvantage with our competitors in all of these areas, which could limit or eliminate our commercial opportunities.
We face the risk of product liability claims and may not be able to obtain insurance.
Our business exposes us to the risk of product liability claims that are inherent in the development of medical devices and products. If the use of one or more of our products harms people, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, pharmaceutical companies or others selling our products. We currently carry clinical trial and product liability insurance for the products we sell. However, we cannot predict all of the possible harms or side effects that may result and, therefore, the amount of insurance coverage we hold may not be adequate to cover all liabilities we might incur. We intend to expand our insurance coverage to include the sale of additional commercial products as we obtain marketing approval for our product candidates in development and as our sales expand, but we may be unable to obtain commercially reasonable product liability insurance for such products. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims and we continue to make sales, or if our coverages turns out to be insufficient, we may be exposed to significant liabilities, which may materially and adversely affect our business and financial position. If we are sued for any injury allegedly caused by our or our collaborators’ products and do not have sufficient insurance coverage, our liability could exceed our total assets and our ability to pay the liability. A product liability claim or series of claims brought against us would decrease our cash and could reduce our value or marketability.
Our product candidates may not be developed or commercialized successfully.
Our product candidates are based on a technology that has not been used previously in the manner we propose and must compete with more established treatments currently accepted as the standards of care. Market acceptance of our products will largely depend on our ability to demonstrate their relative safety, efficacy, cost-effectiveness and ease of use.
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We are subject to the risks that:
· | the U.S. Food and Drug Administration or a foreign regulatory authority finds our product candidates ineffective or unsafe; |
· | we do not receive necessary regulatory approvals; |
· | the regulatory review and approval process may take much longer than anticipated, requiring additional time, effort and expense to respond to regulatory comments and/or directives; |
· | we are unable to get our product candidates in commercial quantities at reasonable costs; and |
· | the patient and physician community does not accept our product candidates. |
In addition, our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, including:
· | adverse or ambiguous results; |
· | undesirable side effects that delay or extend the trials; |
· | the inability to locate, recruit, qualify and retain a sufficient number of clinical investigators or patients for our trials; and |
· | regulatory delays or other regulatory actions. |
Additionally, we currently have limited experience in marketing or selling our products, and we have a limited marketing and sales staff and distribution capabilities. Developing a marketing and sales force is time-consuming and will involve the investment of significant amounts of financial and management resources, and could delay the launch of new products or expansion of existing product sales. In addition, we compete with many companies that currently have extensive and well-funded marketing and sales operations. If we fail to establish successful marketing and sales capabilities or fail to enter into successful marketing arrangements with third parties, our ability to generate revenues will suffer.
Furthermore, even if we enter into marketing and distributing arrangements with third parties, we may have limited or no control over the sales, marketing and distribution activities of these third parties, and these third parties may not be successful or effective in selling and marketing our products. If we fail to create successful and effective marketing and distribution channels, our ability to generate revenue and achieve our anticipated growth could be adversely affected. If these distributors experience financial or other difficulties, sales of our products could be reduced, and our business, financial condition and results of operations could be harmed.
We cannot predict whether we will successfully develop and commercialize our product candidates. If we fail to do so, we will not be able to generate substantial revenues, if any.
The loss of our key management would likely hinder our ability to execute our business plan.
As a small company with eight full-time employees, our success depends on the continuing contributions of our management team and qualified personnel and on our ability to attract and retain highly qualified personnel. We face intense competition in our hiring efforts from other medical device companies, as well as from universities and nonprofit research organizations, and we may have to pay higher salaries to attract and retain qualified personnel. We are also at a disadvantage in recruiting and retaining key personnel as our small size and limited resources may be viewed as providing a less stable environment, with fewer opportunities than would be the case at one of our larger competitors. The loss of one or more of these individuals, or our inability to attract additional qualified personnel, could substantially impair our ability to implement our business plan.
Our failure to protect our intellectual property rights could diminish the value of our solutions, weaken our competitive position and reduce our revenue.
We regard the protection of our intellectual property, which includes patents and patent applications, trade secrets, trademarks and domain names, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees, consultants and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.
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We have obtained patents and we have patent applications pending in both the U.S. and foreign jurisdictions. There can be no assurance that our patent applications will be approved, that any patents issued will adequately protect our intellectual property, or that these patents will not be challenged by third parties or found to be invalid or unenforceable. We have also obtained trademark registration in the U.S. and in foreign jurisdictions. Effective trade secret, trademark and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional patent filings that could be expensive and time-consuming.
Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Further, our competitors may independently develop technologies that are similar to ours but which avoid the scope of our intellectual property rights. Further, the laws in the U.S. and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering solutions that incorporate our most technologically advanced features, which could seriously reduce demand for our products. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not the litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing our intellectual property rights.
We could incur substantial costs and disruption to our business as a result of any claim of infringement of another party’s intellectual property rights, which could harm our business and operating results.
In recent years, there has been significant litigation in the U.S. over patents and other intellectual property rights. From time to time, we may face allegations that we or customers who use our products have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including allegations made by our competitors or by non-practicing entities. We cannot predict whether assertions of third party intellectual property rights or claims arising from these assertions will substantially harm our business and operating results. If we are forced to defend any infringement claims, whether they are with or without merit or are ultimately determined in our favor, we may face costly litigation and diversion of technical and management personnel. Most of our competitors have substantially greater resources than we do and are able to sustain the cost of complex intellectual property litigation to a greater extent and for longer periods of time than we could. Furthermore, an adverse outcome of a dispute may require us, among other things: to pay damages, potentially including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s patent or other intellectual property rights; to cease making, licensing or using products that are alleged to incorporate or make use of the intellectual property of others; to expend additional development resources to redesign our products; and to enter into potentially unfavorable royalty or license agreements in order to obtain the rights to use necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. In any event, we may need to license intellectual property which would require us to pay royalties or make one-time payments. Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could harm our business, operating results, financial condition and reputation.
Our failure to meet certain minimum sales requirements under our license agreement could result in the termination of our exclusive license with respect to our NanoVibronix NPWT product and/or require us to make certain cash payments.
We license the technology that is the basis of our NanoVibronix NPWT product. Under the license agreement, we have the exclusive license to manufacture, market, sell, lease and distribute the technology within the U.S. until August 2014. Thereafter, the term of the license agreement will be extended automatically on a non-exclusive basis for an additional one- or three-year term if we meet certain minimum sales requirements. We are not currently meeting these requirements. If we do not meet these requirements by August 2014, we may be forced to renegotiate our license agreement on less favorable terms or lose our ability to sell our NanoVibronix NPWT product. In addition, we are obligated to pay a royalty payment of 5% of gross revenues from the sale of our pumps and $0.70 per canister. If we have not paid aggregate royalty payments of at least $150,000 by August 2014, we will have to pay the difference. For a description of this license agreement, see “Business—Intellectual Property—License Agreements” below.
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Risks Related to the Regulation of Our Products
We are subject to extensive governmental regulation, including the requirement of U.S. Food and Drug Administration approval or clearance, before our product candidates may be marketed.
The process of obtaining U.S. Food and Drug Administration approval is lengthy, expensive and uncertain, and we cannot be sure that our product candidates will be approved in a timely fashion, or at all. If the U.S. Food and Drug Administration does not approve or clear our product candidates in a timely fashion, or at all, our business and financial condition would likely be adversely affected.
Both before and after approval or clearance of our product candidates, we, our product candidates, our suppliers and our contract manufacturers are subject to extensive regulation by governmental authorities in the U.S. and other countries. Failure to comply with applicable requirements could result in, among other things, any of the following actions:
· | warning letters; |
· | fines and other monetary penalties; |
· | unanticipated expenditures; |
· | delays in U.S. Food and Drug Administration approval and clearance, or U.S. Food and Drug Administration refusal to approve or clear a product candidate; |
· | product recall or seizure; |
· | interruption of manufacturing or clinical trials; |
· | operating restrictions; |
· | injunctions; and |
· | criminal prosecutions. |
In addition to the approval and clearance requirements, numerous other regulatory requirements apply, both before and after approval or clearance, to us, our products and product candidates, and our suppliers and contract manufacturers. These include requirements related to the following:
· | testing; |
· | manufacturing; |
· | quality control; |
· | labeling; |
· | advertising; |
· | promotion; |
· | distribution; |
· | export; |
· | reporting to the U.S. Food and Drug Administration certain adverse experiences associated with the use of the products; and |
· | obtaining additional approvals or clearances for certain modifications to the products or their labeling or claims. |
We are also subject to inspection by the U.S. Food and Drug Administration to determine our compliance with regulatory requirements, as are our suppliers and contract manufacturers, and we cannot be sure that the U.S. Food and Drug Administration will not identify compliance issues that may disrupt production or distribution, or require substantial resources to correct.
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The U.S. Food and Drug Administration’s requirements may change and additional government regulations may be promulgated that could affect us, our product candidates, and our suppliers and contract manufacturers. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action. There can be no assurance that we will not be required to incur significant costs to comply with such laws and regulations in the future, or that such laws or regulations will not have a material adverse effect upon our business.
Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.
International sales of our products and any of our product candidates that we commercialize are subject to the regulatory requirements of each country in which the products are sold. Accordingly, the introduction of our product candidates in markets outside the U.S. where we do not already possess regulatory approval will be subject to regulatory approvals in those jurisdictions. The regulatory review process varies from country to country. Many countries impose product standards, packaging and labeling requirements, and import restrictions on medical devices. In addition, each country has its own tariff regulations, duties and tax requirements, as well as reimbursement and healthcare payment systems. The approval by foreign government authorities is unpredictable and uncertain, and can be expensive. We may be required to perform additional pre-clinical, clinical or post-approval studies even if U.S. Food and Drug Administration approval has been obtained. Our ability to market our approved products could be substantially limited due to delays in receipt of, or failure to receive, the necessary approvals or clearances.
We are uncertain regarding the success of our clinical trials for our products in development.
We believe that all of our products in development will require clinical trials to determine their safety and efficacy by regulatory bodies in their target markets, including the U.S. Food and Drug Administration and various foreign regulators. There can be no assurance that we will be able to successfully complete the U.S. and foreign regulatory approval processes for products in development. In addition, there can be no assurance that we will not encounter additional problems that will cause us to delay, suspend or terminate our clinical trials. In addition, we cannot make any assurance that clinical trials will be deemed sufficient in size and scope to satisfy regulatory approval requirements, or, if completed, will ultimately demonstrate our products to be safe and efficacious.
The adoption of healthcare reform in the U.S. may adversely affect our business and financial results.
On March 23, 2010, President Obama signed into law major healthcare reform legislation under the Patient Protection and Affordable Care Act of 2010, or the PPACA, which was modified on March 30, 2010 by the enactment of the Health Care and Education Reconciliation Act of 2010. Under the PPACA, it is expected that expanded healthcare coverage will be made available to an additional 30 million Americans. The increased costs to the U.S. government from the PPACA are expected to be funded through a combination of payment reductions for providers over time and several new taxes. The PPACA imposes, among other things, an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the U.S. beginning in 2013, resulting in an anticipated cost to the medical device industry of up to $20 billion over the next decade. We believe that we will be exempt from this excise tax with respect to PainShield under the exemption for devices of a “type which is generally purchased by the general public at retail for individual use.” We believe that sales of NanoVibronix NPWT are subject to it, although under the terms of our agreement with our U.S. distributor, we deliver these products to the distributor in Israel, who imports them into the U.S. and is responsible for the payment of these taxes, filing any such returns and any penalties that may result from the failure to do so. We will also need to assess whether we are subject to it with respect to other products when they are approved for sale in the U.S. The PPACA also provides for the establishment of an Independent Medicare Advisory Board that could recommend changes in payment for physicians under certain circumstances beginning in 2014. In addition, the PPACA authorizes certain voluntary demonstration projects beginning no later than 2013 around development of bundling payments for acute, inpatient hospital services, physician services, and post acute services for episodes of hospital care. The PPACA increases fraud and abuse penalties and expands the scope and reach of the Federal Civil False Claims Act and government enforcement tools, which may adversely impact healthcare companies.
The U.S. Supreme Court heard a constitutional challenge to the PPACA and in June 2012 held that the PPACA is constitutional. However, states are allowed to opt out of the expansion of eligibility criteria for Medicaid under the PPACA. In addition to the PPACA, the effect of which cannot presently be quantified given its recent enactment, various healthcare reform proposals have also emerged at the state level. We cannot predict whether future healthcare initiatives will be implemented at the federal or state level or the effect any future legislation or regulation will have on us. However, we anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and an additional downward pressure on the price that we receive for any approved product, and could adversely affect our business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. Insurers may also refuse to provide any coverage of uses of approved products for medical indications other than those for which the U.S. Food and Drug Administration has granted market approvals, all of which may adversely affect our business, financial condition and results of operations, possibly materially.
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If we fail to comply with the U.S. federal Anti-Kickback Statute and similar state laws, we could be subject to criminal and civil penalties and exclusion from the Medicare and Medicaid programs, which would have a material adverse effect on our business and results of operations.
A provision of the Social Security Act, commonly referred to as the federal Anti-Kickback Statute, prohibits the offer, payment, solicitation or receipt of any form of remuneration in return for referring, ordering, leasing, purchasing or arranging for, or recommending the ordering, purchasing or leasing of, items or services payable by Medicare, Medicaid or any other federal healthcare program. The federal Anti-Kickback Statute is very broad in scope and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, most of the states have adopted laws similar to the federal Anti-Kickback Statute, and some of these laws are even broader than the federal Anti-Kickback Statute in that their prohibitions are not limited to items or services paid for by federal healthcare programs, but instead apply regardless of the source of payment. Violations of the federal Anti-Kickback Statute may result in substantial civil or criminal penalties and exclusion from participation in federal healthcare programs.
All of our financial relationships with healthcare providers and others who provide products or services to federal healthcare program beneficiaries are potentially governed by the federal Anti-Kickback Statute and similar state laws. We believe our operations are in compliance with the federal Anti-Kickback Statute and similar state laws. However, we cannot be certain that we will not be subject to investigations or litigation alleging violations of these laws, which could be time-consuming and costly to us and could divert management’s attention from operating our business, which in turn could have a material adverse effect on our business. In addition, if our arrangements were found to violate the federal Anti-Kickback Statute or similar state laws, the consequences of such violations would likely have a material adverse effect on our business, results of operations and financial condition.
Risks Related to Our Organization and Our Securities
We are currently controlled by our executive officers, directors and principal stockholders, and after this offering, our executive officers, directors and principal stockholders will have significant influence regarding all matters submitted to our stockholders for approval.
As of March 3, 2014, our directors, executive officers and 5% or greater stockholders beneficially owned approximately 66.0% of our voting capital stock, or 52.4% after giving effect to (i) the anticipated amendment of certain notes to be convertible into series C preferred stock that were originally convertible into common stock, series B-1 preferred stock and series B-2 preferred stock and (ii) the anticipated amendment of certain outstanding warrants to block any exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock (for a description of these anticipated changes, see “Certain Relationships and Related Transactions”). When this offering is completed, our directors, executive officers and 5% or greater stockholders will, in the aggregate, beneficially own shares representing % of our voting capital stock, assuming such persons do not purchase any shares of common stock in this offering. For a description of the series C preferred stock, see “Description of Securities — Preferred Stock — Series C Convertible Preferred Stock.” Each holder of series C preferred stock w ill be entitled to the number of votes equal to the number of whole shares of common stock into which the shares of series C preferred stock held by such holder is then convertible (subject to a beneficial ownership limitation, which will prevent such holder from exercising voting rights with respect to more than 9.99% of our common stock) with respect to any and all matters presented to the stockholders for their action or consideration. Holders of series C preferred stock will vote together with the holders of common stock as a single class, except as provided by law and except that the consent of holders of a majority of the outstanding series C preferred stock will be required to amend the terms of the series C preferred stock. As a result, if these stockholders were to choose to act together, they would be able to exercise significant influence with respect to all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, will exercise significant influence with respect to the election of directors and approval of any merger, consolidation, sale of all or substantially all of our assets or other business combination or reorganization. This concentration of voting power could delay or prevent an acquisition of us on terms that other stockholders may desire. The interests of this group of stockholders may not always coincide with your interests or the interests of other stockholders, and they may act in a manner that advances their best interests and not necessarily those of other stockholders, and might affect the prevailing market price for our securities.
The price of our securities may be volatile, and the market price of our securities after this offering may drop below the price you pay.
The initial public offering price per unit may vary from the market prices of our units, common stock and redeemable warrants that prevail after the offering. If an active market for our securities develops and continues, the price of such securities nevertheless may be volatile. Market prices for securities of early-stage medical device companies have historically been particularly volatile. As a result of this volatility, you may not be able to sell your units, shares of common stock or redeemable warrants at or above the initial public offering price paid per unit. The factors that may cause the market price of our securities to fluctuate include, but are not limited to:
· | progress, or lack of progress, in developing and commercializing our products; |
· | favorable or unfavorable decisions about our products or intellectual property from government regulators, insurance companies or other third-party payers; |
· | our ability to recruit and retain qualified regulatory and research and development personnel; |
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· | changes in investors’ and securities analysts’ perception of the business risks and conditions of our business; |
· | changes in our relationship with key collaborators; |
· | changes in the market valuation or earnings of our competitors or companies viewed as similar to us; |
· | changes in key personnel; |
· | depth of the trading market in our common stock; |
· | termination of the lock-up agreement or other restrictions on the ability of us or any of our existing stockholders to sell shares after this offering; |
· | changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; |
· | the granting or exercise of employee stock options or other equity awards; |
· | realization of any of the risks described under this section entitled “Risk Factors”; and |
· | general market and economic conditions. |
In addition, the equity markets have experienced significant price and volume fluctuations that have affected the market prices for the securities of newly public companies for a number of reasons, including reasons that may be unrelated to our business or operating performance. These broad market fluctuations may result in a material decline in the market price of our securities and you may not be able to sell your units, common stock or redeemable warrants at prices you deem acceptable. In the past, following periods of volatility in the equity markets, securities class action lawsuits have been instituted against public companies. Such litigation, if instituted against us, could result in substantial cost and the diversion of management attention.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
If you purchase units in this offering, the public offering price that you pay per share of common stock will be substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, you will incur an immediate dilution of $ (or % )in net tangible book value per share of common stock from the price you paid, based on the public offering price of $ per unit. The exercise of outstanding warrants and options may result in further dilution of your investment, but only if the public offering price is greater than $ per unit. In addition, if we raise funds by issuing additional shares or convertible securities in the future, the newly issued shares may further dilute your ownership interest.
Future sales of our common stock, or the perception that future sales may occur, may cause the market price of our common stock to decline, even if our business is doing well.
Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales may occur, could materially and adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. The shares of common stock sold in this offering will be freely tradable, without restriction, in the public market, except for any shares sold to our affiliates.
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In connection with this offering, we and our officers and directors have agreed prior to the commencement of this offering, subject to limited exceptions, not to sell or transfer any shares of common stock for 180 days after the date of this prospectus without the consent of Chardan Capital Markets LLC. However, Chardan Capital Markets LLC may release these shares from any restrictions at any time. We cannot predict what effect, if any, market sales of shares held by any stockholder or the availability of shares for future sale will have on the market price of our common stock.
Approximately 8,583,233 shares of common stock may be sold in the public market by existing stockholders after the date of this prospectus and an additional 6,776,224 shares of common stock may be sold in the public market by existing stockholders on or about 181 days after the date of this prospectus, subject to volume and other limitations imposed under the federal securities laws. Sales of substantial amounts of our common stock in the public market after the completion of this offering, or the perception that such sales could occur, could adversely affect the market price of our common stock and could materially impair our ability to raise capital through offerings of our common stock. See the section entitled “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling shares of our common stock after this offering.
We are issuing redeemable warrants to purchase shares of common stock in this offering. We will also issue a warrant to the underwriter in this offering to purchase an additional units, including units pursuant to the exercise of the overallotment option. In addition, as of March 3, 2014, we had outstanding options to purchase 2,525,704 shares of our common stock and outstanding warrants to purchase an aggregate of 4,161,168 shares of our common stock. We plan to register for offer and sale the shares of common stock that are reserved for issuance pursuant to outstanding options. Shares covered by such registration statements upon the exercise of stock options generally will be eligible for sale in the public market, except that affiliates will continue to be subject to volume limitations and other requirements of Rule 144 under the Securities Act of 1933, as amended. The issuance or sale of such shares could depress the market price of our common stock.
An active trading market may not develop for our securities, and you may not be able to sell your units, common stock or redeemable warrants at or above the initial public offering price or warrant exercise price per share.
There is no established trading market for our securities, and the market for our securities may be highly volatile or may decline regardless of our operating performance. Prior to this offering, you could not buy or sell our securities publicly. An active public market for our securities may not develop or be sustained after this offering. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our units, common stock or redeemable warrants or how liquid that market might become. If a market does not develop or is not sustained, it may be difficult for you to sell your securities at the time you wish to sell them, at a price that is attractive to you, or at all.
The initial public offering price per unit has been determined through negotiation between us and representatives of the underwriter, and may not be indicative of the market prices that prevail after this offering. You may not be able to sell your units, common stock or redeemable warrants at or above the initial public offering price or warrant exercise price per share.
Due to the speculative nature of warrants, there is no guarantee that it will ever be profitable for holders of the redeemable warrants to exercise the redeemable warrants.
The redeemable warrants being offered as part of the units do not confer any rights of common stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of common stock at a fixed price for a limited period of time. Specifically, commencing 45 days after the date of this prospectus, holders of the redeemable warrants may exercise their right to acquire the common stock and pay an exercise price of $ per share (which is equal to 125% of the public offering price of the common stock underlying the units), prior to the expiration of the five-year term on , 2019, after which date any unexercised redeemable warrants will expire and have no further value. Moreover, following this offering, the market value of the redeemable warrants is uncertain and there can be no assurance that the market value of the redeemable warrants will equal or exceed their public offering price. There can be no assurance that the market price of the common stock will ever equal or exceed the exercise price of the redeemable warrants, and, consequently, whether it will ever be profitable for holders of the redeemable warrants to exercise the redeemable warrants.
Holders may be unable to exercise the redeemable warrants if we do not maintain a current prospectus and comply with applicable securities laws.
No redeemable warrants will be exercisable unless at the time of exercise a prospectus relating to the common stock issuable upon exercise of the redeemable warrants is current and the common stock has been registered or qualified or is deemed to be exempt under the securities laws of the state of residence of the holder of the redeemable warrants. Under the terms of the redeemable warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to the common stock issuable upon exercise of the redeemable warrants until the expiration of the redeemable warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the redeemable warrants, holders will be unable to exercise their redeemable warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the redeemable warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the redeemable warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the redeemable warrants may have no value, the market for the redeemable warrants may be limited and the redeemable warrants may expire worthless.
We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the Securities and Exchange Commission and The Nasdaq Stock Market, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time consuming and costly. We expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage.
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We are obligated to develop and maintain proper and effective internal controls over financial reporting. We may not complete our analysis of our internal controls over financial reporting in a timely manner, or these internal controls may have one or more material weaknesses, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently. Section 404 of the Sarbanes-Oxley Act requires public companies to conduct an annual review and evaluation of their internal controls and attestations of the effectiveness of internal controls by independent auditors. We would be required to perform the annual review and evaluation of our internal controls no later than in connection with the second annual report on Form 10-K filed after the offering to which this prospectus relates. However, we initially expect to qualify as a smaller reporting company and as an emerging growth company, and thus, we would be exempt from the auditors’ attestation requirement until such time as we no longer qualify as a smaller reporting company and an emerging growth company. We would no longer qualify as a smaller reporting company if the market value of our public float exceeded $75 million as of the last day of our second fiscal quarter in any fiscal year following this offering. We would no longer qualify as an emerging growth company at such time as described in the risk factor immediately below.
We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to evaluate and correct a material weakness in internal controls needed to comply with Section 404. The material weakness relates to our being a small company with a limited number of employees which limits our ability to assert the controls related to the segregation of duties. During the evaluation and testing process, if we identify one or more additional material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.
While we currently qualify as an “emerging growth company” under the Jumpstart of Business Startups Act of 2012, or the JOBS Act, we will lose that status at the latest by the end of 2018, which will increase the costs and demands placed upon our management.
We will continue to be deemed an emerging growth company until the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1 billion (as indexed for inflation); (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of common stock under this registration statement; (iii) the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or (iv) the date on which we are deemed to be a ‘large accelerated filer,’ as defined by the Securities and Exchange Commission, which would generally occur upon our attaining a public float of at least $700 million. Once we lose emerging growth company status, we expect the costs and demands placed upon our management to increase, as we would have to comply with additional disclosure and accounting requirements, particularly if we would also no longer qualify as a smaller reporting company.
We are an “emerging growth company” and we cannot be certain that the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
The JOBS Act permits “emerging growth companies” like us to rely on some of the reduced disclosure requirements that are already available to smaller reporting companies. As long as we qualify as an emerging growth company or a smaller reporting company, we would be permitted to omit the auditor’s attestation on internal control over financial reporting that would otherwise be required by the Sarbanes-Oxley Act, as described above and are also exempt from the requirement to submit “say-on-pay”, “say-on-pay frequency” and “say-on-parachute” votes to our stockholders and may avail ourselves of reduced executive compensation disclosure that is already available to smaller reporting companies.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
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We will cease to be an emerging growth company at such time as described in the risk factor immediately above. Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile and could cause our stock price to decline.
Our management will have broad discretion over the use of the proceeds we receive in this offering, and may not apply the proceeds in ways that increase the value of your investment.
We estimate that net proceeds of the sale of the units that we are offering will be approximately $ million, or $ million if the underwriter exercises its option to purchase additional units in this offering in full, based on an assumed initial public offering price of $ per unit, the midpoint of the price range set forth on the cover page of this prospectus. We currently intend to use the net proceeds of the offering for marketing activities, clinical and regulatory activities, research and development and intellectual property protection. Depending on the outcome of these activities, our plans and priorities may change and we may apply the net proceeds of this offering differently than we currently anticipate. Moreover, you will not have the opportunity to influence our decision on how to use the proceeds from this offering. We may use the proceeds for corporate purposes that do not immediately enhance our prospects for the future or increase the value of your investment. See “Use of Proceeds.”
Anti-takeover provisions of our certificate of incorporation, our bylaws and Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board and management.
Certain provisions of our amended and restated certificate of incorporation and bylaws that will be in effect upon the completion of this offering could discourage, delay or prevent a merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors. These provisions also could limit the price that investors might be willing to pay in the future for our securities, thereby depressing the market price of our securities. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions, among other things:
· | allow the authorized number of directors to be changed only by resolution of our board of directors; |
· | authorize our board of directors to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve; |
· | establish advance notice requirements for stockholder nominations to our board of directors or for stockholder proposals that can be acted on at stockholder meetings; and |
· | limit who may call a stockholder meeting. |
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law that may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time.
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If securities or industry analysts do not publish research or reports or publish unfavorable research about our business, the price of our securities and their trading volume could decline.
The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us the trading price for our securities would be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the price of our securities and their trading volume to decline.
We may be subject to ongoing restrictions related to grants from the Israeli Office of the Chief Scientist.
Through our Israeli subsidiary, we received grants of $436,815 from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor, or the Office of the Chief Scientist, for research and development programs related to products that we are not currently commercializing or marketing. Because we are no longer developing the product to which the grants relate, we do not believe that we are subject to any material conditions with respect to the grants, except for the restrictions on our ability to make certain transfers of the technology or intellectual property related to these grants described below. We could in the future determine to apply for further grants. If we receive any such grants, we would have to comply with specified conditions, including paying royalties with respect to grants received. If we fail to comply with these conditions in the future, sanctions might be imposed on us, such as grants could be cancelled and we could be required to refund any payments previously received under these programs.
Pursuant to the Israeli Encouragement of Industrial Research and Development Law, any products developed with grants from the Office of the Chief Scientist are required to be manufactured in Israel and certain payments may be required in connection with the change of control of the grant recipient and the financing, mortgaging, production, exportation, licensing and transfer or sale of its technology and intellectual property to third parties, which will require the Office of the Chief Scientist’s prior consent and, in case such a third party is outside of Israel, extended royalties and/or other fees. This could have a material adverse effect on and significant cash flow consequences to us if, and when, any technologies, intellectual property or manufacturing rights are exported, transferred or licensed to third parties outside Israel. If the Office of the Chief Scientist does not wish to give its consent in any required situation or transaction, we would need to negotiate a resolution with the Office of the Chief Scientist. In any event, such a transaction, assuming it was approved by the Office of the Chief Scientist, would involve monetary payments, such as royalties or fees, of not less than the applicable funding received from the Office of the Chief Scientist plus interest, not to exceed, in aggregate, six times the applicable funding received from the Office of the Chief Scientist.
Because we do not expect to pay cash dividends for the foreseeable future, you must rely on appreciation of our common stock price for any return on your investment. Even if we change that policy, we may be restricted from paying dividends on our common stock.
We do not intend to pay cash dividends on shares of our common stock for the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial performance, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Accordingly, you will have to rely on capital appreciation, if any, to earn a return on your investment in our common stock. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited.
Our ability to utilize our federal net operating loss, carryforwards and federal tax credit may be limited under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. The limitations apply if an “ownership change,” as defined by Section 382, occurs. Generally, an ownership change occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50% over their lowest ownership percentage at any time during the applicable testing period (typically three years). If we have experienced an “ownership change” at any time since our formation, we may already be subject to limitations on our ability to utilize our existing net operating losses and other tax attributes to offset taxable income. In addition, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change” and, consequently, Section 382 and 383 limitations. As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards and other tax attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.
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Risks Related to our Operations in Israel
We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and its region.
Our principal offices are located in Israel and most of our officers, employees and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations and results of operations and could make it more difficult for us to raise capital. During the winter of 2012, Israel was engaged in an armed conflict with Hamas, a militia group and political party operating in the Gaza Strip. This conflict involved missile strikes against civilian targets in various parts of Israel and negatively affected business conditions in Israel. Recent political uprisings and civil resistance demonstrations in various countries in the Middle East, including Egypt and Syria, are affecting the political stability of those countries. It is not clear how this instability, or the Arab Spring in general, will develop and how it will affect the political and security situation in the Middle East. This instability may lead to deterioration of the political relationships that exist between Israel and these countries, and have raised concerns regarding security in the region and the potential for armed conflict. In addition, it is widely believed that Iran, which has previously threatened to attack Israel, has been stepping up its efforts to achieve nuclear capability. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza and Hezbollah in Lebanon. The tension between Israel and Iran and/or these groups may escalate in the future and turn violent, which could affect the Israeli economy generally and us in particular. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations. For example, any major escalation in hostilities in the region could result in a portion of our employees being called up to perform military duty for an extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary.
Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.
Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business and trade activity with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.
Our operations may be disrupted as a result of the obligation of management or personnel to perform military service.
Many of our male employees in Israel, including members of our senior management, perform up to one month, and in some cases more, of annual military reserve duty until they reach the age of 45 or older and, in the event of a military conflict, may be called to active duty. There have also been periods of significant call-ups of military reservists, and it is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our employees. Such disruption could materially adversely affect our business, financial condition and results of operations.
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Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuations and inflation.
Our reporting and functional currency is the U.S. dollar. Most of the royalty payments from our agreements with our development and/or commercialization partners are payable in U.S. dollars, and we expect our revenues from future licensing agreements to be denominated mainly in U.S. dollars or in Euros. We pay a substantial portion of our expenses in U.S. dollars; however, a portion of our expenses, related to salaries of the employees in Israel and payment to part of the service providers in Israel and other territories, are paid in New Israeli Shekels, or NIS, and in other currencies. In addition, a portion of our financial assets is held in NIS and in other currencies. As a result, we are exposed to the currency fluctuation risks. For example, if the NIS strengthens against the U.S. dollar, our reported expenses in U.S. dollars may be higher than anticipated. In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our financial assets held in NIS will decline.
It may be difficult for investors in the U.S. to enforce any judgments obtained against us or any of our directors or officers.
Almost all of our assets are located outside the U.S., although we do maintain a permanent place of business within the U.S. In addition, all of our officers and some of our directors are nationals and/or residents of countries other than the U.S., and all or a substantial portion of such persons’ assets are located outside the U.S. As a result, it may be difficult for investors to enforce within the U.S. any judgments obtained against us or any of our non-U.S. directors or officers, including judgments predicated upon the civil liability provisions of the securities laws of the U.S. or any state thereof. Additionally, it may be difficult to assert U.S. securities law claims in actions originally instituted outside of the U.S. Israeli courts may refuse to hear a U.S. securities law claim because Israeli courts may not be the most appropriate forums in which to bring such a claim. Even if an Israeli court agrees to hear a claim, it may determine that the Israeli law, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, certain content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure would still be governed by the Israeli law. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal and state securities laws against us or any of our non-U.S. directors or officers.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
· | The timing of clinical studies and eventual U.S. Food and Drug Administration approval of WoundShield and our other product candidates. |
· | Regulatory actions that could adversely affect the price of or demand for our approved products. |
· | Market acceptance of existing and new products. |
· | Favorable or unfavorable decisions about our products from government regulators, insurance companies or other third-party payers. |
· | Our intellectual property portfolio. |
· | We are not currently meeting the minimum sales requirements necessary to prevent our license agreement related to NanoVibronix NPWT from terminating in August 2014, and even if we meet such sales requirements, the license will no longer be exclusive after such date. |
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· | Our ability to recruit and retain qualified regulatory and research and development personnel. |
· | Unforeseen changes in healthcare reimbursement for any of our approved products. |
· | Lack of financial resources to adequately support our operations. |
· | Difficulties in maintaining commercial scale manufacturing capacity and capability. |
· | Our ability to generate internal growth. |
· | Changes in our relationship with key collaborators. |
· | Changes in the market valuation or earnings of our competitors or companies viewed as similar to us. |
· | Our failure to comply with regulatory guidelines. |
· | Uncertainty in industry demand and patient wellness behavior. |
· | General economic conditions and market conditions in the medical device industry. |
· | Future sales of large blocks of our common stock, which may adversely impact our stock price. |
· | Depth of the trading market in our common stock. |
· | Termination of the lock-up agreement or other restrictions on the ability of us or any of our existing stockholders to sell shares after this offering; |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Please see “Risk Factors” for additional risks which could adversely impact our business and financial performance. Moreover, new risks regularly emerge and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this prospectus are based on information available to us on the date of this prospectus. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this prospectus.
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of the units we are offering will be approximately $ . If the underwriter fully exercises the over-allotment option, the net proceeds of the securities we sell will be approximately $ . “Net proceeds” is what we expect to receive after paying the underwriting discount and other expenses of the offering. For the purpose of estimating net proceeds, we are assuming that the public offering price will be $ per unit, the midpoint of the price range set forth on the cover page of this prospectus.
We intend to use the net proceeds as follows:
· | We expect to use approximately $ for marketing and sales activities, which may include investment in branding our products, producing marketing materials, targeting certain publications, attending exhibitions and medical shows and visiting customers and potential customers. |
· | We expect to use approximately $ for clinical and regulatory activities, specifically to complete the following clinical trials: (i) Woundshield ultrasound patch enhances perfusion of blood, 30 patient trial; (ii) Woundshield ultrasound patch enhances wound healing, 200 patient trial; and (iii) PainShield for Trigeminal Neuralgia 80 patient trial. See “Business – Our Products – WoundShield and NanoVibronix NPWT – Clinical Trials” and “Business – Our Products – PainShield – Clinical Trials” for more information on these anticipated clinical trials. |
· | We expect to use approximately $ for research and development, including the integration of WoundShield and NanoVibronix NPWT and other product innovations, improvements and integration. |
· | We expect to use approximately $ for intellectual property protection, to support filed patent applications and obtain additional intellectual property protection if needed. |
· | We expect to use the balance of the net proceeds for operations and general working capital requirements. |
We will also receive proceeds upon any cash exercise of the redeemable warrants sold in this offering. If all of these redeemable warrants were to be exercised at the exercise price of $ per share, then we would receive net proceeds of approximately $ . We expect to use these proceeds, if any, for operations and general working capital requirements at the time of such exercise.
Investors are cautioned, however, that expenditures may vary substantially from these estimates. Investors will be relying on the judgment of our management, who will have broad discretion regarding the application of the proceeds of this offering. The amounts and timing of our actual expenditures will depend upon numerous factors, including our potential investments in new businesses, the amount of cash generated by our operations, the amount of competition and other operational factors. We may find it necessary or advisable to use portions of the proceeds from this offering for other purposes.
From time to time, we evaluate these and other factors and we anticipate continuing to make such evaluations to determine if the existing allocation of resources, including the proceeds of this offering, is being optimized.
Circumstances that may give rise to a change in the use of proceeds include:
· | the timing of clinical studies and eventual U.S. Food and Drug Administration approval of WoundShield and our other product candidates; |
· | the need or desire on our part to accelerate, increase or eliminate existing initiatives due to, among other things, changing market conditions and competitive developments; and |
· | the availability of other sources of cash including cash flow from operations and new bank debt financing arrangements, if any. |
Until we use the net proceeds of this offering, we will invest the funds in short-term, investment grade, interest-bearing securities.
A $1.00 increase or decrease in the assumed initial public offering price of $ per unit (the midpoint of the price range set forth on the front cover of this prospectus) would increase or decrease the net proceeds to us from this offering by $ , assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commission and estimated offering expenses payable by us. An increase or decrease of units in the number of units offered by us would increase or decrease the total consideration paid to us by new investors by $ , assuming the initial public offering price of $ per unit (the midpoint of the price range set forth on the front cover of this prospectus) remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will adjust based on the actual public offering price and other terms of this offering determined at pricing.
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CAPITALIZATION
The following table summarizes our capitalization as of December 31, 2013:
· | on an actual basis; |
· | on a pro forma basis, giving effect to |
o | a one-for- reverse split of our common stock, which will occur prior to the pricing of this offering; |
o | the conversion of all outstanding shares of our convertible preferred stock into an aggregate of shares of common stock; we have obtained the necessary consents to effect the conversion of all of our outstanding preferred stock automatically upon the effectiveness of this registration statement; |
o | the conversion of all outstanding convertible indebtedness into an aggregate of shares of common stock and shares of series C preferred stock, and assuming a conversion date; we have obtained the necessary consents to effect the conversion of all of our outstanding convertible debt automatically upon the effectiveness of this registration statement, regardless of the proceeds to be received in the offering; and |
o | the filing of our amended and restated certificate of incorporation and the effectiveness of our restated bylaws, which will occur immediately prior to the completion of this offering. |
· |
on a pro forma, as adjusted basis, giving effect to (1) all of the above, (2) our receipt of the net proceeds from the sale by us in this offering of shares of common stock at an assumed public offering price of $ per unit, the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and (3) the application of the net proceeds we will receive from this offering in the manner described in “Use of Proceeds.” |
The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes appearing elsewhere in this prospectus.
December 31, 2013 | ||||||||||||
Actual | Pro Forma | As Adjusted | ||||||||||
(in thousands) (unaudited) | ||||||||||||
Convertible promissory notes | $ | 3,107 | $ | $ | ||||||||
Stockholders’ deficiency: | ||||||||||||
Common stock of $ 0.001 par value - 24,000,000 shares authorized and 1,085,060 shares issued and outstanding actual; shares authorized and shares issued and outstanding pro forma; shares authorized and shares issued and outstanding pro forma as adjusted | 1 | |||||||||||
Preferred stock, par value $0.001; 18,000,000 shares authorized actual; shares authorized and shares issued pro forma and pro forma as adjusted | ||||||||||||
Series A-1 preferred stock of $ 0.001 par value - 400,000 shares authorized and 222,620 shares issued and outstanding actual; no shares authorized and no shares issued and outstanding pro forma and pro forma as adjusted | * | |||||||||||
Series A-2 preferred stock of $ 0.001 par value - 300,000 shares authorized and 171,612 shares issued and outstanding actual; no shares authorized and no shares issued and outstanding pro forma and pro forma as adjusted | * | |||||||||||
Series C preferred stock of $0.001 par value – no shares authorized and no shares issued and outstanding actual; shares authorized and shares issued pro forma and pro forma as adjusted | - | |||||||||||
Additional paid-in capital | 10,905 | |||||||||||
Accumulated deficit | (14,203 | ) | ||||||||||
Total stockholders’ deficiency | (3,297 | ) | ||||||||||
Total liabilities and stockholders' deficiency | $ | 691 |
* Represents an amount lower than $1.
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DILUTION
The difference between the public offering price per share, assuming no value is attributed to the redeemable warrants included in the units we are offering by this prospectus, and the pro forma net tangible book value per share after this offering constitutes the dilution to investors in this offering. Such calculation does not reflect any dilution associated with the sale and exercise of the redeemable warrants. Our net tangible book value on December 31, 2013 was approximately $(3,297,000), or $(3.04) per share. “Net tangible book value” is total assets minus the sum of liabilities and intangible assets. “Net tangible book value per share” is net tangible book value divided by the total number of shares outstanding.
After giving effect to adjustments relating to the offering, our pro forma net tangible book value on December 31, 2013, would have been $ , or $ per share. The adjustments made to determine pro forma net tangible book value per share are the following:
· | The pro forma adjustments referenced under “Capitalization.” |
· |
An increase in total assets to reflect the net proceeds of the offering as described under “Use of Proceeds” (assuming that the public offering price will be $ per unit, the midpoint of the range set forth on the cover page of this prospectus). |
· | The addition of the number of shares offered by this prospectus to the number of shares outstanding. |
The following table illustrates the pro forma increase in net tangible book value of $ per share and the dilution (the difference between the offering price per share and net tangible book value per share) to new investors:
Assumed public offering price per share of common stock | $ | |||
Net tangible book value per share as of December 31, 2013 | $ | (3.04 | ) | |
Pro forma net tangible book value per share of December 31, 2013 | $ | |||
Increase in pro forma net tangible book value per share attributable to the offering | $ | |||
Pro forma as adjusted net tangible book value per share as of December 31, 2013 after giving effect to the offering | $ | |||
Dilution in pro forma net tangible book value per share to new investors in the offering | $ |
The following table shows, on a pro forma basis as described above, the difference between existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid and the average price paid per share. The table assumes that the public offering price will be $ per unit, the midpoint of the range set forth on the cover page of this prospectus .
Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
Existing stockholders | % | $ | % | $ | ||||||||||||||||
New investors | % | $ | % | $ | ||||||||||||||||
Total | % | $ | % |
The foregoing tables and calculations are based on the number of shares of our common stock outstanding as of December 31, 2013 and exclude:
· |
1,578,948 shares of common stock issuable upon the exercise of warrants with an exercise price of $0.38 per share; |
· | 2,319,062 shares of common stock issuable upon the exercise of warrants with an exercise price of $0.199 per share; |
· |
2,520,704 shares of common stock issuable upon the exercise of currently outstanding options with a weighted average exercise price of $1.23; and |
· |
279,296 shares of common stock available for future issuance under our 2004 Global Share Option Plan. |
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To the extent any of these outstanding options or warrants is exercised, the dilution to new investors would be reduced. To the extent all of such outstanding options and warrants had been exercised as of December 31, 2013, the pro forma as adjusted net tangible book value per share after this offering would be $ , and total dilution per share to new investors would be $ .
Each $1.00 increase (decrease) in the assumed initial public offering price of $ per unit, the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value by approximately $ , the pro forma as adjusted net tangible book value per share by approximately $ per share and the dilution to investors in this offering by approximately $ per share, assuming the number of units offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
The information above assumes that the underwriter does not exercise its over-allotment option. If the underwriter exercises its over-allotment option in full, the pro forma as adjusted net tangible book value will increase to $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors.
DIVIDEND POLICY
In the past, we have not declared or paid cash dividends on our common stock, and we do not intend to pay any cash dividends on our common stock. Rather, we intend to retain future earnings (if any) to fund the operation and expansion of our business and for general corporate purposes. Subject to legal and contractual limits, our board of directors will make any decision as to whether to pay dividends in the future.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of financial condition and results of operations in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this prospectus. In addition to historical information, the following discussion and analysis includes forward-looking information that involves risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this prospectus. See “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this prospectus.
Overview
We are a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our WoundShield, PainShield and UroShield products are backed by novel technology which relates to ultrasound delivery through surface acoustic waves. Our NanoVibronix NPWT employs a technology that drains open cavity wounds and seeks to accelerate wound healing.
Recent Events
On February 5, 2013, we issued secured convertible promissory notes to certain investors. The convertible promissory notes were initially issued in the original aggregate principal amount of $100,000. On each of March 28, 2013, June 3, 2013, August 5, 2013, October 7, 2013, December 9, 2013 and February 6, 2014, such principal amount was increased by $100,000, so that the total current principal amount outstanding is $700,000. The convertible promissory notes mature on the earlier of April 30, 2014, the closing date of a financing in which we sell an aggregate of at least $250,000 of our debt or equity securities or on an accelerated date if there is an event of default, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due and payable in full. The convertible promissory notes bear interest at the rate of 6% per annum, which rate is increased to 10% upon and during the occurrence of an event of default. In addition, the convertible promissory notes are convertible either at the holders’ option or upon maturity into shares of our common stock at an initial conversion price of $0.38 per share, subject to adjustment for stock splits, fundamental transactions or similar events. The holders of the convertible promissory notes have a security interest in all of our assets and those of our subsidiaries. To date, no principal or interest has been paid on these notes. See “Liquidity and Capital Resources—Twelve Months Ended December 31, 2013 Compared to Twelve Months Ended December 31, 2012—Convertible Promissory Notes” below for more information on the terms of these notes.
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In connection with the issuance of the convertible promissory notes described above, on each of February 5, 2013, March 28, 2013, June 3, 2013 August 5, 2013, October 7, 2013, December 9, 2013 and February 6, 2014, we issued warrants to purchase 263,158 shares of common stock (in aggregate warrants to purchase 1,842,106 shares), with an exercise price of $0.38 per share (subject to adjustment), to the participating investors. See “Description of Securities—Warrants—February 2013 Warrants” below for more information on the terms of these warrants.
Critical Accounting Policies
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to estimation of fair value of stock based compensation and the estimation of the fair value of warrants.
Functional currency
The accompanying consolidated financial statements have been prepared in U.S. dollars.
We believe that the currency of the primary economic environment in which our operations are conducted is the U.S. dollar; thus the dollar is our functional currency. The majority of the proceeds from our financing activities are received in U.S. dollars. Although a portion of our subsidiary’s expenses are dominated in NIS (mostly salary and rent), a substantial portion of our expenses are denominated in U.S. dollars. In addition, most of our assets and liabilities are in U.S. dollars and we expect that most of our revenues will be generated in U.S. dollars.
Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies have been remeasured into U.S. dollars in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters.”
All transaction gains and losses from the remeasurement of monetary balance sheet items denominated in non- U.S. dollar currencies are reflected in the consolidated statement of comprehensive loss in financial expenses, net, as appropriate.
Revenue recognition
We generate revenues from the sale of our products to end users. Revenues from those products are recognized in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition,” when delivery has occurred, persuasive evidence of an agreement exists, the vendor’s fee is fixed or determinable, no further obligation exists and collectability is probable.
The Company’s agreements with its distributors do not contain any price protection guarantees, rights of return or other post-shipment obligations.
Stock-based compensation
We account for stock-based compensation in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC 718”). ASC 718 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 that is ultimately expected to vest is recognized as an expense over the requisite service period in our consolidated statement of comprehensive loss.
We recognize compensation expense for the value of our awards granted based on the straight line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the invested portion of the surrendered option. Ultimately, the actual expenses recognized over the vesting period will only be for those shares that vest.
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We selected the Black-Scholes-Merton option pricing model as the most appropriate fair value method for our stock option awards. This option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon similar traded companies’ historical share price movements. The expected option term represents the period that our stock options are expected to be outstanding. We currently use a simplified method to estimate the period that our stock options are expected to be outstanding, based on the terms of the awards. We will continue to use this method until sufficient historical exercise data supports using expected life assumptions. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. We use an expected dividend rate of zero, as we have historically not paid dividends and have no foreseeable plans to pay dividends.
Because there has been no public market for our common stock, we have determined the fair value of the common stock underlying all of our options and warrants at the time of grant by considering a number of objective and subjective factors. We have obtained the assistance of an independent valuation firm and applied a market approach using recent third-party transactions in our equity. The fair value of the underlying shares of common stock will continue to be determined by our management until such time as the common stock is listed or quoted on an established stock exchange, national market system or other quotation system.
Income taxes
We account for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). ASC 740 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. We provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2013 and December 31, 2012, we provided a full valuation allowance.
We implement a two-step approach to recognize and measure 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. We believe that our tax positions are all highly certain of being upheld upon examination. As such, as of December 31, 2013 and December 31, 2012, we had not recorded a liability for uncertain tax positions.
Convertible promissory notes
We account for our outstanding convertible promissory notes in accordance with ASC 470-20, “Debt with Conversion and Other Options” (“ASC 470-20”) and ASC 815 “Derivatives and Hedging” (“ASC 815”). In accordance with ASC 815, we bifurcate all embedded derivatives that require bifurcation and account for them separately from the convertible debt. Based upon a third party valuation, we allocated the proceeds from each issuance between the freestanding liability (convertible debt) component, which is accounted for at cost, and the embedded derivative component, which is remeasured on each reporting date.
In addition, under the guidelines of ASC 470-20, we measure an embedded beneficial conversion feature on the date of issuance, by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid in capital. The intrinsic value of the feature is calculated on the date of issuance using the effective conversion price which results from the allocation of the proceeds between the convertible debt and the embedded derivative component. The intrinsic value is limited to the portion of the proceeds allocated to the convertible debt. We recognize an embedded beneficial conversion feature related to our convertible promissory notes. The beneficial conversion feature is amortized to our consolidated statements of comprehensive loss over the term of the liability.
Warrant liability
The fair value of the liability for our warrants issued to investors in 2013 was calculated using the Black-Scholes model. We accounted for these warrants according to the provisions of ASC 815 and, based on the anti-dilution protections contained in the warrants, we classified them as liabilities, measured at fair value for each reporting period until they are exercised or expire, with changes in fair value recognized in our consolidated statement of comprehensive loss as financial income or expense.
Extended Transition Period for “Emerging Growth Companies”
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the Jumpstart Our Business Act of 2012 (known as the JOBS Act). This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our consolidated financial statements may not be comparable to companies that comply with public company effective dates. Because our consolidated financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our common stock.
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Results of Operations
Twelve Months Ended December 31, 2013 Compared to Twelve Months Ended December 31, 2012
Revenues . For the twelve months ended December 31, 2013 and 2012, our revenues were approximately $211,000 and $166,000, respectively, an increase of approximately 27.1%, or $45,000, between the periods. The increase was attributable primarily to an increase in volume of sales, mainly contributed by sales to new distributors that came onboard during the twelve months ended December 31, 2012 and did not contribute to sales for that full year.
For the twelve months ended December 31, 2013, the percentage of revenues attributable to our products was: PainShield - 82.2%; UroShield - 8.4%; and NanoVibronix NWPT - 9.5%. For the twelve months ended December 31, 2012, the percentage of revenues attributable to our products was: PainShield - 93.5%; UroShield - 4.5%; and NanoVibronix NWPT - 2%. For the twelve months ended December 31, 2013 and 2012, the percentage of revenues attributable to our disposable products was 40.3% and 39.7%, respectively. For the twelve months ended December 31, 2013 and 2012, the portion of our revenues that was derived from distributors was 64.3% and 58.5%, respectively.
Gross Profit . For the twelve months ended December 31, 2013, gross profit increased by approximately 3.4%, or $4,000, to approximately $120,000 from approximately $116,000 during the same period in 2012. The key driver of the increase in gross profit was our increase in revenues, described above.
Gross profit as a percentage of revenues was 56.9% for the twelve months ended December 31, 2013 and 69.9% for the same period in 2012. The decrease was primarily due to a write-off of inventory in the amount of approximately $19,000 during the twelve months ended December 31, 2013 and the fact that a greater percentage of our sales during the twelve months ended December 31, 2013 were made through distributors, which sales have lower gross margins.
Research and Development Expenses . For the twelve months ended December 31, 2013 and 2012, research and development expenses were approximately $620,000 and $572,000, respectively, an increase of approximately 8.4%, or $48,000, between the periods. The increase was mainly due to an increase in stock-based compensation expenses of approximately $196,000, to approximately $213,000 from approximately $17,000, offset by a decrease in clinical research expenses of approximately $53,000, a decrease in subcontract expenses of approximately $20,000 and a decrease in royalty payment of approximately $75,000 due to a payment we were required to make under a licensing agreement during the twelve months ended December 31, 2012.
Research and development expenses as a percentage of total revenues were approximately 293.8% and 344.6% for the twelve months ended December 31, 2013 and 2012, respectively. The decrease was due to our increase in revenues, described above.
Our research and development expenses consist mainly of payroll expenses to employees involved in research and development activities, stock based compensation expenses, expenses related to subcontracting, patents, clinical trial and facilities expenses associated with and allocated to research and development activities.
Selling and Marketing Expenses . For the twelve months ended December 31, 2013 and 2012, selling and marketing expenses were approximately $244,000 and $190,000, respectively, an increase of approximately 28.4%, or $54,000, between the periods. The increase was mainly due to an increase in stock-based compensation expenses of approximately $44,000, to approximately $51,000 from approximately $7,000.
Selling and marketing expenses as a percentage of total revenues were approximately 115.6% and 114.5% for the twelve months ended December 31, 2013 and 2012, respectively. The increase was due to the increase in our selling and marketing, described above.
Sales and marketing expenses consist mainly of payroll expenses to direct sales and marketing employees, stock-based compensation expenses, travel expenses, advertising and marketing expenses, rent and facilities expenses associated with and allocated to sales and marketing activities.
General and Administrative Expenses . For the twelve months ended December 31, 2013 and 2012, general and administrative expenses were approximately $366,000 and $128,000, respectively, an increase of approximately 185.9%, or $238,000, between the periods. The increase was mainly due to an increase in stock-based compensation expenses of approximately $211,000, to approximately $215,000 from approximately $4,000, and increase in professional services and accounting expenses of approximately $21,000.
General and administrative expenses as a percentage of total revenues were approximately 173.5% and 77.1% for the twelve months ended December 31, 2013 and 2012, respectively. The increase was due to the increase in general and administrative expenses, described above.
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Our general and administrative expenses consist mainly of payroll expenses for management and administrative employees, share-based compensation expenses, accounting and facilities expenses associated with general and administrative activities.
Other Income . For the twelve months ended December 31, 2013 and 2012, other income was $36,000 and $0, respectively . The increase was due to a windfall payout derived from the distribution of cash to us as an eligible member of Medmarc Insurance Group, which was demutualized in its acquisition by Proassurance Corporation.
Financial Expenses, net . For the twelve months ended December 31, 2013 and 2012, financial expenses, net were $880,000 and $501,000, respectively, an increase of approximately 75.6%, or $379,000, between the periods. The increase resulted primarily from the amortization of the beneficial conversion feature of our convertible promissory notes and accrued interest on our convertible promissory notes.
Tax expenses. For the twelve months ended December 31, 2013 and 2012, tax expenses were $35,000 and $0, respectively. The tax expense is computed by multiplying income before taxes at our Israeli subsidiary by the appropriate tax rate. The increase was due to the fact that our Israeli subsidiary had taxable income in 2013.
Net Loss . Our net loss increased by approximately $714,000, or 56.0%, to approximately $1,989,000 for the twelve months ended December 31, 2013 from approximately $1,275,000 during the same period in 2012. The increase in net loss resulted primarily from the factors described above.
Liquidity and Capital Resources
We continue to incur losses and negative cash flows from operating activities. For the twelve months ended December 31, 2013, we had losses of approximately $1,989,000 and negative cash flows from operating activities of approximately $602,000. These conditions raise substantial doubts about our ability to continue as a going concern. Our ability to continue to operate is dependent upon raising additional funds to finance our activities. We aim to have our securities listed on the NASDAQ Stock Market, for the purpose of raising capital to finance our operations. There are no assurances, however, that we will be successful in obtaining an adequate level of financing to qualify for a NASDAQ listing, or necessary for the long-term development and commercialization of our products.
We are currently meeting our short-term liquidity requirements with the proceeds of our secured convertible promissory notes, which are borrowings from a related party (see “Certain Relationships and Related Transactions”). We intend to use the proceeds of the offering to which this prospectus relates to meet such short-terms requirements as well as to advance our long-term plans. It is our current belief that the proceeds of this offering will provide sufficient funding to meet our liquidity needs for more than a year.
Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully commercialize our products, our development of future products and competing technological and market developments. However, we may be unable to raise sufficient additional capital when we require it or upon terms favorable to us. In addition, the terms of any securities we issue in future financings may be more favorable to new investors and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then outstanding. If we are unable to obtain adequate funds on reasonable terms, we will need to curtail operations significantly, including possibly postponing anticipated clinical trials or entering into financing agreements with unattractive terms.
Twelve Months Ended December 31, 2013 Compared to Twelve Months Ended December 31, 2012
General . As of December 31, 2013, we had cash and cash equivalents of approximately $94,000, compared to approximately $101,000 as of December 31, 2012. The decrease is attributable primarily to our net loss. We have historically met our cash needs through a combination of issuance of equity, borrowing activities and sales. Our cash requirements are generally for product development, research and development cost, marketing and sales activities, finance and administrative cost, capital expenditures and general working capital.
Cash used in our operating activities was approximately $602,000 for the twelve months ended December 31, 2013 and approximately $787,000 for the same period in 2012. The most significant usage of cash in our operating activities for the twelve months ended December 31, 2013 and 2012 was a net loss of approximately $1,989,000 and $1,275,000, respectively, offset during the twelve months ended December 31, 2013 by approximately $479,000 in non-cash stock-based compensation.
Cash used in our investing activities was approximately $5,000 during the twelve months ended December 31, 2013 and 2012.
Cash provided by financing activities was approximately $600,000 for the twelve months ended December 31, 2013, due to the issuance of convertible promissory notes, compared to no cash used in or provided by financing activities for the same period in 2012.
Convertible Promissory Notes . As of December 31, 2013, we had convertible series B-1 promissory notes and convertible series B-2 promissory notes with an aggregate principal amount outstanding of approximately $2,536,765, with aggregate accrued interest of $574,962, and secured convertible promissory notes with an aggregate principal amount of $600,000, with aggregate accrued interest of $17,638. As of December 31, 2013, no principal or interest had been paid on these notes.
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The convertible series B-1 promissory notes mature on the earlier of November 15, 2014 or on an accelerated date if there is an event of default, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due and payable in full. The convertible series B-1 promissory notes bear interest at the rate of 10% per annum, compounded annually. In addition, the convertible series B-1 promissory notes are convertible at any time at the holder’s option into shares of our series B-1 participating convertible preferred stock at an initial conversion price of $0.284 per share, subject to adjustment for stock dividends, stock splits or combinations. The convertible series B-1 promissory notes will automatically convert into series B-1 participating convertible preferred stock upon the occurrence of (i) an aggregate investment in us of $3 million or more in a transaction or series of transactions, (ii) our initial public offering of our common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as we become subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by us under the Securities Exchange Act of 1934, as amended, or equivalent document or (iii) a fundamental transaction. These notes will convert into common stock automatically upon the closing of this offering.
The terms of the convertible series B-2 promissory notes are the same as those of the convertible series B-1 promissory notes, except that the initial conversion price is $0.199. These notes will convert into common stock automatically upon the closing of this offering.
As of December 31, 2013, the secured convertible promissory notes were scheduled to mature on the earlier of February 28, 2014 (which date was subsequently extended to April 30, 2014), the closing date of a financing in which we sell an aggregate of at least $250,000 of our debt or equity securities or on an accelerated upon an event of default, upon which date the entire outstanding principal balance and any outstanding fees or interest would be due and payable in full. The secured convertible promissory notes bear interest at the rate of 6% per annum, which rate is increased to 10% upon and during the occurrence of an event of default. Events of default are comprised of: (i) failure to pay indebtedness under the notes when due; (ii) a default in a covenant, obligation or agreement under the notes or related documents; (iii) any representation, warranty or certification made by us under the notes is false or incorrect in any material respect on the date made; (iv) the occurrence of a liquidation, insolvency or bankruptcy event; (v) the entry of certain final judgments against us; (vi) our failure to make required payments under other debt, the acceleration of the maturity date on other debt, or a demand or requirement that we redeem, repurchase or retire other debt prior to its maturity; (vii) a material adverse effect, as defined in the notes; (viii) any material impairment in the value of the collateral or the priority of the lenders’ liens; (ix) any levy upon, seizure or attachment of a material portion of the collateral; (x) our assertion that any transaction document related to the notes is invalid or unenforceable; and (xi) the lenders cease to have a perfected lien in any of the collateral, subject to certain exceptions. The secured convertible promissory notes are convertible either at the holders’ option or upon maturity into shares of our common stock at an initial conversion price of $0.38 per share, subject to adjustment for stock splits, fundamental transactions or similar events. The holders of the secured convertible promissory notes have a security interest in all of our assets and those of our subsidiaries. These notes will convert into common stock automatically upon the closing of this offering.
Material Commitments
Under the terms of the license agreement for NanoVibronix NWPT, if we have not paid aggregate royalty payments of at least $150,000 by August 2014, we are required to pay the difference. We made an advance payment of $75,000 on account of future royalties during 2012 and remain obligated to pay $75,000 by August 2014.
Off Balance Sheet Arrangements
As of December 31, 2013, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Factors That May Affect Future Operations
We believe that our future operating results will continue to be subject to quarterly variations based upon a wide variety of factors, including the ordering patterns of our distributors, timing of regulatory approvals, the implementation of various phases of our clinical trials and manufacturing efficiencies due to the learning curve of utilizing new materials and equipment. Our operating results could also be impacted by a weakening of the Euro and strengthening of the New Israeli Shekel, or NIS, both against the U.S. dollar. Lastly, other economic conditions we cannot foresee may affect customer demand, such as individual country reimbursement policies pertaining to our products.
BUSINESS
Overview
We were organized as a Delaware corporation in October 2003. Through our wholly-owned subsidiary, NanoVibronix Ltd., a private company incorporated under the laws of the State of Israel, we focus on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. Our products currently consist of:
· | WoundShield, a patch-based therapeutic ultrasound device that facilitates tissue regeneration and wound healing by using ultrasound to increase local capillary perfusion and tissue oxygenation; |
· | NanoVibronix NPWT, a small, lightweight pump with features that allow contamination-free handling of infected wound exudate and enhanced patient mobility; |
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· | PainShield, a disposable patch-based therapeutic ultrasound technology to treat pain, muscle spasm and joint contractures by delivering a localized ultrasound effect to treat pain and induce soft tissue healing in a targeted area; and |
· | UroShield, an ultrasound-based product that is designed to prevent biofilm in urinary catheters, increase antibiotic efficacy and decrease pain and discomfort associated with urinary catheter use. |
Each of our WoundShield, PainShield and UroShield products employs a small, disposable transducer that transmits low frequency, low intensity ultrasound acoustic waves that seek to repair and regenerate tissue, musculoskeletal and vascular structures and increase antibiotic efficacy. Through their size, effectiveness and ease of use, these products are intended to eliminate the need for technicians and medical personnel to manually administer ultrasound treatment through large transducers, thereby promoting patient independence and enabling more cost-effective home-based care. Our NanoVibronix NPWT is based on an existing standard of care for wound therapy treatment and employs a technology that drains open cavity wounds and seeks to accelerate wound healing.
PainShield and NanoVibronix NPWT are currently approved for marketing in the U.S. by the U.S. Food and Drug Administration and all of our products, except for NanoVibronix NPWT, have CE Mark approval in the European Union. We anticipate that we will apply for CE Mark approval for NanoVibronix NPWT within six months after the closing of the offering to which this prospectus relates. We have a Canadian medical device license for PainShield and UroShield, a certificate allowing us to sell PainShield, WoundShield and UroShield in Israel, a certificate allowing us to sell PainShield in Australia, and we are able to sell PainShield, WoundShield and UroShield in India and Ecuador based on our CE Mark. In addition, our distributor in Korea has applied for approval to sell PainShield and UroShield, and our distributor in Chile has applied for approval to sell PainShield. We generally apply, through our distributor, for approval in a particular country for a particular product only when we have a distributor in place with respect to UroShield.
In addition to the need to obtain regulatory approvals, as described above, we anticipate that sales volumes and prices of our WoundShield and PainShield products will depend in large part on the availability of coverage and reimbursement for self-administered use from third party payers. Third party payers include governmental programs such as Medicare and Medicaid in the U.S., private insurance plans and workers’ compensation plans. We do not currently have reimbursement codes for self-administered use or clinical use of WoundShield in any of the markets in which we have regulatory authority to sell WoundShield. Of the markets in which we have regulatory authority to sell PainShield, we have reimbursement codes in the United States (i.e., Current Procedural Terminology codes or “CPT codes”) for clinical use only, but do not have such reimbursement codes for self-administered use of the product. NanoVibronix NPWT is generally reimbursed by governmental and other third-party payers in the U.S. With respect to UroShield, which will be used primarily in a clinical setting, we do not currently have reimbursement codes in any of the markets in which we have regulatory authority to sell UroShield. We anticipate that we will begin to seek reimbursement codes for self-administered and clinical use of our products in the markets in which we have regulatory authority to sell such products after the closing of this offering, however, there is no guarantee that we will be successful in obtaining such codes quickly, or at all.
Assuming we are able to obtain adequate financing, including through this offering, we plan to continue to work on the further commercialization of WoundShield and further marketing of NanoVibronix NPWT. We intend to integrate our WoundShield ultrasound technology into NanoVibronix NPWT, which we believe would make NanoVibronix NPWT a superior product within the negative pressure wound therapy market. We also intend to conduct ongoing clinical trials of our PainShield product, with the aim of obtaining a favorable reimbursement code. With respect to our UroShield product, we are currently seeking a strategic partner that is active in the urology market and would be interested in integrating UroShield into its range of products. If we locate such a partner, we anticipate that we would continue to pursue U.S. Food and Drug Administration approval of the product.
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Ultrasound Technology and Our Products
As noted above, each of our products, other than NanoVibronix NPWT, is based on the use of low frequency ultrasound, which delivers energy through mechanical vibrations in the form of sound waves. Ultrasound has long been used in physical therapy, physical medicine, rehabilitation and sports medicine. Moreover, there is a growing body of research that supports the positive biological effects of ultrasound. A recent study indicates that low frequency ultrasound increases nerve regeneration (Crisci AR, Ferreira AL, “Low-intensity pulsed ultrasound accelerates the regeneration of the sciatic nerve after neurotomy in rats”, Ultrasound Med. Biol. 2002 October; 28(10):1335-41). According to Atland, et. al., low frequency ultrasound also has important therapeutic metabolic effects (Altland OD, Dalecki D, Suchkova VN, Francis CW, “Low-intensity ultrasound increases endothelial cell nitric oxide synthase activity and nitric oxide synthesis”, J. Thromb. Haemost. 2004 April; 2(4):637-43). In addition, there is evidence that ultrasound increases the healing of fractures (Warden SJ, Favaloro JM, Bennell KL, McMeeken JM, Ng KW, Zajac JD, Wark JD, “Low-intensity pulsed ultrasound stimulates the bone-forming response in UMR-106 cells”, Biochem. Biophys. Res. Commun. 2001 August 24; 286(3):443-50 and Warden SJ, Bennell KL, McMeeken JM, Wark JD, “Acceleration of fresh fracture repair using the sonic accelerated fracture healing system (SAFHS)”, Calcif. Tissue Int. 2000 February; 66(2):157-63).
Research has further shown that ultrasound therapy has resulted in increased collagen repair (Da Cunha A, Parizotto NA, Vidal BC, “The effect of therapeutic ultrasound on repair of the achilles tendon (tendo calcaneus) of the rat”, Ultrasound Med. Biol. 2001 December; 27(12):1691-6), improved resolution of inflammation (Young SR, Dyson M, “Macrophage responsiveness to therapeutic ultrasound”, Ultrasound Med. Biol. 1990; 16(8):809-16) and increased tissue healing (Young SR, Dyson M, “Effect of therapeutic ultrasound on the healing of full-thickness excised skin lesions”, Ultrasonics. 1990 May; 28(3):175-80), which are all important factors in the wound healing process. Furthermore, research has shown that ultrasound therapy can contribute to increased membrane permeability (Sundaram J, Mellein BR, Mitragotri S, “An experimental and theoretical analysis of ultrasound-induced permeabilization of cell membranes,” Biophys. J. 2003 May; 84(5):3087-101) and accelerated fibrinolysis, a process that prevents blood clots from growing and becoming problematic (Harpaz D, “Ultrasound enhancement of thrombolytic therapy: observations and mechanisms”, Int. J. Cardiovasc Intervent. 2000 June; 3(2):81-89), which collectively improve the tissue regeneration process and healing of wounds. Sonophoresis, a process that increases the absorption of semisolid topical compounds, including medications, into the skin, is an additional significant effect of ultrasound therapy (Tezel A, Paliwal S, Shen Z, Mitragotri S, “Low-frequency ultrasound as a transcutaneous immunization adjuvant”, Vaccine 2005 May 31; 23(29):3800-7).
In general, ultrasound causes the benefits cited above by increasing local blood circulation, increasing vascular wall permeability, promoting protein secretion, promoting enzymatic reactions, accelerating nitric oxide production, promoting angiogenesis (the formation of new blood vessels from pre-existing vessels) and promoting fibroblast proliferation (fibroblasts are a type of cell that play a critical role in wound healing).
Our proprietary technology consists of a small, thin (1 millimeter) transducer that is capable of transmitting ultrasonic acoustic waves onto treatment surfaces with a radius of up to 10 centimeters. This technology allows us to treat wounds by implanting our transducers into a small, portable self-adhering acoustic patch, thereby eliminating the need for technicians and medical personnel to manually administer ultrasound therapy, which should reduce the cost of therapy. Moreover, we believe that the delivery of ultrasound through our portable devices is more effective than existing products, as our technology is better positioned to target the affected areas of the body.
While there are currently a number of products on the market that treat pain through ultrasound therapy, we believe that our products differentiate themselves because they are portable, without the requirement to be plugged into an outlet and they have a frequency of 100kHz (in contrast to other devices, which have a frequency of 1MHz), which means they do not produce heat that can damage tissue. They can therefore be self-administered by the patient without the need to be moved about the treated area by the patient or a clinician, they can be applied for a significantly longer period without the risk of tissue damage and they do not require the use of gel. We are aware of one product under U.S. Food and Drug Administration review and with CE Mark approval that we understand does not need to be plugged in and operates at a frequency of 3 MHz, which its manufacturer claims overcomes the need for movement around the treated area and allows for a longer treatment period. We understand that this product does not generate surface acoustic waves as our products do, which means that the treatment area is generally limited to that of the transducer’s diameter (see the diagram below), that the use of transmission gel is still required and that the transducer thickness is significantly greater than ours (approximately 1.5cm). We are also aware of a small clinical study, for which results were reported in August 2013, in which a small ultrasound device showed positive results in the treatment of venous ulcers, a type of chronic wound. Based upon currently available information about this device, we believe it will be at least five years before this device is available on the market. We understand that this product also does not generate surface acoustic waves, as our products do, and would likely be heavier and thicker than our products. However, given the early stage of development of this potential device, we cannot say with certainty how our products would compare.
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Traditional ultrasound device and our portable ultrasound patch-based device and a comparison of their energy distribution, where the X-axis represents treatment surface and the Y-axis represents ultrasound energy penetration depth within tissue.
In a comparison of a traditional ultrasound device and our portable ultrasound patch-based device, the bulk wave conventional ultrasound machines with handheld transducers distribute the energy deeply into the body, as shown above in diagram (A) on the left. In comparison, our device distributes the energy on the surface, as shown in diagram (B), thereby greatly increasing the treatment area. Our transducers may also be incorporated into treatment patches, including patches that are designed to deliver medicine and other compounds through the skin. The generation and delivery of low frequency ultrasound over a period of time to a specific area has been termed “targeted slow-release ultrasound”. We believe that this delivery method of ultrasound may be comparable to that of slow release medication in the pharmaceutical industry. This “targeted slow-release” capability is intended to allow for more frequent targeting of the intended treatment area and thus may result in a more effective therapeutic response.
Our Products
WoundShield and NanoVibronix NPWT
WoundShield
Our WoundShield product is intended to treat acute and chronic wounds with a disposable treatment patch that delivers localized therapeutic low frequency ultrasound. The WoundShield patch has two configurations: one that is placed adjacent to the wound and another, called the instillation patch, that is placed on the wound to enable instillation through sonophoresis, a process that increases the absorption of semisolid topical compounds, including medications, into the skin. Based on studies conducted by BIO-EC Microbiology Laboratory and Rosenblum, we believe that our WoundShield product possesses significant potential for the treatment of, among other things, diabetic foot ulcers and burns (Gasser P, Study Report delivered by BIO-EC Microbiology Laboratory, Dec 2007, which we ordered, paid for, and provided devices for; Rosenblum J, “Surface Acoustic Wave Patch Diathermy Generates Healing In Hard To Heal Wounds,” European Wound Management Association 2011, for which we supplied devices but had no further involvement).
Picture of WoundShield Driver and Instillation Patch
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WoundShield delivers surface acoustic waves to the location of the wound. Surface acoustic waves move laterally across the surface of the wound, which enables the transfer of the acoustic energy of the waves along the entire wound surface in a continuous and consistent mode, providing access to the waves’ benefits for a longer treatment period than conventional ultrasound without the need for supervision or a treatment session by a clinician.
WoundShield has been found to have a positive effect on the epithelialization (healing by the growth of epithelial cells) of diabetic wounds, as well as on the stimulation of the precursors of dermal and epidermal (skin) growth. As such, it is a useful adjunct to wound care by increasing dermal and epidermal growth, including glycosaminoglycans, or GAGs (which bind to extracellular proteins like collagen, fibronectin, laminin, etc. and retain considerable amounts of water, thus preserving the skin structure) as well as the amount of collagen (a protein that helps skin heal) and decreasing the number of cells in mitosis (a type of cell division) (Gasser P, Study Report delivered by BIO-EC Microbiology Laboratory, Dec 2007, which we ordered, paid for, and provided devices for; Rosenblum J, “Surface Acoustic Wave Patch Diathermy Generates Healing In Hard To Heal Wounds,” European Wound Management Association 2011, for which we supplied devices but had no further involvement). In addition, the WoundShield instillation patch allows for administration of therapeutic agents into the wound area through a sonophoresis effect.
Many key processes in wound healing are dependent upon an adequate supply of oxygen. Diabetic foot ulcers are particularly in need of an adequate oxygen supply because the disease often results from poor perfusion (blood flow) and decreased oxygen tension. Oxygen is also important for the immune system to ensure bacterial killing, synthesis of collagen, fibroblast proliferation (fibroblasts are a type of cell that play a critical role in wound healing), oxidative (taking place in the presence of oxygen) pathways for adenosine triphosphate, or ATP, formation (ATP transports chemical energy within cells for metabolism) and the nitric oxide dependent signaling pathways. It is generally believed that a lack of available oxygen is a basic contributing factor in the perpetuation of these wounds. Recently, wound healing experts have developed a technique of perfusing ischemic wounds (which occur when blood flow is blocked) with hyper-oxygenated saline, while the wound is being treated with ultrasound, also known as sonication. This localized oxygenation therapy has many advantages over the use of hyperbaric chambers (large chambers in which the oxygen pressure is above normal), a common method for delivering oxygen to wounds, as it is more cost-effective, can be done at the patient’s bedside and can be administered more frequently. The WoundShield instillation patch was tested as a potential ultrasound technology for this localized oxygen therapy and its performance exceeded the performance of the other ultrasound technologies tested. In one study (Morykwas M, “Oxygen Therapy with Surface Acoustic Waveform Sonication,” European Wound Management Association 2011; we supplied devices for this study, but had no further involvement with it), oxygen sensors were placed in the wound bed to directly measure partial pressure of oxygen in an ischemic wound bed on a pig. The wound was perfused with hyperbaric oxygen and sonicated using the WoundShield instillation patch. With surface acoustic wave ultrasound technology, tissue oxygen levels (partial pressure of oxygen in the blood, or PaO2) were raised from a range of 20 mmHg (millimeters of mercury) to 60 mmHg in peripheral (periwound) areas, a 3 centimeter distance away from the transducer, and from 40 mmHg to greater than 100 mmHg in the central wound bed lying below the WoundShield instillation patch (see table below). The results of this study illustrated that the WoundShield instillation patch allowed oxygen to directly enter into the wound. The direct entry of the oxygen increased the amount of oxygen reaching the wound, which has been shown to advance the healing process. In addition, we believe that WoundShield’s small size, lower cost and ease of use makes localized oxygen treatment commercially viable.
In 2012, results were published of a human feasibility trial for the WoundShield instillation patch that was performed at Duke University in North Carolina. Seven patients were treated with the WoundShield instillation patch for their wounds and average tissue oxygen levels (PaO2) increased by an average of 58% over baseline (Covington S, “Ultrasound-Mediated Oxygen Delivery to Lower Extremity Wounds,” Wounds 2012; 24(8)). We supplied devices for this trial, but had no further involvement with it. Based upon the results of this trial, we are planning a series of clinical trials with an end point claim that our WoundShield product enhances perfusion in chronic wounds.
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NanoVibronix NPWT
NanoVibronix NPWT is a small, lightweight pump that provides for enhanced patient mobility through negative pressure wound therapy. Negative pressure wound therapy is a topical treatment intended to promote healing in acute and chronic wounds affected by conditions including diabetes, arterial insufficiency (a lack of enough blood flow through the arteries) and venous insufficiency (impaired blood flow through the veins). Negative pressure wound therapy promotes wound healing by delivering controlled and regulated negative pressure (a vacuum) to the wound bed. This distributed negative pressure helps draw wound edges together, removes infectious materials and actively promotes granulation at the cellular level. The vacuum system of NanoVibronix NPWT provides drainage for open cavity wounds, which promotes healing in acute or chronic wounds and severe burns, and allows for infected wound exudate to be disposed of safely without cross contamination. Negative pressure wound therapy is an accepted standard of care for wound treatment and carries favorable reimbursement coding.
Picture of NanoVibronix NPWT
Integrated WoundShield and NanoVibronix NPWT Product
While we are currently developing and marketing WoundShield and NanoVibronix NPWT as separate products, we intend to develop and market a new product that integrates the two. We anticipate that the integration of the WoundShield ultrasound technology and the NanoVibronix NPWT platform will create a product that provides the benefits of both negative pressure wound therapy and ultrasound therapy. We believe that this new device will be very attractive due its ability to deliver multiple methods of wound therapy in one device. This product, however, will require separate approval by the U.S. Food and Drug Administration. To secure early approval for this product, we intend to design a clinical trial that is similar to the clinical trials being designed for WoundShield that focus on enhancing perfusion in chronic wounds. We anticipate that the integrated WoundShield and NanoVibronix NPWT product could be developed and submitted for U.S. Food and Drug Administration approval in the fourth quarter of 2014.
Market for Wound-Healing Devices
The global wound care device market is continuously growing and expected to reach $20.3 billion by 2015 (“Anticipated market in 2015, Wound Care Products: A Global Strategic Business Report,” September 2011). In addition, the negative pressure wound therapy market is expanding, in light of recent approvals in Japan and a growing diabetes patient pool and currently is estimated at approximately $2 billion (“Negative Pressure Wound Therapy Market to 2017,” GBI Research , June 2012).
According to a report entitled “Advances in Wound Closure Technology” by Frost and Sullivan (2005), approximately 25% of all patients with diabetes develop a foot or leg ulceration at some time during the course of their disease. Some 3.5 million individuals globally suffer from diabetes related foot or leg ulcerations each year. In addition, according to the National Hospital Ambulatory Medical Survey (2000-2004), approximately 500,000 patients receive medical treatment annually for burn injuries in the U.S., with the global number estimated at 1 million. There are also policy-based factors that may increase the size of the wound care market. For example, the Commonwealth of Massachusetts announced a policy not to pay for patients who develop Grade 3 or 4 pressure ulcers acquired in a healthcare facility. We anticipate that these types of decisions will be made on a more widespread basis, which may create a large market opportunity for wound care products, including WoundShield. Furthermore, in 2009, the Centers for Medicare and Medicaid Services announced that they would stop reimbursements for treatment of certain complications that they believed were preventable with proper care. One such complication was surgical site infections after certain elective procedures, including some orthopedic surgeries and bariatric surgery. We believe that such developments incentivize medical care providers to invest in reducing the risk of infection through the use of wound care products, including WoundShield and our planned NanoVibronix NPWT product with WoundShield technology.
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Competition for WoundShield and NanoVibronix NPWT
The market for advanced wound care includes a large number of competitors, such as Kinetic Concepts, Inc., or KCI, Smith and Nephew plc and Convatec Inc., all of whom market wound-healing medical devices. Due to their size, in general these companies may have significant advantages over us. These competitors have their own distribution networks for their products, which gives them an advantage over us in reaching potential customers. In addition, they are vertically-integrated, which may allow them to maximize efficiencies that we cannot achieve with our third-party suppliers and distributors. Finally, because of their significantly greater resources, they could potentially choose to focus on research and development of technology similar to ours, more than we are able to. In general, we believe that these competitors have, and will continue to have, substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do. However, we believe that our products differentiate us from these competitors, and we will be competitive on the basis of our advantageous technology.
At present, ultrasound treatment for wounds is limited only to wound debridement (removal of damaged tissue or foreign objects from a wound) and such products are marketed by Misonix Inc., which produces SonicOne products, and Celleration Inc., which produces the MIST Therapy System. Due to their size, in general these companies may have the same advantages over us discussed with respect to our competitors in the paragpraph above. However, both of these ultrasound devices are indicated for use only in medical clinics and require an operator to deliver their treatment, thus limiting their use and application. The MIST Therapy System is a non-contact ultrasound device that delivers ultrasound through a mist that is applied directly on the wound.
We believe that these therapies are less advantageous than WoundShield because they require an operator to deliver the treatment and the removal of bandages to target the wound bed. In contrast, the WoundShield patch sits on normal skin bordering the open wound and no manipulation of the wound bandage is required. Moreover, WoundShield can be self-administered, without an operator, in both clinics and home settings. We also believe that WoundShield will be able to provide superior wound care therapy at a lower price than the existing products being used by medical practitioners. As such, we believe that facilities that are reimbursed based upon diagnosis-related groups will be more inclined to adopt WoundShield because it will provide the same therapeutic results at a significantly lower cost than traditional ultrasound therapies.
We are also aware of a small clinical study, for which results were reported in August 2013, in which a small ultrasound device showed positive results in the treatment of venous ulcers, a type of chronic wound. Based upon currently available information about this device, we believe it will be at least five years before this device is available on the market. We understand that this product does not generate surface acoustic waves as our products do, which means that the treatment area is generally limited to that of the transducer’s diameter. We believe our products would have certain other advantages over this potential device, if developed, including that our products weigh less and are thinner. However, given the early stage of development of this potential device, we cannot say with certainty how our products would compare.
The most common method of oxygen administration for wound healing is hyperbaric oxygen therapy, especially to treat specific ulcerations in diabetic patients. Hyperbaric oxygen therapy has been shown to increase vascular endothelial growth factor expression, which measures the creation of new blood vessels (Fok TC, at el, "Hyperbaric oxygen results in increased vascular endothelial growth factor (VEGF) protein expression in rabbit calvarial critical-sized defects", Schulich School of Medicine and Dentistry, University of Western Ontario, Canada). The activation of endothelial cells by VEGF sets in motion a series of steps toward the creation of new blood vessels (J Lewis et al, National Cancer Institute, Understanding Cancer and Related Topics, Understanding Angiogenesis). We believe that the WoundShield instillation patch, which can be used as an oxygen instillation system, will be complementary to, or in some cases an alternative, to the use of hyperbaric chamber therapy. This complementary treatment option will allow the treating physician greater therapeutic versatility in treating wounds. For a certain populace of patients, we believe that the WoundShield instillation patch could provide physicians with an alternative to hyperbaric oxygen therapy because it provides the same benefits as hyperbaric oxygen therapy at a lower cost to the patient. There are a number of competitors in the hyperbaric chamber therapy market, including over twelve companies in the U.S. Due to their size, in general these companies may have the same advantages over us discussed with respect to our competitors in the first paragpraph of this section. However, we believe that the WoundShield instillation patch possesses certain advantages over the existing hyperbaric chamber therapy, including lower cost and greater ease of use. In addition, we do not believe that the WoundShield instillation patch will necessarily compete with hyperbaric chamber therapy, but rather will often complement such therapy.
While we believe that WoundShield is well positioned to capture a share of the wound care market, WoundShield may be unable to achieve its anticipated place in the wound care market due to a number of factors, including, but not limited to, an inability to obtain the approval of the U.S. Food and Drug Administration, its failure to treat wounds for which it is indicated and its failure to be adopted by health care practitioners and facilities or patients because of its status as a new product in a market that relies on patient-focused initiative to treat wounds.
In the negative pressure wound therapy market, in 2010, Kinetic Concepts, Inc. possessed a 74% global market share. Smith & Nephew plc was the only major company at that time to compete with Kinetic Concepts, Inc. However, due to the expiration of Kinetic Concepts, Inc.’s patents for negative pressure technology, additional companies such as Medela, Talley Group Limited and Mölnlycke Health Care have entered this market and now offer competing products in the U.S. and abroad. It is predicted that Kinetic Concepts, Inc.’s global market share will decline as more companies enter the negative pressure market (“Negative Pressure Wound Therapy Market to 2017,” GBI Research , June 2012). While the current negative pressure wound therapy market contains both established companies and a growing number of smaller competitors, we believe NanoVibronix NPWT will be able to establish itself in the market due to its competitive pricing and the fact that all of the product’s parts that come in contact with wound exudates are disposable. However, as more negative pressure wound therapy pumps are marketed, it is possible that NanoVibronix NPWT will be unable to compete against more competitively priced alternatives.
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In addition, we believe that there currently is no product in the negative pressure wound therapy market similar to the anticipated integrated WoundShield and NanoVibronix NPWT product, which we believe should be able to provide both negative pressure therapy and the benefits of ultrasound therapy. However, we note that because this integrated product is still in its early stages, its anticipated success is dependent upon a number of factors, including WoundShield obtaining U.S. Food and Drug Administration approval and the ability for the integrated product to be commercialized prior to the commercialization of any similar products by our competitors.
Regulatory Strategy
For a general discussion of the U.S. Food and Drug Administration approval process with respect to our products, and regulation of our products in general, see “–Government Regulation” below.
Our general regulatory strategy for our WoundShield products is focused on seeking U.S. Food and Drug Administration approval for our products for a variety of indications. We received 510(k) clearance from the U.S. Food and Drug Administration to market NanoVibronix NPWT in the U.S. in August 2012. Such clearance is for patients who would benefit from a suction device (negative pressure to help promote wound healing by removing fluids including irrigation and body fluids, wound exudates and infectious materials). Examples of appropriate wound types include diabetic/neuropathic ulcers, pressure ulcers, chronic wounds, acute wounds, dehisced wounds, partial-burns, and flaps and grafts.
WoundShield obtained CE Mark approval in November 2012 for use in wound healing. Following preliminary clinical studies that demonstrated WoundShield’s ability to enhance blood perfusion, we plan to design a clinical trial for WoundShield with an end point of enhanced perfusion in chronic wounds. We believe that this trial will take approximately six months. We are finalizing the protocol for this study, which we anticipate will commence before the end of the year. We intend to coordinate this trial with the Centers for Medicare and Medicaid Services, private insurers and the U.S. Food and Drug Administration to insure that the data generated will be adequate to obtain U.S. Food and Drug Administration approval and reimbursement when used in the outpatient setting. We believe that seeking U.S. Food and Drug Administration approval for an indication limited to enhancing perfusion in chronic wounds will require less complicated clinical trials than if we were to seek approval for other indications, such as wound healing, which in turn will shorten the time necessary to commercialize WoundShield.
Following U.S. Food and Drug Administration approval for WoundShield, and once the product is developed, we intend to submit a second U.S. Food and Drug Administration application for the integrated WoundShield and NanoVibronix NPWT product. Similar to our clinical trials for WoundShield, we intend to structure these trials with an end point claim of enhanced perfusion in chronic wounds. We believe that the approval process for the integrated product should be the shorter 510(k) clearance, because both components will already have U.S. Food and Drug Administration approval.
We also intend to begin clinical studies that compare localized surface acoustic wave-enhanced oxygen therapy for wounds versus either the current standard of care for such wounds or treatment with the hyperbaric chamber for ischemic wounds. For these studies, we intend to coordinate with the U.S. Food and Drug Administration to insure that the data generated will be adequate to obtain U.S. Food and Drug Administration approval for the WoundShield instillation patch and lead to reimbursement of this product. Once we have obtained U.S. Food and Drug Administration approval for certain limited indications for our WoundShield products, we intend to seek approval for a wider range of indications, including wound healing.
Sales and Marketing
In January 2013, we entered into an exclusive distribution agreement for the distribution of NanoVibronix NPWT in the U.S. The distributor has begun marketing NanoVibronix NPWT through participating in product presentations at conferences related to wound therapy and targeting distributors who are selling or renting negative pressure wound therapy equipment to clinics and hospitals.
We have sold limited numbers of our WoundShield products through our website and our distributor in Italy. Following completion of this offering, we intend to aggressively market WoundShield in Europe and pursue the necessary approvals to commence marketing in the U.S.
Clinical Trials
Negative pressure wound treatment is not a novel technology and already has a reimbursement code. Therefore, clinical trials with respect to NanoVibronix NPWT are not needed.
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With respect to WoundShield, to date, we have conducted the following evaluation studies:
Purpose | Doctor/Location |
Time,
subjects |
Objectives | Results | ||||
Clinical evaluation
Physician initiated |
Dr. J. Rosenblum, Shaare Zedek Medical Center |
2008
8 patients |
To evaluate novel technology on wound healing in diabetic foot ulcers.
|
Therapy showed significant changes in wound, wound size was reduced, patients felt less pain, necrotic tissue was less adhesive, necrotic tissue decreased in size. | ||||
Clinical evaluation
Physician initiated |
Dr. J. Rosenblum, Shaare Zedek Medical Center |
2010
8 patients |
To evaluate novel technology on wound healing in diabetic foot ulcers.
|
The device had a positive effect on both epitheliazation of diabetic wounds as and stimulating the precursors of dermal and epidermal growth. | ||||
Clinical evaluation
Physician initiated |
Dr. S. Covington |
2010
7 patients |
The study aimed to determine if hyper oxygenated saline delivered by surface acoustic waves improves tissue oxygenation in lower extremity wounds.
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Surface acoustic wave technology in conjunction with oxygenated saline can increase interstitial oxygen in wound bed. This trial to validate proof of concept was put on hold due to financial constraints. |
If we are able to obtain sufficient funding, we anticipate conducting the following clinical trials:
Trial | Place | Start Date/Timing | Objectives | |||
Woundshield ultrasound patch enhances perfusion of blood 30 patient trial |
University of North Carolina (Rex Hospital) |
March 2014
6-month duration |
Safety and efficacy of Woundshield in enhancing blood flow and oxygenation of wounds. | |||
Woundshield ultrasound patch enhances wound healing 200 patient trial |
To be determined |
To be determined |
Safety and efficacy of WoundShield in wound healing. | |||
Woundshield ultrasound patch combined with NanoVibronix NPWT 200 patient trial |
To be determined |
To be determined |
Safety and efficacy of combination product in enhancing instillation therapy in NanoVibronix NPWT. |
We cannot determine the commencement dates or locations of the second and third trials above until we are certain of funding.
PainShield
PainShield is an ultrasound diathermy device (diathermy is the production of heat in a part of the body by high-frequency electric currents), consisting of a driver unit and a disposable patch, which contains our proprietary therapeutic transducer. It delivers a localized ultrasound effect to treat pain and induce soft tissue healing in a targeted area, while keeping the level of ultrasound energy at a safe and consistent level of 0.4 watts. We believe that PainShield is the smallest and most portable therapeutic ultrasound device on the market and the only product in which the ultrasound transducer is integrated in a therapeutic disposable application patch.
The existing ultrasound therapy devices being used for pain reduction are primarily large devices used exclusively by clinicians in medical settings. PainShield is able to deliver ultrasound therapy without being located in a health care facility or clinic because it is portable, due to it being lightweight and battery operated. Because it is patch based and easy to apply, PainShield does not require medical personnel to apply ultrasound therapy to the patient. The patient benefits include its ease of application and use, faster recovery time, high compliance, safety and efficacy (Adahan M, et al, “A Sound Solution to Tendonitis: Healing Tendon Tears With a Novel Low-Intensity, Low-Frequency Surface Acoustic Ultrasound Patch,” American Academy of Physical Medicine and Rehabilitation Vol. 2 , 685-687, July 2010). PainShield can be used by patients at home or work or in clinical setting and can be used even while the patient is sleeping. Its range of applications includes acute and chronic pain reduction and anti-inflammatory treatment.
Picture of PainShield with Patch
PainShield is used to treat tendon disease and trigeminal neuralgia (a chronic pain condition that affects the trigeminal or 5th cranial nerve, one of the most widely distributed nerves in the head); previously, the therapeutic options for these disorders have been very limited. PainShield has also been used to treat pelvic and abdominal pain. To date, the only treatment options for these conditions are pain medication and surgery.
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Market for PainShield
Pain is one of the most common conditions that hinder quality of life of vast populations of patients on a regular basis. Pain-related complaints are the most common reason patients seek treatment from physicians (Prince V, “Pain Management in Patients with Substance-Use Disorders,” Pain Management, PSAP-VII, Chronic Illnesses). According to Bonica’s Management of Pain (2001), a work considered current in the industry based on available industry data, and Landro L, “New Ways to Treat Pain: Tricking the Brain, Blocking the Nerves in Patients When all Else Has Failed,” Wall Street Journal, May 11, 2010, approximately 25% of the U.S. population, 75 million people, suffer from chronic pain. We estimate that approximately 150 million individuals globally suffer from chronic pain. Studies have shown that low-frequency ultrasound treatment has yielded positive results for a variety of indications, including tendon injuries and short-term pain relief (Warden SJ, “A new direction for ultrasound therapy in sports medicine,” Sports Med. 2003; 33 (2):95-107), chronic low back pain (Ansari NN, Ebadi S, Talebian S, Naghdi S, Mazaheri H, Olyaei G, Jalaie SA, “Randomized, single blind placebo controlled clinical trial on the effect of continuous ultrasound on low back pain,” Electromyogr Clin Neurophysiol. 2006 Nov; 46(6):329-36) and sinusitis (Ansari NN, Naghdi S, Farhadi M, Jalaie S, “A preliminary study into the effect of low-intensity pulsed ultrasound on chronic maxillary and frontal sinusitis,” Physiother Theory Pract. 2007 Jul-Aug; 23(4):211-8). We believe that PainShield’s technology, portability and ease of use may result in it becoming an attractive product in the pain management and therapy field.
Competition
There are numerous products and approaches currently utilized to treat chronic pain. The pharmacological approach, which may be the most common, focuses on drug-related treatments. Alternatively, there are a large number of non-pharmacological pain treatment modalities available, such as ultrasound, transcutaneous electrical nerve stimulation, or TENS, laser therapy and pulsed electromagnetic treatment. In addition, there are some technologies and devices in the market that utilize low frequency ultrasound or patch technology. Many patients are initially prescribed anti-pain medication; however, ongoing use of drugs may cause substantial side effects and lead to addiction. Therefore, patients and clinicians have shown great interest in alternative pain therapy using medical devices that do not carry these side effects.
The currently available ultrasound treatments for chronic pain have generally been accepted by the medical community as standard treatment for pain management. However, the traditional ultrasound treatments, such as those manufactured or distributed by Mettler Electronics Corp, Metron USA and Zimmer MedizinSysteme, are stationary devices found only in clinics and other health care facilities that need to be administered to patients by health care professionals. We are aware of three companies that market smaller ultrasound devices capable of certain self-administered use for the treatment of pain: Koalaty Products, Inc., Sun-Rain System Corp. and PhysioTEC. These devices generally function in the same manner, at the same frequency and with the same administration and safety requirements and limitations as traditional, larger ultrasound devices. We are also aware of one product under U.S. Food and Drug Administration review and with CE Mark approval, marketed by ZetrOZ, Inc., that we understand may eliminate certain of these requirements and limitations, namely the requirement to be plugged in, the need for movement around the treated area and the relatively short safe treatment period. However, like traditional ultrasound, we understand that this product does not generate surface acoustic waves as our products do, which means that the treatment area is generally limited to that of the transducer’s diameter, that the use of transmission gel is still required and that the transducer thickness is significantly greater than ours (approximately 1.5cm). In addition, there are other patch-based methods of pain treatment, such as TENS therapy. TENS therapy is generally not supported by widespread clinical evidence of its efficacy. In addition, TENS therapy may be painful and irritating for the patient due to the muscle contractions resulting from the electrical pulses. PainShield combines the efficacy of ultrasound treatment for pain with the ease of use and portability of a patch-based system. PainShield also may be self-administered by the patient, including while the patient is sleeping. However, if we are unable to obtain widespread insurance coverage and reimbursement for PainShield, its acceptance as a pain management treatment would likely be hindered, as patients may be reluctant to pay for the product out-of-pocket.
Regulatory Strategy
PainShield received 510(k) clearance from the U.S. Food and Drug Administration in October 2008 for treatment of selected medical conditions such as relief of pain, muscle spasms and joint contraction. PainShield received CE Mark approval in July 2008 and was also approved for sale by the Israeli Ministry of Health in 2010. We have a Canadian medical device license for PainShield, a certificate allowing us to sell PainShield in Australia, and we are able to sell PainShield in India and Ecuador based on our CE Mark. In addition, our distributors in Korea and Chile have applied for approval to sell PainShield, which approvals we believe we will receive within a few months.
In the U.S., PainShield falls under the diathermy classification for the treatment of pain for initial reimbursement purposes. The permitted reimbursement codes can be used in the outpatient supervised medical setting. We intend to coordinate with the Centers for Medicare and Medicaid Services and private insurers so that reimbursement can be extended to cover the administration of PainShield outside of health care facilities and clinics. In addition, we intend to conduct clinical trials in order to effectively market PainShield for a larger range of indications.
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Sales and Marketing
PainShield was introduced in 2009 as a treatment for pain and other clinical problems, such as tendonitis, sports injuries, pelvic pain and neurologic pain and we have sold approximately 1,000 units and 6,000 treatment patches since its introduction. We have entered into distribution agreements in North America, Europe, Asia, the Middle East and Australia and New Zealand for the distribution of PainShield. We intend to seek additional distribution opportunities in Europe, East Asia and South America. In addition, we sell PainShield directly to patients through our website.
Clinical Trials
To date, we have conducted the clinical trials set forth below:
Purpose | Doctor/Location |
Time, subjects |
Objectives | Results | ||||
A sound solution for Trigerminal Neuralgia
Physician initiated |
Dr. Ch. Adahan Shiba medical Center |
2009
15 patients |
· Reduction in pain · Reduction in disability · Improvement of function and quality of life · Accelerating of healing |
73% of the subjects experienced complete or near complete relief. | ||||
Randomized control trial examining the efficacy of low intensity low frequency Surface Acoustic wave ultrasound in trigerminal neuralgia pain
For Ph.D., Funded by Israeli Ministry of Health |
Dr. M. Zwecker
Chaim Sheba Medical Center, Tel Hashomer, Israel |
2012-2012
19 patients |
· Reduction in pain · Reduction in disability · Improvement of function and quality of life · Accelerating of healing |
In conclusion this study supports the hypothesis that the application of Low Intensity Low Frequency Surface Acoustic Wave Ultrasound (LILF/SAW) may be associated with a clinically significant reduction of pain severity among patients suffering from trigerminal neuralgia disease. | ||||
Treating Rutgers university athletic injuries with bandaid sized ultrasound unit Painshield
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R. Monaco, G. Sherman, Rutgers University Athletic, Rutgers, New Jersey |
2011
40 patients |
· To assess the pain, functional capacity and discomfort of the subject · To assess the subject’s quality of life · To assess the injury status · To assess the efficacy of the treatment · To assess compliance factors
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Preliminary results: Active group: 70% had improvement, 30% no change Sham group: 70% no change, 30% had improvement This is a really good indication of the effectiveness of the device.
Lack of funding for statistical analysis has stopped this trial prior to fulfillment. |
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Reduction of chronic abdominal and pelvic pain, urological and GI symptoms using wearable device delivering low frequency ultrasound |
D. Wiseman, Synechion Institute for Pelvic Pain |
2011
19 patients |
· To assess the efficacy of Painshield for pelvic and related pain | Improvement in pain related symptoms noted for all symptoms. |
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If we are able to obtain sufficient funding, we anticipate conducting the following clinical trials:
Trial | Place | Start Date/Timing | Objectives | |||
PainShield for Trigeminal Neuralgia 80 patient trial | To be determined | To be determined | Safety and Efficacy of PainShield in Trigeminal Neuralgia | |||
PainShield for Pelvic Pain 200 patient trial |
To be determined | To be determined | Safety and Efficiacy of PainShield in Chronic Pelvic Pain |
UroShield
UroShield is intended to prevent biofilm, increase antibiotic efficacy in the catheter lumen and decrease pain and discomfort associated with urinary catheter use. It is designed to be used with any type of indwelling urinary catheter regardless of the material or coating. We believe UroShield is the first medical device on the market that attempts to simultaneously address all of the aforementioned catheter-related issues. UroShield is similar in design to WoundShield and PainShield, in that it uses a driver unit that produces low frequency, low intensity ultrasound. The driver unit connects to a disposable transducer that is clipped onto the external portion of the catheter to deliver ultrasound therapy to all catheter surfaces as well as the tissue surrounding the catheter.
Picture of UroShield with actuator
The UroShield system has the following advantageous effects:
· |
Prevention or Reduction of Biofilm . The low frequency ultrasound generated by UroShield has been shown to decrease adherence of bacteria to catheter surfaces, thereby reducing biofilm. Biofilm is the complex matrix required for bacteria to grow and cause infection. See the discussion of our Heidelberg 1 trial below. |
· | Decreased Catheter Associated Pain and Discomfort . We believe that UroShield creates an acoustic envelope on the surfaces of the catheter, which decreases friction and tissue trauma, pain and discomfort caused by the catheter. In addition, the tissue in contact with the catheter remains healthier and less traumatized as a result of the application of low frequency and low intensity ultrasound (Tenke P, “The effectiveness of acoustic energy induced by UroShield in the prevention of bacteriuria and the reduction of patients’ complaints related to long-term indwelling urinary catheters,” 26th Annual Congress of the European Association of Urology (EAU) Congress, Vienna, March 2011; we supplied devices for this study and paid for electron microscopy analysis, but had no further involvement with it). |
· | Acoustically Augmented Antibiotic Therapy. Antibiotic resistance in biofilm bacteria is a well-known phenomenon. Although it has been known that ultrasound can increase antibiotic efficacy in in-vitro models, we do not believe that there has been a practical ultrasound-based medical device that was able to augment antibiotic efficacy in the clinical setting. UroShield technology has been shown to eradicate biofilm-residing bacteria by greater than 85% when applied simultaneously with an antibiotic in three clinically relevant species, escherichia coli, staphylococcus epidermidis and pseudomonas aeruginosa (Banin E, et al., “Surface acoustic waves increase the susceptibility of Pseudomonas aeruginosa biofilms to antibiotic treatment,” Biofouling, August 2011; we supplied devices for this study, but had no further involvement with it). |
· | Preservation of the Patency of Catheters. We believe that low frequency ultrasound applied to catheters will add an anti-clogging effect and will preserve patency of catheters. This effect is achieved by ultrasound waves creating an acoustic layer on the inner lumen of the urinary catheter, thereby preventing adherence of biological material and bilofilm formation. We believe that this anti-clogging benefit will help prevent local infection and sepsis secondary to catheter obstruction. |
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UroShield has undergone a number of clinical trials. The Heidelberg 1 trial, which we sponsored, was a 22 patient randomized, double blind, sham-controlled, independent trial that tested UroShield’s safety and ability to prevent biofilm in patients with an indwelling Foley catheter. The trial demonstrated that UroShield prevented biofilm in all patients with the active device as compared to biofilm being found in seven of eleven of the control patients. In addition, there was a marked decrease in pain, discomfort and spasm in the active UroShield patients, as evidenced by a statistically significant decrease in the requirement for the medications required to treat urinary catheter associated pain and discomfort (Ikinger U, “Biofilm Prevention by Surface Acoustic Nanowaves: A New Approach to Urinary Tract Infections?,” 25th World Congress of Endourology and SWL, Cancun, Mexico, October 2007).
In a subsequent physician-sponsored trial known as Heidelberg 2, 40 patients who underwent radical prostatectomies were divided into two groups, with the active group receiving one intra-operative dose of antibiotics and UroShield and the control group receiving one intra-operative dose of antibiotics and then five subsequent doses over three days. At the end of the trial, the control group had four cases of bacteruria, as compared to one in the active group. In a third trial, a physician-sponsored open label trial, ten patients who received emergency placement of a urinary catheter due to acute obstruction were given a UroShield device and followed with regard to their pain, discomfort, spasm and overall well-being. Within 24 hours, all patients showed improvement and increased toleration of the catheter (Zillich S., Ikinger U, “Biofilmprävention durch akustische Nanowellen: Ein neuer Aspekt bei katheterassoziierten Harnwegsinfektionen?,” Gesellschaft für Urologie, Heilbronn, Germany, May 2008). We supplied devices for this trial, but had no further involvement with it.
Market for UroShield
According to Urological Catheters – A Global Strategic Business Report, Global Industry Analysis Inc. 2003, over 55 million indwelling urinary catheters are sold annually worldwide. In addition, as of October 1, 2008, Medicare stopped authorizing its payment to hospitals in which patients have developed a catheter-associated urinary tract infection that was not present on admission. This provides hospitals in the U.S. with a substantial financial incentive to reduce the occurrence of such infections through the use of products such as UroShield, which help prevent infections hospitals would otherwise have to treat without reimbursement. In addition, it has been noted that the Centers for Medicare & Medicaid Services may fine hospitals in the future when their patients develop catheter acquired urinary tract infection, which will likely increase the incentive of hospitals to invest in technologies that may prevent this complication (Brown J, et al. “Never Events: Not Every Hospital-Acquired Infection Is Preventable, Clinical Infectious Diseases, 2009, 49 (5)).
Competition
Several types of products have been introduced to address the growing problem of catheter-acquired infection and biofilm formation on catheter surfaces. Manufacturers offer antibiotic-coated and antiseptic-impregnated catheters. In addition, manufacturers have produced silver-coated catheters, which have been shown in small studies to delay bacteruria for about two to four days. However, larger studies did not corroborate this result; on the contrary, silver hydrogel was associated with overgrowth of gram positive bacteria in the urine (Riley DK, Classen DC, “A large randomized clinical trial of a silver-impregnated urinary catheter: lack of efficacy and staphylococcal superinfection,” Am. J. Med. 1995 April; 98(4):349-56).
UroShield has been designed to be added to any type of catheter, including Foley catheters and silver-coated catheters, to improve a catheter’s infection prevention performance. UroShield is not intended to replace any existing products or technologies, but instead is intended to assist these existing products or technologies in preventing catheter-acquired urinary injury and catheter associated complications. UroShield may be unable to achieve its anticipated catheter market share due to a number of factors, including, but not limited to, an inability to obtain approval of the U.S. Food and Drug Administration and failure to be adopted by health care practitioners and facilities because of its status as a new product in the market, without an established niche.
Regulatory Strategy
UroShield received CE Mark approval in September 2007 and was also approved for sale by the Israeli Ministry of Health in 2008. We have a Canadian medical device license for UroShield and we are able to sell UroShield in India and Ecuador based on our CE Mark. In addition, our distributors in Korea and Chile have applied for approval to sell UroShield, which approvals we believe we will receive within a few months.
In the European Union, UroShield has been marketed for the prevention of biofilm, decreased pain and discomfort associated with urinary catheters and increased antibiotic efficacy. In the U.S., we intend to seek clearance from the U.S. Food and Drug Administration through the de novo classification process for UroShield. We submitted our application for 510(k) approval on January 3, 2011. On May 21, 2012, we received a response from the U.S. Food and Drug Administration proposing that the approval go through the de novo route, which will require clinical trials with proposed study protocols to be pre-cleared by the U.S. Food and Drug Administration. We are currently seeking a strategic partner that is active in the urology market to help fund the clinical trials for UroShield to support our U.S. Food and Drug Administration application. We have not made any further submissions to the U.S. Food and Drug Administration related to UroShield.
Sales and Marketing
We are currently seeking a strategic partner that is active in the urology market and would be interested in integrating UroShield into its range of products. We have sold limited numbers of our UroShield products through our website and our distributor in Italy.
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Clinical Trials
To date, we have conducted the clinical trials set forth below:
Purpose | Doctor/Location |
Time, subjects |
Objectives | Results | ||||
To assess the safety of the UroShield
Double Blind, Comparative, Randomized Study for the Safety Evaluation of the UroShield System (HD1) |
Dr. U. Ikinger, Salem Academic Hospital, University of Heidelberg, Germany |
2005-2006
40 patients |
To demonstrate that the use of the UroShield is safe and that the device is well tolerated by the patients and user friendly to the medical staff. Efficacy objectives were to demonstrate that the UroShield helps in prevention of biofilm formation in comparison with the urinary catheter alone, as well as bacteriuria. |
UroShield was both safe and well tolerated. UroShield proved markedly efficacious in prevention of biofilm. Subjects required significantly less medications than the control group for catheter related pain and discomfort. |
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Double Blind, Comparative, Randomized Study for the Safety Evaluation of the UroShield System (HD2 )
Physician initiated |
Dr. U. Ikinger, Salem Academic Hospital, University of Heidelberg, Germany |
2007
40 patients |
To demonstrate that the use of the UroShield is safe and helps in prevention of biofilm formation and UTI in comparison with the urinary catheter alone, as well as decrease antibiotic use. | In this trial, only 1/20 patients in UroShield device (no antibiotics) group developed urinary tract infection compared to 4/20 patients within control group treated with the antibiotic prophylaxis alone. | ||||
The Effect of UroShield on Pain and Discomfort in Patients Released from the Emergency Room with Urinary Catheter Due to Urine Incontinence
Physician initiated |
Shaare Zedek Medical Center Jerusalem, Israel. |
2007
10 patients |
The study aimed to assess the effectiveness of the UroShield in reducing pain and discomfort levels and improve the well-being of the subjects. Efficacy objectives included reduction of pain, spasm, burning and itching sensation levels of the subjects. |
The results demonstrated a reduction in pain, itching, burning and spasm levels. Additionally, the well-being of the subjects showed a significant increase.
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The Use of the UroShield Device in Patients with Indwelling Urinary Catheters
Open labeled, comparative, randomized study |
Dr. Shenfeld Shaare Zedek Medical Center Jerusalem, Israel. |
2007-2009
40 patients |
Patient complaints related to catheter regarding pain according to VAS scale and discomfort according to 0-10 scale Presence of Clinically Significant UTI Presence of Bacteriuria Presence of Biofilm Use of medication
|
UroShield device was effective in reducing postoperative catheter related pain discomfort and bladder spasms. There was also a notable trend towards reduction of bacteriuria. | ||||
Evaluation of the UroShield in urinary and nephrostomies to reduce bacteruria
Physician initiated |
Prof. P.Tenke, Hungary |
2010-2011
26 patients
|
· Pain, disability and QOL · Catheter patency · Bacteriuria / UTI · Hospitalization period · Analgesics and Antibiotics intake |
Showed reduction in pain and significant decrease in bacteriuria rate. |
If we are able to locate a strategic partner or otherwise obtain sufficient funding, we anticipate conducting the following clinical trial:
Trial | Place | Start Date/Timing | Objectives | |||
UroShield FDA trial 80 patient trial | To be determined | To be determined | Safety and efficacy of UroShield in urinary catheter related pain and infection |
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Third Party Reimbursement
We anticipate that sales volumes and prices of the products we commercialize will depend in large part on the availability of coverage and reimbursement from third party payers. Third party payers include governmental programs such as Medicare and Medicaid, private insurance plans and workers’ compensation plans. These third party payers may deny coverage and reimbursement for a product or therapy, in whole or in part, if they determine that the product or therapy was not medically appropriate or necessary. The third party payers also may place limitations on the types of physicians or clinicians that can perform specific types of procedures. In addition, third party payers are increasingly challenging the prices charged for medical products and services. Some third party payers must also pre-approve coverage for new or innovative devices or therapies before they will reimburse healthcare providers who use the products or therapies. Even though a new product may have been approved or cleared by the U.S. Food and Drug Administration for commercial distribution, we may find limited demand for the device until adequate reimbursement has been obtained from governmental and private third party payers.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific product lines and procedures. There can be no assurance that procedures using our products will be considered medically reasonable and necessary for a specific indication, that our products will be considered cost-effective by third party payers, that an adequate level of reimbursement will be available or that the third party payers’ reimbursement policies will not adversely affect our ability to sell our products profitably.
In the U.S., some insured individuals are receiving their medical care through managed care programs, which monitor and often require pre-approval of the services that a member will receive. Some managed care programs are paying their providers on a per capita basis, which puts the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment per member per month, and consequently, may limit the willingness of these providers to use products, including ours.
One of the components in the reimbursement decision by most private insurers and governmental payers, including the Centers for Medicare & Medicaid Services, which administers Medicare, is the assignment of a billing code. Billing codes are used to identify the procedures performed when providers submit claims to third party payers for reimbursement for medical services. They also generally form the basis for payment amounts. We anticipate that our distributors will be responsible for the process for obtaining billing codes for our products.
The initial phase of establishing a professional billing code for a medical service typically includes applying for a Current Procedural Terminology, or CPT, Category III code. This is a tracking code without relative value assigned that allows third party payers to identify and monitor the service as well as establish value if deemed medically necessary. The process includes CPT application submission, clinical discussion with Medical Professional Society CPT advisors as well as American Medical Association CPT Editorial Panel review. A new CPT Category III code will be assigned if the American Medical Association CPT Editorial Panel committee deems it meets the applicable criteria and is appropriate.
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The secondary phase in the CPT billing code process includes the establishment of a permanent CPT Category I code in which relative value is analyzed and established by the American Medical Association. The approval of this code is based on, among other criteria, widespread usage and established clinical efficacy of the medical service.
We believe that the overall escalating costs of medical products and services has led to, and will continue to lead to, increased pressures on the healthcare industry to reduce the costs of products and services. In addition, recent healthcare reform measures, as well as legislative and regulatory initiatives at the federal and state levels, create significant additional uncertainties. There can be no assurance that third party coverage and reimbursement will be available or adequate, or that future legislation, regulation, or reimbursement policies of third party payers will not adversely affect the demand for our products or our ability to sell these products on a profitable basis. The unavailability or inadequacy of third party payer coverage or reimbursement would have a material adverse effect on our business, operating results and financial condition.
The Diagnosis Related Group System, or DRG, is the system of reimbursement that is used in the United States for hospitalized patients as well as patients who are cared for in skilled nursing facilities and long term care facilities. These facilities are not subject to the same reimbursement codes as described above. In the DRG system, each patient admitted to the hospital or facility is assigned a code based on his or her diagnosis. That code is known to be associated with an average hospital stay and the health care facility is reimbursed for the amount of days as defined by the DRG code, regardless of how many days the patient is in the facility. This system gives a strong incentive for these health care facilities to deliver efficient care and to complete the needed treatment as quickly as possible. For example, if the patient has a wound that requires healing before discharge and they succeed in treating the wound in less hospital days than allowed by the DRG code for this diagnosis, the facility will be rewarded by being paid more for more days than the patient was actually in the hospital for. Conversely, if the treatment takes longer, the facility would actually lose income, as they will be paid for the DRG code only. This system serves as a stimulus for these facilities to purchase and utilize devices and technologies that allow more efficient therapy.
PainShield. PainShield is presently reimbursed in the U.S. by many private insurers for use of the ultrasound device in a supervised medical setting and is reimbursed in units of 15 minutes up to an hour a day, 5 hours a week and 20 hours a month. If the device is efficacious in the treatment of the patient’s condition, the treatment period can be extended in some cases for months. Presently, PainShield is typically purchased by a clinic that bills the existing reimbursement codes. PainShield is not reimbursed for therapy in the home setting. Following completion of the offering to which this prospectus relates, we intend to work to obtain reimbursement in the home setting as well as codes that would allow for reimbursement for use of the non-disposable and disposable components of the PainShield device. Our anticipated clinical trials for PainShield would support this effort.
NanoVibronix NPWT. Negative pressure wound therapy is an accepted advanced wound care therapeutic modality and is reimbursable under accepted codes. NanoVibronix NPWT is reimbursable under a code that describes a stationary or portable negative pressure wound therapy electrical pump that provides controlled subatmospheric pressure designed for use with negative pressure wound therapy dressings and canisters to promote wound healing.
WoundShield. We believe that the initial usage of the WoundShield patch will be in the hospital setting. Reimbursement in the hospital setting is governed by the diagnosis-related group system, which does not require specific reimbursement codes. In parallel to introducing the WoundShield device to hospitals, we intend to apply for reimbursement codes for outpatient use. Although obtaining these codes can take two to five years and may require extensive clinical data, we believe that the desirable characteristics of the WoundShield may serve as an incentive to insurance companies to grant these codes more quickly.
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UroShield. We expect UroShield to be used in hospital settings and therefore reimbursed under the diagnosis-related group reimbursement system. In addition, we anticipate that UroShield will initially be purchased privately until a reimbursement code is obtained. However, we believe that if we can empirically demonstrate UroShield’s efficacy in preventing recurrent hospital admission in chronic Foley catheter patients and reducing overall per-patient cost, third party payers may accelerate the reimbursement approval process since the device could reduce their overall per-patient cost.
Research and Development Expenses
During the years ended December 31, 2013 and 2012, we spent approximately $620,000 and $572,000 on research and development activities, respectively.
Intellectual Property
Patents
We believe that our patent portfolio provides us with sufficient protection of our patentable intellectual property. We have six patents registered in the U.S. and three filed applications. Granted U.S. Patent No. 7,393,501 (having the following foreign counter-parts: China ZL03818327.7; Israel 165422; Japan 4504183; India 246351; Australia 2003231892; European Union 1511414 B), “Method, apparatus and system for treating biofilms associated with catheters” and granted U.S. Patent No. 7,829,029 (having the following foreign counter-parts: China ZL200780019732.3 and European Union 1998834), “Acoustic add-on device for biofilm prevention in urinary catheter,” both relate to the use of surface acoustic waves to prevent biofilm formation on indwelling catheters. These granted U.S. patents expire on December 19, 2023 and August 28, 2029, respectively. Granted U.S. Patent No. 7,892,191 (having the following foreign counter-parts: Russia 2419395 and Australia 2005331251), “Nanovibration coating process for medical devices using multi vibration modes of thin piezo element” and U.S Patent Application No. 11/710,616, “System and method for SAW treatment of medical devices,” relate to methods of generating surface acoustic waves on medical device surfaces on both indwelling medical devices and implants to prevent biofilm formation. U.S. Patent No. 7,892,191 will expire on December 19, 2023. U.S. Patent Application No. 11/710,615 (having the following foreign counter-parts: China ZL200780014875.5; applications in India, European Union, Canada and Israel), “System and method for surface acoustic waves treatment of skin,” relates to methods of using surface acoustic waves for treatment of skin for the purpose of wound-healing, reducing infection, pain reduction and cosmetic enhancements. U.S Patent Application No. 13/521,060, “Method for friction reduction in medical tubing and applications using this method,” relates to the use of acoustic lubrication (complex vibrations) to reduce friction between indwelling medical devices and vital tissue.
We also license three patents pursuant to a license agreement with Piezo-Top Ltd and PMG Medica Ltd., U.S. Patent No. 6,454,716 B1, “A system and method for detection of fetal heartbeat,” and U.S. Patent No. 6,964,640 B2, “A system and method for detection of motion,” relate to certain technology related to biofilm prevention for medical purposes, including biofilm prevention in indwelling catheters, biofilm prevention in dialysis and respiratory assist devices and control of bacteria in hospital and outpatient environments by biofilm prevention and the killing of bacteriato. These patents expire on May 23, 2020 and January 22, 2023, respectively. U.S. Patent No. 7,431,892 B2, “Apparatus for sterilizing a liquid with focused acoustic standing waves,” relates to our original work introducing multiple modes of power into an ultrasonic transducer for purpose of sterilizing liquids. This patent has been the genesis of the more practical patents described above. This patent expires on July 29, 2024. See “—License Agreements” below.
We believe the granted patents, patent applications and license agreements (described below) collectively cover our existing products to the extent necessary, and may be useful for protecting our future technology developments. With respect to our NanoVibronix NPWT product, negative wound pressure therapy is an established technology and we believe that our ability to use such technology is not dependent upon or limited by the terms or existence of a particular patent or patents. Nonetheless, we are party to a license agreement related to our negative pressure wound therapy technology, described below. We intend to continue patenting new technology as it is developed, and to actively pursue any infringement of any of our patents.
To date, we are not aware of other companies that have patent rights to a system and method for surface acoustic wave treatment.
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Trademarks
We believe that our product brand names are an important factor in establishing and maintaining brand recognition. We have the following trademark registrations in the U.S.: NanoVibronix®, WoundShield®, PainShield®, UroShield® and “Curing though prevention”®. Generally, the protection afforded for trademarks is perpetual, if they are renewed on a timely basis, if registered, and continue to be used properly as trademarks.
License Agreements
In October 2003, we entered into a license agreement with Piezo-Top Ltd and PMG Medica Ltd, pursuant to which we were granted an exclusive, worldwide license for the duration of the patent life of U.S. Patent No. 6,454,716 B1, U.S. Patent No. 6,964,640 B2 and U.S. Patent No. 7,431,892 B2 (see “—Patents” above). In exchange for the license, we paid Piezo-Top Ltd and PMG Medica Ltd payments of (i) $5,000 each after the first round of investment in us, (ii) $7,500 each after the second round of investment in us, and (iii) $25,000 each after either the third round of investment, the purchase of at least 40% of our stock or our initial public offering. We have made all three of the required payments under this agreement.
In December 2011, we entered into a license agreement with AC Engineering Ltd. for the exclusive license to manufacture, market, sell, lease and distribute AC Engineering Ltd.’s negative pressure wound therapy technology within the U.S. for a term of two years, commencing from the date of the U.S. Food and Drug Administration approval of the negative pressure wound therapy product, which occurred in August 2012. This technology is the basis of our NanoVibronix NPWT product. The license agreement also granted us a non-exclusive license to use AC Engineering Ltd.’s know-how related to the product and to develop modifications and improvements to the product and to integrate the product into our existing products. The term of the license agreement will be extended automatically for an additional three year non-exclusive term if we sell at least 3,500 units of pumps during the first two years of the license agreement, and the term of the license agreement will be extended automatically thereafter for an additional one year non-exclusive term if we sell at least 1,000 units of pumps during the preceding year. We are obligated to pay AC Engineering Ltd. a royalty payment of 5% of gross revenues from the sale of the pumps and $0.70 per canister. If we have not paid AC Engineering Ltd. aggregate royalty payments of at least $150,000 by the end of the initial two year term, we will have to pay the difference.
Government Regulation
U.S. Food and Drug Administration Regulation
Each of our products must be approved or cleared by the U.S. Food and Drug Administration before it is marketed in the U.S. Before and after approval or clearance in the U.S., our product candidates are subject to extensive regulation by the U.S. Food and Drug Administration under the Federal Food, Drug, and Cosmetic Act and/or the Public Health Service Act, as well as by other regulatory bodies. The U.S. Food and Drug Administration regulations govern, among other things, the development, testing, manufacturing, labeling, safety, storage, record-keeping, market clearance or approval, advertising and promotion, import and export, marketing and sales, and distribution of medical devices and pharmaceutical products. Two of our products, PainShield and NanoVibronix NPWT, have already obtained 510(k) marketing approval by the U.S. Food and Drug Administration.
U.S. Food and Drug Administration Approval or Clearance of Medical Devices
In the U.S., medical devices are subject to varying degrees of regulatory control and are classified in one of three classes depending on the extent of controls the U.S. Food and Drug Administration determines are necessary to reasonably ensure their safety and efficacy:
· | Class I: general controls, such as labeling and adherence to quality system regulations; |
· | Class II: special controls, pre-market notification (510(k)), specific controls such as performance standards, patient registries and post-market surveillance and additional controls such as labeling and adherence to quality system regulations; and |
· | Class III: special controls and approval of a pre-market approval, or PMA, application. |
All our products are classified as Class II medical devices and require U.S. Food and Drug Administration authorization prior to marketing, by means of 510(k) clearance, except for our UroShield product, which we intend to seek clearance from the U.S. Food and Drug Administration through the de novo classification process, described below.
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To request marketing authorization by means of a 510(k) clearance, we must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to another legally marketed medical device, has the same intended use, and is as safe and effective as a legally marketed device and does not raise different questions of safety and effectiveness than a legally marketed device. 510(k) submissions generally include, among other things, a description of the device and its manufacturing, device labeling, medical devices to which the device is substantially equivalent, safety and biocompatibility information and the results of performance testing. In some cases, a 510(k) submission must include data from human clinical studies. Marketing may commence only when the U.S. Food and Drug Administration issues a clearance letter finding substantial equivalence. The typical duration to receive 510(k) approval is approximately nine months from the date of the initial 510(k) submission, although there is no guaranty that the timing will not be longer.
In the past, the 510(k) pathway for product marketing required only the proof of significant equivalence in technology for a given indication with a previously cleared device. Currently, there has been a trend of the U.S. Food and Drug Administration requiring additional clinical work to prove efficacy in addition to technological equivalence. Thus, no matter which regulatory pathway we may take in the future towards marketing products in the U.S., we believe we will be required to provide clinical proof of device effectiveness.
After a device receives 510(k) clearance, any product modification that could significantly affect the safety or effectiveness of the product, or that would constitute a significant change in intended use, requires a new 510(k) clearance or, if the device would no longer be substantially equivalent, would require a PMA. If the U.S. Food and Drug Administration determines that the product does not qualify for 510(k) clearance, then a company must submit and the U.S. Food and Drug Administration must approve a PMA before marketing can begin.
A PMA application must provide a demonstration of safety and effectiveness, which generally requires extensive pre-clinical and clinical trial data. Information about the device and its components, device design, manufacturing and labeling, among other information, must also be included in the PMA. As part of the PMA review, the U.S. Food and Drug Administration will inspect the manufacturer’s facilities for compliance with quality system regulation requirements, which govern testing, control, documentation and other aspects of quality assurance with respect to manufacturing. If the U.S. Food and Drug Administration determines the application or manufacturing facilities are not acceptable, the U.S. Food and Drug Administration may outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the U.S. Food and Drug Administration ultimately may decide that the application does not satisfy the regulatory criteria for approval. During the review period, a U.S. Food and Drug Administration advisory committee, typically a panel of clinicians and statisticians, is likely to be convened to review the application and recommend to the U.S. Food and Drug Administration whether, or upon what conditions, the device should be approved. The U.S. Food and Drug Administration is not bound by the advisory panel decision. While the U.S. Food and Drug Administration often follows the panel’s recommendation, there have been instances where the U.S. Food and Drug Administration has not. If the U.S. Food and Drug Administration finds the information satisfactory, it will approve the PMA. The PMA approval can include post-approval conditions, including, among other things, restrictions on labeling, promotion, sale and distribution, or requirements to do additional clinical studies post-approval. Even after approval of a PMA, a new PMA or PMA supplement is required to authorize certain modifications to the device, its labeling or its manufacturing process. Supplements to a PMA often require the submission of the same type of information required for an original PMA, except that the supplement is generally limited to that information needed to support the proposed change from the product covered by the original PMA. The typical duration to receive PMA approval is approximately two years from the date of submission of the initial PMA application, although there is no guaranty that the timing will not be longer.
As describe above, we anticipate that our UroShield product will receive, a de novo review from the U.S. Food and Drug Administration. De novo is a two-step process that requires a company to submit a 510(k) and complete a standard review, including an analysis of the risk to the patient and operator associated with the use of the device and the substantial equivalence rationale. Once that has been accomplished, and the medical device in question has been determined to be not substantially equivalent to another approved device, the product is automatically classified as a Class III device. The manufacturer can then submit a request for an evaluation to have the product reclassified from Class III into Class I or Class II. The U.S. Food and Drug Administration will review the device classification proposal and either recommend special controls to create a new Class I or II device classification or determine that the product is a Class III device. If the U.S. Food and Drug Administration determines that the level of risk associated with the use of the device is appropriate for a Class II or Class I designation, then the product can be cleared as a 510(k) and the U.S. Food and Drug Administration will issue a new classification regulation and product code. If the device is not approved through de novo review, then it must go through the standard PMA process for Class III devices.
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Clinical Trials of Medical Devices
One or more clinical trials are generally required to support a PMA application and more recently are becoming necessary to support a 510(k) submission. Clinical studies of unapproved or uncleared medical devices or devices being studied for uses for which they are not approved or cleared (investigational devices) must be conducted in compliance with U.S. Food and Drug Administration requirements. If an investigational device could pose a significant risk to patients, the sponsor company must submit an investigational device exemption application to the U.S. Food and Drug Administration prior to initiation of the clinical study. An investigational device exemption application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device on humans and that the testing protocol is scientifically sound. The investigational device exemption will automatically become effective 30 days after receipt by the U.S. Food and Drug Administration unless the U.S. Food and Drug Administration notifies the company that the investigation may not begin. Clinical studies of investigational devices may not begin until an institutional review board has approved the study.
During the study, the sponsor must comply with the U.S. Food and Drug Administration’s investigational device exemption requirements. These requirements include investigator selection, trial monitoring, adverse event reporting, and record keeping. The investigators must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices, and comply with reporting and record keeping requirements. The sponsor, the U.S. Food and Drug Administration, or the institutional review board at each institution at which a clinical trial is being conducted may suspend a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable risk. During the approval or clearance process, the U.S. Food and Drug Administration typically inspects the records relating to the conduct of one or more investigational sites participating in the study supporting the application.
Post-Approval Regulation of Medical Devices
After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
· | the U.S. Food and Drug Administration quality systems regulation, which governs, among other things, how manufacturers design, test, manufacture, exercise quality control over, and document manufacturing of their products; |
· | labeling and claims regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and |
· | the Medical Device Reporting regulation, which requires reporting to the U.S. Food and Drug Administration of certain adverse experiences associated with use of the product. |
Good Manufacturing Practices Requirements
Manufacturers of medical devices are required to comply with the good manufacturing practices set forth in the quality system regulations promulgated under section 520 of the Food, Drug and Cosmetic Act. Current good manufacturing practices regulations require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation. The manufacturing facility for an approved product must meet current good manufacturing practices requirements to the satisfaction of the U.S. Food and Drug Administration pursuant to a pre-PMA approval inspection before the facility can be used. Manufacturers, including third party contract manufacturers, are also subject to periodic inspections by the U.S. Food and Drug Administration and other authorities to assess compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjects a manufacturer to possible legal or regulatory action, including the seizure or recall of products, injunctions, consent decrees placing significant restrictions on or suspending manufacturing operations, and civil and criminal penalties. Adverse experiences with the product must be reported to the U.S. Food and Drug Administration and could result in the imposition of marketing restrictions through labeling changes or in product withdrawal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following the approval.
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International Regulation
We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of product standards, packaging requirements, labeling requirements, import and export restrictions and tariff regulations, duties and tax requirements. The time required to obtain clearance required by foreign countries may be longer or shorter than that required for U.S. Food and Drug Administration clearance, and requirements for licensing a product in a foreign country may differ significantly from U.S. Food and Drug Administration requirements.
The primary regulatory environment in Europe is the European Union, which consists of 25 member states and 42 competent authorities encompassing most of the major countries in Europe. In the European Union, the European Medicines Agency and the European Union Commission determined that WoundShield, PainShield and UroShield are to be regulated as medical device products. These products are classified as Class II devices. These devices are CE Marked and as such can be marketed and distributed within the European Economic Area. We are required to be recertified each year for CE by Intertek, which conducts an annual audit. The audit procedure, which includes on-site visits at our facility, requires us to provide Intertek with information and documentation concerning our management system and all applicable documents, policies, procedures, manuals, and other information.
The primary regulatory bodies and paths in Asia, Australia, Canada and Latin America are determined by the requisite country authority. In most cases, establishment registration and device licensing are applied for at the applicable Ministry of Health through a local intermediary. The requirements placed on the manufacturer are typically the same as those contained in ISO 9001 or ISO 13485, requirements for quality management systems published by the International Organization of Standardization. In some countries outside Europe, we are or will be able to sell on the basis of our CE Mark. We have a Canadian medical device license for PainShield and UroShield, a certificate allowing us to sell PainShield, WoundShield and UroShield in Israel, a certificate allowing us to sell PainShield in Australia, and we are able to sell PainShield, WoundShield and UroShield in India and Ecuador based on our CE Mark. In addition, our distributor in Korea has applied for approval to sell PainShield and UroShield, and our distributor in Chile has applied for approval to sell PainShield. We generally apply, through our distributor, for approval in a particular country for a particular product only when we have a distributor in place with respect to such product.
European Good Manufacturing Practices
In the European Union, the manufacture of medical devices is subject to good manufacturing practice, as set forth in the relevant laws and guidelines of the European Union and its member states. Compliance with good manufacturing practice is generally assessed by the competent regulatory authorities. Typically, quality system evaluation is performed by a notified body, which also recommends to the relevant competent authority for the European Community CE Marking of a device. The competent authority may conduct inspections of relevant facilities, and review manufacturing procedures, operating systems and personnel qualifications. In addition to obtaining approval for each product, in many cases each device manufacturing facility must be audited on a periodic basis by the notified body. Further inspections may occur over the life of the product.
U.S. Anti-Kickback and False Claims Laws
In the U.S., there are federal and state anti-kickback laws that prohibit the payment or receipt of kickbacks, bribes or other remuneration intended to induce the purchase or recommendation of healthcare products and services. Violations of these laws can lead to civil and criminal penalties, including exclusion from participation in federal healthcare programs. These laws are potentially applicable to manufacturers of products regulated by the U.S. Food and Drug Administration as medical devices, such as us, and hospitals, physicians and other potential purchasers of such products. Other provisions of federal and state laws provide civil and criminal penalties for presenting, or causing to be presented, to third-party payers for reimbursement, claims that are false or fraudulent, or which are for items or services that were not provided as claimed. In addition, certain states have implemented regulations requiring medical device and pharmaceutical companies to report all gifts and payments over $50 to medical practitioners. This requirement does not apply to instances involving clinical trials.
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Customers
We initially sell our products both through our website and distribution agreements, though a majority of our sales are currently through distributors. We currently have exclusive distribution agreements for our products with medical product distributors based in the U.S. (for PainShield since 2012, for NanoVibronix NPWT since 2013), Italy (since 2013), India (since 2012), Australia (since 2012), New Zealand (since 2012), Ecuador (since 2012), United Kingdom (since 2010) and Israel (since 2012). In May 2013, we entered into a non-exclusive distribution agreement for the distribution of PainShield for all indications other than abdominal and pelvic pain in the U.S. and Canada.
We are currently in discussions with multiple distribution companies in Europe, Asia, and Latin America. Current and future agreements with distributors stipulate that, while we are responsible for training, providing marketing guidance, marketing materials, and technical guidance, distributors will be responsible for carrying out local marketing activities and sales. In addition, in most cases, all sales costs, including sales representatives, incentive programs, and marketing trials, will be borne by the distributor. Under current agreements, distributors purchase our products from us at a fixed price. Our current agreements with distributors are generally for a term of approximately two to three years and automatically renew for an additional annual terms unless modified by either party.
Manufacturing and Suppliers
We assemble our own products at our facilities in Nesher, Israel. All of the component parts of our products are readily available from a number of manufacturers and suppliers. We order component parts on an as-needed basis, generally from the manufacturer that provides us with the most competitive pricing. Our most significant suppliers are APC International, Ltd., Rotel Product Engineering Ltd. and Amit Industries L.T.D (AmiCell). We do not have written agreements with any of these suppliers, but we believe any one could be easily replaced if necessary.
Employees
As of March 3, 2014, we had nine full-time employees and one part-time employee. Our employees are not party to any collective bargaining agreements. We consider our relations with our employees to be good. We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel.
Properties
We lease an office and manufacturing facility in Nesher, Israel and an office in Melville, New York. Our lease for the facility in Nesher expires December 31, 2015, with an option to renew annually. The space is approximately 230 square meters. We pay approximately $2,880 per month under our lease. Our lease for the facility in Melville expires May 24, 2014, with an option to renew annually. The space is approximately 15 square meters. We pay $915 per month under our lease. We believe that our facilities are adequate to meet our current and proposed needs.
Legal Proceedings
From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing, we are not a party to any material litigation nor are we aware of any such threatened or pending litigation.
There are no material proceedings in which any of our directors, officers or affiliates or any registered or beneficial shareholder of more than 5% of our common stock, or any associate of any of the foregoing is an adverse party or has a material interest adverse to our interest.
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MANAGEMENT
The following table sets forth information regarding our executive officers, our future chief financial officer, the members of our board of directors and certain director nominees who will join our board upon the closing of this offering. All directors hold office for one-year terms until the election and qualification of their successors. Officers are elected by the board of directors and serve at the discretion of the board.
Name | Age | Position | ||
Ophir Shahaf | 47 | Chief Executive Officer | ||
Shay Ashkenazy | 37 | Future Chief Financial Officer | ||
Harold Jacob, M.D. | 60 | Chief Medical Officer, Acting Principal Financial Officer and Director | ||
Jona Zumeris, Ph.D. | 63 | Vice President of Technology and Director | ||
Ira Greenstein | 53 | Chairman of the Board of Directors | ||
Michael Ferguson | 43 | Director Nominee | ||
Thomas R. Mika | 62 | Director Nominee | ||
William Stern, Ph.D. | 72 | Director Nominee |
Ophir Shahaf, Chief Executive Officer and Director. Mr. Shahaf has served as our chief executive officer and director since March 1, 2014. Mr. Shahaf served as chief executive officer of Hadasit Bio-Holdings, which provides its investors with investment exposure to a select portfolio of biotech companies based on inventions developed and owned by the Hadassah University Hospital, for six years, from 2007 to December 2013. Mr. Shahaf was part of the founding team at Hadasit Bio-Holdings and led the company through its initial public offering, subsequent rounds of financing, an ADR listing on the over-the-counter market and a listing on the Tel Aviv Stock Exchange. Prior to that, Mr. Shahaf served as vice president business development at Protalix Biotherapeutics, which is listed on the NYSE MKT, and was a founder and vice president of Clal Biotechnology Industries, which is listed on the Tel Aviv Stock Exchange and is an institutional investor in the life sciences in Israel. Mr. Shahaf received his law degree from Tel Aviv University and his MBA from the Stern School of Business at New York University, with a major in finance and international business. We believe that Mr. Shahaf’s qualifications to serve on our board include his background in biotechnology and investment within the field and his experience serving in management roles of various companies. In addition, as chief executive officer, Mr. Shahaf’s position on the board ensures a unity of vision between the broader goals of our Company and our day-to-day operations.
Shay Ashkenazy, Chief Financial Officer . Mr. Ashkenazy will serve as our chief financial officer effective April 1, 2014. Since 2008, Mr. Ashkenazy has served as associate vice president of finance of Gilat Satellite Networks, a Nasdaq- and Tel Aviv Stock Exchange-listed provider of satellite communications products and services. From 2007 to 2008, he served as director of finance at Superna Systems, which designs, develops and manufactures products and solutions for the digital home market. Prior to that, from 2003 to 2007, Mr. Ashkenazy was at PriceWaterhouseCoopers, ultimately as a supervisor specializing in the hi-tech industry, both public and start-up. Mr. Ashkenazy holds a BA in Accounting and Economy from Tel Aviv University and is a certified public accountant.
Harold Jacob, M.D., Chief Medical Officer and Director. Dr. Jacob has served as our chief medical officer since March 1, 2014 and as our director since September 2003. From September 2003 to February 4, 2014, Dr. Jacob served as chairman of our board of directors and from September 2003 to March 1, 2014, Dr. Jacob served as our chief executive officer. Dr. Jacob also performs the functions of a principal financial officer, and will continue to do so until April 1, 2014. Dr. Jacob is our co-founder and has worked extensively in medical device development. Dr. Jacob also served part-time as an attending gastroenterologist at Shaare Zedek Medical Center in Jerusalem, Israel from 2004 to March 2011. Since April 2011, he has been an attending physician in Gastroenterology at Hadassah University Hospital in Jerusalem, Israel. From 1999 to the present, Dr. Jacob has served as the president of Medical Instrument Development Inc., which provides consulting services to start-up and early stage companies and patents its own proprietary medical devices. From 1997 to 2003, Dr. Jacob served as director of medical affairs at Given Imaging Ltd., a company that developed the first swallowable wireless pill camera for inspection of the intestines. Dr. Jacob also currently serves as a director for Oramed Pharmaceuticals Inc., a pharmaceutical company focused on the development of innovative orally ingestible capsule medication. We believe that Dr. Jacob’s qualifications to serve on our board include his years of experience in the biomedical industry and with our Company and his experience serving in management roles of various companies.
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Jona Zumeris, Ph.D., Vice President of Technology and Director. Dr. Zumeris is our co-founder and has served as our vice president of technology since September 2003. From 1999 to 2003, Professor Zumeris served as director of research and development for PMG Medica Ltd., a medical device company focused on ultrasound and piezomechanics technology. Dr. Zumeris was a founder, president and director of research and development of Nanomotion Ltd., a company that designs and manufactures motion solutions using ceramic servo motors, drivers and controllers, from 1993 to 1996. Dr. Zumeris’s extensive experience in the nano-technology and medical fields, especially in leadership and research roles, provide him the appropriate experience to serve on our board.
Ira Greenstein, Director. Mr. Greenstein has served as our director since August 2009 and as our board chairman since February 4, 2014. Mr. Greenstein has served as president of Genie Energy Ltd., an energy and gas holding company, since December 2011. Mr. Greenstein currently also serves as counsel to the chairman of IDT Corporation, a multinational holding company with operations primarily in the telecommunications industry, and served as the president of IDT Corporation from 2001 through 2011 and counsel to the chairman of IDT Corporation in 2000 and 2001. Mr. Greenstein serves on the boards of directors of Arista Power, Inc., Document Security Systems, Inc. and Ohr Pharmaceuticals, Inc. Mr. Greenstein’s experience serving in corporate roles in publicly-traded companies provides him with knowledge that assists in directing our long-term strategy.
Michael Ferguson, Director Nominee. Mr. Ferguson has agreed to join our board of directors effective upon the closing of this offering. In January 2009, Mr. Ferguson founded Ferguson Strategies, LLC, a government affairs and strategic business consulting firm, where he serves as the chief executive officer and chairman. From 2001 to January 2009, he served in the U.S. House of Representatives, representing New Jersey’s 7th congressional district. While in Congress, he was a member of the House Energy and Commerce Committee, which has wide jurisdiction over the healthcare, telecommunications and energy industries. He served as vice chairman of the panel’s Health Subcommittee, where he became a key member on health care issues and helped to ensure passage of the Medicare Part D prescription drug benefit in 2003. In addition, he served as a member of the Telecommunications and Internet Subcommittee as well as the Oversight and Investigations Subcommittee. Mr. Ferguson was also a member of the House Financial Services Committee, where he cosponsored the Sarbanes-Oxley Act of 2002 and helped enact the initial terrorism risk insurance law. Congressman Ferguson currently serves as a senior fellow of the Center for Medicine in the Public Interest’s Odyssey Initiative for Biomedical Innovation and Human Health. He has also served on various corporate advisory boards and committees, including for Pfizer, Inc., the National Italian American Foundation and the United States Golf Association. Mr. Ferguson received a bachelor’s degree in government from the University of Notre Dame and a master’s of public policy degree with a specialization in education policy from Georgetown University. Mr. Ferguson brings to the board his extensive background in government affairs, health care policy, and business strategy gained from his experiences in Congress and business consulting, which we believe will assist in strengthening and advancing our strategic focus and regulatory compliance.
Thomas R. Mika, Director Nominee. Mr. Mika has agreed to join our board of directors effective upon the closing of this offering. Mr. Mika has over 25 years of senior management, finance and consulting experience. He has served in various roles at CollabRx, Inc. (formerly known as Tegal Corporation), a publicly-traded data analytics company focusing on genomics-based medicine, including as its chief executive officer and president since March 2005 and as chairman of the board since October 2006. From 1992 to 2002, he also served on the company’s board of directors, which included periods of service as the chairman of the compensation committee and a member of the audit committee, until he was appointed as its executive vice president and chief financial officer in August 2002. Prior to that, Mr. Mika founded IMTEC, a boutique investment firm active in the management of several companies in industries such as healthcare, pharmaceuticals, media and information technology. Mr. Mika was also a director of Metrologix, a semiconductor metrology company, from the time of its initial start-up until its sale to KLA-Tencor Corp. Prior to forming IMTEC, Mr. Mika was a managing consultant with Cresap, McCormick & Paget and a policy analyst for the National Science Foundation. He holds a Bachelor of Science degree in microbiology from the University of Illinois at Urbana-Champaign and a Master of Business Administration degree from the Harvard Graduate School of Business. Mr. Mika’s qualifications to serve on our board include his significant strategic and business insight from his prior service on the board of directors of other publicly-held companies, as well as his substantial senior management, finance and consulting experience.
William Stern, Ph.D., Director Nominee. Dr. Stern has agreed to join our board of directors effective upon the closing of this offering. Dr. Stern has served as president of Multigon Industries, Inc., which manufactures non-invasive ultrasound technology that measures blood flow in the brain, since 1984. From 2000 to the present, Dr. Stern has also served as the vice president of Aqua-Eez, Inc., an affiliate of Multigon Industries, Inc. that manufactures and sells a hydrotherapy pool for labor and delivery. From 1972 to 1983, he was the president of Unigon Industries, Inc., which manufactured and distributed diagnostic ultrasound for vascular and neurological diagnostics. Dr. Stern received his Ph.D. in engineering and physics from Columbia University and holds an M.S. and a B.S. degree in electrical engineering from Columbia University and City College of New York, respectively. Dr. Stern’s qualifications to serve on our board include his significant scientific background and over 30 years of executive leadership experience in the field of medical devices and ultrasound technology.
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There are no family relationships among any of our directors and executive officers. Our executive officers are party to certain agreements related to their service as such, described in the “Executive Compensation” section of this prospectus.
Director Independence
Our board of directors has determined that Michael Ferguson, Ira Greenstein, Thomas R. Mika and William Stern, Ph.D. satisfy the requirements for independence set out in Section 5605(a)(2) of the Nasdaq Stock Market Rules and that they have no material relationship with us (other than being a director and/or a stockholder). In making its independence determinations, the board of directors sought to identify and analyze all of the facts and circumstances relating to any relationship between a director, his immediate family or affiliates and our company and our affiliates and did not rely on categorical standards other than those contained in the Nasdaq rule referenced above.
Board Committees
Upon the consummation of this offering, our board of directors will establish an audit committee, a nominating and corporate governance committee and a compensation committee, each of which will have the composition and responsibilities described below.
Audit Committee. The audit committee will consist of Messrs. Mika (chair) and Greenstein and Dr. Stern, each of whom our board has determined to be financially literate and qualify as an independent director under Sections 5605(a)(2) and 5605(c)(2) of the rules of the Nasdaq Stock Market. In addition, Mr. Mika qualifies as a financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K. The function of the audit committee will be to assist the board of directors in its oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements and (3) the qualifications, independence and performance of our independent auditors.
Nominating and Corporate Governance Committee. The nominating and corporate governance committee will consist of Messrs. Ferguson (chair) and Greenstein and Dr. Stern, each of whom our board has determined qualifies as an independent director under Section 5605(a)(2) of the rules of the Nasdaq Stock Market. The primary function of the nominating and corporate governance committee will be to identify individuals qualified to become board members, consistent with criteria approved by the board, and select the director nominees for election at each annual meeting of stockholders.
Compensation Committee. The compensation committee will consist of Dr. Stern (chair) and Messrs. Greenstein and Mika, each of whom our board has determined qualifies as an independent director under Sections 5605(a)(2) and 5605(d)(2) of the rules of the Nasdaq Stock Market, as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code and as a “non-employee director” for purposes of Section 16b-3 under the Securities Exchange Act of 1934, as amended. The function of the compensation committee will be to discharge the board of directors’ responsibilities relating to compensation of our directors and executives and our overall compensation programs. The primary objective of the compensation committee will be to develop and implement compensation policies and plans that are appropriate for us in light of all relevant circumstances and which provide incentives that further our long-term strategic plan and are consistent with our culture and the overall goal of enhancing enduring stockholder value.
Board Leadership Structure
The board of directors is committed to promoting our effective, independent governance. Our board believes it is in our best interests and the best interests of our stockholders for the board to have the flexibility to select the best director to serve as chairman at any given time, regardless of whether that director is an independent director or the chief executive officer. Consequently, we do not have a policy governing whether the roles of chairman of the board and chief executive officer should be separate or combined. This decision is made by our board of directors, based on our best interests considering the circumstances at the time.
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Currently, the offices of the chairman of the board and the chief executive officer are held by two different people. Ira Greenstein is our independent, non-executive chairman of the board of directors and Ophir Shahaf is our chief executive officer. The chief executive officer will be responsible for our day-to-day leadership and performance, while the chairman of the board of directors will provide guidance to the chief executive officer and set the agenda for board meetings and preside over meetings of the board. We believe that separation of the positions will reinforce the independence of the board in its oversight of our business and affairs, and create an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the board to monitor whether management’s actions are in our best interests and those of our stockholders. Furthermore, we believe that Mr. Greenstein’s history with us will assist the board in its transition to a new chief executive officer and chief financial officer and with the addition of our three new independent directors.
Role in Risk Oversight
Our board of directors oversees an enterprise-wide approach to risk management, designed to support the achievement of business objectives, including organizational and strategic objectives, to improve long-term organizational performance and enhance stockholder value. The involvement of our board of directors in setting our business strategy is a key part of its assessment of management’s plans for risk management and its determination of what constitutes an appropriate level of risk for the company. The participation of our board of directors in our risk oversight process includes receiving regular reports from members of senior management on areas of material risk to our company, including operational, financial, legal and regulatory, and strategic and reputational risks.
While our board of directors has the ultimate responsibility for the risk management process, senior management and various committees of our board of directors will also have responsibility for certain areas of risk management.
Our senior management team is responsible for day-to-day risk management and regularly reports on risks to our full board of directors or a relevant committee. Our finance and regulatory personnel serve as the primary monitoring and evaluation function for company-wide policies and procedures, and manage the day-to-day oversight of the risk management strategy for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels.
The audit committee will focus on monitoring and discussing our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies. As appropriate, the audit committee will provide reports to and receive direction from the full board of directors regarding our risk management policies and guidelines, as well as the audit committee’s risk oversight activities.
In addition, the compensation committee will assess our compensation policies to confirm that the compensation policies and practices do not encourage unnecessary risk taking. The compensation committee will review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation and, when appropriate, report on the findings from the discussions to our board of directors. Our compensation committee intends to set performance metrics that will create incentives for our senior executives that encourage an appropriate level of risk-taking that is commensurate with our short-term and long-term strategies.
Code of Ethics
In connection with this offering, our board of directors will adopt a code of business conduct and ethics that will apply to all of our employees, officers, and directors. Upon completion of this offering, the full text of our code of business conduct and ethics will be available on our website. Information on, or accessible through, our website is not part of this prospectus. We expect that any amendments to the code, or any waivers of its requirements, that apply to directors or executive officers, will be disclosed on our website.
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EXECUTIVE COMPENSATION
2013 and 2012 Summary Compensation Table
The table below sets forth, for our last two fiscal years, the compensation earned by our named executive officers, Harold Jacob, M.D., our former chief executive officer and chairman of the board of directors (now our chief medical officer and a member of our board of directors), and Jona Zumeris, our vice president of technology and a member of our board of directors. No other executive officer had compensation of greater than $100,000 for the last three fiscal years.
Name and Principal
Position |
Year |
Salary
($)(1) |
Bonus
($) |
Option
Awards ($) |
All Other
Compensation ($)(1) |
Total
($)(1) |
||||||||||||||||||
Harold Jacob, M.D. | 2013 | - | - | 182,728 | (2) | 15,848 | (3) | 198,576 | ||||||||||||||||
Former Chief Executive Officer and | 2012 | - | - | - | 16,442 | (3) | 16,442 | |||||||||||||||||
Chairman of the Board of Directors | ||||||||||||||||||||||||
Jona Zumeris, Ph.D. | 2013 | 52,668 | - | 187,536 | (2) | 33,723 | (4) | 273,927 | ||||||||||||||||
Vice President of Technology | 2012 | 58,739 | 36,153 | (4) | 94,892 | |||||||||||||||||||
and Director |
(1) |
Compensation amounts received in non-U.S. currency have been converted into U.S. dollars using the average exchange rate for the applicable year. The average exchange rate for each of 2013 and 2012 was 3.759 NIS per dollar and 4.014 NIS per dollar, respectively. |
(2) |
The amounts in this column reflect the dollar amounts to be recognized for financial statement reporting purposes with respect to the twelve month period ended December 31, 2013 in accordance with FASB ASC Topic 718. Fair value is based on the Black-Scholes option pricing model using the fair value of the underlying shares at the grant date. For additional discussion of the valuation assumptions used in determining stock-based compensation and the grant date fair value for stock options, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Critical Accounting Policies - Stock-based compensation” and Note 2—“Significant Accounting Policies” and Note 11—“Stockholders’ Deficiency” of the Notes to Consolidated Financial Statements as of December 31, 2013 included in this prospectus.
|
|
(3) | Represents car-related benefits for Dr. Jacob. |
(4) |
Comprised of car-related benefits for Dr. Zumeris of $18,745 in 2013 and $19,665 in 2012 and other benefits, comprised of contributions towards a pension fund, disability insurance, severance pay, an advanced study fund and recreation pay, of $14,978 in 2013 and $16,488 in 2012. |
Compensation of Harold Jacob, M.D.
During 2012 and 2013, Dr. Jacob served without cash compensation or other benefits, except the use of a car. Effective upon the closing of this offering, Dr. Jacob will be paid 10,000 NIS per month for his service as chief medical officer.
Agreement with Jona Zumeris, Ph.D.
NanoVibronix Ltd., our wholly-owned Israeli subsidiary, is party to an employment agreement with Dr. Zumeris, pursuant to which Dr. Zumeris serves as its vice president of technology. Dr. Zumeris’s salary pursuant to the agreement is 19,500 NIS per month, which was increased to 20,000 NIS per month by oral agreement commencing in December 2012, and he is entitled to a car, which we lease on his behalf, and contributions towards a pension fund, disability insurance, severance pay and an advanced study fund and recreation pay, which are customary or statutorily prescribed in Israel. Dr. Zumeris is also entitled to 15 vacation days. Dr. Zumeris’s employment agreement contains confidentiality restrictions and other terms and provisions that are customary in Israel. Effective upon the closing of this offering, Dr. Zumeris’s salary will be increased to 40,000 NIS per month.
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Agreement with Ophir Shahaf
On February 26, 2014, we entered into an employment agreement with Ophir Shahaf to serve as our chief executive officer. The term of the agreement begins on March 1, 2014 and continues until terminated. Either party may terminate the agreement for any reason by providing ninety days prior written notice to the other party. In addition, if we do not consummate our initial public offering by May 31, 2014, Mr. Shahaf will have until June 30, 2014 to exercise a special right to terminate the employment agreement upon providing only seven days written notice. During either notice period, Mr.Shahaf is entitled to the payment of his full base salary and all other earned and accrued benefits and contributions.
Under this employment agreement, Mr. Shahaf is entitled to a monthly base salary of 60,000 NIS (720,000 NIS per year). During the period beginning on March 1, 2014 and ending on the closing date of our initial public offering, Mr. Shahaf will only receive 50% of his base salary plus a corresponding portion of certain contributions and benefits we have agreed to pay/provide. The remaining portion of his salary, contributions and benefits will be paid on the first pay date immediately following the closing of the offering. Mr. Shahaf is eligible to participate in a bonus plan, as the board may establish from time to time in its sole discretion, pursuant to which he may receive a bonus in an amount equal to up to 25% of his annual base salary. Mr. Shahaf is also entitled to a cash bonus equal to $50,000 within five business days of the closing date of our initial public offering. In addition, on the pricing date of such offering, we will grant to Mr. Shahaf an option, made pursuant to a separate award agreement and subject to the terms and conditions of our equity plan then in effect, to purchase such number of shares of our common stock as equal 3% of the shares of common stock issued and outstanding on the date of grant (taking into account the number of shares that will be sold in the offering) at an exercise price equal to the public offering price, which will be deemed the fair market value of our common stock on the date of grant. The option will be granted under section 102 of the Israeli Income Tax Ordinance 5721-1961, for which we will adopt an equity plan or an appendix to our existing equity plan for Israeli grantees, which will be filed with the Israeli Tax Authorities. The option will vest in three equal installments, subject to Mr. Shahaf’s continued service with us, with one-third vesting on each of the first, second and third anniversary of the date of grant. Mr. Shahaf is also entitled to participate in or receive benefits under our social insurance and benefits plans, including but not limited to manager’s insurance and/or pension fund, disability insurance and an advanced training fund. These are customary benefits provided to executive employees in Israel. A management insurance fund is a combination of severance savings (in accordance with Israeli law), defined contribution tax-qualified pension savings and disability insurance premiums. An advanced training fund is a savings fund of pre-tax contributions to be used after a specified period of time for educational or other permitted purposes. We will pay certain percentages of Mr. Shahaf’s base salary towards these insurance and benefits plans, including 7.5% to the advanced training fund plus either (a) 14.33% to the pension fund, of which 8.33% will be paid to severance compensation and 6% to the pension savings component or (b) 13.33% to manager’s insurance, of which 8.33% will be paid to severance compensation, 5% to the pension savings component and the lower of the amount required to secure at least 75% of his base salary or up to 2.5% to disability insurance. Mr. Shahaf is entitled to choose whether our contributions are made in accordance with (a), (b) or any combination of these options; provided that such contributions are calculated based on an amount that does not exceed his base salary.
Mr. Shahaf’s employment agreement also contains certain noncompetition, non-solicitation, non-disparagement, confidentiality and assignment of work product requirements for Mr. Shahaf.
Agreement with Shay Ashkenazy
On March 2, 2014, we entered into an employment agreement with Shay Ashkenazy to serve as our chief financial officer. The term of the agreement begins on or before April 1, 2014 and continues until terminated. Either party may terminate the agreement for any reason by providing sixty days prior written notice to the other party. In the event that we provide notice of termination, Mr. Ashkenazy is entitled to payment of his full base salary and all other earned and accrued benefits during such notice period.
Under this employment agreement, Mr. Ashkenazy is entitled to a monthly base salary of 40,000 NIS (480,000 NIS per year). Mr. Ashkenazy is eligible to participate in a bonus plan, as the board may establish from time to time in its sole discretion. Mr. Ashkenazy is also entitled to receive a cash bonus equal to $10,000 within five business days of the closing date of our initial public offering, provided that he is still employed by us on such closing date. In addition, on the pricing date of such offering, we will grant to Mr. Ashkenazy an option, made pursuant to a separate award agreement and subject to the terms and conditions of our equity plan then in effect, to purchase such number of shares of our common stock as equal 1% of the shares of common stock issued and outstanding on the date of grant (taking into account the number of shares that will be sold in the offering) at an exercise price equal to the public offering price, which will be deemed the fair market value of our common stock on the date of grant. The option will be granted under section 102 of the Israeli Income Tax Ordinance 5721-1961. The option will vest in three equal installments, subject to Mr. Ashkenazy’s continued service with us, with one-third vesting on each of the first, second and third anniversary of the date of grant. If within three months following a change of control (as such term is defined in our equity plan pursuant to which we will grant the option) we terminate Mr. Ashkenazy’s employment without “cause” (as such term is defined in Mr. Ashkenazy’s employment agreement), the option will become 100% vested and exercisable on the date of termination. Mr. Ashkenazy is also entitled to participate in or receive benefits under our social insurance and benefits plans, including but not limited to manager’s insurance, disability insurance and an advanced training fund. We will pay certain percentages of Mr. Ashkenazy’s base salary towards these insurance and benefits plans, including 7.5% to the advanced training fund and 13.33% to manager’s insurance, of which 8.33% will be paid to severance compensation, 5% to the pension savings component, and the lesser of the amount required to secure at least 75% of his base salary or up to 2.5% to disability insurance.
Mr. Ashkenazy’s employment agreement also contains certain noncompetition, non-solicitation, non-disparagement, confidentiality and assignment of work product requirements for Mr. Ashkenazy.
Outstanding Equity Awards at Fiscal Year End
The following table provides information on the holdings of stock options of the named executive officer at December 31, 2013. This table includes unexercised and unvested options awards. Each outstanding award is shown separately.
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Option Awards | ||||||||||||||||
Number of | Number of | |||||||||||||||
Securities | Securities | |||||||||||||||
Underlying | Underlying | Option | ||||||||||||||
Unexercised | Unexercised | Exercise | Option | |||||||||||||
Date of | Options (#) | Options (#) | Price | Expiration | ||||||||||||
Name | Grant | Exercisable | Unexercisable | ($) | Date | |||||||||||
Harold Jacob, M.D. | December 31, 2004 | 60,000 | - | 0.01 | December 31, 2014 | |||||||||||
December 13, 2007 | 30,000 | - | 10.35 | December 13, 2017 | ||||||||||||
December 9, 2010 | 75,000 | (1) | - | 0.17 | December 9, 2020 | |||||||||||
March 28, 2013 |
760,000 |
- | 0.01 | March 28, 2023 | ||||||||||||
Jona Zumeris, Ph.D. |
March 28, 2013 |
780,000 |
- | 0.01 | March 28, 2023 |
(1) | Granted as compensation for services as an executive officer in light of his below market salary. |
2004 Global Share Option Plan
In November 2004, our board of directors adopted the 2004 Global Share Option Plan, pursuant to which 2,800,000 shares of our common stock are reserved for issuance as awards to employees, directors, consultants and other service providers. The purpose of the 2004 Global Share Option Plan is to provide an incentive to attract and retain directors, officers, consultants, advisors and employees, to encourage a sense of proprietorship and stimulate an active interest of such persons in our development and financial success. The 2004 Global Share Option Plan is administered by our board of directors.
On March 28, 2013, we granted options under the 2004 Global Share Option Plan to the following executive officers and directors. The options all vested immediately.
Number of Securities | Option | Option | ||||||||
Underlying Unexercised Options (#) | Exercise | Expiration | ||||||||
Name | Exercisable | Price ($) | Date | |||||||
Harold Jacob, M.D. | 760,000 | 0.01 | March 28, 2023 | |||||||
Jona Zumeris, Ph.D | 780,000 | 0.01 | March 28, 2023 | |||||||
Paul Packer(1) | 210,000 | 0.28 | March 28, 2023 | |||||||
(1) Mr. Packer resigned as a member of our board of directors, effective as of January 15, 2014. |
Nano Vibronix, Inc. 2014 Long-Term Incentive Plan
On February 28, 2014, our stockholders approved the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan, which was adopted by our board of directors on February 19, 2014. The Nano Vibronix, Inc. 2014 Long-Term Incentive Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights, and other awards, which may be granted singly, in combination, or in tandem, and which may be paid in cash, shares of our common stock, or a combination of cash and shares of our common stock. We have reserved a total of 5,000,000 shares of our common stock for awards under the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan, 100% of which may be delivered pursuant to incentive stock options.
The purpose of the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan is to provide an incentive to attract and retain services of key employees, key contractors, and outside directors whose services are considered valuable, to encourage a sense of proprietorship and to stimulate active interest of such persons in our development and financial success. The Nano Vibronix, Inc. 2014 Long-Term Incentive Plan is intended to serve as an “umbrella” plan for us and our subsidiaries worldwide. Therefore, if so required, appendices may be added to the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan in order to accommodate local regulations in foreign countries that do not correspond to the scope of the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan. Unless terminated earlier by the board of directors, the Nano Vibronix, Inc. 2014 Long-Term Incentive Plan will expire on February 19, 2024.
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Director Compensation
We paid no compensation to our non-employee directors for the one year period ended December 31, 2013 and have paid no compensation during 2014 to date, other than the awards described below. The following table shows information concerning the compensation of our directors, other than Dr. Jacob and Dr. Zumeris, during the twelve months ended December 31, 2013.
Name |
Fees
Earned or Paid in Cash ($) |
Option Awards
($)(1) |
All Other
Compensation ($) |
Total
($)(1) |
||||||||||||
Sim Fass(2) | - | - | - | - | ||||||||||||
Ira Greenstein | - | - | - | - | ||||||||||||
Paul Packer(3) | - | 22,761 | (4) | - | 22,761 |
(1) |
The amounts in this column reflect the dollar amounts to be recognized for financial statement reporting purposes with respect to the twelve month period ended December 31, 2013 in accordance with FASB ASC Topic 718. Fair value is based on the Black-Scholes option pricing model using the fair value of the underlying shares at the grant date. For additional discussion of the valuation assumptions used in determining stock-based compensation and the grant date fair value for stock options, see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Critical Accounting Policies — Stock-based compensation” and Note 2—“Significant Accounting Policies” and Note 11—“Stockholders’ Deficiency” of the Notes to Consolidated Financial Statements as of December 31, 2013 included in this prospectus. |
(2) | Mr. Fass resigned as a member of our board of directors, effective as of January 29, 2014. |
(3) | Mr. Packer resigned as a member of our board of directors, effective as of January 15, 2014. |
(4) | See “—2004 Global Share Option Plan” above for more information on this award. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Generally, we do not to enter into related party transactions unless the members of the board who do not have an interest in the potential transaction have reviewed the transaction and determined that (i) we would not be able to obtain better terms by engaging in a transaction with a non-related party and (ii) the transaction is in our best interest. This policy applies generally to any transaction in which we are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the previous two completed fiscal years, and in which any related person had or will have a direct or indirect material interest. This policy is not currently in writing. In addition, our audit committee will be required to pre-approve any related party transactions pursuant to its charter.
On March 20, 2009, we issued 8,696 shares of series B participating convertible preferred stock and warrants to purchase 8,696 shares of series B participating convertible preferred stock to Paul Packer, who was then a member of our board of directors and who remained a director until January 15, 2014, in exchange for consideration of $150,000. On January 1, 2010, we issued 2,899 shares of series B participating convertible preferred stock and warrants to purchase 2,899 shares of series B participating convertible preferred stock to a fund controlled by Mr. Packer, in exchange for consideration of $50,000. On July 12, 2011, we issued 5,797 shares of series B participating convertible preferred stock and warrants to purchase 5,797 shares of series B participating convertible preferred stock to a fund controlled by Mr. Packer, in exchange for consideration of $100,000. The warrants had an exercise price of $17.25 per share and a five-year term. The series B participating convertible preferred stock was convertible into shares of our common stock at a rate of one common share per series B participating convertible preferred share.
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On November 22, 2011, we issued convertible series B-1 promissory notes to certain investors. These investors include three funds controlled by Mr. Packer. The notes purchased by these funds were in the original aggregate principal amount of $180,000. Dr. Jacob, our former chief executive officer and chairman (now our chief medical officer and a member of our board of directors), also participated in the offering. As compensation for his service from May through December of 2011, Dr. Jacob received notes in the original aggregate principal amount of $25,000. The convertible series B-1 promissory notes mature on the earlier of November 15, 2014 or on an accelerated date if there is an event of default, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due and payable in full. The convertible series B-1 promissory notes bear interest at the rate of 10% per annum, compounded annually. In addition, the convertible series B-1 promissory notes are convertible at any time at the holder’s option into shares of our series B-1 participating convertible preferred stock at an initial conversion price of $0.284 per share, subject to adjustment for stock dividends, stock splits or combinations. Our series B-1 participating convertible preferred stock is convertible into shares of our common stock at a rate of one common share per series B-1 participating convertible preferred share. The convertible series B-1 promissory notes will automatically convert into series B-1 participating convertible preferred stock upon the occurrence of (i) an aggregate investment in us of $3 million or more in a transaction or series of transactions, (ii) our initial public offering of our common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as we become subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by us under the Securities Exchange Act of 1934, as amended, or equivalent document or (iii) a fundamental transaction. To date, no principal or interest has been paid on these notes. As of March 3, 2014, an aggregate of $43,621 in interest has accrued on the notes held by the entities controlled by Mr. Packer and an aggregate of $6,058 has accrued on the notes held by Dr. Jacob. By their existing terms, these notes will convert into shares of series B-1 participating convertible preferred stock, which will then convert into common stock, automatically upon the effectiveness of this registration statement. However, we anticipate that we will enter into an amendment agreement with the entities controlled by Mr. Packer pursuant to which their series B-1 promissory notes will be amended to provide that such notes are convertible into the same number of shares of series C preferred stock as the holder would have received in common stock absent such amendment. We anticipate that each share of our series C preferred stock would be convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of preferences) at any time at the option of the holder, provided that the holder would be prohibited from converting series C preferred stock into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of our common stock then issued and outstanding. For more information regarding the series C preferred stock, see “Description of Securities — Preferred Stock — Series C Convertible Preferred Stock.”
On November 22, 2011, we issued convertible series B-2 promissory notes in the original aggregate principal amount of $340,329 and warrants to purchase 513,575 shares of series B-2 participating convertible preferred stock to Mr. Packer and the two funds described above in exchange for the cancellation of the preferred stock and warrants described above. The principal amount of the notes was equal to the original investment in the series B participating convertible preferred stock plus simple interest at 8% from the date of the original investment. The number of shares underlying the warrants was equal to Mr. Packer’s and the two funds’ proportionate share of 30 percent of the number of shares into which the convertible series B-1 promissory notes were convertible. The terms of the convertible series B-2 promissory notes are the same as those of the convertible series B-1 promissory notes, except that the initial conversion price is $0.199 per share of series B-2 participating convertible preferred stock. Our series B-2 participating convertible preferred stock is convertible into shares of our common stock at a rate of one common share per series B-2 participating convertible preferred share. To date, no principal or interest has been paid on these notes. As of March 3, 2014, an aggregate of $84,910 in interest has accrued on the notes. By their existing terms, these notes will convert into shares of series B-2 participating convertible preferred stock, which will then convert into common stock, automatically upon the effectiveness of this registration statement. However, we anticipate that we will enter into an amendment agreement with the entities controlled by Mr. Packer pursuant to which their series B-2 promissory notes will be amended to provide that such notes are convertible into the same number of shares of series C preferred stock as the holder would have received in common stock absent such amendment. The warrants had an exercise price of $0.199 per share and a seven-year term. Upon the effectiveness of this registration statement, the warrants will be automatically exchanged for warrants to purchase shares of common stock at an exercise price of $ per share. For a description of these new warrants, see “Description of Securities—Warrants— 2014 Warrants.” We anticipate that we will amend and restate the warrants to purchase series B-2 participating convertible preferred stock currently held by Mr. Packer and the entities controlled by Mr. Packer to include, and include in the warrants issued to Mr. Packer and the entities controlled by Mr. Packer upon the effectiveness of this registration statement, provisions that block exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock.
On February 5, 2013, March 28, 2013, June 3, 2013, August 5, 2013, October 7, 2013, December 9, 2013 and February 6, 2014, we issued secured convertible promissory notes to two funds controlled by Mr. Packer. The notes were initially issued in the original aggregate principal amount of $100,000. On each date listed above, such principal amount was increased by $100,000. The sixth amended and restated secured convertible promissory notes issued on February 6, 2014 have an original aggregate principal amount of $700,000. The convertible promissory notes mature on the earlier of April 30, 2014, the closing date of a financing in which we sell an aggregate of at least $250,000 of our debt or equity securities or on an accelerated date if there is an event of default, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due and payable in full. The convertible promissory notes bear interest at the rate of 6% per annum, which rate is increased to 10% upon and during the occurrence of an event of default. In addition, the convertible promissory notes are convertible either at the holders’ option or upon maturity into shares of our common stock at an initial conversion price of $0.38 per share, subject to adjustment for stock splits, fundamental transactions or similar events. The holders of the convertible promissory notes have a security interest in all of our assets and those of our subsidiaries. To date, no principal or interest has been paid on these notes. As of March 3, 2014, an aggregate of $25,134 in interest has accrued on the notes. By their existing terms, these notes will convert into common stock automatically upon the effectiveness of this registration statement, however, we anticipate that we will amend and restate these secured convertible promissory notes to provide that such notes are convertible into series C preferred stock rather than common stock.
In connection with the issuance of the notes described above, on each of February 5, 2013, March 28, 2013, June 3, 2013, August 5, 2013, October 7, 2013, December 9, 2013 and February 6, 2014, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock, with an exercise price of $0.38 per share, subject to adjustment, to the two funds controlled by Mr. Packer. We anticipate that we will amend and restate these warrants to include provisions that block exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock.
On February 21, 2014, we entered into a consulting agreement with AYTA Consulting, LLC, an entity controlled by Mr. Packer, pursuant to which AYTA Consulting, LLC agreed to provide certain financial and strategic advisory and consulting services to us in exchange for a restricted stock award grant of 400,000 shares of our common stock, subject to the terms and conditions of a separate restricted stock award agreement, as the sole compensation for its performance of the consulting services. The agreement will terminate upon (a) our initial public offering, (b) our becoming subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, (c) our merger, share exchange or consolidation (other than one in which our stockholders own a majority of the voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of our assets, (d) written termination of the agreement by AYTA Consulting, LLC with 30 days written notice, or (e) our liquidation, dissolution or winding up. The 400,000 shares of restricted stock were granted to AYTA Consulting, LLC on February 21, 2014 pursuant to a restricted stock award agreement and will fully vest upon the occurrence of any of the events listed in (a), (b) or (c) above. The shares of restricted stock are subject to forfeiture until vested and will be forfeited if such shares have not vested on the later of December 31, 2019 or the date of AYTA Consulting, LLC’s termination of service with us.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock as of March 3, 2014 by:
· | each person known by us to beneficially own more than 5.0% of our common stock; |
· | each of our directors; |
· | each of the named executive officers; and |
· | all of our directors and executive officers as a group |
The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned and each person’s address is c/o Nano Vibronix, Inc., 105 Maxess Road, Suite S124, Melville, NY 11747. As of March 3, 2014, we had 20,191,979 shares outstanding.
The table below also shows beneficial ownership after giving effect to (i) the anticipated amendment of certain notes to be convertible into series C preferred stock that were originally convertible into common stock, series B-1 preferred stock and series B-2 preferred stock and (ii) the anticipated amendment of certain outstanding warrants to block any exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock (for a description of these anticipated changes, see “Certain Relationships and Related Transactions”). After giving effect to these adjustments, as of March 3, 2014, we had 15,359,457 shares outstanding. For a description of the series C preferred stock, see “Description of Securities – Preferred Stock – Series C Convertible Preferred Stock.” Mr. Packer will beneficially own 100% of the issuable series C preferred stock.
Name of Beneficial Owner |
Number of
Shares Beneficially Owned(1) |
Number of
Shares Beneficially Owned Giving Effect to Series C Amendments and Warrant Blockers(1) |
Percentage
Beneficially Owned Prior to Offering(1) |
Percentage
Beneficially Owned Prior to Offering Giving Effect to Series C Amendments and Warrant Blockers (1) |
Percentage
Beneficially Owned After the Offering(1) |
Percentage
Beneficially Owned After the Offering Giving Effect to Series C Amendments and Warrant Blockers (1) |
||||||||||||||||||
5% Owners | ||||||||||||||||||||||||
CollabRx, Inc.(2) | 1,312,327 | (3) | 1,312,327 | (3) | 6.5 | % | 8.5 | % | ||||||||||||||||
IDT Corporation(4) | 1,236,807 | (5) | 1,236,807 | (5) | 6.1 | % | 7.9 | % | ||||||||||||||||
Paul Packer(6) | 9,105,200 | (7) | 1,916,997 | (8) | 40.0 | % | 12.3 | % | ||||||||||||||||
Miriam Winder-Kelly(9) | 1,708,385 | (10) | 1,708,385 | (10) | 8.3 | % | 10.9 | % | ||||||||||||||||
Officers and Directors | ||||||||||||||||||||||||
Ophir Shahaf | - | - | - | - | (11 | ) | ||||||||||||||||||
Shay Ashkenazy | - | - | - | - | (12 | ) | ||||||||||||||||||
Harold Jacob, M.D. | 1,536,302 | (13) | 1,536,302 | (13) | 7.2 | % | 9.4 | % | ||||||||||||||||
Jona Zumeris, Ph.D. | 1,262,152 | (14) | 1,262,152 | (14) | 6.0 | % | 7.8 | % | ||||||||||||||||
Ira Greenstein | 473,781 | (15) | 473,781 | (15) | 2.3 | % | 3.0 | % | ||||||||||||||||
Michael Ferguson | - | - | - | |||||||||||||||||||||
Thomas R. Mika | - | - | - | |||||||||||||||||||||
William Stern, Ph.D. | - | - | - | |||||||||||||||||||||
All current directors and executive officers as a group (4 persons) | 3,272,235 | 3,272,235 | 14.8 | % | 19.0 | % |
* Less than one percent (1%).
(1) |
Shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume the exercise of all options, warrants and other securities convertible into common stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of March 3, 2014. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days are deemed outstanding and held by the holder of such options or warrants for computing the percentage of outstanding common stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding common stock beneficially owned by any other person. In addition, shares of common stock beneficially owned and the respective percentages of beneficial ownership of common stock assume all of the adjustments described on page 4 under “Prospectus Summary – The Offering.” All conversions are deemed to have occurred on March 3, 2014. |
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(2) | CollabRx’s address is 44 Montgomery Street, Suite 800, San Francisco, California 94104. |
(3) | Comprised of shares of common stock to be issued upon the conversion of convertible series B-1 promissory notes. |
(4) | IDT Corporation’s address is 520 Broad Street, Newark, New Jersey 07102. |
(5) | Comprised of (i) 997,152 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes and (ii) 239,654 shares of common stock that may be purchased upon the exercise of warrants. |
(6) | Mr. Packer’s address is 805 Third Avenue, 15 th Floor, New York, NY 10022. |
(7) |
Comprised of (i) 17,253 shares of common stock held by Globis Capital Partners, L.P., (ii) 807,105 shares of common stock to be issued upon the conversion of preferred stock held by Globis Capital Partners, L.P., (iii) 349,954 shares of common stock to be issued upon the conversion of convertible series B-1 promissory notes held by Globis Capital Partners, L.P., (iv) 642,887 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes held by Globis Capital Partners, L.P., (v) 1,628,193 shares of common stock that may be purchased by Globis Capital Partners, L.P. upon the exercise of warrants, (vi) 1,526,598 shares of common stock to be issued upon the conversion of secured convertible promissory notes held by Globis Capital Partners, L.P., (vii) 6,678 shares of common stock held by Globis Overseas Fund, Ltd., (viii) 312,415 shares of common stock to be issued upon the conversion of preferred stock held by Globis Overseas Fund, Ltd., (ix) 109,361 shares of common stock to be issued upon the conversion of convertible series B-1 promissory notes held by Globis Overseas Fund, Ltd., (x) 357,912 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes held by Globis Overseas Fund, Ltd., (xi) 454,444 shares of common stock that may be purchased by Globis Overseas Fund, Ltd. upon the exercise of warrants, (xii) 381,650 shares to be issued upon the conversion of secured convertible promissory notes held by Globis Overseas Fund, Ltd., (xiii) 328,082 shares to be issued upon the conversion of convertible series B-1 promissory notes held by Globis International Investments L.L.C., (xiv) 3,339 shares of common stock held by Mr. Packer, (xv) 156,207 shares to be issued upon the conversion of preferred stock held by Mr. Packer, (xvi) 1,136,079 shares to be issued upon the conversion of convertible series B-2 promissory notes held by Mr. Packer, which will occur automatically upon the closing of this offering, (xvii) 273,044 shares of common stock that may be purchased by Mr. Packer upon the exercise of warrants, (xviii) 214,000 shares of common stock that may be purchased upon the exercise of stock options held by Mr. Packer and (xix) 400,000 shares of restricted stock held by AYTA Consulting, LLC.
Mr. Packer is the managing member of Globis Capital Advisors, L.L.C., which is the general partner of Globis Capital Partners, L.P. Mr. Packer is the managing member of Globis Capital, L.L.C., which is the general partner of Globis Capital Management, L.P., which is the investment manager of Globis Overseas Fund, Ltd. Mr. Packer is also the managing member of Globis International Investments L.L.C. Mr. Packer is deemed to have beneficial ownership of the shares held by Globis Capital Partners, L.P., Globis Overseas Fund, Ltd. and Globis International Investments L.L.C. Mr. Packer also controls, and is deemed to have beneficial ownership of the shares held by, AYTA Consulting, LLC. |
(8) |
Comprised of (i) 17,253 shares of common stock held by Globis Capital Partners, L.P., (ii) 807,105 shares of common stock to be issued upon the conversion of preferred stock held by Globis Capital Partners, L.P., (iii) 6,678 shares of common stock held by Globis Overseas Fund, Ltd., (iv) 312,415 shares of common stock to be issued upon the conversion of preferred stock held by Globis Overseas Fund, Ltd., (v) 3,339 shares of common stock held by Mr. Packer, (vi) 156,207 shares to be issued upon the conversion of preferred stock held by Mr. Packer, (vi) 214,000 shares of common stock that may be purchased upon the exercise of stock options held by Mr. Packer and (vii) 400,000 shares of restricted stock held by AYTA Consulting, LLC.
Does not include the following, which Mr. Packer also beneficially owns: (i) 349,954 shares of series C preferred stock to be issued upon the conversion of convertible series B-1 promissory notes held by Globis Capital Partners, L.P., (ii) 642,887 shares of series C preferred stock to be issued upon the conversion of convertible series B-2 promissory notes held by Globis Capital Partners, L.P., (iii) 1,526,598 shares of series C preferred stock to be issued upon the conversion of secured convertible promissory notes held by Globis Capital Partners, L.P., (iv) 109,361 shares of series C preferred stock to be issued upon the conversion of convertible series B-1 promissory notes held by Globis Overseas Fund, Ltd., (v) 357,912 shares of series C preferred stock to be issued upon the conversion of convertible series B-2 promissory notes held by Globis Overseas Fund, Ltd., (vi) 381,650 shares of series C preferred stock to be issued upon the conversion of secured convertible promissory notes held by Globis Overseas Fund, Ltd., (vii) 328,082 shares of series C preferred stock to be issued upon the conversion of convertible series B-1 promissory notes held by Globis International Investments L.L.C. and (viii) 1,136,079 shares of series C preferred stock to be issued upon the conversion of convertible series B-2 promissory notes held by Mr. Packer. These shares of series C preferred stock are excluded, even though the terms of the series C preferred stock allow for conversion into common stock and voting on an as if converted basis with the common stock, because these rights are prohibited if their exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock.
Does not include the following: (i) 1,628,193 shares of common stock that may be purchased by Globis Capital Partners, L.P. upon the exercise of warrants, (ii) 454,444 shares of common stock that may be purchased by Globis Overseas Fund, Ltd. upon the exercise of warrants, (iii) 273,044 shares of common stock that may be purchased by Mr. Packer upon the exercise of warrants. These shares of common stock are excluded because the warrants contain provisions that block exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock.
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(9) | Ms. Winder-Kelly’s address is 900 Abel Wolman Municipal Bldg. 200N. Holliday St. Baltimore, MD 21202. |
(10) | Comprised of (i) 5,797 shares of common stock to be issued upon the conversion of preferred stock, (ii) 1,372,680 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes and (iii) 329,908 shares of common stock that may be purchased upon the exercise of warrants. |
(11) | On the pricing date of this offering, we will grant to Mr. Shahaf an option to purchase such number of shares of our common stock as equal 3% of the shares of common stock and series C preferred stock issued and outstanding on the date of grant (taking into account the number of shares that will be sold in the offering). For more information on this grant, see “Executive Compensation — Agreement with Ophir Shahaf.” |
(12) | On the pricing date of this offering, we will grant to Mr. Ashkenazy an option to purchase such number of shares of our common stock as equal 1% of the shares of common stock and series C preferred stock issued and outstanding on the date of grant (taking into account the number of shares that will be sold in the offering). For more information on this grant, see “Executive Compensation — Agreement with Shay Ashkenazy.” |
(13) | Comprised of (i) 55,363 shares of common stock held by Medical Instrument Development Inc., an entity controlled by Dr. Jacob, (ii) 360,046 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes held by Medical Instrument Development Inc., (iii) 86,533 shares of common stock that may be purchased by Medical Instrument Development Inc. upon the exercise of warrants, (iv) 109,361 shares of common stock to be issued upon the conversion of convertible series B-1 promissory notes held by Dr. Jacob and (v) 925,000 shares of common stock that may be purchased by Dr. Jacob upon the exercise of stock options. |
(14) | Comprised of (i) 482,152 shares of common stock held by Piezo Top Ltd, an entity controlled by Dr. Zumeris, and (ii) options to purchase 780,000 shares of common stock held by Dr. Zumeris. |
(15) | Comprised of (i) 378,349 shares of common stock to be issued upon the conversion of convertible series B-2 promissory notes, (ii) 90,932 shares of common stock that may be purchased upon the exercise of warrants and (iii) 4,500 shares of common stock that may be purchased upon the exercise of stock options. |
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DESCRIPTION OF SECURITIES
Upon the completion of this offering, our restated certificate of incorporation will authorize us to issue up to 20,000,000 shares of common stock, $0.001 par value per share, and 5,000,000 shares of preferred stock, $0.001 par value per share, of which shares of preferred stock will be designated series C preferred stock and shares of preferred stock will be undesignated. Our board of directors may establish the rights and preferences of the undesignated preferred stock from time to time. The anticipated terms of the series C preferred stock are described below. As of March 3, 2014, there were 20,191,979 shares of common stock outstanding, held of record by approximately 130 stockholders.
Common Stock
The holders of common stock are entitled to one vote per share. Our certificate of incorporation does not provide for cumulative voting. The holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by the board of directors out of legally available funds. Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of the board of directors and issued in the future.
Units
Each unit offered consists of one share of our common stock and one-half of one redeemable warrant to purchase one share of our common stock. We anticipate that the units will begin trading on , 2014. The units will automatically separate 45 days after the date of this prospectus, and each of the shares of common stock and redeemable warrants will trade separately, unless Chardan Capital Markets LLC determines that an earlier date is acceptable based on its assessment of the relative strengths of the securities markets and small capitalization companies in general, and the trading pattern of, and demand for, our securities in particular. If Chardan Capital Markets permits separate trading of the common stock and warrants prior to , we will issue a press release and file a Current Report on Form 8-K with the Securities and Exchange Commission announcing when such separate trading will begin.
Redeemable Warrants Issued as Part of the Units
Each full redeemable warrant entitles the holder to purchase one share of our common stock at an initial exercise price of $ (which is equal to 125% of the offering price of the common stock). Each redeemable warrant will become exercisable 45 days after the date of this prospectus and will expire on , 2019.
While the redeemable warrants are exercisable, we may redeem the outstanding redeemable warrants:
· | in whole but not in part; |
· | at a price of $0.01 per redeemable warrant; |
· | upon a minimum of 30 days’ prior written notice of redemption; and |
· | if, and only if, the last sale price of our common stock on the exchange on which our securities may be traded equals or exceeds $ per share for any 10 trading days within a 30 trading day period ending three business days before we send the notice of redemption; |
provided that, on the date we give notice of redemption and during the entire period thereafter until the time we redeem the redeemable warrants (or they are exercised), there is an effective registration statement related to the exercise of the redeemable warrants covering the common stock issuable upon exercise of the redeemable warrants in effect, and a prospectus relating to the common stock issuable upon exercise of the redeemable warrants is available for use by the holders of the redeemable warrants.
We are not required to get the consent of Chardan Capital Markets or any underwriter before we exercise our warrant redemption rights.
We have established these redemption criteria to provide redeemable warrantholders with adequate notice of redemption only after the then-prevailing common stock price is substantially above the redeemable warrant exercise price, so that there is a buffer to absorb the market reaction, if any, to our election to redeem the redeemable warrants. If the foregoing conditions are satisfied and we issue notice of redemption of the redeemable warrants, each redeemable warrantholder will be entitled to exercise his, her or its redeemable warrants prior to the scheduled redemption date. However, there can be no assurance that the price of our common stock will continue to exceed the $ per share redemption trigger price or the redeemable warrant exercise price of $ per share after the redemption notice is issued.
The redeemable warrants will be represented issued in registered form, in each case pursuant to a redeemable warrant agreement between VStock Transfer, LLC, as warrant agent, and us.
The exercise price and number of shares issuable upon exercise of the redeemable warrants may be adjusted upon the occurrence of certain events, including but not limited to any stock split, stock dividend, recapitalization, reorganization, merger or consolidation. However, redeemable warrants will not be adjusted for issuances of common stock or securities convertible or exercisable into common stock at a price below the then current exercise price of the redeemable warrants.
The redeemable warrants may be exercised, at the option of each holder, in whole or in part, upon surrender of the redeemable warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the redeemable warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price for the number of shares of our common stock purchased upon such exercise, by certified check payable to us or by wire transfer of immediately available funds to an account designated by us. Subject to applicable laws, the redeemable warrants may be transferred at the option of the holders upon surrender of the redeemable warrants to us together with the appropriate instruments of transfer.
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The redeemable warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise their redeemable warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the redeemable warrants, each holder will be entitled to one vote for each share of common stock held of record on all matters to be voted on by stockholders.
No redeemable warrants will be exercisable unless at the time of exercise a prospectus relating to common stock issuable upon exercise of the redeemable warrants is current and the common stock has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the redeemable warrants. Under the terms of the redeemable warrant agreement, we have agreed to meet these conditions and use our best efforts to maintain a current prospectus relating to common stock issuable upon exercise of the redeemable warrants until the expiration of the redeemable warrants. However, we cannot assure you that we will be able to do so, and if we do not maintain a current prospectus related to the common stock issuable upon exercise of the redeemable warrants, holders will be unable to exercise their redeemable warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the common stock issuable upon the exercise of the redeemable warrants is not current or if the common stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the redeemable warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the redeemable warrants may have no value, the market for the redeemable warrants may be limited and the redeemable warrants may expire worthless.
Preferred Stock
All 222,620 currently outstanding shares of series A-1 preferred stock will be converted automatically to common stock at a conversion rate of 11.695 shares of common stock per share of series A-1 preferred stock upon the effectiveness of this registration statement. This conversion rate reflects an antidilution adjustment made in connection with our November 2011 promissory note issuances. All 171,612 currently outstanding shares of series A-2 preferred stock will be converted automatically to common stock at a conversion rate of one share of common stock per share of series A-2 preferred stock upon the effectiveness of this registration statement. The owners of a majority of the outstanding shares of series A-1 and series A-2 preferred stock voting as a single class may cause all shares of series A preferred stock to be converted into shares of common stock. Following the completion of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights attached to that preferred stock.
Series C Convertible Preferred Stock
We anticipate that, if and when established, the series C preferred stock would rank as follows:
• senior to all of our common stock;
• senior to any class or series of our capital stock hereafter created specifically ranking by its terms junior to the preferred stock;
• on parity with any class or series of our capital stock hereafter created specifically ranking by its terms on parity with the preferred stock; and
• junior to any class or series of our capital stock hereafter created specifically ranking by its terms senior to the series C preferred stock;
in each case, as to distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily.
Each share of our series C preferred stock would be convertible into one share of our common stock (subject to adjustment as provided in the related certificate of designation of preferences) at any time at the option of the holders, provided that each holder would be prohibited from converting series C preferred stock into shares of our common stock if, as a result of such conversion, any such holder, together with its affiliates, would own more than 9.99% of the total number of shares of our common stock then issued and outstanding.
In the event of our liquidation, dissolution, or winding up, each holder of our series C preferred stock could elect to receive either (i) in preference to any payments made to the holders of our common stock and any other junior securities, a payment for each share of series C preferred stock then held equal $0.001, plus an additional amount equal to any dividends declared but unpaid on such shares, and any other fees or liquidated damages then due and owing thereon or (ii) the amount of cash, securities or other property to which such holder would be entitled to receive with respect to each share of series C preferred stock if such share of series C preferred stock had been converted to common stock immediately prior to such liquidation, dissolution, or winding up (without giving effect to any conversion limitations).
Shares of series C preferred stock would not be entitled to receive any dividends, unless and until specifically declared by our board of directors. However, holders of our series C preferred stock would be entitled to receive dividends on shares of series C preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends actually paid on shares of the common stock when such dividends are specifically declared by our board of directors. We would not be obligated to redeem or repurchase any shares of preferred stock. Shares of series C preferred stock would not otherwise be entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.
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Each holder of series C preferred stock would be entitled to the number of votes equal to the number of whole shares of common stock into which the shares of series C preferred stock held by such holder is then convertible (subject to the beneficial ownership limitations set forth in the related certificate of designation of preferences) with respect to any and all matters presented to the stockholders for their action or consideration. Holders of series C preferred stock would vote together with the holders of common stock as a single class, except as provided by law and except that the consent of holders of a majority of the outstanding series C preferred stock would be required to amend the terms of the series C preferred stock.
The series C preferred stock would not limit or qualify the rights of the holders to be sold in this offering except for the voting rights and potential liquidation preference described above.
Other Warrants
February 2013 Warrants
On February 5, 2013, in connection with the issuance of our initial secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain full ratchet anti-dilution price protection upon the issuance of equity or equity-linked securities at an effective common stock purchase price of less than $0.38 per share as well as other customary anti-dilution protection. The holders of such warrants have the right to exercise the warrants by means of a cashless exercise. Upon the occurrence of certain change of control transactions, then any holder of the warrants shall, upon exercise, have the right to acquire the same securities as if it had exercised the warrants immediately before the date on which a record is taken for such transaction, 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 transaction. We anticipate that we will amend and restate these warrants to include provisions that block exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock. The warrants expire on February 5, 2018.
March 2013 Warrants
On March 28, 2013, in connection with the issuance of our amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on March 28, 2018.
June 2013 Warrants
On June 3, 2013, in connection with the issuance of our second amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on June 3, 2018.
August 2013 Warrants
On August 5, 2013, in connection with the issuance of our third amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on August 5, 2018.
October 2013 Warrants
On October 7, 2013, in connection with the issuance of our fourth amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on October 7, 2018.
December 2013 Warrants
On December 9, 2013, in connection with the issuance of our fifth amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on December 9, 2018.
February 2014 Warrants
On February 6, 2014, in connection with the issuance of our sixth amended and restated secured convertible promissory notes, we issued to the same accredited investors warrants to purchase up to an aggregate of 263,158 shares of common stock at an exercise price of $0.38 per share. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on February 6, 2019.
2014 Warrants
Automatically upon the effectiveness of this registration statement, we will issue warrants to purchase up to an aggregate of shares of common stock at an exercise price of $0.199 per share in exchange for warrants to purchase an equal number of shares of series B-2 preferred stock, at the same exercise price. The warrants will otherwise be identical to the warrants for which they are exchanged. The warrants will contain customary anti-dilution protection. The holders of such warrants will have the right to exercise the warrants by means of a cashless exercise. Upon the occurrence of certain change of control transactions, then any holder of the warrants shall, upon exercise, have the right to acquire the same securities as if it had exercised the warrants immediately before the consummation of such transaction. The warrants will expire on November 15, 2018. We anticipate that certain of these warrants will contain provisions that block exercise if such exercise will result in the holder having beneficial ownership of more than 9.99% of our common stock (see “Certain Relationships and Related Transactions”).
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Lock-up Agreements
In connection with this offering, we, our directors, executive officers and greater than 5% stockholders have agreed not to offer, sell, contract to sell, pledge, grant options to purchase, or otherwise dispose of any shares of our common stock or securities exchangeable for or convertible into our common stock for a period of 180 days after the date of this prospectus supplement without the prior written consent of Chardan Capital Markets LLC. This agreement does not apply to the issuance of shares upon the exercise of rights to acquire shares of common stock pursuant to any existing stock option or similar equity incentive or compensation plan. Our directors and executive officers have agreed, subject to certain exceptions, not to, directly or indirectly, sell, hedge, or otherwise dispose of any shares of common stock, options to acquire shares of common stock or securities exchangeable for or convertible into shares of common stock, for a period of 180 days after the date of this prospectus supplement without the prior written consent of Chardan Capital Markets LLC.
However, in the event that either (i) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (ii) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless Chardan Capital Markets LLC waives, in writing, such an extension.
Anti-Takeover Effect of Delaware Law, Certain Charter and Bylaw Provisions
Our certificate of incorporation and bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change of control of our company. These provisions are as follows:
· | they provide that special meetings of stockholders may be called only by our chairman, our president or by a resolution adopted by a majority of our board of directors; |
· | they do not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority stockholders to effect changes in our board of directors; and |
· | they allow us to issue, without stockholder approval, up to shares of preferred stock that could adversely affect the rights and powers of the holders of our common stock. |
We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior did own, 15% or more of the voting stock of a corporation.
Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably entitled to indemnity for such expenses.
Our certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the General Corporation Law of the State of Delaware, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.
We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the General Corporation Law of the State of Delaware would permit indemnification. Effective upon the closing of this offering, we will have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures us against losses which we may incur in indemnifying our officers and directors. In addition, we have entered into indemnification agreements with key officers and directors.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to our directors, officers and persons controlling us, we have been advised that it is the Securities and Exchange Commission’s opinion that such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.
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SHARES ELIGIBLE FOR FUTURE ISSUANCE
Prior to this offering, there has been no public market for our securities, and we cannot predict the effect, if any, that market sales of our securities or the availability of our securities for sale will have on the market price of our securities prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities.
Upon the closing of this offering, we will have a total of shares of our common stock outstanding, based on the shares of our common stock outstanding as of March 3, 2014, assuming (i) the conversion of all outstanding shares of our convertible preferred stock into an aggregate of shares of common stock, which will occur automatically upon the effectiveness of this registration statement, (ii) the conversion of all outstanding convertible indebtedness into an aggregate of shares of common stock, which will occur automatically upon the effectiveness of this registration statement and (iii) a one-for- reverse split of our common stock, which will occur prior to the pricing of this offering. Of these outstanding shares, all of the shares of common stock sold in this offering will be freely tradable, except that any shares purchased in this offering by our affiliates, as that term is defined in Rule 144 under the Securities Act of 1933, as amended, would only be able to be sold in compliance with the Rule 144 limitations described below.
The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 or Rule 701 promulgated under the Securities Act of 1933, as amended, which rules are summarized below. In addition, our executive officers, directors and greater than 5% stockholders have entered into lock-up agreements with the underwriter under which they have agreed, subject to specific exceptions, not to sell any of our stock for at least 180 days following the date of this prospectus, as described below. As a result of these agreements, subject to the provisions of Rule 144 or Rule 701, based on an assumed offering date of , 2014, shares will be available for sale in the public market as follows:
· |
Beginning on the date of this prospectus, all of the units sold in this offering will be immediately available for sale in the public market; |
· | Beginning 181 days after the date of this prospectus, subject to possible extension as described in “Underwriting” below, additional shares of common stock will become eligible for sale in the public market, of which shares will be held by affiliates and subject to the volume and other restrictions of Rule 144, as described below; and |
· | The remainder of the shares will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144, as described below. |
69 |
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares upon expiration of the lock-up agreements described below, without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period, a number of shares that does not exceed the greater of:
· | 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering; or |
· | the average weekly trading volume of common stock on the Nasdaq Capital Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701, subject to the market standoff agreements and lock-up agreements described above.
Stock Options
As soon as practicable after the closing of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act of 1933, as amended, covering all of the shares of our common stock subject to outstanding options and the shares of our common stock reserved for issuance under our stock plans. In addition, we intend to file a registration statement on Form S-8 or such other form as may be required under the Securities Act of 1933, as amended, for the resale of shares of our common stock issued upon the exercise of options that were not granted under Rule 701. We expect to file this registration statement as soon as permitted under the Securities Act of 1933, as amended. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice and public information requirements of Rule 144 and will not be eligible for resale until expiration of the lock-up and market standoff agreements to which they are subject.
Lock-up Agreements
For a description of the lock-up agreements with the underwriter that restrict sales of shares by us and our executive officers and directors, see the information under the heading “Underwriting.”
70 |
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting agreement, we have agreed to sell to the underwriter named below, and the underwriter has agreed to purchase from us, the number of units set forth opposite its name below:
Underwriter |
Number
of
Units |
|||
Chardan Capital Markets LLC | ||||
Total | ||||
The underwriting agreement provides that the obligation of the underwriter to purchase the units offered hereby is subject to certain conditions and that the underwriter is obligated to purchase all of the units offered hereby if any of the units are purchased.
If the underwriter sells more units than the above number, the underwriter has an option for 30 days to buy up to an aggregate of additional units from us at the public offering price less the underwriting commissions and discounts to cover these sales. Prior to separation of the units, any exercise of the over-allotment will be settled in units, and subsequent to the separation of the units will be settled in shares of common stock and warrants, as applicable.
The underwriter proposes to offer to the public the units purchased pursuant to the underwriting agreement at the public offering price on the cover page of this prospectus. After completion of this offering, the underwriter may change the offering price and other selling terms at various times. In connection with the sale of the units to be purchased by the underwriter, the underwriter will be deemed to have received compensation in the form of underwriting commissions and discounts.
Commission and Expenses
The underwriter has advised us that it proposes to offer the units to the public at the public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per unit. After this offering, the public offering price and concession may be changed by the underwriter. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus. The units are offered by the underwriter as stated herein, subject to receipt and acceptance by the underwriter and subject to their right to reject any order in whole or in part. The underwriter has informed us that it does not intend to confirm sales to any accounts over which it exercises discretionary authority.
We have agreed to pay to the underwriter a fee equal to 9% of the aggregate sales price of the units sold in this offering, which fee is to be paid by means of a discount from the offering price to purchasers in the offering. In addition, we have agreed to reimburse the underwriter for all of its agreed-upon, actual and out-of-pocket expenses, including but not limited to reasonable and documented travel, legal fees and other expenses, incurred in connection with the offering, whether or not the offering is completed, subject to presentation of appropriate documentation evidencing such out-of-pocket expenses up to a maximum of $25,000 for all expenses other than legal fees plus $125,000 for legal fees upon completion of this offering. In the event that this offering is not consummated, we will not be required to reimburse the underwriter for more than $25,000 for legal fees and we will not be required to reimburse the underwriter for any other out of pocket expenses. Notwithstanding the foregoing, if the underwriter terminates the underwriting agreement prior to closing under certain circumstances, including if we breach the terms of the underwriting agreement or there is a material adverse change impacting the markets generally or the Company specifically, then the foregoing limitations on reimbursement of expenses shall not apply. We estimate that expenses payable by us in connection with this offering, other than the underwriting discounts and commissions referred to above, will be approximately $ .
71 |
The following table summarizes the public offering price, underwriting discounts and commissions and proceeds before expenses to us assuming both no exercise and full exercise of the underwriter’s option to purchase additional securities:
Total | |||||||||||
Per Unit |
Without
Over-
|
With
Over- Allotment |
|||||||||
Public offering price | $ | $ | $ | ||||||||
Underwriting discounts and commissions | |||||||||||
Proceeds, before expenses, to us |
Underwriter Compensation Warrants
The Company shall issue to the underwriter, upon the closing of the offering, and, if applicable, upon the closing of the over-allotment option, underwriter warrants equal in number to 5.0% of the aggregate number of units issued under the offering and, in the event that the over-allotment option is exercised, including 5% of the units issued pursuant to the exercise of the over-allotment option. Each underwriter warrant will have a term of three years commencing one year from the date on which the Registration Statement on Form S-1 of which this prospectus forms a part is declared effective by the Securities and Exchange Commission and may be exercised on a cashless basis if not registered. The underwriter warrants will have an exercise price equal to 125% of the per unit price of the units sold in this offering. The underwriter warrants are exercisable commencing twelve months after the date on which the Registration Statement on Form S-1 of which this prospectus forms a part is declared effective by the Securities and Exchange Commission. The underwriter warrants are not redeemable by us.
The underwriter warrants and the securities underlying such warrants are deemed to be underwriting compensation by the FINRA and are therefore subject to a 180-day lock-up pursuant to FINRA Rule 5110(g)(1). The underwriter (or permitted assignee under the rule) may not sell, transfer, assign, pledge or hypothecate the underwriter warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the underwriter warrants or the underlying securities for a period of 180 days from the date on which the Registration Statement on Form S-1 of which this prospectus forms a part is declared effective by the Securities and Exchange Commission, except to any FINRA member participating in the offering and their bona fide officers or partners.
Lock Up Agreements
We have agreed not to offer, sell, contract to sell, pledge, grant options to purchase, or otherwise dispose of any shares of our common stock or securities exchangeable for or convertible into our common stock for a period of 180 days after the date of this prospectus supplement without the prior written consent of Chardan Capital Markets LLC. This agreement does not apply to the issuance of shares upon the exercise of rights to acquire shares of common stock pursuant to any existing stock option or similar equity incentive or compensation plan. Our directors, executive officers and greater than 5% stockholders have agreed, subject to certain exceptions, not to, directly or indirectly, sell, hedge, or otherwise dispose of any shares of common stock, options to acquire shares of common stock or securities exchangeable for or convertible into shares of common stock, for a period of 180 days from the date on which the Registration Statement on Form S-1 of which this prospectus forms a part is declared effective by the Securities and Exchange Commission without the prior written consent of Chardan Capital Markets LLC.
However, in the event that either (i) during the last 17 days of the “lock-up” period, we release earnings results or material news or a material event relating to us occurs or (ii) prior to the expiration of the “lock-up” period, we announce that we will release earnings results during the 16-day period beginning on the last day of the “lock-up” period, the expiration of the “lock-up” will be extended until the expiration of the 18-day period beginning on the date of the release of the earnings results or the occurrence of the material news or event, as applicable, unless Chardan Capital Markets LLC waives, in writing, such an extension.
Indemnification
The underwriting agreement provides that we will indemnify the underwriter against certain liabilities that may be incurred in connection with this offering, including liabilities under the Securities Act, or to contribute payments that the underwriter may be required to make in respect thereof.
Listing
We have applied to list the units on the Nasdaq Capital Market, subject to notice of issuance, under the symbol “NVBXU.” Once the securities comprising the units begin trading separately, we anticipate that the shares of common stock and redeemable warrants will be listed on the Nasdaq Capital Market under the symbols “NVBX” and “NVBXW,” respectively.
72 |
Electronic Distribution
A prospectus in electronic format may be made available on websites or through other online services maintained by the underwriter of this offering, or by its affiliates. Other than the prospectus in electronic format, the information on the underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter, and should not be relied upon by investors.
Price Stabilization, Short Positions and Penalty Bids
In connection with the offering the underwriter may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:
· | Stabilizing transactions permit bids to purchase securities so long as the stabilizing bids do not exceed a specified maximum. |
· | Over-allotment involves sales by the underwriter of securities in excess of the number of securities the underwriter is obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of securities over-allotted by the underwriter is not greater than the number of securities that it may purchase in the over-allotment option. In a naked short position, the number of securities involved is greater than the number of securities in the over-allotment option. The underwriter may close out any covered short position by either exercising its over-allotment option and/or purchasing securities in the open market. |
· | Syndicate covering transactions involve purchases of securities in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of securities to close out the short position, the underwriter will consider, among other things, the price of securities available for purchase in the open market as compared to the price at which it may purchase securities through the over-allotment option. If the underwriter sells more securities than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying securities in the open market. A naked short position is more likely to be created if the underwriter is concerned that there could be downward pressure on the price of the securities in the open market after pricing that could adversely affect investors who purchase in the offering. |
· | Penalty bids permit the underwriter to reclaim a selling concession from a syndicate member when the securities originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our securities or preventing or retarding a decline in the market price of our securities. As a result, the price of our securities may be higher than the price that might otherwise exist in the open market. Neither we nor the underwriter makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our securities. In addition, neither we nor the underwriter makes any representations that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
No Public Market
Prior to this offering, there has not been a public market for our securities in the U.S. and the public offering price for our units will be determined through negotiations between us and the underwriter. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the underwriter believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant.
73 |
We offer no assurances that the initial public offering price will correspond to the price at which our units, common stock or redeemable warrants will trade in the public market subsequent to this offering or that an active trading market for our units, common stock or redeemable warrants will develop and continue after this offering.
Affiliations
The underwriter and its affiliates may in the future provide, various investment banking and other financial services for us for which services they may in the future receive, customary fees. Except for services provided in connection with this offering, the underwriter has not provided any investment banking or other financial services to us and we do not expect to retain the underwriter to perform any investment banking or other financial services to us for at least 90 days after the date of this prospectus.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us by Haynes and Boone, LLP, New York, New York. The underwriter is being represented by Loeb & Loeb, LLP, New York, New York, in connection with the offering.
EXPERTS
Our consolidated financial statements as of December 31, 2012 and 2013 and for each of the two years ended December 31, 2013 appearing in this prospectus have been audited by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, independent registered public accounting firm, as set forth in their report thereon appearing herein (which contains an explanatory paragraph describing conditions that raise a substantial doubt about our ability to continue as a going concern as described in Note 1b to the consolidated financial statements), and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and Exchange Commission in connection with this offering. In addition, as a result of this offering, we will become subject to the full informational requirements of the Securities Exchange Act of 1934, as amended, and, accordingly, will file annual, quarterly and current reports and other information with the Securities and Exchange Commission. You may read and copy the registration statement and any other documents we have filed at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.W., Washington, D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm.. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the Public Reference Room. Our Securities and Exchange Commission filings are also available to the public at the Securities and Exchange Commission’s Internet site at “http://www.sec.gov”. Upon completion of this offering, you will also be able to access, free of charge, our reports filed with the Securities and Exchange Commission through our website (www.nanovibronix.com). Reports filed with or furnished to the Securities and Exchange Commission will be available as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission. None of the information contained on, or that may be accessed through our websites or any other website identified herein is part of, or incorporated into, this prospectus. All website addresses in this prospectus are intended to be inactive textual references only.
This prospectus is part of the registration statement and does not contain all of the information included in the registration statement. Whenever a reference is made in this prospectus to any of our contracts or other documents included as exhibits to this registration statement, the reference may not be complete and, for a copy of the contract or document included as exhibits to this registration statement, you should refer to the exhibits that are a part of the registration statement.
74 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2013
U.S. DOLLARS IN THOUSANDS
INDEX
Page | |
Report of Independent Registered Public Accounting Firm | F-2 |
Consolidated Balance Sheets | F-3 - F-4 |
Consolidated Statements of Comprehensive Loss | F-5 |
Consolidated Statements of Changes in Stockholders' Deficiency | F-6 |
Consolidated Statements of Cash Flows | F-7 |
Notes to Consolidated Financial Statements | F-8 - F-30 |
- - - - - - - - - - - - - -
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
NANO VIBRONIX INC.
We have audited the accompanying consolidated balance sheets of Nano Vibronix Inc. ("the Company") and its subsidiary as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive loss, changes in stockholders' deficiency and cash flows for each of the two years ended December 31, 2013. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financing reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements referred to above, present fairly, in all material respects, the consolidated financial position of the Company and its subsidiary as of December 31, 2013 and 2012, and the consolidated results of their operations, changes in stockholders' deficiency and cash flows for each of the two years ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1b, the Company has incurred recurring losses and negative cash flows from operating activities during the year ended December 31, 2013. Its ability to continue to operate is dependent upon obtaining additional financial support. These conditions as described in Note 1b, raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Tel-Aviv, Israel | KOST FORER GABBAY & KASIERER |
March 6, 2014 | A Member of Ernst & Young Global |
F- 2 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
The accompanying notes are an integral part of the consolidated financial statements.
F- 3 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the consolidated financial statements.
F- 4 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except share data)
Year
ended
December 31, |
||||||||
2013 | 2012 | |||||||
Revenues | $ | 211 | $ | 166 | ||||
Cost of revenues | 91 | 50 | ||||||
Gross profit | 120 | 116 | ||||||
Operating expenses: | ||||||||
Research and development, net | 620 | 572 | ||||||
Selling and marketing | 244 | 190 | ||||||
General and administrative | 366 | 128 | ||||||
Total operating expenses | 1,230 | 890 | ||||||
Operating loss | 1,110 | 774 | ||||||
Other income | 36 | - | ||||||
Financial expense, net (Note 12) | 880 | 501 | ||||||
Loss before taxes on income | 1,954 | 1,275 | ||||||
Taxes on income (Note 10) | 35 | - | ||||||
Net loss | $ | 1,989 | $ | 1,275 | ||||
Total comprehensive loss | $ | 1,989 | $ | 1,275 | ||||
Net basic and diluted loss per share (Note 14) | $ | (1.83 | ) | $ | (1.18 | ) | ||
Weighted average number of Common stock used in computing basic and diluted net loss per share | 1,085,060 | 1,085,060 |
The accompanying notes are an integral part of the consolidated financial statements.
F- 5 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIENCY
U.S. dollars in thousands (except share data)
Preferred stock | Common stock | Additional paid-in | Accumulated | Total stockholders' | ||||||||||||||||||||||||
Number | Amount | Number | Amount | capital | Deficit | deficiency | ||||||||||||||||||||||
Balance as of January 1, 2012 | 394,232 | $ *) - | 1,085,060 | $ | 1 | $ | 10,353 | $ | (10,939 | ) | $ | (585 | ) | |||||||||||||||
Stock-based compensation related to options granted to consultants and employees | - | - | - | - | 28 | - | 28 | |||||||||||||||||||||
Total comprehensive loss | - | - | - | - | - | (1,275 | ) | (1,275 | ) | |||||||||||||||||||
Balance as of December 31, 2012 | 394,232 | *) - | 1,085,060 | 1 | 10,381 | (12,214 | ) | (1,832 | ) | |||||||||||||||||||
Stock-based compensation related to options granted to consultants and employees | - | - | - | - | 479 | - | 479 | |||||||||||||||||||||
Benefit component of convertible notes | - | - | - | - | 45 | - | 45 | |||||||||||||||||||||
Total comprehensive loss | - | - | - | - | - | (1,989 | ) | (1,989 | ) | |||||||||||||||||||
Balance as of December 31, 2013 | 394,232 | $ *) - | 1,085,060 | $ | 1 | $ | 10,905 | $ | (14,203 | ) | $ | (3,297 | ) |
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the consolidated financial statements.
F- 6 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year
ended
December 31, |
||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,989 | ) | $ | (1,275 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 10 | 9 | ||||||
Stock based compensation | 479 | 28 | ||||||
Benefit component of promissory notes | 466 | 238 | ||||||
Valuation of warrants to purchase Common stock | 77 | - | ||||||
Increase in trade receivables | (6 | ) | (1 | ) | ||||
Decrease (increase) in prepaid expenses and other accounts receivable | (35 | ) | 27 | |||||
Increase in inventories | (5 | ) | (60 | ) | ||||
Increase (decrease) in accounts payable | (2 | ) | 1 | |||||
Increase (decrease) in other accounts payable | 86 | (10 | ) | |||||
Increase in accrued severance pay, net | 1 | - | ||||||
Accrued interest on promissory notes | 316 | 256 | ||||||
Net cash used in operating activities | (602 | ) | (787 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (5 | ) | (5 | ) | ||||
Net cash used in investing activities | (5 | ) | (5 | ) | ||||
Cash flows from financing
activities:
|
||||||||
Proceeds from issuance of promissory notes and warrants | 600 | - | ||||||
Net cash provided by financing activities | 600 | - | ||||||
Decrease in cash and cash equivalents | (7 | ) | (792 | ) | ||||
Cash and cash equivalents at the beginning of the period | 101 | 893 | ||||||
Cash and cash equivalents at the end of the period | $ | 94 | $ | 101 | ||||
|
||||||||
Supplemental information and disclosure of non-cash financing transactions: | ||||||||
Issuance costs | $ | 272 | $ | - | ||||
The accompanying notes are an integral part of the consolidated financial statements.
F- 7 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 1:- | GENERAL |
a. | Nano Vibronix Inc. ("the Company"), a U.S. (Delaware) corporation, commenced operations on October 20, 2003 and is a medical device company focusing on noninvasive biological response-activating devices that target wound healing and pain therapy and can be administered at home, without the assistance of medical professionals. |
The Company's principal research and development activities are conducted in Israel through its wholly-owned subsidiary, Nano Vibronix (Israel 2003) Ltd., a company registered in Israel which commenced operations in October 2003.
b. | During the year ended December 31, 2013, the Company continues to incur losses and negative cash flows from operating activities amounting to $ 1,989 and $ 602, respectively. These conditions raise substantial doubts about the Company's ability to continue as a going concern. The Company's ability to continue to operate is dependent upon raising additional funds to finance its activities. The Company plans to raise capital to finance its operations. There are no assurances, however, that the Company will be successful in obtaining an adequate level of financing needed for the long-term development and commercialization of its products. The consolidated financial statements do not include any adjustments with respect to the carrying amounts of assets and liabilities and their classification that might be necessary should the Company be unable to continue as a going concern. |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP").
a. | Use of estimates: |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
F- 8 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
b. | Financial statements in U.S. dollars: |
The accompanying financial statements have been prepared in U.S. dollars.
The majority of the Company's finances are received in U.S. dollars. Although a portion of the Company's expenses are dominated in New Israeli Shekel ("NIS") (mostly salary and rent), a substantial portion of the expenses are denominated in U.S. dollar. In addition, most of the Company's assets and liabilities are in U.S. dollars and management expects that most of its revenues will be generated in US dollars. The Company's management believes that the currency of the primary economic environment in which the operations of the Company and its subsidiary are conducted is the U.S. dollar; thus the dollar is the functional currency of the Company and its subsidiary.
Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies have been remeasured into U.S. dollars in accordance with ASC 830, "Foreign Currency Matters" ("ASC 830").
All transaction gains and losses from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations in financial expenses, net, as appropriate.
c. | Principles of consolidation: |
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Nano Vibronix (Israel 2003) Ltd. All intercompany balances and transactions have been eliminated upon consolidation.
d. | Cash equivalents: |
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at the date acquired.
e. | Inventories: |
Inventories are stated at the lower of cost or market value. Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence. The Company periodically evaluates the quantities on hand relative to current and historical selling prices and historical and projected sales volume. Based on this evaluation, provisions are made when required to write-down inventory to its market value. As of December 31, 2013 and 2012, inventory write-downs were recorded in the amounts of $ 19 and $ 0, respectively.
Inventories include finished products and raw materials. Cost is determined using the "first-in, first-out" method.
F- 9 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
f. | Property and equipment: |
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following annual rates:
% | |
Computers and peripheral equipment | 33 |
Office furniture and equipment | 10 – 15 (mainly 10) |
g. | Impairment of long-lived assets: |
The Company's property and equipment are reviewed for impairment in accordance with ASC 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 an asset 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. Assets to be disposed of are reported at the lower of the carrying amount or fair value less selling costs. During the years ended December 31, 2013 and 2012, no impairment losses have been identified.
h. | Severance pay: |
The Company's liability for severance pay in respect of its subsidiary is calculated pursuant to Israel's Severance Pay Law, based on the most recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date. Employees are entitled to one month's salary for each year of employment or a portion thereof. The Company's liability for all of its Israeli employees is covered by monthly deposits for insurance policies and/or pension funds and by an accrual. The value of these policies and/or funds is recorded as an asset in the Company's balance sheet. The deposited funds include profits accumulated to the balance sheet date. The deposited amounts may be withdrawn only upon the fulfillment of the obligations pursuant to the Israel's Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrendered value of these policies, and includes immaterial profits.
Severance expenses for the years ended December 31, 2013 and 2012, amounted to $ 37 and $ 26 and, respectively.
F- 10 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
i. | Warrants: |
The Company accounts for certain warrants held by investors which include down round protection as a liability according to provisions of ASC 815-40, "Derivatives and Hedging - Contracts in Entity`s Own Equity", ("ASC 815") which provides new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer`s own sock and thus able to qualify to be a derivative financial instrument. The Company measures the warrants at fair value with the assistance of an independent valuation firm by applying the Black-Scholes option pricing model in each reporting period until they are exercised or expired, with changes in the fair value being recognized in the Company`s statement of comprehensive loss as financial income or expense, as appropriate. For more information see Note 9.
j. | Revenue recognition: |
The Company generates revenues from the sale of its products to distributors and end users, which are usually doctors as well as patients using the product at home. Revenues from those products are recognized in accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB No. 104"), when delivery has occurred, persuasive evidence of an agreement exists, the vendor's fee is fixed or determinable, no further obligation exists and collectability is probable.
The Company's agreements with its distributers do not contain any price protection guarantees, rights of return or other post-shipment obligation.
k. | Research and development costs: |
Research and development costs are charged to the statement of comprehensive loss, as incurred.
l. | Income taxes: |
The Company accounts for income taxes in accordance with ASC 740, "Income Taxes". This Statement 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 Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2013 and 2012, a full valuation allowance was provided by the Company.
The Company implements a two-step approach to recognize and measure 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% (cumulative basis) likely to be realized upon ultimate settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as of December 31, 2013 and 2012 the Company has not recorded a liability for uncertain tax positions.
F- 11 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
m. | Accounting for stock-based compensation: |
The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" 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 that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.
The Company recognizes compensation expenses for the value of its awards granted based on the straight line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company selected the Black-Scholes-Merton option pricing model as the most appropriate fair value method for its stock-options awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon similar traded companies' historical share price movements. The expected option term represents the period that the Company's stock options are expected to be outstanding. The Company currently uses simplified method until sufficient historical exercise data will support using expected life assumptions .The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term.
The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company applies ASC 505-50, "Equity-Based Payments to Non-Employees" with respect to options and warrants issued to non-employees.
The fair value of the shares of Common stock underlying the options and warrants had been determined by the Company`s management with assistance of an independent valuation firm by applying of market approach using recent third-party transactions in the equity of the Company. Because there has been no public market for the Common stock, management has determined fair value of the Common stock at the time of grant of options by considering a number of objective and subjective factors. The fair value of the underlying shares of Common stock shall be determined by management until such time as the Common stock is listed on an established stock exchange, national market system or other quotation system.
F- 12 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
n. | Fair value of financial instruments: |
ASC 820, "Fair Value Measurements and Disclosures", defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
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.
As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - | Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. |
Level 2 - | Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
Level 3 - | Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The carrying amounts of cash and cash equivalents, trade receivables, prepaid expenses and other accounts receivable, accounts payable and other accounts payable approximate their fair value due to the short-term maturities of such instruments.
o. | Convertible promissory notes: |
The Company applies ASC 470-20, "Debt with Conversion and Other Options" ("ASC 470-20"), when it can not elect the fair value option under ASC 825, "Financial Instruments". In accordance with ASC 470-20 the Company first allocates the proceeds to freestanding liability instrument that are measured at fair value at each reporting date, based on their fair value. The remaining proceeds are allocated between the convertible debt and all other freestanding instruments based on the relative fair values of the instruments at the time of issuance. In accordance with ASC 815 "Derivatives andHedging" ("ASC 815"), the Company bifurcates all embedded derivatives that require bifurcation and accounts for them separately from the convertible debt.
F- 13 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
Embedded derivatives that are separated from the convertible debt are bifurcated based on their fair value and remeasured on each reporting date.
In addition, under the guidelines of ASC 470-20, the Company measures and recognizes the embedded beneficial conversion feature on the commitment date. The beneficial conversion feature is measured by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature is calculated on the commitment date using the effective conversion price which had resulted subsequent to the allocation of the proceeds between the convertible debt and all other freestanding instruments. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.
The Company applied ASC 470-20 and ASC 815 to the Convertible promissory notes (see Note 8).
p. | Basic and diluted net loss per share: |
Basic net loss per share is computed based on the weighted average number of Common stock outstanding during each year. Diluted net loss per share is computed based on the weighted average number of Common stock outstanding during each year plus dilutive potential equivalent Common stock considered outstanding during the year, in accordance with ASC 260, "Earnings per Share."
All outstanding stock options and warrants have been excluded from the calculation of the diluted net loss per share because all such securities are anti-dilutive for all periods presented.
q. | Concentrations of credit risk: |
Financial instruments that potentially subject the Company and its subsidiary to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables.
Cash and cash equivalents are invested in major banks in the United States and Israel. Such deposits in the United States and in Israel may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company's investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.
Trade receivables are mainly derived from sales to customers, located in the USA, Israel, Europe and India. The Company performs ongoing credit evaluation of its customers and to date has not experienced any material losses.
F- 14 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
The Company and its subsidiary have no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.
NOTE 3:- | PREPAID EXPENSES AND OTHER ACCOUNTS RECEIVABLE |
December 31, | ||||||||
2013 | 2012 | |||||||
Prepaid expenses | $ | 32 | $ | - | ||||
Other accounts receivable | 20 | 17 | ||||||
$ | 54 | $ | 17 |
NOTE 4:- | PROPERTY AND EQUIPMENT, NET |
December 31, | ||||||||
2013 | 2012 | |||||||
Cost: | ||||||||
Computers and peripheral equipment | $ | 95 | $ | 92 | ||||
Office furniture and equipment | 10 | 8 | ||||||
105 | 100 | |||||||
Accumulated depreciation: | ||||||||
Computers and peripheral equipment | 74 | 65 | ||||||
Office furniture and equipment | 8 | 7 | ||||||
82 | 72 | |||||||
Depreciated cost | $ | 23 | $ | 28 |
Depreciation expenses for the years ended December 31, 2013 and 2012 were $ 10 and $ 9, respectively.
NOTE 5:- | DEFERRED ISSUANCE COSTS |
Deferred issuance costs represent direct and incriental cost related to the Company's planned initial public offering. |
F- 15 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 6:- | OTHER ACCOUNTS PAYABLE |
December 31, | ||||||||
2013 | 2012 | |||||||
Employees and payroll accruals | $ | 94 | $ | 51 | ||||
Accrued expenses | 285 | 24 | ||||||
Deferred revenues | 19 | - | ||||||
Provision for taxes | 35 | - | ||||||
$ | 433 | $ | 75 |
NOTE 7:- | COMMITMENTS AND CONTINGENT LIABILITIES |
a. | The Company leases office facilities and motor vehicles under operating leases, which expire on various dates, the latest of which is 2016. |
Future minimum lease commitments under non-cancelable operating lease agreements as of December 31, 2013 are as follows:
Year ended December 31, | Operating leases | |||
2014 | $ | 60 | ||
2015 | 51 | |||
2016 | 7 | |||
Total | $ | 118 |
Rent and related expenses were $ 54 and $ 46 for the years ended December 31, 2013 and 2012, respectively.
b. | Royalties to the Office of the Chief Scientist ("the OCS"): |
Under the Company's subsidiary research and development agreements with the OCS and pursuant to applicable laws, the Company is required to pay royalties at the rate of 3-3.5% of sales of products developed with funds provided by the OCS, up to an amount equal to 100% of the OCS research and development grants received, linked to the dollar including accrued inters at the LIBOR rate. The Company is obligated to repay the Israeli Government for the grants received only to the extent that there are sales of the funded products.
As of December 31, 2013, the Company has a contingent obligation to pay royalties in the principal amount of approximately $ 487. In addition, the OCS may impose certain conditions on any arrangement under which it permits the Company to transfer technology or development out of Israel.
F- 16 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 7:- | COMMITMENTS AND CONTINGENT LIABILITIES (Cont.) |
c. | In December 2011, the Company entered into a license agreement with a third party, to manufacture and sell its products. The Company will market and sell the third party's products and will pay future royalties as a percentage of future revenue. In regard with this agreement, during 2012 the Company paid an advance payment in an amount of $ 75 on account of the future royalties, which was recorded to the consolidated statement of comprehensive loss in the year ended December 31, 2012, under line item cost of revenues, due to the uncertainty of the Company`s ability to sell the products. In addition, the Company is obligated to pay additional amount of $ 75, in case the actual paid royalties until August 2014 will not exceed the minimum of $ 150, as defined in the agreement. Since the additional future royalties creates an executor contract to the Company, and in accordance with ASC 450-20, the liability was not recorded in the Company's consolidated financial statements as of December 31, 2013 and 2012, and will be recorded only when occurred. |
NOTE 8:- | CONVERTIBLE PROMISSORY NOTES |
a. | In November 2011, the Company issued Convertible B-1 Promissory Notes (the "B-1 Promissory Notes") to new and existing stockholders for a consideration of $ 1,000. The B-1 Promissory Notes bears 10% annual interest and will be automatically converted into series B-1 Participating Convertible Preferred stock ("series B-1 Stock"), upon certain events as defined in the agreement, at a fix conversion price of $ 0.284 per share. In case the B-1 Promissory Notes will not be converted, the Company shall pay the unpaid principal amount and interest accrued on the earlier of an "Event of Default" (as defined in the agreement) or November 15, 2014 (the "Maturity Date"). |
Following the above mentioned, the Company's "old Series B" Participating Convertible Preferred stock and Warrants to Preferred B stock, issued during 2009 through 2011 pursuant to the subscription agreement from 2009 (the "Old Series B Investor") were automatically cancelled and its holders received Convertible B-2 Promissory Notes (the "B-2 Promissory Notes") equal to an aggregate amount of $1,557. The B-2 Promissory Notes terms are identical to the B-1 Promissory Notes terms, except that such B-2 Promissory Notes are convertible into stock of series B-2 Participating Convertible Preferred stock of the Company, par value $ 0.001 per share ("series B-2 stock") and the conversion price set forth in such notes is $ 0.199 per share (reflecting a 30% discount on the B-1 Promissory Notes' conversion price mentioned above). The B-2 Promissory notes are considered to be a liability pursuant to ASC 480 "Distinguishing Liabilities from Equity". The convertible notes are presented at accreted value, which includes the principal amount of the convertible notes less any discount and accumulated interest accrued over the term of the convertible notes, using the interest method.
In addition, the Company issued to the "Old Series B Investors" warrants to purchase 2,319,062 B-2 Preferred stock with a fix exercise price of $ 0.199 (reflecting a 30% discount on the fair value of the Company's Preferred stock on that date). The warrants shall expire on November 15, 2018. The fair value of the warrants on the issuance date was $571 and recorded in equity in accordance with ASC 470.
F- 17 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 8:- | CONVERTIBLE PROMISSORY NOTES (Cont.) |
As a result of issuing the warrants and as a result of the discount on the conversion price of the B-2 Promissory note, the Company recorded in 2011 benefit component in the amount of $ 1,142, to be amortized over the terms of the B-2 Promissory Notes.
b. | On February 5, 2013 the Company signed an agreement with certain investors ("The Agreement"), according to which the Company issued convertible promissory notes (the "Notes") in consideration for $100. The Notes mature on the earlier of June 30, 2013, or the closing date of a financing in which the Company shall sell an aggregate of at least $ 250 of its debt or equity securities or such accelerated date as a result of an occurrence of an event of default as defined in The Agreement, upon which date the entire outstanding principal balance and any outstanding fees or interest will be due and payable in full. The Notes bear interest at the rate of 6% per annum, which rate is increased to 10% upon and during the occurrence of an event of default as defined in The Agreement. In addition, the Notes are convertible either at the investor`s option or upon maturity of the promissory notes into Common stock at an initial conversion price of $ 0.38 per share, subject to adjustment for stock splits, fundamental transactions or similar events. |
In addition, the Company issued to the stockholder 263,158 warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38. The warrants shall expire on February 5, 2018.
On March 28, 2013 the Company signed an amendment to The Agreement and issued Notes to certain investors in the principal amount of $ 200. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on March 28, 2018.
On June 3, 2013 the Company signed a second amendment to The Agreement and issued Notes to certain investors in the principal amount of $ 300. The Note should be fully due and payable at the earliest of September 30, 2013, or the closing date of a financing round as defined in the agreement. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on June 3, 2018.
On August 5, 2013, the Company signed a third amendment to The Agreement and issued Notes to certain investors in the principal amount of $400. The Note should be fully due and payable at the earliest of November 30, 2013, or the closing date of a financing round as defined in the agreement. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on August 5, 2018.
F- 18 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 8:- | CONVERTIBLE PROMISSORY NOTES (Cont.) |
On October 7, 2013, the Company signed a fourth amendment to The Agreement and issued Notes to certain investors in the principal amount of $500. The Note should be fully due and payable at the earliest of December 31, 2013, or the closing date of a financing round asdefined in the agreement. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on October 7, 2018.
On December 9, 2013, the Company signed a fifth amendment to The Agreement and issued Notes to certain investors in the principal amount of $600. The Note should be fully due and payable at the earliest of February 28, 2014 (which date was subsequentlyextended to April 30, 2014. See also Note 14a), or the closing date of a financing round as defined in the agreement. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on December 9, 2018.
The Company accounted for the Notes in accordance with ASC 470-20 and first allocates the proceeds to the detachable warrants that are measured at fair value at each reporting date, based on their fair value (see also Note 9). The remaining proceeds were allocated to the convertible notes for which the Company recorded beneficial convertion feature in an amount of $45.
NOTE 9:- | FAIR VALUE MEASUREMENTS |
During February through December 2013, the Company issued to the stockholder 1,578,948 warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events including "down round" protection. The warrants shall expire on February 5, 2018 through December 9, 2018, based on the issuance date (see also Note 8b).
The Company measures the warrants at fair value with the assistance of an independent valuation firm by applying the Black-Scholes option pricing model in each reporting period until they are exercised or expired, with changes in fair values being recognized in the Company’s consolidated statement of comprehensive loss as financial income or expenses.
F- 19 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 9:- | FAIR VALUE MEASUREMENTS (Cont.) |
In estimating the warrants' fair value the Company used the following assumptions:
Issuance date and December 31, | ||||
2013 | ||||
Dividend yield (1) | 0% | |||
Expected volatility (2) | 58% | |||
Risk-free interest (3) | 0.07% - 0.13% | |||
Expected term (years) (4) | 0.6-1 |
(1) | Dividend yield - was based in the fact that the Company has not paid dividends to its stockholders in the past and does not expect to pay dividends to its stockholders in the future. |
(2) | Expected volatility - was calculated based on actual historical stock price movements of companies in the same industry over the term that is equivalent to the expected term of the option. |
(3) | Risk-free interest - based on yield rate of non-index linked U.S. Federal Reserve treasury stock. |
(4) | Expected term - the expected term was based on the maturity date of the warrants. |
Fair value measurement using significant unobservable inputs (Level 3):
Fair value
of warrants
to Common stock |
||||
Balance at January 1, 2013 | $ | - | ||
Fair value of warrants | 176 | |||
Change in fair value of warrants | 77 | |||
Balance at December 31, 2013 | $ | 253 |
NOTE 10:- | TAXES ON INCOME |
a. | As of December 31, 2013, the U.S. Company had federal and state net operating carry forward tax losses of approximately $ 8,681. The federal operating loss can be offset against taxable income for 20 years. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions of the Internal Revenue Code of 1986. |
F- 20 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 10:- | TAXES ON INCOME (Cont.) |
b. | Foreign tax: |
1. | Income Tax (Inflationary Adjustments) Law, 1985: |
According to the law, until 2007, the results for tax purposes were adjusted for the changes in the Israeli CPI.
In February 2008, the "Knesset" (Israeli parliament) passed an amendment to the Income Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting 2008 and thereafter. Starting 2008, the results for tax purposes are measured in nominal values, excluding certain adjustments for changes in the Israeli CPI carried out in the period up to December 31, 2007. The amendment to the law includes, inter alia, the elimination of the inflationary additions and deductions and the additional deduction for depreciation starting 2008.
2. | The Law for the Encouragement of Capital Investments, 1959: |
According to the law, the Company's subsidiary is entitled to various tax benefits by virtue of the "Beneficiary Enterprise" status granted to the subsidiary, defined by this law.
The principal benefits are:
The subsidiary is tax exempt for a benefit period of two years and in the five subsequent years of the benefit period is subject to a reduced tax rate of 10%-25% (based on percentage of foreign ownership).
According to the law, the benefit period commences in the later of the year elected by the subsidiary or the first year in which the subsidiary has taxable income, provided that 12 years have not elapsed from the beginning of the year of election. The subsidiary has elected 2005 as the year of election.
If dividends are distributed out of tax exempt profits, the subsidiary will then become liable for tax at the rate applicable to its profits from the approved enterprise in the year in which the income was earned, as if it had not chosen the alternative track of benefits. The subsidiary's policy is not to distribute dividends out of these profits.
Conditions for the entitlement to the benefits:
The above benefits are conditional upon the fulfillment of the conditions stipulated by the law, regulations published there under and the letters of approval for the specific investments in the Beneficiary Enterprise. In the event of failure to comply with these conditions, the benefits may be canceled and the subsidiary may be required to refund the amount of the benefits, in whole or in part, including interest. The management believes that the subsidiary is meeting the aforementioned conditions.
F- 21 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 10:- | TAXES ON INCOME (Cont.) |
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), which prescribes, among others, amendments in the Law for the Encouragement of Capital Investments, 1959 ("the Law"). The Amendment became effective as of January 1, 2011. According to the Amendment, the benefit tracks in the Law were modified and a flat tax rate applies to the Company's entire preferred income under its status as a preferred company with a preferred enterprise. Commencing from the 2011 tax year, the Company will be able to apply (the waiver is non-recourse) the Amendment and from the elected tax year and onwards, it will be subject to the amended tax rates that are: 2011 and 2012 - 15% (in development area A - 10%), 2013 and 2014 - 12.5% (in development area A – 7%) and in 2015 and thereafter - 12% (in development area A - 6%). Certain "Special Industrial Companies" that meet certain criteria would enjoy further reduced tax rates of 5% in Zone A and 8% elsewhere. The profits of these Industrial Companies would be freely distributable as dividends, subject to a 15% withholding tax (or lower, under an applicable tax treaty).
The Company and its subsidiary has tested the impact of the amendment to the Law on its financial statements, and as of the publication of the reports the Company and its subsidiary estimates that it will not move under the initiation of the Law as of the tax year 2013.
This estimation of the Company and its subsidiary might change in the future until the submission of the final decision to the tax authorities, as stated in the amendment to the Law.
3. | Tax rates: |
The Israeli corporate tax rate was 25% in 2012 and 2013.
On December 5, 2011, the Israeli Parliament (the Knesset) passed the Law for Tax Burden Reform (Legislative Amendments), 2011 ("the Law") which, among others, cancels effective from 2012, the scheduled progressive reduction in the corporate tax rate. The Law also increases the corporate tax rate to 25% in 2012. In view of this increase in the corporate tax rate to 25% in 2012, the real capital gains tax rate and the real betterment tax rate were also increased accordingly.
On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for 2013-2014 ("Amended Budget Law") which consists, among others, of fiscal changes whose main aim is to enhance long-term collection of taxes.
These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas), taxing revaluation gains and increasing the tax rates on dividends within the scope of the Law for the Encouragement of Capital Investments to 20% effective from January 1, 2014.
F- 22 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 10:- | TAXES ON INCOME (Cont.) |
4. | Taxes on income recorded in the statement of comprehensive loss for the year ended December 31, 2013 are all current year taxes. |
5. | The subsidiary has final tax assessments through 2007. |
c. | Deferred income taxes: |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company`s deferred tax assets are as follows:
December 31, | ||||||||
2013 | 2012 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carry forward | $ | 3,472 | $ | 3,615 | ||||
Temporary differences | 12 | 5 | ||||||
Deferred tax assets before valuation allowance | 3,484 | 3,620 | ||||||
Valuation allowance | (3,484 | ) | (3,620 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2013 and 2012.
d. | Loss before taxes on income: |
Year ended December 31, | ||||||||
2013 | 2012 | |||||||
Domestic | $ | 881 | $ | 679 | ||||
Foreign | 1,073 | 596 | ||||||
$ | 1,954 | $ | 1,275 |
e. | Taxes on income: |
Taxes on income for the period ended December 31, 2013 are foreign current taxes related to the Israeli subsidiary following the intercompany service agreement with the Company.
F- 23 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 10:- | TAXES ON INCOME (Cont.) |
f. | The main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowances in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization of such deferred taxes. |
NOTE 11:- | STOCKHOLDERS' DEFICIENCY |
a. | Composition of stock capital: |
December 31, 2013 and 2012 | ||||||||
Authorized | Issued and outstanding | |||||||
number of shares | ||||||||
Common stock of $ 0.001 par value | 24,000,000 | 1,085,060 | ||||||
Series A-1 Preferred stock of $ 0.001 par value | 400,000 | 222,620 | ||||||
Series A-2 Preferred stock of $ 0.001 par value | 300,000 | 171,612 | ||||||
Series B-1 Preferred stock of $ 0.001 par value | 4,650,000 | - | ||||||
Series B-2 Preferred stock of $ 0.001 par value | 12,650,000 | - |
b. | Common Stock: |
The Common stock confer upon the holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends, if declared and to participate in the distribution of the surplus assets and funds of the Company in the event of liquidation, dissolution or winding up of the Company.
c. | Series A and B Convertible Preferred Stock: |
Liquidation preference - Upon any liquidation, dissolution or winding up of the Company, (i) first, each series B holder will be entitled to be paid, before any distribution or payment is made upon any other securities of the Company, an amount in cash equal to the aggregate Series Issuance Price (subject to adjustments) of all shares of series B Preferred stock held by such holder; (ii) second, each series A holder will be entitled to be paid, before any distribution or payment is made upon any junior securities of the Company, an amount in cash equal to the aggregate Series Issuance Price (subject to adjustments) of all shares of series A Preferred stock held by such holder, (iii) thereafter, each series A holder and series B holder shall participate in any distribution or payment on a pro-rata basis with all junior securities, and such shares shall thereafter confer onlythe rights of Common stock, as if such holder's Preferred stock had been converted into Common stock.
Voting rights - Each outstanding share of Preferred A and B stock shall have the number of votes equal to the number of whole shares of Common stock, into which such share of Preferred stock is then convertible.
F- 24 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 11:- | STOCKHOLDERS' DEFICIENCY (Cont.) |
Conversion - Each share of series A Convertible Preferred stock or series B Convertible Preferred stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common stock as is determined by dividing the applicable Series Issuance Price by the conversion price in effect at the time of conversion.
In each case, subject to adjustment for any and all recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends, subdivisions, combinations or similar events.
d. | Warrants issued to investors: |
1. | In November 2011, the Company issued to some of its stockholder warrants to purchase 2,319,062 shares of B-2 Preferred stock with a fixed exercise price of $ 0.199 (reflecting a 30% discount on the fair value of the Company's Preferred stock on that date). The warrants shall expire on November 15, 2018 (see also Note 7a). |
2. | In February through December 2013, the Company issued to the some of its stockholder warrants to purchase 1,578,948 shares of Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events. The warrants shall expire on February 5, 2018 through December 9, 2018, based on the issuance date (see also Note 7b). |
e. | Stock option plan: |
In November 2004, the Board of Directors of the Company adopted a stock option plan ("the Plan"), according to which options may be granted to employees, directors and consultants.
Pursuant to the Plan, the Company reserved for issuance 2,800,000 stock of Common stock. Each option entitles the holder to purchase one Ordinary stock of the Company and expires after 10 years from the date of grant. Any options, which are terminated, cancelled, forfeited or not exercised, become available for future grants.
F- 25 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 11:- | STOCKHOLDERS' DEFICIENCY (Cont.) |
As of December 31, 2013, under the Plan, 279,296 options were available for future grants.
1. | Option issued to employees |
The fair value for options granted in 2013 is estimated at the date of grant using a Black-Scholes-Merton options pricing model with the following weighted average assumptions (no options were granted during 2012):
Year ended
December 31, 2013 |
||
Risk free interest | 0.77% | |
Dividend yields | 0% | |
Volatility | 54% | |
Expected term (in years) | 5-6 |
A summary of the Company's options activity and related information with respect to options granted to employees during the years ended December 31, 2013 and 2012 are as follows:
Year
ended
December 31, |
||||||||||||||||
2013 | 2012 | |||||||||||||||
Number of
options |
Weighted
average exercise price |
Number of
options |
Weighted
average exercise price |
|||||||||||||
Outstanding - beginning of the year | 327,791 | $ | 7.89 | 327,791 | $ | 7.89 | ||||||||||
Granted | 1,930,000 | $ | 0.04 | - | $ | - | ||||||||||
Exercised | - | $ | - | - | $ | - | ||||||||||
Expired or Forfeited | - | $ | - | - | $ | - | ||||||||||
Outstanding - end of the year | 2,257,791 | $ | 0.58 | 327,791 | $ | 7.89 | ||||||||||
Exercisable at end of year | 2,257,791 | $ | 0.58 | 324,116 | $ | 3.88 |
The weighted average fair value of the options granted in the year ended December 31, 2013 was $ 0.23.
The weighted average remaining contractual life as of December 31, 2013 is 8.48 years. The aggregated intrinsic value of outstanding options and exercisable options, as of December 31, 2013 and 2012 is $ 756 and $ 23, respectively.
As of December 31, 2013 there were no unrecognized compensation cost.
F- 26 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 11:- | STOCKHOLDERS' DEFICIENCY (Cont.) |
2. | Option issued to non employees |
The Company's outstanding options granted to consultants as of December 31, 2013 are as follows:
Issuance date | Options for Common stock | Average exercise price per share | Options exercisable | Expiration date | ||||||||||
December 2004 | 10,225 | $ | 7.38 | 10,225 | December 2014 | |||||||||
April 2005 | 2,250 | $ | 6.74 | 2,250 | April 2015 | |||||||||
December 2005 | 1,000 | $ | 6.74 | 1,000 | December 2015 | |||||||||
September 2006 | 3,500 | $ | 3.37 | 3,500 | September 2016 | |||||||||
December 2007 | 15,000 | $ | 12.08 | 15,000 | December 2017 | |||||||||
October 2008 | 938 | $ | 6.74 | 938 | October 2018 | |||||||||
April 2009 | 7,500 | $ | 10.35 | 6,812 | April 2019 | |||||||||
December 2010 | 5,500 | $ | 0.284 | 5,500 | December 2020 | |||||||||
March 2013 | 210,000 | $ | 0.28 | 210,000 | March 2023 | |||||||||
October 2013 | 7,000 | $ | 0.28 | 7,000 | December 2023 | |||||||||
Total | 262,913 | 262,225 |
The fair value of the Company's stock options granted to non-employees for the year ended December 31, 2013 and 2012 was using the following weighted average assumptions:
Year
ended
December 31, |
||||
2013 | 2012 | |||
Dividend yield | 0% | 0% | ||
Expected volatility | 54%-58% | 82% | ||
Risk-free interest | 2.52%-3.04% | 0.72% - 1.48% | ||
Expected term (years) | 6-10 | 6 - 8 |
3. | Stock-based compensation: |
The stock based expense recognized in the financial statements for services received from employees and non-employees is shown in the following table:
Year
ended
December 31, |
||||||||
2013 | 2012 | |||||||
Research and development, net | $ | 213 | $ | 17 | ||||
Selling and marketing | 51 | 7 | ||||||
General and administrative | 215 | 4 | ||||||
$ | 479 | $ | 28 |
F- 27 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 12:- | FINANCIAL EXPENSE, NET |
Year
ended
December 31, |
||||||||
2013 | 2012 | |||||||
Income interest | $ | - | $ | (1 | ) | |||
Bank commission expenses | 5 | 4 | ||||||
Interest on promissory notes | 316 | 256 | ||||||
Benefit component of promissory notes | 466 | 238 | ||||||
Other | 93 | 4 | ||||||
$ | 880 | $ | 501 |
NOTE 13:- | GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA |
Summary information about geographic areas:
ASC 280, "Segment Reporting," establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company manages its business on the basis of one reportable segment, and derives revenues from selling its products mainly through distributor agreements. The following is a summary of revenues within geographic areas:
Year
ended
December 31, |
||||||||
2013 | 2012 | |||||||
United States | $ | 108 | $ | 67 | ||||
Israel | 16 | 20 | ||||||
Europe | 25 | 20 | ||||||
India | 14 | 16 | ||||||
Rest of the world | 48 | 43 | ||||||
$ | 211 | $ | 166 |
During the years ended December 31, 2013 and 2012, there were no sales to a single customer exceeding 10% of the Company's revenues.
The Company's long-lived assets are all located in Israel.
F- 28 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 14:- | BASIC AND DILUTED NET LOSS PER SHARE |
The following table sets forth the computation of the Company's basic and diluted net loss per share of Common stock:
Year
ended
December 31 |
||||||||
2013 | 2012 | |||||||
Net loss attributable to holders of Common stock as reported | $ | (1,989 | ) | $ | (1,275 | ) | ||
Weighted average number of Common stock used in computing basic and diluted net loss per share | $ | 1,085,060 | $ | 1,085,060 | ||||
Net loss per share of Common stock, basic and diluted | $ | (1.83 | ) | $ | (1.18 | ) |
For the years ended December 31, 2013 and 2012, all outstanding options and warrants have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive.
NOTE 15:- | SUBSEQUENT EVENTS |
a. | On February 6, 2014, the Company signed a sixth amendment to The Agreement (see Note 8b) and issued convertible promissory notes to certain investors in the principal amount of $700. The Note are convertible to Common stock and bears 6% interest, computed annually and should be fully due and payable at the earliest of April 30, 2014, or the closing date of a financing round as defined in the agreement. In addition, the Company issued to the stockholder 263,158 additional warrants to purchase Common stock. The exercise price at which the warrant may be exercised shall be $ 0.38 subject to adjustment for stock splits, fundamental transactions or similar events. The warrants contain identical terms to those of the February 2013 Warrants, other than that the warrants expire on February 6, 2019. |
b. | In February 2014, the Company signed a consulting agreement with a third party. As part of the consulting agreement, in exchange for the services the Company granted the consultant 400,000 restricted Common stock $0.001 par value. The restricted stock shall vest upon (a) the Company’s initial public offering, (b) the Company’s becoming subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended or (c) the Company’s merger, share exchange or consolidation (other than one in which its stockholders own a majority of the voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the Company’s assets. The restricted stock are subject to forfeiture until vested and will be forfeited if such shares have not vested on the later of December 31, 2019 or the date of termination of the consulting agreement by the third party. |
F- 29 |
NANO VIBRONIX INC. AND ITS SUBSIDIARY |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
U.S. dollars in thousands (except share data) |
NOTE 15:- | SUBSEQUENT EVENTS (Cont.) |
c. | On February 19, 2014, the Company's Board of Directors approved the Company's 2014 long-term incentive plan according to which up to 5,000,000 options may be granted to employees, directors and consultants. |
d. | In February 2014, the Company's board of directors approved the employment agreement for hiring a new CEO and CFO, whose appointments will commence during March and April 2014, respectively. According to the employment agreements, the CEO and CFO are entitled to a cash bonus equal to $50 and $10 within five business days of the closing date of an initial public offering. In addition, on the pricing date of such offering, the Company will grant the CEO and CFO options to purchase such number of shares of Common stock as equal to 3% and 1%, respectively, of the shares of Common stock issued and outstanding on the date of grant at an exercise price equal to the public offering price. |
e. | In February 2014, the Company received the signed consent of its Preferred stockholders that upon consummation of an initial public offering all of the Preferred stocks will be converted to Common stock. |
f. | The Company evaluates events or transactions that occur after the balance sheet date but prior to the issuance of financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For its annual consolidated financial statements as of December 31, 2013 and for year then ended, the Company evaluated subsequent events through March 6, 2014, the date that the consolidated financial statements were issued. |
- - - - - - - - - - - - - -
F- 30 |
_______ Units
Nano Vibronix, Inc.
PROSPECTUS
, 2014
Chardan Capital Markets, LLC
Until , 2014 (the 25 th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale and distribution of the common stock being registered. All amounts are estimates except for the Securities and Exchange Commission registration fee, the FINRA filing fee, and the Nasdaq listing fee.
Securities and Exchange Commission Registration Fee | $ | |||
FINRA Filing Fee | ||||
Nasdaq Listing Fee | $ | |||
Accounting Fees and Expenses | $ | |||
Legal Fees and Expenses | $ | |||
Transfer Agent Fees | $ | |||
Printing Expenses | $ | |||
Miscellaneous Fees and Expenses | $ | |||
Total | $ |
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides, in general, that a corporation incorporated under the laws of the State of Delaware, as we are, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than a derivative action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful. In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect of any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery of the State of Delaware or any other court in which such action was brought determines such person is fairly and reasonably entitled to indemnity for such expenses.
Our certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the Delaware General Corporation Law, as amended from time to time, subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract.
Any repeal or modification of these provisions approved by our stockholders will be prospective only and will not adversely affect any limitation on the liability of any of our directors or officers existing as of the time of such repeal or modification.
Effective upon the closing of this offering, we will have directors’ and officers’ liability insurance insuring our directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures us against losses which we may incur in indemnifying our officers and directors. In addition, we have entered into indemnification agreements with key officers and directors.
We are also permitted to apply for insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the Delaware General Corporation Law would permit indemnification.
II- 1 |
Item 15. Recent Sales of Unregistered Securities.
During 2010 and 2011, we issued an aggregate of 40,928 shares of series B preferred stock and warrants to purchase 40,928 shares of series B preferred stock, with an exercise price of $17.25 per share and a five-year term, to certain investors for consideration of $706,010. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by either Regulation S under the Securities Act of 1933, as amended, or Section 4(2) of the Securities Act of 1933, as amended. Each of the investors was either an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) or not a “U.S. person” (as that term is defined in Rule 902 of Regulation S) at the time of the transactions.
On November 22, 2011, we issued convertible series B-1 promissory notes to certain investors in consideration for $1,000,000. The notes are convertible to series B-1 preferred stock and bear interest at 10% per annum, compounded annually. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by either Regulation S under the Securities Act of 1933, as amended, or Section 4(2) of the Securities Act of 1933, as amended. Each of the investors was either an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) or not a “U.S. person” (as that term is defined in Rule 902 of Regulation S) at the time of the transactions.
On November 22, 2011, we issued convertible series B-2 promissory notes and warrants to purchase 2,319,062 shares of series B-2 preferred stock to the holders of series B participating convertible preferred stock and warrants in exchange for the cancellation of such previously-held preferred stock and warrants. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were exchanged pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 3(a)(9) of the Securities Act of 1933, as amended.
On February 5, 2013, we signed an agreement with certain investors according to which we issued convertible promissory notes in consideration for $100,000, in such original principal amount. The notes are convertible to common stock and bear interest at 6% annually. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
On March 28, 2013, we signed an amendment to the agreement described above and issued convertible promissory notes in consideration for an additional $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $200,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
On June 3, 2013, we signed a second amendment to the agreement described above and issued convertible promissory notes in consideration for $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $300,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
II- 2 |
On August 5, 2013, we signed a third amendment to the agreement described above and issued convertible promissory notes in consideration for $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $400,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
On October 7, 2013, we signed a fourth amendment to the agreement described above and issued convertible promissory notes in consideration for $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $500,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
On December 9, 2013, we signed a fifth amendment to the agreement described above and issued convertible promissory notes in consideration for $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $600,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
On February 6, 2014, we signed a sixth amendment to the agreement described above and issued convertible promissory notes in consideration for $100,000 with the same terms described above, so that the aggregate original principal amount was increased to $700,000. In addition on such date, we issued warrants to purchase up to an aggregate of 263,158 shares of common stock with an exercise price of $0.38 per share, subject to adjustments, and a five-year term. The securities issued in the above described transactions were not registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were offered and sold pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(2) of the Securities Act of 1933, as amended. Each investor was an accredited investor (as defined by Rule 501 under the Securities Act of 1933, as amended) at the time of the transaction.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit No. | Description |
1.1+ | Form of Underwriting Agreement |
3.1 | Amended and Restated Certificate of Incorporation, as presently in effect |
3.2 | Bylaws, as presently in effect |
3.3 | Form of Amended and Restated Certificate of Incorporation, to be in effect upon completion of this offering |
3.4+ | Form of Amended and Restated Bylaws, to be in effect upon completion of this offering |
3.5 | Certificate of Amendment of Certificate of Incorporation (providing for automatic conversion of the series A-1, series A-2, series B-1 and series B-2 preferred stock upon the pricing of this offering) |
3.6 | From of Certificate of Amendment of Certificate of Incorporation (creating the series C preferred stock) |
4.1 | Form of Unit Certificate |
4.2 | Form of Common Stock Certificate |
4.3 | Form of Redeemable Warrant Agreement by and between the Company and VStock Transfer, LLC and Form of Warrant Certificate |
5.1 | Form of Opinion of Haynes and Boone, LLP |
10.1 | License Agreement, dated October 26, 2003, by and among Nano Vibronix, Inc., Piezo-Top Ltd, and PMG Medica Ltd |
10.2 | License Agreement, dated December 11, 2011, by and between Nano Vibronix, Inc. and AC Engineering Ltd. |
10.3 | Form of Series B-1 Promissory Note |
II- 3 |
10.4 | Form of Subscription Agreement for Series B-1 Convertible Promissory Notes |
10.5 | Form of Series B-2 Promissory Note |
10.6 | Form of Series B-2 Participating Convertible Preferred Stock Purchase Warrant |
10.7 | Form of Subscription Agreement for Series B Convertible Preferred Stock and Warrants |
10.8 | First Amendment to Subscription Agreement for Series B Convertible Preferred Stock and Warrants, dated November 14, 2011, by and between NanoVibronix, Inc. and the investors signatory thereto |
10.9 | Sixth Amended and Restated Securities Purchase Agreement, dated February 6, 2014, by and between Nano Vibronix, Inc. and Globis Overseas Fund, Ltd. |
10.10 | Sixth Amended and Restated Securities Purchase Agreement, dated February 6, 2014, by and between Nano Vibronix, Inc. and Globis Capital Partners, L.P. |
10.11 | Seventh Amended and Restated Secured Convertible Promissory Note, dated March , 2014, by Nano Vibronix, Inc. in favor of and Globis Overseas Fund, Ltd. |
10.12 | Seventh Amended and Restated Secured Convertible Promissory Note, dated March , 2014, by Nano Vibronix, Inc. in favor of and Globis Capital Partners, L.P. |
10.13 | Form of Amended and Restated 2013 and 2014 Warrant to Purchase Common Stock |
10.14 | Nano Vibronix, Inc. 2004 Global Share Option Plan |
10.15 | Personal Employment Agreement, dated March 1, 2008, by and between Nano-Vibronix (Israel 2003) Ltd and Jona Zumeris |
10.16 | Form of Indemnification Agreement between Nano Vibronix, Inc. and certain of its officers and directors |
10.17 | Amendment to Subscription Agreement Convertible Promissory Notes, dated February 28, 2014, by and between Nano Vibronix, Inc. and the note holders signatory thereto |
10.18 | Amendment to Convertible Promissory Notes (Series B-1), dated February 28, 2014, by and between Nano Vibronix, Inc. and the note holders signatory thereto |
10.19 | Second Amendment to Subscription Agreement Series B Convertible Preferred Stock and Warrants), dated February 28, 2014, by and between Nano Vibronix, Inc. and the holders signatory thereto |
10.20 | Third Amendment to Subscription Agreement Series B Convertible Preferred Stock and Warrants), dated February 28, 2014, by and between Nano Vibronix, Inc. and the holders signatory thereto |
10.21 | Amendment to Convertible Promissory Notes (Series B-2), dated February 28, 2014, by and between Nano Vibronix, Inc. and the note holders signatory thereto |
10.22 | Master Amendment Agreement, dated March , 2014, by and between Nano Vibronix, Inc. and the note holders signatory thereto |
10.23 | Consulting Agreement, dated February 21, 2014, by and among Nano Vibronix, Inc., NanoVibronix Ltd. and AYTA Consulting, LLC |
10.24 | Restricted Stock Award Agreement, dated February 21, 2014, by and between Nano Vibronix, Inc. and AYTA Consulting, LLC |
10.25 | Employment Agreement, dated February 26, 2014, by and among Nano Vibronix, Inc., NanoVibronix Ltd. and Ophir Shahaf |
10.26 | Employment Agreement, dated March 2, 2014, by and among Nano Vibronix, Inc., NanoVibronix Ltd. and Shay Ashkenazy |
10.27 | Nano Vibronix, Inc. 2014 Long-Term Incentive Plan |
10.28 | Form of Amended and Restated Series B-2 Participating Convertible Preferred Stock Purchase Warrant |
21.1 | List of Subsidiaries |
23.1 | Consent of Kost Forer Gabbay & Kasierer, a member firm of Ernst & Young Global |
23.2 | Consent of Haynes and Boone, LLP (included in Exhibit 5.1) |
24.1 | Power of Attorney (included on signature page) |
+ To be filed by amendment.
* Previously filed.
II- 4 |
(b) Financial Statement Schedules
No financial statement schedules are provided because the information is not required or is shown either in the financial statements or the notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B (§230.430B of this chapter):
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
II- 5 |
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II- 6 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Melville, State of New York on March 6, 2014.
NANO VIBRONIX, INC. | |||
By: | /s/ Ophir Shahaf | ||
Name: Ophir Shahaf | |||
Title: Chief Executive Officer |
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Nano Vibronix, Inc., a Delaware corporation (the “Company”), do hereby constitute and appoint Ophir Shahaf and Ira Greenstein, and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments, exhibits thereto and other documents in connection therewith) to this Registration Statement and any subsequent registration statement filed by the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended, which relates to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Ophir Shahaf | Chief Executive Officer and Director (Principal Executive Officer) | March 6, 2014 | ||
Ophir Shahaf | ||||
/s/ Harold Jacob |
Chief Medical Officer and Director
|
March 6, 2014 | ||
Harold Jacob, M.D. | (Principal Financial Officer and Principal Accounting Officer) | |||
/s/ Ira Greenstein | Chairman of the Board of Directors | March 6, 2014 | ||
Ira Greenstein | ||||
/s/ Jona Zumeris | Vice President of Technology and Director | March 6, 2014 | ||
Jona Zumeris, Ph.D. | ||||
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EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NANO VIBRONIX, INC.
Nano Vibronix, Inc. (the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ GCL ”), does hereby certify that:
1. The name of the corporation is Nano Vibronix, Inc.
2. The original Certificate of Incorporation of this Corporation was filed with the Secretary of State of Delaware on October 20, 2003.
3. This Amended and Restated Certificate of Incorporation, which amends and restates the Corporation’s Certificate of Incorporation in its entirety, has been duly adopted with the provisions of Sections 242 and 245 of the GCL, and the stockholders of the Corporation have given their written consent in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. The provisions of the Amended and Restated Certificate of Incorporation are as follows:
ARTICLE I
Name
The name of this corporation is Nano Vibronix, Inc. (the “Corporation”).
ARTICLE II
Registered Office
The registered office in the State of Delaware is located at 1313 Market Street, Suite 5100, in the City of Wilmington 19801, County of New Castle, and its registered agent at such address is PHS Corporate Services, Inc.
ARTICLE III
Purpose
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “GCL”).
ARTICLE IV
Authorized Capital
The Corporation is authorized to issue two classes of capital stock to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares that the Corporation is authorized to issue is forty two million (42,000,000). Twenty four million (24,000,000) shares shall be Common Stock, par value $0.001 per share, and eighteen million (18,000,000) shares shall be Preferred Stock, par value $0.001 per share.
Section 4A. Common Stock .
4A.1. General . Subject to the powers, preferences and rights of any Preferred Stock, including any series thereof, having any preference priority over, or rights superior to, the Common Stock and except as otherwise provided by law and this Article, the holders of the Common Stock shall have and possess all powers and voting and other rights pertaining to the stock of the corporation and each share of Common Stock shall be entitled to one vote. Except as otherwise provided by the Delaware General Corporation Law or this Amended and Restated Certificate of Incorporation, the holders of record of Common Stock shall share ratably in all dividends payable in cash, stock or otherwise and other distributions, whether in respect of liquidation or dissolution (voluntary or involuntary) or otherwise.
4A.2. Voting . The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders. There shall be no cumulative voting.
4A.3 Number . The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
4A.4 Dividends . Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.
4A.5 Liquidation . Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive ratably in all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.
Section 4B. Of the Preferred Stock, four hundred thousand (400,000) shares of Preferred Stock are hereby designated as "Series A-1 Participating Convertible Preferred Stock" (and are referred to herein as “ Series A-1 Stock ”), three hundred thousand (300,000) shares of Preferred Stock are hereby designated as "Series A-2 Participating Convertible Preferred Stock" (and are referred to herein as “ Series A-2 Stock ” and, together with the Series A-1 Preferred Stock, are referred to herein as the “ Series A Stock ”); four million six hundred fifty thousand (4,650,000) shares of Preferred Stock are hereby designated as "Series B-1 Participating Convertible Preferred Stock" (and are referred to herein as “ Series B-1 Stock ”), and twelve million six hundred fifty thousand (12,650,000) shares of Preferred Stock are hereby designated as "Series B-2 Participating Convertible Preferred Stock" (and are referred to herein as “ Series B-2 Stock ” and, together with the Series B-1 Preferred Stock, are referred to herein as the “ Series B Stock ”). Capitalized terms not otherwise defined have the meanings set forth in Section 4.6 below.
Upon this Certificate of Incorporation becoming effective pursuant to the General Corporation Law (the “Effective Time”):
(i) Each share of the Corporation’s Series A Participating Convertible Preferred Stock, par value $0.001 per share, which was initially purchased from the Corporation at a price of $11.23 per share (“Prior $11.23 Series A Stock”), issued and outstanding immediately prior to the Effective Time, will be automatically reclassified as one fully paid and nonassessable share of Series A-1 Stock;
(ii) Each share of the Corporation’s Series A Participating Convertible Preferred Stock, par value $0.001 per share, which was initially purchased from the Corporation at a price of $17.25 per share (“Prior $17.25 Series A Stock”), issued and outstanding immediately prior to the Effective Time, will be automatically reclassified as one fully paid and nonassessable share of Series A-2 Stock.
(iii) Any stock certificate that, immediately prior to the Effective Time, represented shares of Prior $11.23 Series A Stock or Prior $17.25 Series A Preferred Stock (collectively, the “Prior Series A Stock”) will, from and after the Effective Time, until exchanged for a stock certificate representing Series A-1 Stock or Series A-2 Stock, whichever is applicable, automatically represent identical shares of the applicable series of Preferred Stock; provided, however, that each person holding of record a stock certificate or certificates that represented shares of Prior Series A Stock shall receive, upon surrender of such certificate or certificates or any appropriate affidavit of loss, a new certificate or certificates evidencing and representing the same number of shares of the applicable class of Series A Stock.
(iv) the Corporation's Series B Participating Convertible Preferred Stock , par value $0.001 per share (the “ Prior Series B Stock ”) held as treasury stock immediately prior to the Effective Time, shall, automatically and without further action, be reclassified as, and shall become, one share of Common Stock . Any stock certificate that immediately prior to the Effective Time represented shares of the Prior Series B Stock shall from and after the Effective Time be deemed to represent shares of Common Stock, without the need for surrender or exchange thereof.
The rights, preferences, privileges and restrictions, and the number of shares constituting each such series (the “ Series ”) and the designation of such series, are set forth as follows:
4B.1. Number and Designation . Any increase or decrease in the number of authorized shares of the Series shall be effectuated by filing an amendment to this Amended and Restated Certificate of Incorporation that has been duly adopted by the Board of Directors of the Corporation and approved by the stockholders of the Corporation pursuant to the provisions of the GCL and that states that such increase or reduction has been so authorized.
4B.2. Dividends . When and as any dividend or distribution is declared or paid by the Corporation on Common Stock, whether payable in cash, property, securities or rights to acquire securities, the Series A Holders and Series B Holders will be entitled to participate with the holders of Common Stock in such dividend or distribution as set forth in this Section 4B.2. At the time such dividend or distribution is payable to the holders of Common Stock, the Corporation will pay to each Series A Holder and Series B Holder such holder’s share of such dividend or distribution equal to the amount of the dividend or distribution per share of Common Stock payable at such time multiplied by the aggregate number of shares of Common Stock then obtainable upon conversion of such holder’s Preferred Stock.
4B.3. Voting Rights .
A. Generally . Except as otherwise required by law or as set forth herein, the Series A Holders and Series B Holders shall be entitled to notice of any shareholders’ meeting and to vote together with the Common Stock, and not as a separate class (except as specifically provided herein or otherwise required by law), upon any matter submitted for approval by the holders of Common Stock on the following basis: the Series A Holders and Series B Holder shall have that number of votes equal to the aggregate number of shares of Common Stock into which their outstanding Preferred Stock is then convertible.
B. Series A Directors . Until the earlier to occur of (i) a QIPO or (ii) the point at which the equity beneficially owned by the Series A-1 Holders constitutes less than five percent (5%) of the fully-diluted equity of the Corporation, the Series A-1 Holders shall have the exclusive right to elect one member of the Board of Directors of the Corporation (the “ Series A-1 Director ”), who shall also be appointed to the Compensation Committee of the Board of Directors. Until the earlier to occur of (i) a QIPO or (ii) the point at which the equity beneficially owned by the Series A-2 Investors constitutes less than five percent (5%) of the fully-diluted equity of the Corporation, Ludgate Investments Limited shall have the exclusive right to elect one member of the Board of Directors of the Corporation (the “ Series A-2 Director ”). The manner of election of the remaining members of the Board of Directors of the Corporation shall be as set forth in the Bylaws of the Corporation.
C. In addition to any other rights provided by law, so long as any Series A Stock is outstanding but only until the earlier to occur of (x) a QIPO or (y) the point at which the equity beneficially owned by each of the Series A-1 Investors and the Series A-2 Investors constitutes less than five percent (5%) of the fully-diluted equity of the Corporation (except with respect to clause (i) below, which shall remain in place so long as any Series A Stock is outstanding), the Corporation, without first obtaining the affirmative vote or written consent of the holders of not less than a majority of the outstanding shares of the Series A Stock, will not:
(i) amend or repeal any provision of, or add any provision to, the Corporation’s Certificate of Incorporation, as amended or By-Laws if such action would alter adversely the liquidation preferences of, or other priorities, rights or privileges provided for the benefit of, the Series A Stock; or
(ii) authorize or issue shares of any class or series of stock (other than the Series A Stock) having any preference or priority as to dividends, voting or liquidation or other rights superior to, or pari passu with, any such preference, priority, right or privilege of the Series A Stock, or authorize or issue shares of stock of any class or any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of stock of the Corporation having any preference or priority as to dividends, voting or liquidation or other rights superior to any such priority, right or privilege of the Series A Stock;
(iii) reclassify any class or series of stock junior to the Series A Stock into stock senior to the Series A Stock with respect to any preference, priority, right or privilege;
(iv) repurchase or redeem any equity securities of the Corporation; or
(v) increase the number of members of the Corporation’s Board of Directors to more than five members, except in connection with the issuance of equity securities of the Corporation to investors who purchase a minimum of fifteen percent (15%) of the then-current fully diluted equity of the Corporation.
4B.4. Preference Upon Liquidation .
A. Upon any liquidation, dissolution or winding up of the Corporation, (i) first, each Series B Holder will be entitled to be paid, before any distribution or payment is made upon any other securities of the Corporation, an amount in cash equal to the aggregate Liquidation Value of all shares of Series B Stock held by such holder; (ii) second, each Series A Holder will be entitled to be paid, before any distribution or payment is made upon any Junior Securities of the Corporation, an amount in cash equal to the aggregate Liquidation Value of all shares of Series A Stock held by such holder; (iii) thereafter, each Series A Holder and Series B Holder shall participate in any distribution or payment on a pro rata basis with all Junior Securities and such shares shall thereafter have only the rights of Common Stock as if such holder’s Preferred Stock had been converted into Common Stock pursuant to Section 4B.5(A). If upon any such liquidation, dissolution or winding up of the Company, the assets of the Company available for distribution to its shareholders shall be insufficient to pay the Series B Holders (or the Series A Holders) the full amount to which they shall be entitled under Section 4B.4.A.(i) (or Section 4B.4.A.(i) (ii)), the Series B Holders (or the Series A Holders) shall share ratably in any distribution of the assets available for distribution to the Series B Holders (or the Series A Holders) in proportion to the respective amounts which would otherwise be payable in respect of the Preferred Shares held by them upon such distribution if all amounts payable on or with respect to such Preferred Shares were paid in full.
B. Notwithstanding Section 4B.5B(ii) below, the reorganization, consolidation or the merger of the Corporation into or with any other corporation(s) or other entity(ies) (a “ Reorganization ”), the sale, lease, licensing, exchange or other transfer by the Corporation of all or more than 50% of the Corporation’s business assets or the commencement by the Corporation of a voluntary case under the United States bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any other country, or consent to the entry of an order for relief in an involuntary case under any such law or to the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of the Corporation or of or more than 50% of the Corporation’s business assets, or the making of an assignment for the benefit of its creditors, or an admission in writing of its inability to pay its debts generally as they become due (any of such actions or events, a “ Material Event ”), will be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 4B.4 and the consideration payable to the stockholders of the Corporation shall be allocated in accordance with Section 4B.4A. If the amount deemed paid or distributed under this Subsection is made in property other than cash, the value of such property shall be determined in accordance with Section 4B.6F. Notwithstanding the foregoing, any Series A Holder or Series B Holder may elect, in such holder’s sole discretion, upon written notice to the Corporation not less than three (3) days before any such Reorganization, for such Reorganization of the Corporation not to be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 4B.4 with respect to such holder’s shares.
C. Notwithstanding the foregoing, a “Reorganization” shall not include any reorganization, consolidation or the merger involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation.
4B.5. Conversion into Conversion Stock
A. Conversion .
(i) Mandatory Conversion .
(a) Upon QIPO . All of the outstanding shares of Series A Stock and Series B Stock will be automatically converted into the number of shares of Conversion Stock calculated in accordance with the provisions of Section 4.5A(iii) hereof upon the closing of the QIPO. Written notice of such mandatory conversion shall be delivered to all holders of Preferred Stock as soon as reasonably possible following the entry into definitive agreements for the consummation of the QIPO.
(b) Upon Call of Required Holders . The Required Holders of the Series A Stock or Series B Stock may, upon at least thirty (30) days notice to the Corporation, cause each outstanding share of Series A Stock or Series B Stock, respectively, to be called for conversion into shares of Common Stock at the then effective Conversion Price (a “ Required Conversion ”). Such notice shall state the requested date of conversion. The Corporation shall give notice of any Required Conversion, at least fifteen (15) days prior to the requested date of conversion, by certified or registered mail (return receipt requested), postage prepaid, to each of the Series A Holders or Series B Holders (other than the Required Holders who have given a notice of conversion). Such notice shall be addressed to each such Series A Holder or Series B Holder at the address as it appears on the stock transfer books of the Corporation and shall specify the date of conversion and the number of shares requested to be converted.
(ii) Optional Conversion . A Series A Holder or Series B Holder shall at any time have the right to convert any or all of its shares of Preferred Stock into the number of shares of Conversion Stock calculated in accordance with the provisions of Section 4B.5A(iii) hereof.
(iii) Conversion Ratio . Upon conversion of any or all shares of Preferred Stock pursuant to this Section 4B.5A, the Holder shall be entitled to receive the number of shares of Conversion Stock equal to the product of (a) the number of shares of Preferred Stock being converted and (b) a fraction, the numerator of which shall be equal to the Series Issuance Price (as hereafter defined), and the denominator of which shall be equal to the then-applicable Conversion Price (as adjusted, if applicable, pursuant to the provisions of Section 4B.5B hereof).
(iv) As soon as possible after a conversion has been effected, the Corporation will deliver to the converting holder:
(a) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and
(b) a certificate representing any shares of Series A Stock which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted.
(v) Fractional Shares . No fractional shares of Conversion Stock shall be issued upon any conversion. In lieu of any fractional share of Conversion Stock that would have been issuable upon any conversion, the Corporation will pay the holder of the Conversion Stock the Fair Market Value of such fractional share.
(vi) Conversion Fees . The issuance of certificates for shares of Conversion Stock upon conversion of Preferred Stock will be made without charge.
(vii) Books of the Corporation . The Corporation will not close its books against the transfer of Preferred Stock or Conversion Stock issued or issuable upon conversion of Preferred Stock in any manner which interferes with the conversion of Preferred Stock.
B. Adjustment of Conversion Price . In order to prevent dilution of the conversion rights granted under this Section, the Conversion Price will be subject to adjustment from time to time pursuant to this Section 4B.5B.
(i) Subdivision or Combination of Common Stock; Dissolution . |
(a) If the Corporation at any time or from time to time following the Original Issue Date subdivides (by any reclassification, stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares (without a corresponding change to the Series A and Series B Stock), the Conversion Price in effect immediately prior to such subdivision will, concurrently with the effectiveness of such subdivision, be proportionately reduced, and if the Corporation at any time combines (by reclassification, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares (without a corresponding change to its Preferred Stock), the Conversion Price in effect immediately prior to such combination will, concurrently with the effectiveness of such combination, be proportionately increased. In the event of any such reclassification, stock split, stock dividend or subdivision, each Series A Holder and Series B Holder shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification, stock split, subdivision or other change, all subject to further adjustment as provided herein or as provided by the terms of such other securities or property.
(b) In the event of a judicial or non-judicial dissolution of the Corporation, the conversion rights and privileges of the Series A Holders and Series B Holders shall terminate on a date, as fixed by the Board of Directors of the Corporation, not more than 30 days and not less than 3 days before the date of such dissolution; provided that the Series A Holders and Series B Holders receive at least 45 days prior notice of such dissolution setting forth in detail the material terms of dissolution.
(ii) Reorganizations, Mergers or Consolidations . If at any time or from time to time after the Original Issue Date, there is a capital reorganization of the Common Stock (without a corresponding change to the Preferred Stock) or the merger or consolidation of the Corporation with or into another corporation or another entity or person, as a part of such capital reorganization, merger or consolidation, provision shall be made so that the Preferred Stock Holders shall thereafter be entitled to receive, upon conversion of the Preferred Stock, the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger or consolidation, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4B.5 with respect to the rights of the Preferred Stock Holders after the capital reorganization to the end that the provisions of this Section 4B.5 (including adjustment of the Conversion Price then in effect and the number of shares issuable upon conversion of the Preferred Stock) shall be applicable after that event and be as nearly equivalent as practicable.
(iii) Other Adjustments . The Conversion Price of Series A-1 Stock and Series B Stock shall also be subject to other adjustments, as follows:
(a) General .
(x) In any case to which Sections 4B.5B(i) and 4B.5B(ii) hereof are not applicable, except as set forth below, where the Corporation shall issue or sell shares of its Common Stock after the Original Issue Date for a consideration per share (after subtracting the Fair Market Value of any securities or other assets transferred by the Corporation in units or otherwise together with such Common Stock (“ Additional Assets ”)) that is less than the Conversion Price in effect at the time of issuance or sale of such additional shares (such lower consideration per share, the “ Issuance Price ”), then the Conversion Price in effect hereunder shall simultaneously with such issuance or sale be reduced to an amount equal to the Issuance Price; provided that in the case of the Series A-1 Stock, in the event the Issuance Price would be less than the Benchmark Price (as hereinafter defined), the Conversion Price of the Series A-1 Stock shall be the Benchmark Price, as further adjusted pursuant to Section 4B.5B(iii)(a)(y).
(y) To the extent that the Issuance Price shall be less than the lower of the Benchmark Price or the Conversion Price of the Series A-1 Stock then in effect (the “ Weighted Average Price ”), the Conversion Price per share of the Series A-1 Stock in effect hereunder shall simultaneously with such issuance or sale be further reduced to a price determined by multiplying the Weighted Average Price by the quotient of (1) an amount equal to (x) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale, assuming conversion or exercise of all Convertible Securities and Options that are convertible or exercisable (as the case may be) at a price below the Weighted Average Price, multiplied by the Weighted Average Price (or, in the event of further adjustments, the Conversion Price of the Series A-1 Stock in effect hereunder immediately prior to such issuance or sale), plus (y) the consideration, if any, received by the Corporation upon such issuance or sale, divided by (2) the total number of shares of Common Stock outstanding immediately after issuance or sale of such additional shares, assuming conversion or exercise of all Convertible Securities or Options that are convertible or exercisable (as the case may be) at a price below the Weighted Average Price, multiplied by the Weighted Average Price.
(z) This Section 4B.5B(iii) shall not apply to the issuance of (i) all shares of Common Stock issued or issuable to employees, directors or consultants pursuant to any equity compensation plan that is in effect on the date hereof, (ii) all shares of Common Stock issued or issuable to employees, directors or consultants pursuant to any equity compensation approved by the Corporation’s Board of Directors, including the Series A Director, (iii) all shares of Common Stock issued or issuable to bona fide leasing companies, strategic partners, or major lenders, (iv) all shares of Common Stock issued or issuable as the purchase price in a bona fide acquisition or merger or other strategic transaction with an unaffiliated party (including reasonable fees paid in connection therewith), or (v) all shares of Common Stock issued upon conversion or exercise of Options or other Convertible Securities outstanding on the date hereof.
(b) Convertible Securities .
(x) In case the Corporation shall issue or sell any securities convertible into Common Stock of the Corporation (“ Convertible Securities ”) (including without limitation Additional Assets) after the Original Issue Date, there shall be determined the price per share for which Common Stock is issuable upon the conversion or exchange thereof, such determination to be made by dividing (1) the total amount received or receivable by the Corporation as consideration for the issue or sale of such Convertible Securities, plus the then-current minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (2) the maximum number of shares of Common Stock of the Corporation issuable upon the conversion or exchange of all of such Convertible Securities for such then-current minimum aggregate amount of additional consideration.
(y) If the price per share so determined shall be less than the applicable Conversion Price, then such issue or sale shall be deemed to be an issue or sale for cash (as of the date of issue or sale of such Convertible Securities) of such maximum number of shares of Common Stock at the price per share so determined, provided that, if such Convertible Securities shall by their terms provide for an increase or increases or decrease or decreases with the passage of time or otherwise, in the amount of additional consideration, if any, to the Corporation, or in the rate of exchange, upon the conversion or exchange thereof, the adjusted Conversion Price shall, forthwith upon any such increase or decrease becoming effective, be readjusted to reflect the same, and provided further, that upon the expiration of such rights of conversion or exchange of such Convertible Securities, if any thereof shall not have been exercised, the adjusted Conversion Price shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those actually issued or sold upon the conversion or exchange of such Convertible Securities, and that they were issued or sold for the consideration actually received by the Corporation upon such conversion or exchange, plus the consideration, if any, actually received by the Corporation for the issue or sale of all of such Convertible Securities.
(c) Rights and Options .
(x) In case the Corporation shall grant any rights, warrants or options to subscribe for, purchase or otherwise acquire Common Stock (collectively, “ Options ”) after the Original Issue Date, there shall be determined the price per share for which Common Stock is issuable upon the exercise of such Options, such determination to be made by dividing (1) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of such Options, by (2) the maximum number of shares of Common Stock of the Corporation issuable upon the exercise of such Options for such minimum aggregate amount of additional consideration.
(y) If the price per share so determined shall be less than the applicable Conversion Price, then the granting of such Options shall be deemed to be an issue or sale for cash (as of the date of the granting of such Options) of such maximum number of shares of Common Stock at the price per share so determined, provided that, if such Options shall by their terms provide for an increase or increases or decrease or decreases, with the passage of time or otherwise, in the amount of additional consideration payable to the Corporation upon the exercise thereof or in the maximum number of shares of Common Stock issuable, the adjusted Conversion Price shall, forthwith upon any such increase or decrease becoming effective, be readjusted to reflect the same, and provided, further, that upon the expiration of such Options, if any thereof shall not have been exercised, the adjusted Conversion Price shall forthwith be readjusted and thereafter be the price which it would have been had an adjustment been made on the basis that the only shares of Common Stock so issued or sold were those actually issued or sold upon the exercise of such Options and that they were issued or sold for the consideration actually received by the Corporation for the granting of all such Options, whether or not exercised.
(iv) Certain Events . If any event occurs of the type contemplated by the provisions of this Section 4.B5 but not expressly provided for by such provisions, then the Board of Directors of the Corporation will make an adjustment in the Conversion Price so as to protect equitably the rights of the Series A Holders and Series B Holders.
(v) Notices, Regarding Change in Conversion Price or Otherwise . |
(a) Immediately upon any adjustment of the Conversion Price with respect to the Preferred Stock, the Corporation will send written notice thereof to all affected Preferred Stock Holders.
(b) The Corporation will send written notice to all Preferred Stock Holders at least twenty (20) days prior to the date on which the Corporation (x) closes its books or takes a record (1) with respect to any dividend or distribution upon Common Stock, (2) with respect to any pro rata subscription offer to holders of Common Stock, or (3) for determining rights to vote on or approve any matter, (y) proposes to take any action on which the Preferred Stock Holders are entitled to vote pursuant to Section 4B.3 or (z) enters into, agrees to enter into or is subject to a Material Event as described in Section 4B.4B.
(c) All notices and other communications from the Corporation to a Preferred Stock Holder shall include all material information concerning any action, proposed action or other matter referred to in the notice or communication and shall be (x) mailed by first class registered or certified mail, postage prepaid, (y) faxed (with confirmation) or (z) e-mailed (with receipt confirmed), at such address, fax number or e-mail address (as the case may be) as may have been furnished to the Corporation in writing by such holder, or, until an address, fax number or e-mail address is so furnished, to and at the address, fax number or e-mail address of the last holder who has so furnished an address, fax number or e-mail address to the Corporation.
C. Converted Shares . Any shares of Preferred Stock which are converted pursuant to this Section 4B.5 will be canceled and will not be reissued, sold or transferred.
4B.6. Miscellaneous .
A. Registration of Transfer . The Corporation will keep at its principal office a register for the registration of Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation will, at the request of the record holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of shares as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate.
B. Replacement . Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate.
C. Definitions . For purposes hereof:
“ Additional Assets ” has the meaning set forth in Section 4B.5B(iii)(a).
“ Benchmark Price ” shall mean $7.487, subject to equitable adjustment in the event of any change in the Conversion Price pursuant to Sections 4B.5B(i) or 4B.5B(ii).
“ Conversion Price ” with respect to any share shall initially mean its Series Issuance Price, and shall be subject to adjustment from time to time in accordance with the provisions of Section 4B.5B.
“ Conversion Stock ” shall mean the Common Stock or other securities issuable upon conversion of the Preferred Stock as determined in accordance with the provisions of Section 4.5.
“ Convertible Securities ” shall have the meaning set forth in Section 4.5B(iii)(b)(x).
“ Determination Date ” means any particular date chosen for the determination of the Fair Market Value of a share of Common Stock or Additional Asset.
“ Fair Market Value ” of a share of Common Stock or Additional Asset as of a Determination Date shall mean: (i), in the case of Common Stock:
(a) if the Corporation’s Common Stock is traded on an exchange or is quoted on the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) National Market System or the NASDAQ SmallCap Market, then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date;
(b) if the Common Stock is not traded on an exchange or on the NASDAQ National Market System or the NASDAQ SmallCap Market but is traded in the over-the-counter market, then the mean of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date;
(c) except as provided in clause (d) below, if the Common Stock is not publicly traded, then as the holder and the Corporation agree or in the absence of agreement by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen by the Corporation (and reasonably acceptable to a Series A Director, or, if no Series A Director is then serving, the majority in interest of the Series A Holders) from a panel of persons qualified by education and training to pass on the matter to be decided; and
(d) if the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Corporation’s Certificate of Incorporation, as amended, then all amounts to be payable per share to holders of the Common Stock pursuant to the Certificate of Incorporation in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the Certificate of Incorporation, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all warrants that are outstanding at the Determination Date;
and (ii), in the case of Additional Assets, the fair market value of such Additional Assets as reasonably determined by the Board of Directors of the Corporation.
“ Issuance Price ” shall have the meaning set forth in Section 4B.5B(iii)(a).
“ Junior Securities ” means the Common Stock and any equity securities of any kind (but not including any debt securities convertible into equity securities) which the Corporation or any Subsidiary at any time issues or is authorized to issue other than the Series A Stock and the Series B Stock, unless the terms of such security explicitly state that such security shall be senior to or on a par with the Series A Stock or Series B Stock.
“ Liquidation Value ” means, with respect to any share of Series A Stock or Series B Stock as of any particular date, the Series Issuance Price, subject to adjustment for any and all recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends, subdivisions, combinations or similar events .
“ Material Event ” shall have the meaning set forth in Section 4B.4B.
“ Options ” shall have the meaning set forth in Section 4B.5B(iii)(c)(x).
“ Original Issue Date ” means January 31, 2005.
“ Person ” and “ person ” means an individual, a partnership, a corporation, a limited liability company, a trust, a joint venture, an unincorporated organization and a government or any department or agency thereof.
“ QIPO ” shall mean a firm commitment underwritten public offering of shares of Common Stock at a price per share of Common Stock in excess of the Series A-2 then-applicable Conversion Price.
“ Required Holders ” with respect to the Series A Stock or Series B Stock shall mean the owners of a majority of the outstanding shares of the Series A Stock or Series B Stock, respectively.
“ Reorganization ” shall have the meaning set forth in Section 4B.4B.
“ Series A-1 Director ” shall have the meaning set forth in Section 4B.3B.
“ Series A-2 Director ” shall have the meaning set forth in Section 4B.3B.
“ Series A-1 Holder ” shall mean a registered holder of Series A-1 Stock.
“ Series A-2 Holder ” shall mean a registered holder of Series A-2 Stock.
“ Series B Holder ” shall mean a registered holder of Series B Stock.
“ Series B-1 Holder ” shall mean a registered holder of Series B-1 Stock.
“ Series B-2 Holder ” shall mean a registered holder of Series B-2 Stock.
“Series Issuance Price ” means:
(a) $11.23, with respect to the Series A -1 Stock;
(b) $17.25, with respect to the Series A -2 Stock;
(c) $ 0.284, with respect to the Series B -1 Stock; and
(d) $ 0.199, with respect to the Series B -2 Stock
in each case, subject to adjustment for any and all recapitalizations, reclassifications, stock splits, reverse stock splits, stock dividends, subdivisions, combinations or similar events.
“ Subsidiary ” means any corporation of which the shares of stock having a majority of the general voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Corporation either directly or indirectly through Subsidiaries.
D. Amendment and Waiver . No amendment, modification or waiver will be binding or effective with respect to any provision of this Article IV adversely affecting the rights of the holders of the Series A Stock without the prior approval of the Required Holders provided further that in the case of an amendment, modification or waiver with respect to any provision of Section 4B.5B(iii), the Required Holders shall include a majority in interest of the Series A-1 Investors.
E. Generally Accepted Accounting Principles . When any accounting determination or calculation is required to be made, such determination or calculation (unless otherwise provided) will be made in accordance with generally accepted accounting principles, consistently applied.
F. Consideration Other Than Cash. In any case where the consideration received by this Corporation is other than cash, its value will be deemed its fair market value as determined in good faith by the Board of Directors. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by (ii) below: (a) if the principal trading market for such securities is an exchange, the average of the high reported sale prices per share of such securities for the last five previous trading days in which a sale was reported, as officially reported on any consolidated tape, (b) if the principal market for the Common Stock is the over-the-counter market, the average of the high reported sale prices per share on such trading days as set forth by such market or, (c) if such securities are not quoted by such over-the-counter market, the average of the average of the mean of the bid and asking prices per share on such trading days as set forth in the National Quotation Bureau sheet listing such securities for such days. Notwithstanding the foregoing, if there is no reported high sale price, as the case may be, reported on any of the ten trading days preceding the event requiring a determination of fair market value hereunder, then the fair market value shall be the average of the high bid and asked prices for such days; and if there is no reported high bid and asked prices, as the case may be, reported on any of the ten trading days preceding the event requiring a determination of fair market value hereunder, then the fair market value shall be determined in good faith by resolution of the Board of Directors of the Corporation, based on the best information available to it; provided that in the event of a dispute of the Board of Director’s determination, the fair market value shall be determined by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen by the Corporation from a panel of persons qualified by education and training to pass on the matter to be decided.
(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in clauses (i) (a), (b) or (c) to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.
G. Preemptive Rights . The Common Stockholders and the Series A Stockholders shall have such preemptive rights as are set forth in those certain Investor Rights Agreement and Stockholders Agreement, among the Corporation and certain of its stockholders, each dated January 31, 2005, as each may be amended.
ARTICLE V
Stockholder Action
Stockholders of the Corporation shall take action by (i) meetings held pursuant to this Amended and Restated Certificate of Incorporation and the ByLaws or (ii) written consent in lieu of a meeting pursuant to the provisions of Section 228 of the GCL. Meetings of stockholders may be held within or without the State of Delaware, as the ByLaws may provide. Special meetings of the stockholders, for any purpose or purposes, may be called by the Board of Directors of the Corporation or by the holders of at least 50% of the outstanding shares of capital stock of the Corporation. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the ByLaws of the Corporation.
ARTICLE VI
Creditors
Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under Section 291 of the GCL or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under Section 279 of the GCL order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ARTICLE VII
Section 203 of the GCL
The Corporation expressly elects not to be governed by Section 203 of the GCL.
ARTICLE VIII
Management of Business of the Corporation
For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided:
(a) The management of the business and the conduct of the affairs of the Corporation shall be vested in the Board of Directors, of which two members shall be the Series A-1 Director and the Series A-2 Director, if any, subject to the limitations set forth in Section 4.3B above.
(b) The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Corporation’s ByLaws, provided that they do not infringe upon the rights of the Series A Holders under Section 4.3 above. The phrase “whole Board” and the phrase “total number of directors” shall be deemed to have the same meaning, to wit, the total number of directors which the Corporation would have if there were no vacancies. No election of directors need be by written ballot.
ARTICLE IX
ByLaws
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, amend, alter or repeal the ByLaws of the Corporation. Such power of the Board of Directors shall not divest the stockholders of the power, nor limit their power to adopt, amend, alter or repeal the ByLaws of the Corporation.
ARTICLE X
Limitation of Director Liability
To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents (and any other persons to which Delaware law permits the Corporation to provide indemnification) through ByLaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the GCL, subject only to limits created by applicable Delaware law (statutory or non-statutory).
To the fullest extent permitted by applicable law, the directors of the Corporation shall not be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of the GCL or any amendment thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (1) shall have breached the director's duty or loyalty to the Corporation or its stockholders, (2) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law, or (3) shall have derived an improper personal benefit. If the GCL is hereafter amended to authorize the further elimination or limitation of the liability of a director, the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GCL, as so amended. To the fullest extent permitted by applicable law, each person who was or is made a party or is threatened to be made a party to or is in any way involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), including any appeal therefrom, by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or a direct or indirect Subsidiary, or is or was serving at the request of the Corporation as a director or officer of another entity or enterprise, shall be indemnified and held harmless by the Corporation, and the Corporation shall advance all expenses incurred by any such person in defense of any such proceeding prior to its final determination, to the fullest extent authorized by the GCL. In any proceeding against the Corporation to enforce these rights, such person shall be presumed to be entitled to indemnification and the Corporation shall have the burden of proving that such person has not met the standards of conduct for permissible indemnification set forth in the GCL. The rights to indemnification and advancement of expenses conferred by this Article X shall be presumed to have been relied upon by the directors and officers of the Corporation in serving or continuing to serve the Corporation and shall be enforceable as contract rights. Said rights shall not be exclusive of any other rights to which those seeking indemnification may otherwise be entitled. The Corporation may, upon written demand presented by a director or officer of the Corporation or of a direct or indirect Subsidiary, or by a person serving at the request of the Corporation as a director or officer of another entity or enterprise, enter into contracts to provide such persons with specified rights to indemnification, which contracts may confer rights and protections to the maximum extent permitted by the GCL, as amended and in effect from time to time. If a claim under this Article X is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expenses of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce the right to be advanced expenses incurred in defending any proceeding prior to its final disposition where the required undertaking, if any, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the GCL for the Corporation to indemnify the claimant for the amount claimed, but the claimant shall be presumed to be entitled to indemnification and the Corporation shall have the burden of proving that the claimant has not met the standards of conduct for permissible indemnification set forth in the GCL.
If the GCL is hereafter amended to permit the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment, the indemnification rights conferred by this Article X shall be broadened to the fullest extent permitted by the GCL, as so amended.
EXHIBIT 3.2
Adopted June 10, 2009
BYLAWS OF
NANO VIBRONIX, INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1.1 Registered Office . The registered office of the Corporation within the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 1.2 Other Offices . The Corporation may also have an office or offices other than said registered office at such place or places, either within or without the State of Delaware and within or without the United States of America, as the Board of Directors shall from time to time determine or the business of the Corporation may require.
ARTICLE II
Meeting of Stockholders
SECTION 2.1 Place of Meetings . All meetings of the stockholders shall be held at any such place, either within or without the State of Delaware, within or without the United States of America, as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof.
SECTION 2.2 Annual Meeting . The annual meeting of stockholders shall be held at such date and time as shall be designated from time to time by the Board of Directors and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall transact such business as may properly be brought before the meeting in the manner described in these Bylaws.
SECTION 2.3 Special Meetings . Special meetings of stockholders, unless otherwise prescribed by statute, may be called at any time by the Board of Directors or the Chairman of the Board, and shall be called by the Secretary upon the request in writing of a stockholder or stockholders holding of record at least fifty-one percent (51%) of the voting power of the issued and outstanding shares of stock of the Corporation entitled to vote at such meeting.
SECTION 2.4 Notice of Meetings .
(i) Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the date, place and hour of the meeting, and the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not less than seven (7) nor more than sixty (60) days before the date of the meeting.
(ii) Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.
(iii) Notice shall be sent by telecopied or registered or certified mail, postage prepaid, or by hand or by messenger, or by email, addressed to the stockholder at his address as it appears on the records of the Corporation. Any notice shall be effective (i) if mailed, seven (7) days after mailing, (ii) if sent by messenger, upon delivery, (iii) if sent via telecopier, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic confirmation of receipt, and (iv) if sent via email upon transmission provided that the stockholder shall acknowledge receipt.
(iv) Notice of any meeting shall not be required to be given to any person who attends such meeting, except when such person attends the meeting in person or by proxy for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed written waiver of notice, in person or by proxy.
(v) Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice.
SECTION 2.5 Quorum, Adjournments .
(i) The holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote at any annual or special meeting of the stockholders and which are present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders, except as otherwise provided by statute or by the Certificate of Incorporation.
(ii) If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the meeting shall be adjourned and take place at same place and hour 3 days later even if a quorum is not present, without notice other than announcement at the meeting.
(iii) In the event a quorum shall be achieved following adjournment of the meeting, whether by presence or by proxy, any business may be transacted which might have been transacted at the meeting as originally called.
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(iv) If the adjournment is for more than thirty (30) days, or, if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 2.6 Conduct of the Meeting . At each meeting of stockholders, the Chairman of the Board, if one shall have been elected, or in his absence or if one shall not have been elected, a director designated by the Board of Directors, shall act as chairman of the meeting. The Secretary or, in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof.
SECTION 2.7 Order of Business . The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting.
SECTION 2.8 Voting .
Except as otherwise provided by statute or the Certificate of Incorporation, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one vote for each share of capital stock of the Corporation standing in his name on the record of stockholders of the Corporation:
(ii) on the date fixed pursuant to the provisions of Section 5.7 of these By-Laws as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or
(iii) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice thereof shall be given, or, if notice is waived, at the close of business on the date next preceding the day on which the meeting is held.
In all matters, the affirmative vote of a majority of the shares present in person or represented by proxy at a duly called meeting of the stockholders (at which a quorum is present) and entitled to vote on the subject matter, shall be the act of the stockholders, unless the question is one upon which by express provision of statute, the Certificate of Incorporation, or these Bylaws a different vote is required, in which case such express provision shall govern and control the decision of such question.
Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if any, and shall state the number of shares voted.
SECTION 2.9 Proxies .
(i) Each stockholder entitled to vote at any meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him by proxy, but no proxy shall be voted after three years from its date, unless the proxy provides for a longer period.
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(ii) Without limiting the manner in which a stockholder may authorize another person or persons to act for him as proxy under subsection (a) above, the following shall constitute a valid means by which a stockholder may grant such authority:
(a) A stockholder may execute a writing authorizing another person or persons to act for him as a proxy. Execution may be accomplished by the stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.
(b) A stockholder may authorize another person or persons to act for him as proxy by transmitting or authorizing the transmission of a telegram, cablegram, facsimile, or other means of electronic transmission (hereinafter referred to as the “Electronic Communication”) to the person who will be the holder of the proxy, provided that any such Electronic Communication must either set forth or be submitted with information from which it can be determined that the Electronic Communication was actually authorized by the stockholder. If it is determined that any such Electronic Communication is valid, the Chairman of the Board or the chairman of the meeting shall specify the information upon which he relied.
(iii) Any copy, facsimile telecommunication or other reliable reproduction of the writing or Electronic Communication created pursuant to subsection (b) above may be submitted or used in lieu of the original writing or Electronic Communication and all purposes for which the original writing or Electronic Communication could be used, provided that any such copy or reproduction shall be a complete reproduction of the entire original writing or transmission.
(vi) All proxies shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies.
SECTION 2.10 Action by Consent .
(i) Any action required by the Certificate of Incorporation, these Bylaws or by applicable law to be taken at any annual or special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.
(ii) Any written consent for action taken by consent of stockholders in lieu of meeting as provided in subsection (a) above shall be delivered to the Corporation by delivery to its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
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(iii) Every written consent shall contain the date of signature of each stockholder, and no written consent shall be effective to take the corporate action referred to therein, unless, within sixty (60) days of the earlier dated consent delivered to the Corporation in a manner required by this section written consents signed by all stockholders are delivered to the Corporation by delivery to the Corporation's principal place of business or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
(iv) Prompt notice of any action taken by consent in lieu of meeting where such consent was given by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III
Board of Directors
SECTION 3.1 General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the Certificate of Incorporation directed or required to be exercised or done by the stockholders.
SECTION 3.2 Number, Qualifications, Appointment and Term of Office .
(i) The number of directors constituting the entire Board of Directors shall be six.
(ii) Three directors shall be appointed and removed by a majority in interest of the holders of the Common Stock only provided that:
if the Common Stock constitutes, as a
percentage of the fully-diluted equity of the Corporation : |
then the number of directors appointed
under this provision shall be : |
|
Between 10 and 15% | Two directors | |
Between 5 and 10% | One director | |
Less than 5% | None |
(iii) Except as otherwise provided by statute, the Certification of Incorporation or these bylaws, the directors shall be appointed and removed by a majority in interest of all of the stockholders.
(iv) Each director shall hold office until his successor shall have been appointed, or until his death, or until he shall have resigned, or have been removed, as provided in these bylaws or in the Certificate of Incorporation.
(v) The Directors shall not be required to hold any shares in the Corporation to qualify them for their office as Directors.
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SECTION 3.3 Place of Meetings . Meetings of the Board of Directors shall be held at such place or places, within or without the state of Delaware and within or without the United States of America, as the Board of Directors may from time to time determine or as shall be specified in the notice of any such meeting.
SECTION 3.4 Annual Meeting . The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such other time or place within or without the State of Delaware and within or without the United States of America as shall be specified in a notice thereof given as hereinafter provided in Section 3.7 below.
SECTION 3.5 Regular Meetings . Regular meetings of the Board of Directors shall be held at such time and place as the Board of Directors may fix. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the Board of Directors need not be given except as otherwise required by statute or these Bylaws.
SECTION 3.6 Special Meetings . Special meetings of the Board of Directors may be called by the Chairman of the Board, if one shall have been elected, or by two or more directors of the Corporation.
SECTION 3.7 Notice of Meetings .
(i) Notice of each special meeting of the Board of Directors (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 3.7.
(ii) All notices hereunder shall state the time, place and purpose of the meeting, except as otherwise required by the Certification of Incorporation, these Bylaws or applicable law.
(iii) Notice of each such meeting shall be telecopied or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, and, if by mail, shall be sent in a postage prepaid envelope, to each director, addressed to him at his residence or usual place of business, at least ten days before the day on which such meeting is to be held. Any notice shall be effective (i) if mailed, ten (10) business days after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via telecopier, upon transmission and electronic confirmation of receipt or (if transmitted and received on a non-business day) on the first business day following transmission and electronic confirmation of receipt.
(iv) Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting, except when he shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
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SECTION 3.8 Quorum and Manner of Acting .
(i) A majority of the entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors.
(ii) In the absence of a quorum at any meeting of the Board of Directors, the meeting shall be adjourned and take place at the same place and hour 4 business days later even if a quorum is not present, provided that a majority of the directors present thereat may adjourn such meeting to another time and place . Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting a majority of the entire Board of Directors shall constitute a quorum, and any business may be transacted which might have been transacted at the meeting as originally called.
(iii) Except as otherwise expressly required by statute, the Certificate of Incorporation, or these Bylaws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors.
SECTION 3.9 Powers . The directors shall act only as a Board and the individual directors shall have no power to bind or obligate the Corporation except by way of a duly authorized action of the Board.
SECTION 3.10 Recruitment and Terms of Employment . All terms of employment, including salaries and bonuses, for all executive and professional employees of the Corporation shall be approved in advance by the Board of Directors. The Board of Directors may authorize the Chief Executive Officer to hire and discharge support staff and to fix the terms of their employment.
SECTION 3.11 Conduct of Meetings . At each meeting of the Board of Directors, the Chairman of the Board, if one shall have been elected, or, in the absence of the Chairman of the Board or if one shall not have been elected, a director chosen by a majority of the directors present shall act as chairman of the meeting and preside thereat. The Secretary or, in his absence, any person appointed by the chairman shall act as secretary of the meeting and keep the minutes thereof.
SECTION 3.12 Resignations . Any director of the Corporation may resign at any time by giving written notice of his resignation to the Corporation and to the entity who appointed him. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
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SECTION 3.13 Vacancies . Except as may be provided in the Certificate of Incorporation, any vacancy in the Board of Directors, whether arising from death, resignation, removal (with or without cause), an increase in the number of directors or any other cause, shall be filled by the vote of a majority of the directors then in office, though less than a quorum, or by the sole remaining director, and only if there are no remaining directors, by the stockholders at the next annual meeting thereof or at a special meeting thereof. Each director so elected shall hold office until his successor shall have been elected and qualified.
SECTION 3.14 Removal of Director . Any director, or the entire Board of Directors, may be removed from office for cause at any time by the holders of a majority of the shares then entitled to vote at an election of directors.
SECTION 3.15 Compensation .
(i) The members of the Board of Directors shall not receive any compensation for their services to the Corporation in their capacities as directors, provided however that all directors may reimbursed for their reasonable expenses incurred on behalf of the Corporation against the presentation of bona tide and credible vouchers to the appropriate officer of the Corporation.
(ii) Nothing in this Section shall be construed to prohibit a director from receiving compensation from the Corporation for services rendered in any capacity other than as a director of the Corporation.
SECTION 3.16 Committees . The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
Except to the extent restricted by statute or the Certificate of Incorporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the Board of Directors and may authorize the seal of the Corporation to be affixed to all papers which require it. Each such committee shall serve at the pleasure of the Board of Directors and have such name as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors.
SECTION 3.17 Action by Consent . Unless restricted by the Certificate of Incorporation, any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing or by facsimile transmission, and the writing or writings are filed with the minutes of the proceedings of the Board of Directors or such committee, as the case may be.
SECTION 3.18 Telephonic Meeting . Unless restricted by the Certificate of Incorporation, any one or more members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at a meeting.
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SECTION 3.19 Reserved Matters . The Corporation shall not take any of the following actions without the approval of the Board of Directors:
1. | Increase (except for the purposes of issue of shares under subscription or similar rights the grant of which has already been approved by qualifying consent or which does not create a class of share which ranks in priority to the preferred shares and such shares are otherwise issued in accordance with the pre-emption rights contained in any undertaking entered into by the Corporation ) or alter or (except in accordance with any redemption rights attaching to the same on issue) reduce its authorised or issued share capital. |
2. | Except as expressly permitted under (A) above, consolidate or sub-divide any shares, create any new class of shares, grant or agree to grant any option over shares or any right to subscribe for shares or other right to call for its shares, issue or agree to issue any securities convertible into its shares, alter any of the rights attached to any of its issued shares, or otherwise re-organise or grant any rights in respect of its share capital. |
3. | Subscribe for, purchase or acquire any share or loan capital debenture mortgage or any interest therein. |
4. | Acquire, whether by formation or otherwise, any material subsidiary or (except on a transfer to the Corporation or a wholly owned subsidiary thereof) permit the disposal or dilution of its interest directly or indirectly in any material subsidiary, material for these purposes being a subsidiary or proposed subsidiary which would account for more than 25% of the net asset value of the Company and its subsidiaries. |
5. | Sell, transfer, lease, licence or in any other way dispose of all or a substantial part of its business undertaking or assets whether by a single transaction or series of transactions, related or not, except to the Corporation or a wholly owned subsidiary thereof. |
6. | Cease or make any material alteration to its business or change its corporate or business name or adopt or make any material change in its business policy (except as part of a solvent reorganisation involving the transfer of all or substantially all of such business to the Corporation or a wholly owned subsidiary thereof), material for these purposes being a change or alternation which would adversely impact on more than 25% of the net asset value of the Corporation and its subsidiaries. |
7. | Create or issue or allow to come into being any mortgage or charge or other security (other than liens arising by operation of law or in the ordinary course of business) upon any part of its present or future undertaking property or assets, or issue any debenture or debenture stock. |
8. | appoint any person as a director (other than as permitted by these bylaws); |
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9. | Save in circumstances justifying summary dismissal or removal from office, dismiss any material employee or consultant, material for these purposes being any employee or consultant whose personal knowledge and skills are important to the development of the Corporation ’s business and who cannot be readily replaced or any such employee or consultant whose annual remuneration by the Corporation exceeds $100,000. |
10. | Pass any resolution or seek any order for the winding up or dissolution thereof. |
11. | Make any alteration to these Bylaws. |
ARTICLE IV
Officers
SECTION 4.1 Number and qualifications .
(i) The officers of the Corporation shall be elected by the Board of Directors and shall include a Secretary and, as may be necessary or desirable for the business of the Corporation, a Chairman of the Board of Directors, a President and Chief Executive Officer, one or more Vice Presidents and/or a Treasurer.
(ii) The Secretary's duties are described in Section 4.7 below. The officers other than the Secretary shall have such responsibilities as established by resolution of the Board of Directors or the stockholders.
(iii) If the Board of Directors or the stockholders wish, either may elect other officers (including one or more Assistant Treasurers and one or more Assistant Secretaries) as may be necessary or desirable for the business of the Corporation.
(iv) Any two or more offices may be held by the same person, except that the President and Chief Executive Officer, if one has been elected, and the Secretary may not be the same person.
(v) No officer except the Chairman of the Board need be a director.
(vi) Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these Bylaws.
SECTION 4.2 Limitations on Powers . The authority of the Chief Executive Officer and other officers of the Corporation to execute contracts, instruments and enter into any other undertaking in the name or on behalf of the Corporation shall be determined, from time to time, by resolution of the Board of Directors. The officers of the Corporation shall have such powers, authority and privileges as may conferred upon them by the Board of Directors.
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SECTION 4.3 Resignations . Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective.
SECTION 4.4 Removal . Any officer of the Corporation may be removed, either with or without cause, at any time, by the Board of Directors at any meeting thereof. Such removal shall be without prejudice to a person's contract rights, if any, but the election as an officer of the corporation shall not of itself create contract rights.
SECTION 4.5 Chairman of the Board . The Chairman of the Board, if one shall have been elected, shall be a member of the Board, an officer of the Corporation and, if present, shall preside at each meeting of the Board of Directors or the stockholders. He shall also perform such other duties as may from time to time be assigned to him by the Board of Directors. The Chairman of the Board shall not have any casting vote or additional vote or any other similar preferred voting rights.
SECTION 4.6 Chief Executive Officer . Unless the Board of Directors elects a Chairman of the Board who is designated as such, the President shall be the Chief Executive Officer of the Corporation and shall in general supervise and control all of the business affairs of the Corporation, subject to the direction of the Board of Directors. The President may execute, in the name and on behalf of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors or a committee thereof has authorized to be executed, except in cases where the execution shall have been expressly delegated by the Board of Directors or a committee thereof to some other officer or agent of the corporation.
SECTION 4.7 Secretary . The Secretary shall:
(i) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the stockholders;
(ii) see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law;
(iii) be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal;
(iv) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and
(v) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Directors.
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SECTION 4.8 Vacancies .
Any vacancy created as the result of the death, resignation, or removal (with or without cause) of any officer of the Corporation may be filled by action of the Board of Directors at a regular or special meeting thereof. Each officer so elected shall hold office until his successor shall have been elected and qualified.
ARTICLE V
Stock Certificates and Their Transfer
SECTION 5.1 Stock Certificates .
(i) Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by a director, the President and Chief Executive officer, or a Vice-President designated by the Board of Directors and by the Secretary of the Corporation, certifying the number of shares owned by him in the Corporation.
(ii) If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, or in the event the stock of the Corporation is subject to any transfer restrictions, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restriction of such preferences and/or rights and all transfer restrictions shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating, optional or other special rights of each class of stock, or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights and any transfer restrictions.
SECTION 5.2 Facsimile Signatures . Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 5.3 Lost Certificates . The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
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SECTION 5.4 Transfers of Stock .
(i) Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its records; provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer.
(ii) Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so.
SECTION 5.5 Transfer Agents and Registrars . The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.
SECTION 5.6 Regulations . The Board of Directors may make such additional rules and regulations, not inconsistent with these Bylaws, as it may deem expedient concerning the issue, transfer and registration of certificates for shares of stock of the Corporation.
SECTION 5.7 Fixing the Record Date . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 5.8 Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VI
Indemnification of Directors and Officers
SECTION 6.1 General . The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expense (including attorneys' fees), judgment, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea or nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 6.2 Derivative Actions . The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, provided that no indemnification shall be made in respect of any claims, issue or matter as to which such person shall have been a judged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
SECTION 6.3 Indemnification in Certain Cases . To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
SECTION 6.4 Procedure . Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in such Sections 6.1 and 6.2. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if, such quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the stockholders.
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SECTION 6.5 Advances for Expenses . Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VI. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate.
SECTION 6.6 Rights Not Exclusive . The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
SECTION 6.7 Insurance . The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VI.
SECTION 6.8 Definition of Corporation . For the purposes of this Article VI, references to "the Corporation" include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other organization, shall stand in the same position under this Section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation, if its separate existence had continued.
SECTION 6.9 Survival of Rights . The indemnification and advancement of expenses provided by, or granted pursuant to this Article VI shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
ARTICLE VII
General Provisions
SECTION 7.1 Dividends . Subject to the provisions of statute and the Certificate of Incorporation, dividends upon the shares of capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, in property or in shares of stock of the Corporation, unless otherwise provided by statute or the Certificate of Incorporation.
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SECTION 7.2 Reserves . Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors may think conducive to the interests of the Corporation. The Board of Directors may modify or abolish any such reserves in the manner in which it was created.
SECTION 7.3 Seal . The seal of the Corporation shall be in such form as shall be approved by the Board of Directors.
SECTION 7.4 Fiscal Year . The Fiscal year of the Corporation shall be fixed by the Board of Directors, and once fixed, may thereafter be changed, by resolution of the Board of Directors.
SECTION 7.5 Checks, Notes, Drafts, Etc . All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer or officers or directors as shall be designated by resolution of the Board of Directors.
SECTION 7.6 Voting of Stock in Other Corporations . Unless otherwise provided by resolution of the Board of Directors, a director designated by the Board of Directors, from time to time, may (or may appoint one or more attorneys or agents to) cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of the shares or other securities of such other corporation. In the event one or more attorneys or agents are appointed, the director designated by the Board of Directors may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The director designated by the Board of Directors may, or may instruct the attorneys or agent appointed to, execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, such written proxies, consents, waivers or other instruments as may be necessary or proper in the circumstances.
ARTICLE VIII
Amendments
Subject to the Certificate of Incorporation and these Bylaws, these Bylaws may be amended or repealed or new Bylaws adopted (a) by action of the stockholders entitled to vote thereon at any annual or special meeting of stockholders or (b) if the Certificate of Incorporation so provides, by action of the Board of Directors at a regular or special meeting thereof.
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EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NANO VIBRONIX, INC.
Nano Vibronix, Inc. (the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify that:
The name of the corporation is Nano Vibronix, Inc.
The original Certificate of Incorporation of this Corporation was filed with the Secretary of State of Delaware on October 20, 2003 (the “ Original Certificate of Incorporation ”).
This Amended and Restated Certificate of Incorporation, which amends and restates the Corporation’s Amended and Restated Certificate of Incorporation, as amended, in its entirety, has been duly adopted in accordance with the provisions of Sections 242 and 245 of the DGCL, and the stockholders of the Corporation have given their written consent in accordance with the provisions of Section 228 of the DGCL. The provisions of this Amended and Restated Certificate of Incorporation are as follows:
First: The name of the corporation is Nano Vibronix, Inc. (hereinafter referred to as the “ Corporation ”).
Second: The address of the registered office of the Corporation in the State of Delaware is 1313 Market Street, Suite 5100, City of Wilmington, postal code 19801, in the County of New Castle. The name of the registered agent of the Corporation at that address is PHS Corporate Services, Inc.
Third: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (the “ DGCL ”).
Fourth: A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is twenty-five million (25,000,000), consisting of twenty million (20,000,000) shares of Common Stock, par value $0.001 per share (the “ Common Stock ”) and five million (5,000,000) shares of Preferred Stock, par value $0.001 per share (the “ Preferred Stock ”).
B. The board of directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a “ Preferred Stock Designation ”), 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 thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.
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C. Of the Preferred Stock authorized by this Amended and Restated Certificate of Incorporation, ____ (_____) shares of Preferred Stock are hereby designated as Series C Convertible Preferred Stock (the “ Series C Preferred Stock ”). The rights, preferences, privileges and restrictions of the Series C Preferred Stock are set forth as follows:
1. Definitions . With respect to the Series C Preferred Stock, the following terms shall have the following meanings:
“ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Series C Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Series C Holder will be deemed to be an Affiliate of such Series C Holder.
“ Alternate Consideration ” shall have the meaning set forth in Section C.7(b) of this Article FOURTH.
“ Beneficial Ownership Limitation ” shall have the meaning set forth in Section C.6(b)(iv) of this Article FOURTH.
“ Business Day ” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security prior to 4:00 p.m., New York City time, on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting service mutually acceptable to and hereafter designated by the Series C Holders holding a majority of the then-outstanding Series C Preferred Stock and the Corporation), or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, L.P., or, if no last trade price is reported for such security by Bloomberg, L.P., the average of the bid prices of any market makers for such security as reported on the any over the counter market operated by OTC Markets Group, Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Corporation.
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“ Commission ” means the Securities and Exchange Commission.
“ Common Stock Equivalents ” means any securities of the Corporation or its 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 exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“ Conversion Date ” shall have the meaning set forth in Section C.6(a) of this Article FOURTH.
“ Conversion Price ” shall mean $1.00, as adjusted pursuant to Section C.7 of this Article FOURTH.
“ Conversion Ratio ” for each share of Series C Preferred Stock shall be equal to the Stated Value divided by the Conversion Price.
“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series C Preferred Stock in accordance with the provisions of Section C.6 of Article FOURTH hereof.
“ Daily Failure Amount ” means the product of (x) .005 multiplied by (y) the Closing Sale Price of the Common Stock on the applicable Share Delivery Date.
“ DWAC Delivery ” shall have the meaning set forth in Section C.6(a) of this Article FOURTH.
“ 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 C.7(b) of this Article FOURTH.
“ Notice of Conversion ” shall have the meaning set forth in Section C.6(a) of this Article FOURTH.
“ Person ” means any 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.
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“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Series C Holder ” means any holder of Series C Preferred Stock.
“ Series C Preferred Stock Register ” shall have the meaning set forth in Section C.2 of this Article FOURTH.
“ Share Delivery Date ” shall have the meaning set forth in Section C.6(c)(i) of Article FOURTH.
“ Stated Value ” shall mean $1.00.
2. Number and Designation; Assignment . The number of shares designated as Series C Preferred Stock shall not be subject to increase without the written consent of the Series C Holders holding a majority of the then issued and outstanding Series C Preferred Stock. The Corporation shall register shares of the Series C Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “ Series C Preferred Stock Register ”), in the name of the Series C Holders thereof from time to time. The Corporation may deem and treat the registered Series C Holder of shares of Series C Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series C Preferred Stock in the Series C Preferred Stock Register, upon surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Series C Holder thereof, to the Corporation at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Series C Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Series C Holder, in each case, within three Business Days.
3. Dividends . Series C Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are specifically declared by the Board of Directors of the Corporation to be payable to the holders of the Common Stock. Other than as set forth in the previous sentence, no other dividends shall be paid on shares of Series C Preferred Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock unless it simultaneously complies with the previous sentence.
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4. Voting Rights. Subject to the limitations set forth in Section C.6(b) herein, the Series C Holder of each share of Series C Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Series C Preferred Stock could be converted for purposes of determining the shares entitled to vote at any regular, annual or special meeting of stockholders of the Corporation, and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series C Preferred Stock held by each Series C Holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).
5. Liquidation . Upon liquidation, dissolution or winding up of the Corporation (a “ Liquidation ”), whether voluntary or involuntary, each Series C Holder shall be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Series C Preferred Stock if such shares had been converted to Common Stock immediately prior to such Liquidation (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section C.6(b) of this Article FOURTH, subject to the preferential rights of holders of any senior securities of the Corporation.
6. Conversion.
(a) Conversion at Option of Holder . Each share of Series C Preferred Stock shall be convertible, at any time and from time to time from and after the date of issuance, at the option of the Series C Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio. Except for a conversion following a Fundamental Transaction or following a notice provided for under Section C.7(d)(ii) of this Article FOURTH, Series C Holders shall exercise the option to convert by providing the Corporation with a written notice of conversion (a “ Notice of Conversion ”), duly completed and executed. Each Notice of Conversion shall specify the number of shares of Series C Preferred Stock to be converted, the number of shares of Series C Preferred Stock owned prior to the requested conversion, the number of shares of Series C Preferred Stock owned subsequent to the requested conversion and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Series C Holder delivers such Notice of Conversion to the Corporation (the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Business Day that the Corporation receives the Notice of Conversion. Provided the Corporation’s transfer agent is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer program and the applicable Conversion Shares are either registered for resale or eligible for resale without restriction pursuant to Rule 144 of the Securities Act, the Notice of Conversion may specify, at the Series C Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Series C Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “ DWAC Delivery ”). The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.
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(b) Beneficial Ownership Limitation .
(i) Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of the Series C Preferred Stock, and a Series C Holder shall not have the right to convert any portion of its Series C Preferred Stock, to the extent that, after giving effect to an attempted conversion, such Series C Holder (together with such Series C Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Series C Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Series C Holder is a member) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below).
(ii) For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Series C Series C Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock subject to conversion with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted shares of Series C Preferred Stock beneficially owned by such Series C Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation beneficially owned by such Series C Holder or any of its Affiliates (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. 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.
(iii) To the extent that the limitation contained in this Section C.6(b) of Article FOURTH applies, the determination of whether the Series C Preferred Stock may be converted (in relation to other securities owned by the Series C Holder together with any Affiliates) and of which portion of its Series C Preferred Stock may be converted shall be in the sole discretion of the Series C Holder and the submission of a Notice of Conversion shall be deemed to be such Series C Holder’s determination of whether the shares of Series C Preferred Stock may be converted (in relation to other securities owned by such Series C Holder together with any Affiliates) and how many shares of the Series C Preferred Stock are convertible, in each case subject to the Beneficial Ownership Limitation. For purposes of this Section, in determining the number of outstanding shares of Common Stock, a Series C Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent public filing with the Commission, (B) a more recent public announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Series C Holder setting forth the number of shares of Common Stock then outstanding. For any reason at any time, upon the written or oral request of a Series C Holder (which may be by email), the Corporation shall, within two (2) Business Days of such request, confirm orally and in writing to such Series C 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 Series C Preferred Stock, by such Series C Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was last publicly reported or confirmed to the Series C Holder.
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(iv) 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 pursuant to such conversion (to the extent permitted pursuant to this Section). The Series C Holder, upon not less than 61 days’ prior notice to the Corporation, may increase (in the event that that the Beneficial Ownership Limitation is subsequently reduced) or decrease the Beneficial Ownership Limitation provisions of this Section, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion the Series C Preferred Stock held by the Series C Holder and the provisions of this Section shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Corporation and shall only be effective with respect to such Series C Holder. The provisions of this Section 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 Series C Preferred Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Series C Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.
(v) The Beneficial Ownership Limitation provisions of this Section may be waived at the election of any Series C Holder upon not less than 61 days’ prior written notice to the Corporation. Any such waiver will not be effective and the provisions of this Section shall continue to apply until the 61st day (or later, if stated in the notice) after such notice of waiver is delivered to the Corporation.
(c) Mechanics of Conversion.
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(i) Delivery of Certificate or Electronic Issuance Upon Conversion . Not later than three Business Days after the applicable Conversion Date, or if the Series C Holder requests the issuance of physical certificate(s), two Business Days after receipt by the Corporation of the original certificate(s) representing such shares of Series C Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion (the “ Share Delivery Date ”), the Corporation shall (a) deliver, or cause to be delivered, to the converting Series C Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Series C Preferred Stock or (b) in the case of a DWAC Delivery, electronically transfer such Conversion Shares by crediting the account of the Series C Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion such certificate or certificates 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 Series C Holder by the Share Delivery Date, the applicable Series C Holder shall be entitled to elect to rescind such Conversion Notice 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 Series C Holder any original Series C Preferred Stock certificate delivered to the Corporation and such Series C 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 Series C Holder through the DWAC system, representing the shares of Series C Preferred Stock unsuccessfully tendered for conversion to the Corporation.
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(ii) Obligation Absolute . Subject to Section C.6(b) hereof and subject to a Series C Holder’s right to rescind a Conversion Notice pursuant to Section C.6(c)(i) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series C Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Series C 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 Series C Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Series C Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Series C Holder in connection with the issuance of such Conversion Shares. Subject to the Beneficial Ownership Limitation herein and subject to a Series C Holder’s right to rescind a Conversion Notice pursuant to Section C.6(c)(i) above, in the event a Series C Holder shall elect to convert any or all of its Series C Preferred Stock, the Corporation may not refuse conversion based on any claim that such Series C Holder or any one Person associated or affiliated with such Series C Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to such Series C Holder, restraining and/or enjoining conversion of all or part of the Series C Preferred Stock of such Series C Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Series C Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Series C 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 Series C Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall, subject to the Beneficial Ownership Limitation herein and subject to Series C Holder’s right to rescind a Conversion Notice pursuant to Section C.6(c)(i) above, issue Conversion Shares upon a properly noticed conversion. If the Corporation fails to deliver to a Series C Holder such certificate or certificates, or electronically deliver (or cause its transfer agent to electronically deliver) such shares in the case of a DWAC Delivery, pursuant to Section Section C.6(c)(i) on or prior to the fifth (5th) Business Day after the Share Delivery Date applicable to such conversion (other than a failure caused by incorrect or incomplete information provided by Series C Holder to the Corporation), then, unless the Series C Holder has rescinded the applicable Conversion Notice pursuant to Section C.6(c)(i) above, the Corporation shall pay (as liquidated damages and not as a penalty) to such Series C Holder an amount payable in cash equal to the product of (x) the number of Conversion Shares required to have been issued by the Corporation on such Share Delivery Date, (y) an amount equal to the Daily Failure Amount and (z) the number of Business Days actually lapsed after such fifth (5th) Business Day after the Share Delivery Date during which such certificates have not been delivered, or, in the case of a DWAC Delivery, such shares have not been electronically delivered. Nothing herein shall limit a Series C Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Series C 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; provided that Series C Holder shall not receive duplicate damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein. The exercise of any such rights shall not prohibit a Series C Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(iii) Reservation of Shares Issuable Upon Conversion . The Corporation 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 the Series C Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Series C Holders, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section C.7 of this Article FOURTH) upon the conversion of all outstanding shares of Series C Preferred Stock. 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 nonassessable.
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(iv) Fractional Shares . No fractional shares of Common Stock shall be issued upon the conversion of the Series C Preferred Stock. As to any fraction of a share which a Series C Holder would otherwise be entitled to receive upon such conversion, such fraction shall be rounded up or down to the next whole share.
(v) Transfer Taxes and Expenses . The issuance of certificates for shares of the Common Stock upon conversion of the Series C Preferred Stock shall be made without charge to any Series C 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 Series C Holder(s) of such shares of Series C 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. The Corporation shall pay all transfer agent fees required for processing of any Notice of Conversion.
(d) Status as Stockholder . Upon each Conversion Date, (i) the shares of Series C Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the Series C Holder’s rights as a holder of such converted shares of Series C 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 Series C Holder because of a failure by the Corporation to comply with the terms herein. In all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to convert Series C Preferred Stock.
7. Certain Adjustments.
(a) Stock Dividends and Stock Splits . If the Corporation, at any time while this Series C Preferred Stock is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of this Series C Preferred Stock) with respect to the then outstanding shares of Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; or (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, 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 (excluding any treasury shares of the Corporation). Any adjustment made pursuant to this Section C.7(a) 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 or combination.
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(b) Fundamental Transaction . If, at any time while this Series C Preferred Stock is outstanding, (A) the Corporation effects any merger or consolidation of the Corporation with or into another Person (other than a merger in which the Corporation is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (B) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all of the Common Stock is exchanged for or converted into other securities, cash or property, or (D) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination covered by Section C.7(b) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Series C Preferred Stock the Series C Holders shall have the right to receive, in lieu of the right to receive Conversion Shares, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate Consideration ”). For purposes of any such subsequent conversion, the determination of the Conversion Ratio 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 adjust the Conversion Ratio 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 Series C Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series C 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 an amendment to this Amended and Restated Certificate of Incorporation or separate Certificate of Designation with the same terms and conditions and issue to the Series C Holders new preferred stock consistent with the foregoing provisions and evidencing the Series C Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement to which the Corporation is a party and pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section C.7(b) and insuring that the Series C Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Corporation shall cause to be delivered to each Series C Holder, at its last address as it shall appear upon the stock books of the Corporation, written notice of any Fundamental Transaction at least 20 calendar days prior to the date on which such Fundamental Transaction is expected to become effective or close.
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(c) Calculations . All calculations under this Section C.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 C.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.
(d) Notice to Holders .
(i) Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any provision of this Section C.7, the Corporation shall promptly deliver to each Series C Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(ii) Other Notices . 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, of 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 Series C Preferred Stock, and shall cause to be delivered to each Series C Holder at its last address as it shall appear upon the stock books of the Corporation, at least 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.
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8. Miscellaneous.
(a) Notices . Any and all notices or other communications or deliveries to be provided by the Series C Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 105 Maxess Road, Suite S124, Melville, NY 11747, facsimile number (631) 574-4401, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the Series C Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Series C Holder at the facsimile number or address of such Series C Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Series C Holder. 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 facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(b) Lost or Mutilated Series C Preferred Stock Certificate . If a Series C Holder’s Series C 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 Series C 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 thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.
(c) Status of Converted Series C Preferred Stock . If any shares of Series C Preferred Stock shall be converted 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 Series C Preferred Stock.
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D. Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote; provided , however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any Preferred Stock Designation relating to any series of Preferred Stock).
Fifth: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors. In addition to the powers and authority expressly conferred upon them by statute or by this Amended and Restated Certificate of Incorporation or the bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written ballot unless the bylaws so provide.
C. Subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation or by written consent in lieu of a meeting pursuant to the provisions of Section 228 of the DGCL.
D. Special meetings of stockholders of the Corporation may be called only by the board of directors acting pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Amended and Restated Certificate of Incorporation, the term “ Whole Board ” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.
E. An annual meeting of stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the board of directors shall fix.
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Sixth: A. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the board of directors pursuant to a resolution adopted by a majority of the Whole Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Each director shall hold office either until the expiration of the term for which elected or appointed and until a successor has been elected and qualified, or until such director’s earlier death, resignation or removal.
B. A majority of the Whole Board shall constitute a quorum for all purposes at any meeting of the board of directors, and, except as otherwise expressly required by law or by this Amended and Restated Certificate of Incorporation, all matters shall be determined by the affirmative vote of a majority of the directors present at any meeting at which a quorum is present.
C. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the board of directors resulting from death, resignation, disqualification, removal from office or other cause shall, unless the board of directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders and except as otherwise provided by applicable law, be filled only by a majority vote of the directors then in office, even though less than a quorum of the board of directors (and not by stockholders), and any director so chosen shall serve for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been duly elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.
D. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the bylaws of the Corporation.
Seventh: The board of directors is expressly empowered to adopt, amend or repeal bylaws of the Corporation. Any adoption, amendment or repeal of the bylaws of the Corporation by the board of directors shall require the approval of a majority of the Whole Board. The stockholders shall also have power to adopt, amend or repeal the bylaws of the Corporation, subject to any restriction that may be set forth in this Amended and Restated Certificate of Incorporation (including any certificate of designation that may be filed from time to time); provided, however , that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Amended and Restated Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to adopt, amend or repeal any provision of the bylaws of the Corporation.
Eighth: A. To the fullest extent permitted by applicable law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
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B. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the corporation (and any other persons to which applicable law permits the Corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise in excess of the indemnification and advancement otherwise permitted by such applicable law.
C. Any repeal or modification of this Article EIGHTH shall not adversely affect any right or protection or increase the liability of a director of the Corporation existing at the time of such repeal or modification.
Ninth: The Corporation reserves the right to amend or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation.
IN WITNESS WHEREOF, Nano Vibronix, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by its duly authorized officer on _______, 2014.
NANO VIBRONIX, INC. | |||
By: | |||
[Name] | |||
[Title] |
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EXHIBIT 3.5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NANO VIBRONIX, INC.
Nano Vibronix, Inc. (the “ Corporation ”), a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ GCL ”), does hereby certify that:
1. The original Certificate of Incorporation of this Corporation was filed with the Secretary of State of Delaware on October 20, 2003 (the “ Original Certificate of Incorporation ”).
2. The Original Certificate of Incorporation was amended and restated and an Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on November 21, 2011 (the “ Amended and Restated Certificate of Incorporation ”).
3. Resolutions were duly adopted by the Board of Directors of the Corporation setting forth this proposed Amendment to the Amended and Restated Certificate of Incorporation and declaring said amendment to be advisable and calling for the consideration and written approval of the stockholders of the Corporation thereof, in accordance with Section 228 of the GCL.
4. The Amended and Restated Certificate of Incorporation is hereby amended by deleting the definition of “QIPO” set forth in subsection (B)(6)(C) of ARTICLE IV in its entirety and inserting the following in lieu thereof:
“QIPO ” shall mean the Corporation’s initial public offering of its Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Corporation becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Corporation under the Exchange Act or equivalent document. |
5. Pursuant to the resolution of the Board of Directors, the Corporation received written consents in favor of the foregoing amendment from the holders of the necessary number of shares.
6. The foregoing amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
IN WITNESS WHEREOF, Nano Vibronix, Inc., has caused this Certificate to be executed by its duly authorized officer on this 5th day of March, 2014.
NANOVIBRONIX, INC | |||
By: | /s/ Ophir Shahaf | ||
Name: | Ophir Shahaf | ||
Title: | Chief Executive Officer |
EXHIBIT 3.6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NANO VIBRONIX, INC.
Nano Vibronix, Inc. (the “ Corporation ”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ GCL ”), does hereby certify that:
1. The original Certificate of Incorporation of this Corporation was filed with the Secretary of State of Delaware on October 20, 2003 (the “ Original Certificate of Incorporation ”).
2. The Original Certificate of Incorporation was amended and restated and an Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on November 21, 2011 (the “ Amended and Restated Certificate of Incorporation ”).
3. The Amended and Restated Certificate of Incorporation was further amended and a Certificate of Amendment of the Certificate of Incorporation was filed with the Secretary of State of Delaware on March 6, 2014.
4. Resolutions were duly adopted by the Board of Directors of the Corporation setting forth this proposed Amendment to the Amended and Restated Certificate of Incorporation and declaring said amendment to be advisable and calling for the consideration and written approval of the stockholders of the Corporation thereof, in accordance with Section 228 of the GCL.
5. The Amended and Restated Certificate of Incorporation is hereby amended to change the authorized capital of the Corporation by deleting the first paragraph of ARTICLE IV in its entirety and inserting the following in lieu thereof:
“The Corporation is authorized to issue two classes of capital stock to be designated, respectively, “Common Stock” and “Preferred Stock”. The total number of shares that the Corporation is authorized to issue is forty seven million five hundred thousand (47,500,000). Twenty four million (24,000,000) shares shall be Common Stock, par value $0.001 per share, and twenty-three million five hundred thousand (23,500,000) shares shall be Preferred Stock, par value $0.001 per share.”
6. The Amended and Restated Certificate of Incorporation is hereby amended to designate a new series of Preferred Stock by deleting the first paragraph of Section 4B of ARTICLE IV in its entirety and inserting the following in lieu thereof:
“Section 4B. Of the Preferred Stock, four hundred thousand (400,000) shares of Preferred Stock are hereby designated as "Series A-1 Participating Convertible Preferred Stock" (and are referred to herein as “ Series A-1 Stock ”), three hundred thousand (300,000) shares of Preferred Stock are hereby designated as "Series A-2 Participating Convertible Preferred Stock" (and are referred to herein as “ Series A-2 Stock ” and, together with the Series A-1 Preferred Stock, are referred to herein as the “ Series A Stock ”); four million six hundred fifty thousand (4,650,000) shares of Preferred Stock are hereby designated as "Series B-1 Participating Convertible Preferred Stock" (and are referred to herein as “ Series B-1 Stock ”), twelve million six hundred fifty thousand (12,650,000) shares of Preferred Stock are hereby designated as "Series B-2 Participating Convertible Preferred Stock" (and are referred to herein as “ Series B-2 Stock ” and, together with the Series B-1 Preferred Stock, are referred to herein as the “ Series B Stock ”) and five million five hundred thousand (5,500,000) shares of Preferred Stock are hereby designated as “Series C Participating Convertible Preferred Stock” (and are referred to herein as “ Series C Stock ”). Capitalized terms not otherwise defined have the meanings set forth below in Section 4B.6C, with respect to the Series A Stock and Series B Stock, and Section 4B.7A, with respect to the Series C Stock.”
7. The Amended and Restated Certificate of Incorporation is hereby amended by deleting the last paragraph in the lead-in to Section 4B, immediately above 4B.1, and inserting the following in lieu thereof:
“The rights, preferences, privileges and restrictions, and the number of shares constituting the Series A Stock and the Series B Stock (the “ Series ”) and the designation of such series, are set forth as follows:”
8. The Amended and Restated Certificate of Incorporation is hereby amended by deleting, from the first line of subsection 4(B)(6)(C) of ARTICLE IV “ Definitions . For purposes hereof:” in its entirety and inserting the following in lieu thereof:
“C. Definitions . With respect to the Series A Stock and Series B Stock, for the purposes hereof:”
9. The Amended and Restated Certificate of Incorporation is hereby amended by inserting the following subsection after the final paragraph in ARTICLE IV:
“4B.7. Series C Stock . The rights, preferences, privileges, and restrictions, and the number of shares constituting the Series C Stock and the designation of such series, are set forth as follows:
A. | Definitions . With respect to the Series C Stock, the following terms shall have the following meanings: |
“ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Series C Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Series C Holder will be deemed to be an Affiliate of such Series C Holder.
“ Alternate Consideration ” shall have the meaning set forth in Section 4B.7G(ii).
“ Beneficial Ownership Limitation ” shall have the meaning set forth in Section 4B.7F(ii)(d).
“ Business Day ” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security prior to 4:00 p.m., New York City time, on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting service mutually acceptable to and hereafter designated by the Series C Holders holding a majority of the then-outstanding Series C Stock and the Corporation), or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, L.P., or, if no last trade price is reported for such security by Bloomberg, L.P., the average of the bid prices of any market makers for such security as reported on the any over the counter market operated by OTC Markets Group, Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Corporation.
“ Commission ” means the Securities and Exchange Commission.
“ Common Stock Equivalents ” means any securities of the Corporation or its 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 exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“ Conversion Date ” shall have the meaning set forth in Section 4B.7F(i).
“ Conversion Price ” shall mean $1.00, as adjusted pursuant to Section 4B.7G hereof.
“ Conversion Ratio ” for each share of Series C Stock shall be equal to the Stated Value divided by the Conversion Price.
“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series C Stock in accordance with the provisions of Section 4B.7F hereof.
“ Daily Failure Amount ” means the product of (x) .005 multiplied by (y) the Closing Sale Price of the Common Stock on the applicable Share Delivery Date.
“ DWAC Delivery ” shall have the meaning set forth in Section 4B.7F(i).
“ 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 4B.7G(ii).
“ Notice of Conversion ” shall have the meaning set forth in Section 4B.7F(i).
“ Person ” means any 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.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Senior Securities ” shall have the meaning set forth in Section 4B.7E(i).
“Series C Holder” means any holder of Series C Stock.
“ Series C Stock Register ” shall have the meaning set forth in Section 4B.7B(ii).
“ Share Delivery Date ” shall have the meaning set forth in Section 4B.7F(iii)(a).
“ Stated Value ” shall mean $1.00.
B. | Number and Designation; Assignment . |
(i) The number of shares designated as Series C Stock shall not be subject to increase without the written consent of the Series C Holders holding a majority of the then issued and outstanding Series C Stock.
(ii) The Corporation shall register shares of the Series C Stock, upon records to be maintained by the Corporation for that purpose (the “ Series C Stock Register ”), in the name of the Series C Holders thereof from time to time. The Corporation may deem and treat the registered Series C Holder of shares of Series C Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series C Stock in the Series C Stock Register, upon surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Series C Holder thereof, to the Corporation at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Series C Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Series C Holder, in each case, within three Business Days.
C. Dividends . Series C Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series C Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are specifically declared by the Board of Directors of the Corporation to be payable to the holders of the Common Stock. Other than as set forth in the previous sentence, no other dividends shall be paid on shares of Series C Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock unless it simultaneously complies with the previous sentence.
D. Voting Rights. Subject to the limitations set forth in Section 4B.7F(ii) herein, the Series C Holder of each share of Series C Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which such share of Series C Stock could be converted for purposes of determining the shares entitled to vote at any regular, annual or special meeting of stockholders of the Corporation, and shall have voting rights and powers equal to the voting rights and powers of the Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Common Stock as a single class) and shall be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series C Stock held by each Series C Holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).
E. Rank; Liquidation . Upon liquidation, dissolution or winding up of the Corporation (a “ Liquidation ”), whether voluntary or involuntary, each Series C Holder shall be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive with respect to such shares of Series C Stock if such shares had been converted to Common Stock immediately prior to such Liquidation (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 4B.7F(ii), subject to the preferential rights of holders of any senior securities of the Corporation.
F. Conversion .
(i) Conversion at Option of Holder . Each share of Series C Stock shall be convertible, at any time and from time to time from and after the date of issuance, at the option of the Series C Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio. Except for a conversion following a Fundamental Transaction or following a notice provided for under Section 4B.7G(iv)(b), Series C Holders shall exercise the option to convert by providing the Corporation with a written notice of conversion (a “ Notice of Conversion ”), duly completed and executed. Each Notice of Conversion shall specify the number of shares of Series C Stock to be converted, the number of shares of Series C Stock owned prior to the requested conversion, the number of shares of Series C Stock owned subsequent to the requested conversion and the date on which such conversion is to be effected, which date may not be prior to the date the applicable Series C Holder delivers such Notice of Conversion to the Corporation (the “ Conversion Date ”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the Business Day that the Corporation receives the Notice of Conversion. Provided the Corporation’s transfer agent is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer program and the applicable Conversion Shares are either registered for resale or eligible for resale without restriction pursuant to Rule 144 of the Securities Act, the Notice of Conversion may specify, at the Series C Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Series C Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “ DWAC Delivery ”). The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.
(ii) Beneficial Ownership Limitation .
(a) Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of the Series C Stock, and a Series C Holder shall not have the right to convert any portion of its Series C Stock, to the extent that, after giving effect to an attempted conversion, such Series C Holder (together with such Series C Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Series C Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Series C Holder is a member) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below).
(b) For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Series C Series C Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series C Stock subject to conversion with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted shares of Series C Stock beneficially owned by such Series C Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation beneficially owned by such Series C Holder or any of its Affiliates (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. 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.
(c) To the extent that the limitation contained in this Section 4B.7F(ii) applies, the determination of whether the Series C Stock may be converted (in relation to other securities owned by the Series C Holder together with any Affiliates) and of which portion of its Series C Stock may be converted shall be in the sole discretion of the Series C Holder and the submission of a Notice of Conversion shall be deemed to be such Series C Holder’s determination of whether the shares of Series C Stock may be converted (in relation to other securities owned by such Series C Holder together with any Affiliates) and how many shares of the Series C Stock are convertible, in each case subject to the Beneficial Ownership Limitation. For purposes of this Section, in determining the number of outstanding shares of Common Stock, a Series C Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent public filing with the Commission, (B) a more recent public announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Series C Holder setting forth the number of shares of Common Stock then outstanding. For any reason at any time, upon the written or oral request of a Series C Holder (which may be by email), the Corporation shall, within two (2) Business Days of such request, confirm orally and in writing to such Series C 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 Series C Stock, by such Series C Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was last publicly reported or confirmed to the Series C Holder.
(d) 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 pursuant to such conversion (to the extent permitted pursuant to this Section). The Series C Holder, upon not less than 61 days’ prior notice to the Corporation, may increase (in the event that that the Beneficial Ownership Limitation is subsequently reduced) or decrease the Beneficial Ownership Limitation provisions of this Section, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon the conversion the Series C Stock held by the Series C Holder and the provisions of this Section shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Corporation and shall only be effective with respect to such Series C Holder. The provisions of this Section 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 Series C Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Series C Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.
(e) The Beneficial Ownership Limitation provisions of this Section 4B.7F(ii) may be waived at the election of any Series C Holder upon not less than 61 days’ prior written notice to the Corporation. Any such waiver will not be effective and the provisions of this Section 4B.7F(ii) shall continue to apply until the 61st day (or later, if stated in the notice) after such notice of waiver is delivered to the Corporation.
(iii) Mechanics of Conversion.
(a) Delivery of Certificate or Electronic Issuance Upon Conversion . Not later than three Business Days after the applicable Conversion Date, or if the Series C Holder requests the issuance of physical certificate(s), two Business Days after receipt by the Corporation of the original certificate(s) representing such shares of Series C Stock being converted, duly endorsed, and the accompanying Notice of Conversion (the “ Share Delivery Date ”), the Corporation shall (a) deliver, or cause to be delivered, to the converting Series C Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Series C Stock or (b) in the case of a DWAC Delivery, electronically transfer such Conversion Shares by crediting the account of the Series C Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion such certificate or certificates 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 Series C Holder by the Share Delivery Date, the applicable Series C Holder shall be entitled to elect to rescind such Conversion Notice 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 Series C Holder any original Series C Stock certificate delivered to the Corporation and such Series C 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 Series C Holder through the DWAC system, representing the shares of Series C Stock unsuccessfully tendered for conversion to the Corporation.
(b) Obligation Absolute . Subject to Section 4B.7F(ii) hereof and subject to a Series C Holder’s right to rescind a Conversion Notice pursuant to Section 4B.7F(iii)(a) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series C Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Series C 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 Series C Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Series C Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Series C Holder in connection with the issuance of such Conversion Shares. Subject to the Beneficial Ownership Limitation herein and subject to a Series C Holder’s right to rescind a Conversion Notice pursuant to Section 4B.7F(iii)(a) above, in the event a Series C Holder shall elect to convert any or all of its Series C Stock, the Corporation may not refuse conversion based on any claim that such Series C Holder or any one Person associated or affiliated with such Series C Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to such Series C Holder, restraining and/or enjoining conversion of all or part of the Series C Stock of such Series C Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Series C Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Series C 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 Series C Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall, subject to the Beneficial Ownership Limitation herein and subject to Series C Holder’s right to rescind a Conversion Notice pursuant to Section4B.7F(iii)(a) above, issue Conversion Shares upon a properly noticed conversion. If the Corporation fails to deliver to a Series C Holder such certificate or certificates, or electronically deliver (or cause its transfer agent to electronically deliver) such shares in the case of a DWAC Delivery, pursuant to Section 4B.7F(iii)(a) on or prior to the fifth (5th) Business Day after the Share Delivery Date applicable to such conversion (other than a failure caused by incorrect or incomplete information provided by Series C Holder to the Corporation), then, unless the Series C Holder has rescinded the applicable Conversion Notice pursuant to Section 4B.7F(iii)(a) above, the Corporation shall pay (as liquidated damages and not as a penalty) to such Series C Holder an amount payable in cash equal to the product of (x) the number of Conversion Shares required to have been issued by the Corporation on such Share Delivery Date, (y) an amount equal to the Daily Failure Amount and (z) the number of Business Days actually lapsed after such fifth (5th) Business Day after the Share Delivery Date during which such certificates have not been delivered, or, in the case of a DWAC Delivery, such shares have not been electronically delivered. Nothing herein shall limit a Series C Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Series C 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; provided that Series C Holder shall not receive duplicate damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein. The exercise of any such rights shall not prohibit a Series C Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(c) Reservation of Shares Issuable Upon Conversion . The Corporation 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 the Series C Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Series C Holders, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section 4B.7G) upon the conversion of all outstanding shares of Series C Stock. 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 nonassessable.
(d) Fractional Shares . No fractional shares of Common Stock shall be issued upon the conversion of the Series C Stock. As to any fraction of a share which a Series C Holder would otherwise be entitled to receive upon such conversion, such fraction shall be rounded up or down to the next whole share.
(e) Transfer Taxes and Expenses . The issuance of certificates for shares of the Common Stock upon conversion of the Series C Stock shall be made without charge to any Series C 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 Series C Holder(s) of such shares of Series C 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. The Corporation shall pay all transfer agent fees required for processing of any Notice of Conversion.
(iv) Status as Stockholder . Upon each Conversion Date, (i) the shares of Series C Stock being converted shall be deemed converted into shares of Common Stock and (ii) the Series C Holder’s rights as a holder of such converted shares of Series C 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 Series C Holder because of a failure by the Corporation to comply with the terms herein. In all cases, the holder shall retain all of its rights and remedies for the Corporation’s failure to convert Series C Stock
G. Certain Adjustments .
(i) Stock Dividends and Stock Splits . If the Corporation, at any time while this Series C Stock is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of this Series C Stock) with respect to the then outstanding shares of Common Stock; (B) subdivides outstanding shares of Common Stock into a larger number of shares; or (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, 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 (excluding any treasury shares of the Corporation). Any adjustment made pursuant to this Section 4B.7G(i) 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 or combination.
(ii) Fundamental Transaction . If, at any time while this Series C Stock is outstanding, (A) the Corporation effects any merger or consolidation of the Corporation with or into another Person (other than a merger in which the Corporation is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (B) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (C) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all of the Common Stock is exchanged for or converted into other securities, cash or property, or (D) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination covered by Section 4B.7G(i) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Series C Stock the Series C Holders shall have the right to receive, in lieu of the right to receive Conversion Shares, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate Consideration ”). For purposes of any such subsequent conversion, the determination of the Conversion Ratio 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 adjust the Conversion Ratio 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 Series C Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series C 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 an amendment to this Amended and Restated Certificate of Incorporation or separate Certificate of Designation with the same terms and conditions and issue to the Series C Holders new preferred stock consistent with the foregoing provisions and evidencing the Series C Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement to which the Corporation is a party and pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 4B.7G(ii) and insuring that the Series C Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Corporation shall cause to be delivered to each Series C Holder, at its last address as it shall appear upon the stock books of the Corporation, written notice of any Fundamental Transaction at least 20 calendar days prior to the date on which such Fundamental Transaction is expected to become effective or close.
(iii) Calculations . All calculations under this Section 4B.7G 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 4B.7G, 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.
(iv) Notice to Holders .
(a) Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any provision of this Section 4B.7G, the Corporation shall promptly deliver to each Series C Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(b) Other Notices . 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, of 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 Series C Stock, and shall cause to be delivered to each Series C Holder at its last address as it shall appear upon the stock books of the Corporation, at least 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.
H. Miscellaneous .
(i) Notices . Any and all notices or other communications or deliveries to be provided by the Series C Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 105 Maxess Road, Suite S124, Melville, NY 11747, facsimile number (631) 574-4401, or such other facsimile number or address as the Corporation may specify for such purposes by notice to the Series C Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to each Series C Holder at the facsimile number or address of such Series C Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Series C Holder. 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 facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
(ii) Lost or Mutilated Series C Stock Certificate . If a Series C Holder’s Series C 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 Series C 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 thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.
(iii) Status of Converted Series C Stock . If any shares of Series C Stock shall be converted 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 Series C Stock.”
10. Pursuant to the resolution of the Board of Directors, the Corporation received written consents in favor of the foregoing amendment from the holders of the necessary number of shares.
11. The foregoing amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
IN WITNESS WHEREOF, Nano Vibronix, Inc., has caused this Certificate to be executed by its duly authorized officer on this _ day of ______, 2014.
NANO VIBRONIX, INC. | ||
By: | ||
Exhibit 4.1
Exhibit 4.2
|
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE NANO VIBRONIX, INC.
|
|
SHARES OF COMMON STOCK | PREFERRED STOCK |
PAR VALUE $ EACH | PAR VALUE $ EACH |
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO ANY SHAREHOLDER WHO SO REQUESTS THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES
THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS
This is to Certify that | is the owner of | |
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
NANO VIBRONIX, INC.
transferable on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney, upon surrender of this Certificate, properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized officers.
Dated:
SECRETARY |
THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS
SET FORTH ON THE BACK HEREOF. |
CHIEF EXECUTIVE OFFICER |
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH
THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
TEN COM | -as tenants in common | UNIF GIFT MIN ACT - | …..Custodian ……… |
(Cust) (Minor) | |||
TEN ENT | -as tenants by the entireties | Under Uniform Gifts to Minors | |
JT TEN |
- as joint tenants with right of
survivorship and not as tenants in common |
Act ………………….…….
(State) |
Additional abbreviations may also be used though not in the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
|
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
___________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and appoint
____________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with full power of substitition in the premises .
Dated _________________ 20__
In presence o f
EXHIBIT 4.3
WARRANT AGREEMENT
NanoVibronix, Inc.
and
VStock Transfer, LLC., as Warrant Agent
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this “ Agreement ”), dated as of ____________, 2014, is by and between NanoVibronix, Inc., a Delaware corporation (the “ Company ”), and VStock Transfer, LLC, a _______________________, as Warrant Agent (the “ Warrant Agent ”).
WHEREAS, the Company is engaged in an initial public offering (the “ Offering ”) of units consisting of common stock of the Company, par value $0.001 per share (“ Common Stock ”) and warrants to purchase shares of Common Stock of the Company (“ Warrants ”) and, in connection therewith, has determined to issue and deliver up to ____________ Warrants to public investors in the Offering, each such Warrant evidencing the right of the holder thereof to purchase one share of Common Stock of the Company for $_____ per share, subject to adjustment as described herein; and
WHEREAS, the Company has filed with the Securities and Exchange Commission (the “ Commission ”) a registration statement on Form S-1, No. 333-193784 (the “ Registration Statement ”) and prospectus (the “ Prospectus ”), for the registration, under the Securities Act of 1933, as amended (the “ Securities Act ” ), of the shares of Common Stock to be sold in the Offering, the Warrants to be sold in the Offering and the shares of Common Stock underlying the Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange, redemption and exercise of the Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
1. | Appointment of Warrant Agent . The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement. |
2. | Warrants . |
2.1 | Form of Warrant . Each Warrant shall be issued in registered form only and shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein. Each Warrant shall be signed by, or bear the facsimile signature of, the Chairman of the Board, President, Chief Executive Officer, Secretary or other principal officer of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance. |
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2.2 | Effect of Countersignature . Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof. |
2.3 | Registration . |
2.3.1 | Warrant Register . The Warrant Agent shall maintain books (the “ Warrant Register ”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company. |
2.3.2 | Registered Holder . Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant is registered in the Warrant Register (the “ Registered Holder ”) as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate (as defined below) made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. |
3. | Terms and Exercise of Warrants . |
3.1 | Warrant Price . Each Warrant shall, when countersigned by the Warrant Agent, entitle the Registered Holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of Shares of Common Stock stated therein, at the price of $___ per share, subject to the adjustments provided in Section 4 hereof and in the last sentence of this Section 3.1 . The term “ Warrant Price ” as used in this Warrant Agreement shall mean the price per share at which Shares of Common Stock may be purchased at the time a Warrant is exercised. |
3.2 | Duration of Warrants . A Warrant may be exercised only during the period (the “ Exercise Period ”) commencing on the date of issuance thereof and ending on the earlier of: (a) _________, 2019; (b) the trading day preceding the date on which such Warrants are redeemed pursuant to Section 3.4 below, or (c) upon the dissolution and winding up of the Company (the “ Expiration Date ”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions, as set forth in subsection 3.3.2 below with respect to an effective registration statement. Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the Expiration Date. |
3.3 | Exercise of Warrants . |
3.3.1 | Payment . Subject to the provisions of the Warrant and this Warrant Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised by the Registered Holder thereof by surrendering it, at the office of the Warrant Agent in Nassau County, Village of Woodmere and State of New York, or at the office of its successor as Warrant Agent, in the Borough of Manhattan , City and State of New York, with the subscription form, as set forth in the Warrant, duly executed, and by paying in full the Warrant Price for each full share of Common Stock as to which the Warrant is exercised and any and all applicable taxes due in connection with the exercise of the Warrant, the exchange of the Warrant for the Shares of Common Stock and the issuance of such Shares of Common Stock, in lawful money of the United States, in good certified check or good bank draft payable to the order of the Company. |
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3.3.2 | Issuance of Common Stock on Exercise . As soon as practicable after the exercise of any Warrant and the clearance of the funds in payment of the Warrant Price, the Company shall issue to the Registered Holder of such Warrant a certificate or certificates for the number of full Shares of Common Stock to which he, she or it is entitled, registered in such name or names as may be directed by him, her or it, and if such Warrant shall not have been exercised in full, a new countersigned Warrant for the number of shares as to which such Warrant shall not have been exercised. Notwithstanding the foregoing, the Company shall not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Warrant and shall have no obligation to settle such Warrant exercise unless a registration statement under the Securities Act with respect to the Common Stock underlying the Warrants is then effective and a prospectus relating thereto is current, [subject to the Company’s satisfying its obligations under Section 6.4.] No Warrant shall be exercisable and the Company shall not be obligated to issue shares of Common Stock upon exercise of a Warrant unless the shares of Common Stock issuable upon such Warrant exercise have been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the Registered Holder of the Warrant. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Warrant, the holder of such Warrant shall not be entitled to exercise such Warrant and such Warrant may have no value and expire worthless. In no event shall the Company be required to net cash settle any Warrant. |
3.3.3 | Valid Issuance . All Common Stock issued or issuable upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable. |
3.3.4 | Date of Issuance . Each person in whose name any certificate for the Common Stock is issued shall for all purposes be deemed to have become the holder of record of such Common Stock on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the share transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the share transfer books are open. |
3.4 | Redemption of Warrants . |
3.4.1 | The Company may call the Warrants for redemption at a price of $0.01 per Warrant, upon not less than 30 days’ prior written notice of redemption to each Warrant holder, at any time after such Warrants have become exercisable pursuant to Section 3.2, if, and only if, (i) the Closing Price (defined below) has equaled or exceeded $[_____] per share for any 10 trading days within a 30-trading-day period ending on the third trading day prior to the notice of redemption to Warrant holders and (ii) at all times between the date of such notice of redemption and the redemption date a registration statement is in effect and a current prospectus is available covering the shares of Common Stock issuable upon exercise of the Warrants. |
3.4.2 | The “ Closing Price ” of the Common Stock on any date of determination means: |
(a) the closing sale price for the regular trading session (without considering after hours or other trading outside regular trading session hours) of the Common Stock (regular way) as reported in the composite transactions for the principal United States securities exchange on which the Common Stock is so listed on that date (or, if no closing price is reported, the last reported sale price during that regular trading session), or
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(b) if the Common Stock is not so listed, the last quoted sales price for the Common Stock in the over-the-counter market as reported by the OTC Bulletin Board, the National Quotation Bureau or similar organization, or
(c) if the Common Stock is not so quoted, the average of the mid-point of the last bid and ask prices for the Common Stock from at least three nationally recognized investment-banking firms that the Company selects for this purpose.
4. | Adjustments . |
4.1 | Stock Dividends . |
4.1.1 | Split-Ups . If after the date hereof, and subject to the provisions of Section 4.6 below, the number of outstanding shares of Common Stock is increased by a stock dividend payable in Common Stock, or by a split-up of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in the outstanding shares of Common Stock. |
4.1.2 | Dividends . If the Company, at any time while the Warrants are outstanding and unexpired, shall pay a dividend or make a distribution in cash, securities or other assets to the holders of shares of Common Stock on account of such Common Stock (or other shares of the Company’s capital stock into which the Warrants are convertible), other than as described in subsection 4.1.1 above (any such non- excluded event being referred to herein as a “ Dividend ”), then the Warrant Price shall be decreased, effective immediately after the effective date of such Dividend, by the amount of cash and/or the fair market value (as determined by the Board, in good faith) of any securities or other assets paid on each share of Common Stock in respect of such Dividend. |
4.2 | Aggregation of Shares . If after the date hereof, and subject to the provisions of Section 4.6 hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock. |
4.3 | Adjustments in Exercise Price . Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, as provided in subsection 4.1.1 or 4.2 above, the Warrant Price shall be adjusted (to the nearest cent) by multiplying such Warrant Price immediately prior to such adjustment by a fraction (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of the Warrants immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter. |
4.4 | Replacement of Securities upon Reorganization, etc . In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than a change under subsections 4.1.1 or 4.1.2 or Section 4.2 hereof or that solely affects the par value of such shares of Common Stock), or in the case of any merger or consolidation of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding shares of the Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the holders of the Warrants shall thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Warrants and in lieu of the shares of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Warrants would have received if such holder had exercised his, her or its Warrant(s) immediately prior to such event. If any reclassification or reorganization also results in a change in the Common Stock covered by subsection 4.1.1, then such adjustment shall be made pursuant to subsection 4.1.1 or Sections 4.2, 4.3 and this Section 4.4. The provisions of this Section 4.4 shall similarly apply to successive reclassifications, reorganizations, mergers or consolidations, sales or other transfers. |
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4.5 | Notices of Changes in Warrant . Upon every adjustment of the Warrant Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Warrant Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Sections 4.1, 4.2, 4.3 or 4.4, the Company shall give written notice of the occurrence of such event to each holder of a Warrant, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event. |
4.6 | No Fractional Shares . Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round to the nearest whole number, the number of the shares of Common Stock to be issued to such holder. |
4.7 | Form of Warrant . The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement; provided, however, that the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed. |
4.8 | Other Events . In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4 are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall give its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and purpose of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment. The Company shall adjust the terms of the Warrants in a manner that is consistent with any adjustment recommended in such opinion. |
5. | Transfer and Exchange of Warrants . |
5.1 | Registration of Transfer . The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request. |
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5.2 | Procedure for Surrender of Warrants . Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants. |
5.3 | Fractional Warrants . The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in the issuance of a warrant certificate for a fraction of a warrant. |
5.4 | Warrant Execution and Countersignature . The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5. |
6. | Other Provisions Relating to Rights of Holders of Warrants . |
6.1 | No Rights as Stockholder . A Warrant does not entitle the Registered Holder thereof to any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter. |
6.2 | Lost, Stolen, Mutilated, or Destroyed Warrants . If any Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant Agent may on such terms as to indemnity bond or otherwise as they may in their discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination, tenor, and date as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant shall constitute a substitute contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any time enforceable by anyone. |
6.3 | Reservation of Common Stock . The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement. |
6.4 | Registration of Common Stock . The Company registered the shares of Common Stock and Warrants underlying the Warrants in the Registration Statement. The Company will use its reasonable best efforts to maintain the effectiveness of such Registration Statement and the current status of the Prospectus or to file and maintain the effectiveness of another registration and another current prospectus covering the shares of Common Stock issuable upon exercise of the Warrants at any time that the Warrants are exercisable. In addition, the Company agrees to use its reasonable best efforts to register such shares of Common Stock under the blue sky laws of the states of residence of the exercising Warrant holders to the extent an exemption from such registration is not available. |
7. | Concerning the Warrant Agent and Other Matters . |
7.1 | Payment of Taxes . The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of the Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares. |
7.2 | Resignation, Consolidation, or Merger of Warrant Agent . |
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7.2.1 | Appointment of Successor Warrant Agent . The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation organized and existing under the laws of the State of New York, in good standing and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations. |
7.2.2 | Notice of Successor Warrant Agent . In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the Transfer Agent for the Common Stock not later than the effective date of any such appointment. |
7.2.3 | Merger or Consolidation of Warrant Agent . Any company into which the Warrant Agent may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party shall be the successor Warrant Agent under this Agreement without any further act. |
7.3 | Fees and Expenses of Warrant Agent . |
7.3.1 | Remuneration . The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and shall, pursuant to its obligations under this Agreement, reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder. |
7.3.2 | Further Assurances . The Company agrees to perform, execute, acknowledge, and deliver or cause to be performed, executed, acknowledged, and delivered all such further and other acts, instruments, and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing of the provisions of this Agreement. |
7.4 | Liability of Warrant Agent . |
7.4.1 | Reliance on Company Statement . Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the President or Chairman of the Board of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Agreement. |
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7.4.2 | Indemnity . The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant Agent’s gross negligence, willful misconduct or bad faith. |
7.4.3 | Exclusions . The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock shall, when issued, be valid and fully paid and nonassessable. |
7.5 | Acceptance of Agency . The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of the Warrants. |
8. | Miscellaneous Provisions . |
8.1 | Successors . All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns. |
8.2 | Notices . Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows: |
NanoVibronix, Inc.
105 Maxess Road
Suite S124
Melville, NY 11747
Any notice, statement or demand authorized by this Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be sufficiently given when so delivered if by hand or overnight delivery or if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:
VStock Transfer, LLC
18 Lafayette Place
Woodmere, NY 11598
8 |
8.3 | Applicable Law . The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. |
8.4 | Persons Having Rights under this Agreement . Nothing in this Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the Registered Holders of the Warrants. |
8.5 | Examination of the Warrant Agreement . A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in Nassau County, Village of Woodmere and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it. |
8.6 | Counterparts . This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. |
8.7 | Effect of Headings . The section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof. |
8.8 | Amendments . This Agreement may be amended by the parties hereto without the consent of any Registered Holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters or questions arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the Registered Holders. All other modifications or amendments shall require the written consent of the Registered Holders of 65% of the then outstanding Warrants. |
8.9 | Severability . This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable. |
Exhibit A - Form of Warrant Certificate
9 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
NANOVIBRONIX, INC. | ||
By: | ||
VSTOCK TRANSFER, LLC, as Warrant Agent | ||
By: | ||
Name: | ||
Title: |
10 |
EXHIBIT A
Number ___________ | CUSIP__________ |
FORM OF WARRANT CERTIFICATE
THIS WARRANT SHALL BE VOID IF NOT EXERCISED
PRIOR TO
THE EXPIRATION OF THE EXERCISE PERIOD PROVIDED FOR
IN THE WARRANT AGREEMENT DESCRIBED BELOW
NANOVIBRONIX, INC.
Incorporated Under the Laws of the State of Delaware
Warrant Certificate
This Warrant Certificate certifies that , or registered assigns, is the registered holder of warrants (the “ Warrants ”) to purchase shares of Common Stock, $.001 par value (the “ Common Stock” ), of NanoVibronix, Inc., a Delaware corporation (the “ Company ”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and nonassessable shares of Common Stock (each, a “ Warrant ”) as set forth below, at the exercise price (the “ Exercise Price ”) as determined pursuant to the Warrant Agreement, payable in lawful money of the United States of America upon surrender of this Warrant Certificate at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Each Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. The number of the Warrants issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
The initial Exercise Price per share of Common Stock for any Warrant is equal to $____ per share. The Exercise Price is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.
Subject to the conditions set forth in the Warrant Agreement, the Warrants may be exercised only during the Exercise Period and to the extent not exercised by the end of such Exercise Period, such Warrants shall become void.
The Company reserves the right to redeem the Warrant, in whole and not in part, at any time prior to its exercise, with a notice of redemption in writing to the holders of record of the Warrant, giving 30 days’ notice of such call at any time after the Warrant becomes exercisable if (i) the last sale price of the Common Stock has been at least $[______] per share on each of 10 trading days within any 30 trading day period ending on the third trading day prior to the date on which notice of such redemption is given and (ii) at all times between the date of such notice of redemption and the redemption date a registration statement is in effect covering the Common Stock issuable upon exercise of the Warrants and a current prospectus relating to those shares of Common Stock is available. The redemption price of the Warrants shall be $.01 per Warrant. Any Warrant either not exercised or tendered back to the Company by the end of the date specified in the notice of redemption shall be cancelled on the books of the Company and have no further value except for the $.01 redemption price.
Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed
and construed in accordance with the internal laws of the State of New York, without regard to conflicts of laws principles thereof.
NANOVIBRONIX, INC. | ||
By: | ||
Name: Chief Executive Officer | ||
Title: | ||
By: | ||
Name: | ||
Title: Secretary | ||
Countersigned:
Dated: ________, 20__
VStock Transfer, LLC,
as Warrant Agent
[REVERSE]
The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants entitling the holder on exercise to receive shares of Common Stock and are issued or to be issued pursuant to a Warrant Agreement dated as of , 2014 (the “ Warrant Agreement ”), duly executed and delivered by VStock Transfer, LLC, a ______________, as warrant agent (the “ Warrant Agent ”), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words “ holders ” or “ holder ” meaning the Registered Holders or Registered Holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.
Warrants may be exercised at any time during the Exercise Period as set forth in the Warrant Agreement. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price, at the principal corporate trust office of the Warrant Agent. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his, her or its assignee, a new Warrant Certificate evidencing the number of Warrants not exercised.
Notwithstanding anything else in this Warrant Certificate or the Warrant Agreement, no Warrant may be exercised unless at the time of exercise (i) a registration statement covering the shares of Common Stock to be issued upon exercise is effective under the Securities Act of 1933 and (ii) a prospectus thereunder relating to the shares of Common Stock is current.
The Warrant Agreement provides that upon the occurrence of certain events the number of the Warrants set forth on the face hereof may, subject to certain conditions, be adjusted. If, upon exercise of a Warrant, the holder thereof would be entitled to receive a fractional interest in a share of Common Stock, the Company shall, upon exercise, round to the nearest whole number of shares to be issued to the holder of the Warrant.
Warrant Certificates, when surrendered at the principal corporate trust office of the Warrant Agent by the Registered Holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Warrant Agent a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the Registered Holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company.
Election to Purchase
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive shares of Common Stock and herewith tenders payment for such shares to the order of NanoVibronix, Inc.. (the “ Company ”) in the amount of $ in accordance with the terms hereof. The undersigned requests that a certificate for such shares be registered in the name of , whose address is and that such shares be delivered to whose address is . If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of , whose address is , and that such Warrant Certificate be delivered to , whose address is .
Date: , 20___ | ||
(Signature) | ||
(Address) | ||
(Tax Identification Number) |
Signature Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15).
EXHIBIT 5.1
FORM OF LEGAL OPINION
_____ __, 2014
Nano Vibronix, Inc.
105 Maxess Road, Suite S124
Melville, NY 11747
Re: Nano Vibronix, Inc. Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), in connection with the proposed registration of (i) ______ units (the “ Units ”), each consisting of one share of common stock, par value $0.001 per share, of the Company (the “ Common Stock ”) and one-half of one redeemable warrant to purchase one share of Common Stock (the “ Redeemable Warrants ”), (ii) ______ shares of Common Stock included in the Units, (iii) ______ Redeemable Warrants included in the Units, (iv) ______ shares of Common Stock underlying the Redeemable Warrants included in the Units, (v) two warrants to be issued to Chardan Capital Markets LLC to purchase ______ Units (the “ Underwriter’s Warrants ”), (vi) ______ Units underlying the Underwriter’s Warrants, (vii) ______ shares of Common Stock included in the Units underlying the Underwriter’s Warrants, (viii) ______ Redeemable Warrants included in the Units underlying the Underwriter’s Warrants and (ix) ______ shares of Common Stock underlying the Redeemable Warrants included in the Units underlying the Underwriter’s Warrants (all of the securities listed in (i) through (ix) above, the “ Securities ”), pursuant to a Registration Statement on Form S-1 under the Securities Act of 1933, as amended (the “ Securities Act ”), originally filed with the Securities and Exchange Commission (the “ Commission ”) on February 6, 2014 (Registration No. 333- 193784), as amended to date (the “ Registration Statement ”).
The opinion expressed herein is limited exclusively to the General Corporation Law of the State of Delaware (the “ DGCL ”), applicable provisions of the Delaware Constitution and judicial decisions interpreting the DGCL and such provisions of the Delaware Constitution, and we have not considered, and express no opinion on, any other laws or the laws of any other jurisdiction.
In rendering the opinions expressed herein, we have examined and relied upon the originals, or copies certified to our satisfaction, of (i) the Registration Statement, including the prospectus, and all exhibits thereto; (ii) the Company’s Certificate of Incorporation, as amended to date, certified by the Secretary of State of the State of Delaware; (iii) the Company’s Bylaws, as amended to date, certified by the Chief Executive Officer of the Company; (iv) the minutes and records of the corporate proceedings of the Company with respect to the authorization of the issuance of the Securities covered by the Registration Statement and related matters thereto; (v) the form of Underwriting Agreement (herein so called), to be entered into among the Company and Chardan Capital Markets LLC; (vi) the forms of Unit certificate, Common Stock certificate, Redeemable Warrant and Underwriter’s Warrant; and (vii) such other records, documents and instruments as we have deemed necessary for the expression of the opinions stated herein.
In making the foregoing examinations, we have assumed the genuineness of all signatures (other than those of the Company), the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies thereof and the authenticity of the originals of such latter documents. As to all questions of fact material to this opinion, where such facts have not been independently established, and as to the content and form of certain minutes, records, resolutions or other documents or writings of the Company, we have relied, to the extent we have deemed reasonably appropriate, upon representations or certificates of officers of the Company or governmental officials and representations of the Company in the Underwriting Agreement. We have assumed that the Underwriting Agreement will be executed in substantially the same form submitted to us.
Nano Vibronix, Inc.
_____ __, 2014
Page 2
Based upon and subject to the foregoing and to the other qualifications and limitations set forth herein, we are of the opinion that the Securities have been duly authorized, and if, as, and when issued by the Company in accordance with and in the manner described in the prospectus set forth in the Registration Statement (as amended and supplemented through the date of issuance) and, in the case of those Securities underlying the Redeemable Warrants and the Underwriter’s Warrants, when issued in accordance with the terms of the applicable warrants, will be validly issued, fully paid and non-assessable and, with respect to the Redeemable Warrants and the Underwriter’s Warrants, will be legally binding obligations of the Company in accordance with their terms except: (a) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law); (b) as enforceability of any indemnification or contribution provision may be limited under the Federal and state securities laws; and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement and any abbreviated registration statements relating thereto that may be filed to register additional securities identical to those covered by the Registration Statement (including a registration statement filed pursuant to Rule 462(b) under the Securities Act), and to the reference to our firm under the caption “Legal Matters” in the prospectus constituting part of such Registration Statement. In giving such consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
Haynes and Boone, LLP
EXHIBIT 10.1
LICENSE AGREEMENT
This LICENSE AGREEMENT (“Agreement”), effective as of October 26, 2003, (the “ EFFECTIVE DATE ”) by and between PIEZO-TOP LTD , private company no. 51-248336-3 a lawfully incorporated Israeli private company with its principal offices located at 47 Hataasiah St. Tel-Hanan, Israel (“ PIEZO-TOP ”), PMG MEDICA LTD , private company no 51-280771-0, a lawfully incorporated Israeli private company with its principal offices located at 47 Hataasiah St. Tel-Hanan, Israel (“ PMG ”) and NANO-VIBRONIX INC. a lawfully incorporated Delaware company with its principal offices located at Cedarhurst, NY USA (“ NANO-VIBRONIX ”).
RECITALS
WHEREAS P.M.G. and PIEZO-TOP are medical technology companies, and are engaged, among other businesses, in developing piezoelectric systems for medical applications;
WHEREAS NANO-VIBRONIX is a medical technology company
WHEREAS, P.M.G. and PIEZO-TOP have developed technology which is applicable to bio-film prevention in the human body.
WHEREAS, P.M.G. and PIEZO-TOP are interested in licensing the Technology to NANO-VIBRONIX, and NANO-VIBRONIX is interested in the exclusive licensing rights to the TECHNOLOGY from PMG and PIEZO-TOP for the worldwide commercialization thereof; and
WHEREAS, subject to the terms and conditions set forth in this Agreement, NANO-VIBRONIX wishes to obtain and PMG and PIEZO-TOP are willing to grant an exclusive license under which the know-how and intellectual property rights related to the TECHNOLOGY will be used by NANO-VIBRONIX in order to proceed with the commercialization thereof;
NOW, THEREFORE, the Parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1 — DEFINITIONS
In this Agreement, the following expressions shall bear the meanings set forth along side them:
“ LICENSED TECHNOLOGY ” shall mean all past, present and future tangible or intangible know-how, (whether or not patentable), data, products, processes, articles of manufacture, information, software (including source code and object code embodiments), hardware, algorithms, techniques, designs, and any other tangible or intangible technical materials or information (collectively, the “ KNOW-HOW ”), which has been developed or acquired by PMG and PIEZO-TOP to the extent such KNOW-HOW is reasonably necessary or useful for the manufacture, use, or sale of products and technology related to bio-film prevention in the human body or other medical purposes (which shall be deemed to include without limitation: biofilm prevention in indwelling catheters, biofilm prevention in dialysis and respiratory assist devices and control of bacteria in the hospital and outpatient environments by biofilm prevention and killing of bacteria) provided that KNOW-HOW which has been developed or acquired more than 5 years after the Effective Date shall not be included in “ LICENSED TECHNOLOGY ”. To avoid any doubt, the LICENSED TECHNOLOGY does not include any application, which is related to water treatment or purification, even in the hospital and outpatient environments.
“ IP RIGHTS ” shall mean unpatented inventions, patent applications, patents, design rights, copyrights (including, without limitation, rights in computer software), know-how and other trade secret rights, and all other intellectual property rights and rights or forms of protection of a similar nature or having equivalent or similar effect to any of these rights, whether or not any of these rights is registered, and including, without limitation, applications for registration of, and rights to apply for, any such rights.
“ USD ” shall mean United States Dollars or the equivalent amount thereto in New Israeli Shekels according to the representative rate published by the Bank of Israel and known on date of payment.
“ SUBSIDIARY ” shall mean a corporation, company or other entity:
(a) | more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, now or hereafter, owned or controlled, directly or indirectly, by a party hereto, or |
(b) | which does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, but more than fifty percent (50%) of whose ownership interest representing the right to make the decisions for such corporation, company or other entity is now or hereafter, owned or controlled, directly or indirectly, by a party hereto, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists. |
ARTICLE 2 - REPRESENTATIONS
2.1 | The preamble and definitions to this Agreement are an integral part thereof. |
2.2 | PMG and PIEZO-TOP represent and warrant that they have the full right and power to grant the license set forth in this Agreement. |
2.3 | NANO-VIBRONIX hereby acknowledges that |
(One) PMG and PIEZO-TOP exclusively own all right, title and interest in and to the LICENSED TECHNOLOGY, and
(Two) PMG and PIEZO-TOP otherwise reserve all rights to the KNOWHOW except those specifically granted to NANO-VIBRONIX herein.
2.4 | Each party represents and warrants that it is a corporation in good standing under the laws of the country of its incorporation; that it has the authority to enter into this Agreement; that it has obtained all corporate approvals necessary to enter into this Agreement; and that this Agreement is valid and binding and enforceable against it in accordance with its terms. |
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2.5 | PMG and PIEZO-TOP (“LICENSORS”) further represent and warrant that: |
(a) | the LICENSORS have all right, title, and interest in the LICENSED TECHNOLOGY; |
(b) | the LICENSORS have taken reasonable security measures, including measures against unauthorized disclosure, to protect the secrecy, confidentiality and value of the LICENSED TECHNOLOGY. No employee, consultant (paid or unpaid), director or shareholder of the LICENSORS, or any present or past employer of any such person, has any right with respect to the KNOWHOW and IP Rights licensed hereunder. Each of the LICENSORS' employees, consultants (paid or unpaid), and any other persons who, either alone or in concert with others, developed, invented, discovered, derived, programmed or designed KNOWHOW and IP Rights licensed hereunder, or who has knowledge of or access thereto have entered into written confidentiality agreements and invention assignment agreements assigning to the LICENSORS all such IP Rights. |
(c) | to the best of the LICENSORS' knowledge, the use of the KNOWHOW and IP Rights licensed hereunder and any other IP Rights necessary to enable operation of the business of NANO-VIBRONIX as currently conducted and/or proposed to be conducted, shall not constitute an infringement, misappropriation or misuse of any intellectual property rights or other rights of any third party. |
(d) | Aside from the M. Weiss case, none of the LICENSORS are aware of any claims alleging that any of the LICENSORS has violated any of the patents, copyrights, trade secrets or other proprietary rights of any other person or entity. None of the LICENSORS or their employees is obligated under any contract (including licenses, covenants or commitments of any nature) or subject to any judgment, decree or order of any court or administrative agency that would interfere with such person's efforts to promote the development of the LICENSED TECHNOLOGY. |
(e) | the LICENSORS have not granted, and shall not grant, any third party any rights, nor taken upon themselves obligations towards third parties, inconsistent with the License or any of LICENSORS' obligations herein. |
2.6 | Each and every obligation taken by the Parties to this Agreement will be deemed taken on the party's own behalf as well as on its Subsidiaries' behalf to the extent that such Subsidiaries exist. |
ARTICLE 3 - GRANTS OF LICENSES
3.1 | PMG and PIEZO-TOP hereby grant to NANO-VIBRONIX, and NANO-VIBRONIX hereby accepts, subject to the terms and conditions set forth in this Agreement, a perpetual, exclusive, worldwide license to make any and all use of the LICENSED TECHNOLOGY and all IP Rights related to the LICENSED TECHNOLOGY, including without limitation the right to make, have made, use, modify, distribute, create derivative works and sublicense (the “LICENSE”) provided that only to the extent that NANO-VIBRONIX and/or its Subsidiaries have paid the price for the TECHNOLOGY then due to PMG and PIEZO-TOP under this Agreement. |
3.2 | Notwithstanding the generality of Section 3.1 hereof, the LICENSE, as of the date hereof, includes, without limitation, the patents, patent applications and provisional patent applications listed in Appendix “A” hereto and the KNOW HOW listed in Appendix “B” hereto. |
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3.3 | The LICENSORS shall immediately begin an orderly transfer of all of the LICENSED TECHNOLOGY to NANO-VIBRONIX and shall promptly provide (and create if necessary) all drawings, manuals, specifications and formulas, any proprietary manufacturing equipment or apparatus, as well as any demonstrations and training, which are necessary or useful for the exploitation of the LICENSED TECHNOLOGY. |
3.4 | All new inventions of LICENSORS, which may constitute LICENSED TECHNOLOGY, shall be immediately disclosed to NANO-VIBRONIX. |
3.5 | LICENSORS shall file and prosecute the patent applications listed in Appendix B (with respect to existing LICENSED TECHNOLOGY) and all patent applications with respect to new inventions of LICENSORS, which may constitute LICENSED TECHNOLOGY. LICENSORS shall consult with NANO-VIBRONIX in regard to the preparation and prosecution of such patent applications. Notwithstanding the foregoing, NANO-VIBRONIX may elect to file and/or prosecute any patent application with respect to LICENSED TECHNOLOGY. |
3.6 | LICENSORS shall execute all documents, join in any action and provide all cooperation requested by NANO-VIBRONIX necessary or useful for the full exploitation of the License, including without limitation, any patent filing and prosecution, registration of the License, any action with respect to the infringement of the LICENSED TECHNOLOGY and claims of infringement against NANO-VIBRONIX with respect to the LICENSED TECHNOLOGY. In the event that NANO-VIBRONIX shall prosecute a claim of infringement of the LICENSED TECHNOLOGY against third parties, then without prejudice to any other rights hereunder, NANO-VIBRONIX shall retain all of the proceeds of such claim. |
3.7 | Without prejudice to any of LICENSORS' other obligations hereunder, LICENSORS shall defend, indemnify, and hold NANO-VIBRONIX and/or its officers, directors, agents, shareholders and representatives harmless from and against, and will solely and exclusively bear and pay, any and all claims, suits, losses, penalties, settlements, damages (whether actual, punitive, consequential, or otherwise) and all liabilities and the associated costs and expenses (including attorneys' fees) arising out of any claim that may arise. Piezotop will indemnify and hold harmless regarding the claim that Menachem Weiss has brought or towards any settlement that may be reached with him that which shall affect the KNOWHOW, the LICENSED TECHNOLOGY or the LICENSE. |
ARTICLE 4 - PAYMENTS AND REPORTS
4.1 | For the rights granted and obligations undertaken under this Agreement, NANO-VIBRONIX shall pay PMG and PIEZO-TOP as follows: |
4.1.1 | 14 (fourteen) days after the close of the first round of investment in NANO-VIBRONIX, NANO-VIBRONIX will pay PMG and PIEZO-TOP, each, a licensing fee of USD 5,000 (five thousand) (the “FIRST Licensing Fee”) (USD 10,000 all together). |
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4.1.2 | No later than 14 (fourteen) days after the second investment in NANO-VIBRONIX, NANO-VIBRONIX will pay PMG and PIEZO-TOP, each, a second licensing fee of USD 7,500 (seven thousand five hundred) (the “Second Licensing Fee”) (USD 15,000 all together). |
4.1.3 | In the event of |
(a) | a third investment in NANO-VIBRONIX, or |
(b) | a buy-out of more than 40% of NANO-VIBRONIX's stock, or |
(c) | an 1P0, and no later than 14 (fourteen) days thereafter (hereinafter, collectively: the Third Investment), |
NANO-VIBRONIX will pay PMG and PIEZO-TOP, each, a third licensing fee of USD 25,000 (twenty five thousand) (the “Third Licensing Fee”) (USD 50,000 all together).
4.2 | NANO-VIBRONIX shall make written reports to PMG and PIEZO-TOP within 7 (seven) days after each investment therein. |
ARTICLE 5 — DEVELOPING OF THE LICENSED TECHNOLOGY
All Parties agree to keep confidential the LICENSED TECHNOLOGY as provided in the non-disclosure agreement attached to this Agreement as an integral part thereof.
ARTICLE 6 - ASSIGNMENT
This Agreement and the rights granted in this Agreement are personal to the parties thereto. Parties shall not have the right to assign rights or obligations in this Agreement. Notwithstanding the foregoing, NANO-VIBRONIX may assign the rights granted in this Agreement provided the assignee assumes all rights and responsibilities of the Agreement.
ARTICLE 7 - NOTICE
7.1 | Any notice required or provided for by the terms of this Agreement shall be in writing. All notices shall be sent by registered mail to the business address of the party to be given notice. The business addresses of the parties shall be as follows: |
PMG Medica Ltd.
47 Hataasiah St. P.O. Box 515
Tel-Hanan, Israel 36603.
PIEZO-TOP LTD
47 Hataasiah St. P.O. Box 515
Tel-Hanan, Israel 36603
NANO-VIBRONIX INC. |
USA |
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7.2 | Unless otherwise proven, each such notice given by either party hereto shall be deemed to have been received by the other party on the 10th day following the mailing date. |
ARTICLE 8 - MISCELLANEOUS
8.1 | The construction and performance of this Agreement shall be governed by and shall be subject to the laws of the State of Israel. |
8.2 | Neither party shall be deemed to have waived any of its rights under this Agreement by failure to take any action to enforce any of its rights at any particular time. |
8.3 | This Agreement is the entire Agreement between the parties and there are no other terms, obligation, covenants, representation, statements or conditions, oral or otherwise, of any kind except the non-disclosure agreement attached to this Agreement as an integral part thereof. |
8.4 | This Agreement may not be changed, modified, or amended in whole or in part except by written document signed by the duly authorized officers of both parties. |
8.5 | The provisions of the Agreement shall be deemed separable. A holding by a court of competent jurisdiction that any provision of this Agreement which is not material to the consideration provided by either party is void or unenforceable shall not affect the validity or enforceability of the remaining provisions of the Agreement. |
8.6 | To all payments mentioned in this Agreement there shall be added the appropriate value added tax (VAT) as regulated on date of payment. |
ARTICLE 9 - ARBITRATION
9.1 | Any controversy or claim arising under or related to technical disputes regarding the LICENSED TECHNOLOGY (for instance, if parties disagree on the question if a specific item is included in the licensed technology) shall be settled by single arbitration jointly agreed upon the parties. The arbitrator will be selected by the parties or by court if they disagree. |
9.2 | The arbitrator will be a university professor in physics or engineering, and if such is not selected by mutual consent then a person with appropriate technical and scientific background will be selected arbitrator (the “ Arbitrator ”). |
9.3 | The Arbitrator will be bound by the Israeli Arbitration Act of 1968 and its appendix, but will have to give a detailed and explained verdict. |
9.4 | Other disputes, which are not of a technical nature will not be subject to this arbitration clause. |
IN WITNESS WHEREOF, the parties have MIS this Agreement to be executed in duplicate to be effective as of 10/26/03
/s/ Jona Zumeris | /s/ Jona Zumeris | /s/ Harold Jacob | ||
PMG MEDICA Ltd. | PIEZO-TOP LTD. | NANO-VIBRONIX INC. |
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CONFIDENTIAL DISCLOSURE AGREEMENT
Effective Date: October 26 th , 2003
To protect certain confidential information that may be disclosed between them, NanoVibronix Inc., and its affiliates (collectively “NV”), and the “Participant” identified below, agree that:
1. | Any party to this Agreement may be a Discloser of confidential information. |
2. | The parties' primary contacts for disclosing or receiving confidential information are: |
NV: Harold Jacob MD or other employees of NV designated in writing and Participant: Piezotop Ltd., PMG Medica Ltd. and all of their employees and Jona Zumeris:
3. | The confidential information (“Information”) that is the subject of this Agreement is described as: |
For NV: -LICENSED TECHNOLOGY AS DESCRIBED IN THE LICENSE AGREEMENT
For Participant: LICENSED TECHNOLOGY AS DESCRIBED IN THE LICENSE AGREEMENT
The relationship created under this Agreement is confidential and is to be treated as Information according to the terms of this Agreement.
4. | This Agreement relates to Information that is disclosed to a party (“Recipient”) after the Effective Date. |
5. | Recipient's duties under this Agreement expire October 15, 2015. |
6. | Recipient shall not disclose Information to a third party without express written permission from Discloser. Recipient shall protect the disclosed Information by using the same degree of care, but no less than a reasonable degree of care, to prevent the unauthorized disclosure of the Information, as Recipient uses to protect its own confidential information of a like nature. |
7. | If Recipient is required by judicial or administrative process to disclose Information, Recipient shall promptly notify Discloser and shall allow Discloser a reasonable time to oppose such process. |
9. | Recipient's duties under this Agreement shall apply to Information that is (a) disclosed by Discloser in writing and is marked at the time of disclosure to indicate it is confidential; (b) disclosed by Discloser in any other manner and is indicated at the time of disclosure to be confidential and thereafter is also summarized and designated as confidential in a written memorandum delivered to Recipient within one month of the disclosure; or (c) disclosed in the form of tangible materials transmitted to Recipient with a written memorandum within 30 days indicating the confidential nature of the materials. (d) information which is obviously sensitive and would be considered confidential |
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13. | Each Discloser warrants that it has the right to make disclosures under this Agreement. |
14. | Except as otherwise provided herein, all additions or modifications to this Agreement must be made in writing and executed by all parties. |
15. | This Agreement constitutes the entire agreement and understanding between the parties hereto relating to the subject matter hereof. This Agreement shall be deemed made in and shall be governed by the laws of the State of New York, U.S.A. pertaining to contracts made and performed within that state, without recourse to any conflicts of laws principles and the State and/or Federal Courts in the State of New York shall have exclusive jurisdiction of any litigation arising under or in connection with this Agreement. Should any provision of this Agreement not be enforceable in any jurisdiction, the remainder of this Agreement shall not be affected thereby. |
In witness thereof, the duly authorized representatives of the Companies have signed this Agreement as the date, stated below.
/s/ Harold Jacob | /s/ Jona Zumeris | |
Harold Jacob MD CEO NANO Vibronix INC |
Jona Zumeris PIEZOTOP LtD |
|
/s/ Jona Zumeris | ||
Jona Zumeris | ||
PMG Medica LtD |
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EXHIBIT 10.2
License Agreement
between
AC Engineering Ltd.
11 Netivei Am
Jerusalem, Israel 97552
hereinafter referred to as
“AC”
and
NanoVibronix Inc.
105 Maxess Road, Suite S124
Melville, NY 11747
hereinafter referred to as
“NV”
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COMPANY CONFIDENTIAL
This License Agreement (the “Agreement”) is made and entered into this 11th day of December 2011 (the “Effective Date”) by and between NanoVibronix Inc., located at 105 Maxess Road, Suite 5124, Melville, NY 11747 , and its affiliates, (“NV”), and AC Engineering Ltd. an Israeli Company, located at 11 Netivei Am, Jerusalem, Israel 97552 (“AC”).
WITNESSETH:
Whereas, AC represents that it has designed and developed a negative pressure wound treatment product which, in part, is based upon concepts contained in Patents filed by AC and issued by the US Government Patent and Trademark Office and hereinafter listed; and
Whereas NV has designed, developed, and obtained licensing rights to, and/or is in the process of designing, developing , and/or obtaining licensing rights to a wound treatment ultrasound system, a wound instillation system, and wound oxygenation technology, which can be used together with the AC negative pressure wound treatment or separately, and
Whereas NV desires to obtain the right, license and privilege to manufacture, use, sell and lease, in the United States, the aforesaid AC product, including improvements thereon which are made by AC or NV during the term of this Agreement.
Now therefore, in consideration of the mutual agreements herein provided the Parties agree as follows:
Article 1: Definitions
For the purpose of this Agreement, the following definitions shall apply:
1.1 | ‘Canister’ shall mean the negative pressure wound treatment canister component of the Licensed Product that is covered in whole or part by the Licensed Patent(s) or that is manufactured using the Know-How. |
1.2 | ‘Contract Year’ shall be each sequential twelve (12) month period beginning with the first day of the first month immediately after the Effective Date. |
1.3 | ‘Effective Date’ shall mean the date first set forth above. |
1.4 | ‘Gross Revenues’ shall mean, subject to the last sentence hereof, sale , rental, or other revenues received by NV, or the fair market value of other consideration received by NV, in respect of the sale or lease of Pumps, whether sold separately or as part of an Integrated Product. For the avoidance of any doubt, the term “Gross Revenues” does not include (i) sales tax that NV has to pay or absorb, customs duties, and transportation and insurance charges, if included in the gross sales price and identified on the relevant invoice, and any and all Federal, foreign, State or local taxes (except income tax) incurred by NV, if applicable, on such sales; and (2) amounts refunded or credited for returned goods and fees or commissions paid or payable by NV to distributors. In no event shall the Gross Revenues per each Pump be calculated as less than US$1,000 regardless of the actual revenues received; provided, however, that in the event the Pump Components are sold separately, the Gross Revenues per each Pump Component shall be calculated in accordance with the official NV price list then applicable. |
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COMPANY CONFIDENTIAL
1.5 | ‘Integrated Product’ shall mean any product developed by NV that integrates and/or incorporates as a component thereof the Licensed Product, or any portion thereof,. Except for the Licensed Product, which is part of the Integrated Product, NV shall own all right, title and interest in and to the Integrated Products. |
1.6 | ‘Know-How’ shall mean the Technical Data provided by AC to NV and the Technical Cooperation rendered by AC to NV under this Agreement. |
1.7 | ‘Licensed Patent(s)’ shall mean United States patent number 7,284,965, and/or any other United States patents for any improvements or additions to the ‘Licensed Product’ which are made by AC, as well as additional pending applications as listed in Exhibit D, including all additions, divisions, confirmations, continuations, continuations-in-part, substitutions, re-issues, re-examinations, extensions, registrations, patent term extensions, supplementary protection certificates and renewals of any of the above. |
1.8 | ‘Licensed Product’ shall mean the AC negative pressure wound treatment system consisting of the Canister and the Pump, the electronic circuitry and related software, that is described in the Licensed Product Specification attached hereto as Exhibit ‘A’, as well as any modifications or improvements to the Licensed Product made by AC. |
1.9 | ‘Market’ shall mean the United States. |
1.10 | ‘NV Technology’ shall mean NV’s technology, intellectual property, know-how, and trade secrets that it owns and/or has licensed relating to wound treatment systems. For the avoidance of any doubt, the NV Technology does not include the Licensed Product nor the Licensed Patent(s). |
1.12 | ‘Pump’ shall mean the negative pressure wound treatment pump component of the Licensed Product and the Pump Components, that are covered in whole or part by the Licensed Patent(s) or that are manufactured using the Know-How. |
1.13 | ‘Pump Components’ shall mean the charger, cradle, tubing, bleed hole system and carrying case components of the Pump. |
1.14 | ‘Support’ shall mean to replace, use, operate, maintain, repair, assemble, test, calibrate, overhaul, install, and handle the Licensed Product, as well as training and documentation in respect thereof. |
1.15 | ‘Technical Cooperation’ shall mean technical information used in the application of the Technical Data to the manufacture and Support of the Licensed Product conveyed by AC in writing, by verbal communication, or by demonstration or training. |
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COMPANY CONFIDENTIAL
1.16 | ‘Technical Data’ shall mean the manufacturing drawings, specifications, material lists, protocols and results, processes, and component specifications, needed for the manufacture of the Licensed Product. |
Article 2: Grant to NV
2.1 | AC hereby grants to NV during the term of this Agreement (as set forth in Article 12 below), the following licenses and rights, subject to the limitations of paragraph 2.2 below and all other terms of this Agreement. |
(a) | A non-exclusive right and license to use the Know-How for the manufacture and/or Support of the Licensed Product for negative pressure wound treatment applications. |
(b) | An exclusive right and license to market, sell lease and/or distribute, whether directly or via dealers, distributors and sales agents, the Licensed Product in and to the Market for negative pressure wound treatment applications. |
(c) | An exclusive right and license to sell and/or provide in the Market Support for any Licensed Product sold by NV or its dealers to customers pursuant to this Article 2; and |
(d) | A non-exclusive right and license, with the right to sub-license, to design, develop, and implement modifications, improvements, and derivate works of the Licensed Product for negative pressure wound treatment applications. |
(e) | A non-exclusive right and license to integrate and/or incorporate the Licensed Product with NV products to create Integrated Products, and to market, sell, lease, and/or distribute such Integrated Products in the Market. |
(f) | A license under any and all Licensed Patents insofar as such license is required to exercise the rights and licenses specified in paragraph 2.1 [a], [b], [c], [d], and [e] of this Article 2. |
2.2 | The rights and licenses granted to NV above are limited to the manufacture, marketing, sale, lease, distribution, and Support of the Licensed Product solely for negative pressure wound treatment applications, with all other applications and markets being expressly reserved to AC’s exclusive control. NV shall be entitled to place its markings, logo and/or symbol on the products covered under sub-article 2.1 above. NV shall not be liable if Licensed Product sold by it for uses permitted to NV hereunder are in fact used subsequently for a different purpose not authorized by NV. |
2.3 | NV shall be entitled to grant sublicenses under this Agreement for purpose of using third-party subcontractors for the purpose of manufacturing, marketing, selling, leasing, distributing and supporting the Licensed Products, subject to notifying AC of each such sub-license and sub-contract. |
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COMPANY CONFIDENTIAL
Article 4: AC Representations and Warranties
4.1 | AC represents as follows: |
(a) | That it is the sole owner of all right, title and interest in and to the ‘Licensed Product’ and the Licensed Patent(s). |
(b) | That AC has not granted any, and that there are no outstanding, options, licenses or agreements of any kind relating to the Licensed Product or the Licensed Patent(s) that conflict with the rights and licenses granted hereunder; |
(c) | That AC has the full right, power and authority to enter into this Agreement and to grant the rights and licenses herein granted and; |
(d) | That AC has received no notice and has no knowledge that the Licensed Product or the Licensed Patent(s) infringe any intellectual property rights of any third party, including the claims of any patent or rights of another party. |
(e) | That AC has received no notice and has no knowledge of any existing or threatened litigation concerning the Licensed Product or Licensed Patent(s). AC shall promptly notify NV in writing upon becoming aware of any threatened litigation challenging the validity of the Licensed Patent(s); |
(f) | That there is no pending or threatened interference, re-examination, opposition or other proceeding or challenge relating to or involving the validity of, scope of, or AC’s ownership of, the Licensed Patent(s). |
4.2 |
(a) | AC warrants that the Know-How to be furnished to NV under this Agreement, in writing, is identical to the Know-How which AC uses for the manufacture and Support of the Licensed Product, and shall comprise the know-how required to manufacture and Support the Licensed Product. AC shall correct any non-conformity with this warranty within thirty (30) days of receiving notice of such non-conformity. |
(b) | AC warrants that the Licensed Product will perform substantially in accordance with the specifications set forth in Exhibit A attached hereto, as same may be modified from time to time by AC to reflect improvements or other modifications to the Licensed Product. |
(c) | Any warranties or other undertakings given by NV to third parties in respect to the Licensed Product shall in no way obligate AC. |
(d) | The warranties detailed in this Article 4.2 are in lieu of all other warranties, expressed or implied including any implied warranty of merchantability or fitness for a particular purpose. |
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COMPANY CONFIDENTIAL
Article 5: Technical Data and Technical Cooperation
5.1 | Within forty-five (45) days of the Effective Date, AC shall provide NV with all of the Technical Data necessary for NV to manufacture and Support the Licensed Product. |
5.2 | AC agrees that during the term of this Agreement it will exercise commercially reasonable efforts to assist NV in implementing the Technical Data provided hereunder. AC will not receive additional compensation for such assistance, except for pre-approved air fare and accommodation expenses for AC and any AC personnel or consultants assisting AC in such effort. Any such activity of AC shall be as an independent contractor, and neither AC nor any such consultants or personnel assisting AC shall be deemed employees of NV for any purpose. |
5.3 | AC will exercise its commercially reasonable efforts to design and implement improvements to Licensed Product requested by NV within twelve (12) months of the Effective Date of this Agreement. Any failure to achieve any such requested improvement shall in no way derogate from the rights and obligations of the parties hereunder as to the Licensed Product herein originally defined. |
5.4 | Notwithstanding anything to the contrary herein, NV is aware that (i) the Pumps and Canisters for the Licensed Product, and their related tooling and Technical Data, may require additional work and qualification to bring them to full-scale production status, and (ii) specific test equipment for the production line or multi cavity molds for reducing product cost may be required. NV will undertake all of the above described work at its own cost and risk, and AC will provide all requested support on the terms of Paragraph 5.2 above, and AC will make the tooling in its possession available to NV for production of Pumps and Canisters. |
5.5 | NV agrees to (i) use reasonable commercial efforts to subcontract the establishment of a production line for the Licensed Product, as soon as practicable, in accordance with Exhibit B hereto, and (ii) sell to AC Licensed Product manufactured by NV upon AC’s request. The price to AC for such Licensed Product shall be determined under the terms of Exhibit C hereto. |
Article 6: Governmental Approvals
6.1 | NV will be responsible for obtaining the necessary government or agency approvals, including without limitation FDA and CE approvals, and will make reasonable commercial efforts to obtain the approvals required for the manufacture, sale, use and Support of the Licensed Product in the Market. NV shall be responsible for all costs related to that effort. AC shall, pursuant to the terms of Paragraph 5.2 above, cooperate with NV in obtaining such approvals. NV will also be responsible for the payment of all expenses associated with the preparation and development of all materials data and testing necessary for obtaining such approvals. NV shall supply to AC copies of all documentation and/or presentations submitted or made to the FDA or with respect to the CE approval process within 30 days of their submission or presentation to the FDA or other related agency. Upon the expiration or termination of this Agreement for any reason other than breach by AC, NV will assign all of its rights to any such FDA or CE approvals to AC. |
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COMPANY CONFIDENTIAL
Article 7: Compensation
7.1 | NV shall pay AC (i) a royalty of five percent (5%) on Gross Revenues as well as (ii) a royalty of seventy cents ($0.70) per Canister sold or leased by NV to a third party. |
7.2 | As an advance on the payments due to AC under 7.1 above, NV shall pay AC an advance royalty payment to AC of US$75,000 (seventy-five thousand US dollars) as soon as FDA 510(K) listing is obtained. From each future royalty payment, NV shall withhold an amount equal to fifty percent (50%) of the royalty payment until the advance royalty payment is fully recouped. Additionally, if by the end of the initial term of this Agreement (as set forth in Article 12 below), AC has not received in royalty payments a minimum of US$150,000 then NV will, at the end of said initial term, pay to AC the difference between US$150,000 and the royalties actually paid. |
7.3 | The royalties payable under sub-article 7.1 shall be calculated quarterly [i.e. for the quarterly periods ending on, 31 March, 30 June, 30 September, and 31 December during the term of this Agreement, relating to the quarters of NV’s business year, starting on January 1 of each year Payment shall be made within ten (10) days of receipt of an invoice from AC. Within forty-five (45) days of the end of each quarterly period, NV shall provide AC with a report setting forth the number of units of Licensed Product sold or rented by NV during the preceding quarter and the Gross Revenues received by NV in said preceding quarter. In the event of a delay in excess of fourteen days in the payment of any sums due to AC, interest will be due on said late payment to the date of actual payment at a rate of one-half percent (0.5%) per month from the date on which payment is due [i.e. thirty days after receipt of invoice]. Any delay in payment in excess of thirty (30) days will be deemed a breach of this Agreement and will entitle AC to terminate this Agreement by written notice to NV pursuant to Article 12.2[B] below, whereupon the provisions of paragraphs 13.2, 13.3, 13.4, 13.5 and 13.6 of Article 13 below shall apply. NV will add to all the payments under paragraphs 7.1, 7.2, and/or 7.5 any VAT applicable to such payments. |
7.4 | NV agrees to keep accurate books of accounts to enable the royalties payable hereunder to be determined, as well as to determine the manufacturing cost of Licensed Products sold to AC, and further agrees that such books of accounts shall be available for examination, not more frequently than once in any twelve (12) month period, by a certified public accountant appointed by AC, during reasonable business hours upon prior reasonable notice, to the extent necessary to verify the reports, records and payments provided for herein. The public accountant has to be acceptable to NV. NV shall be required to keep such books of accounts for no less than three (3) years from the time of making them. |
7.5 | NV shall pay to AC all sums payable under the terms of this Agreement in US dollars. All payments due by NV to AC shall be made free and clear, and free of any assessments or other charges; provided, however that NV may deduct from payment any income tax or tax of a similar nature imposed by any governmental taxing authority on the income of AC from such payment and actually paid by NV for the account of AC, and NV shall furnish to AC tax withholding certificates as evidence that such tax payments have been made on AC’s behalf to the applicable taxing authorities. |
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COMPANY CONFIDENTIAL
Article 8: Patents
8.1 | NV agrees that the ‘Licensed Product’ shall bear a patent notice as required by the applicable patent numbers relating to the marking of patent articles. AC agrees to advise NV of the applicable patent numbers. Pending the issuance of any applicable patents, each item of ‘Licensed Product’ or its package will be marked ‘Patent pending’. |
Article 9: Improvements
9.1 | NV may make improvements to the Licensed Product, and in such case NV shall own all intellectual property rights to such improvements. With regard to Licensed Products manufactured by NV for AC, any changes made to the Licensed Product or to the tooling are subject to AC’s approval, which approval shall not be unreasonably withheld or delayed. |
9.2 | In the event NV makes any improvements to the Licensed Product, NV will inform AC within thirty (30) days of its implementation by NV and provide a copy of the corresponding data and/or know-how accordingly. AC shall have the right, at no charge to AC, to obtain a license to use such improvements to the Licensed Product solely to make, use, sell and lease Licensed Product in the markets reserved to AC hereunder for the Licensed Product during the term of this Agreement. |
9.3 | For the avoidance of any doubt, NV shall retain all right, title, and interest in and to the NV Technology and all NV products designed, developed, or produced using the NV Technology. Nothing herein shall be construed as granting AC a license to the NV Technology, nor to any products designed, developed or produced using the NV technology. |
Article 10: Indemnification
10.1 | Indemnification by NV. NV will defend against any claim by any third party against AC for damages incurred as a result of an injury, illness or death of any person which is caused by a manufacturing defect in the Licensed Product manufactured and sold by NV, and indemnify AC against all costs, damages, losses, liabilities and expenses (including attorneys’ fees and costs) awarded against AC by a court of competent jurisdiction, or agreed to in a written settlement agreement signed by NV arising out of such claim. |
10.2 | Indemnification by AC. AC will advance fifty percent (50%) of NV’s defense costs and assist NV’s counsel at NV’s request in the defense of any claim by any third party against NV that the Licensed Product or the Licensed Patent(s) infringe any intellectual property rights of another, and in the event of an adverse judgment indemnify NV against all costs and expenses incurred (including attorneys’ fees and costs) and against all damages, losses, liabilities and expenses (including attorneys’ fees and costs) awarded against NV by a court of competent jurisdiction, or agreed to in a written settlement agreement signed by AC, arising out of such claim. |
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COMPANY CONFIDENTIAL
10.3 | Enjoinment of Use. If a final judgment or administrative ruling is obtained enjoining or charging for the use of the Licensed Patent(s) or the Licensed Product as a result of a violation or infringement of intellectual property rights of another, AC shall at its expense procure the right to continue using the Licensed Patent(s) and Licensed Product. If the aforementioned obligation cannot be accomplished by AC on a commercially reasonable basis, in the event that an injunction prevents further sale or use of the Licensed Product, AC may terminate this Agreement and in such event AC shall refund to NV all fees and royalties paid by NV to AC hereunder with regard to Licensed Products sold by NV prior thereto as to which NV is required to refund payments. |
10.4 | If either party receives a written claim for damages allegedly caused by Licensed Product, such party shall promptly, and in any case within thirty [30] days thereafter, give notice of such possible claim to the other party, and shall cooperate fully with the other party in the defense of all such claims. The giving of such notice promptly shall be a condition precedent to the right of indemnification hereunder. No settlement or compromise entered into without its prior written consent shall bind a party hereto or be used in any way as evidence by one party hereto again the other. |
Article 11: Proprietary and confidential Nature of ‘Know-How’
11.1 | All Know-How to be supplied by AC to NV under the terms of this Agreement shall remain the property of AC. NV shall acquire no rights, title or interest in any said Know-How, except as herein specifically licensed, and, except as provided for in this Article, the Know-How will be used by NV only to exercise the rights granted hereunder. For clarity sake and without derogating from the provisions of the preceding sentence, NV shall not use any Know-How in the design, development, test, manufacture or Support of any product except as expressly granted the right to do so under sub-article 2.1 above. |
11.2 | Except as provided in this paragraph and elsewhere in this article, NV will not disclose, either intentionally or negligently, any such Know-How nor will it permit any such Know-How to be disclosed to or be acquired by anyone; provided, however, that NV may disclose such Know-How (i) to suppliers, contractors, and consultants solely to the extent necessary to exploit the rights and licenses granted hereunder, and (ii) to dealers, distributors, sales agents, bona fide customers, and potential customers as may be necessary for any sales or maintenance program, but in no event shall such disclosures in the context of a sales or maintenance program include manufacturing information and techniques. Any such disclosures to customers will be accompanied by a statement restricting the use of such information for maintenance and repair purposes. NV may disclose the Know-How, including manufacturing information and techniques to its suppliers and subcontractors, but in such cases such disclosures shall be limited to the specific needs and purposes of the contract between NV and such suppliers or subcontractors and the use of Know-How disclosed will be limited for said specific needs and purposes. . At the termination of this Agreement all production tooling, test equipment, jigs and molds created pursuant to the Know-How will be transferred at no charge to AC. |
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COMPANY CONFIDENTIAL
11.3 | The non-disclosure agreement entered into by the parties on November 10, 2011 shall remain in effect and continue to govern the disclosure of confidential information by one party to the other. |
Article 12: Duration of Agreement
12.1 | The Agreement shall be effective as of the Effective Date, and the initial term of this Agreement shall extend until two years (2) years from the receipt by NV of FDA approval for the Licensed Product or three (3) years from the ‘Effective Date’, whichever period expires earlier. In the event that during the initial term NV sells at least 3,500 units of Pumps in the Market, then the term of this Agreement will automatically extend for an additional three (3) years (the “Extended Term”), provided however that during the Extended Term the rights under Paragraphs 2.1 (B) and (C) shall be on a non-exclusive basis. At the end of said Extended Term, this Agreement shall automatically renew for successive renewal periods of twelve (12) months each provided that NV sells at least 1,000 units of Pumps in the Market during the preceding renewal period. Thereafter, the Agreement will continue to renew automatically each year unless one party provides the other party with prior written notice of non-renewal at least sixty (60) days before the expiration of the then-current term. In the event this Agreement expires upon the expiration of the initial term, subject to the terms of paragraph 12.4 below, the licenses and rights granted to NV and AC hereunder shall be of no further force or effect. |
12.2 | This Agreement and the rights of the party hereunder forthwith may be terminated: |
(a) | by mutual consent of the parties in writing, or |
(b) | by thirty (30) days prior written notice by AC to NV, in accordance with the provisions of sub-article 7.3 of Article 7 above, if such delay in payment shall continue un-remedied during such notice period, or |
(c) | by thirty (30) days prior written notice by one party to the other party if said other party shall create or suffer to exist any material breach of any of the terms or conditions of this Agreement, which shall continue un-remedied during such thirty (30) day notice period, |
(d) | by AC at its discretion, should NV fail to attain FDA and CE approvals within two (2) years of the Effective Date or at any other time should NV be prevented from distribution of Licensed Product, as a result of FDA sanctions, for a period of at least 150 days. |
12.3 | The exercise by either party of any rights of termination pursuant to paragraph 12.2 of this Article 12 shall not affect AC’s right to be fully paid any royalties or other accrued payment obligations which accrued prior to or after said termination, except if termination is due to the breach of AC. |
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COMPANY CONFIDENTIAL
12.4 | Upon expiration or termination of this Agreement, NV shall have the right to complete and service orders previously contracted for and to accept orders based on binding offers mailed prior to the effective date of termination or expiration. In the event NV shall complete such orders, it shall be obliged to continue to pay AC royalties therefore, as provided in Article 7. |
12.5 | The provisions of Articles 10 and 11 shall survive the termination or expiration of this Agreement. NV shall, in the event of the expiration or termination of this Agreement, return to AC all Technical Data received or reproduced under this Agreement which are in a form suitable for transmittal, and shall destroy all other such data, and shall cease the use of the Know How and of the special tooling used in the manufacture of the Licensed Product, and shall discontinue the manufacture and sale of the Licensed Product. Excluded from above restrictions are any and all data, know-how, and measures which are necessary to enable NV to fulfill its guarantee, service and repair obligations vis-a-vis all customers using previously sold Licensed Products. Additionally, at AC’s request, NV shall transfer to AC all tooling and production jigs, test equipment and fixtures in the Licensed Product production line of NV. |
12.6 | Nothing contained herein shall be construed to grant any rights to NV, or to any person, firm or corporation claiming under NV, other than the rights specifically set forth in this Agreement. |
12.7 | Should AC desire to accept an offer from a third party to purchase (i) all or substantially all of the intellectual property rights of AC in the Licensed Patent(s) or Licensed Products, or (ii) all or substantially all of the stock or assets of AC, NV shall have the right of first refusal to make such purchase from AC on the same terms as offered by such third party. AC will promptly notify NV in writing upon the receipt of any such offer, and for this purpose, NV will have 30 days from NV’s receipt of written notice of such offer to exercise this right, and agrees to purchase the intellectual property, stock, or assets, as the case may be, on such terms, within 30 days from NV’s notice that it will be exercising its right of first refusal, whereupon NV will be required to make payment of the purchase price in accordance with such third party offer or this right will terminate. |
Article 13: Intentionally Left Blank
Article 14: Remedies
14.1 | In the event any of the representations or warranties by AC under Article 4 are breached or prove to be untrue or if third parties successfully prosecute a patent infringement action against NV and/or AC regarding the ‘Licensed Product’, then AC will be responsible for the judgment in such case. |
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COMPANY CONFIDENTIAL
14.2 | Notwithstanding anything to the contrary in the foregoing provisions of Article 14, in no event will either party be liable for any indirect, incidental or consequential damages of any kind to the other party or otherwise. |
14.3 | Except with regard to a breach of confidentiality, breach of the Article 4 representations and warranties, infringement of intellectual property rights, or a party’s indemnification obligations pursuant to Article 10 above, either party’s total liability to the other party under this Agreement shall be limited to the payments paid or payable by NV to AC during the twelve-month period preceding the interposition of the claim. |
Article 15: Notices
Any and all notices, payments or statements required under this Agreement shall be made in writing and addressed as follows:
NanoVibronix Inc.
105 Maxess Road, Suite S124
Melville, NY 11747
AC Engineering
11 Netivei Am
Jerusalem, Israel 97552
Article 16: Miscellaneous
16.1 | Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same Agreement. |
16.2 | Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force, without being impaired or invalidated in any way. |
16.3 | Execution of Documents. Each party agrees to execute and deliver such other documents and instruments and to take such further actions as may be reasonably necessary to fully carry out the intent and purposes of this Agreement. |
16.4 | Headings. The headings contained in this Agreement have been inserted for convenience only, and in no way define or limit the scope or interpretation of the Agreement. |
16.5 | Governing Law and Jurisdiction. This Agreement shall be construed in accordance with the laws of the State of Israel. Any claim by any Party against the other Party hereunder shall be brought exclusively in the courts of the State of Israel. |
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COMPANY CONFIDENTIAL
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
AC Engineering Ltd. | |
By: | /s/ Carmeli Adahan |
Name: | Carmeli Adahan |
Title: | CEO |
Date: | December 11, 2011 |
NanoVibronix Inc. | |
By: | /s/ Harold Jacob |
Name: | Harold Jacob |
Title: | President |
Date: | December 10, 2011 |
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COMPANY CONFIDENTIAL
Exhibit A
Licensed Product Specification
Performance Specification for the AC NPWT pump:
1. | Reach and maintain one of selectable 6 vacuum levels: 50, 75,100,125,150.175 mm. Hg. |
2. | Vacuum levels are to be maintained at ±10mm. Hg. |
3. | Attaining the selected vacuum level is indicated by a double audible beep. |
4. | Vacuum levels are to be maintained when leakage is between 50 and 350 ml/minute. (Hypodermic needles 26G for max. leakage 27G x 1/2" for minimal leakage). |
5. | At steady state the system should draw no more than 250 ma current. |
6. | When a line occlusion exists, the motor speed should be reduced to 30 RPM If vacuum keeps rising the pump should shut down and an alarm should sound, together with the occlusion LED lighting up. |
7. | If the motor exceeds 300 RPM and the desired vacuum level is not obtained within 30 seconds a leakage alarm and LED are activated and the system is shut down. |
8. | When the charger is plugged in for charging the charge LED is on and a beep is sounded when charge begins. Charger disconnect during operation will result in an audible BEEP. |
9. | At end of battery charge charger LED will change color. |
10. | Low battery alarm and LED light start when battery voltage drops below 6.5 VDC. |
11. | Intermittent mode switch results in the pump operating 5 minutes on and 2 minutes off, with intermittent LED on at all times. Pressing intermittent switch during operation stops intermittent mode. |
12. | All key depressions respond to 2 second key activation. Exception is the alarm silence switch, which responds with no delay. |
13. | Initial vacuum level at start is always 50 mm Hg. After reaching 175 mm Hg. setting, depressing vacuum level switch will revert setting to 50 mm Hg. |
14. | When vacuum level is being reduced motor is rotated at minimal speed to obtain vacuum reading. |
15. | When canister is full liquid blocks the filter — alarm and LED should activate and motor will stop. |
16. | Alarm silence key activation stops the audible alarm for 30 seconds. |
AC vacuum drainage system user instructions:
Press
to turn suction on/ of
- | Obtain desired vacuum level by pressing the mm/hg key |
- | Alarm will sound when leak is present for more than 15 seconds |
- | A double signal indicates vacuum level reached |
- | System may operate either upright or laying down. |
- | Keyboard will lock after 5 minutes or by pressing the key button. |
14 |
COMPANY CONFIDENTIAL
Exhibit B
Production Line and Related Tasks Required of NV
A part of the Agreement, NV shall take full responsibility for establishing and maintaining, either directly or through subcontractors, a production line for the manufacture of Licensed Products.
Establishing and maintaining a production line that shall include the following roles and responsibilities:
1. | Procurement - handle procurement process including: finding and negotiating with potential suppliers, placing components' purchase orders, etc. |
2. | Shipping and handling components from the relevant supplier to NV warehouse |
3. | Inventory - maintaining sufficient inventory to meet purchase orders and forecasts, submitted by AC. |
4. | Managing the production process, either directly or through subcontractors, of the following elements: Silicone parts, Plastic components, Electronic circuit board and its components, with attention given to long-lead items. |
5. | Assembling - responsibility of assembling the Licensed Product from components to sellable product. |
6. | Quality Assurance - Implementing automatic Quality Assurance tests for all assembled elements separately (Pump, Canister) as well as Quality Assurance tests of the entire assembled product. |
7. | Packing — For AC's orders, packaging according to AC requirements, with AC assuming the cost of such packing. |
8. | Shipping or preparing for pickup. |
9. | Maintain ISO 9001 certification. |
15 |
COMPANY CONFIDENTIAL
Exhibit C
Production Pricing and Special Terms
The price of Licensed Product from NV to AC shall be the NV direct production costs (i.e., material costs plus per produced unit direct labor per produced unit for manufacturing through FAT, plus a G&A load which will not exceed 10% of the combined material and direct labor costs (the "G&A Load"), plus a 10% profit margin thereon. Every six months the parties shall review the pricing to determine any reduction in costs due to learning curves or improvements in product and technology and adjust the price accordingly.
The Licensed Product which NV will manufacture for AC will be provided initially within four (4) months from date of order, and then after six (6) months the lead time will be reduced to 3 months, all provided that NV has an active production line. In the event the capacity of the NV production line is insufficient to meet both NV's market requirements and the orders from AC, then until NV expands that capacity, AC will be entitled to at least 30% of the Licensed Hardware units produced on NV's production Line against AC's orders. On the first of each month, AC will provide NV with a running three-month forecast of its projected needs for Licensed Products over the upcoming three months. NV shall invoice AC for Licensed Product manufactured by NV for AC upon delivery, and AC shall make payment within forty-five (45) days of the date of invoice.
It is understood by NV that the Licensed Product to be delivered to AC may require minor modifications from the NV standard product (such as labeling, packaging, user manuals, and programming) and NV agrees to implement those modifications for AC at cost, plus the G&A Load, plus a 10% profit margin thereon.
AC may continually or from time to time observe the Production process for the Licensed Product upon written notice of at least one week.
16 |
COMPANY CONFIDENTIAL
Exhibit D
Licensed Patents
1
A Compact Vacuum Pump – (JR0040968) |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
International Procedure |
PCT/IL02/00661 W003/016719 |
1452267 | 12/08/2002 |
US 5,466,229 US 4,747,843 US 5,173,033 US 4,883,476 |
Completed | ||||
U. S. A. |
10/486,940 US 2004-028756 |
1452291 | 12/08/2002 | 7,284,965 | 23/OCT/2007 | 23/4/2015 |
US 5,173,033 US 6,135,725 US5,021,048 US 4,231,722 |
Granted | |
USA .-CONT |
11/529,388 U52007-0031268 |
1686468 | 29/09/2006 | 7,758,539 | 20/JUL/2010 | 20.1.2014 |
US 4570833 US 4828464 US 5645540 |
Granted | |
U.S.A-CONT |
11/896,674 US2007-0297924 |
1774991 | 05/09/2007 | 7,918,654 | 05.04.2011 | 05.10.2014 | US 6315534 US4468222 | Granted |
The following references were also cited in the Priority application, filed in GB 2124712
EP1045146
EP0494375
US 4842584
US 4798589
US4639245
2
Wound Closure and Drainage System- (JR0046587 |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
International Procedure |
IL2005/000784 W02007/013049 |
1615905 | 24/07/2005 |
US 2004/064132 US 4,930,997 US 4,661,093 US 2001/029956 WO 03/016719 US 5,645,081 US 2002/151826 US 5,776,119 US 2004/059284 |
Completed | ||||
U.S.A. |
11/989,297 US2009-0264837 |
1797042 | 24/07/2005 |
US5941859 US4108574 US20050180868 US4208171 US20040015042 US3516160 |
In Examination |
Office Action received; deadline to respond is 11.1.12 extension possible until 11.4.12 |
17 |
COMPANY CONFIDENTIAL
3
Suctioning System, Method and Kit - (JR0047730) |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
U.S.A. |
11/344,007 2007-0179460 |
1642628 | 01/02/2006 | 7,503,910 | 11/MAR/2009 | 17/9/2012 |
US5370610 US5662599 US6471982 US5636643 US7128735 US 5,370,610+ US 5,662,599+ US 6,471,982+ US 5,636,643+ US 7,128,735+ |
Granted | |
International Procedure |
IL2006/000855 W02007/013064 |
1685999 | 24/07/2006 |
GB 2,378,734 US 5,419,687 US 2001/029956 DE 10215896 US 2004/199840 US 6,042,560 |
Completed |
4
Suctioning System, Method and Kit - (JR0050306) |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
International Procedure |
1L2006/001287 W02007/088530 |
1710805 | 08/11/2006 |
WO 00/02016 DE 2401643 WO 96/05873 EP 0156211 US 6071267 US 2005004534 US 5599333 US 2004039243 US 2003014022 US 3416461 WO 03/016719 |
Completed | ||||
U.S.A. |
12/223,473 US2009-0030402 |
1843192 | 08/11/2006 | WO/02016 |
In Examination
|
Office Action received; deadline to respond 13.1.12 extension until 13.4.12 |
18 |
COMPANY CONFIDENTIAL
5
Vacuum system and kit therefore-(JR0051674) |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
U.S.A. – PROV |
60/924,268 | 1745470 | 07/5/2007 | * | Provisional ended | ||||
International Procedure |
IL2008000624 W02008/135997 |
1801463 | 06/05/2008 | Completed | |||||
U.S.A. | 12/451,335 US20100063483 | 1957778 | 06/5/2008 | Published | Awaiting first Office Action |
6
Wound enclosure - (JR0055047) |
|||||||||
Country | App. No. and Pub No. | Our Ref. | Filed | Patent No. | Date of Grant | Next Renewal | References cited | Status | Next action |
PCT |
IL2009/000618 W02009/156984 |
1922871 | 23/06/2009 | Completed | |||||
U.S.A. | 12/999,663 US20110125113 | 2057650 | 23/06/2009 | Filed |
19 |
EXHIBIT 10.3
NEITHER THIS NOTE NOR ANY SECURITIES THAT MAY BE ISSUED UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), STATE SECURITIES LAWS, OR LAWS OF ANY FOREIGN JURISDICTION. NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD, ASSIGNED, OFFERED, PLEDGED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVING AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, ASSIGNMENT, OFFER, PLEDGE, OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND STATE SECURITIES LAWS.
Nano Vibronix, INC.
FORM OF CONVERTIBLE PROMISSORY NOTE
$_____________ | November __, 2011 |
Investor: ________________
FOR VALUE RECEIVED, subject to the terms contained herein, the undersigned, Nano Vibronix, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of the investor set forth above (the “Investor”), the amount stated above (the “Principal Amount”) plus interest thereon calculated from the date hereof until paid in full at the annual rate of ten percent (10%), compounded annually. The Company shall pay the unpaid Principal Amount and interest accrued hereunder in lawful money of the United States in full on demand on the earlier of an “Event of Default” (as defined below) or November 15, 2014 (the “Maturity Date”), unless it has been previously converted pursuant to Section Error! Reference source not found. hereof, in which case all outstanding principal and accrued interest under this Note will be satisfied in full by virtue of such conversion. This Convertible Promissory Note is one of the convertible promissory notes issued by the Company in connection with its issuance and sale of $1,000,000 of convertible promissory notes pursuant to that certain Convertible Promissory Note Subscription Agreement dated as of November ___, 2011 by and among the Company, the Investor and the other purchasers of Notes (as such agreement may be amended, supplemented or otherwise modified from time to time, the “Subscription Agreement”).
1. | Prepayment . This Note may not be prepaid without the prior written consent of the Investor. |
2. | Conversion . |
a. | Definitions . |
i. | “Issuance Conversion Event” shall mean an aggregate investment in the Company of $3,000,000 or more in one transaction or a series of related transactions occurring after the date hereof, in which the Company shall have issued shares in the Company or securities (including convertible debt) exercisable or convertible into shares in the Company. |
ii. | “Entity Conversion Event” shall mean a sale, lease, licensing, exchange or other transfer by the Company of all or substantially all of the Company’s business assets, sale of all or substantially all of the shares in the Company, reorganization, or consolidation or merger of the Company into or with any other entity except any such merger or consolidation involving the Company or a subsidiary in which (A) the shares of the surviving or resulting corporation (or if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation) are not listed or traded on any exchange and (B) the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation. |
iii. | “Conversion Price” shall mean $0.284 per share of Series B-1 Participating Convertible Preferred Stock, par value $.001 per share, of the Company. Such amount shall be appropriately adjusted in the case of a stock dividend, stock split or combination. |
b. | If an Issuance Conversion Event or Entity Conversion Event shall occur prior to the Maturity Date, this Note (including accrued but unpaid interest) shall automatically be converted, at the Conversion Price, into shares of Series B-1 Participating Convertible Preferred Stock of the Company, par value $.001 per share. |
c. | Election to Convert . At any time prior to the Maturity Date, the Investor may elect by written notice to the Company and the surrender of this Note to convert this Note (including accrued but unpaid interest), at the Conversion Price, into shares of Series B-1 Participating Convertible Preferred Stock of the Company, par value $.001 per share. |
d. | No Fractional Shares . The Company shall not issue any fractional shares on conversion of this Note. If on any conversion of this Note a fraction of a share results, the Company shall pay the Investor the cash value of that fractional share, calculated on the basis of the Conversion Price. |
e. | No Rights as Shareholder . This Note does not by itself entitle the Investor to any voting rights or other rights as a shareholder of the Company. |
2 |
3. | Event of Default. |
a. | “Event of Default” means any of the following: |
i. | The failure of the Company to pay when due any amounts due hereunder that remain unpaid ten (10) business days after the Company receives written notice thereof; |
ii. | The Company’s breach of a representation or obligation in the Subscription Agreement which remains uncured for more than 30 days after the Company receives written notice thereof; or |
iii. | The Company shall have entered against it by a court having jurisdiction thereof a decree or order for relief in respect to the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official will have been appointed for the Company or for any substantial part of the Company’s property, or the winding up or liquidation of the Company’s affairs will have been ordered; or the Company will have commenced a voluntary case under any applicable bankruptcy, insolvency or other similar law, or consent to the entry of an order for such relief in an involuntary case under any such law, or any such involuntary case will have commenced, and not been dismissed within 90 days, or the Company will have consented to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the Company or for any substantial part of the Company’s property, or make any general assignment for the benefit of creditors. |
b. | Upon the occurrence, and at any time during the continuance, of an Event of Default, the Investor, by notice to the Company, may declare all unpaid principal and interest and all other amounts payable under the Notes to be immediately due and payable and same shall become immediately due and payable upon such notice without presentment, demand, protest or further notice of any kind; provided, however, that in the event of the occurrence of an Event of Default specified in subparagraph (iii) above, this Note, all such interest and other amounts payable to Investor hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind. |
4. | Usury Savings Clause . The Company and the Investor intend to comply at all times with usury laws. If at any time such laws would render usurious any amounts due under this Note, then it is the Company’s and the Investor’s express intention that the Company not be required to pay interest on this Note at a rate in excess of the maximum lawful rate, that the provisions of this section will control over all other provisions of this Note that appear to be in conflict hereunder, that such excess amount will be immediately credited to the principal balance of this Note (or, if this Note has been fully paid, refunded by the Investor to the Company), and the provisions hereof will be immediately reformed and the amounts thereafter decreased, so as to comply with the then-applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note. |
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5. | General Provisions . |
a. | Amendments and Waivers . This Note and any term hereof may be amended, waived, discharged or terminated only by an instrument in writing signed by the Company and the Investor or as otherwise provided in the Subscription Agreement. |
b. | Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery and if a fax number has been provided, upon delivery (with answerback confirmed), addressed to a party at its address and the fax number, if any, shown below or at such other address and fax number as such party may designate by three days advance notice to the other party. |
Any notice to the Investor shall be sent to the address set forth on the signature page hereof.
c. | Severability . If any provision of this Note is held to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions of this Note will not be affected or impaired. |
d. | Headings . The descriptive headings of the articles, sections, and subsections of this Note are for convenience of reference only. They do not constitute a part of this Note and do not affect this Note’s construction or interpretation. |
e. | Governing Law; Jurisdiction . The laws of the State of New York govern all matters arising out of or relating to this Note, including, without limitation, its interpretation, construction, performance, and enforcement, without giving effect to such State’s conflicts of law principles or rules of construction concerning the drafter hereof. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Note and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address shown below. Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non-conveniens. Each party also waives any right to trial by jury. |
[Signature Page Follows]
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The parties are signing and delivering this Note as of the date stated in the caption of this Note.
COMPANY: |
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NANO VIBRONIX, INC. | |||
By: | |||
INVESTOR:
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Investor Address: | |||
By: | |||
Name: | |||
Title: |
[Acknowledgment and Receipt of Investor to Convertible Promissory Note]
EXHIBIT 10.4
NANO VIBRONIX, INC.
FORM OF SUBSCRIPTION AGREEMENT
CONVERTIBLE PROMISSORY NOTES
SUBSCRIPTION AGREEMENT (the “ Agreement ”) dated as of November __, 2011, between Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this agreement as investors (collectively, the “ Investors ”).
WITNESSETH :
WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase, up to $1,000,000 in aggregate principal amount of convertible promissory notes of the Company in substantially the form attached hereto as Exhibit 1 (the “ Notes ”).
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto hereby agree as follows:
1. | Purchase and Sale of Securities . |
1.1. Sale and Issuance of Notes . The Company shall sell to the Investors and the Investors shall purchase from the Company, up to $1,000,000 in aggregate principal amount of Notes for an aggregate purchase price of US$1,000,000.
1.2. The closing (the “ Closing ”) of the purchase and sale of the Notes hereunder shall take place within three (3) business days of the date of this Agreement or such other date agreed to by the Company and the Investors (the “ Closing Date ”). The Closing shall take place remotely by means of and concurrently with the electronic or facsimile exchange of documents and signatures at the Company or at such location as is mutually acceptable to the Investors and the Company. At the Closing:
(a) each Investor shall deliver to the Company by wire transfer as set forth below:
Mellon Bank Pittsburdgh, PA | |
ABA # : | 043000261 |
FFC: | Merrill Lynch |
Account # : | 101-1730 |
Name on the account: | NanoVibronix Inc |
FFC: | 831-07B23 |
or such other method of payment as the Company shall approve, an amount equal to the purchase price of the Note purchased by such Investor hereunder; and
(b) the Company shall issue and deliver to each Investor a Note in the name of the Investor, in the principal amount equal to the purchase price paid by such Investor; and
(c) the Company shall have obtained all requisite approvals and waivers of its Board of Directors and stockholders with respect to the transactions described herein and the amendment and restatement of the Company’s certificate of incorporation in substantially the form attached hereto as Exhibit 2 and shall have filed such certificate with the Secretary of State of the State of Delaware.
2. Representations and Warranties of the Company . The Company hereby makes the following representations and warranties only:
2.1 The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own or lease its properties as and in the places where such business is conducted and to carry on its business as conducted, and (iii) is duly qualified as a foreign corporation authorized to do business in every jurisdiction where the failure to so qualify, individually or in the aggregate, would have a material adverse effect on the operations, assets, liabilities, financial condition or business of the Company or its subsidiary (“Material Adverse Effect”).
2.2 The Company’s subsidiary is duly incorporated and validly existing under the laws of its jurisdiction of incorporation and is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect.
2.3 As of the date of this Agreement (assuming that the Restated Certificate has been filed) and as of the Closing, the Company (i) has the requisite corporate power and authority to execute, deliver and perform this Agreement and the other documents set forth in Section 1.2 above (“Transaction Documents”) and to incur the obligations herein and therein and (ii) has been authorized by all necessary corporate action to execute, deliver and perform this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby (the “ Contemplated Transactions ”).
2.4 Each of this Agreement and the other Transaction Documents is a valid and binding obligation of the Company enforceable in accordance with its terms except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at law or equity).
2.5 As of the date of this Agreement (assuming that the Restated Certificate has been filed) and as of the Closing, the issuance of the Notes and the shares of Series B-1 Convertible Preferred Stock, par value $.001 per share, of the Company (“Preferred B Shares”) issuable upon a conversion of the Notes (the “Conversion Shares”) has been duly authorized by all necessary corporate action on the part of the Company and, when issued to, delivered to the Investors in accordance with this Agreement and the Notes, the Conversion Shares will be validly issued, fully paid and non-assessable.
2.6 The Company shall at all times reserve and keep available sufficient Preferred B-1 Shares and common stock solely for issuance and delivery upon a conversion of the Notes.
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3. Representations and Warranties and Agreement of the Investors . Each Investor represents and warrants to the Company as follows:
3.1. Authorization . Each Investor (i) has full power and authority to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and to incur the obligations herein and therein and (ii) if applicable, has been authorized by all necessary corporate action to execute, deliver and perform this Agreement and the other Transaction Documents and to consummate the Contemplated Transactions. Each of this Agreement and the other Transaction Documents is a valid and binding obligation of Investor enforceable in accordance with its terms, except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at law or equity).
3.2. Securities Laws Representations and Covenants of Investors .
(a) This Agreement is made with each Investor in reliance upon such Investor’s representation to the Company, which by such Investor’s execution of this Agreement such Investor hereby confirms, that the Notes and any Conversion Shares to be received by such Investor will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof such that such Investor would constitute an “underwriter” under the Securities Act of 1933, as amended (the “ Securities Act”). The Investor has not granted and shall not grant any right to any other person to acquire the Notes or the Conversion Shares except as permitted by the Securities Act and other applicable securities laws.
(b) Each Investor understands and acknowledges that the offering of the Notes pursuant to this Agreement will not be registered under the Securities Act or qualified under any other applicable securities laws on the grounds that the offering and sale of the Securities are exempt from registration and qualification and that the Company’s reliance upon such exemption is predicated upon such Investor’s representations set forth in this Agreement.
(c) Each Investor covenants that, unless the Notes, the Conversion Shares or any other securities of the Company received in respect of the foregoing have been registered pursuant to the Securities Act, such Investor will not dispose of such securities unless and until such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with an opinion of counsel reasonably satisfactory in form and substance to the Company and its counsel to the effect that (i) such disposition will not require registration under the Securities Act and (ii) appropriate action necessary for compliance with the Securities Act and any applicable state, local or foreign law has been taken. Therefore, such Investor may be required to hold such securities for an indeterminate period.
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(d) Each Investor further represents that such Investor (i) is able to fend for itself in the Contemplated Transactions; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of such Investor’s prospective investment in the Notes; (iii) has the ability to bear the economic risks of such Investor’s prospective investment and can afford the complete loss of such investment; (iv) has received all the information it considers necessary or appropriate for deciding whether to purchase the Notes; (v) has had access to officers of the Company and an opportunity to ask questions of and receive satisfactory answers from such officers; (vi) qualifies as an “accredited investor” as such term is defined under Rule 501 promulgated under the Securities Act; and (vi) in the case a corporation, a partnership, a trust or other business entity, further represents by execution of this Agreement that it has not been organized for the purpose of purchasing the Securities.
(e) The maximum liability of the Company under this Agreement to each Investor shall not exceed the purchase price paid plus accrued interest by such Investor. An Investor may not bring any claim arising out of this Agreement unless written notice of the claim shall have been given to the Company no later than 3 months following the date that the Company's financial statements for the period ending 31 December 2011 shall be made available. This provision shall not affect an Investor’s ability to enforce payment due under the Notes.
(f) Each Investor shall provide all information and execute all documents that the Company shall deem necessary to prepare and file with the SEC a Form D concerning the sale of the Securities.
3.3. Legends . The Notes and all certificates for the Conversion Shares, and each certificate representing any other securities of the Company received in respect of the foregoing, and each certificate for any such securities issued to subsequent transferees of any such certificate shall bear a legend substantially in the following form:
“NEITHER THIS NOTE NOR ANY SECURITIES THAT MAY BE ISSUED UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), STATE SECURITIES LAWS, OR LAWS OF ANY FOREIGN JURISDICTION. NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD, ASSIGNED, OFFERED, PLEDGED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVING AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, ASSIGNMENT, OFFER, PLEDGE, OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND STATE SECURITIES LAWS.”
In addition, such cer`ificates shall bear any legend that, in the opinion of the Company’s counsel, is required under the other Transaction Documents or pursuant to any state, local or foreign law governing the Notes, the Conversion Shares and any other securities of the Company received in respect of the foregoing.
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3.4. Brokers or Finders . Each Investor represents and warrants that neither the Company nor the Investor has incurred, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage of finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.
3.5. Buyout Proposal . If at any time (i) the Company receives from any third party (in which no stockholder has a significant interest) a bona fide offer or proposal (a “Buyout Proposal”) to purchase all of the shares of the Company, or all or substantially all of the assets of the Company, or to effect a merger or consolidation with the Company, which is conditioned upon the sale of all shares of the Company to such third party or stockholder approval and (ii) the holders of shares representing seventy five percent (75%) of the aggregate voting power of the Company approve the Buyout Proposal, then the Investors shall transfer their stock in the Company to such third party or shall vote in favor of the proposed Buyout Proposal, as applicable.
4. Miscellaneous .
4.1. Entire Agreement; Successors and Assigns . This Agreement (including all schedules and exhibits thereto) constitutes the entire contract between the parties relative to the subject matter hereof and thereof. Any previous agreement among the parties with respect to the sale of the Securities is superseded by this Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. Except as expressly provided herein, nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
4.2. Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the State of New York without regard to principles of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Agreement and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address shown below. Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non-conveniens. Each party also waives any right to trial by jury.
4.3. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
4.4. Headings . The headings of the sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement.
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4.5. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery and if a fax number has been provided, upon delivery (with answerback confirmed), addressed to a party at its address and the fax number, if any, shown below or at such other address and fax number as such party may designate by three days advance notice to the other party.
Any notice to the Investors shall be sent to the addresses set forth on the signature pages hereof.
.Any notice to the Company shall be sent to: | With a copy to: | ||
Nano Vibronix Inc. | |||
601 Chestnut Street | |||
Cedarhurst, NY 11516 | Nano Vibronix, Inc. | ||
Attention: Dr. Harold Jacob | Fax: +972 4 820 2794 | ||
Fax: 516 569 6872 |
4.6. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be deemed prohibited or invalid under such applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the remainder of such provision or any other provision of this Agreement.
4.7. Expenses . Irrespective of whether the Closing is effected, the Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. Each Investor shall be responsible for all costs incurred by it in connection with the negotiation, execution, delivery and performance of this Agreement including, but not limited to, legal fees and expenses.
4.8 Amendments and Waivers . Any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Notes. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Notes purchased under this Agreement at the time outstanding, and the Company.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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SIGNATURE PAGE
TO
NANO VIBRONIX INC.
SUBSCRIPTION AGREEMENT
IF the PURCHASER is an INDIVIDUAL, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ______________.
Amount of Subscription:
$_________
Investor Name: | |
Signature of Investor | |
Social Security Number | |
Address and Fax Number | |
ACCEPTED AND AGREED:
NANO VIBRONIX INC.
By: | ||
Name: | ||
Title: |
Dated: |
SIGNATURE PAGE
TO
NANO VIBRONIX, INC.
SUBSCRIPTION AGREEMENT
IF the INTERESTS will be held as JOINT TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ____________.
Amount of Subscription: | |
$ ____________ | Print Name of a Purchaser |
Signature of a Purchaser | |
Print Name of Spouse or Other Purchaser | |
Signature of Spouse or Other Purchaser | |
Social Security Number | |
Address | |
ACCEPTED AND AGREED:
NANO VIBRONIX INC.
By: | ||
Name: | ||
Title: |
Dated: |
SIGNATURE PAGE
TO
NANO VIBRONIX INC.
SUBSCRIPTION AGREEMENT
IF the PURCHASER is a PARTNERSHIP, CORPORATION, TRUST or OTHER ENTITY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ______________.
Amount of Subscription: | |||
$ _____________ | |||
Print Full Legal Name of Partnership, | |||
Company, Trust or Other Entity | |||
By: | |||
(Authorized Signatory) | |||
Name: | |||
Title: |
Address and Fax Number: |
Employer Identification Number: |
Date and State of Incorporation or Organization: |
Date on which Taxable Year Ends: |
ACCEPTED AND AGREED:
NANO VIBRONIX INC.
By: |
Name:
Title:
Dated:
EXHIBIT 10.5
NEITHER THIS NOTE NOR ANY SECURITIES THAT MAY BE ISSUED UPON THE CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), STATE SECURITIES LAWS, OR LAWS OF ANY FOREIGN JURISDICTION. NEITHER THIS NOTE NOR ANY SUCH SECURITIES MAY BE SOLD, ASSIGNED, OFFERED, PLEDGED, OR OTHERWISE TRANSFERRED IN THE ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR (II) THE COMPANY RECEIVING AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, ASSIGNMENT, OFFER, PLEDGE, OR OTHER TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT AND STATE SECURITIES LAWS.
Nano Vibronix, INC.
FORM OF CONVERTIBLE PROMISSORY NOTE
$_____________ | November __, 2011 |
Investor: ________________
FOR VALUE RECEIVED, subject to the terms contained herein, the undersigned, Nano Vibronix, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of the investor set forth above (the “Investor”), the amount stated above (the “Principal Amount”) plus interest thereon calculated from the date hereof until paid in full at the annual rate of ten percent (10%), compounded annually. The Company shall pay the unpaid Principal Amount and interest accrued hereunder in lawful money of the United States in full on demand on the earlier of an “Event of Default” (as defined below) or November 15, 2014 (the “Maturity Date”), unless it has been previously converted pursuant to Section. hereof, in which case all outstanding principal and accrued interest under this Note will be satisfied in full by virtue of such conversion. This Note is one of the convertible promissory notes issued by the Company in connection with its issuance of approximately $1,537,000 of convertible promissory notes pursuant to that certain Subscription Agreement Series B Convertible Preferred Stock and Warrants, dated as of ___________, 2009, as amended as of November ___, 2011, by and among the Company, the Investor and the other persons who have executed as investors thereunder (as such agreement may be amended, supplemented or otherwise modified from time to time, the “Subscription Agreement”).
1. | Prepayment . This Note may not be prepaid without the prior written consent of the Investor. |
2. | Conversion . |
a. | Definitions . |
i. | “Issuance Conversion Event” shall mean an aggregate investment in the Company of $3,000,000 or more in one transaction or a series of related transactions occurring after the date hereof, in which the Company shall have issued shares in the Company or securities (including convertible debt) exercisable or convertible into shares in the Company. |
ii. | “Entity Conversion Event” shall mean a sale, lease, licensing, exchange or other transfer by the Company of all or substantially all of the Company’s business assets, sale of all or substantially all of the shares in the Company, reorganization, or consolidation or merger of the Company into or with any other entity except any such merger or consolidation involving the Company or a subsidiary in which (A) the shares of the surviving or resulting corporation (or if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation) are not listed or traded on any exchange and (B) the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation. |
iii. | “Conversion Price” shall mean $0.199 per share of Series B-2 Participating Convertible Preferred Stock, par value $.001 per share, of the Company. Such amount shall be appropriately adjusted in the case of a stock dividend, stock split or combination. |
b. | If an Issuance Conversion Event or Entity Conversion Event shall occur prior to the Maturity Date, this Note (including accrued but unpaid interest) shall automatically be converted, at the Conversion Price, into shares of Series B-2 Participating Convertible Preferred Stock of the Company, par value $.001 per share. |
c. | Election to Convert . At any time prior to the Maturity Date, the Investor may elect by written notice to the Company and the surrender of this Note to convert this Note (including accrued but unpaid interest), at the Conversion Price, into shares of Series B-2 Participating Convertible Preferred Stock of the Company, par value $.001 per share. |
d. | No Fractional Shares . The Company shall not issue any fractional shares on conversion of this Note. If on any conversion of this Note a fraction of a share results, the Company shall pay the Investor the cash value of that fractional share, calculated on the basis of the Conversion Price. |
e. | No Rights as Shareholder . This Note does not by itself entitle the Investor to any voting rights or other rights as a shareholder of the Company. |
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3. | Event of Default. |
a. | “Event of Default” means any of the following: |
i. | The failure of the Company to pay when due any amounts due hereunder that remain unpaid ten (10) business days after the Company receives written notice thereof; |
ii. | The Company’s breach of a representation or obligation in the Subscription Agreement which remains uncured for more than 30 days after the Company receives written notice thereof; or |
iii. | The Company shall have entered against it by a court having jurisdiction thereof a decree or order for relief in respect to the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or a receiver, liquidator, assignee, custodian, trustee, sequestrator or other similar official will have been appointed for the Company or for any substantial part of the Company’s property, or the winding up or liquidation of the Company’s affairs will have been ordered; or the Company will have commenced a voluntary case under any applicable bankruptcy, insolvency or other similar law, or consent to the entry of an order for such relief in an involuntary case under any such law, or any such involuntary case will have commenced, and not been dismissed within 90 days, or the Company will have consented to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for the Company or for any substantial part of the Company’s property, or make any general assignment for the benefit of creditors. |
b. | Upon the occurrence, and at any time during the continuance, of an Event of Default, the Investor, by notice to the Company, may declare all unpaid principal and interest and all other amounts payable under the Notes to be immediately due and payable and same shall become immediately due and payable upon such notice without presentment, demand, protest or further notice of any kind; provided, however, that in the event of the occurrence of an Event of Default specified in subparagraph (iii) above, this Note, all such interest and other amounts payable to Investor hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind. |
4. | Usury Savings Clause . The Company and the Investor intend to comply at all times with usury laws. If at any time such laws would render usurious any amounts due under this Note, then it is the Company’s and the Investor’s express intention that the Company not be required to pay interest on this Note at a rate in excess of the maximum lawful rate, that the provisions of this section will control over all other provisions of this Note that appear to be in conflict hereunder, that such excess amount will be immediately credited to the principal balance of this Note (or, if this Note has been fully paid, refunded by the Investor to the Company), and the provisions hereof will be immediately reformed and the amounts thereafter decreased, so as to comply with the then-applicable usury law, but so as to permit the recovery of the fullest amount otherwise due under this Note. |
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5. | General Provisions . |
a. | Amendments and Waivers . This Note and any term hereof may be amended, waived, discharged or terminated only by an instrument in writing signed by the Company and the Investor or as otherwise provided in the Subscription Agreement. |
b. | Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery and if a fax number has been provided, upon delivery (with answerback confirmed), addressed to a party at its address and the fax number, if any, shown below or at such other address and fax number as such party may designate by three days advance notice to the other party. |
Any notice to the Investor shall be sent to the address set forth on the signature page hereof.
Any notice to the Company shall be sent to: | With a copy to: |
Nano Vibronix, Inc. | |
Nano Vibronix, Inc. | |
601 Chestnut Street | Fax: +972 4 820 2794 |
Cedarhurst, NY 11516 | |
Attention: Dr. Harold Jacob | |
Fax: (516) 569 6872 |
c. | Severability . If any provision of this Note is held to be invalid, illegal, or unenforceable, the validity, legality and enforceability of the remaining provisions of this Note will not be affected or impaired. |
d. | Headings . The descriptive headings of the articles, sections, and subsections of this Note are for convenience of reference only. They do not constitute a part of this Note and do not affect this Note’s construction or interpretation. |
e. | Governing Law; Jurisdiction . The laws of the State of New York govern all matters arising out of or relating to this Note, including, without limitation, its interpretation, construction, performance, and enforcement, without giving effect to such State’s conflicts of law principles or rules of construction concerning the drafter hereof. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Note and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address shown below. Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non-conveniens. Each party also waives any right to trial by jury. |
[Signature Page Follows]
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The parties are signing and delivering this Note as of the date stated in the caption of this Note.
COMPANY: | |||
NANO VIBRONIX, INC. | |||
By: | |||
INVESTOR: | |||
Investor Address: | |||
By: | |||
Name: | |||
Title: |
[Acknowledgment and Receipt of Investor to Convertible Promissory Note]
EXHIBIT 10.6
Void after November 15, 2018 | Warrant No. ________ |
This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933. This Warrant and such shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act. This Warrant and such shares may not be transferred except upon the conditions specified in this Warrant, and no transfer of this Warrant or such shares shall be valid or effective unless and until such conditions shall have been complied with.
NANO VIBRONIX, INC.
FORM OF SERIES B-2 PARTICIPATING CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
Nano Vibronix, Inc. (the “ Company ”), having its principal office at 601 Chestnut Street, Cedarhurst, NY 11516, hereby certifies that, for value received, _____________ (“Investor”), or assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time on, or from time to time after, November___, 2011 and before 5:00 P.M., New York City time, on November 15 , 2018, or as curtailed in accordance with the terms hereof (the “ Expiration Date ”), ______________ fully paid and non-assessable shares of Warrant Shares of the Company, at the Purchase Price per share of $0.199. The number and character of such shares of Warrant Shares and the Purchase Price per share are subject to adjustment as provided herein.
As used herein, the following terms have the following respective meanings:
“Warrant Shares” means the Series B-2 Participating Convertible Preferred Stock of the Company Stock, par value $0.001 per share, of the Company.
“ Exchange Act ” means the Securities Exchange Act of 1934 as the same shall be in effect at the time.
“ Holder ” means any record owner of this Warrant.
“ Per Share Market Value ” has the meaning set forth in Section 2.3.
“ Original Issue Date ” means November ___, 2011.
“ Other Securities ” refers to any stock (other than Warrant Shares) and other securities of the Company or any other entity which the Holder of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to Warrant Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Warrant Shares or Other Securities pursuant to Section 5 or otherwise.
“ Securities Act ” means the Securities Act of 1933 as the same shall be in effect at the time.
“ Underlying Securities ” means any Warrant Shares or Other Securities issued or issuable upon exercise of this Warrant.
“ Warrant ” means, as applicable, this Warrant or each right as set forth in this Warrant to purchase one share of Warrant Shares, as adjusted.
1. Sale or Exercise Without Registration . If, at the time of any exercise, transfer or surrender for exchange of a Warrant or of Underlying Securities previously issued upon the exercise of Warrants, such Warrant or Underlying Securities shall not be registered under the Securities Act, the Company may require, as a condition of allowing such exercise, transfer or exchange, that the Holder or transferee of such Warrant or Underlying Securities, as the case may be, furnish to the Company an opinion of counsel, reasonably satisfactory to the Company, to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act.
2. Exercise of Warrant .
2.1. Exercise in Full . Subject to the provisions hereof, this Warrant may be exercised in full by the Holder hereof by surrender of this Warrant, with the form of subscription at the end hereof duly executed by such Holder, to the Company at its principal office accompanied by payment, in cash or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Purchase Stock issuable upon exercise of this Warrant by the Purchase Price per share, after giving effect to all adjustments through the date of exercise.
2.2. Partial Exercise . Subject to the provisions hereof, this Warrant may be exercised in part by surrender of this Warrant in the manner and at the place provided in Section 3.1 except that the amount payable by the Holder upon any partial exercise shall be the amount obtained by multiplying (a) the number of shares of Warrant Shares (without giving effect to any adjustment therein) designated by the Holder in the subscription at the end hereof, by (b) the Purchase Price per share. Upon any such partial exercise, the Company at its expense will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, for the remaining number of shares of Warrant Shares which may be purchased hereunder.
2.3 Cashless Exercise . In addition to the method of payment set forth in Sections 2.1 and 2.2 and in lieu of any cash payment required thereunder, the Holder of the Warrant shall have the right at any time and from time to time to exercise the Warrant in full or in part by surrendering this Warrant in the manner and at the place specified in Section 3.1, specifying the number of shares for which this Warrant is being exercised. The Company shall issue Holder the number of shares computed using the following formula:
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X = |
|
where: | X = the number of Underlying Securities to be issued to Holder. | |
Y = the number of Underlying Securities for which this Warrant is being exercised. | ||
A = the Purchase Price. | ||
B = the Per Share Market Value of one share of Underlying Securities on the business day immediately preceding the date of such election |
“ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Underlying Securities on such date on any registered national stock exchange on which the Underlying Securities is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Underlying Securities is not then listed on a registered national stock exchange, the closing sales price for a share of Underlying Securities in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Underlying Securities is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Underlying Securities as determined by the Board, acting in good faith. In determining the fair market value of any shares of Underlying Securities no consideration shall be given to any restrictions on transfer of the Underlying Securities imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
2.4. Certain Exercises . If this Warrant is to be exercised in connection with a registered public offering or sale of the Company, such exercise may, at the election of the Holder, be conditioned on the consummation of the public offering or sale of the Company, in which case such exercise shall not be deemed effective until the consummation of such transaction.
3. Delivery of Stock Certificates, etc., on Exercise . As soon as practicable after the exercise of this Warrant in full or in part, the Company at its own expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and non-assessable shares of Warrant Shares or Other Securities to which such Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then-current Market Price of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 4 or otherwise.
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4. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case at any time or from time to time after the Original Issue Date, the holders of Warrant Shares (or, if applicable, Other Securities) shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor
(a) other or additional stock or other securities or property (other than cash) by way of dividend, or
(b) any cash paid or payable (including, without limitation, by way of dividend), or
(c) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement,
then, and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 2, shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) which such Holder would hold on the date of such exercise if on the Original Issue Date such Holder had been the Holder of record of the number of shares of Warrant Shares called for on the face of this Warrant and had thereafter, during the period from the Original Issue Date to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) receivable by such Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 5 hereof. If the number of shares of Warrant Shares outstanding at any time after the date hereof is decreased by a combination or reverse stock split of the outstanding shares of Common Stock, the Purchase Price per share shall be increased, and the number of shares of Warrant Shares purchasable under this Warrant shall be decreased in proportion to such decrease in outstanding shares of Warrant Shares.
5. Reorganization, Consolidation, Merger, etc. In case the Company after the Original Issue Date shall (a) effect a reorganization, (b) consolidate with or merge into any other entity or (c) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the Holder of this Warrant, upon the exercise hereof as provided in Section 3 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall be entitled to receive (and the Company shall be entitled to deliver), in lieu of the Underlying Securities issuable upon such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in this Section 5; provided that if the sole consideration to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, is cash, the Warrant shall be terminated upon such consummation or dissolution. The Company shall not effect any such reorganization, consolidation, merger or sale, unless prior to or simultaneously with the consummation thereof, the successor corporation resulting from such consolidation or merger or the corporation purchasing such assets or the appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to each Holder the shares of stock, cash, other securities or assets to which, in accordance with the foregoing provisions, each Holder may be entitled to and all other obligations of the Company under this Warrant. In any such case, if necessary, the provisions set forth in this Section 5 with respect to the rights thereafter of the Holders shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any Other Securities or assets thereafter deliverable on the exercise of the Warrants.
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6. Further Assurances . The Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of stock upon the exercise of all Warrants from time to time outstanding.
7. Officer's Certificate as to Adjustments . In each case of any adjustment or readjustment in the shares of Warrant Shares (or Other Securities) issuable upon the exercise of the Warrants, the Company will issue a certificate setting forth such adjustment or readjustment and the basis therefor.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of its stockholders for the purpose of determining the stockholders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders who are entitled to vote in connection with any proposed capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or
(b) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, or
(c) any proposed issue or grant by the Company of any Common Stock, or any other securities, or any right or option to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities (other than the issue of Common Stock on the exercise of the Warrants),
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then and in each such event the Company will mail or cause to be mailed to each Holder of a Warrant a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any, as of which the Holders of record of Underlying Securities shall be entitled to exchange their shares of Underlying Securities for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall be given at least 10 days prior to the date therein specified.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants . The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of the Warrants, all shares of Warrant Shares (or Other Securities) from time to time issuable upon the exercise of the Warrants.
10. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be delivered by fax or courier, at such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last Holder of this Warrant who has so furnished an address to the Company.
11. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder or as otherwise provided in the Subscription Agreement. This Warrant shall be governed by and construed and enforced in accordance with the General Corporation Law of the State of Delaware without regard to principles of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Agreement and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address specified herein (or as otherwise noticed to the other party). Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non conveniens . Each party also waives any right to trial by jury.
Dated: __________ __, 2011 | NANO VIBRONIX, INC. | |||
By: | ||||
Name: | ||||
Attest: | Title: |
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: NANO VIBRONIX, INC.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _________ shares of Warrant Shares of Nano Vibronix, Inc., and herewith makes payment therefor
(i) of $_____________ or
(ii) by surrender of the number of Warrants included in the within Warrant required for full exercise pursuant to Section 2.3 of the Warrant,
and requests that the certificates for such shares be issued in the name of, and delivered to, ___________________, whose address is _______________________.
Dated: | |
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant) | |
(Address) |
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EXHIBIT 10.7
NANO VIBRONIX, INC.
FORM OF SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
AND WARRANTS
SUBSCRIPTION AGREEMENT (the “ Agreement ”) dated as of March ___, 2009 between Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this agreement as investors (collectively, the “ Investors ”).
WITNESSETH :
WHEREAS, the Company desires to sell to the Investors, and the Investors desire to purchase, an aggregate of _______ shares of Series B Convertible Preferred Stock, par value $.001 per share, of the Company (the “ Shares ”) with warrants, in substantially the form attached hereto as Exhibit 1 , exercisable to purchase an aggregate of ____ Shares at $17.25 per share, subject to adjustment (the “ Warrants ”), all for an aggregate price of US$______.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto hereby agree as follows:
1. Purchase and Sale of Securities .
1.1. Sale and Issuance of Securities . The Company shall sell to the Investors and the Investors shall purchase from the Company, an aggregate of (x) _____ Shares (the “ Purchased Shares ”) and (y) Warrants to purchase an aggregate of _____ shares of Common Stock (the “ Purchased Warrants ” and, collectively with the Purchased Shares, the “ Securities ”), for an aggregate purchase price of US$______.
1.2. The closing (the “ Closing ”) of the purchase and sale of the Securities hereunder shall take place within three (3) business days of the date of this Agreement or such other date agreed to by the Company and the Investors (the “ Closing Date ”). The Closing shall take place remotely by means of and concurrently with the electronic or facsimile exchange of documents and signatures at the Company or at such location as is mutually acceptable to the Investors and the Company. At the Closing:
(a) each Investor shall deliver to the Company by wire transfer as set forth below:
Mellon Bank Pittsburdgh, PA | |
ABA # : | 043000261 |
FFC: | Merrill Lynch |
Account # : | 101-1730 |
Name on the account: | NanoVibronix Inc |
FFC: | 831-07B23 |
or such other method of payment as the Company shall approve, an amount equal to the purchase price of the Securities purchased by such Investor hereunder; and
(b) the Company shall issue and deliver to each Investor a stock certificate registered in the name of the Investor, representing the number of Purchased Shares purchased by such Investor, and the number of Purchased Warrants purchased by such Investor; and
(c) the Company shall have obtained all requisite approvals and waivers of its Board of Directors and stockholders with respect to the transactions described herein and the amendment and restatement of the Company’s certificate of incorporation in substantially the form attached hereto as Exhibit 2 and shall have filed such certificate with the Secretary of State of the State of Delaware.
2. Representations and Warranties of the Company . The Company hereby makes the following representations and warranties only:
2.1 The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own or lease its properties as and in the places where such business is conducted and to carry on its business as conducted, and (iii) is duly qualified as a foreign corporation authorized to do business in every jurisdiction where the failure to so qualify, individually or in the aggregate, would have a material adverse effect on the operations, assets, liabilities, financial condition or business of the Company or its subsidiary (“Material Adverse Effect”).
2.2 The subsidiary is duly incorporated and validly existing under the laws of its jurisdiction of incorporation and is qualified to do business as a foreign corporation in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Material Adverse Effect.
2.3 As of the date of this Agreement (assuming that the Restated Certificate has been filed) and as of the Closing, the Company (i) has the requisite corporate power and authority to execute, deliver and perform this Agreement and the other documents set forth in Section 1.2 above (“Transaction Documents”) and to incur the obligations herein and therein and (ii) has been authorized by all necessary corporate action to execute, deliver and perform this Agreement and the other Transaction Documents and to consummate the transactions contemplated hereby and thereby (the “ Contemplated Transactions ”).
2.4 Each of this Agreement and the other Transaction Documents is a valid and binding obligation of the Company enforceable in accordance with its terms except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at law or equity).
2.5 As of the date of this Agreement (assuming that the Restated Certificate has been filed) and as of the Closing, the issuance of the Securities has been duly authorized by all necessary corporate action on the part of the Company and, when issued to, delivered to, and paid for by the Investors in accordance with this Agreement, the Purchased Shares will be validly issued, fully paid and non-assessable.
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3. Representations and Warranties and Agreement of the Investors . Each Investor represents and warrants to the Company as follows:
3.1. Authorization . Each Investor (i) has full power and authority to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and to incur the obligations herein and therein and (ii) if applicable, has been authorized by all necessary corporate action to execute, deliver and perform this Agreement and the other Transaction Documents and to consummate the Contemplated Transactions. Each of this Agreement and the other Transaction Documents is a valid and binding obligation of Investor enforceable in accordance with its terms, except as limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding at law or equity).
3.2. Securities Laws Representations and Covenants of Investors .
(a) This Agreement is made with each Investor in reliance upon such Investor’s representation to the Company, which by such Investor’s execution of this Agreement such Investor hereby confirms, that the Securities to be received by such Investor will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof such that such Investor would constitute an “underwriter” under the Securities Act of 1933, as amended (the “ Securities Act”). The Investor has not granted any right to any other person to acquire the Securities purchased by such Investor or the shares of the Company issuable upon the conversion or exercise of the Securities (“Underlying Shares”) except as permitted by the Securities Act and other applicable securities laws.
(b) Each Investor understands and acknowledges that the offering of the Securities pursuant to this Agreement will not be registered under the Securities Act or qualified under any other applicable securities laws on the grounds that the offering and sale of the Securities are exempt from registration and qualification and that the Company’s reliance upon such exemption is predicated upon such Investor’s representations set forth in this Agreement.
(c) Each Investor covenants that, unless the Purchased Shares, the Purchased Warrants, the Underlying Shares or any other shares of capital stock of the Company received in respect of the foregoing have been registered pursuant to the Securities Act, such Investor will not dispose of such securities unless and until such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with an opinion of counsel reasonably satisfactory in form and substance to the Company and its counsel to the effect that (i) such disposition will not require registration under the Securities Act and (ii) appropriate action necessary for compliance with the Securities Act and any applicable state, local or foreign law has been taken. Therefore, such Investor may be required to hold such securities for an indeterminate period.
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(d) Each Investor further represents that such Investor (i) is able to fend for itself in the Contemplated Transactions; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of such Investor’s prospective investment in the Securities; (iii) has the ability to bear the economic risks of such Investor’s prospective investment and can afford the complete loss of such investment; (iv) has received all the information it considers necessary or appropriate for deciding whether to purchase the Securities; (v) has had access to officers of the Company and an opportunity to ask questions of and receive satisfactory answers from such officers; (vi) qualifies as an “accredited investor” as such term is defined under Rule 501 promulgated under the Securities Act; and (vi) in the case a corporation, a partnership, a trust or other business entity, further represents by execution of this Agreement that it has not been organized for the purpose of purchasing the Securities.
(e) The maximum liability of the Company under this Agreement to each Investor shall not exceed the purchase price paid by such Investor. An Investor may not bring any claim arising out of this Agreement unless written notice of the claim shall have been given to the Company no later than 3 months following of the date that the Company's financial statements for the period ending 31 December 2009 shall be made available.
(f) Each Investor shall provide all information and execute all documents that the Company shall deem necessary to prepare and file with the SEC a Form D concerning the sale of the Securities.
3.3. Legends . All certificates for the Securities, and the Underlying Shares, and each certificate representing any shares of capital stock of the Company received in respect of the foregoing, and each certificate for any such securities issued to subsequent transferees of any such certificate shall bear the following legend:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.” |
In addition, such certificates shall bear any legend that, in the opinion of the Company’s counsel, is required under the other Transaction Documents or pursuant to any state, local or foreign law governing the Securities or the Underlying Shares.
3.4. Brokers or Finders . Each Investor represents and warrants that neither the Company nor the Investor has incurred, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage of finders’ fees or agents’ commissions or any similar charges in connection with this Agreement.
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3.5. Buyout Proposal . If at any time (i) the Company receives from any third party (in which no stockholder has a significant interest) a bona fide offer or proposal (a “Buyout Proposal”) to purchase all of the shares of the Company, or all or substantially all of the assets of the Company, or to effect a merger or consolidation with the Company, which is conditioned upon the sale of all shares of the Company to such third party or stockholder approval and (ii) the holders of shares representing seventy five percent (75%) of the aggregate voting power of the Company approve the Buyout Proposal, then the Investors shall transfer their stock in the Company to such third party or shall vote in favor of the proposed Buyout Proposal, as applicable.
4. Adjustments .
4.1 Definitions .
(a) “Issuance Conversion Event” shall mean an aggregate investment in the Company of $1,000,000 or more in which the Company shall have issued shares in the Company or securities (including convertible debt) exercisable or convertible into shares in the Company at a specific price per share, other than shares issued (i) to employees, directors or consultants pursuant to any equity compensation plan or otherwise approved by the Company’s Board of Directors; (ii) by reason of a stock dividend, stock split, split-up or other distribution of shares of Common Stock; (iii) to bona fide leasing companies, strategic partners, or major lenders; or (iv) upon conversion or exercise of options, warrants or other convertible securities which are outstanding at the date of this Agreement.
(b) “Non-Qualifying Issuance” shall mean an aggregate investment in the Company of less than $1,000,000 which is otherwise described in Section 4.1(a) above.
(c) “Entity Conversion Event” shall mean a reorganization, consolidation or merger of the Company into or with any other entity (other than a transaction as a result of which the stockholders of the Company immediately prior to such transaction hold a majority of the combined voting power of the surviving entity immediately after such transaction), the sale of all or substantially all of the Company’s business assets, or the sale of all or substantially all of the shares in the Company.
(d) “Conversion Period” shall mean the period commencing immediately after the completion of the current round of investment and ending on March 31, 2012.
4.2 The Securities shall be subject to exchange and/or modification (as described below) upon the first to occur of the following events or election during the Conversion Period:
(a) In the event that an Issuance Conversion Event shall occur during the Conversion Period, the Securities purchased under this Agreement and any Underlying Shares purchased pursuant to the Warrants shall automatically be cancelled and shall represent solely the right to receive such number of Issuance Conversion Event securities which would have been issued to such Investor pursuant to the terms of such Issuance in consideration for the sum of: (1) the purchase price paid by the Investor hereunder, (2) any purchase price previously paid in connection with any prior exercise of the Warrants, plus (3) simple interest at 8% per annum from the date of payment of such amounts provided that the purchase price for such Issuance Conversion Event securities shall be deemed reduced by thirty (30%) percent.
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(b) The Company shall give the Investor written notice of each Non-Qualifying Issuance. Within 10 days of the Company’s notice, the Investor may elect by written notice to the Company and the surrender of his Securities and any Underlying Shares purchased pursuant to the Warrants to receive in exchange therefor such number of Non-Qualifying Issuance securities which would have been issued to him in consideration for the sum of: (1) the purchase price paid by the Investor hereunder, plus (2) any purchase price previously paid in connection with any prior exercise of the Warrants.
(c) In the event that an Entity Conversion Event shall occur during the Conversion Period, the Investor may elect to receive, in lieu of any distribution due under the Amended and Restated Certificate of Incorporation and in cancellation of his Purchased Shares, proceeds (to the extent available before any distributions are made to the holders of Series A Stock or Common Stock) equal to: (i) 130% of the purchase price paid under this Agreement, plus (ii) an amount equal to simple interest on the purchase price at 8% per annum from the date of payment.
4.3 In the event that during the Conversion Period, a Conversion Event shall not have occurred and the Investor shall not have elected to exchange such Investor’s Securities as set forth in Section 4.2(b) above, (a) the Investor shall be issued additional shares of Series B Convertible Preferred Stock such that the Investor’s average purchase price for the Purchased Shares and the additional shares issuable under this Section shall be $10.00 per share; and (b) the Purchased Warrants shall be amended so that the “Purchase Price” therein shall be $10.00 per share and the aggregate number of Warrants increased accordingly. (Such $10.00 amount shall be appropriately adjusted in the case of stock dividend, stock split or combination.)
5. Miscellaneous .
5.1. Entire Agreement; Successors and Assigns . This Agreement (including all schedules and exhibits thereto) constitutes the entire contract between the parties relative to the subject matter hereof and thereof. Any previous agreement among the parties with respect to the sale of the Securities is superseded by this Agreement. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. Except as expressly provided herein, nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement.
5.2. Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the State of New York without regard to principles of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Agreement and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address shown below. Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non-conveniens. Each party also waives any right to trial by jury.
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5.3. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
5.4. Headings . The headings of the sections of this Agreement are for convenience and shall not by themselves determine the interpretation of this Agreement.
5.5. Notices . Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery and if a fax number has been provided, upon delivery (with answerback confirmed), addressed to a party at its address and the fax number, if any, shown below or at such other address and fax number as such party may designate by three days advance notice to the other party.
Any notice to the Investors shall be sent to the addresses set forth on the signature pages hereof.
5.6. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be deemed prohibited or invalid under such applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, and such prohibition or invalidity shall not invalidate the remainder of such provision or any other provision of this Agreement.
5.7. Expenses . Irrespective of whether the Closing is effected, the Company shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. Each Investor shall be responsible for all costs incurred by it in connection with the negotiation, execution, delivery and performance of this Agreement including, but not limited to, legal fees and expenses.
5.8 Amendments and Waivers . Any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the aggregate then-outstanding Shares. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any securities purchased under this Agreement at the time outstanding (including the Underlying Shares or other securities into which such securities are convertible), each future holder of all such securities, and the Company.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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SIGNATURE PAGE
TO
NANO VIBRONIX INC.
SUBSCRIPTION AGREEMENT
IF the PURCHASER is an INDIVIDUAL, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ______________.
Amount of Subscription:
$_________
Number of Purchased Shares: | Investor Name: | |||
Signature of Investor | ||||
Social Security Number | ||||
Address and Fax Number | ||||
ACCEPTED AND AGREED: | ||||
NANO VIBRONIX INC. | ||||
By: | ||||
Name: | ||||
Title: |
Dated: |
SIGNATURE PAGE
TO
NANO VIBRONIX, INC.
SUBSCRIPTION AGREEMENT
IF the INTERESTS will be held as JOINT TENANTS, as TENANTS IN COMMON, or as COMMUNITY PROPERTY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ____________.
SIGNATURE PAGE
TO
NANO VIBRONIX INC.
SUBSCRIPTION AGREEMENT
IF the PURCHASER is a PARTNERSHIP, CORPORATION, TRUST or OTHER ENTITY, please complete the following:
IN WITNESS WHEREOF, the undersigned has executed this Agreement this __ day of ______________.
Amount of Subscription: | |||
$___________________ | |||
Number of Purchased Shares: | |||
_____________ | |||
Print Full Legal Name of Partnership, | |||
Company, Trust or Other Entity | |||
By: | |||
(Authorized Signatory) | |||
Name: | |||
Title: |
Address and Fax Number: | |||
Employer Identification Number: _________ | |
Date and State of Incorporation or Organization:______________________ | |
Date on which Taxable Year Ends:_________________________________ |
ACCEPTED AND AGREED:
NANO VIBRONIX INC. | ||
By: | ||
Name: | ||
Title: | ||
Dated: |
- 2 - |
EXHIBIT 10.8
NANO VIBRONIX, INC.
FIRST AMENDMENT TO
SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
AND WARRANTS
FIRST AMENDMENT TO SUBSCRIPTION AGREEMENT SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANTS (this “ Amendment ”) dated as of November 14, 2011 between Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this agreement as investors (collectively, the “ Investors ”).
WITNESSETH :
WHEREAS, the Company entered into a Subscription Agreement Series B Convertible Preferred Stock and Warrants, dated as of March 20, 2009 with the persons who executed such agreement as investors (the “ Subscription Agreement ”);
WHEREAS, pursuant to Section 5.8 of the Subscription Agreement , any provision of the Subscription Agreement may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding shares of Series B Convertible Preferred Stock of the Company;
WHEREAS, the Company and the holders of a majority of the aggregate outstanding shares of Series B Convertible Preferred Stock desire to amend Section 4.2(a) of the Subscription Agreement as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto hereby agree as follows:
1. Section 4.2(a) of the Subscription Agreement is hereby deleted and replaced by the following:
(a) In the event that an Issuance Conversion Event shall occur during the Conversion Period, the Securities purchased under this Agreement (including Warrants which shall have been exercised as of such date and any Underlying Shares purchased pursuant to such Warrants) shall automatically be cancelled and shall represent solely the right to receive:
(i) such number of Issuance Conversion Event securities which would have been issued to such Investor pursuant to the terms of such Issuance in consideration for the sum of: (1) the purchase price paid by the Investor hereunder, (2) any purchase price previously paid in connection with any prior exercise of the Warrants, plus (3) simple interest at 8% per annum from the date of payment of such amounts provided that the purchase price for such Issuance Conversion Event securities shall be deemed reduced by thirty (30%) percent provided further that in the case of an Issuance Conversion Event in which notes convertible into shares in the Company are issued, (A) the conversion price set forth in such notes shall be reduced by thirty (30%) percent, and (B) the purchase price for such notes shall not be deemed reduced by thirty (30%) percent; and
(ii) warrants in the form attached hereto as Exhibit A, to purchase such number of securities as shall equal thirty (30%) percent of the number of Issuance Conversion Event securities issued to the Investor pursuant to Section 4.2(a)(i) hereof, at an exercise price equal to seventy (70%) percent of the purchase price to investors in the Issuance Conversion Event provided that in the case of an Issuance Conversion Event in which notes convertible into shares are issued, (A) the warrants shall grant the right to purchase such number of shares as shall equal thirty (30%) percent of the number of shares issuable upon conversion of the note issued to the Investor pursuant to Section 4.2(a)(i) hereof and (B) the exercise price under such warrants shall be equal to the conversion price in the note issued to the Investor pursuant to Section 4.2(a)(i) hereof.
The liquidation preference (if any) of any preferred shares issued in such Issuance Conversion Event or upon conversion or exercise of such warrants or convertible notes shall reflect such reduced purchase price.
2. The parties acknowledge that the full execution by the investors listed on the signature page hereof shall constitute the consent of a majority of the aggregate outstanding shares of Series B Participating Convertible Preferred Stock of the Company.
3. The Subscription Agreement otherwise remains in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the 14 day of November, 2011.
Nano Vibronix, Inc.
By: | Harold Jacob |
Investors:
/s/ JB | |
INTERNATIONAL B MANAGEMENT COMPANY LTD. | |
AMERICAN INVESTMENTS LIMITED | |
(SIGNED BY IBMC, DIRECTOR) | |
/s/ Joseph Bronner | |
/s/ Jonathan Kahan | |
/s/ Alexandria Kelly | |
/s/ Miriam Winder Kelly | |
/s/ Harold Jacob for MIDI | |
/s/ Ira Greenstein | |
/s/ Stephen Zuller | |
/s/ Paul Packer Globis Capital Partners |
|
/s/ Paul Packer | |
/s/ Paul Packer Globis Overseas Fund |
|
/s/ David Kreinberg |
EXHIBIT 10.9
SIXTH AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS SIXTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of February 6, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and Globis Overseas Fund, Ltd. (the “ Investor ”).
WHEREAS, the Company and the Investor entered into that certain Securities Purchase Agreement dated as of February 5, 2013 (the “ Original SPA ”) and, in connection therewith, the Company issued to the Investor that certain (i) Secured Convertible Promissory Note dated February 5, 2013 in the principal amount of $20,000 and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated February 5, 2013 (the “ February Warrant ”);
WHEREAS, the Company and the Investor entered into that certain Amended and Restated Securities Purchase Agreement dated as of March 28, 2013 (the “ March SPA ”) to amend and restate the Original SPA and, in connection therewith, the Company issued to the Investor that certain (i) Amended and Restated Secured Convertible Promissory Note dated March 28, 2013 in the principal amount of $40,000 (the “ March Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated March 28, 2013 (the “ March Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Second Amended and Restated Securities Purchase Agreement dated as of June 3, 2013 (the “ June SPA ”) to amend and restate the March SPA and, in connection therewith, the Company issued to the Investor that certain (i) Second Amended and Restated Secured Convertible Promissory Note dated June 3, 2013 in the principal amount of $60,000 (the “ June Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated June 3, 2013 (the “ June Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Third Amended and Restated Securities Purchase Agreement dated as of August 5, 2013 (the “ August SPA ”) to amend and restate the June SPA and, in connection therewith, the Company issued to the Investor that certain (i) Third Amended and Restated Secured Convertible Promissory Note dated August 5, 2013 in the principal amount of $80,000 (the “ August Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated August 5, 2013 (the “ August Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Fourth Amended and Restated Securities Purchase Agreement dated as of October 7, 2013 (the “ October SPA ”) to amend and restate the August SPA and, in connection therewith, the Company issued to the Investor that certain (i) Fourth Amended and Restated Secured Convertible Promissory Note dated October 7, 2013 in the principal amount of $100,000 (the “ October Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated October 7, 2013 (the “ October Warrant ”; and, together with the February Warrant, the March Warrant, the June Warrant and the August Warrant, the “ Existing Warrants ”); and
WHEREAS, the Company and the Investor entered into that certain Fifth Amended and Restated Securities Purchase Agreement dated as of December 9, 2013 (the “ Existing SPA ”) to amend and restate the October SPA and, in connection therewith, the Company issued to the Investor that certain (i) Fifth Amended and Restated Secured Convertible Promissory Note dated December 9, 2013 in the principal amount of $120,000 (the “ Existing Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated December 9, 2013 (the “ December Warrant ”; and, together with the February Warrant, the March Warrant, the June Warrant, the August Warrant and the October Warrant, the “ Existing Warrants ”); and
WHEREAS, the Company and the Investor desire to amend and restate the Existing SPA and the Existing Note to increase the principal amount outstanding thereunder and to issue an additional warrant as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree that the Existing SPA is hereby amended and restated in its entirety as follows:
SECTION
1
DEFINITIONS
1.1 Definitions . Capitalized but otherwise undefined terms used herein shall have the meanings provided therefor in the Convertible Note. In addition to the terms defined elsewhere in this Agreement and the Convertible Note, the following terms have the meanings indicated:
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” has the meaning ascribed to such term in the Convertible Note.
“ Common Stock ” means the common stock of the Company.
“ Convertible Note ” shall have the meaning ascribed to such term in Section 2.1 .
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” has the meaning ascribed to such term in the Convertible Note.
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Note Conversion Shares ” means the shares of Common Stock issuable upon the conversion of the Convertible Note in accordance with Section 5 of the Convertible Note.
“ Organic Document ” means, relative to any Person, its articles or certificate of incorporation, or certificate of limited partnership or formation, its bylaws, partnership or operating agreement or other organizational documents, and all stockholders agreements, voting trusts and similar arrangements applicable to any of its capital stock, partnership interests or other ownership interests.
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“ Person ” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, or joint stock company.
“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“ Securities ” means the Convertible Note, the Warrants, the Note Conversion Shares and the Warrant Shares.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (a) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (b) that is, at any time any determination is made, otherwise controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ Transaction Documents ” means this Agreement, the Convertible Note, the Warrants and any other and all other certificates, documents, agreements and instruments delivered to the Investor under or in connection with this Agreement, the Convertible Note or the Warrants.
“ Warrant Shares ” means the shares of Common Stock into which the Warrants are exercisable, pursuant to terms of the applicable Warrant.
“ Warrants ” means, collectively, the Existing Warrants and the Additional Warrant.
SECTION
2
ISSUANCE OF SECURITIES
2.1 Issuance of Securities . Subject to the terms and conditions of this Agreement, the Company shall issue and sell to the Investor the sixth amended and restated secured convertible promissory note, the form of which is attached hereto as Exhibit A (the “ Convertible Note ”), in the principal amount of $140,000 (the “ Principal Amount ”), the Existing Warrants (which were previously delivered by the Company on February 5, 2013, March 28, 2013, June 3, 2013, August 5, 2013, October 7, 2013 and December 9, 2013, respectively) and a warrant to purchase an aggregate of up to 52,632 shares of Common Stock, the form of which is attached hereto as Exhibit B (the “ Additional Warrant ”), against payment by the Investor to (or to the order of) the Company of $140,000 (the “ Purchase Price ”) (of which $20,000 was paid by the Investor on February 5, 2013, $20,000 was paid by the Investor on March 28, 2013, $20,000 was paid by the Investor on June 3, 2013, $20,000 was paid by the Investor on August 5, 2013, $20,000 was paid by the Investor on October 7, 2013 and $20,000 was paid by the Investor on December 9, 2013).
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2.2 Delivery . On the date hereof, (a) the Company shall execute and deliver to the Investor the Convertible Note and the Additional Warrant, and (b) the Investor shall deliver to the Company a check or wire transfer of immediately available funds in an amount equal to $20,000. Each of the Convertible Note and the Additional Warrant shall be a binding obligation of the Company upon execution thereof by the Company and delivery thereof to the Investor. The Company acknowledges that it already received $120,000 of the Purchase Price ($20,000 paid by the Investor on February 5, 2013, $20,000 paid by the Investor on March 28, 2013, $20,000 paid by the Investor on June 3, 2013, $20,000 paid by the Investor on August 5, 2013, $20,000 paid by the Investor on October 7, 2013 and $20,000 paid by the Investor on December 9, 2013) in connection with the Original SPA, the March SPA, the June SPA, the August SPA, the October SPA and the Existing SPA, such that only $20,000 of the Purchase Price is due on the date hereof, and the Investor acknowledges that it received the February Warrant on February 5, 2013 in connection with the Original SPA, the March Warrant on March 28, 2013 in connection with the March SPA, the June Warrant on June 3, 2013 in connection with the June SPA, the August Warrant on August 5, 2013 in connection with the August SPA, the October Warrant on October 7, 2013 in connection with the October SPA and the December Warrant on December 9, 2013 in connection with the Existing SPA.
SECTION
3
REPRESENTATIONS AND WARRANTIES OF the investor
The Investor hereby represents, warrants and covenants to the Company as follows:
3.1 Purchase for Own Account . The Investor represents that it is acquiring the Securities solely as an investment for such Person’s own account not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by the Investor of any of the Securities shall constitute confirmation of the representation by the Investor that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.
3.2 Investment Experience . Either (a) the Investor or its officers, directors, managers or controlling persons has a preexisting personal or business relationship with the Company or its officers, directors or controlling persons, or (b) the Investor, by reason of its own business and financial experience, has the capacity to protect its own interests in connection with the investment contemplated hereby. The Investor represents that it is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Investor acknowledges that any investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
3.3 Accredited Investor . The Investor represents that it is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.4 Restrictions on Transfer . The Investor understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act, only in certain limited circumstances. In this connection, the Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
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3.5 Authorization and Power . The Investor has the requisite power and authority to enter into and perform this Agreement and the other Transaction Documents that it is a party to and to purchase the Convertible Note and the Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement and the other Transaction Documents that the Investor is a party to by the Investor and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action, and no further consent or authorization of the Investor or its Board of Directors, members or managers, as the case may be, is required. Each of this Agreement and the Transaction Documents that the Investor is a party to has been duly authorized, executed and delivered by the Investor and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Investor enforceable against the Investor in accordance with the terms thereof.
SECTION
4
Representations and Warranties of the Company
The Company hereby represents and warrants to the Investor that:
4.1 Organization, Good Standing and Qualification; Licenses . Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority, and holds all governmental licenses, permits, registrations and other approvals required under applicable law, to own and hold under lease its property and to carry on its business as now conducted and as proposed to be conducted, except where the failure to hold any such licenses, permits, registrations and other approvals could not result in a Material Adverse Effect. Each of the Company and each of its Subsidiaries is qualified to do business in each jurisdiction where the nature of its properties of the conduct of its business requires it to be so qualified to do business and where the failure so to qualify could result in a Material Adverse Effect.
4.2 Authorization . All action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Securities, has been taken or will be taken prior to the date hereof. Each of the Transaction Documents constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms.
4.3 Absence of Required Consents; No Violations . No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Company or any of its Subsidiaries is required in connection with the consummation of the transactions contemplated by the Transaction Documents, except for the filing with the SEC of a Form D, and such filing(s) pursuant to applicable state securities laws as may be necessary, which filings will be timely effected after the delivery of the Securities pursuant to Section 2.2 , and recordings or filings in connection with the perfection of the Liens on the Collateral in favor of the Investor. Neither the Company nor any of its Subsidiaries is in violation or default (a) of any provision of its Organic Documents, (b) of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or (c) of any provision of any federal or state statute, rule or regulation applicable to the Company, except in the cases of clause (b) and (c) above, for such violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any Lien upon any material assets of the Company, any of its Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company or any of its Subsidiaries, their business or operations or any of their assets or properties and which would result in a Material Adverse Effect.
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4.4 Convertible Note and Warrant . All representations and warranties of the Company contained in the Convertible Note and the Warrants are true and correct as of the date hereof.
4.5 Licenses and Intellectual Property Rights . The Company and each of its Subsidiaries possess all licenses, patents, trademarks, trade names, service marks, copyrights, and other intellectual property rights, free from burdensome restrictions, necessary to enable them to conduct their respective business, the absence of which could result in a Material Adverse Effect.
4.6 Disclosure . None of the representations or warranties made by the Company herein as of the date of such representations and warranties, and none of the statements contained in any other information with respect to the Company and its properties and assets, including each exhibit or report, furnished by or on behalf of the Company to the Investor in connection herewith, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they are made, not misleading.
4.7 Offering . Subject in part to the truth and accuracy of the Investor’s representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Securities as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.
4.8 Valid Issuance of Note Conversion Shares and Warrant Shares . The Note Conversion Shares, when issued, sold and delivered in accordance with the terms of the Convertible Note for the consideration specified therein and the Warrant Shares, when issued, sold and delivered in accordance with the terms of the Warrants for the consideration specified therein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws.
4.9 Collateral .
(a) The Company’s chief executive office and principal place of business (as of the date of this Agreement) is located at the address set forth in Schedule 1 ; the Company’s jurisdiction of organization and organizational identification number are set forth in Schedule 1 ; the Company’s exact legal name is as set forth in the first paragraph of this Agreement; and all other locations where the Company conducts business or Collateral is kept (as of the date of this Agreement) are set forth in Schedule 2 .
(b) The Company has rights in or the power to transfer the Collateral, and the Company is the legal and beneficial owner of the Collateral, free from any Lien, and has good and marketable title thereto.
(c) All of the Company’s U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in Schedule 2 .
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SECTION
5
MISCELLANEOUS
5.1 Survival of Representations, Warranties and Covenants . The warranties, representations and covenants of the Company, the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company.
5.2 Successors and Assigns . Except as otherwise provided therein, the terms and conditions of this Agreement and the other Transaction Documents shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Securities); provided , however , that the Company may not assign or transfer its rights or obligations hereunder or under the other Transaction Documents without the prior written consent of the Investor. The Securities shall be freely transferable, without restriction, subject to compliance with applicable securities laws. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
5.3 Governing Law; Venue; Jury Trial Waiver .
(a) This Agreement is to be construed in accordance with and governed by the laws of the State of New York.
(b) Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, 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 any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
5.4 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
5.5 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
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5.6 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next Business Day delivery, with written verification of receipt. All communications for the Company shall be sent to 105 Maxess Road, Suite S124, Melville, NY 11747 and all communications for the Investor shall be sent to 805 Third Avenue, 15th Floor, New York, NY 10022, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 5.6 .
5.7 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver is in writing and only with the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this section shall be binding upon each holder of any Securities acquired under this Agreement at the time outstanding (including securities into which such Securities are convertible), each future holder of all such Securities, and the Company.
5.8 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
5.9 Expenses . The Company shall pay the fees and expenses of the advisors, counsel, accountants and other experts of the Company and the Investor, if any, and all other expenses, incurred by the Company and the Investor incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.
5.10 Register . The Company shall maintain at its principal executive offices a register for the Securities, in which the Company shall record the name and address of the person in whose name the Securities have been issued (including the name and address of each transferee) and the amount of the Securities held by such person. The Company shall keep the register open and available during business hours for inspection by the Investors or their legal representatives upon prior written notice.
5.11 Interpretation . In this Agreement and the other Transaction Documents, except to the extent the context otherwise requires: (a) any reference in this Agreement or other Transaction Document to a Section, a Schedule or an Exhibit is a reference to a Section thereof, a schedule thereto or an exhibit thereto, respectively, and to a subsection thereof or a clause thereof is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (b) the words “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Agreement or other Transaction Document as a whole and not merely to the specific Section, subsection, paragraph or clause in which the respective word appears; (c) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (d) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto; (e) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; and (f) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement or other Transaction Document.
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5.12 Further Assurances . Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurance as may be reasonably requested by any other party to evidence and reflect the transactions described in this Agreement and the other Transaction Documents and contemplated hereby and thereby and to carry into effect the intents and purposes of this Agreement and the other Transaction Documents.
5.13 Reservation of Stock . The Company covenants that it will (a) reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the conversion of the Convertible Note and the exercise of the Warrants and/or (b) take all necessary steps, within the opinion of legal counsel, to amend the Company’s certificate of incorporation to provide sufficient reserves of shares of Common Stock issuable upon conversion of the Convertible Note and the exercise of the Warrants.
5.14 Notices for Collateral .
(a) The Company shall give prompt written notice to the Investor (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of the Company’s chief executive office or principal place of business; (ii) any change in the locations set forth in Schedule 1 ; (iii) any change in the Company’s name; (iv) any changes in the Company’s identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading; (v) any change in the Company’s registration as an organization (or any new such registration); or (vi) any change in the Company’s jurisdiction of organization; provided that the Company shall not locate any Collateral outside of the United States nor shall the Company change its jurisdiction of organization to a jurisdiction outside of the United States.
(b) If and when the Company shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Investor thereof, and (ii) hereby authorizes the Investor to modify, amend, or supplement Schedule 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
5.15 Power of Attorney . (a) The Investor shall have the right to, in the name of the Company, or in the name of the Investor or otherwise, upon notice to but without the requirement of assent by the Company, and the Company hereby constitutes and appoints the Investor (and any of the Investor’s officers, employees or agents designated by the Investor) as the Company’s true and lawful attorney-in-fact, with full power and authority to: (i) sign and file any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of the Investor’s security interest in the Collateral; (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; (iii) give notices of control, default or exclusivity (or similar notices) under any account control agreement or similar agreement with respect to exercising control over deposit accounts or securities accounts; and (iv) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of the Company, which the Investor may deem reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and the Investor’s security interest therein and to accomplish the purposes of this Agreement. The Investor agrees that, except upon and during the continuance of an event of default under the Convertible Note, it shall not exercise the power of attorney, or any rights granted to the Investor, pursuant to clauses (ii), (iii) and (iv). The foregoing power of attorney is coupled with an interest and irrevocable so long as the obligations under the Convertible Note have not been paid and performed in full. The Company hereby ratifies, to the extent permitted by law, all that the Investor shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 5.15 .
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5.16 Amendment and Restatement . The Company and the Investor agree that: (a) the Obligations (as defined in the Convertible Note) represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Agreement is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing SPA in its entirety; and (c) the entering into and performance by the Company and the Investor of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Agreement and the Convertible Note. All references in the other Transaction Documents to the Existing SPA shall henceforth include references to this Agreement, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
5.17 Ratifications . The Company hereby (a) ratifies and confirms all provisions of the Existing SPA and the Convertible Note and all other Transaction Documents, and (b) ratifies and confirms that all guaranties, assurances, and liens granted, conveyed, or assigned to the Investor under the Existing Note are not released, reduced, or otherwise adversely affected by this Agreement and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Agreement, the Convertible Note and the Transaction Documents.
5.18 Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.
(Remainder of page intentionally left blank; signature pages follow)
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IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Securities Purchase Agreement as of the date first above written.
NANO VIBRONIX, INC. , | ||
as the Company | ||
By: | /s/ Harold Jacob | |
Name: | Harold Jacob | |
Title: | Chief Executive Officer | |
GLOBIS OVERSEAS FUND LTD. , | ||
as the Investor | ||
By: | /s/ Paul Packer | |
Name: | Paul Packer | |
Title: | Managing Member of the General Partner of the Investment Manager |
EXHIBIT A
FORM OF SECURED CONVERTIBLE NOTE
THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE ARE SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN THAT CERTAIN SIXTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 6, 2014, BETWEEN THE COMPANY AND THE LENDER REFERENCED HEREIN, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED HEREIN BY REFERENCE.
SIXTH AMENDED AND RESTATED
SECURED CONVERTIBLE PROMISSORY NOTE
$140,000 | February 6, 2014 |
New York, New York
FOR VALUE RECEIVED, NANO VIBRONIX, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of GLOBIS OVERSEAS FUND LTD. (together with its successors, representatives, and assigns, the “ Lender ”), the principal sum of ONE HUNDRED AND FORTY THOUSAND DOLLARS ($140,000) with interest on the outstanding principal amount at the rate, except as otherwise provided herein, of six percent (6.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate of interest then permitted under applicable law; provided , however , that from and after an Event of Default (as defined below), all indebtedness hereunder shall accrue interest at the rate of ten percent (10.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate permitted by applicable law (the “ Post-Default Rate ”). Interest shall commence with the date hereof and shall continue on the outstanding principal of this Sixth Amended and Restated Secured Convertible Promissory Note (this “ Note ”) until paid or converted in accordance with the provisions hereof.
Reference is made to the Sixth Amended and Restated Securities Purchase Agreement of even date herewith by and between the Company and the Lender, as the “ Investor ” (the “ Agreement ”), which amends and restates the Existing SPA (as defined in the Agreement). In connection with the Existing SPA, the Company issued to the Lender that certain Fifth Amended and Restated Secured Convertible Promissory Note dated December 9, 2013 in the principal amount of $120,000 (the “ Existing Note ”). The Company and the Lender desire to amend and restate the Existing SPA and the Existing Note to increase the principal amount outstanding hereunder.
Reference is also made to the Sixth Amended and Restated Securities Purchase Agreement of even date herewith by and between the Company and Globis Capital Partners, L.P. (the “ Capital SPA ”). In connection with the Capital SPA, the Company issued to Globis Capital Partners, L.P. that certain Sixth Amended and Restated Secured Convertible Promissory Note dated February 6, 2014 in the principal amount of $560,000 (the “ Capital Note ”).
1. Definitions . For purposes of this Note, the following terms shall have the following meanings (capitalized terms used herein but not otherwise defined shall have the meanings provided therefor in the Agreement):
“ Affiliate ” shall mean with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such first Person, or (iii) whereby 10% or more of the voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.
“ Agreement ” shall have the meaning ascribed to such term in the recitals of this Note.
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” shall have the meaning ascribed to such term in Section 2 of this Note.
“ Common Stock ” means the common stock of the Company.
“ Common Stock Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Stock or any Convertible Security.
“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” (and the lower-case versions of the same) shall have meanings correlative thereto.
“ Convertible Securities ” shall mean evidences of indebtedness, shares of stock or other securities or instruments (other than Options) which are convertible into or exchangeable for shares of Common Stock, either immediately or upon the arrival of a specified date or the occurrence of a specified event.
“ Debt ” shall mean, with respect to any Person, all liabilities, obligations and indebtedness of such Person of every kind and nature, including, without limitation: (i) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services (including trade obligations); (ii) obligations as lessee under any leases (including under any capital leases); (iii) any reimbursement or other obligations under any performance or surety bonds or any letters of credit issued for the account of such Person; (iv) all net obligations in respect of any derivative products; (v) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor against loss; and (vi) obligations secured by any Lien on property owned by such Person, whether or not the obligations have been assumed.
“ Default ” means an Event of Default or an event or condition which with notice or lapse of time or both would constitute an Event of Default.
“ Exercise Price ” shall have the meaning ascribed to such term in Section 5(a) of this Note
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“ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
“ GAAP ” means generally accepted principles of good accounting practice in the United States, consistently applied.
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim or other priority or preferential arrangement of any kind or nature whatsoever (other than a financing statement filed by a lessor in respect of an operating lease not intended as security).
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Obligations ” shall mean all obligations of the Company to the Lender howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Note and the other Transaction Documents, including all costs and expenses incurred by the Lender in connection with the enforcement of this Note or any other Transaction Document.
“ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
“ Patents ” shall have the meaning ascribed to such term in Section 2 of this Note.
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“ Permitted Debt ” shall mean, with respect to the Company and each of its direct and indirect Subsidiaries, any of (i) the Obligations, (ii) trade accounts payable incurred in the ordinary course which are due no later than 90 calendar days after invoice, (iii) other current liabilities incurred in the ordinary course of business and not incurred through the borrowing of money or the obtaining of credit, (iv) obligations under long-term real property leases incurred in the ordinary course of business, (v) short-term lease obligations or indebtedness incurred to finance the cost of tangible personal property (which was acquired after the date hereof) in an amount that does not exceed an aggregate of $10,000 during any twelve month period, (vi) Debt in respect of taxes or other governmental charges which is not yet due or which is being contested in good faith by appropriate proceedings, and (vii) Debt in connection with the Capital Note.
“ Permitted Lien ” shall mean, as of any particular time with respect to the Company and each of its direct and indirect Subsidiaries, (i) Liens of taxes, assessments or other charges of a Governmental Authority not then delinquent or which are being contested in good faith by appropriate proceedings, (ii) Liens in favor of the Lender created pursuant to the Transaction Documents, (iii) any mechanic’s, worker’s, repairer’s, supplier’s, vendor’s or like Liens securing obligations arising in the ordinary course of business (A) that are not mature and overdue, (B) that do not materially impair the value of the Collateral provided to the Lender pursuant to the Transaction Documents and (C) that could not result in an aggregate liability in excess of $10,000, (iv) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that such deposit account is not a dedicated cash collateral account.
“ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (i) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (ii) that is, at any time any determination is made, otherwise Controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York.
“ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
2. Grant of Security Interest . As collateral security for the prompt and complete payment and performance of all of the Company’s present or future Obligations, the Company hereby grants a security interest and mortgage to the Lender, as security, in and to the Company’s entire right, title and interest in, to and under the following intellectual property, now owned or hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest (all of which shall collectively be called the “Collateral” for purposes of this Note):
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(a) All letters patent of, or rights corresponding thereto in, the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto in, the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; all reissues, continuations, continuations-in-part or extensions thereof; all petty patents, divisionals, and patents of addition; and all patents to be issued under any such applications, including without limitation the patents and patent applications set forth on Exhibit “A” attached hereto (collectively, the “ Patents ”);
(b) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(c) All licenses or other rights to use any of the Patents, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(d) All amendments, renewals and extensions of any of the Patents; and
(e) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
3. Maturity . Unless sooner paid or converted in accordance with the terms hereof, the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable on the earlier of (a) April 30, 2014, (b) the closing date of a financing, conducted through a bona fide arm’s length transaction, in which the Company (i) issues and sells for cash its capital stock to investor(s) and/or (ii) issues indebtedness to lenders, in aggregate amount from the date hereof equal to or greater than Two Hundred and Fifty Thousand Dollars ($250,000), or (c) the date of the acceleration of the maturity of this Note by the Lender upon the occurrence of an Event of Default (such earlier date, the “ Maturity Date ”).
4. Payments .
(a) Form of Payment . All payments of interest and principal (other than payment by way of conversion) shall be in lawful money of the United States of America to the Lender, at the address specified in the Agreement, or at such other address as may be specified from time to time by the Lender in a written notice delivered to the Company. All payments made hereunder shall be applied first to accrued interest, and thereafter to principal and any fees due and owing to the Lender.
(b) Prepayment . Prepayment of principal or interest under this Note without the express prior written consent of the Lender is not permitted.
5. Conversion .
(a) Conversion at the Option of the Lender . At any time prior to the Maturity Date, the Lender may, in its sole discretion and upon 5 Business Days’ prior written notice to the Company, convert all or a portion of the Debt of the Company outstanding on such date under this Note into that number of shares of Common Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the outstanding principal amount of this Note elected by the Lender to be so converted and (ii) any accrued but unpaid interest thereon elected by the Lender to be so converted by (b) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof) (the “ Exercise Price ”). Any accrued but unpaid interest not converted into shares of Common Stock as provided in the preceding sentence shall be paid in cash on such date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Common Stock as would be issuable upon conversion of the Note pursuant to this Section 5(a) .
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(b) Conversion or Repayment Upon Maturity . In the event that any Debt under this Note remains outstanding on the Maturity Date, then the principal amount under this Note then outstanding and any accrued but unpaid interest thereon shall, at the option of the Lender, either (a) become immediately due and payable on such date or (b) convert on such date into that number of shares of Common Stock which is equal to the quotient obtained by dividing (i) the sum of (A) the then outstanding principal amount of this Note elected by the Lender to be so converted and (B) any accrued but unpaid interest thereon elected by the Lender to be so converted by (ii) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof). Any principal and any accrued but unpaid interest not converted into shares of Common Stock as provided in the preceding sentence shall be paid in cash on the Maturity Date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Common Stock as would be issuable upon conversion of the Note pursuant to this Section 5(b) .
(c) Issuance of Certificates . As soon as is reasonably practicable after a conversion has been effected (but in any event within five (5) Business Days thereafter), the Company shall deliver to the Lender a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion in such name or names and in such denomination or denominations as the Lender may specify.
(d) No Fractional Shares . If any fractional share of Common Stock would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall pay an amount equal to the value of such fractional share, as determined by the per share conversion price used to effect such conversion.
(e) Issuance Costs . The issuance of certificates for shares of capital stock issuable upon conversion of this Note shall be made without charge to the Lender for any documentary stamp tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of such shares of Common Stock; 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 certificate upon conversion in a name other than that of the Lender so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Common Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.
(f) Compliance with Laws and Regulations . The Company shall take all such actions as may be necessary to assure that all shares of capital stock issued upon conversion of this Note may be so issued without violation of any applicable law or governmental regulation or any requirement of any domestic securities exchange upon which such shares of capital stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon such issuance).
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(g) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of this Note, if the Company, at any time after the date hereof, (1) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (2) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (3) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock 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 clause (1) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (2) or (3) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(h) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the date hereof issue or sell any share of Common Stock (otherwise than as provided in Section 5(g) hereof or pursuant to Common Stock Equivalents granted or issued prior to the date hereof) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock.
(i) Issuance or Modification of Common Stock Equivalents . In the event the Company shall, at any time following the date hereof: (1) issue or sell any Common Stock Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (2) modify the conversion or exercise price of any Common Stock Equivalent issued prior to, on or after the date hereof, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock Equivalent.
(j) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment to the Exercise Price pursuant to Sections 5(h) or 5(i) hereof upon (1) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (2) securities issued pursuant to the exercise or conversion of Common Stock Equivalents issued prior to the date hereof (but such exception shall not affect the obligation to decrease the Exercise Price if required by Section 5(i)(2) hereof), (3) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (4) Common Stock issued or options to purchase Common Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
(k) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Lender will thereafter have the right to receive upon conversion of this Note at any time after the consummation of the applicable Fundamental Transaction but prior to the repayment in full of this Note, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the conversion of this Note prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Lender would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Lender. The provisions of this Clause (k) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
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6. Affirmative Covenants . So long as any Obligations remain outstanding, the Company shall:
(a) Compliance with Laws . Comply in all material respects with applicable laws, rules, regulations and orders, such compliance to include, without limitations, paying before the same become delinquent all taxes, assessments, and charges imposed upon it or upon its property by any Governmental Authority except for good faith contests for which adequate reserves are being maintained.
(b) Information . Deliver to the Lender or cause to be delivered to the Lender, in form and detail satisfactory to Lender, the following financial and other information:
(i) written notice of any of the following, promptly, and in any event within three (3) days after the Company actually becomes aware of any of the following: (i) any proceeding being instituted or threatened by or against it involving a sum in excess of $25,000 in the aggregate for all proceedings, (ii) any order, judgment or decree being entered against the Company or any of its properties or assets involving a sum in excess of $25,000 in the aggregate for all such orders, judgments and decrees taken together, and (iii) any actual or prospective change, development or event which has had or could reasonably be expected to have a Material Adverse Effect; and
(ii) such other statements, lists of property and accounts, budgets, forecasts, projections, reports, or other information as the Lender may from time to time reasonably request.
(c) Notice of Litigation . Provide to the Lender promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or Governmental Authority affecting the Company, which, if determined adversely to the Company, could have a Material Adverse Effect.
(d) Notice of Defaults and Events of Defaults . Provide to the Lender, as soon as possible and in any event within three (3) days after the occurrence thereof, with written notice of each event which either (i) is an Event of Default, or (ii) with the giving of notice or lapse of time or both would constitute an Event of Default, in each case setting forth the details of such event and the action which is proposed to be taken by the Company with respect thereto.
(e) Governmental Approvals . Use commercially reasonable efforts to promptly obtain and maintain any and all authorizations, consents, approvals, licenses, franchises, concessions, leases, rulings, permits, certifications, exemptions, filings or registrations by or with any Governmental Authority necessary for the Company to conduct its business and own (or lease) its properties or to execute, deliver and perform the Transaction Documents, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
(f) Insurance . Promptly obtain and maintain in full force and effect at all times with responsible insurance companies such insurance covering its assets and properties, in such amounts and against such risks and with such deductibles as an enterprise conducting a similar business under similar business conditions as the Company would customarily maintain, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
(g) Continuance of Business . Maintain its legal existence, licenses and privileges in good standing under and in compliance with all applicable laws and continue to operate the business currently conducted by the Company and its Subsidiaries. Without limiting the generality of the foregoing, the Company shall do and cause to be done all things necessary to apply for, preserve, maintain and keep in full force and effect all of its registrations of trademarks, service marks and other marks, trade names and other trade rights, patents, copyrights and other intellectual property in accordance with prudent business practices.
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(h) Taxes . Pay and discharge (i) all federal and other material taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien (other than a Permitted Lien) upon any of its properties or assets; and (ii) all other lawful claims which, if unpaid, would by law become a Lien upon its property not constituting a Permitted Lien.
(i) Additional Patents . Following the date hereof, if the Company shall obtain rights to any new patents or otherwise acquires or becomes entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Lender thereof and (ii) hereby authorizes the Lender to modify, amend, or supplement Exhibit A and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
(j) Preservation of Patents . The Company shall (i) prosecute diligently all applications in respect of the Patents, now or hereafter pending; (ii) make federal applications on all of its unpatented but patentable inventions; (iii) preserve and maintain all of its material rights in the Patents and protect the Patents from infringement, unfair competition, cancellation, or dilution by all appropriate action necessary in the Company’s reasonable business judgment, including, without limitation, the commencement and prosecution of legal proceedings to recover damages for infringement and to defend and preserve its rights in the Patents; and (iv) not abandon any of the Patents necessary to the conduct of its business.
7. Negative Covenants . So long as any Obligations remain outstanding:
(a) Liens . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, create or suffer to exist any Lien (other than the Liens granted hereunder, under the Captial Note and the Permitted Liens) on any assets of such Person.
(b) Debt . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, incur any Debt other than Permitted Debt; prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Debt (other than amounts due in respect of this Note); or amend, modify or otherwise change the terms of any Debt (other than this Note) in a manner which would accelerate the scheduled repayment thereof or otherwise be adverse to the interests of the Lender.
(c) Sale of Subsidiary . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, transfer, cause to be sold or transferred, or otherwise dispose of, any interest in a Subsidiary of such Person.
(d) Distributions . The Company shall not declare or pay any dividends or make any distribution of any kind on the Company’s capital stock.
(e) Amendment of Organic Documents . The Company shall not amend, supplement, or otherwise modify any of the provisions of the Company’s Organic Documents in a manner that would be materially adverse to the Lender.
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(f) Transaction with Affiliates . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, transfer, sell, assign or otherwise dispose of any of its assets to any Affiliate or enter into any transaction directly or indirectly with or for the benefit of any Affiliate unless the monetary or business consideration arising therefrom would be as advantageous to the Company or, as applicable, such Subsidiary, as the Company or such Subsidiary would obtain in a comparable arm’s length transaction with a Person not an Affiliate.
(g) Sale of Collateral . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, license, transfer or otherwise dispose of any interest in any Collateral, except for licenses or sublicenses of rights in intellectual property on a non-exclusive or other limited basis in the ordinary course of business.
(h) Changes in Business . The Company shall not enter into or engage in any business other than that carried on (or contemplated to be carried on) as of the date hereof.
(i) Accounting Changes . The Company shall not change its fiscal year or make or permit any change in accounting policies or reporting practices, except as permitted by GAAP.
8. Use of Proceeds . The Company shall use the proceeds from this Note solely to fund the operations of the Company in the ordinary course of business.
9. Default .
(a) Events of Default . For purposes of this Note, any of the following events which shall occur shall constitute an “ Event of Default ”:
(i) any indebtedness under this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise;
(ii) a default shall occur in the observance or performance of (A) any covenant, obligation or agreement of the Company contained in Sections 6 , 7 or 8 , or (B) any other provision of this Note, the Agreement or any Transaction Document and such default shall continue uncured for a period of 5 days after the Company knew or should have known, exercising reasonable diligence, of the event or circumstances giving rise to such default;
(iii) any representation, warranty or certification made by the Company herein or in the Agreement or in any certificate, report, document, agreement or instrument delivered pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made;
(iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of itself or any part of its property, (B) become subject to the appointment of a receiver, trustee, custodian or liquidator for itself or any part of its property that is not discharged or stayed within 60 days after such appointment, (C) make an assignment for the benefit of creditors, (D) or fail generally or admit in writing to its inability to pay its debts as they become due, (E) institute any proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, or file a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law, or file an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, or (F) become subject to any involuntary proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally that is not dismissed within 60 days after commencement, or have an order for relief entered against it in any proceeding under the United States Bankruptcy Code that is not dismissed within 60 days of entry;
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(v) the Company shall (A) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or dissolution), (B) suspend its operations other than in the ordinary course of business, or (C) take any action to authorize any of the actions or events set forth above in Section 9(a)(iv) ;
(vi) any final judgment or judgments for the payment of money aggregating in excess of $50,000 shall be rendered against the Company which judgments are not, within 30 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 45 days after the expiration of such stay; provided , however , that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating such amount so long as the Company provides the Lender with a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Lender) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;
(vii) (A) any Debt of the Company (other than this Note) shall not be paid at its stated maturity or shall be duly declared to be or shall become due and payable prior to the stated maturity thereof, or (B) there shall occur and be continuing any event under any agreement or instrument relating to any such Debt, the effect of which is to cause such Debt to become due prior to its stated maturity, or (C) the holder or holders of such Debt, or any trustee, agent or other representative on behalf of such holder or holders, shall have demanded or required, pursuant to the terms of any agreement or instrument relating to such Debt, that the Company redeem, repurchase or otherwise acquire or retire such Debt for value at any time prior to its stated maturity;
(viii) the occurrence or existence of any event or condition that, in the Lender’s reasonable and good faith judgment, has had or would have or result in a Material Adverse Effect;
(ix) any material impairment in the value of the Collateral or the priority of the Lender’s Lien hereunder;
(x) any levy upon, seizure or attachment of a material portion of the Collateral which shall not have been rescinded or withdrawn within 20 days after the date of such levy, seizure or attachment; or
(xi) (A) the Company asserts that any Transaction Document is invalid or unenforceable, in whole or in part, or (B) the Lender shall cease to have a perfected Lien in any of the Collateral (subject to Permitted Liens).
(b) Consequences of Events of Default .
(i) Upon the occurrence of any Event of Default, the Lender may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Transaction Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without limiting the generality of the foregoing, (w) the Lender may, subject to the UCC and other applicable law, peaceably and without notice enter any premises of the Company, take possession of any of the Collateral, remove or dispose of all or part of the Collateral on any premises of the Company or elsewhere, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as the Lender may determine; (x) the Lender may require the Company to assemble all or any part of the Collateral and make it available to the Lender at any place and time designated by the Lender; (y) the Lender may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law); (z) the Lender may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of the Company’s assets, without charge or liability to the Lender therefor) at public or private sale, by one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as the Lender deems advisable; provided , however, that the Company shall be credited with the net proceeds of sale only when such proceeds are finally collected by the Lender.
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(ii) For the purpose of enabling the Lender to exercise its rights and remedies under this Section 9 during the continuance of an Event of Default, the Company hereby grants to the Lender an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to the Company) to use, license or sublicense any intellectual property Collateral.
(iii) The Lender has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and the Lender may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting the Lender’s rights against the Company. The Company waives any right it may have to require the Lender to pursue any third Person for any of the Obligations. The Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Lender may sell the Collateral without giving any warranties as to the Collateral. The Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If the Lender sells any of the Collateral upon credit, the Company will be credited only with payments actually made by the purchaser, received by the Lender and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Lender may resell the Collateral and the Company shall be credited with the proceeds of the sale.
(iv) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of the Lender in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to the Lender; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to the Company or otherwise disposed of in accordance with the UCC or other applicable law. The Company shall remain liable to the Lender for any deficiency which exists after any sale or other disposition or collection of Collateral.
(v) The Lender shall also have any other rights which the Lender may have been afforded under any contract or agreement at any time and any other rights which the Lender may have pursuant to applicable law. The Lender may exercise any and all of its remedies under this Note, the Agreement and the other Transaction Documents contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.
10. Lost, Stolen, Destroyed or Mutilated Note . In case this Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any such mutilated Note, or in lieu of any such Note lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of any such Note.
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11. Governing Law . This Note is to be construed in accordance with and governed by the laws of the State of New York. The provisions of Section 5.3 of the Agreement relating to venue, submission to jurisdiction and the waiver of the right to jury trial are by this reference incorporated herein, mutatis mutandis , as if set forth herein in full.
12. Amendment and Waiver . Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lender.
13. Notices . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Note shall be made in accordance with Section 5.6 of the Agreement.
14. Securities Purchase Agreement . This Note is issued pursuant to the terms of the Agreement.
15. Termination . Upon payment and performance in full of all Obligations, the security interest created under this Note shall terminate.
16. Authorization. The Company hereby irrevocably authorizes the Lender (or its designee) at any time and from time to time to file in any jurisdiction any financing or continuation statement and amendment thereto or any registration of charge, mortgage or otherwise, containing any information required under the UCC or any applicable of any other applicable jurisdiction (in each case, without the signature of the Company to the extent permitted by applicable law), reasonably necessary or appropriate in the judgment of the Lender to perfect or evidence its first priority security interest in and Lien on the Collateral. The Company hereby irrevocably ratifies and approves any such filing, registration or recordation in any jurisdiction by the Lender (or its designee) that has occurred prior to the date hereof, of any financing statement, registration of charge, mortgage or otherwise. The Company agrees to provide to the Lender (or its designee) any and all information required under the UCC or any applicable law of any other applicable jurisdiction for the effective filing of a financing statement and any amendment thereto or any registration of charge, mortgage or otherwise in connection with the Collateral.
17. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
18. Assignment . The Company shall not have the right to assign its rights and obligations hereunder or any interest herein. The Lender may at any time assign or transfer all or part of its rights and/or obligations under this Note.
19. Remedies Cumulative; Failure or Indulgence Not a Waiver . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
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20. Payments . Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of the Lender as of the date of issuance hereof, shall initially be the address for the Lender as set forth in the Agreement); provided that the Lender may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Lender’s wire transfer instructions. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest. All payments received by the Lender after 5:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest shall continue to accrue.
21. Excessive Interest . Notwithstanding any other provision herein to the contrary, this Note is hereby expressly limited so that the interest rate charged hereunder shall at no time exceed the maximum rate permitted by applicable law. If, for any circumstance whatsoever, the interest rate charged exceeds the maximum rate permitted by applicable law, the interest rate shall be reduced to the maximum rate permitted, and if the Lender shall have received an amount that would cause the interest rate charged to be in excess of the maximum rate permitted, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing hereunder (without charge for prepayment) and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal, such excess shall be refunded to the Company.
22. Facsimile Transmission of Signature Page . The delivery of any executed signature page to this Note by telecopy or other electronic imaging means shall be effective as delivery of a manually executed signature page to this Note.
23. Amendment and Restatement . The Company and the Lender agree that: (a) the Obligations represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Note is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing Note in its entirety; and (c) the entering into and performance by the Company and the Lender of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Note. All references in the other Transaction Documents to the Existing Note shall henceforth include references to this Note, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
24. Ratifications . The Company hereby (a) ratifies and confirms all provisions of the other Transaction Documents, and (b) ratifies and confirm that all guaranties, assurances, and liens granted, conveyed, or assigned to the Lender under the Existing Note are not released, reduced, or otherwise adversely affected by this Note and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Note and the Transaction Documents. The Company hereby acknowledges that immediately prior to the execution and delivery of this Note, the outstanding principal balance of the Existing Note is $120,000 and the accrued but unpaid interest thereon is $1,163.84, which amount is and shall be payable in accordance with the terms hereof and is in addition to the interest that accrues under this Note after the date hereof.
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25. Waiver of Notice . To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Transaction Documents. In addition, the Company hereby waives, to the fullest extent permitted by law, (a) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (b) any right to require the Lender (i) to proceed against any Person, (ii) to exhaust any other collateral or security for any of the Obligations, or (iii) to pursue any remedy in the Lender’s power; and (c) all claims, damages, and demands against the Lender arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral.
(Remainder of page intentionally left blank; signature page follows)
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IN WITNESS WHEREOF, the Company has caused this Sixth Amended and Restated Secured Convertible Promissory Note to be duly executed by its officers, thereunto duly authorized as of the date first above written.
Address of the Company: | NANO VIBRONIX, INC. | |
105 Maxess Road, Suite S124 | By: | |
Melville, NY 11747 | ||
Attn: ____________ | Name: | |
Its: |
Address of the Lender: | GLOBIS OVERSEAS FUND LTD. | |
805 Third Avenue, 15th Floor | ||
New York, NY 10022 | ||
By: | ||
Name: | ||
Its: |
EXHIBIT B
FORM OF WARRANT TO PURCHASE COMMON STOCK
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Nano Vibronix, Inc.
Form of Warrant To Purchase Common Stock
Warrant No.: ____-__
Date of Issuance: __________ (“ Issuance Date ”)
Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ____________, the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “ Warrant ”), at any time or times after the date hereof, but not after 11:59 p.m., New York time, on _____ __, 20__, ___________ (______) (subject to adjustment as provided herein) fully paid and nonassessable shares of Common Stock (as defined below) (the “ Warrant Shares ”).
1. | EXERCISE OF WARRANT . |
(a) Mechanics of Exercise . Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day after the Issuance Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant. Within one (1) Business Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “ Aggregate Exercise Price ”) in the manner set forth in Section 1(c) below. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1 st ) Business Day following the date on which the Company has received an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder and the Company’s transfer agent for the Warrant Shares, if any. On or before the third (3 rd ) Business Day following the date on which the Company has received such Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.
(b) Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $0.38 per Warrant Share, subject to adjustment as provided herein.
(c) Payment of Exercise Price . The Holder shall pay the Exercise Price (i) in cash in immediately available funds or (ii) through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = |
|
|
Where | X= | the number of Warrant Shares to be issued to the Holder. |
Y= | the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. | |
A= | the Exercise Price. | |
B= | the Per Share Market Value of one Warrant Share on the Business Day immediately preceding the date of such election. |
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.
(d) Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.
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(e) Insufficient Authorized Shares . From and after the Issuance Date, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder. If, notwithstanding the foregoing, and not in limitation thereof, at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock (an “ Authorized Share Failure ”) to satisfy its obligation to reserve for issuance upon exercise of this Warrant (the “ Required Reserve Amount ”), then the Company shall promptly take all action necessary to increase the Company’s authorized shares of Common Stock, as applicable, to an amount sufficient to allow the Company to reserve the Required Reserve Amount. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock, and to cause its board of directors to recommend to the stockholders that they approve such proposal.
2. | ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . |
(a) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of Section 3, if the Company, at any time after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case (A) the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the Issuance Date issue or sell any share of Common Stock (otherwise than as provided in Section 2(a) hereof or pursuant to Common Stock Equivalents granted or issued prior to the Issuance Date) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
(c) Issuance or Modification of Common Stock Equivalents . In the event the Company shall, at any time following the Issuance Date: (i) issue or sell any Common Stock Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (ii) modify the conversion or exercise price of any Common Stock Equivalent issued prior to, on or after the Issuance Date, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock Equivalent, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
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(d) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Issuer shall not be required to make any adjustment to the Exercise Price pursuant to Sections 2(b) or 2(c) hereof upon (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the exercise or conversion of Common Stock Equivalents issued prior to the Issuance Date (but such exception shall not affect the obligation to decrease the Warrant Price if required by Section 2(c)(ii) hereof), (iii) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (iv) Common Stock issued or options to purchase Common Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
3. | FUNDAMENTAL TRANSACTIONS . |
(a) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.
(b) Application . The provisions of this Section 3 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
4. NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of the Company’s certificate of incorporation, the Company’s bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect and (ii) shall take all such actions as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
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5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
6. REISSUANCE OF WARRANTS .
(a) Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Sections 6(a) or 6(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
7. NOTICES . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Warrant shall be given or delivered by one party to the other in accordance with the notice provisions of the ______________ Securities Purchase Agreement by and between the Company and Holder dated ______ __, 20__.
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8. NOTICES OF CERTAIN CORPORATE ACTIONS . The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Business Days prior to the consummation of any Fundamental Transaction.
9. AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
10. SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
11. GOVERNING LAW . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
12. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. 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, exercises 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 of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any 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 Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
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13. TRANSFER . This Warrant may not be offered for sale, sold, transferred or assigned by the Holder except in a manner consistent with the restrictive legend on the first page of this Warrant; provided , however , that no such assignment shall relieve the Holder of its obligations hereunder if such assignee fails to perform such obligations.
14. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:
(a) “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the city of New York, New York are authorized or required by law to remain closed.
(b) “ Common Stock ” means the common stock of the Company.
(c) “ Common Stock Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.
(d) “ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(e) “ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
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(f) “ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Common Stock on such date on any registered national securities exchange on which the Common Stock is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not then listed on a registered national securities exchange, the closing sales price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Common Stock as determined by the Company’s board of directors, acting in good faith. In determining the fair market value of any shares of Common Stock no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
(g) “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(h) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(i) “ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
[ signature page follows ]
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IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
Nano Vibronix, Inc. | ||
By: | ||
Name: | ||
Title: | ||
holder | ||
By: | ||
Name: | ||
Title: |
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
Nano Vibronix, Inc.
The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“ Warrant Shares ”) of Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), evidenced by Warrant No. _______ (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Exercise Price . The Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Shares . The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:
Date: _______________ __, ______
Name of Registered Holder | ||
By: | ||
Name: | ||
Title: |
SCHEDULE 1
COMPANY INFORMATION
Principal place of business: 105 Maxess Road, Suite S124, Melville, NY 11747, USA
Location of chief executive officer: 9 Derech Hashalom St., P.O.B 515, Nesher 36651, Israel
Jurisdiction of organization: Delaware, USA
IRS Employer Identification No.: 01-0801232
SCHEDULE 2
COMPANY INTELLECTUAL PROPERTY
Important Notes:
Nanovibronix strategy was to create strong IP barrier for other companies. Nanovibronix aimed to cover it's novel technology and devices world wide, because our attempts were to create valuable company. The author of all ideas – Jona Zumeris, D.Sc. Nanovibronix is working with Pearl Cohen Zedek and Malina patent offices. Annuity is being done through Dennemeyer&Co
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | USA | 7,393,501 B2 | USA |
filed May28,2003 reg. Jul1,2008 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | China | ZL03818327.7 | China |
Filed May29,2003 Grant April29,2009 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Israel | 165422 | Israel |
filed May28,2003 reg. Aug18,2010 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Japan | 4504183 | Japan |
filed May28,2003 reg. Apr.30,2010 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | India | 246351 | India |
filed May29,2003 reg. Feb24,2011, |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Australia | 2003231892 | Australia |
filed May28,2003 reg. Nov6,2008 |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | European Union | 1511414 B |
European Union (UK,Gr,Fr) |
Filed Dec9,2004 Grant Aug8,2012 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Hong Kong | Appl.nr 05107834.0 | Hong Kong | Allowed, but decision to abandon | |||||
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | USA | 7,829.029 B2 | USA |
filed May29,2007 reg. Nov9,2010 |
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Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | China | Appl.nr. 200780019732.3 | China |
filed May29,2007 allowed |
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Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | European Union | Appl.nr 07736150.9 |
European Union (Fr,UK,Gr) |
filed Mar29,2007 allowed |
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Nano Vibronix, Inc. | System and method for SAW treatment of medical devices | USA | US nr. 11/710,616 | USA | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | USA | US nr. 11/710,615 | USA | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | India | India | Filed Feb26,2007 | ||||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Hong Kong | Appl.nr 09110611.9 | Hong Kong | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | European Union |
Appl.nr. 07861247.0 |
European Union | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Canada | Appl.nr 2,643,423 | Canada | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | China | Appl.nr. 2007/780014875.5 | China | Filed Feb26,2007 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Israel | Appl.nr.193600 | Israel | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | Method for friction reduction in medical tubing and applications using this method | USA |
US nr. 13/521,060 |
USA | Filled Jul09,2012 | |||||
Nano Vibronix, Inc. (Assignment from inventors to Nano Vibronix, Inc. has not yet been recorded. Each inventor to this patent is obligated per their employment agreement to assign these rights to NanoVibronix, Inc.) | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | USA | 7,892,191 | USA |
filed May18,2005 reg. Feb22,2011 |
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Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Russia | 2419395 | Russia |
filed May18,2005 reg. May27,2011 |
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | European Union |
Appl.nr. 05752180.9 |
European Union |
filed May18,2005
|
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Japan | Appl..nr 2007-527384 | Japan |
filed May18,2005
|
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Israel | Appl.nr. 179372 | Israel |
filed May18,2005
|
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | A system and method for detection of motion | USA | 6,964,640 B2 | USA |
filed Jan22,2003 reg. Nov.15, 2005 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | A system and method for detection of fetal heartbeat | USA | 6,454,716 B1 | USA |
filed May23,2000 reg. Sep24,2002 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | Apparatus for sterilizing a liquid with focused acoustic standing waves | USA | 7,431,892 B2 | USA |
filed Sep.25,2002 reg. Oct7, 2008 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | System and method for sterilization of a liquid | USA | Appl.nr. 12/188,302 | USA | Filled Aug8,2008 |
EXHIBIT 10.10
SIXTH AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
THIS SIXTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of February 6, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and Globis Capital Partners, L.P. (the “ Investor ”).
WHEREAS, the Company and the Investor entered into that certain Securities Purchase Agreement dated as of February 5, 2013 (the “ Original SPA ”) and, in connection therewith, the Company issued to the Investor that certain (i) Secured Convertible Promissory Note dated February 5, 2013 in the principal amount of $80,000 and (ii) a warrant to purchase 210,526 shares of common stock of the Company, dated February 5, 2013 (the “ February Warrant ”);
WHEREAS, the Company and the Investor entered into that certain Amended and Restated Securities Purchase Agreement dated as of March 28, 2013 (the “ March SPA ”) to amend and restate the Original SPA and, in connection therewith, the Company issued to the Investor that certain (i) Amended and Restated Secured Convertible Promissory Note dated March 28, 2013 in the principal amount of $160,000 (the “ March Note ”) and (ii) a warrant to purchase 210,526 shares of common stock of the Company, dated March 28, 2013 (the “ March Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Second Amended and Restated Securities Purchase Agreement dated as of June 3, 2013 (the “ June SPA ”) to amend and restate the March SPA and, in connection therewith, the Company issued to the Investor that certain (i) Second Amended and Restated Secured Convertible Promissory Note dated June 3, 2013 in the principal amount of $240,000 (the “ June Note ”) and (ii) a warrant to purchase 210,526 shares of common stock of the Company, dated June 3, 2013 (the “ June Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Third Amended and Restated Securities Purchase Agreement dated as of August 5, 2013 (the “ August SPA ”) to amend and restate the June SPA and, in connection therewith, the Company issued to the Investor that certain (i) Third Amended and Restated Secured Convertible Promissory Note dated August 5, 2013 in the principal amount of $320,000 (the “ August Note ”) and (ii) a warrant to purchase 210,526 shares of common stock of the Company, dated August 5, 2013 (the “ August Warrant ”); and
WHEREAS, the Company and the Investor entered into that certain Fourth Amended and Restated Securities Purchase Agreement dated as of October 7, 2013 (the “ October SPA ”) to amend and restate the August SPA and, in connection therewith, the Company issued to the Investor that certain (i) Fourth Amended and Restated Secured Convertible Promissory Note dated October 7, 2013 in the principal amount of $400,000 (the “ October Note ”) and (ii) a warrant to purchase 210,526 shares of common stock of the Company, dated October 7, 2013 (the “ October Warrant ”; and, together with the February Warrant, the March Warrant, the June Warrant and the August Warrant, the “ Existing Warrants ”); and
WHEREAS, the Company and the Investor entered into that certain Fifth Amended and Restated Securities Purchase Agreement dated as of December 9, 2013 (the “ Existing SPA ”) to amend and restate the October SPA and, in connection therewith, the Company issued to the Investor that certain (i) Fifth Amended and Restated Secured Convertible Promissory Note dated December 9, 2013 in the principal amount of $120,000 (the “ Existing Note ”) and (ii) a warrant to purchase 52,632 shares of common stock of the Company, dated December 9, 2013 (the “ December Warrant ”; and, together with the February Warrant, the March Warrant, the June Warrant, the August Warrant and the October Warrant, the “Existing Warrants”); and
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WHEREAS, the Company and the Investor desire to amend and restate the Existing SPA and the Existing Note to increase the principal amount outstanding thereunder and to issue an additional warrant as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree that the Existing SPA is hereby amended and restated in its entirety as follows:
SECTION 1
DEFINITIONS
1.1 Definitions . Capitalized but otherwise undefined terms used herein shall have the meanings provided therefor in the Convertible Note. In addition to the terms defined elsewhere in this Agreement and the Convertible Note, the following terms have the meanings indicated:
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” has the meaning ascribed to such term in the Convertible Note.
“ Common Stock ” means the common stock of the Company.
“ Convertible Note ” shall have the meaning ascribed to such term in Section 2.1 .
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” has the meaning ascribed to such term in the Convertible Note.
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Note Conversion Shares ” means the shares of Common Stock issuable upon the conversion of the Convertible Note in accordance with Section 5 of the Convertible Note.
“ Organic Document ” means, relative to any Person, its articles or certificate of incorporation, or certificate of limited partnership or formation, its bylaws, partnership or operating agreement or other organizational documents, and all stockholders agreements, voting trusts and similar arrangements applicable to any of its capital stock, partnership interests or other ownership interests.
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“ Person ” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, or joint stock company.
“ SEC ” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
“ Securities ” means the Convertible Note, the Warrants, the Note Conversion Shares and the Warrant Shares.
“ Securities Act ” means the Securities Act of 1933, as amended.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (a) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (b) that is, at any time any determination is made, otherwise controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ Transaction Documents ” means this Agreement, the Convertible Note, the Warrants and any other and all other certificates, documents, agreements and instruments delivered to the Investor under or in connection with this Agreement, the Convertible Note or the Warrants.
“ Warrant Shares ” means the shares of Common Stock into which the Warrants are exercisable, pursuant to terms of the applicable Warrant.
“ Warrants ” means, collectively, the Existing Warrants and the Additional Warrant.
SECTION 2
ISSUANCE OF SECURITIES
2.1 Issuance of Securities . Subject to the terms and conditions of this Agreement, the Company shall issue and sell to the Investor the sixth amended and restated secured convertible promissory note, the form of which is attached hereto as Exhibit A (the “ Convertible Note ”), in the principal amount of $560,000 (the “ Principal Amount ”), the Existing Warrants (which were previously delivered by the Company on February 5, 2013, March 28, 2013, June 3, 2013, August 5, 2013, October 7, 2013 and December 9, 2013, respectively) and a warrant to purchase an aggregate of up to 210,526 shares of Common Stock, the form of which is attached hereto as Exhibit B (the “ Additional Warrant ”), against payment by the Investor to (or to the order of) the Company of $560,000 (the “ Purchase Price ”) (of which $80,000 was paid by the Investor on February 5, 2013, $80,000 was paid by the Investor on March 28, 2013, $80,000 was paid by the Investor on June 3, 2013, $80,000 was paid by the Investor on August 5, 2013, $80,000 was paid by the Investor on October 7, 2013 and $80,000 was paid by the Investor on December 9, 2013).
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2.2 Delivery . On the date hereof, (a) the Company shall execute and deliver to the Investor the Convertible Note and the Additional Warrant, and (b) the Investor shall deliver to the Company a check or wire transfer of immediately available funds in an amount equal to $80,000. Each of the Convertible Note and the Additional Warrant shall be a binding obligation of the Company upon execution thereof by the Company and delivery thereof to the Investor. The Company acknowledges that it already received $480,000 of the Purchase Price ($80,000 paid by the Investor on February 5, 2013, $80,000 paid by the Investor on March 28, 2013, $80,000 paid by the Investor on June 3, 2013, $80,000 paid by the Investor on August 5, 2013, $80,000 paid by the Investor on October 7, 2013 and $80,000 paid by the Investor on December 9, 2013) in connection with the Original SPA, the March SPA, the June SPA, the August SPA, the October SPA and the Existing SPA, such that only $80,000 of the Purchase Price is due on the date hereof, and the Investor acknowledges that it received the February Warrant on February 5, 2013 in connection with the Original SPA, the March Warrant on March 28, 2013 in connection with the March SPA, the June Warrant on June 3, 2013 in connection with the June SPA, the August Warrant on August 5, 2013 in connection with the August SPA, the October Warrant on October 7, 2013 in connection with the October SPA and the December Warrant on December 9, 2013 in connection with the Existing SPA).
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents, warrants and covenants to the Company as follows:
3.1 Purchase for Own Account . The Investor represents that it is acquiring the Securities solely as an investment for such Person’s own account not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The acquisition by the Investor of any of the Securities shall constitute confirmation of the representation by the Investor that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Securities.
3.2 Investment Experience . Either (a) the Investor or its officers, directors, managers or controlling persons has a preexisting personal or business relationship with the Company or its officers, directors or controlling persons, or (b) the Investor, by reason of its own business and financial experience, has the capacity to protect its own interests in connection with the investment contemplated hereby. The Investor represents that it is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself, can bear the economic risk of its investment, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Securities. The Investor acknowledges that any investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
3.3 Accredited Investor . The Investor represents that it is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.4 Restrictions on Transfer . The Investor understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act, only in certain limited circumstances. In this connection, the Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
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3.5 Authorization and Power . The Investor has the requisite power and authority to enter into and perform this Agreement and the other Transaction Documents that it is a party to and to purchase the Convertible Note and the Warrants being sold to it hereunder. The execution, delivery and performance of this Agreement and the other Transaction Documents that the Investor is a party to by the Investor and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action, and no further consent or authorization of the Investor or its Board of Directors, members or managers, as the case may be, is required. Each of this Agreement and the Transaction Documents that the Investor is a party to has been duly authorized, executed and delivered by the Investor and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Investor enforceable against the Investor in accordance with the terms thereof.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor that:
4.1 Organization, Good Standing and Qualification; Licenses . Each of the Company and its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite power and authority, and holds all governmental licenses, permits, registrations and other approvals required under applicable law, to own and hold under lease its property and to carry on its business as now conducted and as proposed to be conducted, except where the failure to hold any such licenses, permits, registrations and other approvals could not result in a Material Adverse Effect. Each of the Company and each of its Subsidiaries is qualified to do business in each jurisdiction where the nature of its properties of the conduct of its business requires it to be so qualified to do business and where the failure so to qualify could result in a Material Adverse Effect.
4.2 Authorization . All action on the part of the Company necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance (or reservation for issuance), sale and delivery of the Securities, has been taken or will be taken prior to the date hereof. Each of the Transaction Documents constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms.
4.3 Absence of Required Consents; No Violations . No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Company or any of its Subsidiaries is required in connection with the consummation of the transactions contemplated by the Transaction Documents, except for the filing with the SEC of a Form D, and such filing(s) pursuant to applicable state securities laws as may be necessary, which filings will be timely effected after the delivery of the Securities pursuant to Section 2.2 , and recordings or filings in connection with the perfection of the Liens on the Collateral in favor of the Investor. Neither the Company nor any of its Subsidiaries is in violation or default (a) of any provision of its Organic Documents, (b) of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or (c) of any provision of any federal or state statute, rule or regulation applicable to the Company, except in the cases of clause (b) and (c) above, for such violations or defaults that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event that results in the creation of any Lien upon any material assets of the Company, any of its Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to the Company or any of its Subsidiaries, their business or operations or any of their assets or properties and which would result in a Material Adverse Effect.
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4.4 Convertible Note and Warrant . All representations and warranties of the Company contained in the Convertible Note and the Warrants are true and correct as of the date hereof.
4.5 Licenses and Intellectual Property Rights . The Company and each of its Subsidiaries possess all licenses, patents, trademarks, trade names, service marks, copyrights, and other intellectual property rights, free from burdensome restrictions, necessary to enable them to conduct their respective business, the absence of which could result in a Material Adverse Effect.
4.6 Disclosure . None of the representations or warranties made by the Company herein as of the date of such representations and warranties, and none of the statements contained in any other information with respect to the Company and its properties and assets, including each exhibit or report, furnished by or on behalf of the Company to the Investor in connection herewith, contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they are made, not misleading.
4.7 Offering . Subject in part to the truth and accuracy of the Investor’s representations set forth in Section 3 of this Agreement, the offer, sale and issuance of the Securities as contemplated by this Agreement is exempt from the registration requirements of the Securities Act and will not result in a violation of the qualification or registration requirements of the any applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption.
4.8 Valid Issuance of Note Conversion Shares and Warrant Shares . The Note Conversion Shares, when issued, sold and delivered in accordance with the terms of the Convertible Note for the consideration specified therein and the Warrant Shares, when issued, sold and delivered in accordance with the terms of the Warrants for the consideration specified therein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Agreement and under applicable state and federal securities laws.
4.9 Collateral .
(a) The Company’s chief executive office and principal place of business (as of the date of this Agreement) is located at the address set forth in Schedule 1 ; the Company’s jurisdiction of organization and organizational identification number are set forth in Schedule 1 ; the Company’s exact legal name is as set forth in the first paragraph of this Agreement; and all other locations where the Company conducts business or Collateral is kept (as of the date of this Agreement) are set forth in Schedule 2 .
(b) The Company has rights in or the power to transfer the Collateral, and the Company is the legal and beneficial owner of the Collateral, free from any Lien, and has good and marketable title thereto.
(c) All of the Company’s U.S. and foreign patents and patent applications, copyrights (whether or not registered), applications for copyright, trademarks, service marks and trade names (whether registered or unregistered), and applications for registration of such trademarks, service marks and trade names, are set forth in Schedule 2 .
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SECTION 5
MISCELLANEOUS
5.1 Survival of Representations, Warranties and Covenants . The warranties, representations and covenants of the Company, the Investor contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of the Investor or the Company.
5.2 Successors and Assigns . Except as otherwise provided therein, the terms and conditions of this Agreement and the other Transaction Documents shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any Securities); provided , however , that the Company may not assign or transfer its rights or obligations hereunder or under the other Transaction Documents without the prior written consent of the Investor. The Securities shall be freely transferable, without restriction, subject to compliance with applicable securities laws. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
5.3 Governing Law; Venue; Jury Trial Waiver .
(a) This Agreement is to be construed in accordance with and governed by the laws of the State of New York.
(b) Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, 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 any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 to such party at the address for such 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 manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
5.4 Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. The delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.
5.5 Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
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5.6 Notices . All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified, (b) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) Business Day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next Business Day delivery, with written verification of receipt. All communications for the Company shall be sent to 105 Maxess Road, Suite S124, Melville, NY 11747 and all communications for the Investor shall be sent to 805 Third Avenue, 15th Floor, New York, NY 10022, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section 5.6 .
5.7 Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only if such amendment, modification or waiver is in writing and only with the written consent of the Company and the Investor. Any amendment or waiver effected in accordance with this section shall be binding upon each holder of any Securities acquired under this Agreement at the time outstanding (including securities into which such Securities are convertible), each future holder of all such Securities, and the Company.
5.8 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
5.9 Expenses . The Company shall pay the fees and expenses of the advisors, counsel, accountants and other experts of the Company and the Investor, if any, and all other expenses, incurred by the Company and the Investor incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents.
5.10 Register . The Company shall maintain at its principal executive offices a register for the Securities, in which the Company shall record the name and address of the person in whose name the Securities have been issued (including the name and address of each transferee) and the amount of the Securities held by such person. The Company shall keep the register open and available during business hours for inspection by the Investors or their legal representatives upon prior written notice.
5.11 Interpretation . In this Agreement and the other Transaction Documents, except to the extent the context otherwise requires: (a) any reference in this Agreement or other Transaction Document to a Section, a Schedule or an Exhibit is a reference to a Section thereof, a schedule thereto or an exhibit thereto, respectively, and to a subsection thereof or a clause thereof is, unless otherwise stated, a reference to a subsection or a clause of the Section or subsection in which the reference appears; (b) the words “hereof,” “herein,” “hereto,” “hereunder” and the like mean and refer to this Agreement or other Transaction Document as a whole and not merely to the specific Section, subsection, paragraph or clause in which the respective word appears; (c) the meaning of defined terms shall be equally applicable to both the singular and plural forms of the terms defined; (d) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto; (e) references to statutes or regulations are to be construed as including all statutory and regulatory provisions consolidating, amending or replacing the statute or regulation referred to; and (f) the captions and headings are for convenience of reference only and shall not affect the construction of this Agreement or other Transaction Document.
5.12 Further Assurances . Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurance as may be reasonably requested by any other party to evidence and reflect the transactions described in this Agreement and the other Transaction Documents and contemplated hereby and thereby and to carry into effect the intents and purposes of this Agreement and the other Transaction Documents.
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5.13 Reservation of Stock . The Company covenants that it will (a) reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the conversion of the Convertible Note and the exercise of the Warrants and/or (b) take all necessary steps, within the opinion of legal counsel, to amend the Company’s certificate of incorporation to provide sufficient reserves of shares of Common Stock issuable upon conversion of the Convertible Note and the exercise of the Warrants.
5.14 Notices for Collateral .
(a) The Company shall give prompt written notice to the Investor (and in any event not later than 30 days following any change described below in this subsection) of: (i) any change in the location of the Company’s chief executive office or principal place of business; (ii) any change in the locations set forth in Schedule 1 ; (iii) any change in the Company’s name; (iv) any changes in the Company’s identity or structure in any manner which might make any financing statement filed hereunder incorrect or misleading; (v) any change in the Company’s registration as an organization (or any new such registration); or (vi) any change in the Company’s jurisdiction of organization; provided that the Company shall not locate any Collateral outside of the United States nor shall the Company change its jurisdiction of organization to a jurisdiction outside of the United States.
(b) If and when the Company shall obtain rights to any new patents, trademarks, service marks, trade names or copyrights, or otherwise acquire or become entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Investor thereof, and (ii) hereby authorizes the Investor to modify, amend, or supplement Schedule 2 and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
5.15 Power of Attorney . (a) The Investor shall have the right to, in the name of the Company, or in the name of the Investor or otherwise, upon notice to but without the requirement of assent by the Company, and the Company hereby constitutes and appoints the Investor (and any of the Investor’s officers, employees or agents designated by the Investor) as the Company’s true and lawful attorney-in-fact, with full power and authority to: (i) sign and file any of the financing statements and other documents and instruments which must be executed or filed to perfect or continue perfected, maintain the priority of or provide notice of the Investor’s security interest in the Collateral; (ii) assert, adjust, sue for, compromise or release any claims under any policies of insurance; (iii) give notices of control, default or exclusivity (or similar notices) under any account control agreement or similar agreement with respect to exercising control over deposit accounts or securities accounts; and (iv) execute any and all such other documents and instruments, and do any and all acts and things for and on behalf of the Company, which the Investor may deem reasonably necessary or advisable to maintain, protect, realize upon and preserve the Collateral and the Investor’s security interest therein and to accomplish the purposes of this Agreement. The Investor agrees that, except upon and during the continuance of an event of default under the Convertible Note, it shall not exercise the power of attorney, or any rights granted to the Investor, pursuant to clauses (ii), (iii) and (iv). The foregoing power of attorney is coupled with an interest and irrevocable so long as the obligations under the Convertible Note have not been paid and performed in full. The Company hereby ratifies, to the extent permitted by law, all that the Investor shall lawfully and in good faith do or cause to be done by virtue of and in compliance with this Section 5.15 .
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5.16 Amendment and Restatement . The Company and the Investor agree that: (a) the Obligations (as defined in the Convertible Note) represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Agreement is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing SPA in its entirety; and (c) the entering into and performance by the Company and the Investor of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Agreement and the Convertible Note. All references in the other Transaction Documents to the Existing SPA shall henceforth include references to this Agreement, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
5.17 Ratifications . The Company hereby (a) ratifies and confirms all provisions of the Existing SPA and the Convertible Note and all other Transaction Documents, and (b) ratifies and confirms that all guaranties, assurances, and liens granted, conveyed, or assigned to the Investor under the Existing Note are not released, reduced, or otherwise adversely affected by this Agreement and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Agreement, the Convertible Note and the Transaction Documents.
5.18 Entire Agreement . This Agreement and the documents referred to herein constitute the entire agreement among the parties with respect to the subject matter hereof and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.
(Remainder of page intentionally left blank; signature pages follow)
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IN WITNESS WHEREOF, the parties have executed this Sixth Amended and Restated Securities Purchase Agreement as of the date first above written.
NANO VIBRONIX, INC. , | ||
as the Company | ||
By: | /s/ Harold Jacob | |
Name: | Harold Jacob | |
Title: | Chief Executive Officer | |
GLOBIS CAPITAL PARTNERS, L.P. , | ||
as the Investor | ||
By: | /s/ Paul Packer | |
Name: | Paul Packer | |
Title: | Managing Member of the General Partner |
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EXHIBIT A
FORM OF SECURED CONVERTIBLE NOTE
THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SIXTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE ARE SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN THAT CERTAIN SIXTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 6, 2014, BETWEEN THE COMPANY AND THE LENDER REFERENCED HEREIN, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED HEREIN BY REFERENCE.
SIXTH AMENDED AND RESTATED
SECURED CONVERTIBLE PROMISSORY NOTE
$560,000 | February 6, 2014 |
New York, New York
FOR VALUE RECEIVED, NANO VIBRONIX, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of GLOBIS CAPITAL PARTNERS, L.P. (together with its successors, representatives, and assigns, the “ Lender ”), the principal sum of FIVE HUNDRED AND SIXTY THOUSAND DOLLARS ($560,000) with interest on the outstanding principal amount at the rate, except as otherwise provided herein, of six percent (6.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate of interest then permitted under applicable law; provided , however , that from and after an Event of Default (as defined below), all indebtedness hereunder shall accrue interest at the rate of ten percent (10.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate permitted by applicable law (the “ Post-Default Rate ”). Interest shall commence with the date hereof and shall continue on the outstanding principal of this Sixth Amended and Restated Secured Convertible Promissory Note (this “ Note ”) until paid or converted in accordance with the provisions hereof.
Reference is made to the Sixth Amended and Restated Securities Purchase Agreement of even date herewith by and between the Company and the Lender, as the “ Investor ” (the “ Agreement ”), which amends and restates the Existing SPA (as defined in the Agreement). In connection with the Existing SPA, the Company issued to the Lender that certain Fifth Amended and Restated Secured Convertible Promissory Note dated December 9, 2013 in the principal amount of $480,000 (the “ Existing Note ”). The Company and the Lender desire to amend and restate the Existing SPA and the Existing Note to increase the principal amount outstanding hereunder.
Reference is also made to the Sixth Amended and Restated Securities Purchase Agreement of even date herewith by and between the Company and Globis Overseas Fund Ltd. (the “ Overseas SPA ”). In connection with the Overseas SPA, the Company issued to Globis Overseas Fund Ltd. that certain Sixth Amended and Restated Secured Convertible Promissory Note dated February 6, 2014 in the principal amount of $140,000 (the “ Overseas Note ”).
1. Definitions . For purposes of this Note, the following terms shall have the following meanings (capitalized terms used herein but not otherwise defined shall have the meanings provided therefor in the Agreement):
“ Affiliate ” shall mean with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such first Person, or (iii) whereby 10% or more of the voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.
“ Agreement ” shall have the meaning ascribed to such term in the recitals of this Note.
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” shall have the meaning ascribed to such term in Section 2 of this Note.
“ Common Stock ” means the common stock of the Company.
“ Common Stock Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Stock or any Convertible Security.
“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” (and the lower-case versions of the same) shall have meanings correlative thereto.
“ Convertible Securities ” shall mean evidences of indebtedness, shares of stock or other securities or instruments (other than Options) which are convertible into or exchangeable for shares of Common Stock, either immediately or upon the arrival of a specified date or the occurrence of a specified event.
“ Debt ” shall mean, with respect to any Person, all liabilities, obligations and indebtedness of such Person of every kind and nature, including, without limitation: (i) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services (including trade obligations); (ii) obligations as lessee under any leases (including under any capital leases); (iii) any reimbursement or other obligations under any performance or surety bonds or any letters of credit issued for the account of such Person; (iv) all net obligations in respect of any derivative products; (v) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor against loss; and (vi) obligations secured by any Lien on property owned by such Person, whether or not the obligations have been assumed.
“ Default ” means an Event of Default or an event or condition which with notice or lapse of time or both would constitute an Event of Default.
“ Exercise Price ” shall have the meaning ascribed to such term in Section 5(a) of this Note
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“ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
“ GAAP ” means generally accepted principles of good accounting practice in the United States, consistently applied.
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim or other priority or preferential arrangement of any kind or nature whatsoever (other than a financing statement filed by a lessor in respect of an operating lease not intended as security).
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Obligations ” shall mean all obligations of the Company to the Lender howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Note and the other Transaction Documents, including all costs and expenses incurred by the Lender in connection with the enforcement of this Note or any other Transaction Document.
“ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
“ Patents ” shall have the meaning ascribed to such term in Section 2 of this Note.
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“ Permitted Debt ” shall mean, with respect to the Company and each of its direct and indirect Subsidiaries, any of (i) the Obligations, (ii) trade accounts payable incurred in the ordinary course which are due no later than 90 calendar days after invoice, (iii) other current liabilities incurred in the ordinary course of business and not incurred through the borrowing of money or the obtaining of credit, (iv) obligations under long-term real property leases incurred in the ordinary course of business, (v) short-term lease obligations or indebtedness incurred to finance the cost of tangible personal property (which was acquired after the date hereof) in an amount that does not exceed an aggregate of $10,000 during any twelve month period, (vi) Debt in respect of taxes or other governmental charges which is not yet due or which is being contested in good faith by appropriate proceedings, and (vii) Debt in connection with the Overseas Note.
“ Permitted Lien ” shall mean, as of any particular time with respect to the Company and each of its direct and indirect Subsidiaries, (i) Liens of taxes, assessments or other charges of a Governmental Authority not then delinquent or which are being contested in good faith by appropriate proceedings, (ii) Liens in favor of the Lender created pursuant to the Transaction Documents, (iii) any mechanic’s, worker’s, repairer’s, supplier’s, vendor’s or like Liens securing obligations arising in the ordinary course of business (A) that are not mature and overdue, (B) that do not materially impair the value of the Collateral provided to the Lender pursuant to the Transaction Documents and (C) that could not result in an aggregate liability in excess of $10,000, (iv) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that such deposit account is not a dedicated cash collateral account.
“ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (i) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (ii) that is, at any time any determination is made, otherwise Controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York.
“ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
2. Grant of Security Interest . As collateral security for the prompt and complete payment and performance of all of the Company’s present or future Obligations, the Company hereby grants a security interest and mortgage to the Lender, as security, in and to the Company’s entire right, title and interest in, to and under the following intellectual property, now owned or hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest (all of which shall collectively be called the “ Collateral ” for purposes of this Note):
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(a) All letters patent of, or rights corresponding thereto in, the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto in, the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; all reissues, continuations, continuations-in-part or extensions thereof; all petty patents, divisionals, and patents of addition; and all patents to be issued under any such applications, including without limitation the patents and patent applications set forth on Exhibit “A” attached hereto (collectively, the “ Patents ”);
(b) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(c) All licenses or other rights to use any of the Patents, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(d) All amendments, renewals and extensions of any of the Patents; and
(e) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
3. Maturity . Unless sooner paid or converted in accordance with the terms hereof, the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable on the earlier of (a) April 30, 2014, (b) the closing date of a financing, conducted through a bona fide arm’s length transaction, in which the Company (i) issues and sells for cash its capital stock to investor(s) and/or (ii) issues indebtedness to lenders, in aggregate amount from the date hereof equal to or greater than Two Hundred and Fifty Thousand Dollars ($250,000), or (c) the date of the acceleration of the maturity of this Note by the Lender upon the occurrence of an Event of Default (such earlier date, the “ Maturity Date ”).
4. Payments .
(a) Form of Payment . All payments of interest and principal (other than payment by way of conversion) shall be in lawful money of the United States of America to the Lender, at the address specified in the Agreement, or at such other address as may be specified from time to time by the Lender in a written notice delivered to the Company. All payments made hereunder shall be applied first to accrued interest, and thereafter to principal and any fees due and owing to the Lender.
(b) Prepayment . Prepayment of principal or interest under this Note without the express prior written consent of the Lender is not permitted.
5. Conversion .
(a) Conversion at the Option of the Lender . At any time prior to the Maturity Date, the Lender may, in its sole discretion and upon 5 Business Days’ prior written notice to the Company, convert all or a portion of the Debt of the Company outstanding on such date under this Note into that number of shares of Common Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the outstanding principal amount of this Note elected by the Lender to be so converted and (ii) any accrued but unpaid interest thereon elected by the Lender to be so converted by (b) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof) (the “ Exercise Price ”). Any accrued but unpaid interest not converted into shares of Common Stock as provided in the preceding sentence shall be paid in cash on such date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Common Stock as would be issuable upon conversion of the Note pursuant to this Section 5(a) .
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(b) Conversion or Repayment Upon Maturity . In the event that any Debt under this Note remains outstanding on the Maturity Date, then the principal amount under this Note then outstanding and any accrued but unpaid interest thereon shall, at the option of the Lender, either (a) become immediately due and payable on such date or (b) convert on such date into that number of shares of Common Stock which is equal to the quotient obtained by dividing (i) the sum of (A) the then outstanding principal amount of this Note elected by the Lender to be so converted and (B) any accrued but unpaid interest thereon elected by the Lender to be so converted by (ii) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof). Any principal and any accrued but unpaid interest not converted into shares of Common Stock as provided in the preceding sentence shall be paid in cash on the Maturity Date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Common Stock as would be issuable upon conversion of the Note pursuant to this Section 5(b) .
(c) Issuance of Certificates . As soon as is reasonably practicable after a conversion has been effected (but in any event within five (5) Business Days thereafter), the Company shall deliver to the Lender a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion in such name or names and in such denomination or denominations as the Lender may specify.
(d) No Fractional Shares . If any fractional share of Common Stock would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall pay an amount equal to the value of such fractional share, as determined by the per share conversion price used to effect such conversion.
(e) Issuance Costs . The issuance of certificates for shares of capital stock issuable upon conversion of this Note shall be made without charge to the Lender for any documentary stamp tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of such shares of Common Stock; 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 certificate upon conversion in a name other than that of the Lender so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Common Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.
(f) Compliance with Laws and Regulations . The Company shall take all such actions as may be necessary to assure that all shares of capital stock issued upon conversion of this Note may be so issued without violation of any applicable law or governmental regulation or any requirement of any domestic securities exchange upon which such shares of capital stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon such issuance).
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(g) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of this Note, if the Company, at any time after the date hereof, (1) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (2) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (3) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock 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 clause (1) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (2) or (3) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(h) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the date hereof issue or sell any share of Common Stock (otherwise than as provided in Section 5(g) hereof or pursuant to Common Stock Equivalents granted or issued prior to the date hereof) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock.
(i) Issuance or Modification of Common Stock Equivalents . In the event the Company shall, at any time following the date hereof: (1) issue or sell any Common Stock Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (2) modify the conversion or exercise price of any Common Stock Equivalent issued prior to, on or after the date hereof, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock Equivalent.
(j) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment to the Exercise Price pursuant to Sections 5(h) or 5(i) hereof upon (1) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (2) securities issued pursuant to the exercise or conversion of Common Stock Equivalents issued prior to the date hereof (but such exception shall not affect the obligation to decrease the Exercise Price if required by Section 5(i)(2) hereof), (3) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (4) Common Stock issued or options to purchase Common Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
(k) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Lender will thereafter have the right to receive upon conversion of this Note at any time after the consummation of the applicable Fundamental Transaction but prior to the repayment in full of this Note, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the conversion of this Note prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Lender would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Lender. The provisions of this Clause (k) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
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6. Affirmative Covenants . So long as any Obligations remain outstanding, the Company shall:
(a) Compliance with Laws . Comply in all material respects with applicable laws, rules, regulations and orders, such compliance to include, without limitations, paying before the same become delinquent all taxes, assessments, and charges imposed upon it or upon its property by any Governmental Authority except for good faith contests for which adequate reserves are being maintained.
(b) Information . Deliver to the Lender or cause to be delivered to the Lender, in form and detail satisfactory to Lender, the following financial and other information:
(i) written notice of any of the following, promptly, and in any event within three (3) days after the Company actually becomes aware of any of the following: (i) any proceeding being instituted or threatened by or against it involving a sum in excess of $25,000 in the aggregate for all proceedings, (ii) any order, judgment or decree being entered against the Company or any of its properties or assets involving a sum in excess of $25,000 in the aggregate for all such orders, judgments and decrees taken together, and (iii) any actual or prospective change, development or event which has had or could reasonably be expected to have a Material Adverse Effect; and
(ii) such other statements, lists of property and accounts, budgets, forecasts, projections, reports, or other information as the Lender may from time to time reasonably request.
(c) Notice of Litigation . Provide to the Lender promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or Governmental Authority affecting the Company, which, if determined adversely to the Company, could have a Material Adverse Effect.
(d) Notice of Defaults and Events of Defaults . Provide to the Lender, as soon as possible and in any event within three (3) days after the occurrence thereof, with written notice of each event which either (i) is an Event of Default, or (ii) with the giving of notice or lapse of time or both would constitute an Event of Default, in each case setting forth the details of such event and the action which is proposed to be taken by the Company with respect thereto.
(e) Governmental Approvals . Use commercially reasonable efforts to promptly obtain and maintain any and all authorizations, consents, approvals, licenses, franchises, concessions, leases, rulings, permits, certifications, exemptions, filings or registrations by or with any Governmental Authority necessary for the Company to conduct its business and own (or lease) its properties or to execute, deliver and perform the Transaction Documents, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
(f) Insurance . Promptly obtain and maintain in full force and effect at all times with responsible insurance companies such insurance covering its assets and properties, in such amounts and against such risks and with such deductibles as an enterprise conducting a similar business under similar business conditions as the Company would customarily maintain, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
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(g) Continuance of Business . Maintain its legal existence, licenses and privileges in good standing under and in compliance with all applicable laws and continue to operate the business currently conducted by the Company and its Subsidiaries. Without limiting the generality of the foregoing, the Company shall do and cause to be done all things necessary to apply for, preserve, maintain and keep in full force and effect all of its registrations of trademarks, service marks and other marks, trade names and other trade rights, patents, copyrights and other intellectual property in accordance with prudent business practices.
(h) Taxes . Pay and discharge (i) all federal and other material taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien (other than a Permitted Lien) upon any of its properties or assets; and (ii) all other lawful claims which, if unpaid, would by law become a Lien upon its property not constituting a Permitted Lien.
(i) Additional Patents . Following the date hereof, if the Company shall obtain rights to any new patents or otherwise acquires or becomes entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Lender thereof and (ii) hereby authorizes the Lender to modify, amend, or supplement Exhibit A and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
(j) Preservation of Patents . The Company shall (i) prosecute diligently all applications in respect of the Patents, now or hereafter pending; (ii) make federal applications on all of its unpatented but patentable inventions; (iii) preserve and maintain all of its material rights in the Patents and protect the Patents from infringement, unfair competition, cancellation, or dilution by all appropriate action necessary in the Company’s reasonable business judgment, including, without limitation, the commencement and prosecution of legal proceedings to recover damages for infringement and to defend and preserve its rights in the Patents; and (iv) not abandon any of the Patents necessary to the conduct of its business.
7. Negative Covenants . So long as any Obligations remain outstanding:
(a) Liens . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, create or suffer to exist any Lien (other than the Liens granted hereunder, under the Overseas Note and the Permitted Liens) on any assets of such Person.
(b) Debt . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, incur any Debt other than Permitted Debt; prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Debt (other than amounts due in respect of this Note); or amend, modify or otherwise change the terms of any Debt (other than this Note) in a manner which would accelerate the scheduled repayment thereof or otherwise be adverse to the interests of the Lender.
(c) Sale of Subsidiary . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, transfer, cause to be sold or transferred, or otherwise dispose of, any interest in a Subsidiary of such Person.
(d) Distributions . The Company shall not declare or pay any dividends or make any distribution of any kind on the Company’s capital stock.
(e) Amendment of Organic Documents . The Company shall not amend, supplement, or otherwise modify any of the provisions of the Company’s Organic Documents in a manner that would be materially adverse to the Lender.
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(f) Transaction with Affiliates . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, transfer, sell, assign or otherwise dispose of any of its assets to any Affiliate or enter into any transaction directly or indirectly with or for the benefit of any Affiliate unless the monetary or business consideration arising therefrom would be as advantageous to the Company or, as applicable, such Subsidiary, as the Company or such Subsidiary would obtain in a comparable arm’s length transaction with a Person not an Affiliate.
(g) Sale of Collateral . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, license, transfer or otherwise dispose of any interest in any Collateral, except for licenses or sublicenses of rights in intellectual property on a non-exclusive or other limited basis in the ordinary course of business.
(h) Changes in Business . The Company shall not enter into or engage in any business other than that carried on (or contemplated to be carried on) as of the date hereof.
(i) Accounting Changes . The Company shall not change its fiscal year or make or permit any change in accounting policies or reporting practices, except as permitted by GAAP.
8. Use of Proceeds . The Company shall use the proceeds from this Note solely to fund the operations of the Company in the ordinary course of business.
9. Default .
(a) Events of Default . For purposes of this Note, any of the following events which shall occur shall constitute an “ Event of Default ”:
(i) any indebtedness under this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise;
(ii) a default shall occur in the observance or performance of (A) any covenant, obligation or agreement of the Company contained in Sections 6 , 7 or 8 , or (B) any other provision of this Note, the Agreement or any Transaction Document and such default shall continue uncured for a period of 5 days after the Company knew or should have known, exercising reasonable diligence, of the event or circumstances giving rise to such default;
(iii) any representation, warranty or certification made by the Company herein or in the Agreement or in any certificate, report, document, agreement or instrument delivered pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made;
(iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of itself or any part of its property, (B) become subject to the appointment of a receiver, trustee, custodian or liquidator for itself or any part of its property that is not discharged or stayed within 60 days after such appointment, (C) make an assignment for the benefit of creditors, (D) or fail generally or admit in writing to its inability to pay its debts as they become due, (E) institute any proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, or file a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law, or file an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, or (F) become subject to any involuntary proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally that is not dismissed within 60 days after commencement, or have an order for relief entered against it in any proceeding under the United States Bankruptcy Code that is not dismissed within 60 days of entry;
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(v) the Company shall (A) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or dissolution), (B) suspend its operations other than in the ordinary course of business, or (C) take any action to authorize any of the actions or events set forth above in Section 9(a)(iv) ;
(vi) any final judgment or judgments for the payment of money aggregating in excess of $50,000 shall be rendered against the Company which judgments are not, within 30 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 45 days after the expiration of such stay; provided , however , that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating such amount so long as the Company provides the Lender with a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Lender) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;
(vii) (A) any Debt of the Company (other than this Note) shall not be paid at its stated maturity or shall be duly declared to be or shall become due and payable prior to the stated maturity thereof, or (B) there shall occur and be continuing any event under any agreement or instrument relating to any such Debt, the effect of which is to cause such Debt to become due prior to its stated maturity, or (C) the holder or holders of such Debt, or any trustee, agent or other representative on behalf of such holder or holders, shall have demanded or required, pursuant to the terms of any agreement or instrument relating to such Debt, that the Company redeem, repurchase or otherwise acquire or retire such Debt for value at any time prior to its stated maturity;
(viii) the occurrence or existence of any event or condition that, in the Lender’s reasonable and good faith judgment, has had or would have or result in a Material Adverse Effect;
(ix) any material impairment in the value of the Collateral or the priority of the Lender’s Lien hereunder;
(x) any levy upon, seizure or attachment of a material portion of the Collateral which shall not have been rescinded or withdrawn within 20 days after the date of such levy, seizure or attachment; or
(xi) (A) the Company asserts that any Transaction Document is invalid or unenforceable, in whole or in part, or (B) the Lender shall cease to have a perfected Lien in any of the Collateral (subject to Permitted Liens).
(b) Consequences of Events of Default .
(i) Upon the occurrence of any Event of Default, the Lender may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Transaction Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without limiting the generality of the foregoing, (w) the Lender may, subject to the UCC and other applicable law, peaceably and without notice enter any premises of the Company, take possession of any of the Collateral, remove or dispose of all or part of the Collateral on any premises of the Company or elsewhere, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as the Lender may determine; (x) the Lender may require the Company to assemble all or any part of the Collateral and make it available to the Lender at any place and time designated by the Lender; (y) the Lender may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law); (z) the Lender may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of the Company’s assets, without charge or liability to the Lender therefor) at public or private sale, by one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as the Lender deems advisable; provided , however, that the Company shall be credited with the net proceeds of sale only when such proceeds are finally collected by the Lender.
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(ii) For the purpose of enabling the Lender to exercise its rights and remedies under this Section 9 during the continuance of an Event of Default, the Company hereby grants to the Lender an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to the Company) to use, license or sublicense any intellectual property Collateral.
(iii) The Lender has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and the Lender may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting the Lender’s rights against the Company. The Company waives any right it may have to require the Lender to pursue any third Person for any of the Obligations. The Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Lender may sell the Collateral without giving any warranties as to the Collateral. The Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If the Lender sells any of the Collateral upon credit, the Company will be credited only with payments actually made by the purchaser, received by the Lender and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Lender may resell the Collateral and the Company shall be credited with the proceeds of the sale.
(iv) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of the Lender in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to the Lender; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to the Company or otherwise disposed of in accordance with the UCC or other applicable law. The Company shall remain liable to the Lender for any deficiency which exists after any sale or other disposition or collection of Collateral.
(v) The Lender shall also have any other rights which the Lender may have been afforded under any contract or agreement at any time and any other rights which the Lender may have pursuant to applicable law. The Lender may exercise any and all of its remedies under this Note, the Agreement and the other Transaction Documents contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.
10. Lost, Stolen, Destroyed or Mutilated Note . In case this Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any such mutilated Note, or in lieu of any such Note lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of any such Note.
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11. Governing Law . This Note is to be construed in accordance with and governed by the laws of the State of New York. The provisions of Section 5.3 of the Agreement relating to venue, submission to jurisdiction and the waiver of the right to jury trial are by this reference incorporated herein, mutatis mutandis , as if set forth herein in full.
12. Amendment and Waiver . Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lender.
13. Notices . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Note shall be made in accordance with Section 5.6 of the Agreement.
14. Securities Purchase Agreement . This Note is issued pursuant to the terms of the Agreement.
15. Termination . Upon payment and performance in full of all Obligations, the security interest created under this Note shall terminate.
16. Authorization. The Company hereby irrevocably authorizes the Lender (or its designee) at any time and from time to time to file in any jurisdiction any financing or continuation statement and amendment thereto or any registration of charge, mortgage or otherwise, containing any information required under the UCC or any applicable of any other applicable jurisdiction (in each case, without the signature of the Company to the extent permitted by applicable law), reasonably necessary or appropriate in the judgment of the Lender to perfect or evidence its first priority security interest in and Lien on the Collateral. The Company hereby irrevocably ratifies and approves any such filing, registration or recordation in any jurisdiction by the Lender (or its designee) that has occurred prior to the date hereof, of any financing statement, registration of charge, mortgage or otherwise. The Company agrees to provide to the Lender (or its designee) any and all information required under the UCC or any applicable law of any other applicable jurisdiction for the effective filing of a financing statement and any amendment thereto or any registration of charge, mortgage or otherwise in connection with the Collateral.
17. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
18. Assignment . The Company shall not have the right to assign its rights and obligations hereunder or any interest herein. The Lender may at any time assign or transfer all or part of its rights and/or obligations under this Note.
19. Remedies Cumulative; Failure or Indulgence Not a Waiver . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
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20. Payments . Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of the Lender as of the date of issuance hereof, shall initially be the address for the Lender as set forth in the Agreement); provided that the Lender may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Lender’s wire transfer instructions. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest. All payments received by the Lender after 5:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest shall continue to accrue.
21. Excessive Interest . Notwithstanding any other provision herein to the contrary, this Note is hereby expressly limited so that the interest rate charged hereunder shall at no time exceed the maximum rate permitted by applicable law. If, for any circumstance whatsoever, the interest rate charged exceeds the maximum rate permitted by applicable law, the interest rate shall be reduced to the maximum rate permitted, and if the Lender shall have received an amount that would cause the interest rate charged to be in excess of the maximum rate permitted, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing hereunder (without charge for prepayment) and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal, such excess shall be refunded to the Company.
22. Facsimile Transmission of Signature Page . The delivery of any executed signature page to this Note by telecopy or other electronic imaging means shall be effective as delivery of a manually executed signature page to this Note.
23. Amendment and Restatement . The Company and the Lender agree that: (a) the Obligations represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Note is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing Note in its entirety; and (c) the entering into and performance by the Company and the Lender of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Note. All references in the other Transaction Documents to the Existing Note shall henceforth include references to this Note, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
24. Ratifications . The Company hereby (a) ratifies and confirms all provisions of the other Transaction Documents, and (b) ratifies and confirm that all guaranties, assurances, and liens granted, conveyed, or assigned to the Lender under the Existing Note are not released, reduced, or otherwise adversely affected by this Note and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Note and the Transaction Documents. The Company hereby acknowledges that immediately prior to the execution and delivery of this Note, the outstanding principal balance of the Existing Note is $480,000 and the accrued but unpaid interest thereon is $4,655.34, which amount is and shall be payable in accordance with the terms hereof and is in addition to the interest that accrues under this Note after the date hereof.
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25. Waiver of Notice . To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Transaction Documents. In addition, the Company hereby waives, to the fullest extent permitted by law, (a) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (b) any right to require the Lender (i) to proceed against any Person, (ii) to exhaust any other collateral or security for any of the Obligations, or (iii) to pursue any remedy in the Lender’s power; and (c) all claims, damages, and demands against the Lender arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral.
(Remainder of page intentionally left blank; signature page follows)
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IN WITNESS WHEREOF, the Company has caused this Sixth Amended and Restated Secured Convertible Promissory Note to be duly executed by its officers, thereunto duly authorized as of the date first above written.
Address of the Company: | NANO VIBRONIX, INC. | |
105 Maxess Road, Suite S124 | By: | |
Melville, NY 11747 | ||
Attn: ____________ | Name: | |
Its: |
Address of the Lender: | GLOBIS CAPITAL PARTNERS, L.P. | |
805 Third Avenue, 15th Floor | ||
New York, NY 10022 | ||
By: | ||
Name: | ||
Its: |
EXHIBIT B
FORM OF WARRANT TO PURCHASE COMMON STOCK
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Nano Vibronix, Inc.
Form of Warrant To Purchase Common Stock
Warrant No.: ____-__
Date of Issuance: __________ (“ Issuance Date ”)
Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ____________, the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “ Warrant ”), at any time or times after the date hereof, but not after 11:59 p.m., New York time, on _____ __, 20__, ___________ (______) (subject to adjustment as provided herein) fully paid and nonassessable shares of Common Stock (as defined below) (the “ Warrant Shares ”).
1. | EXERCISE OF WARRANT . |
(a) Mechanics of Exercise . Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day after the Issuance Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant. Within one (1) Business Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “ Aggregate Exercise Price ”) in the manner set forth in Section 1(c) below. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1 st ) Business Day following the date on which the Company has received an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder and the Company’s transfer agent for the Warrant Shares, if any. On or before the third (3 rd ) Business Day following the date on which the Company has received such Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.
(b) Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $0.38 per Warrant Share, subject to adjustment as provided herein.
(c) Payment of Exercise Price . The Holder shall pay the Exercise Price (i) in cash in immediately available funds or (ii) through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = |
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Where | X= | the number of Warrant Shares to be issued to the Holder. |
Y= | the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. | |
A= | the Exercise Price. | |
B= | the Per Share Market Value of one Warrant Share on the Business Day immediately preceding the date of such election. |
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.
(d) Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.
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(e) Insufficient Authorized Shares . From and after the Issuance Date, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder. If, notwithstanding the foregoing, and not in limitation thereof, at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock (an “ Authorized Share Failure ”) to satisfy its obligation to reserve for issuance upon exercise of this Warrant (the “ Required Reserve Amount ”), then the Company shall promptly take all action necessary to increase the Company’s authorized shares of Common Stock, as applicable, to an amount sufficient to allow the Company to reserve the Required Reserve Amount. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock, and to cause its board of directors to recommend to the stockholders that they approve such proposal.
2. | ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES . |
(a) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of Section 3, if the Company, at any time after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case (A) the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(b) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the Issuance Date issue or sell any share of Common Stock (otherwise than as provided in Section 2(a) hereof or pursuant to Common Stock Equivalents granted or issued prior to the Issuance Date) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
(c) Issuance or Modification of Common Stock Equivalents . In the event the Company shall, at any time following the Issuance Date: (i) issue or sell any Common Stock Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (ii) modify the conversion or exercise price of any Common Stock Equivalent issued prior to, on or after the Issuance Date, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock Equivalent, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
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(d) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Issuer shall not be required to make any adjustment to the Exercise Price pursuant to Sections 2(b) or 2(c) hereof upon (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the exercise or conversion of Common Stock Equivalents issued prior to the Issuance Date (but such exception shall not affect the obligation to decrease the Warrant Price if required by Section 2(c)(ii) hereof), (iii) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (iv) Common Stock issued or options to purchase Common Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
3. | FUNDAMENTAL TRANSACTIONS . |
(a) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.
(b) Application . The provisions of this Section 3 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
4. NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of the Company’s certificate of incorporation, the Company’s bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect and (ii) shall take all such actions as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
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5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
6. REISSUANCE OF WARRANTS .
(a) Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
(c) Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Sections 6(a) or 6(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
7. NOTICES . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Warrant shall be given or delivered by one party to the other in accordance with the notice provisions of the ______________ Securities Purchase Agreement by and between the Company and Holder dated ______ __, 20__.
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8. NOTICES OF CERTAIN CORPORATE ACTIONS . The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Business Days prior to the consummation of any Fundamental Transaction.
9. AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
10. SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
11. GOVERNING LAW . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
12. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. 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, exercises 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 of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any 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 Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
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13. TRANSFER . This Warrant may not be offered for sale, sold, transferred or assigned by the Holder except in a manner consistent with the restrictive legend on the first page of this Warrant; provided , however , that no such assignment shall relieve the Holder of its obligations hereunder if such assignee fails to perform such obligations.
14. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:
(a) “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the city of New York, New York are authorized or required by law to remain closed.
(b) “ Common Stock ” means the common stock of the Company.
(c) “ Common Stock Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.
(d) “ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(e) “ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
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(f) “ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Common Stock on such date on any registered national securities exchange on which the Common Stock is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not then listed on a registered national securities exchange, the closing sales price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Common Stock as determined by the Company’s board of directors, acting in good faith. In determining the fair market value of any shares of Common Stock no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
(g) “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(h) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(i) “ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
[ signature page follows ]
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IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
Nano Vibronix, Inc. | ||
By: | ||
Name: | ||
Title: | ||
holder | ||
By: | ||
Name: | ||
Title: |
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
Nano Vibronix, Inc.
The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“ Warrant Shares ”) of Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), evidenced by Warrant No. _______ (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Exercise Price . The Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Shares . The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:
Date: _______________ __, ______
Name of Registered Holder | ||
By: | ||
Name: | ||
Title: |
SCHEDULE 1
COMPANY INFORMATION
Principal place of business: 105 Maxess Road, Suite S124, Melville, NY 11747, USA
Location of chief executive officer: 9 Derech Hashalom St., P.O.B 515, Nesher 36651, Israel
Jurisdiction of organization: Delaware, USA
IRS Employer Identification No.: 01-0801232
SCHEDULE 2
COMPANY INTELLECTUAL PROPERTY
Important Notes:
Nanovibronix strategy was to create strong IP barrier for other companies. Nanovibronix aimed to cover it's novel technology and devices world wide, because our attempts were to create valuable company. The author of all ideas – Jona Zumeris, D.Sc. Nanovibronix is working with Pearl Cohen Zedek and Malina patent offices. Annuity is being done through Dennemeyer&Co
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | USA | 7,393,501 B2 | USA |
filed May28,2003 reg. Jul1,2008 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | China | ZL03818327.7 | China |
Filed May29,2003 Grant April29,2009 |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Israel | 165422 | Israel |
filed May28,2003 reg. Aug18,2010 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Japan | 4504183 | Japan |
filed May28,2003 reg. Apr.30,2010 |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | India | 246351 | India |
filed May29,2003 reg. Feb24,2011, |
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Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Australia | 2003231892 | Australia |
filed May28,2003 reg. Nov6,2008 |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | European Union | 1511414 B |
European Union (UK,Gr,Fr) |
Filed Dec9,2004 Grant Aug8,2012 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Hong Kong | Appl.nr 05107834.0 | Hong Kong | Allowed, but decision to abandon | |||||
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | USA | 7,829.029 B2 | USA |
filed May29,2007 reg. Nov9,2010 |
|||||
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | China | Appl.nr. 200780019732.3 | China |
filed May29,2007 allowed |
|||||
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | European Union | Appl.nr 07736150.9 |
European Union (Fr,UK,Gr) |
filed Mar29,2007 allowed |
|||||
Nano Vibronix, Inc. | System and method for SAW treatment of medical devices | USA | US nr. 11/710,616 | USA | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | USA | US nr. 11/710,615 | USA | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | India | India | Filed Feb26,2007 | ||||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Hong Kong | Appl.nr 09110611.9 | Hong Kong | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | European Union |
Appl.nr. 07861247.0 |
European Union | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Canada | Appl.nr 2,643,423 | Canada | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | China | Appl.nr. 2007/780014875.5 | China | Filed Feb26,2007 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Israel | Appl.nr.193600 | Israel | Filed Feb26,2007 | |||||
Nano Vibronix, Inc. | Method for friction reduction in medical tubing and applications using this method | USA |
US nr. 13/521,060 |
USA | Filled Jul09,2012 | |||||
Nano Vibronix, Inc. (Assignment from inventors to Nano Vibronix, Inc. has not yet been recorded. Each inventor to this patent is obligated per their employment agreement to assign these rights to NanoVibronix, Inc.) | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | USA | 7,892,191 | USA |
filed May18,2005 reg. Feb22,2011 |
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Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Russia | 2419395 | Russia |
filed May18,2005 reg. May27,2011 |
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | European Union |
Appl.nr. 05752180.9 |
European Union |
filed May18,2005
|
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Japan | Appl..nr 2007-527384 | Japan |
filed May18,2005
|
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies)
of Registration |
Application or
Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
|||||
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Israel | Appl.nr. 179372 | Israel |
filed May18,2005
|
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | A system and method for detection of motion | USA | 6,964,640 B2 | USA |
filed Jan22,2003 reg. Nov.15, 2005 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | A system and method for detection of fetal heartbeat | USA | 6,454,716 B1 | USA |
filed May23,2000 reg. Sep24,2002 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | Apparatus for sterilizing a liquid with focused acoustic standing waves | USA | 7,431,892 B2 | USA |
filed Sep.25,2002 reg. Oct7, 2008 |
|||||
Nano Vibronix, Inc. ( under licensing agreement with Piezo top) | System and method for sterilization of a liquid | USA | Appl.nr. 12/188,302 | USA | Filled Aug8,2008 |
EXHIBIT 10.11
THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE ARE SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN THAT CERTAIN SEVENTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 6, 2014, BETWEEN THE COMPANY AND THE LENDER REFERENCED HEREIN, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED HEREIN BY REFERENCE.
SEVENTH AMENDED AND RESTATED
SECURED CONVERTIBLE PROMISSORY NOTE
$140,000 | March __, 2014 |
New York, New York
FOR VALUE RECEIVED, NANO VIBRONIX, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of GLOBIS OVERSEAS FUND LTD. (together with its successors, representatives, and assigns, the “ Lender ”), the principal sum of ONE HUNDRED AND FORTY THOUSAND DOLLARS ($140,000) with interest on the outstanding principal amount at the rate, except as otherwise provided herein, of six percent (6.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate of interest then permitted under applicable law; provided , however , that from and after an Event of Default (as defined below), all indebtedness hereunder shall accrue interest at the rate of ten percent (10.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate permitted by applicable law (the “ Post-Default Rate ”). Interest commenced on February 6, 2014 and shall continue on the outstanding principal of this Seventh Amended and Restated Secured Convertible Promissory Note (this “ Note ”) until paid or converted in accordance with the provisions hereof.
Reference is made to the Sixth Amended and Restated Securities Purchase Agreement, dated February 6, 2014, by and between the Company and the Lender, as the “ Investor ” (the “ Agreement ”). In connection with the Sixth Amended and Restated Securities Purchase Agreement, the Company issued to the Lender that certain Sixth Amended and Restated Secured Convertible Promissory Note dated February 6, 2014, in the principal amount of $140,000 (the “ Existing Note ”). The Company and the Lender desire to amend and restate the Existing Note as set forth herein.
Reference is also made to the Seventh Amended and Restated Secured Convertible Promissory Note dated March __, 2014, issued by the Company to Globis Capital Partners, L.P., in the principal amount of $560,000 (the “ Capital Note ”).
1. Definitions . For purposes of this Note, the following terms shall have the following meanings (capitalized terms used herein but not otherwise defined shall have the meanings provided therefor in the Agreement):
“ Affiliate ” shall mean with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such first Person, or (iii) whereby 10% or more of the voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.
“ Agreement ” shall have the meaning ascribed to such term in the recitals of this Note.
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” shall have the meaning ascribed to such term in Section 2 of this Note.
“ Common Stock ” means the common stock of the Company.
“ Common Stock or Series C Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Stock or any Convertible Security.
“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” (and the lower-case versions of the same) shall have meanings correlative thereto.
“ Convertible Securities ” shall mean evidences of indebtedness, shares of stock or other securities or instruments (other than Options) which are convertible into or exchangeable for shares of Common Stock or Series C Preferred Stock, either immediately or upon the arrival of a specified date or the occurrence of a specified event.
“ Debt ” shall mean, with respect to any Person, all liabilities, obligations and indebtedness of such Person of every kind and nature, including, without limitation: (i) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services (including trade obligations); (ii) obligations as lessee under any leases (including under any capital leases); (iii) any reimbursement or other obligations under any performance or surety bonds or any letters of credit issued for the account of such Person; (iv) all net obligations in respect of any derivative products; (v) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor against loss; and (vi) obligations secured by any Lien on property owned by such Person, whether or not the obligations have been assumed.
“ Default ” means an Event of Default or an event or condition which with notice or lapse of time or both would constitute an Event of Default.
“ Exercise Price ” shall have the meaning ascribed to such term in Section 5(a) of this Note
“ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock or Series C Preferred Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
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“ GAAP ” means generally accepted principles of good accounting practice in the United States, consistently applied.
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim or other priority or preferential arrangement of any kind or nature whatsoever (other than a financing statement filed by a lessor in respect of an operating lease not intended as security).
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Obligations ” shall mean all obligations of the Company to the Lender howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Note and the other Transaction Documents, including all costs and expenses incurred by the Lender in connection with the enforcement of this Note or any other Transaction Document.
“ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock, Series C Preferred Stock or Convertible Securities.
“ Patents ” shall have the meaning ascribed to such term in Section 2 of this Note.
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“ Permitted Debt ” shall mean, with respect to the Company and each of its direct and indirect Subsidiaries, any of (i) the Obligations, (ii) trade accounts payable incurred in the ordinary course which are due no later than 90 calendar days after invoice, (iii) other current liabilities incurred in the ordinary course of business and not incurred through the borrowing of money or the obtaining of credit, (iv) obligations under long-term real property leases incurred in the ordinary course of business, (v) short-term lease obligations or indebtedness incurred to finance the cost of tangible personal property (which was acquired after the date hereof) in an amount that does not exceed an aggregate of $10,000 during any twelve month period, (vi) Debt in respect of taxes or other governmental charges which is not yet due or which is being contested in good faith by appropriate proceedings, and (vii) Debt in connection with the Capital Note.
“ Permitted Lien ” shall mean, as of any particular time with respect to the Company and each of its direct and indirect Subsidiaries, (i) Liens of taxes, assessments or other charges of a Governmental Authority not then delinquent or which are being contested in good faith by appropriate proceedings, (ii) Liens in favor of the Lender created pursuant to the Transaction Documents, (iii) any mechanic’s, worker’s, repairer’s, supplier’s, vendor’s or like Liens securing obligations arising in the ordinary course of business (A) that are not mature and overdue, (B) that do not materially impair the value of the Collateral provided to the Lender pursuant to the Transaction Documents and (C) that could not result in an aggregate liability in excess of $10,000, (iv) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that such deposit account is not a dedicated cash collateral account.
“ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“ Series C Preferred Stock ” means the Series C Preferred Stock of the Company.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (i) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (ii) that is, at any time any determination is made, otherwise Controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York.
“ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
2. Grant of Security Interest . As collateral security for the prompt and complete payment and performance of all of the Company’s present or future Obligations, the Company hereby grants a security interest and mortgage to the Lender, as security, in and to the Company’s entire right, title and interest in, to and under the following intellectual property, now owned or hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest (all of which shall collectively be called the “Collateral” for purposes of this Note):
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(a) All letters patent of, or rights corresponding thereto in, the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto in, the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; all reissues, continuations, continuations-in-part or extensions thereof; all petty patents, divisionals, and patents of addition; and all patents to be issued under any such applications, including without limitation the patents and patent applications set forth on Exhibit “A” attached hereto (collectively, the “ Patents ”);
(b) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(c) All licenses or other rights to use any of the Patents, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(d) All amendments, renewals and extensions of any of the Patents; and
(e) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
3. Maturity . Unless sooner paid or converted in accordance with the terms hereof, the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable on the earlier of (a) April 30, 2014, (b) the closing date of a financing, conducted through a bona fide arm’s length transaction, in which the Company (i) issues and sells for cash its capital stock to investor(s) and/or (ii) issues indebtedness to lenders, in aggregate amount from the date hereof equal to or greater than Two Hundred and Fifty Thousand Dollars ($250,000), or (c) the date of the acceleration of the maturity of this Note by the Lender upon the occurrence of an Event of Default (such earlier date, the “ Maturity Date ”).
4. Payments .
(a) Form of Payment . All payments of interest and principal (other than payment by way of conversion) shall be in lawful money of the United States of America to the Lender, at the address specified in the Agreement, or at such other address as may be specified from time to time by the Lender in a written notice delivered to the Company. All payments made hereunder shall be applied first to accrued interest, and thereafter to principal and any fees due and owing to the Lender.
(b) Prepayment . Prepayment of principal or interest under this Note without the express prior written consent of the Lender is not permitted.
5. Conversion .
(a) Conversion at the Option of the Lender . At any time prior to the Maturity Date, the Lender may, in its sole discretion and upon 5 Business Days’ prior written notice to the Company, convert all or a portion of the Debt of the Company outstanding on such date under this Note into that number of shares of Series C Preferred Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the outstanding principal amount of this Note elected by the Lender to be so converted and (ii) any accrued but unpaid interest thereon elected by the Lender to be so converted by (b) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof) (the “ Exercise Price ”). Any accrued but unpaid interest not converted into shares of Series C Preferred Stock as provided in the preceding sentence shall be paid in cash on such date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Series C Preferred Stock as would be issuable upon conversion of the Note pursuant to this Section 5(a) .
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(b) Conversion or Repayment Upon Maturity . In the event that any Debt under this Note remains outstanding on the Maturity Date, then the principal amount under this Note then outstanding and any accrued but unpaid interest thereon shall, at the option of the Lender, either (a) become immediately due and payable on such date or (b) convert on such date into that number of shares of Series C Preferred Stock which is equal to the quotient obtained by dividing (i) the sum of (A) the then outstanding principal amount of this Note elected by the Lender to be so converted and (B) any accrued but unpaid interest thereon elected by the Lender to be so converted by (ii) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof). Any principal and any accrued but unpaid interest not converted into shares of Series C Preferred Stock as provided in the preceding sentence shall be paid in cash on the Maturity Date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Series C Preferred Stock as would be issuable upon conversion of the Note pursuant to this Section 5(b) .
(c) Issuance of Certificates . As soon as is reasonably practicable after a conversion has been effected (but in any event within five (5) Business Days thereafter), the Company shall deliver to the Lender a certificate or certificates representing the number of shares of Series C Preferred Stock issuable by reason of such conversion in such name or names and in such denomination or denominations as the Lender may specify.
(d) No Fractional Shares . If any fractional share of Series C Preferred Stock would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall pay an amount equal to the value of such fractional share, as determined by the per share conversion price used to effect such conversion.
(e) Issuance Costs . The issuance of certificates for shares of capital stock issuable upon conversion of this Note shall be made without charge to the Lender for any documentary stamp tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of such shares of Series C Preferred Stock; 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 certificate upon conversion in a name other than that of the Lender so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Series C Preferred Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.
(f) Compliance with Laws and Regulations . The Company shall take all such actions as may be necessary to assure that all shares of capital stock issued upon conversion of this Note may be so issued without violation of any applicable law or governmental regulation or any requirement of any domestic securities exchange upon which such shares of capital stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon such issuance).
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(g) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of this Note, if the Company, at any time after the date hereof, (1) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock or Series C Preferred Stock, (2) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock into a larger number of shares or (3) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock or Series C Preferred Stock, as applicable, outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock or Series C Preferred Stock, as applicable, outstanding immediately after such event. Any adjustment made pursuant to clause (1) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (2) or (3) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(h) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the date hereof issue or sell any share of Common Stock or Series C Preferred Stock (otherwise than as provided in Section 5(g) hereof or pursuant to Common Stock or Series C Equivalents granted or issued prior to the date hereof) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock.
(i) Issuance or Modification of Common Stock or Series C Equivalents . In the event the Company shall, at any time following the date hereof: (1) issue or sell any Common Stock or Series C Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (2) modify the conversion or exercise price of any Common Stock or Series C Equivalent issued prior to, on or after the date hereof, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock or Series C Equivalent.
(j) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment to the Exercise Price pursuant to Sections 5(h) or 5(i) hereof upon (1) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (2) securities issued pursuant to the exercise or conversion of Common Stock or Series C Equivalents issued prior to the date hereof (but such exception shall not affect the obligation to decrease the Exercise Price if required by Section 5(i)(2) hereof), (3) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (4) Common Stock or Series C Preferred Stock issued or options to purchase Common Stock or Series C Preferred Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
(k) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Series C Preferred Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Series C Preferred Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Lender will thereafter have the right to receive upon conversion of this Note at any time after the consummation of the applicable Fundamental Transaction but prior to the repayment in full of this Note, in lieu of the shares of the Series C Preferred Stock (or other securities, cash, assets or other property) issuable upon the conversion of this Note prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Lender would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Lender. The provisions of this Clause (k) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
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6. Affirmative Covenants . So long as any Obligations remain outstanding, the Company shall:
(a) Compliance with Laws . Comply in all material respects with applicable laws, rules, regulations and orders, such compliance to include, without limitations, paying before the same become delinquent all taxes, assessments, and charges imposed upon it or upon its property by any Governmental Authority except for good faith contests for which adequate reserves are being maintained.
(b) Information . Deliver to the Lender or cause to be delivered to the Lender, in form and detail satisfactory to Lender, the following financial and other information:
(i) written notice of any of the following, promptly, and in any event within three (3) days after the Company actually becomes aware of any of the following: (i) any proceeding being instituted or threatened by or against it involving a sum in excess of $25,000 in the aggregate for all proceedings, (ii) any order, judgment or decree being entered against the Company or any of its properties or assets involving a sum in excess of $25,000 in the aggregate for all such orders, judgments and decrees taken together, and (iii) any actual or prospective change, development or event which has had or could reasonably be expected to have a Material Adverse Effect; and
(ii) such other statements, lists of property and accounts, budgets, forecasts, projections, reports, or other information as the Lender may from time to time reasonably request.
(c) Notice of Litigation . Provide to the Lender promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or Governmental Authority affecting the Company, which, if determined adversely to the Company, could have a Material Adverse Effect.
(d) Notice of Defaults and Events of Defaults . Provide to the Lender, as soon as possible and in any event within three (3) days after the occurrence thereof, with written notice of each event which either (i) is an Event of Default, or (ii) with the giving of notice or lapse of time or both would constitute an Event of Default, in each case setting forth the details of such event and the action which is proposed to be taken by the Company with respect thereto.
(e) Governmental Approvals . Use commercially reasonable efforts to promptly obtain and maintain any and all authorizations, consents, approvals, licenses, franchises, concessions, leases, rulings, permits, certifications, exemptions, filings or registrations by or with any Governmental Authority necessary for the Company to conduct its business and own (or lease) its properties or to execute, deliver and perform the Transaction Documents, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
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(f) Insurance . Promptly obtain and maintain in full force and effect at all times with responsible insurance companies such insurance covering its assets and properties, in such amounts and against such risks and with such deductibles as an enterprise conducting a similar business under similar business conditions as the Company would customarily maintain, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
(g) Continuance of Business . Maintain its legal existence, licenses and privileges in good standing under and in compliance with all applicable laws and continue to operate the business currently conducted by the Company and its Subsidiaries. Without limiting the generality of the foregoing, the Company shall do and cause to be done all things necessary to apply for, preserve, maintain and keep in full force and effect all of its registrations of trademarks, service marks and other marks, trade names and other trade rights, patents, copyrights and other intellectual property in accordance with prudent business practices.
(h) Taxes . Pay and discharge (i) all federal and other material taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien (other than a Permitted Lien) upon any of its properties or assets; and (ii) all other lawful claims which, if unpaid, would by law become a Lien upon its property not constituting a Permitted Lien.
(i) Additional Patents . Following the date hereof, if the Company shall obtain rights to any new patents or otherwise acquires or becomes entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Lender thereof and (ii) hereby authorizes the Lender to modify, amend, or supplement Exhibit A and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
(j) Preservation of Patents . The Company shall (i) prosecute diligently all applications in respect of the Patents, now or hereafter pending; (ii) make federal applications on all of its unpatented but patentable inventions; (iii) preserve and maintain all of its material rights in the Patents and protect the Patents from infringement, unfair competition, cancellation, or dilution by all appropriate action necessary in the Company’s reasonable business judgment, including, without limitation, the commencement and prosecution of legal proceedings to recover damages for infringement and to defend and preserve its rights in the Patents; and (iv) not abandon any of the Patents necessary to the conduct of its business.
7. Negative Covenants . So long as any Obligations remain outstanding:
(a) Liens . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, create or suffer to exist any Lien (other than the Liens granted hereunder, under the Captial Note and the Permitted Liens) on any assets of such Person.
(b) Debt . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, incur any Debt other than Permitted Debt; prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Debt (other than amounts due in respect of this Note); or amend, modify or otherwise change the terms of any Debt (other than this Note) in a manner which would accelerate the scheduled repayment thereof or otherwise be adverse to the interests of the Lender.
(c) Sale of Subsidiary . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, transfer, cause to be sold or transferred, or otherwise dispose of, any interest in a Subsidiary of such Person.
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(d) Distributions . The Company shall not declare or pay any dividends or make any distribution of any kind on the Company’s capital stock.
(e) Amendment of Organic Documents . The Company shall not amend, supplement, or otherwise modify any of the provisions of the Company’s Organic Documents in a manner that would be materially adverse to the Lender.
(f) Transaction with Affiliates . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, transfer, sell, assign or otherwise dispose of any of its assets to any Affiliate or enter into any transaction directly or indirectly with or for the benefit of any Affiliate unless the monetary or business consideration arising therefrom would be as advantageous to the Company or, as applicable, such Subsidiary, as the Company or such Subsidiary would obtain in a comparable arm’s length transaction with a Person not an Affiliate.
(g) Sale of Collateral . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, license, transfer or otherwise dispose of any interest in any Collateral, except for licenses or sublicenses of rights in intellectual property on a non-exclusive or other limited basis in the ordinary course of business.
(h) Changes in Business . The Company shall not enter into or engage in any business other than that carried on (or contemplated to be carried on) as of the date hereof.
(i) Accounting Changes . The Company shall not change its fiscal year or make or permit any change in accounting policies or reporting practices, except as permitted by GAAP.
8. Use of Proceeds . The Company shall use the proceeds from this Note solely to fund the operations of the Company in the ordinary course of business.
9. Default .
(a) Events of Default . For purposes of this Note, any of the following events which shall occur shall constitute an “ Event of Default ”:
(i) any indebtedness under this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise;
(ii) a default shall occur in the observance or performance of (A) any covenant, obligation or agreement of the Company contained in Sections 6 , 7 or 8 , or (B) any other provision of this Note, the Agreement or any Transaction Document and such default shall continue uncured for a period of 5 days after the Company knew or should have known, exercising reasonable diligence, of the event or circumstances giving rise to such default;
(iii) any representation, warranty or certification made by the Company herein or in the Agreement or in any certificate, report, document, agreement or instrument delivered pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made;
(iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of itself or any part of its property, (B) become subject to the appointment of a receiver, trustee, custodian or liquidator for itself or any part of its property that is not discharged or stayed within 60 days after such appointment, (C) make an assignment for the benefit of creditors, (D) or fail generally or admit in writing to its inability to pay its debts as they become due, (E) institute any proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, or file a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law, or file an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, or (F) become subject to any involuntary proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally that is not dismissed within 60 days after commencement, or have an order for relief entered against it in any proceeding under the United States Bankruptcy Code that is not dismissed within 60 days of entry;
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(v) the Company shall (A) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or dissolution), (B) suspend its operations other than in the ordinary course of business, or (C) take any action to authorize any of the actions or events set forth above in Section 9(a)(iv) ;
(vi) any final judgment or judgments for the payment of money aggregating in excess of $50,000 shall be rendered against the Company which judgments are not, within 30 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 45 days after the expiration of such stay; provided , however , that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating such amount so long as the Company provides the Lender with a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Lender) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;
(vii) (A) any Debt of the Company (other than this Note) shall not be paid at its stated maturity or shall be duly declared to be or shall become due and payable prior to the stated maturity thereof, or (B) there shall occur and be continuing any event under any agreement or instrument relating to any such Debt, the effect of which is to cause such Debt to become due prior to its stated maturity, or (C) the holder or holders of such Debt, or any trustee, agent or other representative on behalf of such holder or holders, shall have demanded or required, pursuant to the terms of any agreement or instrument relating to such Debt, that the Company redeem, repurchase or otherwise acquire or retire such Debt for value at any time prior to its stated maturity;
(viii) the occurrence or existence of any event or condition that, in the Lender’s reasonable and good faith judgment, has had or would have or result in a Material Adverse Effect;
(ix) any material impairment in the value of the Collateral or the priority of the Lender’s Lien hereunder;
(x) any levy upon, seizure or attachment of a material portion of the Collateral which shall not have been rescinded or withdrawn within 20 days after the date of such levy, seizure or attachment; or
(xi) (A) the Company asserts that any Transaction Document is invalid or unenforceable, in whole or in part, or (B) the Lender shall cease to have a perfected Lien in any of the Collateral (subject to Permitted Liens).
(b) Consequences of Events of Default .
(i) Upon the occurrence of any Event of Default, the Lender may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Transaction Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without limiting the generality of the foregoing, (w) the Lender may, subject to the UCC and other applicable law, peaceably and without notice enter any premises of the Company, take possession of any of the Collateral, remove or dispose of all or part of the Collateral on any premises of the Company or elsewhere, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as the Lender may determine; (x) the Lender may require the Company to assemble all or any part of the Collateral and make it available to the Lender at any place and time designated by the Lender; (y) the Lender may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law); (z) the Lender may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of the Company’s assets, without charge or liability to the Lender therefor) at public or private sale, by one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as the Lender deems advisable; provided , however, that the Company shall be credited with the net proceeds of sale only when such proceeds are finally collected by the Lender.
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(ii) For the purpose of enabling the Lender to exercise its rights and remedies under this Section 9 during the continuance of an Event of Default, the Company hereby grants to the Lender an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to the Company) to use, license or sublicense any intellectual property Collateral.
(iii) The Lender has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and the Lender may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting the Lender’s rights against the Company. The Company waives any right it may have to require the Lender to pursue any third Person for any of the Obligations. The Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Lender may sell the Collateral without giving any warranties as to the Collateral. The Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If the Lender sells any of the Collateral upon credit, the Company will be credited only with payments actually made by the purchaser, received by the Lender and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Lender may resell the Collateral and the Company shall be credited with the proceeds of the sale.
(iv) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of the Lender in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to the Lender; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to the Company or otherwise disposed of in accordance with the UCC or other applicable law. The Company shall remain liable to the Lender for any deficiency which exists after any sale or other disposition or collection of Collateral.
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(v) The Lender shall also have any other rights which the Lender may have been afforded under any contract or agreement at any time and any other rights which the Lender may have pursuant to applicable law. The Lender may exercise any and all of its remedies under this Note, the Agreement and the other Transaction Documents contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.
10. Lost, Stolen, Destroyed or Mutilated Note . In case this Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any such mutilated Note, or in lieu of any such Note lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of any such Note.
11. Governing Law . This Note is to be construed in accordance with and governed by the laws of the State of New York. The provisions of Section 5.3 of the Agreement relating to venue, submission to jurisdiction and the waiver of the right to jury trial are by this reference incorporated herein, mutatis mutandis , as if set forth herein in full.
12. Amendment and Waiver . Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lender.
13. Notices . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Note shall be made in accordance with Section 5.6 of the Agreement.
14. Securities Purchase Agreement . This Note is issued pursuant to the terms of the Agreement.
15. Termination . Upon payment and performance in full of all Obligations, the security interest created under this Note shall terminate.
16. Authorization. The Company hereby irrevocably authorizes the Lender (or its designee) at any time and from time to time to file in any jurisdiction any financing or continuation statement and amendment thereto or any registration of charge, mortgage or otherwise, containing any information required under the UCC or any applicable of any other applicable jurisdiction (in each case, without the signature of the Company to the extent permitted by applicable law), reasonably necessary or appropriate in the judgment of the Lender to perfect or evidence its first priority security interest in and Lien on the Collateral. The Company hereby irrevocably ratifies and approves any such filing, registration or recordation in any jurisdiction by the Lender (or its designee) that has occurred prior to the date hereof, of any financing statement, registration of charge, mortgage or otherwise. The Company agrees to provide to the Lender (or its designee) any and all information required under the UCC or any applicable law of any other applicable jurisdiction for the effective filing of a financing statement and any amendment thereto or any registration of charge, mortgage or otherwise in connection with the Collateral.
17. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
18. Assignment . The Company shall not have the right to assign its rights and obligations hereunder or any interest herein. The Lender may at any time assign or transfer all or part of its rights and/or obligations under this Note.
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19. Remedies Cumulative; Failure or Indulgence Not a Waiver . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
20. Payments . Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of the Lender as of the date of issuance hereof, shall initially be the address for the Lender as set forth in the Agreement); provided that the Lender may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Lender’s wire transfer instructions. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest. All payments received by the Lender after 5:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest shall continue to accrue.
21. Excessive Interest . Notwithstanding any other provision herein to the contrary, this Note is hereby expressly limited so that the interest rate charged hereunder shall at no time exceed the maximum rate permitted by applicable law. If, for any circumstance whatsoever, the interest rate charged exceeds the maximum rate permitted by applicable law, the interest rate shall be reduced to the maximum rate permitted, and if the Lender shall have received an amount that would cause the interest rate charged to be in excess of the maximum rate permitted, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing hereunder (without charge for prepayment) and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal, such excess shall be refunded to the Company.
22. Facsimile Transmission of Signature Page . The delivery of any executed signature page to this Note by telecopy or other electronic imaging means shall be effective as delivery of a manually executed signature page to this Note.
23. Amendment and Restatement . The Company and the Lender agree that: (a) the Obligations represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Note is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing Note in its entirety; and (c) the entering into and performance by the Company and the Lender of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Note. All references in the other Transaction Documents to the Existing Note shall henceforth include references to this Note, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
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24. Ratifications . The Company hereby (a) ratifies and confirms all provisions of the other Transaction Documents, and (b) ratifies and confirm that all guaranties, assurances, and liens granted, conveyed, or assigned to the Lender under the Existing Note are not released, reduced, or otherwise adversely affected by this Note and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Note and the Transaction Documents. The Company hereby acknowledges that immediately prior to the execution and delivery of this Note, the outstanding principal balance of the Existing Note is $140,000 and the accrued but unpaid interest thereon is $____, which amount is and shall be payable in accordance with the terms hereof and is in addition to the interest that accrues under this Note after the date hereof.
25. Waiver of Notice . To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Transaction Documents. In addition, the Company hereby waives, to the fullest extent permitted by law, (a) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (b) any right to require the Lender (i) to proceed against any Person, (ii) to exhaust any other collateral or security for any of the Obligations, or (iii) to pursue any remedy in the Lender’s power; and (c) all claims, damages, and demands against the Lender arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral.
(Remainder of page intentionally left blank; signature page follows)
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IN WITNESS WHEREOF, the Company has caused this Seventh Amended and Restated Secured Convertible Promissory Note to be duly executed by its officers, thereunto duly authorized as of the date first above written.
Address of the Company: | NANO VIBRONIX, INC. |
105 Maxess Road, Suite S124 Melville, NY 11747 Attn: ____________ |
By: ________________________________
Name: ________________________________
|
Its: ________________________________ | |
Address of the Lender:
805 Third Avenue, 15th Floor New York, NY 10022 |
GLOBIS OVERSEAS FUND LTD.
|
By: ________________________________
|
|
Name: ________________________________
Its: ________________________________
|
Exhibit A to
Secured Convertible Promissory Note
Important Notes:
Nanovibronix strategy was to create strong IP barrier for other companies. Nanovibronix aimed to cover it's novel technology and devices world wide, because our attempts were to create valuable company. The author of all ideas – Jona Zumeris, D.Sc. Nanovibronix is working with Pearl Cohen Zedek and Malina patent offices. Annuity is being done through Dennemeyer&Co
Exact Legal Name of Owner | Description of Intellectual Property | Country(ies) of Registration |
Application or Registration Number(s) |
Registration Office(s) | Application or Registration Date(s) |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | USA | 7,393,501 B2 | USA |
filed May28,2003 reg. Jul1,2008 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | China | ZL03818327.7 | China |
Filed May29,2003 Grant April29,2009 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Israel | 165422 | Israel |
filed May28,2003 reg. Aug18,2010 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Japan | 4504183 | Japan |
filed May28,2003 reg. Apr.30,2010 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | India | 246351 | India |
filed May29,2003 reg. Feb24,2011, |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Australia | 2003231892 | Australia |
filed May28,2003 reg. Nov6,2008 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | European Union | 1511414 B |
European Union (UK,Gr,Fr) |
Filed Dec9,2004 Grant Aug8,2012 |
Exact Legal Name of Owner | Description of Intellectual Property | Country(ies) of Registration |
Application or Registration Number(s) |
Registration Office(s) | Application or Registration Date(s) |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Hong Kong | Appl.nr 05107834.0 | Hong Kong | Allowed, but decision to abandon |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | USA | 7,829.029 B2 | USA |
filed May29,2007 reg. Nov9,2010 |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | China | Appl.nr. 200780019732.3 | China |
filed May29,2007 allowed |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | European Union | Appl.nr 07736150.9 |
European Union (Fr,UK,Gr) |
filed Mar29,2007 allowed |
Nano Vibronix, Inc. | System and method for SAW treatment of medical devices | USA | US nr. 11/710,616 | USA | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | USA | US nr. 11/710,615 | USA | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | India | India | Filed Feb26,2007 | |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Hong Kong | Appl.nr 09110611.9 | Hong Kong | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | European Union |
Appl.nr. 07861247.0 |
European Union | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Canada | Appl.nr 2,643,423 | Canada | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | China | Appl.nr. 2007/780014875.5 | China | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Israel | Appl.nr.193600 | Israel | Filed Feb26,2007 |
Nano Vibronix, Inc. | Method for friction reduction in medical tubing and applications using this method | USA |
US nr. 13/521,060 |
USA | Filled Jul09,2012 |
Nano Vibronix, Inc. (Assignment from inventors to Nano Vibronix, Inc. has not yet been recorded. Each inventor to this patent is obligated per their employment agreement to assign these rights to NanoVibronix, Inc.) | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | USA | 7,892,191 | USA |
filed May18,2005 reg. Feb22,2011 |
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Russia | 2419395 | Russia |
filed May18,2005 reg. May27,2011 |
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | European Union |
Appl.nr. 05752180.9 |
European Union |
filed May18,2005
|
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Japan | Appl..nr 2007-527384 | Japan |
filed May18,2005
|
18 |
EXHIBIT 10.12
THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS SEVENTH AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS SECURED CONVERTIBLE PROMISSORY NOTE IS CONVERTIBLE ARE SUBJECT TO RESTRICTIONS ON TRANSFER CONTAINED IN THAT CERTAIN SEVENTH AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, DATED AS OF FEBRUARY 6, 2014, BETWEEN THE COMPANY AND THE LENDER REFERENCED HEREIN, WHICH RESTRICTIONS ON TRANSFER ARE INCORPORATED HEREIN BY REFERENCE.
SEVENTH AMENDED AND RESTATED
SECURED CONVERTIBLE PROMISSORY NOTE
$560,000 | March __, 2014 |
New York, New York
FOR VALUE RECEIVED, NANO VIBRONIX, INC., a Delaware corporation (the “ Company ”), hereby promises to pay to the order of GLOBIS CAPITAL PARTNERS, L.P. (together with its successors, representatives, and assigns, the “ Lender ”), the principal sum of FIVE HUNDRED AND SIXTY THOUSAND DOLLARS ($560,000) with interest on the outstanding principal amount at the rate, except as otherwise provided herein, of six percent (6.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate of interest then permitted under applicable law; provided , however , that from and after an Event of Default (as defined below), all indebtedness hereunder shall accrue interest at the rate of ten percent (10.00%) per annum (computed on the basis of actual calendar days elapsed and a year of 365 or 366 days, as the case may be) or, if less, at the highest rate permitted by applicable law (the “ Post-Default Rate ”). Interest commenced on February 6, 2014 and shall continue on the outstanding principal of this Seventh Amended and Restated Secured Convertible Promissory Note (this “ Note ”) until paid or converted in accordance with the provisions hereof.
Reference is made to the Sixth Amended and Restated Securities Purchase Agreement, dated February 6, 2014, by and between the Company and the Lender, as the “ Investor ” (the “ Agreement ”). In connection with the Sixth Amended and Restated Securities Purchase Agreement, the Company issued to the Lender that certain Sixth Amended and Restated Secured Convertible Promissory Note dated February 6, 2014, in the principal amount of $560,000 (the “ Existing Note ”). The Company and the Lender desire to amend and restate the Existing Note as set forth herein.
Reference is also made to the Seventh Amended and Restated Secured Convertible Promissory Note dated March __, 2014, issued by the Company to Globis Overseas Fund Ltd., in the principal amount of $560,000 (the “ Overseas Note ”).
1. Definitions . For purposes of this Note, the following terms shall have the following meanings (capitalized terms used herein but not otherwise defined shall have the meanings provided therefor in the Agreement):
“ Affiliate ” shall mean with respect to any Person, any other Person (i) which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, (ii) which beneficially owns or holds 10% or more of any class of the voting stock of such first Person, or (iii) whereby 10% or more of the voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of such other Person is beneficially owned or held by such first Person or by a Subsidiary of such first Person.
“ Agreement ” shall have the meaning ascribed to such term in the recitals of this Note.
“ Business Day ” means any day which is not a Saturday or Sunday or a legal holiday on which banks are authorized or required to be closed in New York, New York.
“ Collateral ” shall have the meaning ascribed to such term in Section 2 of this Note.
“ Common Stock ” means the common stock of the Company.
“ Common Stock or Series C Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Stock or any Convertible Security.
“ Control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” (and the lower-case versions of the same) shall have meanings correlative thereto.
“ Convertible Securities ” shall mean evidences of indebtedness, shares of stock or other securities or instruments (other than Options) which are convertible into or exchangeable for shares of Common Stock or Series C Preferred Stock, either immediately or upon the arrival of a specified date or the occurrence of a specified event.
“ Debt ” shall mean, with respect to any Person, all liabilities, obligations and indebtedness of such Person of every kind and nature, including, without limitation: (i) indebtedness or liability for borrowed money, or for the deferred purchase price of property or services (including trade obligations); (ii) obligations as lessee under any leases (including under any capital leases); (iii) any reimbursement or other obligations under any performance or surety bonds or any letters of credit issued for the account of such Person; (iv) all net obligations in respect of any derivative products; (v) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business), and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any other Person, or otherwise to assure a creditor against loss; and (vi) obligations secured by any Lien on property owned by such Person, whether or not the obligations have been assumed.
“ Default ” means an Event of Default or an event or condition which with notice or lapse of time or both would constitute an Event of Default.
“ Exercise Price ” shall have the meaning ascribed to such term in Section 5(a) of this Note
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“ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock or Series C Preferred Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
“ GAAP ” means generally accepted principles of good accounting practice in the United States, consistently applied.
“ Governmental Authority ” shall mean any federal, state, local or other governmental department, commission, board, bureau, agency or other instrumentality or authority, domestic or foreign, exercising executive, legislative, judicial, regulatory or administrative authority or functions of or pertaining to government.
“ Lien ” shall mean any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), claim or other priority or preferential arrangement of any kind or nature whatsoever (other than a financing statement filed by a lessor in respect of an operating lease not intended as security).
“ Material Adverse Effect ” shall mean (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, condition (financial or otherwise) or prospects of the Company and its direct or indirect Subsidiaries, taken as a whole on a consolidated basis, or (iii) a material and adverse impairment of the Company’s ability to perform fully on a timely basis its obligations under any of the Transaction Documents to which such Person is party.
“ Obligations ” shall mean all obligations of the Company to the Lender howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, or now or hereafter existing, or due or to become due, which arise out of or in connection with this Note and the other Transaction Documents, including all costs and expenses incurred by the Lender in connection with the enforcement of this Note or any other Transaction Document.
“ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock, Series C Preferred Stock or Convertible Securities.
“ Patents ” shall have the meaning ascribed to such term in Section 2 of this Note.
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“ Permitted Debt ” shall mean, with respect to the Company and each of its direct and indirect Subsidiaries, any of (i) the Obligations, (ii) trade accounts payable incurred in the ordinary course which are due no later than 90 calendar days after invoice, (iii) other current liabilities incurred in the ordinary course of business and not incurred through the borrowing of money or the obtaining of credit, (iv) obligations under long-term real property leases incurred in the ordinary course of business, (v) short-term lease obligations or indebtedness incurred to finance the cost of tangible personal property (which was acquired after the date hereof) in an amount that does not exceed an aggregate of $10,000 during any twelve month period, (vi) Debt in respect of taxes or other governmental charges which is not yet due or which is being contested in good faith by appropriate proceedings, and (vii) Debt in connection with the Overseas Note.
“ Permitted Lien ” shall mean, as of any particular time with respect to the Company and each of its direct and indirect Subsidiaries, (i) Liens of taxes, assessments or other charges of a Governmental Authority not then delinquent or which are being contested in good faith by appropriate proceedings, (ii) Liens in favor of the Lender created pursuant to the Transaction Documents, (iii) any mechanic’s, worker’s, repairer’s, supplier’s, vendor’s or like Liens securing obligations arising in the ordinary course of business (A) that are not mature and overdue, (B) that do not materially impair the value of the Collateral provided to the Lender pursuant to the Transaction Documents and (C) that could not result in an aggregate liability in excess of $10,000, (iv) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution, provided that such deposit account is not a dedicated cash collateral account.
“ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
“ Series C Preferred Stock ” means the Series C Preferred Stock of the Company.
“ Subsidiary ” shall mean, with respect to any Person (herein referred to as the “parent”), any corporation, limited liability company, partnership, association or other business entity (i) of which securities of other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by the parent, or (ii) that is, at any time any determination is made, otherwise Controlled by, the parent or one or more Subsidiaries of the parent and one or more Subsidiaries of the parent.
“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York.
“ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
2. Grant of Security Interest . As collateral security for the prompt and complete payment and performance of all of the Company’s present or future Obligations, the Company hereby grants a security interest and mortgage to the Lender, as security, in and to the Company’s entire right, title and interest in, to and under the following intellectual property, now owned or hereafter acquired by the Company or in which the Company now holds or hereafter acquires any interest (all of which shall collectively be called the “ Collateral ” for purposes of this Note):
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(a) All letters patent of, or rights corresponding thereto in, the United States or any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto in, the United States or any other country, including, without limitation, registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country; all reissues, continuations, continuations-in-part or extensions thereof; all petty patents, divisionals, and patents of addition; and all patents to be issued under any such applications, including without limitation the patents and patent applications set forth on Exhibit “A” attached hereto (collectively, the “ Patents ”);
(b) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above;
(c) All licenses or other rights to use any of the Patents, and all license fees and royalties arising from such use to the extent permitted by such license or rights;
(d) All amendments, renewals and extensions of any of the Patents; and
(e) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing.
3. Maturity . Unless sooner paid or converted in accordance with the terms hereof, the entire unpaid principal amount and all unpaid accrued interest shall become fully due and payable on the earlier of (a) April 30, 2014, (b) the closing date of a financing, conducted through a bona fide arm’s length transaction, in which the Company (i) issues and sells for cash its capital stock to investor(s) and/or (ii) issues indebtedness to lenders, in aggregate amount from the date hereof equal to or greater than Two Hundred and Fifty Thousand Dollars ($250,000), or (c) the date of the acceleration of the maturity of this Note by the Lender upon the occurrence of an Event of Default (such earlier date, the “ Maturity Date ”).
4. Payments .
(a) Form of Payment . All payments of interest and principal (other than payment by way of conversion) shall be in lawful money of the United States of America to the Lender, at the address specified in the Agreement, or at such other address as may be specified from time to time by the Lender in a written notice delivered to the Company. All payments made hereunder shall be applied first to accrued interest, and thereafter to principal and any fees due and owing to the Lender.
(b) Prepayment . Prepayment of principal or interest under this Note without the express prior written consent of the Lender is not permitted.
5. Conversion .
(a) Conversion at the Option of the Lender . At any time prior to the Maturity Date, the Lender may, in its sole discretion and upon 5 Business Days’ prior written notice to the Company, convert all or a portion of the Debt of the Company outstanding on such date under this Note into that number of shares of Series C Preferred Stock which is equal to the quotient obtained by dividing (a) the sum of (i) the outstanding principal amount of this Note elected by the Lender to be so converted and (ii) any accrued but unpaid interest thereon elected by the Lender to be so converted by (b) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof) (the “ Exercise Price ”). Any accrued but unpaid interest not converted into shares of Series C Preferred Stock as provided in the preceding sentence shall be paid in cash on such date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Series C Preferred Stock as would be issuable upon conversion of the Note pursuant to this Section 5(a) .
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(b) Conversion or Repayment Upon Maturity . In the event that any Debt under this Note remains outstanding on the Maturity Date, then the principal amount under this Note then outstanding and any accrued but unpaid interest thereon shall, at the option of the Lender, either (a) become immediately due and payable on such date or (b) convert on such date into that number of shares of Series C Preferred Stock which is equal to the quotient obtained by dividing (i) the sum of (A) the then outstanding principal amount of this Note elected by the Lender to be so converted and (B) any accrued but unpaid interest thereon elected by the Lender to be so converted by (ii) $0.38 (subject to appropriate adjustments for any stock dividend, stock split, stock combination, reclassification or similar transaction after the date hereof). Any principal and any accrued but unpaid interest not converted into shares of Series C Preferred Stock as provided in the preceding sentence shall be paid in cash on the Maturity Date. Prior to the execution of this Note, the Company shall have reserved and set aside for issuance to the Lender such number of shares of Series C Preferred Stock as would be issuable upon conversion of the Note pursuant to this Section 5(b) .
(c) Issuance of Certificates . As soon as is reasonably practicable after a conversion has been effected (but in any event within five (5) Business Days thereafter), the Company shall deliver to the Lender a certificate or certificates representing the number of shares of Series C Preferred Stock issuable by reason of such conversion in such name or names and in such denomination or denominations as the Lender may specify.
(d) No Fractional Shares . If any fractional share of Series C Preferred Stock would, except for the provisions hereof, be deliverable upon conversion of this Note, the Company, in lieu of delivering such fractional share, shall pay an amount equal to the value of such fractional share, as determined by the per share conversion price used to effect such conversion.
(e) Issuance Costs . The issuance of certificates for shares of capital stock issuable upon conversion of this Note shall be made without charge to the Lender for any documentary stamp tax in respect thereof or other cost incurred by the Company in connection with such conversion and the related issuance of such shares of Series C Preferred Stock; 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 certificate upon conversion in a name other than that of the Lender so converted and the Company 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 Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Upon conversion of this Note, the Company shall take all such actions as are necessary in order to ensure that the Series C Preferred Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable.
(f) Compliance with Laws and Regulations . The Company shall take all such actions as may be necessary to assure that all shares of capital stock issued upon conversion of this Note may be so issued without violation of any applicable law or governmental regulation or any requirement of any domestic securities exchange upon which such shares of capital stock may be listed (except for official notice of issuance which shall be immediately delivered by the Company upon such issuance).
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(g) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of this Note, if the Company, at any time after the date hereof, (1) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock or Series C Preferred Stock, (2) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock into a larger number of shares or (3) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock or Series C Preferred Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock or Series C Preferred Stock, as applicable, outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock or Series C Preferred Stock, as applicable, outstanding immediately after such event. Any adjustment made pursuant to clause (1) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (2) or (3) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
(h) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the date hereof issue or sell any share of Common Stock or Series C Preferred Stock (otherwise than as provided in Section 5(g) hereof or pursuant to Common Stock or Series C Equivalents granted or issued prior to the date hereof) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock.
(i) Issuance or Modification of Common Stock or Series C Equivalents . In the event the Company shall, at any time following the date hereof: (1) issue or sell any Common Stock or Series C Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (2) modify the conversion or exercise price of any Common Stock or Series C Equivalent issued prior to, on or after the date hereof, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock or Series C Equivalent.
(j) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment to the Exercise Price pursuant to Sections 5(h) or 5(i) hereof upon (1) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (2) securities issued pursuant to the exercise or conversion of Common Stock or Series C Equivalents issued prior to the date hereof (but such exception shall not affect the obligation to decrease the Exercise Price if required by Section 5(i)(2) hereof), (3) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (4) Common Stock or Series C Preferred Stock issued or options to purchase Common Stock or Series C Preferred Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
(k) Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Series C Preferred Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Series C Preferred Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Lender will thereafter have the right to receive upon conversion of this Note at any time after the consummation of the applicable Fundamental Transaction but prior to the repayment in full of this Note, in lieu of the shares of the Series C Preferred Stock (or other securities, cash, assets or other property) issuable upon the conversion of this Note prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Lender would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Lender. The provisions of this Clause (k) shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
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6. Affirmative Covenants . So long as any Obligations remain outstanding, the Company shall:
(a) Compliance with Laws . Comply in all material respects with applicable laws, rules, regulations and orders, such compliance to include, without limitations, paying before the same become delinquent all taxes, assessments, and charges imposed upon it or upon its property by any Governmental Authority except for good faith contests for which adequate reserves are being maintained.
(b) Information . Deliver to the Lender or cause to be delivered to the Lender, in form and detail satisfactory to Lender, the following financial and other information:
(i) written notice of any of the following, promptly, and in any event within three (3) days after the Company actually becomes aware of any of the following: (i) any proceeding being instituted or threatened by or against it involving a sum in excess of $25,000 in the aggregate for all proceedings, (ii) any order, judgment or decree being entered against the Company or any of its properties or assets involving a sum in excess of $25,000 in the aggregate for all such orders, judgments and decrees taken together, and (iii) any actual or prospective change, development or event which has had or could reasonably be expected to have a Material Adverse Effect; and
(ii) such other statements, lists of property and accounts, budgets, forecasts, projections, reports, or other information as the Lender may from time to time reasonably request.
(c) Notice of Litigation . Provide to the Lender promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or Governmental Authority affecting the Company, which, if determined adversely to the Company, could have a Material Adverse Effect.
(d) Notice of Defaults and Events of Defaults . Provide to the Lender, as soon as possible and in any event within three (3) days after the occurrence thereof, with written notice of each event which either (i) is an Event of Default, or (ii) with the giving of notice or lapse of time or both would constitute an Event of Default, in each case setting forth the details of such event and the action which is proposed to be taken by the Company with respect thereto.
(e) Governmental Approvals . Use commercially reasonable efforts to promptly obtain and maintain any and all authorizations, consents, approvals, licenses, franchises, concessions, leases, rulings, permits, certifications, exemptions, filings or registrations by or with any Governmental Authority necessary for the Company to conduct its business and own (or lease) its properties or to execute, deliver and perform the Transaction Documents, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
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(f) Insurance . Promptly obtain and maintain in full force and effect at all times with responsible insurance companies such insurance covering its assets and properties, in such amounts and against such risks and with such deductibles as an enterprise conducting a similar business under similar business conditions as the Company would customarily maintain, except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect.
(g) Continuance of Business . Maintain its legal existence, licenses and privileges in good standing under and in compliance with all applicable laws and continue to operate the business currently conducted by the Company and its Subsidiaries. Without limiting the generality of the foregoing, the Company shall do and cause to be done all things necessary to apply for, preserve, maintain and keep in full force and effect all of its registrations of trademarks, service marks and other marks, trade names and other trade rights, patents, copyrights and other intellectual property in accordance with prudent business practices.
(h) Taxes . Pay and discharge (i) all federal and other material taxes, fees, assessments and governmental charges or levies imposed upon it or upon its properties or assets prior to the date on which penalties attach thereto, and all lawful claims for labor, materials and supplies which, if unpaid, might become a Lien (other than a Permitted Lien) upon any of its properties or assets; and (ii) all other lawful claims which, if unpaid, would by law become a Lien upon its property not constituting a Permitted Lien.
(i) Additional Patents . Following the date hereof, if the Company shall obtain rights to any new patents or otherwise acquires or becomes entitled to the benefit of, or apply for registration of, any of the foregoing, the Company (i) shall promptly notify the Lender thereof and (ii) hereby authorizes the Lender to modify, amend, or supplement Exhibit A and from time to time to include any of the foregoing and make all necessary or appropriate filings with respect thereto.
(j) Preservation of Patents . The Company shall (i) prosecute diligently all applications in respect of the Patents, now or hereafter pending; (ii) make federal applications on all of its unpatented but patentable inventions; (iii) preserve and maintain all of its material rights in the Patents and protect the Patents from infringement, unfair competition, cancellation, or dilution by all appropriate action necessary in the Company’s reasonable business judgment, including, without limitation, the commencement and prosecution of legal proceedings to recover damages for infringement and to defend and preserve its rights in the Patents; and (iv) not abandon any of the Patents necessary to the conduct of its business.
7. Negative Covenants . So long as any Obligations remain outstanding:
(a) Liens . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, create or suffer to exist any Lien (other than the Liens granted hereunder, under the Overseas Note and the Permitted Liens) on any assets of such Person.
(b) Debt . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, incur any Debt other than Permitted Debt; prepay, redeem, purchase, defease or otherwise satisfy in any manner prior to the scheduled repayment thereof any Debt (other than amounts due in respect of this Note); or amend, modify or otherwise change the terms of any Debt (other than this Note) in a manner which would accelerate the scheduled repayment thereof or otherwise be adverse to the interests of the Lender.
(c) Sale of Subsidiary . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, transfer, cause to be sold or transferred, or otherwise dispose of, any interest in a Subsidiary of such Person.
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(d) Distributions . The Company shall not declare or pay any dividends or make any distribution of any kind on the Company’s capital stock.
(e) Amendment of Organic Documents . The Company shall not amend, supplement, or otherwise modify any of the provisions of the Company’s Organic Documents in a manner that would be materially adverse to the Lender.
(f) Transaction with Affiliates . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, transfer, sell, assign or otherwise dispose of any of its assets to any Affiliate or enter into any transaction directly or indirectly with or for the benefit of any Affiliate unless the monetary or business consideration arising therefrom would be as advantageous to the Company or, as applicable, such Subsidiary, as the Company or such Subsidiary would obtain in a comparable arm’s length transaction with a Person not an Affiliate.
(g) Sale of Collateral . The Company shall not, and shall not permit any of its direct or indirect Subsidiaries to, sell, license, transfer or otherwise dispose of any interest in any Collateral, except for licenses or sublicenses of rights in intellectual property on a non-exclusive or other limited basis in the ordinary course of business.
(h) Changes in Business . The Company shall not enter into or engage in any business other than that carried on (or contemplated to be carried on) as of the date hereof.
(i) Accounting Changes . The Company shall not change its fiscal year or make or permit any change in accounting policies or reporting practices, except as permitted by GAAP.
8. Use of Proceeds . The Company shall use the proceeds from this Note solely to fund the operations of the Company in the ordinary course of business.
9. Default .
(a) Events of Default . For purposes of this Note, any of the following events which shall occur shall constitute an “ Event of Default ”:
(i) any indebtedness under this Note is not paid when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise;
(ii) a default shall occur in the observance or performance of (A) any covenant, obligation or agreement of the Company contained in Sections 6 , 7 or 8 , or (B) any other provision of this Note, the Agreement or any Transaction Document and such default shall continue uncured for a period of 5 days after the Company knew or should have known, exercising reasonable diligence, of the event or circumstances giving rise to such default;
(iii) any representation, warranty or certification made by the Company herein or in the Agreement or in any certificate, report, document, agreement or instrument delivered pursuant to any provision hereof or thereof shall prove to have been false or incorrect in any material respect on the date or dates as of which made;
(iv) the Company shall (A) apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of itself or any part of its property, (B) become subject to the appointment of a receiver, trustee, custodian or liquidator for itself or any part of its property that is not discharged or stayed within 60 days after such appointment, (C) make an assignment for the benefit of creditors, (D) or fail generally or admit in writing to its inability to pay its debts as they become due, (E) institute any proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally, or file a petition or answer seeking reorganization or an arrangement with creditors to take advantage of any insolvency law, or file an answer admitting the material allegations of a bankruptcy, reorganization or insolvency petition filed against it, or (F) become subject to any involuntary proceedings under the United States Bankruptcy Code or any other federal or state bankruptcy, reorganization, receivership, insolvency or other similar law affecting the rights of creditors generally that is not dismissed within 60 days after commencement, or have an order for relief entered against it in any proceeding under the United States Bankruptcy Code that is not dismissed within 60 days of entry;
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(v) the Company shall (A) liquidate, wind up or dissolve (or suffer any liquidation, wind-up or dissolution), (B) suspend its operations other than in the ordinary course of business, or (C) take any action to authorize any of the actions or events set forth above in Section 9(a)(iv) ;
(vi) any final judgment or judgments for the payment of money aggregating in excess of $50,000 shall be rendered against the Company which judgments are not, within 30 days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 45 days after the expiration of such stay; provided , however , that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating such amount so long as the Company provides the Lender with a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Lender) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;
(vii) (A) any Debt of the Company (other than this Note) shall not be paid at its stated maturity or shall be duly declared to be or shall become due and payable prior to the stated maturity thereof, or (B) there shall occur and be continuing any event under any agreement or instrument relating to any such Debt, the effect of which is to cause such Debt to become due prior to its stated maturity, or (C) the holder or holders of such Debt, or any trustee, agent or other representative on behalf of such holder or holders, shall have demanded or required, pursuant to the terms of any agreement or instrument relating to such Debt, that the Company redeem, repurchase or otherwise acquire or retire such Debt for value at any time prior to its stated maturity;
(viii) the occurrence or existence of any event or condition that, in the Lender’s reasonable and good faith judgment, has had or would have or result in a Material Adverse Effect;
(ix) any material impairment in the value of the Collateral or the priority of the Lender’s Lien hereunder;
(x) any levy upon, seizure or attachment of a material portion of the Collateral which shall not have been rescinded or withdrawn within 20 days after the date of such levy, seizure or attachment; or
(xi) (A) the Company asserts that any Transaction Document is invalid or unenforceable, in whole or in part, or (B) the Lender shall cease to have a perfected Lien in any of the Collateral (subject to Permitted Liens).
(b) Consequences of Events of Default .
(i) Upon the occurrence of any Event of Default, the Lender may declare any of the Obligations to be immediately due and payable and shall have, in addition to all other rights and remedies granted to it in this Agreement or any other Transaction Document, all rights and remedies of a secured party under the UCC and other applicable laws. Without limiting the generality of the foregoing, (w) the Lender may, subject to the UCC and other applicable law, peaceably and without notice enter any premises of the Company, take possession of any of the Collateral, remove or dispose of all or part of the Collateral on any premises of the Company or elsewhere, and otherwise collect, receive, appropriate and realize upon all or any part of the Collateral, and demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all or any part of the Collateral, as the Lender may determine; (x) the Lender may require the Company to assemble all or any part of the Collateral and make it available to the Lender at any place and time designated by the Lender; (y) the Lender may secure the appointment of a receiver of the Collateral or any part thereof (to the extent and in the manner provided by applicable law); (z) the Lender may sell, resell, lease, use, assign, license, sublicense, transfer or otherwise dispose of any or all of the Collateral in its then condition or following any commercially reasonable preparation or processing (utilizing in connection therewith any of the Company’s assets, without charge or liability to the Lender therefor) at public or private sale, by one or more contracts, in one or more parcels, at the same or different times, for cash or credit, or for future delivery without assumption of any credit risk, all as the Lender deems advisable; provided , however, that the Company shall be credited with the net proceeds of sale only when such proceeds are finally collected by the Lender.
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(ii) For the purpose of enabling the Lender to exercise its rights and remedies under this Section 9 during the continuance of an Event of Default, the Company hereby grants to the Lender an irrevocable, non-exclusive and assignable license (exercisable without payment or royalty or other compensation to the Company) to use, license or sublicense any intellectual property Collateral.
(iii) The Lender has no obligation to attempt to satisfy the Obligations by collecting them from any other Person liable for them, and the Lender may release, modify or waive any Collateral provided by any other Person to secure any of the Obligations, all without affecting the Lender’s rights against the Company. The Company waives any right it may have to require the Lender to pursue any third Person for any of the Obligations. The Lender may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. The Lender may sell the Collateral without giving any warranties as to the Collateral. The Lender may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral. If the Lender sells any of the Collateral upon credit, the Company will be credited only with payments actually made by the purchaser, received by the Lender and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, the Lender may resell the Collateral and the Company shall be credited with the proceeds of the sale.
(iv) The cash proceeds actually received from the sale or other disposition or collection of Collateral, and any other amounts received in respect of the Collateral the application of which is not otherwise provided for herein, shall be applied first, to the payment of the reasonable costs and expenses of the Lender in exercising or enforcing its rights hereunder and in collecting or attempting to collect any of the Collateral, and to the payment of all other amounts payable to the Lender; and second, to the payment of the Obligations. Any surplus thereof which exists after payment and performance in full of the Obligations shall be promptly paid over to the Company or otherwise disposed of in accordance with the UCC or other applicable law. The Company shall remain liable to the Lender for any deficiency which exists after any sale or other disposition or collection of Collateral.
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(v) The Lender shall also have any other rights which the Lender may have been afforded under any contract or agreement at any time and any other rights which the Lender may have pursuant to applicable law. The Lender may exercise any and all of its remedies under this Note, the Agreement and the other Transaction Documents contemporaneously or separately from the exercise of any other remedies hereunder or under applicable law.
10. Lost, Stolen, Destroyed or Mutilated Note . In case this Note shall be mutilated, lost, stolen or destroyed, the Company shall issue a new Note of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any such mutilated Note, or in lieu of any such Note lost, stolen or destroyed, upon receipt of evidence satisfactory to the Company of the loss, theft or destruction of any such Note.
11. Governing Law . This Note is to be construed in accordance with and governed by the laws of the State of New York. The provisions of Section 5.3 of the Agreement relating to venue, submission to jurisdiction and the waiver of the right to jury trial are by this reference incorporated herein, mutatis mutandis , as if set forth herein in full.
12. Amendment and Waiver . Any term of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Lender.
13. Notices . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Note shall be made in accordance with Section 5.6 of the Agreement.
14. Securities Purchase Agreement . This Note is issued pursuant to the terms of the Agreement.
15. Termination . Upon payment and performance in full of all Obligations, the security interest created under this Note shall terminate.
16. Authorization. The Company hereby irrevocably authorizes the Lender (or its designee) at any time and from time to time to file in any jurisdiction any financing or continuation statement and amendment thereto or any registration of charge, mortgage or otherwise, containing any information required under the UCC or any applicable of any other applicable jurisdiction (in each case, without the signature of the Company to the extent permitted by applicable law), reasonably necessary or appropriate in the judgment of the Lender to perfect or evidence its first priority security interest in and Lien on the Collateral. The Company hereby irrevocably ratifies and approves any such filing, registration or recordation in any jurisdiction by the Lender (or its designee) that has occurred prior to the date hereof, of any financing statement, registration of charge, mortgage or otherwise. The Company agrees to provide to the Lender (or its designee) any and all information required under the UCC or any applicable law of any other applicable jurisdiction for the effective filing of a financing statement and any amendment thereto or any registration of charge, mortgage or otherwise in connection with the Collateral.
17. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from this Note and the balance of this Note shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
18. Assignment . The Company shall not have the right to assign its rights and obligations hereunder or any interest herein. The Lender may at any time assign or transfer all or part of its rights and/or obligations under this Note.
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19. Remedies Cumulative; Failure or Indulgence Not a Waiver . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
20. Payments . Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of the Lender as of the date of issuance hereof, shall initially be the address for the Lender as set forth in the Agreement); provided that the Lender may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Lender’s wire transfer instructions. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest. All payments received by the Lender after 5:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest shall continue to accrue.
21. Excessive Interest . Notwithstanding any other provision herein to the contrary, this Note is hereby expressly limited so that the interest rate charged hereunder shall at no time exceed the maximum rate permitted by applicable law. If, for any circumstance whatsoever, the interest rate charged exceeds the maximum rate permitted by applicable law, the interest rate shall be reduced to the maximum rate permitted, and if the Lender shall have received an amount that would cause the interest rate charged to be in excess of the maximum rate permitted, such amount that would be excessive interest shall be applied to the reduction of the principal amount owing hereunder (without charge for prepayment) and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal, such excess shall be refunded to the Company.
22. Facsimile Transmission of Signature Page . The delivery of any executed signature page to this Note by telecopy or other electronic imaging means shall be effective as delivery of a manually executed signature page to this Note.
23. Amendment and Restatement . The Company and the Lender agree that: (a) the Obligations represent, among other things, the restatement, renewal, amendment and modification of the “Obligations” (as defined in the Existing Note); (b) this Note is intended to, and does hereby, restate, renew, amend, modify, supersede and replace the Existing Note in its entirety; and (c) the entering into and performance by the Company and the Lender of their respective obligations under the Transaction Documents and the transactions evidenced hereby and thereby do not constitute a novation nor shall they be deemed to have terminated, extinguished or discharged the indebtedness under the Existing Note, all of which indebtedness shall continue under and be governed by this Note. All references in the other Transaction Documents to the Existing Note shall henceforth include references to this Note, as may, from time to time, be further amended, modified, extended, and/or renewed. To the extent permitted by applicable Law, any and all of the terms and provisions of the other Transaction Documents are hereby amended and modified wherever necessary, even though not specifically addressed herein, so as to conform to the amendments and modifications set forth herein.
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24. Ratifications . The Company hereby (a) ratifies and confirms all provisions of the other Transaction Documents, and (b) ratifies and confirm that all guaranties, assurances, and liens granted, conveyed, or assigned to the Lender under the Existing Note are not released, reduced, or otherwise adversely affected by this Note and continue to guarantee, assure, and secure full payment and performance of the present and future obligations of the Company under this Note and the Transaction Documents. The Company hereby acknowledges that immediately prior to the execution and delivery of this Note, the outstanding principal balance of the Existing Note is $560,000 and the accrued but unpaid interest thereon is $____, which amount is and shall be payable in accordance with the terms hereof and is in addition to the interest that accrues under this Note after the date hereof.
25. Waiver of Notice . To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Transaction Documents. In addition, the Company hereby waives, to the fullest extent permitted by law, (a) any right of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling of the Collateral or other collateral or security for the Obligations; (b) any right to require the Lender (i) to proceed against any Person, (ii) to exhaust any other collateral or security for any of the Obligations, or (iii) to pursue any remedy in the Lender’s power; and (c) all claims, damages, and demands against the Lender arising out of the repossession, retention, sale or application of the proceeds of any sale of the Collateral.
(Remainder of page intentionally left blank; signature page follows)
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IN WITNESS WHEREOF, the Company has caused this Seventh Amended and Restated Secured Convertible Promissory Note to be duly executed by its officers, thereunto duly authorized as of the date first above written.
Address of the Company: | NANO VIBRONIX, INC. |
105 Maxess Road, Suite S124 Melville, NY 11747 Attn: ____________ |
By: ________________________________
Name: ________________________________
|
Its: ________________________________ | |
Address of the Lender:
805 Third Avenue, 15th Floor New York, NY 10022 |
GLOBIS CAPITAL PARTNERS, L.P.
|
By: ________________________________
|
|
Name: ________________________________
Its: ________________________________
|
Exhibit A to
Secured Convertible Promissory Note
Important Notes:
Nanovibronix strategy was to create strong IP barrier for other companies. Nanovibronix aimed to cover it's novel technology and devices world wide, because our attempts were to create valuable company. The author of all ideas – Jona Zumeris, D.Sc. Nanovibronix is working with Pearl Cohen Zedek and Malina patent offices. Annuity is being done through Dennemeyer&Co
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies) of Registration |
Application or Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | USA | 7,393,501 B2 | USA |
filed May28,2003 reg. Jul1,2008 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | China | ZL03818327.7 | China |
Filed May29,2003 Grant April29,2009 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Israel | 165422 | Israel |
filed May28,2003 reg. Aug18,2010 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Japan | 4504183 | Japan |
filed May28,2003 reg. Apr.30,2010 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | India | 246351 | India |
filed May29,2003 reg. Feb24,2011, |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Australia | 2003231892 | Australia |
filed May28,2003 reg. Nov6,2008 |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | European Union | 1511414 B |
European Union (UK,Gr,Fr) |
Filed Dec9,2004 Grant Aug8,2012 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies) of Registration |
Application or Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
Nano Vibronix, Inc. | Method, apparatus and system for treating biofilms associated with catheters | Hong Kong | Appl.nr 05107834.0 | Hong Kong | Allowed, but decision to abandon |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | USA | 7,829.029 B2 | USA |
filed May29,2007 reg. Nov9,2010 |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | China | Appl.nr. 200780019732.3 | China |
filed May29,2007 allowed |
Nano Vibronix, Inc. | Acoustic add-on device for biofilm prevention in urinary catheter | European Union | Appl.nr 07736150.9 |
European Union (Fr,UK,Gr) |
filed Mar29,2007 allowed |
Nano Vibronix, Inc. | System and method for SAW treatment of medical devices | USA | US nr. 11/710,616 | USA | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | USA | US nr. 11/710,615 | USA | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | India | India | Filed Feb26,2007 | |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Hong Kong | Appl.nr 09110611.9 | Hong Kong | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | European Union |
Appl.nr. 07861247.0 |
European Union | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Canada | Appl.nr 2,643,423 | Canada | Filed Feb26,2007 |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | China | Appl.nr. 2007/780014875.5 | China | Filed Feb26,2007 |
Exact Legal
Name of Owner |
Description of
Intellectual Property |
Country(ies) of Registration |
Application or Registration Number(s) |
Registration
Office(s) |
Application or
Registration Date(s) |
Nano Vibronix, Inc. | System and method for surface acoustic waves treatment of skin | Israel | Appl.nr.193600 | Israel | Filed Feb26,2007 |
Nano Vibronix, Inc. | Method for friction reduction in medical tubing and applications using this method | USA |
US nr. 13/521,060 |
USA | Filled Jul09,2012 |
Nano Vibronix, Inc. (Assignment from inventors to Nano Vibronix, Inc. has not yet been recorded. Each inventor to this patent is obligated per their employment agreement to assign these rights to NanoVibronix, Inc.) | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | USA | 7,892,191 | USA |
filed May18,2005 reg. Feb22,2011 |
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Russia | 2419395 | Russia |
filed May18,2005 reg. May27,2011 |
Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | European Union |
Appl.nr. 05752180.9 |
European Union |
filed May18,2005
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Nano Vibronix, Inc. | Nanovibration coating process for medical devices using multi vibration modes of thin piezo element | Japan | Appl..nr 2007-527384 | Japan |
filed May18,2005
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EXHIBIT 10.13
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Nano Vibronix, Inc.
Form of Amended and Restated
Warrant To Purchase Common Stock
Warrant No.: _______
Date of Issuance: _________ (“ Issuance Date ”)
Amended and Restated: _________
Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, _________, the registered holder hereof or its permitted assigns (the “ Holder ”), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this Amended and Restated Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “ Warrant ”), at any time or times after the date hereof, but not after 11:59 p.m., New York time, on _________, 20__, _________ (______) (subject to adjustment as provided herein) fully paid and nonassessable shares of Common Stock (as defined below) (the “ Warrant Shares ”).
This Warrant amends, restates and supersedes in all respects that certain Warrant to Purchase Common Stock, Warrant No. ____-__, issued to the Holder on _________, 20__ (the “ Original Warrant ”). The Original Warrant is henceforth void and shall be of no further force or effect as of the date hereof. However, the Company and the Holder hereby agree that (i) no consideration was paid by the Holder in connection with the amendment and restatement of the Original Warrant, (ii) this Warrant shall be treated as a continuation of the Original Warrant for U.S. tax purposes and (iii) for purposes of calculating any holding periods under Rule 144 of the Securities Act of 1933, as amended, the original issuance date of this Warrant shall be _________, 20__.
1. | EXERCISE OF WARRANT . |
(a) Mechanics of Exercise . Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day after the Issuance Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit A (the “ Exercise Notice ”), of the Holder’s election to exercise this Warrant. Within one (1) Business Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “ Aggregate Exercise Price ”) in the manner set forth in Section 1(c) below. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof. On or before the first (1 st ) Business Day following the date on which the Company has received an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice to the Holder and the Company’s transfer agent for the Warrant Shares, if any. On or before the third (3 rd ) Business Day following the date on which the Company has received such Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Company shall issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice, the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. Upon delivery of an Exercise Notice and payment of the Aggregate Exercise Price for the number of Warrant Shares for which this Warrant was so exercised, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the certificates evidencing such Warrant Shares.
(b) Exercise Price . For purposes of this Warrant, “ Exercise Price ” means $0.38 per Warrant Share, subject to adjustment as provided herein.
(c) Payment of Exercise Price . The Holder shall pay the Exercise Price (i) in cash in immediately available funds or (ii) through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:
X = |
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Where | X= | the number of Warrant Shares to be issued to the Holder. |
Y= | the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised. | |
A= | the Exercise Price. | |
B= | the Per Share Market Value of one Warrant Share on the Business Day immediately preceding the date of such election. |
For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.
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(d) Fractional Shares . The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share.
(e) Insufficient Authorized Shares . From and after the Issuance Date, the Company shall at all times keep reserved for issuance under this Warrant a number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder. If, notwithstanding the foregoing, and not in limitation thereof, at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock (an “ Authorized Share Failure ”) to satisfy its obligation to reserve for issuance upon exercise of this Warrant (the “ Required Reserve Amount ”), then the Company shall promptly take all action necessary to increase the Company’s authorized shares of Common Stock, as applicable, to an amount sufficient to allow the Company to reserve the Required Reserve Amount. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock, and to cause its board of directors to recommend to the stockholders that they approve such proposal.
(f) Holder’s Exercise Limitations . The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, 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), 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 shall include the number of shares of Common Stock issuable upon exercise of this Warrant 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) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1(f) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(f), in determining the number of outstanding shares of Common Stock, a 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 two Business Days 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 Warrant, 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 exercise of this Warrant. The Holder, upon not less than 61 days’ prior written notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1(f), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 1(f) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such written notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. The Beneficial Ownership Limitation provisions of this Section 1(f) may be waived at the election of the Holder upon not less than 61 days’ prior written notice to the Company. Any such waiver will not be effective and the provisions of this paragraph shall continue to apply until the 61st day (or later, if stated in the notice) after such notice of waiver is delivered to the Company. Unless earlier waived, the provisions of this Section 1(f) shall expire and be of no further force or effect as of _________, 20__.
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2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES .
(a) Stock Dividends, Subdivisions and Combinations . Without limiting any provision of Section 3, if the Company, at any time after the Issuance Date, (i) pays a stock dividend on one or more classes of its then outstanding shares of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case (A) the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and (B) the number of shares of Common Stock for which this Warrant is exercisable immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is used in any calculation hereunder, then in such calculation such Exercise Price shall be adjusted appropriately to reflect such event.
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(b) Issuance of Additional Shares of Stock . In the event the Company shall at any time following the Issuance Date issue or sell any share of Common Stock (otherwise than as provided in Section 2(a) hereof or pursuant to Common Stock Equivalents granted or issued prior to the Issuance Date) (an “ Additional Share of Stock ”) at a price per share less than the Exercise Price then in effect, or without consideration (in which case such Additional Shares of Stock shall be deemed to have been issued at a price per share of $0.001 per share), the Exercise Price then in effect upon each such issuance shall be decreased to the price equal to the consideration per share paid for such Additional Share of Stock, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
(c) Issuance or Modification of Common Stock Equivalents . In the event the Company shall, at any time following the Issuance Date: (i) issue or sell any Common Stock Equivalent with an exercise or conversion price less than the Exercise Price then in effect, or (ii) modify the conversion or exercise price of any Common Stock Equivalent issued prior to, on or after the Issuance Date, to an exercise or conversion price less than the Exercise Price then in effect, the Exercise Price then in effect shall be decreased to the exercise or conversion price of such Common Stock Equivalent, and the number of Warrant Shares for which this Warrant is exercisable shall be increased such that the Aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the Aggregate Exercise Price prior to such adjustment.
(d) Certain Issues Excepted . Anything herein to the contrary notwithstanding, the Issuer shall not be required to make any adjustment to the Exercise Price pursuant to Sections 2(b) or 2(c) hereof upon (i) securities issued (other than for cash) in connection with a merger, acquisition, or consolidation, (ii) securities issued pursuant to the exercise or conversion of Common Stock Equivalents issued prior to the Issuance Date (but such exception shall not affect the obligation to decrease the Warrant Price if required by Section 2(c)(ii) hereof), (iii) securities issued in connection with bona fide strategic license agreements or other partnering arrangements so long as such issuances are not for the purpose of raising capital and (iv) Common Stock issued or options to purchase Common Stock granted, in each case, pursuant to the Company’s stock option plans and employee stock purchase plans that have been approved for adoption by the Company’s board of directors and stockholders.
3. | FUNDAMENTAL TRANSACTIONS . |
Fundamental Transactions . Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “ Corporate Event ”), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the applicable Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Warrant been exercised immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the exercise of this Warrant). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.
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(b) Application . The provisions of this Section 3 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.
4. NONCIRCUMVENTION . The Company hereby covenants and agrees that the Company will not, by amendment of the Company’s certificate of incorporation, the Company’s bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect and (ii) shall take all such actions as may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER . Except as otherwise specifically provided herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
6. REISSUANCE OF WARRANTS .
(a) Transfer of Warrant . If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost, Stolen or Mutilated Warrant . Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder satisfactory to the Company and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.
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(c) Exchangeable for Multiple Warrants . This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for fractional shares of Common Stock shall be given.
(d) Issuance of New Warrants . Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Sections 6(a) or 6(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.
7. NOTICES . Except as may be otherwise provided herein, all notices, requests, waivers and other communications made pursuant to this Warrant shall be given or delivered by one party to the other in accordance with the notice provisions of the _________ Securities Purchase Agreement by and between the Company and Holder dated _________, 20__.
8. NOTICES OF CERTAIN CORPORATE ACTIONS . The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon each adjustment of the Exercise Price and the number of Warrant Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10) Business Days prior to the consummation of any Fundamental Transaction.
9. AMENDMENT AND WAIVER . Except as otherwise provided herein, the provisions of this Warrant may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.
10. SEVERABILITY . If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
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11. GOVERNING LAW . This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.
12. REMEDIES, CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF . The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. 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, exercises 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 of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any 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 Warrant (including, without limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.
13. TRANSFER . This Warrant may not be offered for sale, sold, transferred or assigned by the Holder except in a manner consistent with the restrictive legend on the first page of this Warrant; provided , however , that no such assignment shall relieve the Holder of its obligations hereunder if such assignee fails to perform such obligations.
14. CERTAIN DEFINITIONS . For purposes of this Warrant, the following terms shall have the following meanings:
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(a) “ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
(b) “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the city of New York, New York are authorized or required by law to remain closed.
(c) “ Common Stock ” means the common stock of the Company.
(d) “ Common Stock Equivalent ” means any Convertible Security or warrant, Option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.
(e) “ Convertible Securities ” means any stock or other security (other than Options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
(f) “ Fundamental Transaction ” means that (i) the Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company 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), or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.
(g) “ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Common Stock on such date on any registered national securities exchange on which the Common Stock is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not then listed on a registered national securities exchange, the closing sales price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Common Stock is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Common Stock as determined by the Company’s board of directors, acting in good faith. In determining the fair market value of any shares of Common Stock no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
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(h) “ Options ” means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(i) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.
(j) “ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).
[ signature page follows ]
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IN WITNESS WHEREOF, the Company and the Holder have caused this Amended and Restated Warrant to Purchase Common Stock to be duly executed as of the date first written above.
NANO VIBRONIX, INC. | ||
By: | ||
Name:
Title: |
Holder | ||
By: | ||
Name:
Title: |
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EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
Nano Vibronix, Inc.
The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“ Warrant Shares ”) of Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), evidenced by Warrant No. _______ (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.
1. Payment of Exercise Price . The Holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.
2. Delivery of Warrant Shares . The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:
Date: _______________ __, ______
Name of Registered Holder | |||||
By: | |||||
Name: | |||||
Title: | |||||
EXHIBIT 10.14
Nano Vibronix, Inc.
2004 Global Share Option Plan
Approved November 18, 2004
TABLE OF CONTENTS
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This plan, as amended from time to time, shall be known as the Nano Vibronix, Inc. 2004 Global Share Option Plan (the “ Plan ”).
1. | PURPOSE OF THE PLAN |
The Plan is intended to provide an incentive to retain, in the employ of the Company (as defined below) and its affiliates, persons of training, experience and ability; to attract new employees, directors, consultants and service providers; to encourage the sense of proprietorship of such persons; and to stimulate the active interest of such persons in the development and financial success of the Company by providing them with opportunities to purchase shares in the Company.
2. | DEFINITIONS |
For purposes of interpreting the Plan and related documents (including the Option Agreement and its appendixes), the following definitions shall apply.
2.1 | “Board” means the Board of Directors of the Company. |
2.2 | “ Cause ” means (i) conviction of any felony involving moral turpitude or affecting the Company or its affiliates; (ii) any refusal to carry out a reasonable directive of the Company’s Chief Executive Officer, Board or the Optionee’s direct supervisor, which involves the business of the Company or its affiliates and was capable of being lawfully performed; (iii) embezzlement of funds of the Company or its affiliates; (iv) any breach of the Optionee’s fiduciary duties or duties of care of the Company or its affiliates, including without limitation disclosure of confidential information of the Company or its affiliates; and (v) any conduct (other than conduct in good faith) reasonably determined by the Board to be materially detrimental to the Company or its affiliates. |
2.3 | “Chairman” means the Chairman of the Committee. |
2.4 | “Committee ” means a share option compensation committee of the Board, designated from time to time by the resolution of the Board, which shall consist of no fewer than two members of the Board. |
2.5 | “Company” means Nano Vibronix, Inc., a Delaware corporation. |
2.6 | “Date of Grant” means the date of grant of an Option determined by the Board or the Committee and set forth in the Option Agreement. |
2.7 | “Employee” means a person who is employed by the Company or any affiliate. |
2.8 | “Expiration Date” means the date upon which an Option shall expire, as set forth in Section 8.2 of the Plan. |
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2.9 | “ Fair Market Value ” means as of any date, the value of a Share determined as follows: |
(i) | If the Shares are listed on any established stock exchange or any national market system, including without limitation the Tel Aviv Stock Exchange, the NASDAQ National Market System or the NASDAQ SmallCap Market, the Fair Market Value shall be the last reported sale price for such Shares (or the highest closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to the date of determination, as reported in The Wall Street Journal, or such other source as the Board deems reliable; |
(ii) | If the Shares are not listed on any established stock exchange or national market system as mentioned in sub-section (i) above but the Shares are regularly quoted by one or more recognized securities dealers, the Fair Market Value shall be the mean between the highest bid and lowest asked prices quoted for the Shares on the last market trading day prior to the day of determination; or |
(iii) | If the Shares are not listed on any established stock exchange or national market system and the Shares are not regularly quoted by one or more recognized securities dealers as mentioned in sub-sections (i) and (ii) above, the Fair Market Value thereof shall be determined in good faith by the Board. |
2.10 | “IPO” means the initial public offering of the Company’s shares. |
2.11 | “ Option ” means an option to purchase one or more Shares pursuant to the Plan. |
2.12 | “Optionee” means a person who receives or holds an Option under the Plan. |
2.13 | “Option Agreement” means the share option agreement between the Company and an Optionee that evidences and sets out the terms and conditions of an Option. |
2.14 | “Plan” means the Company’s 2004 Global Share Option Plan. |
2.15 | “Purchase Price” means the purchase price for each Share subject to an Option. |
2.16 | “Service Provider” means a director, consultant or adviser or other service provider of the Company or any affiliate, who is not an Employee. |
2.17 | “Share” means the common stock, $ 0.001 par value, of the Company. |
2.18 | “Successor Company” means any entity which the Company is merged into or acquires all or substantially all of the Company’s assets. |
2.19 | “Transaction” means (i) merger, acquisition or reorganization of the Company with one or more other entities in which the Company is not the surviving entity, (ii) a sale of all or substantially all of the assets or shares of the Company to another entity. |
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2.20 | “Vested Option” means any Option, which has already been vested according to the Vesting Dates. |
2.21 | “Vesting Dates” means, as determined by the Board or the Committee, the date as of which the Optionee shall be entitled to exercise an Option or part of an Option, as set forth in Section 9 of the Plan. |
3. | ADMINISTRATION OF THE PLAN |
3.1 | The Board shall have the power to administer the Plan. To the extent permitted under applicable law, the Board may delegate its powers under the Plan, or any part thereof, to the Committee, in which case, any reference to the Board in the Plan with respect to the rights so delegated shall be construed as reference to the Committee. Notwithstanding the foregoing, the Board shall automatically have residual authority (i) if no Committee shall be constituted, (ii) with respect to rights not delegated by the Board to the Committee, or (iii) if such Committee shall cease to operate for any reason whatsoever. |
3.2 | The Committee, if appointed, shall select one of its members as its Chairman and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. |
3.3 | The Board shall have full power and authority (subject to applicable laws): (i) to designate Optionees; (ii) to determine the terms and provisions of Option Agreements (which need not be identical) including, but not limited to, the number of Shares to be covered by each Option, the period and the extent to which the Options may be exercised and the nature and duration of restrictions as to transferability or restrictions constituting substantial risk of forfeiture; (iii) to accelerate the right of an Optionee to exercise, in whole or in part, any previously granted Option; (iv) to interpret the provisions and supervise the administration of the Plan; (v) to determine the Fair Market Value of the Shares; (vi) to designate the type of Options to be granted to an Optionee; (vii) to determine any other matter which is necessary or desirable for, or incidental to, the administration of the Plan. |
3.4 | The Board shall have the authority to grant, in its discretion, to the holder of an outstanding Option, in exchange for the surrender and cancellation of such Option, a new Option having a Purchase Price equal to, lower than or higher than the Purchase Price of the original Option so surrendered and canceled, and containing such other terms and conditions as the Board may prescribe in accordance with the provisions of the Plan. |
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3.5 | Subject to the Company’s incorporation documents, all decisions and elections made by the Board or the Committee pursuant to the provisions of the Plan shall be made by a majority of its members except that no member of the Board or the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Board or the Committee relating to any Option to be granted to that member. All decisions and elections shall be made in accordance with the provisions of the Company’s incorporation documents, as the same may be in effect from time to time. |
3.6 | The interpretation and construction by the Board of any provision of the Plan or of any Option Agreement there under shall be final and conclusive unless otherwise determined by the Board. |
3.7 | Subject to the Company’s incorporation documents, applicable law, and the resolutions of the Company’s Board and/or shareholders , and to all approvals legally required, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company's incorporation documents, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. |
4. | ELIGIBLE PARTICIPANTS |
Only Employees and/or Service Providers shall be eligible for participation in the Plan. The grant of an Option hereunder shall neither entitle the Optionee to participate nor disqualify him or her from participating in, any other grant of Options pursuant to the Plan or any other option or share plan of the Company or any of its affiliates.
5. | SHARES RESERVED FOR THE PLAN |
5.1 | The Company has reserved Three Hundred Thousand (300,000) authorized but unissued Shares for the purposes of the Plan, subject to adjustment as set forth in Section 7 below. Any Shares which remain unissued and which are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of Shares to meet the requirements of the Plan. Should any Option for any reason expire or be canceled prior to its exercise or relinquishment in full, the Share or Shares subject to such Option may again be subjected to an Option under the Plan or under future plans. |
5.2 | Each Option granted pursuant to the Plan, shall be evidenced by a written Option Agreement between the Company and the Optionee, in such form as the Board shall from time to time approve. Each Option Agreement shall state, inter alia, the number of Shares to which the Option relates, the type of Option granted thereunder, the Vesting Dates, the Purchase Price per Share and the Expiration Date. |
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5.3 | Until the consummation of an IPO, Shares issued upon exercise of Options, shall be voted by an irrevocable proxy (the ” Proxy ”), such Proxy to be assigned to the person or persons designated by the Board (the “ Proxy Holder ”). Subject to the Company’s incorporation documents, applicable law and to all approvals legally required, t he Proxy Holder shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him/her, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the voting of such Proxy unless arising out of such Proxy Holder's own fraud or bad faith. Such indemnification shall be in addition to any rights of indemnification the Proxy Holder(s) may have as a director or otherwise under the Company's incorporation documents, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise. |
6. | PURCHASE PRICE |
6.1 | The Purchase Price of each Share subject to an Option shall be determined by the Board in its sole and absolute discretion in accordance with applicable law. Each Option Agreement shall set forth the Purchase Price determined for each Option. |
6.2 | The Purchase Price shall be payable upon the exercise of an Option in the following acceptable forms of payment: |
(i) | cash, check or wire transfer. |
(ii) | at the discretion of the Board, through delivery of Shares (including other Shares purchased pursuant to the Options being exercised) having a Fair Market Value equal as of the date of exercise to the Purchase Price of the Shares to be purchased and acquired upon the exercise of the Option, or by a different form of cashless exercise method through a third party broker as approved by the Board . |
(iii) | at the discretion of the Board, any combination of the methods of payment permitted by any paragraph of this Section 6.2 |
6.3 | The Purchase Price shall be paid in currency of the primary economic environment of either the Company or the Employee (that is the functional currency of the Company or the currency in which the Employee is paid), as shall be determined by the Board. |
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7. | ADJUSTMENTS |
Upon the occurrence of any of the following events, Optionees' rights to purchase Shares under the Plan shall be adjusted as hereafter provided:
7.1 | In the event of Transaction, (a) the unexercised Options then outstanding under the Plan shall be ”Assumed or Substituted” (as defined in Section 7.3 below), (b) appropriate adjustments shall be made to the Purchase Price of each Option so as to reflect such action and (c) all other terms and conditions of the Option Agreements shall remain unchanged, including but not limited to the vesting schedule, all subject to the determination of the Board, which determination shall be in their sole discretion and final. The Company shall notify the Optionee of the Transaction in such form and method as it deems appropriate at least ten (10) days prior to the effective date of such Transaction. |
7.2 | Notwithstanding the above and subject to all applicable law, the Board shall have the power and authority to determine that certain Option Agreements shall provide for the acceleration of the Vesting Dates of outstanding Options so that they vest prior to the Transaction. For avoidance of doubt, no such acceleration shall occur , unless expressly specified in the Option Agreement or determined by the Board. |
7.3 | For the purposes of Section 7.1 above, an Option shall be considered “Assumed or Substituted” if, the Option shall confer the right, subject to such Option’s original vesting schedule and other provisions contained in the relevant Option Agreement, to purchase or receive, for each Share underlying such Option immediately prior to the Transaction, the consideration (whether shares, options, cash, or other securities or property) received in the Transaction by the holders of Shares for each Share held on the effective date of the Transaction (and if such holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Transaction is not solely shares of common stock (or their equivalent) of the Successor Company or its parent or subsidiary, the Board may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option to be solely shares of common stock (or their equivalent) of the Successor Company or its parent or subsidiary equal in Fair Market Value to the per Share consideration received by holders of a majority of the outstanding shares in the Transaction; and provided further that the Board may determine, in its discretion, that in lieu of such assumption or substitution of Options for options of the Successor Company or its parent or subsidiary, such Options will be substituted for any other type of asset or property including cash which is fair under the circumstances. |
7.4 | If the Company is to be voluntarily liquidated or dissolved while unexercised Vested Options remain outstanding under the Plan, the Company shall notify all unexercised Vested Option holders of such liquidation or dissolution at least ten (10) days prior to the effective date thereof, and the Option holders shall then have ten (10) days to exercise any unexercised Vested Option held by them, in accordance with the exercise procedure set forth herein. Upon the expiration of such ten-day period, all remaining outstanding Options will terminate immediately. For avoidance of doubt all non Vested Options shall terminate upon such liquidation or dissolution. |
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7.5 | If the outstanding Shares shall at any time be changed or exchanged by declaration of a share dividend (bonus shares), Share split or reverse Share split, combination or exchange of shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class and kind of the Shares subject to the Plan or subject to any Options theretofore granted, and the Purchase Prices, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares without changing the aggregate Purchase Price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights (rights offering) on outstanding Shares. Upon the occurrence of any of the foregoing, the class and aggregate number of Shares issuable pursuant to the Plan (as set forth in Section 5 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted (all as determined by the Board whose determination shall be final). |
7.6 | Anything herein to the contrary notwithstanding, in any transaction approved by the Board or as otherwise required by the Company’s Certificate of Incorporation in which all of the stockholders of the Company are to sell, exchange or transfer their Shares (in connection with a Transaction or otherwise), each Optionee shall be obliged to sell, exchange, or transfer, as the case may be, any Shares purchased under the Plan and held by the Optionee, in accordance with the instructions issued by the Board in connection with the transaction, whose determination shall be final. |
7.7 | The Optionee acknowledges that each Optionee’s rights to sell the Shares may be subject to certain limitations (including a lock-up period), as will be requested by the Company or its underwriters, and the Optionee unconditionally agrees and accepts any such limitations. |
8. | TERM AND EXERCISE OF OPTIONS |
8.1 | The Board shall determine the form and method of exercising the Options. Except as otherwise determined by the Board, Options shall be exercised by the Optionee’s written notice to the Company or to any third party designated by the Company (the “ Representative ”), in such form and method as may be determined by the Company, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the payment of the Purchase Price for the number of Shares with respect to which the Option is being exercised, at the Company’s or the Representative’s principal office . The notice shall specify the number of Shares with respect to which the Option is being exercised. |
8.2 | All Options shall expire upon the earlier of: (i) the expiration date set forth in the Option Agreement; and (ii) termination of Optionee’s employment or service, subject to the provisions of Section 8.5 below. |
8.3 | Vested Options may be exercised by the Optionee in whole at any time or in part from time to time prior to the Expiration Date. |
8.4 | Unless otherwise approved by the Board, a notice of termination of employment or services shall be deemed to constitute termination of employment or services . |
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8.5 | Notwithstanding anything to the contrary hereinabove and unless otherwise provided in the Optionee’s Option Agreement, an Option which had vested on or before the date of termination of the Optionee’s employment or service may be exercised after the date of termination of Optionee’s employment or service for the additional period set forth below but in no event later than the expiration date set forth in the Option Agreement: |
8.5.1 | if termination was made without Cause, such Vested Options still in force and unexpired may be exercised within a period of three (3) months after the date of such termination; or |
8.5.2 | if termination was the result of death or disability of the Optionee, such Vested Options still in force and unexpired may be exercised within a period of twelve (12) months after such date of termination. |
The Board shall have the authority to provide for longer periods than the three (3) months or twelve (12) months set forth above for a period not to exceed the period during which the Options by their terms would otherwise have been exercisable.
For avoidance of any doubt, if termination of employment or service is for Cause, any outstanding unexercised Option will immediately terminate, and the Optionee shall not have any rights in respect of such outstanding Options.
8.6 | To avoid doubt, Optionees shall not have any of the rights or privileges of shareholders of the Company, in respect of any Shares purchasable upon the exercise of an Option, nor shall they be deemed to be a class of shareholders or creditors of the Company for the purpose of any law, until registration of the Optionee as holder of such Shares in the Company’s register of shareholders upon exercise of the Option in accordance with the provisions of the Plan. |
8.7 | Any Option Agreement may contain such other provisions, not inconsistent with the Plan, as the Board may, from time to time, deem advisable. |
9. | VESTING OF OPTIONS |
9.1 | Subject to the provisions of the Plan, Options shall vest at the Vesting Dates set forth in the Option Agreement provided that no Option may be exercised after the Expiration Date. |
9.2 | The vesting of an Option may be subject to such other terms and conditions, not inconsistent with the Plan, as the Board may deem appropriate. The vesting provisions of individual Options may vary. |
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10. | PURCHASE FOR INVESTMENT |
The Company’s obligation to issue or allocate Shares upon exercise of an Option granted under the Plan is expressly conditioned upon: (a) the Company’s completion of any registration or other qualifications of such Shares under all applicable laws, rules and regulations or (b) representations and undertakings by the Optionee (or his legal representative, heir or legatee, in the event of the Optionee’s death) to assure that the sale of the Shares complies with any registration exemption requirements which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Optionee (or his legal representative, heir, or legatee): (a) is purchasing such Shares for investment and not with any present intention of selling or otherwise disposing thereof; and (b) agrees to have placed upon the face and reverse of any certificates evidencing such Shares a legend setting forth (i) any representations and undertakings which such Optionee has given to the Company or a reference thereto and (ii) that, prior to effecting any sale or other disposition of any such Shares, the Optionee must furnish to the Company an opinion of counsel, satisfactory to the Company, that such sale or disposition will not violate the applicable laws, rules and regulations of the United States or any other state having jurisdiction over the Company and the Optionee.
11. | SHARES SUBJECT TO RIGHT OF FIRST REFUSAL |
11.1 | Notwithstanding anything to the contrary in the incorporation documents of the Company, none of the Optionees shall have a right of first refusal with respect to any sale of shares in the Company by virtue of Shares issued upon the exercise of an Option. |
11.2 | Unless otherwise determined by the Board, until such time as the Company shall complete an IPO, an Optionee shall not have the right to sell Shares issued upon the exercise of an Option within six (6) months and one day of the date of exercise of such Option or issuance of such Shares. |
Sale of Shares by the Optionee shall be subject to a right of first refusal as set forth in the incorporation documents of the Company. In the event that the incorporation documents of the Company do not contain any provision regarding rights of first refusal, then, unless otherwise determined by the Board, until such time as the Company shall complete an IPO, the sale of Share issuable upon the exercise of an Option shall be subject to a right of first refusal on the part of the “Repurchaser(s)”.
“Repurchaser(s)” means (i) the Company, if permitted by applicable law, (ii) if the Company is not permitted by applicable law, then any affiliate of the Company designated by the Board; or (iii) if no affiliate of the Company is designated by the Board, then the Company’s existing shareholders (save, for avoidance of doubt, for other Optionees who already exercised their Options), pro rata in accordance with their shareholding.
The Optionee shall give a notice of sale (hereinafter the “ Notice ”) to the Company in order to offer the Shares to the Repurchaser(s).
11.3 | The Notice shall specify the name of each proposed purchaser or other transferee (hereinafter the “Proposed Transferee”), the number of Shares offered for sale, the price per Share and the payment terms. The Repurchaser(s) will be entitled for thirty (30) days from the day of receipt of the Notice (hereinafter the “Notice Period”), to purchase all or part of the offered Shares on a pro rata basis based upon their respective holdings in the Company. |
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11.4 | If by the end of the Notice Period not all of the offered Shares have been purchased by the Repurchaser(s), the Optionee shall be entitled to sell such Shares at any time during the ninety (90) days following the end of the Notice Period on terms not more favorable than those set out in the Notice, provided that the Proposed Transferee agrees in writing that the provisions of this section shall continue to apply to the Shares in the hands of such Proposed Transferee. Any sale of Shares issued under the Plan by the Optionee that is not made in accordance with the Plan and the Option Agreement shall be null and void. |
12. | DIVIDENDS |
With respect to all Shares (but excluding, for avoidance of any doubt, any unexercised Options) allocated or issued upon the exercise of Options purchased by the Optionee and held by the Optionee or by a trustee, as the case may be, the Optionee shall be entitled to receive dividends with respect to such Shares, subject to the provisions of the Company’s incorporation documents, as amended from time to time and subject to any applicable taxation on distribution of dividends.
13. | RESTRICTIONS ON ASSIGNABILITY AND SALE OF OPTIONS |
No Option or any right with respect thereto, or purchasable thereunder, whether fully paid or not, shall be assignable, transferable, or given as collateral nor may any right with respect thereto be given to any third party whatsoever, other than by will or by the laws of descent and distribution or as specifically otherwise allowed under the Plan. During the lifetime of the Optionee, each and all of such Optionee’s rights to purchase Shares hereunder shall be exercisable only by the Optionee. Any action made in contradiction to the aforementioned, shall be null and void.
14. | EFFECTIVE DATE AND DURATION OF THE PLAN |
The Plan shall be effective as of the day it was adopted by the Board and shall terminate at the end of ten (10) years from such day of adoption ( the “ Termination Date ”) .
The Company shall obtain the approval of the Company’s shareholders for the adoption of this Plan or for any amendment to this Plan, if shareholders’ approval is necessary or desirable to comply with any applicable law including without limitation the U.S. securities law or the securities laws of other jurisdictions applicable to Options granted to Optionees under this Plan, or if shareholders’ approval is required by any authority or by any governmental agencies or national securities exchanges including without limitation the US Securities and Exchange Commission.
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15. | AMENDMENTS OR TERMINATION |
15.1 | The Board may at any time, subject to the provisions of Section 15.2 below and all applicable law, amend, alter, suspend or terminate the Plan, provided , however , that no amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise by the Optionee and the Company, which agreement must be in writing and signed by the Optionee and the Company. Earlier termination of the Plan prior to the Termination Date shall not affect the Board’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such earlier termination. |
15.2 | The Company shall obtain the approval of the Company’s shareholders for any amendment to this Plan and/or the Appendixes thereto if shareholders’ approval is required under any applicable law including without limitation the U.S. securities law or the securities laws of other jurisdictions applicable to Options granted to Optionees under this Plan and/or the Appendixes thereto, or if shareholders’ approval is required by any authority or by any governmental agencies or national securities exchanges including without limitation the U.S. Securities and Exchange Commission. |
16. | GOVERNMENT REGULATIONS |
The Plan, the granting and exercise of Options hereunder and the obligation of the Company to sell and deliver Shares under such Options shall be subject to all applicable laws, rules, regulations, approvals and consents whether of the United States, the State of Israel, or any other state having jurisdiction over the Company or the Optionees, including the registration of the Shares under the United States Securities Act 1933 or under the securities act of any applicable jurisdiction, and to such approvals by any governmental agencies or national securities exchanges as may be required. Nothing herein shall be deemed to require the Company to register the Shares under the securities law of any jurisdiction.
17. | CONTINUANCE OF EMPLOYMENT |
Neither the Plan nor any Option Agreement shall impose any obligation on the Company or an affiliate to continue any Optionee in its employ or service, and nothing in the Plan or in any Option granted pursuant hereto shall confer upon any Optionee any right to continue in the employ or service of the Company or an affiliate thereof or restrict the right of the Company or an affiliate thereof to terminate such employment or service at any time.
18. | GOVERNING LAW AND JURISDICTION |
The Plan shall be governed by and construed and enforced in accordance with the laws of the State of Delaware as applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of the State of New York shall have sole jurisdiction in any matters pertaining to the Plan.
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19. | TAX CONSEQUENCES |
Any tax consequences to any Optionee arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company and/or its affiliates, or the Optionee) hereunder shall be borne solely by the Optionee. The Company and/or its affiliates shall withhold taxes according to the applicable laws, rules, and regulations, including withholding taxes at source. The Company shall have the right to withhold taxes from any compensation paid to the Optionee by the Company or its affiliates. Furthermore, the Optionee shall agree to indemnify the Company and/or its affiliates and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to withholding.
The Company shall not be required to release any Share certificate to an Optionee until all required payments have been fully made.
20. | NON-EXCLUSIVITY OF THE PLAN |
The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
21. | MULTIPLE AGREEMENTS |
The terms of each Option may differ from other Options granted under the Plan at the same time, or at any other time. The Board may also grant more than one Option to a given Optionee during the term of the Plan, either in addition to, or in substitution for, one or more Options previously granted to that Optionee.
22. | RULES PARTICULAR TO SPECIFIC COUNTRIES |
Notwithstanding anything herein to the contrary, the terms and conditions of the Plan may be adjusted with respect to Optionees resident in a particular country by means of an addendum to the Plan in the form of an appendix (the “ Appendix ”), and to the extent that the terms and conditions set forth in the Appendix conflict with any provisions of the Plan, the provisions of the Appendix shall govern with respect to such Optionees. Terms and conditions set forth in the Appendix shall apply only to Options issued to Optionees under the jurisdiction of the specific country that is the subject of the Appendix and shall not apply to Options issued to any other Optionee. The adoption of any such Appendix shall be subject to the approval of the Board and, if required, the approval of the shareholders of the Company.
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EXHIBIT 10.15
PERSONAL EMPLOYMENT AGREEMENT
BETWEEN NANOVIBRONIX AND Dr. JONA ZUMERIS
AGREEMENT made as of March 1, 2008, between NANO VIBRONIX (ISRAEL) LTD., an Israeli corporation, having an office at 47 Haatasia St. POB 515 Nesher, Israel 36603, (the "Company"), which is a wholly-owned subsidiary of NANOVIBRONIX Inc., a Delaware corporation with an office at 601 Chestnut Street, Cedarhurst, NY 11516, and Dr. Jona Zumeris (the " Employee ").
WHEREAS, the Company desires to engage the Employee in the position described in Exhibit A, and the Employee represent that he/she has the requisite skill and knowledge to serve as such.
NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations and covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT AND DUTIES
1.1 The Company hereby appoints the Employee to act in the position described in Exhibit A. The Employee shall report regularly to the CEO of the Company with respect to Employee's activities.
1.2 During the term of Employment hereunder, Employee's employment shall be on a full time basis.
In the fulfillment of his position in the Company, Employee shall devote his full attention and use his experience faithfully to the Company, shall be available for work at all reasonable times, according to the Company’s policy and requirements, or in any work or other engagement which might be in conflict with the interests of the Company, or might harm his work with the Company, unless he has obtained prior written consent to such engagement from the Company. It is understood that Employee may undertake strictly volunteer activities on behalf of recognized charity non-profit institutions, provided such activities do not harm or create conflicts of any kind with his work with the Company.
However, employee may serve on Boards of Directors of other companies as long as there is no conflict of interest.
1.3 It is agreed between the parties that the duties and responsibilities of the Employee hereunder are of a managerial and administrative nature and require a special degree of personal confidence, within the meaning of the Rest and Work Hours Law, 5711-1951 (the “Work Hours Law”). As such, the provisions of the Work Hours Law shall not apply to this Agreement.
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1.4 Employee shall perform Employee's duties hereunder at the Company's facilities in Israel, but understands and agrees that Employee's position may involve extensive travel abroad.
2. TERM OF EMPLOYMENT
2.1 The initial term of employment under this Agreement shall begin on the date set forth in Exhibit A (the "Employment Date") and shall continue until it is terminated as hereafter provided.
2.2 The Company may terminate this Agreement and the employment relationship hereunder at its discretion at any time by giving the Employee 90 days prior written notice. The Employee may terminate this Agreement and the employment relationship hereunder at Employee's discretion at any time by giving the Company 90 days prior written notice.
2.3 During the period following notice of termination by either party, this Agreement shall remain in full force and effect and there shall be no change in Employee's position with the Company or any obligations hereunder, unless otherwise determined by the Company in a written notice to Employee, and the Employee shall cooperate with the Company and use Employee's best efforts to assist the integration into the Company's organization of the person or persons who will assume the Employee's responsibilities.
3. SALARY
3.1 The Company shall pay the Employee a gross (“brutto”) monthly salary in the amount of New Israeli Shekels (“NIS”), set forth in Exhibit A. (the "Salary"), which shall be paid 12 times annually (hereinafter "basic salary").
3.2 Payment of the Salary shall be made no later then the 10th day of each calendar month after the month for which the salary is being made. The Company shall deduct all required taxes and similar payments from the Salary and from all other payments made to the Employee.
3.3 The parties accept and agree that the basic salary is an accurate and just consideration for the responsibility and assignments the Employee is about to undertake and that an additional amount had been taken into account within the calculations of the basic salary and the other benefits Employee may be granted, as a special remuneration for both, overtime and extra work beyond regular work time as well as his obligation for non-competition. To remove any doubt, Employee waives and removes in advance any argument and/or claim, as he may have if at all, for additional remuneration of any kind, due to overtime or extra work on weekends or on any irregular working times, or against his obligation for non-competition.
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4. INSURANCE AND SOCIAL BENEFITS
4.1 The Company shall insure the Employee: under an accepted "Manager's Insurance Scheme" or "Pension Fund" to be selected by the Employee; (hereinafter referred to as the "Insurance Scheme") as follows: (i) the Company shall pay an amount equal to 5% of the Salary towards a fund for insurance or pension, and shall deduct 5% from the Salary and pay such amount towards the Insurance Scheme for the Employee's benefit; (ii) the Company shall also contribute 2.5% towards insurance for the event of loss of working ability (Ovdan Kosher Avoda) in accordance with Company policy; and (iii) the Company shall pay an amount equal to 8.33% of the Salary towards a fund for severance compensation.
4.2 The Company and the Employee shall maintain an advanced study fund (Keren Hishtalmut Fund). The Company shall contribute to such Fund an amount equal to 7.5% of the Salary, and the Employee shall contribute to such fund an amount equal to 2.5% of the Salary. Employee hereby instructs the Company to transfer to such fund the amount of the Employee's and the Company's contribution from each monthly salary payment. For any amounts contributed by the Company and the Employee in terms hereof which exceed the maximum permitted under the Law for tax purposes (the “Excess Amounts”), the Company shall deposit such Excess Amounts into the advanced study fund, and the Employee shall bear all taxes arising from the Excess Amounts. (It is further agreed and acknowledged by the Employee that any Excess Amounts shall in no way be deemed to form part of the Salary and the Employee shall have no claim against the Company for any severance pay or any social or other employment benefits arising from or based upon the Excess Amounts.)
4.3 Upon termination of this Agreement by the Company or by the Employee, other than in circumstances justifying the non-payment of severance pay under applicable law, the Company shall assign and transfer to the Employee, after Employee has met all of Employee's obligations including, but not limited to, transfer all the information related to his job, to his replacement as the company shall assign, hereunder in connection with such termination of employment, the ownership in the aforesaid Manager's Insurance Scheme and Keren Hishtalmut Fund. In the event that this Agreement is terminated in circumstances justifying the non-payment of severance pay under applicable law, the Company, in its absolute discretion, may retain its payments to the aforesaid Manager’s Insurance Scheme which were paid according to sub-section 4.1(iii) above and release to the employee all other sums contributed by both parties to aforesaid Manager's Insurance Scheme and Keren Hishtalmut Fund.
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5. OTHER BENEFITS
5.1 To remove any doubt it is agreed and accepted by the parties, that any bonus program, as much as shall prevail, if at all, cannot be considered an obligation of the Company and the Company has no obligation or commitment to pay payments and/or bonuses and/or any benefit to Employee. Also it is agreed and accepted by the parties, that the Company may, according to criteria of its sole discretion, pay or grant different benefits and/or payments to certain Employees and not to others. Accordingly, Employee declares and confirms upon signing this agreement, that he waives and removes in advance any argument and/or claim, as he may have if at all, for discrimination in bonuses and/or other benefit payments that may be paid to certain employees or any employee and not paid to Employee.
5.2 The employee shall be entitled to be reimbursed for Employee's necessary and actual business expenses in accordance with the Company’s policies, as the same shall change from time to time.
5.3 Employee shall be entitled to that number of vacation days per year set forth in Exhibit A. The employee will have to use at least 10 vacation days each year (out of which, 5 days will have to be consecutive). The Company shall be entitled to direct use of the vacation days, at its discretion. In the event that the demands of Employee's activities preclude or limit the ability of the Employee to actually use all or part of such vacation in any year, the Employee shall be entitled to the balance of such vacation only in the next succeeding three years or, if unable to take the balance in these next succeeding years, to receive an amount equal to the rate of Salary then applicable to the vacation time not taken during such years, subject to applicable law.
5.4 Employee shall be entitled to receive the statutory required “Recreation Pay” (Dmei Havra'a).
5.5 The Company will provide a car (motor 2000) to the Employee (the “Car”), and will bear all of the fixed and variable maintenance costs, including licenses, insurance, gas, repairs, etc., but excluding personal traffic summons and the like. The Car will be leased by the Company, and will be returned to the Company by the Employee immediately upon the termination of the relationship between the Company and the Employee. Under no circumstances shall the Employee have a lien on the Car. Use of the Car at all times and payment of Early Return Fine shall be subject to the Company policies regarding the use of the Car, as these shall be in effect from time to time.
5.6 Employee shall be entitled to full sick leave payments.
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6. STOCK OPTIONS.
The company shall grant the Employee options, pending BOD resolution, at a discount of present share price as set forth in Exhibit A. They are subject to ESOP of the company.
Any future grant of stock options shall be subject to such terms as the Board of Directors or its Committee in its sole discretion shall specify at the time of grant.
7 . TERMINATION
a. This Agreement may be terminated by either party with or without cause on the terms and conditions contained herein.
b. During such notice period, the Company shall maintain the option to either employ Employee or renounce such employment, at any time during the notice period
c. Notwithstanding the terms of the above subsection b, the Company may terminate this agreement for cause, without giving Employee any notice period and with immediate effect, upon the occurrence of one or more of the causes as detailed in the following subsections. . In the event of termination for such cause, Employee shall not be entitled to receive any distribution of the Insurance Program, or any other severance benefit, except to the extent required by applicable law.
(i) Employee has committed any act of moral turpitude or dishonesty vis-à-vis the Company or any of its affiliates, customers, suppliers or service providers, including but not limited to theft, fraud, embezzlement, breach of trust or fiduciary duty;
(ii) Employee is found by the Company to have been in willful neglect of his duty hereunder or Employee committed any material breach of this Agreement other than a breach which is eligible for remedy and is remedied forthwith by Employee at the Company’s request;
(iii) Employee has been arrested or convicted for the commission of any crime involving an act of moral turpitude; or
(iv) Employee has violated
one or more of the restrictions set forth herein regarding confidentiality, inventions, work products and non-competition.
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(v) Employee has been involved in a conduct for which according to the Israeli labor law, employers are entitled to terminate work relations with employees without the obligation to pay severance payments.
d. In the event Employee elects to terminate this Agreement, he shall give a written notice to the Company at least 30 days in advance.
e. Upon termination of this Agreement for any reason, Employee shall immediately return to the Company any equipment, including company car if same supplied to him as part of work benefits, documentation and moneys advanced to him by the Company, and/or by any affiliate, customer or supplier, as well as all other items, documents and materials as required hereunder. In the event Employee fails to do so, the Company shall be entitled, as much as it is in compliance with Israeli labor laws, to withhold any salary payments, distribution of the Insurance Program, or other severance benefit, if any, due hereunder until such time as Employee shall have complied fully with the provisions of this subsection.
f. In the event that Employee owes the Company money at the time of the termination of this Agreement, the Company shall be entitled, as much as it is in compliance with Israeli labor laws, to offset the amount owed by Employee from his last salary payment or any other payment due to him prior to termination including any unreimbursed legitimate business expenses for which Employee is entitled to reimbursement under this Agreement.
8. DUTIES.
Employee shall serve as VP Research and shall be responsible for the overall Research and Technologies programs of all of the company products and other functions as the Chief Executive Officer of the Company shall from time to time determine. The Employee shall comply, in the performance of his duties with the policies of the Company.
9. REPRESENTATIONS AND AGREEMENTS.
Employee represents and warrants that he is free to enter into this Agreement and to perform the duties required hereunder, and that there are no employment contracts or understandings, restrictive covenants or other restrictions, whether written or oral, preventing the performance of his duties hereunder.
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10. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION.
(a) Employee shall not, during the term of this Agreement, or at any time following termination of this Agreement, directly or indirectly, disclose, permit to be known or make accessible (other than as is required in the regular course of his duties or is required by law (in which case Employee shall give the Company prior written notice of such required disclosure) or with the prior written consent of the CEO), to any person, firm or corporation, any confidential information acquired by him during the course of, or as an incident to, his employment. Such confidential information shall include, but shall not be limited to, proprietary technology, trade secrets, patented processes, research and development data, know-how, market studies and forecasts, competitive analyses, pricing policies, employee lists, personnel policies, the substance of agreements with customers and others, marketing or dealership arrangements, servicing and training programs and arrangements, customer lists and any other documents embodying such confidential information. This confidentiality obligation shall not apply to any confidential information which thereafter becomes publicly available other than pursuant to a breach of this Section 10(a) by Executive.
(b) All information and documents relating to the Company and its affiliates as hereinabove described (or other business affairs) shall be the exclusive property of the Company, and Employee shall use commercially reasonable best efforts to prevent any publication or disclosure thereof. Upon termination of Employee's employment with the Company, all documents, records, reports, writings and other similar documents containing confidential information, including copies thereof, then in Employee's possession or control shall be returned and left with the Company.
11. SPECIFIC PERFORMANCE.
Emplyee agrees that if he breaches, or threatens to commit a breach of, any of the provisions of Section 9,10 (the "Restrictive Covenant"), the Company shall have, in addition to, and not in lieu of, any other rights and remedies available to the Company under law and in equity, the right to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Notwithstanding the foregoing, nothing herein shall constitute a waiver by Employee of his right to contest whether a breach or threatened breach of any Restrictive Covenant has occurred.
12. AMENDMENT OR ALTERATION.
No amendment or alteration of the terms of this Agreement shall be valid unless made in writing and signed by both of the parties hereto.
13. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Israel applicable to agreements made and to be performed therein.
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14. SEVERABILITY.
The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect.
15. NOTICES.
Any notices required or permitted to be given hereunder shall be sufficient if in writing, and if delivered by hand, or sent by certified mail, return receipt requested, to the addresses set forth above or such other address as either party may from time to time designate in writing to the other, and shall be deemed given as of 2 days after the date of the delivery or mailing.
16. WAIVER OR BREACH.
It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.
17. ENTIRE AGREEMENT AND BINDING EFFECT.
This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, distributors, successors and assigns. Notwithstanding the foregoing, all prior agreements between Employee and the Company relating to the confidentiality of information, trade secrets, patents and stock options shall not be affected by this Agreement.
18. SURVIVAL.
The termination of Employee's employment hereunder or the expiration of this Agreement shall not affect the enforceability of Sections, 10, and 11 hereof.
19. FURTHER ASSURANCES.
The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.
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20. HEADINGS.
The Section headings appearing in this Agreement are for the purposes of easy reference and shall not be considered a part of this Agreement or in any way modify, demand or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
NANO VIBRONIX (ISRAEL) LTD. | |||
By: | /s/ Harold Jacob | ||
/s/ Jona Zumeris | |||
Employee |
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Exhibit A
To Personal Employment Agreement by and between NanoVibronix Ltd.and the Employee whose name is set forth herein
Name of Employee: | Dr. Jona Zumeris | |
ID No. of Employee | 303996086 | |
Address of Employee | 16/8 Mor, Haifa | |
Position in the Company | VP Technology | |
Employment Date | 1.9.2004 | |
Salary | 19.500 | |
Options and Vesting Schedule:
|
||
Vacation Days Per Year: | 15 |
The Company:
NANO VIBRONIX
/s/ Harold Jacob
By: HAROLD JACOB
Title: CEO |
Employee: (print name): Dr. Jona Zumeris
Signature:
/s/ Jona Zumeris |
Exhibit 10.16
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of [Date], is made by and between Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and [Name of Indemnity] (the “ Indemnitee ”), to be effective upon the occurrence of a Reporting Event (as defined below).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as directors, officers or agents of corporations unless they are protected by comprehensive liability insurance or indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors, officers and agents with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers and agents and the directors, officers and agents of its subsidiaries to assume the risk of huge judgments and other expenses which may occur in cases in which the director, officer or agent received no personal profit and in cases where the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation against a director, officer or agent of a corporation such as the Company or its subsidiaries are often related to the knowledge, motives and intent of such director, officer or agent, that he is usually the only witness with knowledge of the essential facts and exculpating circumstances regarding such matters, and that the long period of time which usually elapses before the trial or other disposition of such litigation often extends beyond the time that the director, officer or agent can reasonably recall such matters; and may extend beyond the normal time for retirement for such director, officer or agent with the result that he, after retirement or in the event of his death, his spouse, heirs, executors or administrators, may be faced with limited ability and undue hardship in maintaining an adequate defense, which may discourage such a director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of Directors of the Company (the “ Board ”) has concluded that, to retain and attract talented and experienced individuals to serve as directors, officers and agents of the Company and its subsidiaries and to encourage such individuals to take the business risks necessary for the success of the Company and its subsidiaries, it is necessary for the Company to contractually indemnify its directors, officers and agents and the directors, officers and agents of its subsidiaries, and to assume for itself maximum liability for expenses and damages in connection with claims against such directors, officers and agents in connection with their service to the Company and its subsidiaries, and has further concluded that the failure to provide such contractual indemnification could result in great harm to the Company and its subsidiaries and the Company’s stockholders.
G. Section 145 of the General Corporation Law of Delaware, under which the Company is organized (“ Section 145 ”), empowers the Company to indemnify its directors, officers, employees and agents by agreement and to indemnify persons who serve, at the request of the Company, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or continue to serve as a director, officer or agent of the Company and/or one or more subsidiaries of the Company free from undue concern for claims for damages arising out of or related to such services to the Company and/or one or more subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the Company and/or one or more subsidiaries of the Company, provided that he is furnished the indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions .
(a) Agent . For the purposes of this Agreement, an “agent” of the Company means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company or a subsidiary of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation.
(b) Expenses . For purposes of this Agreement, “expenses” include all out-of-pocket costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements), actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement or Section 145 or otherwise; provided, however, that “expenses” shall not include any judgments.
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(c) Proceeding . For the purposes of this Agreement, “proceeding” means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, or investigative.
(d) Reporting Event . For purposes of this Agreement, “Reporting Event” means the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document.
(e) Subsidiary . For purposes of this Agreement, “subsidiary” means any corporation of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve . The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of the Company, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as he tenders his resignation in writing; provided, however, that nothing contained in this Agreement is intended to create any right to continued employment by Indemnitee.
3. Liability Insurance .
(a) Maintenance of D&O Insurance . The Company hereby covenants and agrees that, so long as the Indemnitee shall continue to serve as an agent of the Company and thereafter so long as the Indemnitee shall be subject to any possible proceeding by reason of the fact that the Indemnitee was an agent of the Company, the Company, subject to Section 3(c) , shall promptly obtain and maintain in full force and effect directors’ and officers’ liability insurance (“ D&O Insurance ”) in reasonable amounts from established and reputable insurers.
(b) Rights and Benefits . In all policies of D&O Insurance, the Indemnitee shall be named as an insured in such a manner as to provide the Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if the Indemnitee is a director; or of the Company’s officers, if the Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if the Indemnitee is not a director or officer but is a key employee.
(c) Limitation on Required Maintenance of D&O Insurance . Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or the Indemnitee is covered by similar insurance maintained by a subsidiary of the Company.
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4. Mandatory Indemnification . Subject to Section 9 below, the Company shall indemnify the Indemnitee as follows:
(a) Successful Defense . To the extent the Indemnitee has been successful on the merits or otherwise in defense of any proceeding (including, without limitation, an action by or in the right of the Company) to which the Indemnitee was a party by reason of the fact that he is or was an agent of the Company at any time, the Company shall indemnify the Indemnitee against all expenses of any type whatsoever actually and reasonably incurred by him in connection with the investigation, defense or appeal of such proceeding.
(b) Third Party Actions . If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the Company) by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company shall indemnify the Indemnitee against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
(c) Derivative Actions . If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the Company by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, the Company shall indemnify the Indemnitee against all expenses actually and reasonably incurred by him in connection with the investigation, defense, settlement, or appeal of such proceeding, provided the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and its stockholders; except that no indemnification under this subsection 4(c) shall be made in respect to any claim, issue or matter as to which such person shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction unless and only to the extent that the court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such amounts which the court shall deem proper.
(d) Actions where Indemnitee is Deceased . If the Indemnitee is a person who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that he is or was an agent of the Company, or by reason of anything done or not done by him in any such capacity, and if prior to, during the pendency or after completion of such proceeding Indemnitee becomes deceased, the Company shall indemnify the Indemnitee’s heirs, executors and administrators against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) actually and reasonably incurred to the extent Indemnitee would have been entitled to indemnification pursuant to Sections 4(a) , 4(b) , or 4(c) above were Indemnitee still alive.
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(e) Notwithstanding the foregoing, the Company shall not be obligated to indemnify the Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) for which payment is actually made to or on behalf of Indemnitee under a valid and collectible insurance policy of D&O Insurance, or under a valid and enforceable indemnity clause, by-law or agreement.
5. Partial Indemnification . If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in settlement) incurred by him in the investigation, defense, settlement or appeal of a proceeding, but not entitled, however, to indemnification for all of the total amount hereof, the Company shall nevertheless indemnify the Indemnitee for such total amount except as to the portion hereof to which the Indemnitee is not entitled.
6. Indemnification for Expenses of a Witness . Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of the fact that the Indemnitee is or was an agent of the Company, a witness in any proceeding to which Indemnitee is not a party, he shall be indemnified against all expenses actually and reasonably incurred by him or on his behalf in connection therewith.
7. Mandatory Advancement of Expenses . Subject to Section 9 below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall be determined ultimately that the Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to the Indemnitee within twenty (20) days following delivery of a written request therefor by the Indemnitee to the Company. In the event that the Company fails to pay expenses as incurred by the Indemnitee as required by this paragraph, Indemnitee may seek mandatory injunctive relief from any court having jurisdiction to require the Company to pay expenses as set forth in this paragraph. If Indemnitee seeks mandatory injunctive relief pursuant to this paragraph, it shall not be a defense to enforcement of the Company’s obligations set forth in this paragraph that Indemnitee has an adequate remedy at law for damages.
8. Notice and Other Indemnification Procedures .
(a) Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof.
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(b) If, at the time of the receipt of a notice of the commencement of a proceeding pursuant to Section 8(a) hereof, the Company has D&O Insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
(c) In the event the Company shall be obligated to pay the expenses of any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by the Indemnitee, upon the delivery to the Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee shall have the right to employ his counsel in any such proceeding at the Indemnitee’s expense; and (ii) if (A) the employment of counsel by the Indemnitee has been previously authorized by the Company, (B) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company. The Company shall not enter into any settlement of any proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such proceeding) unless such settlement provides for the full and final release of all claims asserted against Indemnitee.
9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee . To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board, (iii) such indemnification is provided by the Company, in its sole discretion, pursuant to the powers vested in the Company under the General Corporation Law of Delaware or (iv) the proceeding is brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145;
(b) Lack of Good Faith . To indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements . To indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a proceeding unless the Company consents to such settlement, which consent shall not be unreasonably withheld.
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10. Non-exclusivity . The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company’s Amended and Restated Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to action in his official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitee’s rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee.
11. Enforcement . Any right to indemnification or advances granted by this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. Indemnitee, in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. It shall be a defense to any action for which a claim for indemnification is made under this Agreement (other than an action brought to enforce a claim for expenses pursuant to Section 7 hereof, provided that the required undertaking has been tendered to the Company) that Indemnitee is not entitled to indemnification because of the limitations set forth in Sections 4 and 9 hereof. Neither the failure of the Company (including its Board or its stockholders) to have made a determination prior to the commencement of such enforcement action that indemnification of Indemnitee is proper in the circumstances, nor an actual determination by the Company (including its Board or its stockholders) that such indemnification is improper, shall be a defense to the action or create a presumption that Indemnitee is not entitled to indemnification under this Agreement or otherwise.
12. Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
13. Survival of Rights .
(a) All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an agent of the Company and shall continue thereafter so long as Indemnitee shall be subject to any possible claim or proceeding by reason of the fact that Indemnitee was serving in the capacity referred to herein.
(b) The Company shall require any successor to the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
14. Interpretation of Agreement . It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent permitted by law including those circumstances in which indemnification would otherwise be discretionary.
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15. Severability . If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.
16. Modification and Waiver . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
17. Notice . All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.
18. Governing Law . This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.
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The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
COMPANY: | ||||
Nano Vibronix, Inc. | ||||
By: | ||||
Name: | ||||
Title: | ||||
Address: | 105 Maxess Road, Suite S124 Melville, NY 11747 | |||
INDEMNITEE: | ||||
By: | ||||
[Name of Indemnitee] | ||||
Address: |
Signature Page to Indemnity Agreement
EXHIBIT 10.17
AMENDMENT TO
SUBSCRIPTION AGREEMENT
CONVERTIBLE PROMISSORY NOTES
This Amendment to Subscription Agreement for Convertible Promissory Notes (this “ Amendment ”) is made as of February 28, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this Amendment (the “ Majority Noteholders ”).
W I T N E S S E T H :
WHEREAS, the Company and the investors in the Company’s Convertible Promissory Notes convertible into shares of Series B-1 Participating Convertible Preferred Stock (the “ Series B-1 Notes ”) are parties to that certain Subscription Agreement for Convertible Promissory Notes, dated November 22, 2011 (the “ Subscription Agreement ”); and
WHEREAS, pursuant to Section 4.8 of the Subscription Agreement, the Subscription Agreement may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Series B-1 Notes and any such amendment shall be binding upon each holder of any Series B-1 Notes at the time outstanding and the Company; and
WHEREAS, the Majority Noteholders hold a majority of the aggregate currently-outstanding principal amount of the Series B-1 Notes; and
WHEREAS, pursuant to Section 5.a of the Series B-1 Notes, the Series B-1 Notes may be amended as provided in the Subscription Agreement; and
WHEREAS, the Company and the Majority Noteholders desire to amend the Subscription Agreement to provide that the Series B-1 Notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Series B-1 Notes;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto, intending legally to be bound, hereby agree as follows:
1. | The following is hereby added after the first sentence of Section 4.8 of the Subscription Agreement: |
Any provision of the Notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Notes, which amendment shall be binding on the holders of all Notes regardless of whether or not they consented to such amendment. |
2. | This Amendment shall be effective upon its execution by the Company and the Majority Noteholders. |
3. | This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or by electronic mail (in portable document format (“PDF”)) shall be effective as delivery of a manually executed counterpart of this Amendment. |
4. | This Amendment shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. |
[Signature page follows]
2 |
IN WITNESS WHEREOF the parties have signed this Amendment as of the date first written above.
NANO VIBRONIX, INC. | ||||
By: | /s/ Harold Jacob | |||
Name: | Harold Jacob | |||
Title: | Chief Executive Officer |
HOLDERS
/s/ Horn Grandchildren 2004 Trust
/s/ Robin Press
/s/ Joseph Bronner
/s/ Ira Rabinowitz
/s/ Richard Grossman
/s/ Menachem Lifshitz
/s/ CollabRx, Inc. (f/k/a Tegal Corp.)
/s/ Aaron Martin
/s/ Harborview Master Fund LP
/s/ Globis International Investments, LLC
/s/ Globis Capital Partners, LP
/s/ Globis Overseas Fund, Ltd.
/s/ Harold Jacob
/s/ GCK Holdings Corp
/s/ Ellis International LP
/s/ Charles Alpert
/s/ Steve Zuller
EXHIBIT 10.18
AMENDMENT TO
CONVERTIBLE PROMISSORY NOTES
This Amendment to Convertible Promissory Notes (this “ Amendment ”) is made as of February 28, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this Amendment (the “ Majority Noteholders ”).
W I T N E S S E T H :
WHEREAS, the Company has certain outstanding Convertible Promissory Notes convertible into shares of Series B-1 Participating Convertible Preferred Stock (the “ Series B-1 Notes ”); and
WHEREAS, the Company and the investors in the Series B-1 Notes are parties to that certain Subscription Agreement for Convertible Promissory Notes, dated November 22, 2011, as amended by that certain Amendment to Subscription Agreement for Convertible Promissory Notes, dated as of the date hereof (the “ Subscription Agreement ”); and
WHEREAS, pursuant to Section 5.a of the Series B-1 Notes, the Series B-1 Notes may be amended as provided in the Subscription Agreement; and
WHEREAS, pursuant to Section 4.8 of the Subscription Agreement, the Series B-1 Notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Series B-1 Notes and any such amendment shall be binding upon each holder of any Series B-1 Notes at the time outstanding and the Company; and
WHEREAS, the Majority Noteholders hold a majority of the aggregate currently-outstanding principal amount of the Series B-1 Notes; and
WHEREAS, the Company and the Majority Noteholders desire to amend the Series B-1 Notes to provide that the definition of “Issuance Conversion Event” includes, and the Series B-1 Notes will automatically convert upon, the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto, intending legally to be bound, hereby agree as follows:
1. | Section 2.a.i of each of the outstanding Series B-1 Notes is hereby deleted and replaced in its entirety with the following: |
“ Issuance Conversion Event” shall mean (i) an aggregate investment in the Company of $3,000,000 or more in one transaction or a series of related transactions occurring after the date hereof, in which the Company shall have issued shares in the Company or securities (including convertible debt) exercisable or convertible into shares in the Company or (ii) the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document. |
2. | This Amendment shall be effective upon its execution by the Company and the Majority Noteholders. |
3. | This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or by electronic mail (in portable document format (“PDF”)) shall be effective as delivery of a manually executed counterpart of this Amendment. |
4. | This Amendment shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. |
[Signature page follows]
2 |
IN WITNESS WHEREOF the parties have signed this Amendment as of the date first written above.
NANO VIBRONIX, INC. | ||||
By: | /s/ Harold Jacob | |||
Name: | Harold Jacob | |||
Title: | Chief Executive Officer |
HOLDERS
/s/ Horn Grandchildren 2004 Trust
/s/ Robin Press
/s/ Joseph Bronner
/s/ Ira Rabinowitz
/s/ Richard Grossman
/s/ Menachem Lifshitz
/s/ CollabRx, Inc. (f/k/a Tegal Corp.)
/s/ Aaron Martin
/s/ Harborview Master Fund LP
/s/ Globis International Investments, LLC
/s/ Globis Capital Partners, LP
/s/ Globis Overseas Fund, Ltd.
/s/ Harold Jacob
/s/ GCK Holdings Corp
/s/ Ellis International LP
/s/ Charles Alpert
/s/ Steve Zuller
EXHIBIT 10.19
SECOND AMENDMENT TO
SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
AND WARRANTS
This Second Amendment to Subscription Agreement for Series B Convertible Preferred Stock and Warrants (this “ Amendment ”) is made as of February 28, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this Amendment (the “ Majority Holders ”).
W I T N E S S E T H :
WHEREAS, the Company and the holders of the Company’s Convertible Promissory Notes convertible into shares of Series B-2 Participating Convertible Preferred Stock (the “ Series B-2 Notes ”) and the Company’s Series B-2 Participating Convertible Preferred Stock Warrants (the “ Warrants ”) are parties to that certain Subscription Agreement for Series B Convertible Preferred Stock and Warrants, dated March 2009, as amended by that certain First Amendment to Subscription Agreement for Series B Convertible Preferred Stock, dated November 14, 2011 (as amended, the “ Subscription Agreement ”); and
WHEREAS, pursuant to Section 5.8 of the Subscription Agreement, the Subscription Agreement may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding Shares (as defined in the Subscription Agreement) and any such amendment shall be binding upon each holder of any securities purchased under the Subscription Agreement, each future holder of all such securities, and the Company; and
WHEREAS, the Majority Holders hold (i) a majority of the aggregate currently-outstanding principal amount of the Series B-2 Notes and (ii) Warrants exercisable for a majority of the shares of Series B-2 Participating Convertible Preferred Stock for which the Warrants, in the aggregate, are currently exercisable; and
WHEREAS, pursuant to Section 5.a of the Series B-2 Notes, the Series B-2 Notes may be amended as provided in the Subscription Agreement; and
WHEREAS, pursuant to Section 11 of the Warrants, the Warrants and any term thereof may be changed, waived, discharged or terminated as provided in the Subscription Agreement; and
WHEREAS, the Company and the Majority Holders desire to amend the Subscription Agreement to provide that the Series B-2 Notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Series B-2 Notes; and
WHEREAS, the Company and the Majority Holders desire to amend the Subscription Agreement to provide that the Warrants and any term thereof may be changed, waived, discharged or terminated with the written consent of the Company and the holders of Warrants exercisable for a majority of the securities for which the Warrants, in the aggregate, are then-currently exercisable;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto, intending legally to be bound, hereby agree as follows:
1. Section 5.8 of the Subscription Agreement is hereby deleted in its entirety and replaced with the following:
Amendments and Waivers . Any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the aggregate then-outstanding securities purchased under this Agreement or securities into or for which the securities purchased under this Agreement have been converted or exchanged (the “ Then-Outstanding Securities ”). With respect to any Then-Outstanding Securities that are notes, any provision of such notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the notes. With respect to any Then-Outstanding Securities that are warrants, the warrants and any term thereof may be changed, waived, discharged or terminated with the written consent of the Company and the holders of such warrants exercisable for a majority of the securities for which such warrants, in the aggregate, are then-currently exercisable. Any amendment or waiver effected in accordance with this Section shall be binding upon each holder of any Then-Outstanding Securities at the time outstanding (including the Underlying Shares or other securities into or for which such securities are convertible or exercisable), each future holder of all such Then-Outstanding Securities, and the Company. |
2. This Amendment shall be effective upon its execution by the Company and the Majority Holders.
3. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or by electronic mail (in portable document format (“PDF”)) shall be effective as delivery of a manually executed counterpart of this Amendment.
4. This Amendment shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof.
[Signature page follows]
2 |
IN WITNESS WHEREOF the parties have signed this Amendment as of the date first written above.
NANO VIBRONIX, INC. | ||||
By: | /s/ Harold Jacob | |||
Name: | Harold Jacob | |||
Title: | Chief Executive Officer |
HOLDERS
/s/ W.B. Nominees Limited
/s/ Walker Crips Stockbroker Ltd.
/s/ T.D.K. Simond
/s/ David Naylor-Leyland
/s/ Ian Harrison
/s/ Mark Nixon
/s/ Ira Greenstein
/s/ IDT Corporation
/s/ Orin Hirschman
/s/ Paul Packer
/s/ Jonathan Kahan
/s/ Judah Schorr
/s/ Miriam Winder Kelly
/s/ Bezalel Perl
/s/ Medical Instrument Development Inc.
/s/ Globis Overseas Fund, Ltd.
/s/ A. Chris Tupker
/s/ David Kreinberg
/s/ American Investments Limited
/s/ Joseph Bronner
/s/ Steven Zullar
/s/ Globis Capital Partners, LP
EXHIBIT 10.20
THIRD AMENDMENT TO
SUBSCRIPTION AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK
AND WARRANTS
This Third Amendment to Subscription Agreement for Series B Convertible Preferred Stock and Warrants (this “ Amendment ”) is made as of February 28, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this Amendment (the “ Majority Holders ”).
W I T N E S S E T H :
WHEREAS, the Company and the holders of the Company’s Convertible Promissory Notes convertible into shares of Series B-2 Participating Convertible Preferred Stock (the “ Series B-2 Notes ”) and the Company’s Series B-2 Participating Convertible Preferred Stock Warrants (the “ Warrants ”) are parties to that certain Subscription Agreement for Series B Convertible Preferred Stock and Warrants, dated March 2009, as amended by that certain First Amendment to Subscription Agreement for Series B Convertible Preferred Stock and Warrants, dated November 14, 2011 and that certain Second Amendment to Subscription Agreement for Series B Convertible Preferred Stock and Warrants, dated as of the date hereof (as amended, the “ Subscription Agreement ”); and
WHEREAS, pursuant to Section 11 of the Warrants, the Warrants and any term thereof may be changed, waived, discharged or terminated as provided in the Subscription Agreement; and
WHEREAS, pursuant to Section 5.8 of the Subscription Agreement, the Subscription Agreement may be amended with the written consent of the Company and the holders of a majority of the aggregate Then-Outstanding Securities (as defined in the Subscription Agreement) and any such amendment shall be binding upon each holder of any Then-Outstanding Securities at the time outstanding, each future holder of all such Then-Outstanding Securities, and the Company; and
WHEREAS, pursuant to Section 5.8 of the Subscription Agreement, with respect to any Then-Outstanding Securities that are warrants, the warrants and any term thereof may be changed, waived, discharged or terminated with the written consent of the Company and the holders of such warrants exercisable for a majority of the securities for which such warrants, in the aggregate, are then-currently exercisable; and
WHEREAS, the Majority Holders hold (i) a majority of the aggregate Then-Outstanding Securities and (ii) Warrants exercisable for a majority of the shares of Series B-2 Participating Convertible Preferred Stock for which the Warrants, in the aggregate, are currently exercisable; and
WHEREAS, the Company and the Majority Holders desire to amend the Subscription Agreement to provide that, upon the Company’s initial public offering of its Common Stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document (a “ Reporting Event ”), each of the Warrants will automatically be cancelled and represent the right receive a warrant to purchase (i) such number of shares of the Company’s common stock as the holder thereof would have acquired if such holder had exercised the cancelled Warrant immediately prior to such Reporting Event, acquired shares of Series B-2 Participating Convertible Preferred Stock, and had such shares converted into shares of common stock in connection with the Reporting Event, (ii) at an exercise price that is equal to the exercise price under the cancelled Warrant at the time of cancellation, as adjusted in proportion to the increase or decrease in the number of shares of common stock underlying the new warrant in comparison to the number of shares of Series B-2 Participating Convertible Preferred Stock underlying the cancelled Warrant at the time of cancellation;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto, intending legally to be bound, hereby agree as follows:
1. The Subscription Agreement is hereby amended to add the following Section 4.4:
Reporting Event . Upon a Reporting Event, each then-outstanding warrant issued under this Agreement or in exchange for any securities issued under this Agreement will automatically be cancelled and represent the right receive a warrant in the form of Exhibit 3 attached hereto to purchase (i) such number of shares of the Company’s common stock as the holder thereof would have acquired if such holder had exercised the cancelled warrant immediately prior to such Reporting Event, acquired shares of Series B-2 Participating Convertible Preferred Stock, and had such shares converted into shares of common stock in connection with the Reporting Event, (ii) at an exercise price that is equal to the exercise price under the cancelled warrant at the time of cancellation, as adjusted in proportion to the increase or decrease in the number of shares of common stock underlying the new warrant in comparison to the number of securities underlying the cancelled warrant at the time of cancellation. A Reporting Event shall mean the Company’s initial public offering of its Common Stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document.
2. This Amendment shall be effective upon its execution by the Company and the Majority Holders.
3. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or by electronic mail (in portable document format (“PDF”)) shall be effective as delivery of a manually executed counterpart of this Amendment.
4. This Amendment shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof.
[Signature page follows]
IN WITNESS WHEREOF the parties have signed this Amendment as of the date first written above.
NANO VIBRONIX, INC. | ||||
By: | /s/ Harold Jacob | |||
Name: | Harold Jacob | |||
Title: | Chief Executive Officer |
HOLDERS
/s/ W.B. Nominees Limited
/s/ Walker Crips Stockbroker Ltd.
/s/ T.D.K. Simond
/s/ David Naylor-Leyland
/s/ Ian Harrison
/s/ Mark Nixon
/s/ Ira Greenstein
/s/ IDT Corporation
/s/ Orin Hirschman
/s/ Paul Packer
/s/ Jonathan Kahan
/s/ Judah Schorr
/s/ Miriam Winder Kelly
/s/ Bezalel Perl
/s/ Medical Instrument Development Inc.
/s/ Globis Overseas Fund, Ltd.
/s/ A. Chris Tupker
/s/ David Kreinberg
/s/ American Investments Limited
/s/ Joseph Bronner
/s/ Steven Zullar
/s/ Globis Capital Partners, LP
EXHIBIT 3
Void after November 15, 2018 | Warrant No. |
This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933. This Warrant and such shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act. This Warrant and such shares may not be transferred except upon the conditions specified in this Warrant, and no transfer of this Warrant or such shares shall be valid or effective unless and until such conditions shall have been complied with. |
NANO VIBRONIX, INC.
FORM OF COMMON STOCK PURCHASE WARRANT
Nano Vibronix, Inc. (the “ Company ”), having its principal office at 105 Maxess Road, Suite S124, Melville, NY 11747, hereby certifies that, for value received, _____________ (“Investor”), or assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time on, or from time to time after, _____ ___, 2014 and before 5:00 P.M., New York City time, on November 15 , 2018, or as curtailed in accordance with the terms hereof (the “ Expiration Date ”), ______________ fully paid and non-assessable shares of Warrant Shares of the Company, at the Purchase Price per share of $___. The number and character of such shares of Warrant Shares and the Purchase Price per share are subject to adjustment as provided herein.
As used herein, the following terms have the following respective meanings:
“Warrant Shares” means the common stock of the Company Stock, par value $0.001 per share, of the Company.
“ Exchange Act ” means the Securities Exchange Act of 1934 as the same shall be in effect at the time.
“ Holder ” means any record owner of this Warrant.
“ Per Share Market Value ” has the meaning set forth in Section 2.3.
“ Original Issue Date ” means _____ ___, 2014.
“ Other Securities ” refers to any stock (other than Warrant Shares) and other securities of the Company or any other entity which the Holder of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to Warrant Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Warrant Shares or Other Securities pursuant to Section 5 or otherwise.
“ Securities Act ” means the Securities Act of 1933 as the same shall be in effect at the time.
“ Underlying Securities ” means any Warrant Shares or Other Securities issued or issuable upon exercise of this Warrant.
“ Warrant ” means, as applicable, this Warrant or each right as set forth in this Warrant to purchase one share of Warrant Shares, as adjusted.
1. Sale or Exercise Without Registration . If, at the time of any exercise, transfer or surrender for exchange of a Warrant or of Underlying Securities previously issued upon the exercise of Warrants, such Warrant or Underlying Securities shall not be registered under the Securities Act, the Company may require, as a condition of allowing such exercise, transfer or exchange, that the Holder or transferee of such Warrant or Underlying Securities, as the case may be, furnish to the Company an opinion of counsel, reasonably satisfactory to the Company, to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act.
2. Exercise of Warrant .
2.1. Exercise in Full . Subject to the provisions hereof, this Warrant may be exercised in full by the Holder hereof by surrender of this Warrant, with the form of subscription at the end hereof duly executed by such Holder, to the Company at its principal office accompanied by payment, in cash or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Purchase Stock issuable upon exercise of this Warrant by the Purchase Price per share, after giving effect to all adjustments through the date of exercise.
2.2. Partial Exercise . Subject to the provisions hereof, this Warrant may be exercised in part by surrender of this Warrant in the manner and at the place provided in Section 3.1 except that the amount payable by the Holder upon any partial exercise shall be the amount obtained by multiplying (a) the number of shares of Warrant Shares (without giving effect to any adjustment therein) designated by the Holder in the subscription at the end hereof, by (b) the Purchase Price per share. Upon any such partial exercise, the Company at its expense will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, for the remaining number of shares of Warrant Shares which may be purchased hereunder.
2.3 Cashless Exercise . In addition to the method of payment set forth in Sections 2.1 and 2.2 and in lieu of any cash payment required thereunder, the Holder of the Warrant shall have the right at any time and from time to time to exercise the Warrant in full or in part by surrendering this Warrant in the manner and at the place specified in Section 3.1, specifying the number of shares for which this Warrant is being exercised. The Company shall issue Holder the number of shares computed using the following formula:
X = |
|
where: | X = the number of Underlying Securities to be issued to Holder. | |
Y = the number of Underlying Securities for which this Warrant is being exercised. | ||
A = the Purchase Price. | ||
B = the Per Share Market Value of one share of Underlying Securities on the business day immediately preceding the date of such election |
“ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Underlying Securities on such date on any registered national stock exchange on which the Underlying Securities is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Underlying Securities is not then listed on a registered national stock exchange, the closing sales price for a share of Underlying Securities in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Underlying Securities is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Underlying Securities as determined by the Board, acting in good faith. In determining the fair market value of any shares of Underlying Securities no consideration shall be given to any restrictions on transfer of the Underlying Securities imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
2.4. Certain Exercises . If this Warrant is to be exercised in connection with a registered public offering or sale of the Company, such exercise may, at the election of the Holder, be conditioned on the consummation of the public offering or sale of the Company, in which case such exercise shall not be deemed effective until the consummation of such transaction.
3. Delivery of Stock Certificates, etc., on Exercise . As soon as practicable after the exercise of this Warrant in full or in part, the Company at its own expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and non-assessable shares of Warrant Shares or Other Securities to which such Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then-current Market Price of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 4 or otherwise.
4. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case at any time or from time to time after the Original Issue Date, the holders of Warrant Shares (or, if applicable, Other Securities) shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor
(a) other or additional stock or other securities or property (other than cash) by way of dividend, or
(b) any cash paid or payable (including, without limitation, by way of dividend), or
(c) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement,
then, and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 2, shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) which such Holder would hold on the date of such exercise if on the Original Issue Date such Holder had been the Holder of record of the number of shares of Warrant Shares called for on the face of this Warrant and had thereafter, during the period from the Original Issue Date to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) receivable by such Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 5 hereof. If the number of shares of Warrant Shares outstanding at any time after the date hereof is decreased by a combination or reverse stock split of the outstanding shares of common stock, the Purchase Price per share shall be increased, and the number of shares of Warrant Shares purchasable under this Warrant shall be decreased in proportion to such decrease in outstanding shares of Warrant Shares.
5. Reorganization, Consolidation, Merger, etc. In case the Company after the Original Issue Date shall (a) effect a reorganization, (b) consolidate with or merge into any other entity or (c) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the Holder of this Warrant, upon the exercise hereof as provided in Section 3 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall be entitled to receive (and the Company shall be entitled to deliver), in lieu of the Underlying Securities issuable upon such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in this Section 5; provided that if the sole consideration to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, is cash, the Warrant shall be terminated upon such consummation or dissolution. The Company shall not effect any such reorganization, consolidation, merger or sale, unless prior to or simultaneously with the consummation thereof, the successor corporation resulting from such consolidation or merger or the corporation purchasing such assets or the appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to each Holder the shares of stock, cash, other securities or assets to which, in accordance with the foregoing provisions, each Holder may be entitled to and all other obligations of the Company under this Warrant. In any such case, if necessary, the provisions set forth in this Section 5 with respect to the rights thereafter of the Holders shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any Other Securities or assets thereafter deliverable on the exercise of the Warrants.
6. Further Assurances . The Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of stock upon the exercise of all Warrants from time to time outstanding.
7. Officer's Certificate as to Adjustments . In each case of any adjustment or readjustment in the shares of Warrant Shares (or Other Securities) issuable upon the exercise of the Warrants, the Company will issue a certificate setting forth such adjustment or readjustment and the basis therefor.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of its stockholders for the purpose of determining the stockholders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders who are entitled to vote in connection with any proposed capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or
(b) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, or
(c) any proposed issue or grant by the Company of any common stock, or any other securities, or any right or option to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities (other than the issue of common stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be mailed to each Holder of a Warrant a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any, as of which the Holders of record of Underlying Securities shall be entitled to exchange their shares of Underlying Securities for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall be given at least 10 days prior to the date therein specified.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants . The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of the Warrants, all shares of Warrant Shares (or Other Securities) from time to time issuable upon the exercise of the Warrants.
10. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be delivered by fax or courier, at such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last Holder of this Warrant who has so furnished an address to the Company.
11. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder or as otherwise provided in the Subscription Agreement. This Warrant shall be governed by and construed and enforced in accordance with the General Corporation Law of the State of Delaware without regard to principles of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Agreement and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address specified herein (or as otherwise noticed to the other party). Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non conveniens . Each party also waives any right to trial by jury.
Dated: __________ __, 2014 | NANO VIBRONIX, INC. |
By:________________________________ | |
Name: | |
Attest:___________________________ | Title: |
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: NANO VIBRONIX, INC.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _________ shares of Warrant Shares of Nano Vibronix, Inc., and herewith makes payment therefor
(i) of $_____________ or
(ii) by surrender of the number of Warrants included in the within Warrant required for full exercise pursuant to Section 2.3 of the Warrant,
and requests that the certificates for such shares be issued in the name of, and delivered to, ___________________, whose address is _______________________.
Dated:
(Signature must conform in all respects to name of Holder as specified on the face of the Warrant) | |
(Address) |
EXHIBIT 10.21
AMENDMENT TO
CONVERTIBLE PROMISSORY NOTES
This Amendment to Convertible Promissory Notes (this “ Amendment ”) is made as of February 28, 2014, by and among Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and the persons who execute this Amendment (the “ Majority Noteholders ”).
W I T N E S S E T H :
WHEREAS, the Company has certain outstanding Convertible Promissory Notes convertible into shares of Series B-2 Participating Convertible Preferred Stock (the “ Series B-2 Notes ”); and
WHEREAS, the Company and the holders of the Series B-2 Notes are parties to that certain Subscription Agreement for Series B Convertible Preferred Stock, dated March 2009, as amended by that certain First Amendment to Subscription Agreement for Series B Convertible Preferred Stock, dated November 14, 2011, that certain Second Amendment to Subscription Agreement Agreement for Series B Convertible Preferred Stock, dated as of the date hereof, and that certain Third Amendment to Subscription Agreement for Series B Convertible Preferred Stock, dated as of the date hereof (as amended, the “ Subscription Agreement ”); and
WHEREAS, pursuant to Section 5.a of the Series B-2 Notes, the Series B-2 Notes may be amended as provided in the Subscription Agreement; and
WHEREAS, pursuant to Section 5.8 of the Subscription Agreement, the Series B-2 Notes may be amended with the written consent of the Company and the holders of a majority of the aggregate then-outstanding principal amount of the Series B-2 Notes and any such amendment shall be binding upon each holder of any Series B-2 Notes at the time outstanding and the Company; and
WHEREAS, the Majority Noteholders hold a majority of the aggregate currently-outstanding principal amount of the Series B-2 Notes; and
WHEREAS, the Company and the Majority Noteholders desire to amend the Series B-2 Notes to provide that the definition of “Issuance Conversion Event” includes, and the Series B-2 Notes will automatically convert upon, the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document;
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto, intending legally to be bound, hereby agree as follows:
1. Section 2.a.i of each of the outstanding Series B-2 Notes is hereby deleted and replaced in its entirety with the following:
“Issuance Conversion Event” shall mean (i) an aggregate investment in the Company of $3,000,000 or more in one transaction or a series of related transactions occurring after the date hereof, in which the Company shall have issued shares in the Company or securities (including convertible debt) exercisable or convertible into shares in the Company or (ii) the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, or upon such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document. |
2. This Amendment shall be effective upon its execution by the Company and the Majority Noteholders.
3. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or by electronic mail (in portable document format (“PDF”)) shall be effective as delivery of a manually executed counterpart of this Amendment.
4. This Amendment shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof.
[Signature page follows]
IN WITNESS WHEREOF the parties have signed this Amendment as of the date first written above.
NANO VIBRONIX, INC. | ||||
By: | /s/ Harold Jacob | |||
Name: | Harold Jacob | |||
Title: | Chief Executive Officer |
HOLDERS
/s/ W.B. Nominees Limited
/s/ Walker Crips Stockbroker Ltd.
/s/ T.D.K. Simond
/s/ David Naylor-Leyland
/s/ Ian Harrison
/s/ Mark Nixon
/s/ Ira Greenstein
/s/ IDT Corporation
/s/ Orin Hirschman
/s/ Paul Packer
/s/ Jonathan Kahan
/s/ Judah Schorr
/s/ Miriam Winder Kelly
/s/ Bezalel Perl
/s/ Medical Instrument Development Inc.
/s/ Globis Overseas Fund, Ltd.
/s/ A. Chris Tupker
/s/ David Kreinberg
/s/ American Investments Limited
/s/ Joseph Bronner
/s/ Steven Zullar
/s/ Globis Capital Partners, LP
EXHIBIT 10.22
MASTER AMENDMENT AGREEMENT
This MASTER AMENDMENT AGREEMENT (this “ Agreement ”), dated as of March __, 2014, is among GLOBIS CAPITAL PARTNERS, L.P., a Delaware limited partnership (“ Globis Capital ”), GLOBIS OVERSEAS FUND, LTD., a Cayman Islands exempted company (“ Globis Overseas ”), GLOBIS INTERNATIONAL INVESTMENTS LLC, a Delaware limited liability company (“ Globis Investments ”), PAUL PACKER (“ Packer ,” and together with Globis Capital, Globis Overseas and Globis International, the “ Holders ”), an individual resident of New York, and NANO VIBRONIX, INC., a Delaware corporation (the “ Company ”).
WHEREAS , Globis Capital, Globis Overseas and Globis International hold Convertible Promissory Notes convertible into shares of series B-1 participating convertible preferred stock of the Company, as amended (the “ Series B-1 Notes ”);
WHEREAS , Globis Capital, Globis Overseas and Paul Packer hold Convertible Promissory Notes convertible into shares of series B-2 participating convertible preferred stock of the Company, as amended (the “ Series B-2 Notes ”);
WHEREAS , the parties hereto desire to make certain amendments to the Series B-1 Notes and the Series B-2 Notes (together, the “ Amended Notes ”).
NOW THEREFORE , for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Amendments to Series B-1 Notes . Effective as of the date hereof, the Series B-1 Notes held by the Holders are hereby amended by:
(a) deleting Section 2(b) and replacing it in its entirety with the following:
“b. | If an Issuance Conversion Event or Entity Conversion Event shall occur prior to the Maturity Date, this Note (including accrued but unpaid interest) shall automatically be converted into such number of shares of Series C Preferred Stock of the Company, par value $0.001 per share (the “Series C Preferred Stock”), as equals the number of shares of Common Stock of the Company, par value $0.001 per share (the “Common Stock”), that the Investor would have received if this Note (including accrued but unpaid interest) had been converted as of the same date, at the Conversion Price, into shares of Series B-1 Participating Convertible Preferred Stock of the Company, par value $.001 per share (the “Series B-1 Preferred Stock”), and such shares of Series B-1 Preferred Stock had been immediately thereafter converted, in accordance with the then-current terms thereof, into shares of Common Stock.” |
(b) deleting Section 2(c) and replacing it in its entirety with the following:
“c. | Election to Convert . At any time prior to the Maturity Date, the Investor may elect by written notice to the Company and the surrender of this Note to convert this Note (including accrued but unpaid interest) into such number of shares of Series C Preferred Stock as equals the number of shares of Common Stock that the Investor would have received if this Note (including accrued but unpaid interest) had been converted as of the same date, at the Conversion Price, into shares of Series B-1 Preferred Stock, and such shares of Series B-1 Preferred Stock had been immediately thereafter converted, in accordance with the then-current terms thereof, into shares of Common Stock.” |
(c) amending Section 2(d) by deleting “Conversion Price” and replacing it with “effective conversion price of this Note per share of Series C Preferred Stock applying the formula set forth in 2(b) and (c) above”
2. Amendments to Series B-2 Notes . Effective as of the date hereof, the Series B-2 Notes held by the Holders are hereby amended by:
(a) deleting Section 2(b) and replacing it in its entirety with the following:
“b. | If an Issuance Conversion Event or Entity Conversion Event shall occur prior to the Maturity Date, this Note (including accrued but unpaid interest) shall automatically be converted into such number of shares of Series C Preferred Stock of the Company, par value $0.001 per share (the “Series C Preferred Stock”), as equals the number of shares of Common Stock of the Company, par value $0.001 per share (the “Common Stock”), that the Investor would have received if this Note (including accrued but unpaid interest) had been converted as of the same date, at the Conversion Price, into shares of Series B-2 Participating Convertible Preferred Stock of the Company, par value $.001 per share (the “Series B-2 Preferred Stock”), and such shares of Series B-2 Preferred Stock had been immediately thereafter converted, in accordance with the then-current terms thereof, into shares of Common Stock.” |
(b) deleting Section 2(c) and replacing it in its entirety with the following:
“c. | Election to Convert . At any time prior to the Maturity Date, the Investor may elect by written notice to the Company and the surrender of this Note to convert this Note (including accrued but unpaid interest) into such number of shares of Series C Preferred Stock as equals the number of shares of Common Stock that the Investor would have received if this Note (including accrued but unpaid interest) had been converted as of the same date, at the Conversion Price, into shares of Series B-2 Preferred Stock, and such shares of Series B-2 Preferred Stock had been immediately thereafter converted, in accordance with the then-current terms thereof, into shares of Common Stock.” |
(c) amending Section 2(d) by deleting “Conversion Price” and replacing it with “effective conversion price of this Note per share of Series C Preferred Stock applying the formula set forth in 2(b) and (c) above”
3. Representations and Warranties . Each party hereto hereby represents and warrants unto the other parties hereto as follows:
(a) it has the organizational power and authority to execute, deliver and perform this Agreement, and all organizational action on the part of it requisite for the due execution, delivery and performance of this Agreement has been duly and effectively taken;
2 |
(b) this Agreement constitutes the legal, valid and binding obligation of it, enforceable against it in accordance with the terms hereof;
(c) this Agreement does not and will not violate any provisions of any of its organizational documents or any contract, agreement, instrument or requirement of any governmental authority to which it is subject; and
(d) the execution, delivery and performance of this Agreement does not require the consent or approval of any other person, including, without limitation, any regulatory authority or governmental body of the United States of America or any state thereof or any political subdivision of the United States of America or any state thereof.
4. Execution in Counterparts . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile or electronic mail shall be equally as effective as delivery of a manually executed counterpart of this Agreement.
5. Joint Effort . This Agreement shall be considered for all purposes as having been prepared through the joint efforts of the parties hereto, and shall not be construed against one party or the other as a result of the preparation, submittal or other event of negotiation, drafting or execution thereof.
6. Headings . Section headings in this Agreement are included herein for convenience of reference only and shall not have any effect for purposes of interpretation or construction of the terms of this Agreement.
7. Governing Law . This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without giving effect to its conflict of laws provisions other than Section 5-1401 of the New York General Obligations Law.
[Signature Page Follows]
3 |
IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date first written above.
GLOBIS CAPITAL PARTNERS, L.P. | |||
By: | |||
Name:
Title: |
Paul Packer
Managing Member of the General Partner |
||
GLOBIS OVERSEAS FUND, LTD. | |||
By: | |||
Name:
Title: |
Paul Packer
Managing Member of the General Partner of the Investment Manager |
||
GLOBIS INTERNATIONAL INVESTMENTS LLC | |||
By: | |||
Name:
Title: |
Paul Packer
Managing Member |
||
Paul Packer | |||
NANO VIBRONIX, INC. | |||
By: | |||
Name:
Title: |
Ophir Shahaf
Chief Executive Officer |
[Signature Page to Master Amendment Agreement] |
EXHIBIT 10.23
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the “ Agreement ”) is made and entered into as of February 21, 2014 (the “ Effective Date ”), by and between Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and AYTA Consulting, LLC, a New York limited liability company (“ AYTA ”).
WHEREAS, subject to the terms and conditions of this Agreement, the Company desires to retain AYTA to provide certain consulting services in connection with the operation and conduct of the Company’s business, and AYTA desires to provide such services;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Retention . During the term of this Agreement (the “ Term ”), the Company hereby engages, and AYTA hereby agrees to such engagement, to provide the Company with consulting services as described herein (the “ Consulting Services ”) in connection with the Company’s business and operations.
Notice is hereby given that this Agreement contains indemnification provisions in Section 5(b) that apply to any Indemnified Liabilities (as defined in Section 5(b) below).
2. Consulting Services . AYTA shall provide the Consulting Services to the Company as requested from time to time by the Company with respect to (i) strategic, financial and operational planning, (ii) advice regarding potential financing arrangements, (iii) assistance with the preparation of reports, summaries, corporate profiles, due diligence packages and other materials to assist in presenting the Company to third parties, (iv) the evaluation and assessment of investor relations and ongoing business operations, (v) the identification of potential acquisition candidates and financing sources, (vi) the identification and potential acquisition of undervalued assets, (vii) the operations, marketing and development of the Company, (viii) advice with respect to potential mergers, acquisitions, divestitures, joint ventures and similar transactions and (ix) other general business advisory services as may reasonably be requested by the Company from time to time. AYTA agrees to meet with representatives of the Company as reasonably requested by the Company. AYTA is under no obligation to devote a specified number of hours to providing the Consulting Services.
3. Consulting Fees . On the date hereof, Parent shall grant Consultant an award of 400,000 shares of the Company’s common stock, subject to the terms and conditions of that certain Restricted Stock Award Agreement attached hereto as Exhibit A (the “ Consulting Fee ”). The Consulting Fee shall be the sole compensation payable to Consultant with respect to its performance of the Consulting Services.
4. Term of Agreement . The Agreement shall continue in full force and effect until the earlier of (a) the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, (b) such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document, (c) the merger, share exchange or consolidation of the Company (other than one in which stockholders of the Company own a majority of the voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company, (d) the written termination of this Agreement by AYTA with thirty (30) days written notice to the Company or (e) the Company’s liquidation, dissolution or winding up. The obligations of the Company and AYTA under Section 5 below shall survive any such termination.
5. Indemnity .
(a) Company’s Indemnity . The Company hereby agrees to indemnify, exonerate and hold AYTA, and AYTA’s members, managers, affiliates, persons for which they are acting as nominees, trustees, directors, officers, fiduciaries, employees and agents and each of the partners, shareholders, affiliates, trustees, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the “ AYTA Affiliates ”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation attorneys’ fees and disbursements (collectively, the “ Indemnified Liabilities ”), incurred by the AYTA Affiliates or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement except for any such Indemnified Liabilities arising on account of any AYTA Affiliate’s breach of this Agreement, gross negligence or willful misconduct.
(b) AYTA’s Indemnity . AYTA hereby agrees to indemnify, exonerate and hold the Company, and the Company’s members, managers, affiliates, persons for which they are acting as nominees, trustees, directors, officers, fiduciaries, employees and agents and each of the partners, shareholders, affiliates, trustees, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the “ Company Affiliates ”) free and harmless from and against any and all Indemnified Liabilities incurred by the Company Affiliates or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement except for any such Indemnified Liabilities arising on account of any Company Affiliate’s breach of this Agreement, gross negligence or willful misconduct.
6. Disclaimer and Opportunities .
(a) Disclaimer; Standard of Care . AYTA makes no representations or warranties, express or implied, in respect of the services to be provided by AYTA hereunder.
(b) Freedom to Pursue Opportunities . In recognition that the AYTA Affiliates currently have, and will in the future have or will consider acquiring, investments in numerous companies and other entities with respect to which AYTA Affiliates may serve as an advisor, a director or in some other capacity, and in recognition that the AYTA Affiliates have myriad duties to various entities, investors and partners, and in anticipation that the Company, on the one hand and the AYTA Affiliates (or one or more associated investment funds or portfolio companies or clients of a AYTA Affiliate), on the other hand, may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the Company hereunder, the provisions of this Section 6(b) are set forth to regulate, define and guide the conduct of certain affairs of the Company as they may involve the AYTA Affiliates. Except as otherwise agreed by AYTA and any other AYTA Affiliate:
(i) AYTA and the other AYTA Affiliates will have the right: (A) to directly or indirectly engage in any business (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Company) or invest, own or deal in securities of any other Person so engaged in any business, (B) to directly or indirectly do business with any client or customer of the Company, (C) to take any other action that AYTA or any AYTA Affiliate believes in good faith is necessary to or appropriate to fulfill its obligations as described in the first sentence of this Section 6(b) , and (D) not to present potential transactions, matters or business opportunities to the Company, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any such opportunity to another Person. “ Person ” means an individual, corporation, limited liability company, partnership, association, joint venture, trust, unincorporated organization, other entity or group, including any governmental entity.
(ii) AYTA and the other AYTA Affiliates will have no duty (contractual or otherwise) to communicate or present any corporate opportunities to the Company or to refrain from any actions specified in Section 6(b)(i) , and the Company hereby renounces and waives any right to require AYTA or any other AYTA Affiliate to act in a manner inconsistent with the provisions of this Section 6(b) .
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(iii) AYTA and the other AYTA Affiliates will not be liable to the Company for breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in this Section 6(b) or of any such person’s participation therein.
7. Independent Contractor . The Company and AYTA agree and acknowledge that AYTA shall perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Except with respect to AYTA officers and employees who are employed by the Company, neither AYTA nor any other AYTA Affiliate shall be considered an employee of the Company as a result of this Agreement or the services provided hereunder.
8. Non-Assignability of Agreement . Neither party shall have the right to assign this Agreement without the consent of the other party hereto. AYTA acknowledges that its services under this Agreement are unique. Accordingly, any purported assignment by AYTA without the consent of the Company shall be void. Notwithstanding the foregoing, AYTA may assign all or part of its rights and obligations hereunder to any AYTA Affiliate that provides services similar to those called for by this Agreement, in which event AYTA shall be released of all of its rights and obligations hereunder.
9. Waiver . No amendment or waiver of any term, provision or condition of this Agreement shall be effective unless in writing and executed by each of AYTA and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.
10. Governing Law; Jurisdiction; Waiver of Jury Trial
(a) Choice of Law . This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.
(b) Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of the State of New York. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of New York for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives, to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens , should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 12 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceedings any claim that service of process made in accordance with Section 12 does not constitute good and sufficient service of process. The provisions of this Section 10(b) shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of the State of New York.
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(c) Waiver of Jury Trial . To the extent not prohibited by applicable law that cannot be waived, each of the parties hereto hereby waives, and covenants that he or it will not assert (whether as plaintiff, defendant, or otherwise), any right to trial by jury in any forum in respect of any issue, claim, demand, cause of action, action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof, in each case whether now existing or hereafter arising and whether in contract or tort or otherwise. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 10(c) constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transaction contemplated hereby. Any of the parties hereto may file an original counterpart or a copy of this Section 10(c) with any court as written evidence of the consent of each of the parties hereto to the waiver of his or its right to trial by jury.
11. Entire Agreement . This Agreement contains the entire understanding of the parties and supersedes and preempts any prior agreements, understandings or representations by or between the parties, written or oral, with respect to the subject matter hereof.
12. Notice . All notices, demands, and communications of any kind that any party may require or desire to serve upon any other party under this Agreement shall be in writing and shall be served upon such other party as specified below by personal delivery to its address set forth below or to such other address as any party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by Federal Express or any other reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party at such address. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In case of service by certified or registered mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party of change of address shall be deemed complete only upon actual receipt by an officer or agent of such party.
If to the Company, to :
Nano Vibronix, Inc.
105 Maxess Road, Suite S124
Melville, NY 11747
Attn: Chief Executive Officer
If to AYTA, to :
AYTA Consulting, LLC
805 Third Avenue, 15th Floor
New York, NY 10022
Attn: Paul Packer
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13. Counterparts . This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile or “.pdf” transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or “.pdf” shall be deemed to be their original signatures for any purpose whatsoever.
14. Joint Obligation . The obligations of the Company hereunder shall be joint obligations.
15. Severability . If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be a valid and binding agreement, enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.
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[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as of the date first above written.
NANO VIBRONIX, INC. | |||
a Delaware corporation | |||
By: | /s/ Harold Jacob | ||
Name: | Harold Jacob | ||
Title: | Chief Executive Officer | ||
AYTA Consulting, LLC | |||
a New York limited liability company | |||
By: | /s/ Paul Packer | ||
Name: | Paul Packer | ||
Title: | Managing Member |
EXHIBIT 10.24
NANO VIBRONIX, INC.
RESTRICTED STOCK AWARD AGREEMENT
1. Grant of Award . Pursuant to this restricted stock award agreement (this “ Agreement ”), Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), hereby grants to
___ AYTA Consulting, LLC __
(the “ Contractor ”)
an Award of Restricted Stock, effective as of February 21, 2014 (the “ Date of Grant ”). The number of shares of common stock of the Company, par value $0.001 per share (“ Common Stock ”), awarded under this Agreement is four hundred thousand (400,000) shares (the “ Awarded Shares ”).
2. Definitions . For purposes of this Agreement, the following terms shall have the meanings set forth below:
a. “ Code ” means the Internal Revenue Code of 1986, as amended.
b. “ Termination of Service ” occurs when the Contractor ceases to serve as a contractor of the Company or a subsidiary of the Company for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have occurred when the Contractor becomes an outside director or employee of the Company or vice versa.
3. Vesting . Except as specifically provided in this Agreement, one hundred percent (100%) of the total Awarded Shares shall vest upon (a) the Company’s initial public offering of its common stock pursuant to an effective registration statement under the United States Securities Act of 1933, as amended, or equivalent law of another jurisdiction, (b) such date as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, without limitation, upon consummation of a reverse merger or upon the effectiveness of a registration statement on Form 10 filed by the Company under the Exchange Act or equivalent document or (c) the merger, share exchange or consolidation of the Company (other than one in which stockholders of the Company own a majority of the voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.
4. Forfeiture of Awarded Shares . Awarded Shares that are not vested in accordance with Section 3 shall be forfeited on the later of (i) December 31, 2019, and (ii) the date of the Contractor’s Termination of Service. Upon forfeiture, all of the Contractor’s rights with respect to the forfeited Awarded Shares shall cease and terminate, without any further obligations on the part of the Company.
5. Restrictions on Awarded Shares . Subject to the terms of this Agreement, from the Date of Grant until the date the Awarded Shares are vested in accordance with Section 3 and are no longer subject to forfeiture in accordance with Section 4 (the “ Restriction Period ”), the Contractor shall not be permitted to sell, transfer, pledge, hypothecate, margin, assign, or otherwise encumber any of the Awarded Shares.
6. Legend . Awarded Shares electronically registered in the Contractor’s name shall note that such shares are restricted stock. If certificates for Awarded Shares are issued, the following legend shall be placed on all certificates issued representing Awarded Shares:
On the face of the certificate:
“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On the reverse:
“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Restricted Stock Award Agreement dated as of February __, 2014, by and between the Company and AYTA Consulting, LLC. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Award Agreement. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Award Agreement.”
The following legend shall be inserted on a certificate, if issued, evidencing Common Stock if the shares were not issued in a transaction registered under the applicable federal and state securities laws:
“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”
All Awarded Shares owned by the Contractor shall be subject to the terms of this Agreement and shall be represented by a certificate or certificates bearing the foregoing legend.
7. Delivery of Certificates; Registration of Shares . The Company shall deliver certificates for the Awarded Shares to the Contractor or shall register the Awarded Shares in the Contractor’s name, free of restriction under this Agreement, promptly after, and only after, the Restriction Period has expired without forfeiture pursuant to Section 4 . In connection with any issuance of a certificate for Restricted Stock, the Contractor shall endorse such certificate in blank or execute a stock power in a form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
8. Rights of a Stockholder . Except as provided in Section 4 and Section 5 above, the Contractor shall have, with respect to his Awarded Shares, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Any stock dividends paid with respect to Awarded Shares shall at all times be treated as Awarded Shares and shall be subject to all restrictions placed on Awarded Shares; any such stock dividends paid with respect to Awarded Shares shall vest as the Awarded Shares become vested.
9. Voting . The Contractor, as record holder of the Awarded Shares, has the exclusive right to vote, or consent with respect to, such Awarded Shares until such time as the Awarded Shares are transferred in accordance with this Agreement; provided , however , that this Section 9 shall not create any voting right where the holders of such Awarded Shares otherwise have no such right.
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10. Adjustment to Number of Awarded Shares . In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of the Awarded Shares, then the Company shall adjust the number of Awarded Shares so that the fair value of the Awarded Shares immediately after the transaction or event is equal to the fair value of the Awarded Shares immediately prior to the transaction or event. The Company shall determine the specific adjustments to be made under this Section 10 , and its determination shall be conclusive. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject. Upon the occurrence of any such adjustment, the Company shall provide notice to the Contractor of its computation of such adjustment which shall be conclusive and shall be binding upon the Contractor.
11. Specific Performance . The parties acknowledge that remedies at law will be inadequate remedies for breach of this Agreement and consequently agree that this Agreement shall be enforceable by specific performance. The remedy of specific performance shall be cumulative of all of the rights and remedies at law or in equity of the parties under this Agreement.
12. Contractor’s Representations . Notwithstanding any of the provisions hereof, the Contractor hereby agrees that he will not acquire any Awarded Shares, and that the Company will not be obligated to issue any Awarded Shares to the Contractor hereunder, if the issuance of such shares shall constitute a violation by the Contractor or the Company of any provision of any law or regulation of any governmental authority. Any determination in this connection by the Company shall be final, binding, and conclusive. The rights and obligations of the Company and the rights and obligations of the Contractor are subject to all applicable laws, rules, and regulations.
13. Investment Representations . Notwithstanding anything herein to the contrary, the Contractor hereby represents and warrants to the Company, that:
(a) The Contractor acknowledges that the Awarded Shares have not been registered under the Securities Act of 1933, as amended (the “ Securities Act ”), and that the Company’s reliance on an exemption from the Securities Act depends, in part, upon the truth and accuracy of the Contractor’s representations set forth herein.
(b) The Contractor is acquiring the Awarded Shares for his own account, for investment purposes only, and not with a view to the distribution, resale, or other disposition not in compliance with the Securities Act and applicable state securities laws.
(c) The Contractor is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act.
(d) The decision of the Contractor to acquire the Awarded Shares for investment has been based solely upon the evaluation made by the Contractor.
(e) The Contractor recognizes and understands that the Awarded Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement or an available exemption, he must hold such Awarded Shares indefinitely. The Contractor further acknowledges that Rule 144 promulgated under the Securities Act may not be applicable to the Awarded Shares and understands that the Company will not be obligated to make the filings and reports, or make publicly available the information, which is a condition to the availability of Rule 144. The Contractor further recognizes that the Company is under no obligation to register the Awarded Shares or to comply with any exemption from such registration. The Contractor understands that the certificates representing the Awarded Shares may carry one or more legends incorporating such restrictions.
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(f) The Contractor acknowledges that he is a sophisticated investor, having such knowledge and experience in financial and business matters as to be capable of making an informed investment decision with respect to the acquisition of the Awarded Shares and that he has the financial wherewithal to absorb the loss of any investment in the Awarded Shares.
(g) The Contractor acknowledges receipt of all information he considers necessary or appropriate for deciding and evaluating the merits and risks of his acquiring and holding the Awarded Shares. The Contractor acknowledges that he has had an opportunity to ask questions and to receive answers from the Company regarding the Awarded Shares and the business properties, prospects, and financial condition of the Company and to obtain additional information necessary to verify the accuracy of any information furnished to him or to which he had access.
(h) The Contractor acknowledges that applicable securities laws provide restrictions on the ability of stockholders to sell, transfer, assign, mortgage, hypothecate, or otherwise encumber their Awarded Shares and places certain other restrictions on the Contractor.
14. Contractor’s Acknowledgments . The Contractor hereby accepts the Awarded Shares subject to all the terms and provisions of this Agreement. The Contractor hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Company upon any questions arising under this Agreement.
15. Law Governing . This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this agreement to the laws of another state).
16. No Right to Continue Service . Nothing herein shall be construed to confer upon the Contractor the right to continue to provide services to the Company or any subsidiary, or to interfere with or restrict in any way the right of the Company or any subsidiary to discharge the Contractor at any time.
17. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement, and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein.
18. Covenants and Agreements as Independent Agreements . Each of the covenants and agreements that are set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Contractor against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement.
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19. Entire Agreement . This Agreement supersedes any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement and that any agreement, statement or promise that is not contained in this Agreement shall not be valid or binding or of any force or effect.
20. Parties Bound . The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein. No person shall be permitted to acquire any Awarded Shares without first executing and delivering an agreement in the form satisfactory to the Company making such person or entity subject to the restrictions on transfer contained herein.
21. Modification . No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties.
22. Headings . The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement.
23. Gender and Number . Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise.
24. Notice . Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Contractor, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith:
a. | Notice to the Company shall be addressed and delivered as follows |
Nano Vibronix, Inc. | |
105 Maxess Road, Suite S124 | |
Melville, NY 11747 | |
Attn: | |
Fax: | |
b. | Notice to the Contractor shall be addressed and delivered as set forth on the signature page. |
25. Tax Requirements . The Contractor is hereby advised to consult immediately with his own tax advisor regarding the tax consequences of this Agreement, the method and timing for filing an election to include this Agreement in income under Section 83(b) of the Code, and the tax consequences of such election. By execution of this Agreement, the Contractor agrees that if the Contractor makes such an election, the Contractor shall provide the Company with written notice of such election in accordance with the regulations promulgated under Section 83(b) of the Code. The Company or, if applicable, any subsidiary (for purposes of this Section 25 , the term “ Company ” shall be deemed to include any applicable subsidiary), shall have the right to deduct from all amounts paid in cash or other form, any federal, state, local, or other taxes required by law to be withheld in connection with the Awarded Shares. The amount of any tax withholding due with respect to the vesting of the Awarded Shares may be made by the Contractor to the Company by (i) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) the actual delivery by the Contractor to the Company of shares of common stock of the Company (“ Shares ”), which Shares so delivered have an aggregate fair market value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) the actual delivery by the Contractor of a number of Awarded Shares vesting (through either physical delivery of certificates to the Company representing Awarded Shares or an instruction to the Company from the Contractor to cancel any Awarded Shares not represented by a physical certificate), which Awarded Shares so delivered have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, with the consent of the Contractor, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Contractor.
* * * * * * * * * *
[ Remainder of Page Intentionally Left Blank.
Signature Page Follows ]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Contractor, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof.
COMPANY: | ||
NANO VIBRONIX, INC. | ||
By: | /s/ Ira Greenstein | |
Name: | Ira Greenstein | |
Title: | Chairman of the Board | |
CONTRACTOR: | ||
AYTA Consulting, LLC | ||
By: | /s/ Paul Packer | |
Name: | Paul Packer | |
Title: | Managing Member | |
Address: | ||
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EXHIBIT 10.25
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is dated as of February 26, 2014 and is entered into by and among Ophir Shahaf (the “ Executive ”), Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and its wholly-owned Israeli subsidiary, NanoVibronix Ltd., (“ NanoVibronix ”), a company organized under the laws of the State of Israel. The Company and NanoVibronix are referred to herein collectively as the “ Companies ”. The Companies and the Executive shall be referred to herein as the “ Parties .”
RECITALS
Whereas , the Companies desire to employ the Executive through NanoVibronix as the Chief Executive Officer (“ CEO ”) of both companies, and the Executive desires to be employed by the Companies as their CEO;
Whereas , the Parties desire to set forth in writing the terms and conditions of their agreement and understandings with respect to the employment of the Executive as CEO; and
Whereas , the Company and NanoVibronix hereby propose to employ the Executive, and the Executive hereby accepts employment with the Company and NanoVibronix for the period and upon the terms and conditions contained in this Agreement.
Now, Therefore , in consideration of the mutual promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:
ARTICLE I.
Services to be Provided by Executive
A. Position and Responsibilities . The Executive shall serve the Company and NanoVibronix in the capacity of CEO and in such other capacities as the Board of Directors of the Company and NanoVibronix (collectively, the “ Board ”) may from time to time request. The Executive shall fulfill all the Board instructions diligently and in a timely manner. To the extent not in conflict with the direction of, or policy determined by, the Board, the Executive shall have all powers and authority conferred upon a Chief Executive Officer under the Companies Law 5759-1999, but without derogating from the Board’s right to assume same as per Section 51 of the Companies Law 5759-1999. The Executive also agrees to serve, if elected, as an officer or director of the Company, NanoVibronix or any other direct or indirect subsidiary of the Companies, in each such case at no compensation in addition to that provided for in this Agreement. The Companies will use their best efforts to cause the Executive to be elected as a member of the Board as long as the Executive continues to serve as CEO. The Executive shall resign as a member of the Board if his employment terminates for any reason. The Executive acknowledges and agrees that his duties shall include travel outside of Israel as may be necessary in order to fulfill his duties hereunder, as determined by the Board in its sole discretion. The Companies and the Executive confirm and agree that this Agreement is a personal employment contract and that the relationship between the parties hereto shall not be subject to any general or special collective employment agreement or any custom or practice of the Companies in respect of any of its other employees or contractors.
B. Performance . During the Executive’s employment with the Companies, the Executive shall devote on a full-time basis all of the Executive’s time, energy, skill and reasonable best efforts to the performance of the Executive’s duties hereunder in a manner that will faithfully and diligently further the business and interests of the Companies, and shall exercise reasonable best efforts to perform the Executive’s duties in a diligent, trustworthy, good faith and business-like manner, all for the purpose of advancing the business of the Companies. The Executive shall at all times act in a manner consistent with the Executive’s position. The Executive will continue his service as a director for additional companies, in a manner consistent with Article IV (B) hereunder.
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C. Compliance . The Executive agrees to act in accordance with high business and ethical standards at all times. The Executive shall comply with the policies, codes of conduct, codes of ethics, written manuals and lawful directives of the Companies. The Executive shall comply with all laws of any jurisdiction in which the Companies do business. The Executive shall keep the Board promptly and fully informed of Executive’s conduct in connection with the business affairs of the Companies. The Executive shall report Executive’s own wrongdoing and any wrongdoing or proposed wrongdoing of any other employee, director, or contractor of the Companies or other person performing services on behalf of the Companies to the Board immediately upon becoming aware of it.
ARTICLE II.
Compensation for SErvices
As compensation for all services the Executive will perform under this Agreement, the Company will pay the Executive, and the Executive shall accept as full compensation, the following:
A. Base Salary . Except as otherwise provided herein, during the Executive’s employment with the Companies, the Company shall pay the Executive a gross monthly salary of sixty thousand new Israeli shekels (NIS60,000) (NIS720,000 annualized), (the “ Base Salary ”) for all services rendered by the Executive under this Agreement. The Base Salary for each month shall be payable in arrears within nine (9) calendar days of the end of the calendar month for the preceding month. Notwithstanding the foregoing, for the period beginning on the Effective Date (as defined below) and ending on the closing date of the Company’s initial public offering pursuant to which the Company raises at least US$5,000,000 (the “ IPO ”), the Company shall pay the Executive fifty percent (50%) of the Base Salary payable to the Executive pursuant to this Article II.A plus a corresponding portion of the contributions described below. The remaining fifty percent (50%) of such Base Salary (the “ Deferred Base Salary ”), together with the derived contributions in respect thereof in accordance with the terms hereof, including contributions towards allocations to pension fund and/or manager's insurance fund and to all fringe and benefits and/or social contributions of any kind according to this Agreement shall be paid to the Executive on the first pay date immediately following the closing of the IPO.
As the Executive is employed by the Companies in a senior managerial position involving a fiduciary relationship between the Executive and the Companies, the Work and Rest Law (5711-1951), shall not apply to the Executive or to his employment with the Companies, and the Executive shall not be entitled to any compensation in respect of such law. The Executive acknowledges that the compensation set for him under this Agreement includes compensation that would otherwise be due to the Executive pursuant to such law. The provisions of any collective bargaining agreement which exist or shall exist do not, and will not, apply to the employment of the Executive, whether such agreement was signed among the government, the General Federation of Labor and Employers organizations, or any of such parties, or whether signed by others, in relation to the field or fields of the business of the Company or NanoVibronix or in relation to the position held by or the profession of the Executive.
The Base Salary and all other benefits according to this Agreement shall be comprehensive and all-inclusive in that it shall be deemed to represent the Executive’s entire compensation for his employment and work under this Agreement, except where it is otherwise specifically set forth in this Agreement.
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B. Bonus Plan . During the Executive’s employment with the Companies or any of them, the Executive shall be eligible to participate in a bonus plan, as the Board in its sole discretion, may from time to time establish. The Executive shall be eligible to receive a bonus in an amount equal to up to twenty-five percent (25%) of his annualized Base Salary during each year in which the Executive is eligible to participate in such bonus plan.
C. IPO Bonus . The Company shall pay the Executive a lump sum cash bonus equal to fifty thousand U.S. dollars (U.S. $50,000), less applicable payroll deductions and tax withholdings, within five (5) business days of the closing date of the IPO, provided that the Executive is still employed by any of the Companies on the closing date of the IPO.
D. Equity Grant . On the pricing date of the IPO (the “ Date of Grant ”), the Company shall grant the Executive an option, pursuant to a separate award agreement and subject to the terms and conditions of the Company’s equity plan then-in effect, to purchase such number of shares of the Company’s common stock equal to three percent (3%) of the shares of common stock issued and outstanding on the Date of Grant (taking into account the number of shares that will be sold in the IPO and issued in connection with the IPO) (the “ Option Grant ”) at an exercise price equal to the public offering price in the IPO, which shall be the fair market value of the common stock on the date of grant. The Option Grant, as defined below, will be under section 102 of the Israeli Income Tax Ordinance [NEW VERSION] 5721-1961 (capital gain tax route), and for this purpose the Companies shall adopt an equity plan/an appendix to an existing equity plan for Israeli grantees, to be filed with the Israeli Tax Authorities. The Option Grant shall vest in three equal installments on each of the first, second, and third anniversary of the date of grant; provided that the Executive is employed by any of the Companies on the applicable vesting date.
E. Company Automobile . The Company shall provide the Executive an automobile of the same class as Mazda 6 / Ford Mondeo, either purchased or rented by the Company, for the Executive’s use in connection with the performance of his duties hereunder and for his reasonable personal use. The Company shall pay all maintenance, repair, and operating expenses attributable to the reasonable use of such automobile. The Executive shall be liable for all traffic or parking fines or penalties assessed on such automobile and shall reimburse the Companies for any such fines or penalties paid by the Companies, which amount the Company may deduct from other compensation payable to the Executive under this Agreement. The Executive shall return the automobile to NanoVibronix 30 days from the end of employee-employer relations.
F. Cellular Phone and Laptop . The Company shall provide the Executive with a cellular phone and laptop for the Executive’s use in connection with the performance of his duties hereunder. The Executive shall return the cellular phone and laptop to the Company upon the end of employee - employer relations.
G. Expenses . The Company agrees that, during the Executive's employment, it will reimburse the Executive for out-of-pocket expenses reasonably incurred in connection with the Executive's performance of Executive’s services hereunder, upon the presentation by the Executive of an itemized accounting of such expenditures, with supporting receipts, provided that Executive submits such expenses for reimbursement within thirty (30) days of the date such expenses were incurred. The reimbursements shall be in compliance with the Company’s expense reimbursement policies.
H. Vacation . The Executive shall be entitled to 25 paid vacation days for each calendar year. Vacation days shall be taken at such times and intervals as shall be determined by Executive, subject to the reasonable business needs of the Companies.
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I. Sick Leave . The Executive shall be entitled to the number of paid sick leave days as provided by applicable law. Notwithstanding the aforesaid the Executive shall be entitled to paid sick leave from the first day of sickness.
J. Employee Benefits . The Executive shall be eligible to participate in any group health insurance plan, equity/equity-based incentive compensation plan, retirement plan, disability plan, group life plan, and any other benefit or welfare program or policy that is made generally available, from time to time, to other executive employees of the Companies, on a basis consistent with such participation and subject to the terms of the plan documents, as such plans may be modified, amended, terminated, or replaced from time to time by the Company, in its sole discretion.
K. Manager’s Insurance .
(i) During the term, the Company shall purchase a Manager’s Insurance Policy (the “ Policy ”) and/or a pension fund (the "Fund" ) for the benefit of Executive, as per the Executive’s election. Subject to the foregoing, the percentages of the monthly contributions shall be as follows:
(a)
To the Fund, the Company's contributions will be no less than14 1/3 % of the Base Salary, of which 8-1/3 % will be paid
towards severance and 6% will be paid towards the pension savings component, against a deduction from the Employee’s Base
Salary equal to 5.5% of the Base Salary; or,
(b) To the Policy, the Company’s contributions will be no less than 13-1/3 % of the Base Salary, of which 8-1/3% will be paid towards severance and 5% will be paid towards the pension savings component, and in addition, an amount required to secure at least 75% of the Base Salary or in an amount up to 2.5% of the Base Salary, the lower of the two, towards disability insurance, against a deduction from the Employee’s Base Salary equal to 5% of the Base Salary.
The Executive will be entitled to choose whether Company's contribution shall be made under Section (a), (b) or any combination of these two options; provided that any contribution made under this Section will be calculated based on an amount not exceeding the Base Salary. The Executive shall be soley responsible for any tax liability related to any contribution by the Company to the Policy or Fund that exceeds the highest contribution exempted by the Israeli tax laws.
(ii) The amounts which the Executive is entitled to receive from the Policy and/or the Fund accruing from disbursements paid by the Company towards the Policy/Fund shall be in lieu of the severance pay portion and shall be credited against any obligation the Company may have to pay severance pay under applicable law.
(iii) It is further agreed that such payment contribution made by Company towards the Policy/Fund as described in this Article II.K., shall be in place of any severance payment due to the Executive under any circumstances in which the Executive shall be entitled to severance payment subject to the applicable law, including but not limited to the Severance Payment Law (1963), in accordance with the provisions of the Order published pursuant to section 14 of the Severance Pay Law (1963), as amended and as shall be amended from time to time, subject to any law or regulations (including without limitation, any restrictions on the permitted contributions such as ceilings) (the “Order”). The Order as published up to the date of this Agreement is attached to this Agreement as Appendix A. The Order is hereby adopted by the parties and forms an integral part of this Agreement.
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(iv) According to the provisions of the Order and without derogating from there, the Company waives any right it may have to recover sums from its contributions, unless the Executive 's entitlement to severance pay has been denied in a judgment under sections 16 or 17 of the Severance Pay Law, 1963, unless the Executive withdraws sums from pension fund or the insurance fund otherwise than in the circumstances of an “entitling event” as defined in the Order (i.e., demise, disability or retirement at the age of 60 or above).
L. Recuperation Pay (Dmei Ha’vraa) . The Executive shall be entitled to recuperation pay for the number of days as provided by applicable law.
M. Advanced Training Fund (Keren Hishtalmut) . The Company shall open and maintain an advanced training fund (the “ Training Fund ”) designated by the Executive for the benefit of the Executive. During the Term of Employment, the Company shall pay a sum equal to 7.5% of the Base Salary to the Training fund, and the Company shall deduct 2.5% from the Base Salary to be paid on the Executive’s behalf to the Training Fund. Use of these funds shall be in accordance with the by-laws of the Training Fund. The Executive acknowledges and understands that Company’s contributions to the Training Fund exceeding the highest amount recognized as tax free by the Israeli tax authorities shall be deemed income of the Executive and shall be taxed accordingly, and all taxes and mandatory tax payments imposed on such additional income shall be exclusively borne by the Executive.
N. D&O Insurance . During the Employment Term, the Companies shall maintain and provide the Executive with coverage under a directors’ and officers’ liability policy at the Companies’ expense that is at least equivalent to the coverage provided by the Companies to the active directors and active senior executives of the Companies.
O. Taxes . Any taxes imposed on the benefits granted to the Executive under this Article II or upon other perquisites provided by the Company to the Executive, including, without limitation, the Executive’s use of (i) the automobile purchased or rented by the Company or (ii) a cellular telephone, shall be paid solely by the Executive and such taxes may be withheld by the Company from other compensation payable to the Executive under this Agreement.
ARTICLE III.
Term; Termination
A. Term of Employment . The term of the Executive’s employment under this Agreement shall begin on March 1, 2014 (the “ Effective Date ”) and shall continue in effect until terminated by either party as provided below. The Executive’s employment is not for any specific term, and is “at-will”, which means it can be terminated by either party at any time, for any reason.
B. Termination . Either party may terminate this Agreement at any time for any reason upon ninety (90) days written notice (the “ Notice Period ”). The date of the termination shall be the date stated in the notice of termination but in any event no earlier than ninety (90) days following the date of such notice. During the Notice Period the Company shall pay the Executive his Base Salary, Deferred Base Salary and all other earned and accrued benefits and contributions to which the Executive is entitled according to this Agreement (collectively, the “ Accrued Obligations ”).
C. Special Termination Right . In the event that the Company does not consummate an IPO by May 31, 2014, the Executive shall have a special right to terminate his employment upon seven (7) days written notice. Such special termination right shall be available to the Executive until June 30, 2014. In the event the Executive exercises this right, then the Executive shall be entitled to receive the Accrued Obligations.
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D. Survival. The Executive’s post-termination obligations in Article IV shall continue as provided in this Agreement.
E. Advance Notice Law . Other than as instructed in writing by the Company’s Chairman of the Board, during the Notice Period, the Executive, if so requested by the Companies, shall continue to perform his duties, cooperate with the Companies, and use his best efforts to assist in the integration into the Companies’ organization of the person or persons who will assume the Executive’s responsibilities.
ARTICLE IV.
RESTRICTIVE COVENANTS
A. Confidentiality .
(i) Confidential Information. During the Executive’s employment with the Companies, the Companies shall grant the Executive otherwise prohibited access to their trade secrets and confidential information which is not known to the Companies’ competitors or within the Companies’ industry generally, which was developed by the Companies over a long period of time and/or at their substantial expense, and which is of great competitive value to the Companies, and access to the Companies’ customers and clients. For purposes of this Agreement, “ Confidential Information ” includes any trade secrets or confidential or proprietary information of the Companies, including, but not limited to, the following: methods of operation, products, inventions, services, processes, equipment, know-how, technology, technical data, policies, strategies, designs, formulas, developmental or experimental work, improvements, discoveries, research, plans for research or future products and services, database schemas or tables, software, development tools or techniques, training procedures, training techniques, training manuals, business information, marketing and sales methods, plans and strategies, competitors, markets, market surveys, techniques, production processes, infrastructure, business plans, distribution and installation plans, processes and strategies, methodologies, budgets, financial data and information, customer and client information, prices and costs, fees, customer and client lists and profiles, employee, customer and client nonpublic personal information, supplier lists, business records, product construction, product specifications, audit processes, pricing strategies, business strategies, marketing and promotional practices, management methods and information, plans, reports, recommendations and conclusions, information regarding the skills and compensation of employees and contractors of the Companies, and other non public business information disclosed to the Executive by the Companies, either directly or indirectly, in writing, orally, or by drawings or observation. “ Confidential Information ” does not include, and there shall be no obligation hereunder with respect to, information that (i) is generally available to the public on the date of this Agreement; (ii) was previously rightfully known by the Executive, unless provided to him by the Companies during the discussions preceding his engagement hereunder; or (iii) becomes generally available to the public other than as a result of a disclosure not otherwise permissible hereunder.
(ii) No Unauthorized Use or Disclosure . The Executive acknowledges and agrees that Confidential Information is proprietary to and a trade secret of the Companies and, as such, is a special and unique asset of the Companies, and that any disclosure or unauthorized use of any Confidential Information by the Executive may cause irreparable harm and loss to the Companies. The Executive understands and acknowledges that the Confidential Information (i) has been developed by the Companies at significant effort and expense and is sufficiently secret to derive economic value from not being generally known to other parties, and (ii) constitutes a protectable business interest of the Companies. The Executive acknowledges and agrees that the Companies own the Confidential Information. The Executive agrees not to dispute, contest, or deny any such ownership rights either during or after the Executive’s employment with the Companies. The Executive agrees to preserve and protect the confidentiality of all Confidential Information. The Executive agrees that during the period of Executive’s employment with the Companies and after his termination from employment for any reason, the Executive shall not directly or indirectly, disclose to any unauthorized person or use for the Executive’s own account any Confidential Information without the Companies’ consent. Throughout the Executive’s employment with the Companies and thereafter: (i) the Executive shall hold all Confidential Information in the strictest confidence, take reasonable precautions to prevent its inadvertent disclosure to any unauthorized person, and follow all Company policies protecting the Confidential Information; and (ii) the Executive shall not, directly or indirectly, utilize, disclose or make available to any other person or entity, any of the Confidential Information, other than in the proper performance of the Executive’s duties. Further, the Executive shall not, directly or indirectly, use the Companies’ Confidential Information to: (1) call upon, solicit business from, attempt to conduct business with, conduct business with, interfere with or divert business away from any customer, client, service provider, supplier or vendor of the Companies with whom or which the Companies conducted business; and/or (2) recruit, solicit, hire or attempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by the Companies. If the Executive learns that any person or entity is taking or threatening to take any actions which would compromise any Confidential Information, the Executive shall timely advise the Companies of all facts concerning such action or threatened action. The Executive shall use all reasonable efforts to obligate all persons to whom any Confidential Information shall be disclosed by the Executive hereunder to preserve and protect the confidentiality of such Confidential Information.
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(iii) Return of Property and Information . Upon the termination of the Executive’s employment for any reason, the Executive shall immediately return and deliver to the Companies any and all Confidential Information, software, devices, cell phones, personal data assistants, credit cards, data, reports, proposals, lists, correspondence, materials, equipment, computers, hard drives, papers, books, records, documents, memoranda, manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, which belong to the Companies or relate to the Companies’ business and which are in the Executive’s possession, custody or control, whether prepared by the Executive or others. If at any time after termination of the Executive’s employment the Executive determines that the Executive has any Confidential Information in the Executive’s possession or control, the Executive shall return to the Companies all such Confidential Information in the Executive’s possession or control, including all copies and portions thereof as soon as possible.
B. Restrictive Covenants . In consideration for (i) the Companies’ promise to provide Confidential Information to the Executive; (ii) the substantial economic investment made by the Companies in the Confidential Information and goodwill of the Companies, and/or the business opportunities disclosed or entrusted to the Executive, (iii) access to the Companies’ customers and clients, and (iv) the Companies’ employment of the Executive pursuant to this Agreement and the compensation and other benefits provided by the Companies to the Executive, to protect the Companies’ Confidential Information and business goodwill of the Companies, the Executive agrees to the following restrictive covenants.
(i) Non-Competition . The Executive agrees that during the Restricted Period (defined below), other than in connection with Executive’s duties under this Agreement (including, without limitation, services to affiliates of the Companies), the Executive shall not, and shall not use any Confidential Information to, without the prior written consent of the Companies, directly or indirectly, either individually or as a principal, partner, stockholder, manager, agent, consultant, contractor, distributor, employee, lender, investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, become employed by, control, manage, carry on, join, lend money for, operate, engage in, establish, perform services for, invest in, solicit investors for, consult for, do business with or otherwise engage in any Competing Business (defined below) within the Restricted Area (defined below). Notwithstanding the restrictions contained in this Article IV.B.(i) , the Executive may own an aggregate of not more than five percent (5%) of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange in the United States (or a comparable exchange in a foreign jurisdiction) or regularly traded in the over-the-counter market by a member of a national securities exchange in the United States, without violating the provisions of Article IV.B.(i) ; provided, however, that the Executive does not have the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.
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For purposes of this Agreement:
(a) “ Restricted Period ” means during the Executive’s employment with the Companies and for a period of eighteen (18) months immediately following the date of the Executive’s termination from employment for any reason.
(b) As CEO of the Companies, the Executive has responsibility for the Companies’ operations throughout the United States and Israel. Because the Companies shall do business throughout the United States and Israel, the “ Restricted Area ” means (i) the United States; (ii) Israel; and (iii) any other geographic area(s) for which the Executive had any responsibility or about which the Executive received Confidential Information at any time during the one-year period before the end of the Executive’s employment.
(c) “ Competing Business ” means any business, individual, partnership, firm, corporation or other entity that is competing or that is preparing to compete with any aspect of the Companies’ business, i.e. the development and commercialization of noninvasive biological response-activating devices that target wound healing and pain therapy and any other business the Companies conducted during Executive’s employment with the Companies or prepared to conduct and is conducting during such eighteen month period.
(ii) Non-Solicitation . The Executive agrees that during the Restricted Period, other than in connection with Executive’s duties under this Agreement, the Executive shall not, and shall not use any Confidential Information to, directly or indirectly, either as a principal, manager, agent, employee, consultant, officer, director, stockholder, partner, investor or lender or in any other capacity, and whether personally or through other persons:
(a) Solicit business from, interfere with, induce, attempt to solicit business with, interfere with, induce or do business with any actual or prospective customer, client, service provider, supplier or vendor of the Companies with whom the Companies did business or who the Companies solicited within the preceding two (2) years, and who or which: (1) the Executive contacted, called on, serviced or did business with during the Executive’s employment with the Companies; (2) the Executive learned of as a result of the Executive’s employment with the Companies; or (3) about whom the Executive received Confidential Information. This restriction applies only to business which is in the scope of services or products provided by the Companies or any affiliate thereof; or
(b) Solicit, induce or attempt to solicit or induce, engage or hire, on behalf of the Executive or any other person or entity, any person who is an employee or who was employed by the Companies within the preceding 12 months or who is or was a consultant of the Companies within the preceding 12 months who specializes in the scope of services or products provided by the Companies or any affiliate thereof.
(iii) Non-Disparagement . The Executive shall refrain, both during and after the Executive’s employment terminates, from publishing any oral or written statements about the Companies or any of the Companies’ directors, managers, officers, employees, consultants, agents or representatives that (i) are slanderous, libelous or defamatory; or (ii) place the Companies or any of their directors, managers, officers, employees, consultants, agents or representatives in a false light before the public. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded to the Companies under this provision are in addition to any and all rights and remedies otherwise afforded by law.
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C. Works.
(i) Assignment of Work Product . For the purposes of this Agreement, the term “ Work Product ” shall mean, collectively, all work product, information, inventions, original works of authorship, ideas, know-how, processes, designs, computer programs, photographs, illustrations, developments, trade secrets and discoveries, including improvements thereto, and all other intellectual property, including patents, trademarks, copyrights and trade secrets, that the Executive conceives, creates, develops, makes, reduces to practice, or fixes in a tangible medium of expression, either alone or with others that (a) relates in any manner to the previous, existing or significantly contemplated business, work, or investigations of the Companies; (b) is or was suggested by, has resulted or will result from, or has arisen or will arise out of any work that the Executive has done or may do for or on behalf of the Companies; (c) has resulted or will result from or has arisen or will arise out of any materials or Confidential Information that may have been disclosed or otherwise made available to the Executive as a result of duties assigned to the Executive by the Companies; or (d) has been or will be otherwise made through the significant use of the Companies’ time, information, facilities, or materials, even if conceived, created, developed, made, reduced to practice, or fixed during other than working hours. Following the termination of the Executive’s employment for any reason, the Executive agrees that to make full written disclosure to the Companies of all Work Product conceived, created, developed, made, reduced to practice, or fixed in a tangible medium of expression during the period of the Executive’s employment with the Companies. Executive hereby assigns and shall be deemed to have assigned to the Companies or their designee, all of the Executive’s right, title, and interest in and to any and all Work Product conceived, created, developed, made, reduced to practice, or fixed in a tangible medium of expression during the period of the Executive’s employment with the Companies. The Executive further acknowledges that all original works of authorship that have been or will be made or fixed in a tangible medium of expression by the Executive (solely or jointly with others) within the scope of the Executive’s employment with the Companies that are protectable by copyright are “Works Made for Hire,” as that term is defined in the United States Copyright Act. The Executive understands and agrees that the decision whether or not to commercialize or market any Work Product is within the Companies’ sole discretion and for the Companies’ sole benefit, and that no royalty will be due to the Executive as a result of the Companies’ efforts to commercialize or market any such Work Product.
(ii) Maintenance of Records . The Executive agrees to keep and maintain adequate and current electronic records of all Work Product made by the Executive (solely or jointly with others) during the term of the Executive’s employment with the Companies. The records will be available to and remain the sole property of the Companies during the Executive’s employment with the Companies and at all times thereafter.
(iii) Patent and Copyright Registrations . The Executive agrees to assist the Companies, or their designee, at the Companies’ expense, in every proper way to secure the Companies’ rights in Work Product in any and all countries, including the disclosure to the Companies of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, affidavits, and all other instruments which the Companies shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Companies, their successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Work Product. The Executive further agrees that the Executive’s obligation to execute or cause to be executed, when it is in the Executive’s power to do so, any such instrument or papers shall continue after the termination of this Agreement. The Companies will reimburse the Executive for any reasonable documented expenses incurred with respect to fulfilling his obligation under this section IV.C(iii).
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D. Business Opportunities . The Executive assigns and agrees to assign without further compensation to the Companies and their successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Companies. The Executive shall present all Business Opportunities to the Board, and shall not exploit a Business Opportunity apart from the Companies without the prior written approval of the Board. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to any aspect of the Companies’ business, which includes, but is not limited to, the development and commercialization of PainShield TM , WondShield TM , UroShield TM , NG-Shield TM , patch based medical products, therapeutic ultrasound and catheter based products, and any other business the Companies conducted, prepared to conduct, or significantly contemplated conducting during Executive’s employment with the Companies, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto. For the avoidance of doubt, this Article IV.D is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
E. Remedies . The Executive acknowledges that the restrictions contained in Article IV of this Agreement, in view of the nature of the Companies’ business and the Executive’s position with the Companies, are reasonable and necessary to protect the Companies’ legitimate business interests and that any violation of Article IV of this Agreement may result in irreparable injury to the Companies. In the event of a breach by the Executive of Article IV of this Agreement, then the Companies shall be entitled to a temporary restraining order and injunctive relief restraining the Executive from the commission of any breach. Such remedies shall not be deemed the exclusive remedies for a breach or threatened breach of this Article IV but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Executive, the Executive’s agents, any future employer of the Executive, and any person that conspires or aids and abets the Executive in a breach or threatened breach of this Agreement.
F. Reasonableness . The Executive hereby represents to the Companies that the Executive has read and understands, and agrees to be bound by, the terms of this Article IV . The Executive acknowledges that the geographic scope and duration of the covenants contained in this Article IV are fair and reasonable in light of (i) the nature and wide geographic scope of the operations of the Companies’ business; (ii) the Executive’s level of control over and contact with the business in the Restricted Area; and (iii) the amount of compensation, trade secrets and Confidential Information that the Executive is receiving in connection with the Executive’s employment by the Companies. It is the desire and intent of the Parties that the provisions of Article IV be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the Executive and the Companies hereby waive any provision of applicable law that would render any provision of Article IV invalid or unenforceable.
G. Reformation . The Companies and the Executive agree that the foregoing restrictions set forth in Article IV are reasonable under the circumstances and that any breach of the covenants contained in Article IV may cause irreparable injury to the Companies. The Executive understands that the foregoing restrictions may limit the Executive’s ability to engage in certain businesses anywhere in or involving the Restricted Area during the Restricted Period, but acknowledges that the Executive shall receive Confidential Information and trade secrets, as well as sufficiently high remuneration and other benefits as an employee of the Companies to justify such restrictions. If any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the Parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modification prospectively at this time, the Companies and the Executive intend to make this provision enforceable under the law or laws of all applicable jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.
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H. No Previous Restrictive Agreements . The Executive represents that, except as disclosed in writing to the Companies, the Executive is not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of the Executive’s employment with the Companies or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party. The Executive further represents that the Executive’s performance of all the terms of this Agreement and the Executive’s work duties for the Companies do not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by the Executive in confidence or in trust prior to the Executive’s employment with the Companies. The Executive shall not disclose to the Companies or induce the Companies to use any confidential or proprietary information or material belonging to any previous employer or others.
ARTICLE V.
Miscellaneous Provisions
A. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Israel. Venue of any litigation arising from this Agreement or any disputes relating to the Executive’s employment shall exclusively be in the Tel-Aviv Regional Labor Court. The Executive consents to personal jurisdiction of the Tel-Aviv Regional Labor Court for any dispute relating to or arising out of this Agreement or the Executive’s employment, and the Executive agrees that the Executive shall not challenge personal or subject matter jurisdiction in such courts.
B. Cooperation . After the termination of the Executive’s employment, the Executive agrees to cooperate and provide reasonable assistance, at the request of the Companies, in the transitioning of the Executive’s job duties and responsibilities, and any and all investigations or other legal, equitable or business matters or proceedings which involve any matters for which the Executive worked on or had responsibility during the Executive’s employment with the Companies. The Executive also agrees to be reasonably available to the Companies or their representatives to provide general advice or assistance as requested by the Companies. This includes but is not limited to testifying (and preparing to testify) as a witness in any proceeding or otherwise providing information or reasonable assistance to the Companies in connection with any investigation, claim or suit, and cooperating with the Companies regarding any investigation, litigation, claims or other disputed items involving the Companies that relate to matters within the knowledge or responsibility of the Executive. Specifically, the Executive agrees (i) to meet with the Companies’ representatives, their counsel or other designees at reasonable times and places with respect to any items within the scope of this provision; (ii) to provide truthful testimony regarding same to any court, agency or other adjudicatory body; (iii) to provide the Companies with immediate notice of contact or subpoena by any non-governmental adverse party as to matters relating to the Companies, and (iv) to not voluntarily assist any such non-governmental adverse party or such non-governmental adverse party’s representatives; provided however, that the Companies shall reimburse the Executive for all reasonable expenses incurred in providing the cooperation outlined in subsections (i) and (ii) above.
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C. Headings . The paragraph headings contained in this Agreement are for convenience only and shall in no way or manner be construed as a part of this Agreement.
D. Severability . In the event that any court of competent jurisdiction holds any provision in this Agreement to be invalid, illegal or unenforceable in any respect, the remaining provisions shall not be affected or invalidated and shall remain in full force and effect.
E. Reformation . In the event any court of competent jurisdiction holds any restriction in this Agreement to be unreasonable and/or unenforceable as written, the court may reform this Agreement to make it enforceable, and this Agreement shall remain in full force and effect as reformed by the court.
F. Entire Agreement . This Agreement constitutes the entire agreement between the Parties, and fully supersedes any and all prior agreements, understanding or representations between the Parties pertaining to or concerning the subject matter of this Agreement, including, without limitation, the Executive’s employment with the Companies. No oral statements or prior written material not specifically incorporated in this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized, unless incorporated in this Agreement by written amendment, such amendment to become effective on the date stipulated in it. Any amendment to this Agreement must be signed by all parties to this Agreement. The Executive acknowledges and represents that in executing this Agreement, the Executive did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Companies, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
G. Waiver . No waiver of any breach of this Agreement shall be construed to be a waiver as to succeeding breaches. The failure of either party to insist in any one or more instances upon performance of any terms or conditions of this Agreement shall not be construed as a waiver of future performance of any such term, covenant or condition but the obligations of either party with respect thereto shall continue in full force and effect. The breach by one party to this Agreement shall not preclude equitable relief or the obligations in Article IV .
H. Modification . The provisions of this Agreement may be amended, modified or waived only with the prior written consent of the Companies and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
I. Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, successors and permitted assigns. The Parties may not assign this Agreement to a third party. However, the Companies may assign their rights, together with their obligations hereunder, to any affiliate and/or subsidiary of the Companies or any successor thereto or any purchaser of substantially all of the assets of the Companies.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Companies and the Executive have caused this Agreement to be executed on the date first set forth above, to be effective as of the Effective Date.
EXECUTIVE:
/s/ Ophir Shahaf
Ophir Shahaf
COMPANY:
Nano Vibronix, INC.
By: | /s/ Ira Greenstein | ||
Name: | Ira Greenstein | ||
Title: | Chairman of the Board | ||
NANOVIBRONIX: | |||
NanoVibronix LTD. | |||
By: | /s/ Harold Jacob | ||
Name: | Harold Jacob | ||
Title: | CEO |
Appendix A
General Order and Confirmation Regarding Payments of Employers to Pension Funds and Insurance Funds instead of Severance Pay
Pursuant to the power granted to me under section 14 of the Severance Pay Law 5723-1963 ( “Law” ) I hereby confirm that payments paid by an employer, commencing the date hereof, to an employee’s comprehensive pension fund into a provident fund which is not an insurance fund, as defined in the Income Tax Regulations (Registration and Management Rules of a Provident Fund) 5724-1964 ( “Pension Fund” ), or to a Manager’s Insurance Fund that includes the possibility of an allowance or a combination of payments to an Allowance Plan and to a plan which is not an Allowance Plan in an Insurance Fund ( “Insurance Fund” ), including payments which the employer paid by combination of payments to a Pension Fund and to an Insurance Fund whether there exists a possibility in the Insurance Fund to an allowance plan ( “Employer Payments” ), will replace the severance pay that the employee is entitled to for the salary and period of which the payments were paid ( “Exempt Wages” ) if the following conditions are satisfied:
(1) Employer Payments –
(A) | for Pension Funds are not less than 14.33 % of the Exempt Wages or 12% of the Exempt Wages, if the employer pays for his employee an additional payment on behalf of the severance pay completion for a providence fund or Insurance Fund at the rate of 2.33% of the Exempt Wages. If an employer does not pay the additional 2.33% on top of the 12%, then the payment will constitute only 72% of the Severance Pay. |
(B) | to the Insurance Fund are not less than one of the following: |
(1) | 13.33% of the Exempt Wages if the employer pays the employee additional payments to insure his monthly income in case of work disability, in a plan approved by the Supervisor of the Capital Market, Insurance and Savings in the Finance Ministry, at the lower of, a rate required to insure 75% of the Exempt Wages or 2.5% of the Exempt Wages ( “Disability Payment” ). |
(2) | 11% of the Exempt Wages if the employer pays an additional Disability Payment and in this case the Employer Payments will constitute only 72% of the employee’s severance pay; if, in addition to the abovementioned sum, the employer pays 2.33% of the Exempt Wages for the purpose of Severance Pay completion to providence fund or Insurance Funds, the Employer Payments will constitute 100% of the severance pay. |
(2) | A written agreement must be made between the employer and employee no later than 3 months after the commencement of the Employer Payments that include – |
(A) | the agreement of the employee to the arrangement pursuant to this confirmation which details the Employer Payments and the name of the Pension Fund or Insurance Fund; this agreement must include a copy of this confirmation; |
(B) | an advanced waiver of the employer for any right that he could have to have his payments refunded unless the employee’s right to severance pay is denied by judgment according to sections 16 or 17 of the Law, and in case the employee withdrew monies from the Pension Fund or Insurance Fund not for an Entitling Event; for this matter, Entitling Event or purpose means death, disablement or retirement at the age of 60 or over. |
(3) | This confirmation does not derogate from the employee’s entitlement to severance pay according to the Law, Collective Agreement, Extension Order or personal employment agreement, for any salary above the Exempt Wages. |
EXHIBIT 10.26
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is dated as of March 2, 2014 and is entered into by and among Shay Ashkenazy (the “ Executive ”), Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), and its wholly-owned Israeli subsidiary, NanoVibronix Ltd., (“ NanoVibronix ”), a company organized under the laws of the State of Israel. The Company and NanoVibronix are referred to herein collectively as the “ Companies . ” The Companies and the Executive shall be referred to herein as the “ Parties .”
RECITALS
Whereas , the Company desires to employ the Executive through NanoVibronix as the Chief Financial Officer (“ CFO ”) of both companies, and the Executive desires to be employed by the Companies as their CFO;
Whereas , the Parties desire to set forth in writing the terms and conditions of their agreement and understandings with respect to the employment of the Executive as CFO; and
Whereas , the Company and NanoVibronix hereby employ the Executive, and the Executive hereby accepts employment with the Company and NanoVibronix for the period and upon the terms and conditions contained in this Agreement.
Now, Therefore , in consideration of the mutual promises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:
ARTICLE I.
Services to be Provided by Executive
A. Position and Responsibilities . The Executive shall serve the Company and NanoVibronix in the capacity of CFO and in such other capacities as the Company’s Chief Executive Officer (“ CEO ”) or the Board of Directors of the Company and NanoVibronix (collectively, the “ Board ”) may from time to time request. The Executive shall fulfill all CEO and Board instructions diligently and in a timely manner. The Executive also agrees to serve, if elected, as an officer or director of the Company, NanoVibronix or any other direct or indirect subsidiary of the Companies, in each such case at no compensation in addition to that provided for in this Agreement. The Executive acknowledges and agrees that his duties shall include travel outside of Israel as may be necessary in order to fulfill his duties hereunder, as determined by the CEO in his sole discretion. The Companies and the Executive confirm and agree that this Agreement is a personal employment contract and that the relationship between the parties hereto shall not be subject to any general or special collective employment agreement or any custom or practice of the Companies in respect of any of its other employees or contractors.
B. Performance . During the Executive’s employment with the Companies, the Executive shall devote on a full-time basis all of the Executive’s time, energy, skill and reasonable best efforts to the performance of the Executive’s duties hereunder in a manner that will faithfully and diligently further the business and interests of the Companies, and shall exercise reasonable best efforts to perform the Executive’s duties in a diligent, trustworthy, good faith and business-like manner, all for the purpose of advancing the business of the Companies. The Executive shall at all times act in a manner consistent with the Executive’s position.
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C. Compliance . The Executive agrees to act in accordance with high business and ethical standards at all times. The Executive shall comply with the policies, codes of conduct, codes of ethics, written manuals and lawful directives of the Companies. The Executive shall comply with all laws of any jurisdiction in which the Companies do business. The Executive shall keep the CEO promptly and fully informed of the Executive’s conduct in connection with the business affairs of the Companies. The Executive shall report the Executive’s own wrongdoing and any wrongdoing or proposed wrongdoing of any other employee, director, or contractor of the Companies or other person performing services on behalf of the Companies to the CEO immediately upon becoming aware of it.
ARTICLE II.
Compensation for SErvices
As compensation for all services the Executive will perform under this Agreement, the Company will pay the Executive, and the Executive shall accept as full compensation, the following:
A. Base Salary . Except as otherwise provided herein, during the Executive’s employment with the Companies, the Company shall pay the Executive a gross monthly salary of forty thousand new Israeli shekels (NIS40,000) (NIS480,000 annualized), (the “ Base Salary ”) for all services rendered by the Executive under this Agreement. The Base Salary (after deduction of applicable taxes and like payments) for each month shall be payable within nine (9) calendar days of the end of the calendar month for the preceding month, including contributions towards allocations to a manager’s insurance fund and to all fringe and benefits and/or social contributions of any kind according to this Agreement.
As the Executive is employed by the Companies in a senior managerial position involving a fiduciary relationship between the Executive and the Companies, the Work and Rest Law (5711-1951), shall not apply to the Executive or to his employment with the Companies, and the Executive shall not be entitled to any compensation in respect of such law. The Executive acknowledges that the compensation set for him under this Agreement includes compensation that would otherwise be due to the Executive pursuant to such law. The provisions of any collective bargaining agreement which exist or shall exist do not, and will not, apply to the employment of the Executive, whether such agreement was signed among the government, the General Federation of Labor and Employers organizations, or any of such parties, or whether signed by others, in relation to the field or fields of the business of the Company or NanoVibronix or in relation to the position held by or the profession of the Executive.
The Base Salary and all other benefits according to this Agreement shall be comprehensive and all-inclusive in that it shall be deemed to represent the Executive’s entire compensation for his employment and work under this Agreement, except where it is otherwise specifically set forth in this Agreement.
B. Bonus Plan . During the Executive’s employment with the Companies, the Executive may be eligible to participate in a bonus plan, as the Board in its sole discretion, may from time to time establish.
C. IPO Bonus . The Company shall pay the Executive a lump sum cash bonus equal to ten thousand U.S. dollars (U.S. $10,000), less applicable payroll deductions and tax withholdings, within five (5) business days of the closing date of the IPO, provided that the Executive is still employed by any of the Companies on the closing date of the IPO.
D. Equity Grant . On the pricing date of the IPO (the “ Date of Grant ”), the Company shall grant the Executive an option, pursuant to a separate award agreement and subject to the terms and conditions of the Company’s equity plan then-in effect, to purchase such number of shares of the Company’s common stock equal to one percent (1%) of the shares of common stock issued and outstanding on the Date of Grant (taking into account the number of shares that will be sold in the IPO and issued in connection with the IPO) (the “ Option Grant ”) at an exercise price equal to the public offering price in the IPO, which shall be the fair market value of the common stock on the date of grant. The Option Grant, as defined below, will be under section 102 of the Israeli Income Tax Ordinance [NEW VERSION] 5721-1961 (capital gain tax route), and for this purpose the Companies shall adopt an equity plan/an appendix to an existing equity plan for Israeli grantees, to be filed with the Israeli Tax Authorities. The Option Grant shall vest in three equal installments on each of the first, second, and third anniversary of the date of grant; provided that the Executive is employed by the Companies on the applicable vesting date. Notwithstanding the foregoing, if the Companies (or the successor in interest thereto) terminate the Executive without “cause” (as defined below) within the three (3) month period after a “change in control” (as such term is defined by the Company’s equity plan pursuant to which the Option Grant was granted), then the Option Grant shall become 100% vested and exercisable on date of the Executive’s termination of employment. For purposes of the Option Grant, “cause” shall mean (i) the Executive’s commission of a dishonest or fraudulent act in connection with his employment with the Companies, or misappropriation of the property of the Companies; (ii) the Executive’s conviction of, or plea of nolo contendere to, a felony or crime involving dishonesty; (iii) the Executive’s inattention to duties, unsatisfactory performance, or failure to perform the Executive’s duties hereunder; (iv) a substantial failure of the Executive to comply with the Companies’ policies; (v) a material and willful breach of the Executive’s fiduciary duties in any material respect; (vi) the Executive’s failure to comply in any material respect with any legal written directive of the Board; or (vii) any act or omission of the Executive which is of substantial detriment to the Companies because of the Executive’s intentional failure to comply with any statute, rule or regulation.
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E. Company Automobile . The Company shall provide the Executive an automobile of the same class as a Mazda 3, either purchased or rented by the Company, for the Executive’s use in connection with the performance of his duties hereunder and for his reasonable personal use. The Company shall pay all maintenance, repair, and operating expenses attributable to the reasonable use of such automobile. The Executive shall be liable for all traffic or parking fines or penalties assessed on such automobile and shall reimburse the Companies for any such fines or penalties paid by the Companies, which amount the Company may deduct from other compensation payable to the Executive under this Agreement. The Executive shall return the automobile to NanoVibronix thirty (30) days from the end of employee-employer relations.
F. Cellular Phone and Laptop . The Company shall provide the Executive with a cellular phone and laptop for the Executive’s use in connection with the performance of his duties hereunder. The Executive shall return the cellular phone and laptop to the Company upon the end of employee-employer relations.
G. Expenses . The Company agrees that, during the Executive's employment, it will reimburse the Executive for out-of-pocket expenses reasonably incurred in connection with the Executive's performance of the Executive’s services hereunder, upon the presentation by the Executive of an itemized accounting of such expenditures, with supporting receipts, provided that the Executive submits such expenses for reimbursement within thirty (30) days of the date such expenses were incurred. The reimbursements shall be in compliance with the Company’s expense reimbursement policies.
H. Vacation . The Executive shall be entitled to twenty two (22) paid vacation days for each calendar year, except as otherwise required by law. Vacation days shall be taken at such times and intervals as shall be determined by the Executive, subject to the reasonable business needs of the Companies.
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I. Sick Leave . The Executive shall be entitled to the number of paid sick leave days as provided by applicable law. Notwithstanding the aforesaid, the Executive shall be entitled to paid sick leave from the first day of sickness.
J. Employee Benefits . The Executive shall be eligible to participate in any group health insurance plan, equity/equity-based incentive compensation plan, retirement plan, disability plan, group life plan, and any other benefit or welfare program or policy that is made generally available, from time to time, to other executive employees of the Companies, on a basis consistent with such participation and subject to the terms of the plan documents, as such plans may be modified, amended, terminated, or replaced from time to time by the Company, in its sole discretion.
K. Manager’s Insurance .
(i) During the term, the Company shall purchase a Manager’s Insurance Policy (the “ Policy ”) for the benefit of the Executive. The Company’s contributions will be no less than 13-1/3% of the Base Salary, of which 8-1/3% will be paid towards severance and 5% will be paid towards the pension savings component, and in addition, an amount required to secure at least 75% of the Base Salary or in an amount up to 2.5% of the Base Salary, the lower of the two, towards disability insurance, against a deduction from the Employee’s Base Salary equal to 5% of the Base Salary. The Executive shall be solely responsible for any tax liability related to any contribution by the Company to the Policy that exceeds the highest contribution exempted by the Israeli tax laws.
(ii) The amounts which the Executive is entitled to receive from the Policy accruing from disbursements paid by the Company towards the Policy shall be in lieu of the severance pay portion and shall be credited against any obligation the Company may have to pay severance pay under applicable law.
(iii) It is further agreed that such payment contribution made by the Company towards the Policy as described in this Article II.K., shall be in place of any severance payment due to the Executive under any circumstances in which the Executive shall be entitled to severance payment subject to the applicable law, including but not limited to the Severance Pay Law (1963), in accordance with the provisions of the Order published pursuant to section 14 of the Severance Pay Law (1963), as amended and as shall be amended from time to time, subject to any law or regulations (including without limitation, any restrictions on the permitted contributions such as ceilings) (the “ Order ”). The Order as published up to the date of this Agreement is attached to this Agreement as Appendix A. The Order is hereby adopted by the parties and forms an integral part of this Agreement.
(iv) According to the provisions of the Order and without derogating from there, the Company waives any right it may have to recover sums from its contributions, unless the Executive 's entitlement to severance pay has been denied in a judgment under sections 16 or 17 of the Severance Pay Law (1963), unless the Executive withdraws sums from the insurance fund otherwise than in the circumstances of an “entitling event” as defined in the Order (i.e., demise, disability or retirement at the age of sixty (60) or above).
L. Recuperation Pay (Dmei Ha’vraa) . The Executive shall be entitled to recuperation pay for the number of days as provided by applicable law.
M. Advanced Training Fund (Keren Hishtalmut) . The Company shall open and maintain an advanced training fund (the “ Training Fund ”) designated by the Executive for the benefit of the Executive. During the Term of Employment, the Company shall pay a sum equal to 7.5% of the Base Salary to the Training fund, and the Company shall deduct 2.5% from the Base Salary to be paid on the Executive’s behalf to the Training Fund. Use of these funds shall be in accordance with the by-laws of the Training Fund. The Executive acknowledges and understands that the Company’s contributions to the Training Fund exceeding the highest amount recognized as tax free by the Israeli tax authorities shall be deemed income of the Executive and shall be taxed accordingly, and all taxes and mandatory tax payments imposed on such additional income shall be exclusively born by the Executive.
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N. D&O Insurance . During the Employment Term, the Companies shall maintain and provide the Executive with coverage under a directors’ and officers’ liability policy at the Companies’ expense that is at least equivalent to the coverage provided by the Companies to the active directors and active senior executives of the Companies.
O. Taxes . Any taxes imposed on the benefits granted to the Executive under this Article II or upon other perquisites provided by the Company to the Executive, including, without limitation, the Executive’s use of (i) the automobile purchased or rented by the Company or (ii) a cellular telephone, shall be paid solely by the Executive and such taxes may be withheld by the Company from other compensation payable to the Executive under this Agreement.
ARTICLE III.
Term; Termination
A. Term of Employment . The term of the Executive’s employment under this Agreement shall begin on or before April 1, 2014 (the “ Effective Date ”) and shall continue in effect until terminated by either party. The Executive’s employment is not for any specific term, and is “at-will”, which means it can be terminated by either party at any time, for any reason.
B. Termination . Either party may terminate this Agreement at any time for any reason upon sixty (60) days written notice (the “ Notice Period ”). The date of the Executive’s termination shall be the date stated in the notice of termination but in no event earlier than sixty (60) days following the date of such notice. Should the Company notify the Executive of the termination of this Agreement, the Company shall pay the Executive with respect to the Notice Period, his Base Salary, Deferred Base Salary and all other earned and accrued benefits to which the Executive is entitled according to this Agreement (the “ Accrued Obligations ”).
C. Survival. The Executive’s post-termination obligations in Article IV shall continue as provided in this Agreement.
D. Advance Notice Law . Other than as instructed in writing by the Company’s Chairman of the Board, during the Notice Period, the Executive, if so requested by the Companies, shall continue to perform his duties, cooperate with the Companies, and use his best efforts to assist in the integration into the Companies’ organization the person or persons who will assume the Executive’s responsibilities.
ARTICLE IV.
RESTRICTIVE COVENANTS
A. Confidentiality .
(i) Confidential Information. During the Executive’s employment with the Companies, the Companies shall grant the Executive otherwise prohibited access to their trade secrets and confidential information which is not known to the Companies’ competitors or within the Companies’ industry generally, which was developed by the Companies over a long period of time and/or at their substantial expense, and which is of great competitive value to the Companies, and access to the Companies’ customers and clients. For purposes of this Agreement, “ Confidential Information ” includes any trade secrets or confidential or proprietary information of the Companies, including, but not limited to, the following: methods of operation, products, inventions, services, processes, equipment, know-how, technology, technical data, policies, strategies, designs, formulas, developmental or experimental work, improvements, discoveries, research, plans for research or future products and services, database schemas or tables, software, development tools or techniques, training procedures, training techniques, training manuals, business information, marketing and sales methods, plans and strategies, competitors, markets, market surveys, techniques, production processes, infrastructure, business plans, distribution and installation plans, processes and strategies, methodologies, budgets, financial data and information, customer and client information, prices and costs, fees, customer and client lists and profiles, employee, customer and client nonpublic personal information, supplier lists, business records, product construction, product specifications, audit processes, pricing strategies, business strategies, marketing and promotional practices, management methods and information, plans, reports, recommendations and conclusions, information regarding the skills and compensation of employees and contractors of the Companies, and other non-public business information disclosed to the Executive by the Companies, either directly or indirectly, in writing, orally, or by drawings or observation. “ Confidential Information ” does not include, and there shall be no obligation hereunder with respect to, information that (a) is generally available to the public on the date of this Agreement; (b) was previously rightfully known by the Executive, unless provided to him by the Companies during the discussions preceding his engagement hereunder; or (c) becomes generally available to the public other than as a result of a disclosure not otherwise permissible hereunder.
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(ii) No Unauthorized Use or Disclosure . The Executive acknowledges and agrees that Confidential Information is proprietary to and a trade secret of the Companies and, as such, is a special and unique asset of the Companies, and that any disclosure or unauthorized use of any Confidential Information by the Executive may cause irreparable harm and loss to the Companies. The Executive understands and acknowledges that the Confidential Information (a) has been developed by the Companies at significant effort and expense and is sufficiently secret to derive economic value from not being generally known to other parties, and (b) constitutes a protectable business interest of the Companies. The Executive acknowledges and agrees that the Companies own the Confidential Information. The Executive agrees not to dispute, contest, or deny any such ownership rights either during or after the Executive’s employment with the Companies. The Executive agrees to preserve and protect the confidentiality of all Confidential Information. The Executive agrees that during the period of the Executive’s employment with the Companies and after his termination from employment for any reason, the Executive shall not directly or indirectly, disclose to any unauthorized person or use for the Executive’s own account any Confidential Information without the Companies’ consent. Throughout the Executive’s employment with the Companies and thereafter: (a) the Executive shall hold all Confidential Information in the strictest confidence, take reasonable precautions to prevent its inadvertent disclosure to any unauthorized person, and follow all Company policies protecting the Confidential Information; and (b) the Executive shall not, directly or indirectly, utilize, disclose or make available to any other person or entity, any of the Confidential Information, other than in the proper performance of the Executive’s duties. Further, the Executive shall not, directly or indirectly, use the Companies’ Confidential Information to: (1) call upon, solicit business from, attempt to conduct business with, conduct business with, interfere with or divert business away from any customer, client, service provider, supplier or vendor of the Companies with whom or which the Companies conducted business; and/or (2) recruit, solicit, hire or attempt to recruit, solicit, or hire, directly or by assisting others, any persons employed by the Companies. If the Executive learns that any person or entity is taking or threatening to take any actions which would compromise any Confidential Information, the Executive shall timely advise the Companies of all facts concerning such action or threatened action. The Executive shall use all reasonable efforts to obligate all persons to whom any Confidential Information shall be disclosed by the Executive hereunder to preserve and protect the confidentiality of such Confidential Information.
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(iii) Return of Property and Information . Upon the termination of the Executive’s employment for any reason, the Executive shall immediately return and deliver to the Companies any and all Confidential Information, software, devices, cell phones, personal data assistants, credit cards, data, reports, proposals, lists, correspondence, materials, equipment, computers, hard drives, papers, books, records, documents, memoranda, manuals, e-mail, electronic or magnetic recordings or data, including all copies thereof, which belong to the Companies or relate to the Companies’ business and which are in the Executive’s possession, custody or control, whether prepared by the Executive or others. If at any time after termination of the Executive’s employment the Executive determines that the Executive has any Confidential Information in the Executive’s possession or control, the Executive shall return to the Companies all such Confidential Information in the Executive’s possession or control, including all copies and portions thereof as soon as possible.
B. Restrictive Covenants . In consideration for (i) the Companies’ promise to provide Confidential Information to the Executive; (ii) the substantial economic investment made by the Companies in the Confidential Information and goodwill of the Companies, and/or the business opportunities disclosed or entrusted to the Executive, (iii) access to the Companies’ customers and clients, and (iv) the Companies’ employment of the Executive pursuant to this Agreement and the compensation and other benefits provided by the Companies to the Executive, to protect the Companies’ Confidential Information and business goodwill of the Companies, the Executive agrees to the following restrictive covenants.
(i) Non-Competition . The Executive agrees that during the Restricted Period (defined below), other than in connection with the Executive’s duties under this Agreement (including, without limitation, services to affiliates of the Companies), the Executive shall not, and shall not use any Confidential Information to, without the prior written consent of the Companies, directly or indirectly, either individually or as a principal, partner, stockholder, manager, agent, consultant, contractor, distributor, employee, lender, investor, or as a director or officer of any corporation or association, or in any other manner or capacity whatsoever, become employed by, control, manage, carry on, join, lend money for, operate, engage in, establish, perform services for, invest in, solicit investors for, consult for, do business with or otherwise engage in any Competing Business (defined below) within the Restricted Area (defined below). Notwithstanding the restrictions contained in this Article IV.B.(i) , the Executive may own an aggregate of not more than five percent (5%) of the outstanding stock of any class of any corporation engaged in a Competing Business, if such stock is listed on a national securities exchange in the United States (or a comparable exchange in a foreign jurisdiction) or regularly traded in the over-the-counter market by a member of a national securities exchange in the United States, without violating the provisions of Article IV.B.(i) ; provided, however, that the Executive does not have the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.
For purposes of this Agreement:
(a) “ Restricted Period ” means during the Executive’s employment with the Companies and for a period of eighteen (18) months immediately following the date of the Executive’s termination from employment for any reason.
(b) As CFO of the Companies, the Executive has responsibility for the Companies’ operations throughout the United States and Israel. Because the Companies shall do business throughout the United States and Israel, the “ Restricted Area ” means (i) the United States; (ii) Israel; and (iii) any other geographic area(s) for which the Executive had any responsibility or about which the Executive received Confidential Information at any time during the one (1)-year period before the end of the Executive’s employment.
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(c) “ Competing Business ” means any business, individual, partnership, firm, corporation or other entity that is competing or that is preparing to compete with any aspect of the Companies’ business, i.e., the development and commercialization of noninvasive biological response-activating devices that target wound healing and pain therapy and any other business the Companies conducted during the Executive’s employment with the Companies or prepared to conduct and is conducting during such eighteen (18) month period.
(ii) Non-Solicitation . The Executive agrees that during the Restricted Period, other than in connection with the Executive’s duties under this Agreement, the Executive shall not, and shall not use any Confidential Information to, directly or indirectly, either as a principal, manager, agent, employee, consultant, officer, director, stockholder, partner, investor or lender or in any other capacity, and whether personally or through other persons:
(a) Solicit business from, interfere with, induce, attempt to solicit business with, interfere with, induce or do business with any actual or prospective customer, client, service provider, supplier or vendor of the Companies with whom the Companies did business or who the Companies solicited within the preceding two (2) years, and who or which: (1) the Executive contacted, called on, serviced or did business with during the Executive’s employment with the Companies; (2) the Executive learned of as a result of the Executive’s employment with the Companies; or (3) about whom the Executive received Confidential Information. This restriction applies only to business which is in the scope of services or products provided by the Companies or any affiliate thereof; or
(b) Solicit, induce or attempt to solicit or induce, engage or hire, on behalf of the Executive or any other person or entity, any person who is an employee or who was employed by the Companies within the preceding twelve (12) months or who is or was a consultant of the Companies within the preceding twelve (12) months who specializes in the scope of services or products provided by the Companies or any affiliate thereof.
(iii) Non-Disparagement . The Executive shall refrain, both during and after the Executive’s employment terminates, from publishing any oral or written statements about the Companies or any of the Companies’ directors, managers, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory; or (b) place the Companies or any of their directors, managers, officers, employees, consultants, agents or representatives in a false light before the public. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded to the Companies under this provision are in addition to any and all rights and remedies otherwise afforded by law.
C. Works.
(i) Assignment of Work Product . For the purposes of this Agreement, the term “ Work Product ” shall mean, collectively, all work product, information, inventions, original works of authorship, ideas, know-how, processes, designs, computer programs, photographs, illustrations, developments, trade secrets and discoveries, including improvements thereto, and all other intellectual property, including patents, trademarks, copyrights and trade secrets, that the Executive conceives, creates, develops, makes, reduces to practice, or fixes in a tangible medium of expression, either alone or with others that (a) relates in any manner to the previous, existing or significantly contemplated business, work, or investigations of the Companies; (b) is or was suggested by, has resulted or will result from, or has arisen or will arise out of any work that the Executive has done or may do for or on behalf of the Companies; (c) has resulted or will result from or has arisen or will arise out of any materials or Confidential Information that may have been disclosed or otherwise made available to the Executive as a result of duties assigned to the Executive by the Companies; or (d) has been or will be otherwise made through the significant use of the Companies’ time, information, facilities, or materials, even if conceived, created, developed, made, reduced to practice, or fixed during other than working hours. Following the termination of the Executive’s employment for any reason, the Executive agrees that to make full written disclosure to the Companies of all Work Product conceived, created, developed, made, reduced to practice, or fixed in a tangible medium of expression during the period of the Executive’s employment with the Companies. The Executive hereby assigns and shall be deemed to have assigned to the Companies or their designee, all of the Executive’s right, title, and interest in and to any and all Work Product conceived, created, developed, made, reduced to practice, or fixed in a tangible medium of expression during the period of the Executive’s employment with the Companies. The Executive further acknowledges that all original works of authorship that have been or will be made or fixed in a tangible medium of expression by the Executive (solely or jointly with others) within the scope of the Executive’s employment with the Companies that are protectable by copyright are “Works Made for Hire,” as that term is defined in the United States Copyright Act. The Executive understands and agrees that the decision whether or not to commercialize or market any Work Product is within the Companies’ sole discretion and for the Companies’ sole benefit, and that no royalty will be due to the Executive as a result of the Companies’ efforts to commercialize or market any such Work Product.
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(ii) Maintenance of Records . The Executive agrees to keep and maintain adequate and current electronic records of all Work Product made by the Executive (solely or jointly with others) during the term of the Executive’s employment with the Companies. The records will be available to and remain the sole property of the Companies during the Executive’s employment with the Companies and at all times thereafter.
(iii) Patent and Copyright Registrations . The Executive agrees to assist the Companies, or their designee, at the Companies’ expense, in every proper way to secure the Companies’ rights in Work Product in any and all countries, including the disclosure to the Companies of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, affidavits, and all other instruments which the Companies shall deem necessary in order to apply for and obtain such rights and in order to assign and convey to the Companies, their successors, assigns, and nominees the sole and exclusive rights, title and interest in and to such Work Product. The Executive further agrees that the Executive’s obligation to execute or cause to be executed, when it is in the Executive’s power to do so, any such instrument or papers shall continue after the termination of this Agreement. The Companies will reimburse the Executive for any reasonable documented expenses incurred with respect to fulfilling his obligation under this section IV.C(iii).
D. Business Opportunities . The Executive assigns and agrees to assign without further compensation to the Companies and their successors, assigns or designees, all of the Executive’s right, title and interest in and to all Business Opportunities (defined below), and further acknowledges and agrees that all Business Opportunities constitute the exclusive property of the Companies. The Executive shall present all Business Opportunities to the Board, and shall not exploit a Business Opportunity apart from the Companies without the prior written approval of the Board. For purposes of this Agreement, “ Business Opportunities ” means all business ideas, prospects, or proposals pertaining to any aspect of the Companies’ business, which includes, but is not limited to, the development and commercialization of PainShield TM , WondShield TM , UroShield TM , NG-Shield TM , patch based medical products, therapeutic ultrasound and catheter based products, and any other business the Companies conducted, prepared to conduct, or significantly contemplated conducting during the Executive’s employment with the Companies, which are developed by the Executive or originated by any third party and brought to the attention of the Executive, together with information relating thereto. For the avoidance of doubt, this Article IV.D is not intended to limit or narrow the Executive’s duties or obligations under federal or state law with respect to corporate opportunities.
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E. Remedies . The Executive acknowledges that the restrictions contained in Article IV of this Agreement, in view of the nature of the Companies’ business and the Executive’s position with the Companies, are reasonable and necessary to protect the Companies’ legitimate business interests and that any violation of Article IV of this Agreement may result in irreparable injury to the Companies. In the event of a breach by the Executive of Article IV of this Agreement, then the Companies shall be entitled to a temporary restraining order and injunctive relief restraining the Executive from the commission of any breach. Such remedies shall not be deemed the exclusive remedies for a breach or threatened breach of this Article IV but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Executive, the Executive’s agents, any future employer of the Executive, and any person that conspires or aids and abets the Executive in a breach or threatened breach of this Agreement.
F. Reasonableness . The Executive hereby represents to the Companies that the Executive has read and understands, and agrees to be bound by, the terms of this Article IV . The Executive acknowledges that the geographic scope and duration of the covenants contained in this Article IV are fair and reasonable in light of (i) the nature and wide geographic scope of the operations of the Companies’ business; (ii) the Executive’s level of control over and contact with the business in the Restricted Area; and (iii) the amount of compensation, trade secrets and Confidential Information that the Executive is receiving in connection with the Executive’s employment by the Companies. It is the desire and intent of the Parties that the provisions of Article IV be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and therefore, to the extent permitted by applicable law, the Executive and the Companies hereby waive any provision of applicable law that would render any provision of Article IV invalid or unenforceable.
G. Reformation . The Companies and the Executive agree that the foregoing restrictions set forth in Article IV are reasonable under the circumstances and that any breach of the covenants contained in Article IV may cause irreparable injury to the Companies. The Executive understands that the foregoing restrictions may limit the Executive’s ability to engage in certain businesses anywhere in or involving the Restricted Area during the Restricted Period, but acknowledges that the Executive shall receive Confidential Information and trade secrets, as well as sufficiently high remuneration and other benefits as an employee of the Companies to justify such restrictions. If any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the Parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modification prospectively at this time, the Companies and the Executive intend to make this provision enforceable under the law or laws of all applicable jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.
H. No Previous Restrictive Agreements . The Executive represents that, except as disclosed in writing to the Companies, the Executive is not bound by the terms of any agreement with any previous employer or other party to refrain from using or disclosing any trade secret or confidential or proprietary information in the course of the Executive’s employment with the Companies or to refrain from competing, directly or indirectly, with the business of such previous employer or any other party. The Executive further represents that the Executive’s performance of all the terms of this Agreement and the Executive’s work duties for the Companies do not and will not breach any agreement to keep in confidence proprietary information, knowledge or data acquired by the Executive in confidence or in trust prior to the Executive’s employment with the Companies. The Executive shall not disclose to the Companies or induce the Companies to use any confidential or proprietary information or material belonging to any previous employer or others.
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ARTICLE V.
Miscellaneous Provisions
A. Governing Law . This Agreement shall be governed by and construed under the laws of the State of Israel. Venue of any litigation arising from this Agreement or any disputes relating to the Executive’s employment shall exclusively be in the Tel-Aviv Regional Labor Court. The Executive consents to personal jurisdiction of the Tel-Aviv Regional Labor Court for any dispute relating to or arising out of this Agreement or the Executive’s employment, and the Executive agrees that the Executive shall not challenge personal or subject matter jurisdiction in such courts.
B. Cooperation . After the termination of the Executive’s employment, the Executive agrees to cooperate and provide reasonable assistance, at the request of the Companies, in the transitioning of the Executive’s job duties and responsibilities, and any and all investigations or other legal, equitable or business matters or proceedings which involve any matters for which the Executive worked on or had responsibility during the Executive’s employment with the Companies. The Executive also agrees to be reasonably available to the Companies or their representatives to provide general advice or assistance as requested by the Companies. This includes, but is not limited to, testifying (and preparing to testify) as a witness in any proceeding or otherwise providing information or reasonable assistance to the Companies in connection with any investigation, claim or suit, and cooperating with the Companies regarding any investigation, litigation, claims or other disputed items involving the Companies that relate to matters within the knowledge or responsibility of the Executive. Specifically, the Executive agrees (i) to meet with the Companies’ representatives, their counsel or other designees at reasonable times and places with respect to any items within the scope of this provision; (ii) to provide truthful testimony regarding the same to any court, agency or other adjudicatory body; (iii) to provide the Companies with immediate notice of contact or subpoena by any non-governmental adverse party as to matters relating to the Companies; and (iv) to not voluntarily assist any such non-governmental adverse party or such non-governmental adverse party’s representatives; provided, however, that the Companies shall reimburse the Executive for all reasonable expenses incurred in providing the cooperation outlined in subsections (i) and (ii) above.
C. Headings . The paragraph headings contained in this Agreement are for convenience only and shall in no way or manner be construed as a part of this Agreement.
D. Severability . In the event that any court of competent jurisdiction holds any provision in this Agreement to be invalid, illegal or unenforceable in any respect, the remaining provisions shall not be affected or invalidated and shall remain in full force and effect.
E. Reformation . In the event any court of competent jurisdiction holds any restriction in this Agreement to be unreasonable and/or unenforceable as written, the court may reform this Agreement to make it enforceable, and this Agreement shall remain in full force and effect as reformed by the court.
F. Entire Agreement . This Agreement constitutes the entire agreement between the Parties, and fully supersedes any and all prior agreements, understanding or representations between the Parties pertaining to or concerning the subject matter of this Agreement, including, without limitation, the Executive’s employment with the Companies. No oral statements or prior written material not specifically incorporated in this Agreement shall be of any force and effect, and no changes in or additions to this Agreement shall be recognized, unless incorporated in this Agreement by written amendment, such amendment to become effective on the date stipulated in it. Any amendment to this Agreement must be signed by all parties to this Agreement. The Executive acknowledges and represents that in executing this Agreement, the Executive did not rely on, has not relied on, and specifically disavows any reliance on any communications, promises, statements, inducements, or representation(s), oral or written, by the Companies, except as expressly contained in this Agreement. The Parties represent that they relied on their own judgment in entering into this Agreement.
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G. Waiver . No waiver of any breach of this Agreement shall be construed to be a waiver as to succeeding breaches. The failure of either party to insist in any one or more instances upon performance of any terms or conditions of this Agreement shall not be construed as a waiver of future performance of any such term, covenant or condition, but the obligations of either party with respect thereto shall continue in full force and effect. The breach by one party to this Agreement shall not preclude equitable relief or the obligations in Article IV .
H. Modification . The provisions of this Agreement may be amended, modified or waived only with the prior written consent of the Companies and the Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof.
I. Assignment . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, successors and permitted assigns. The Parties may not assign this Agreement to a third party. However, the Companies may assign their rights, together with their obligations hereunder, to any affiliate and/or subsidiary of the Companies or any successor thereto or any purchaser of substantially all of the assets of the Companies.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Companies and the Executive have caused this Agreement to be executed on the date first set forth above, to be effective as of the Effective Date.
EXECUTIVE:
/s/ Shay Ashkenazy
Shay Ashkenazy
COMPANY:
Nano Vibronix, INC.
By: | /s/ Ophir Shahaf | ||
Name: | Ophir Shahaf | ||
Title: | CEO | ||
NANOVIBRONIX: | |||
NanoVibronix LTD. | |||
By: | /s/ Ophir Shahaf | ||
Name: | Ophir Shahaf | ||
Title: | CEO |
Appendix A
General Order and Confirmation Regarding Payments of Employers to Pension Funds and Insurance Funds instead of Severance Pay
Pursuant to the power granted to me under section 14 of the Severance Pay Law 5723-1963 ( “Law” ) I hereby confirm that payments paid by an employer, commencing the date hereof, to an employee’s comprehensive pension fund into a provident fund which is not an insurance fund, as defined in the Income Tax Regulations (Registration and Management Rules of a Provident Fund) 5724-1964 ( “Pension Fund” ), or to a Manager’s Insurance Fund that includes the possibility of an allowance or a combination of payments to an Allowance Plan and to a plan which is not an Allowance Plan in an Insurance Fund ( “Insurance Fund” ), including payments which the employer paid by combination of payments to a Pension Fund and to an Insurance Fund whether there exists a possibility in the Insurance Fund to an allowance plan ( “Employer Payments” ), will replace the severance pay that the employee is entitled to for the salary and period of which the payments were paid ( “Exempt Wages” ) if the following conditions are satisfied:
(1) Employer Payments –
(A) for Pension Funds are not less than 14.33 % of the Exempt Wages or 12% of the Exempt Wages, if the employer pays for his employee an additional payment on behalf of the severance pay completion for a providence fund or Insurance Fund at the rate of 2.33% of the Exempt Wages. If an employer does not pay the additional 2.33% on top of the 12%, then the payment will constitute only 72% of the Severance Pay.
(B) to the Insurance Fund are not less than one of the following:
(1) 13.33% of the Exempt Wages if the employer pays the employee additional payments to insure his monthly income in case of work disability, in a plan approved by the Supervisor of the Capital Market, Insurance and Savings in the Finance Ministry, at the lower of, a rate required to insure 75% of the Exempt Wages or 2.5% of the Exempt Wages ( “Disability Payment” ).
(2) 11% of the Exempt Wages if the employer pays an additional Disability Payment and in this case the Employer Payments will constitute only 72% of the employee’s severance pay; if, in addition to the abovementioned sum, the employer pays 2.33% of the Exempt Wages for the purpose of Severance Pay completion to providence fund or Insurance Funds, the Employer Payments will constitute 100% of the severance pay.
(2) A written agreement must be made between the employer and employee no later than 3 months after the commencement of the Employer Payments that include –
(A) the agreement of the employee to the arrangement pursuant to this confirmation which details the Employer Payments and the name of the Pension Fund or Insurance Fund; this agreement must include a copy of this confirmation;
(B) an advanced waiver of the employer for any right that he could have to have his payments refunded unless the employee’s right to severance pay is denied by judgment according to sections 16 or 17 of the Law, and in case the employee withdrew monies from the Pension Fund or Insurance Fund not for an Entitling Event; for this matter, Entitling Event or purpose means death, disablement or retirement at the age of 60 or over.
(3) This confirmation does not derogate from the employee’s entitlement to severance pay according to the Law, Collective Agreement, Extension Order or personal employment agreement, for any salary above the Exempt Wages.
EXHIBIT 10.27
NANO VIBRONIX, INC.
2014 LONG-TERM INCENTIVE PLAN
The Nano Vibronix, Inc. 2014 Long-Term Incentive Plan (the “ Plan ”) was adopted by the Board of Directors of Nano Vibronix, Inc., a Delaware corporation (the “ Company ”), effective as of February 19, 2014, subject to approval by the Company’s stockholders.
Article 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key Employees, key Contractors, and Outside Directors of the Company and its Subsidiaries and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights, and Other Awards, whether granted singly, or in combination, or in tandem, that will:
(a) increase the interest of such persons in the Company’s welfare;
(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and
(c) provide a means through which the Company may attract able persons as Employees, Contractors, and Outside Directors.
With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio , to the extent permitted by law and deemed advisable by the Committee.
Article 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated:
2.1 “ Applicable Law ” means all legal requirements relating to the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, the rules of any foreign jurisdiction applicable to Incentives granted to residents therein, and any other applicable law, rule or restriction.
2.2 “ Award ” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, Restricted Stock Units, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem (each individually referred to herein as an “ Incentive ”).
2.3 “ Award Agreement ” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.
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2.4 “ Award Period ” means the period set forth in the Award Agreement during which one or more Incentives granted under an Award may be exercised.
2.5 “ Board ” means the board of directors of the Company.
2.6 “ Change in Control ” means the occurrence of the event set forth in any one of the following paragraphs, except as otherwise provided herein:
(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (c) below;
(b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the effective date of this Plan, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3 rds ) of the directors then still in office who either were directors on the effective date of this Plan or whose appointment, election or nomination for election was previously so approved or recommended;
(c) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least sixty percent (60%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing thirty percent (30%) or more of the combined voting power of the Company’s then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
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For purposes hereof:
“ Affiliate ” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.
“ Beneficial Owner ” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
“ Person ” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.
Notwithstanding the foregoing provisions of this Section 2.6 , if an Award issued under the Plan is subject to Section 409A of the Code, then an event shall not constitute a Change in Control for purposes of such Award under the Plan unless such event also constitutes a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within the meaning of Section 409A of the Code.
2.7 “ Code ” means the United States Internal Revenue Code of 1986, as amended.
2.8 “ Committee ” means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan.
2.9 “ Common Stock ” means the common stock, par value $0.001 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan.
2.10 “ Company ” means Nano Vibronix, Inc., a Delaware corporation, and any successor entity.
2.11 “ Contractor” means any natural person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, with compensation, pursuant to a written independent contractor agreement between such person (or any entity employing such person) and the Company or a Subsidiary, provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities.
2.12 “ Corporation ” means any entity that (i) is defined as a corporation under Section 7701 of the Code and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under Section 7701 of the Code.
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2.13 “ Date of Grant ” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement; provided, however, that solely for purposes of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder, the Date of Grant of an Award shall be the date of stockholder approval of the Plan if such date is later than the effective date of such Award as set forth in the Award Agreement.
2.14 “ Dividend Equivalent Right ” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made.
2.15 “ Employee ” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company ; provided , however , in the case of individuals whose employment status, by virtue of their employer or residence, is not determined under Section 3401(c) of the Code, “Employee” shall mean an individual treated as an employee for local payroll tax or employment purposes by the applicable employer under Applicable Law for the relevant period.
2.16 “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended.
2.17 “ Executive Officer ” means an officer of the Company or a Subsidiary subject to Section 16 of the Exchange Act or a “covered employee” as defined in Section 162(m)(3) of the Code.
2.18 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are listed on any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of Common Stock reported on the automated quotation system on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the OTC Bulletin Board operated by the Financial Industry Regulation Authority, Inc. or the OTC Markets Group Inc., formerly known as Pink OTC Markets Inc.; or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code.
2.19 “ Incentive ” is defined in Section 2.2 hereof.
2.20 “ Incentive Stock Option ” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.21 “ Independent Third Party ” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.
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2.22 “ Nonqualified Stock Option ” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive Stock Option.
2.23 “ Option Price ” means the price which must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock.
2.24 “ Other Award ” means an Award issued pursuant to Section 6.9 hereof.
2.25 “ Outside Director ” means a director of the Company who is not an Employee or a Contractor.
2.26 “ Participant ” means an Employee or Contractor of the Company or a Subsidiary or an Outside Director to whom an Award is granted under this Plan.
2.27 “ Performance Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof.
2.28 “ Performance Goal ” means any of the goals set forth in Section 6.10 hereof.
2.29 “ Plan ” means this Nano Vibronix, Inc. 2014 Long-Term Incentive Plan, as amended from time to time.
2.30 “ Reporting Participant ” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act.
2.31 “ Restricted Stock ” means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement.
2.32 “ Restricted Stock Units ” means units awarded to Participants pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the Committee.
2.33 “ Retirement ” means any Termination of Service solely due to retirement upon or after attainment of age sixty-five (65), or permitted early retirement as determined by the Committee ; provided , however , in the case of Participants who reside in the European Economic Area, “Retirement” shall mean any Termination of Service as of a date they are eligible for mandatory retirement benefits under local law, without regard to age.
2.34 “ SAR ” or “ S tock Appreciation Right ” means the right to receive an amount, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares.
2.35 “ SAR Price ” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR.
2.36 “ Stock Option ” means a Nonqualified Stock Option or an Incentive Stock Option.
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2.37 “ Subsidiary ” means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. “ Subsidiaries ” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies.
2.38 “ Termination of Service ” occurs when a Participant who is (i) an Employee of the Company or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (ii) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (iii) a Contractor of the Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee becomes an Outside Director or Contractor or vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.38 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of “separation from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
2.39 “ Total and Permanent Disability ” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease, or mental disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that , with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.39 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder.
Article 3
ADMINISTRATION
3.1 General Administration; Establishment of Committee. Subject to the terms of this Article 3 , the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board.
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Membership on the Committee shall be limited to those members of the Board who are “outside directors” under Section 162(m) of the Code and “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee.
3.2 Designation of Participants and Awards.
(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board.
(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an “ Authorized Officer ”) to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan, and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided , however , that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards, and (z) not authorize an officer to designate himself as a recipient of any Award.
3.3 Authority of the Committee. The Committee, in its discretion, shall (i) interpret the Plan and Award Agreements, (ii) prescribe, amend, and rescind any rules and regulations and sub-plans (including sub-plans for Awards made to Participants who are not resident in the United States), as necessary or appropriate for the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement, and (iv) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary.
The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee.
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With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, Section 422 of the Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards.
Article 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan.
Article 5
SHARES SUBJECT TO PLAN
5.1 Number Available for Awards. Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is Five Million (5,000,000) shares, of which one hundred percent (100%) may be delivered pursuant to Incentive Stock Options. Subject to adjustment pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock Options or SARs may be granted to an Executive Officer during any calendar year is One Million (1,000,000) shares of Common Stock. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan.
5.2 Reuse of Shares. To the extent that any Award under this Plan shall be forfeited, shall expire or be canceled, in whole or in part, then the number of shares of Common Stock covered by the Award or stock option so forfeited, expired or canceled may again be awarded pursuant to the provisions of this Plan. In the event that previously acquired shares of Common Stock are delivered to the Company in full or partial payment of the exercise price for the exercise of a Stock Option granted under this Plan, the number of shares of Common Stock available for future Awards under this Plan shall be reduced only by the net number of shares of Common Stock issued upon the exercise of the Stock Option. Awards that may be satisfied either by the issuance of shares of Common Stock or by cash or other consideration shall be counted against the maximum number of shares of Common Stock that may be issued under this Plan only during the period that the Award is outstanding or to the extent the Award is ultimately satisfied by the issuance of shares of Common Stock. Awards will not reduce the number of shares of Common Stock that may be issued pursuant to this Plan if the settlement of the Award will not require the issuance of shares of Common Stock, as, for example, a SAR that can be satisfied only by the payment of cash. Notwithstanding any provisions of the Plan to the contrary, only shares forfeited back to the Company, shares canceled on account of termination, expiration or lapse of an Award, shares surrendered in payment of the exercise price of an option or shares withheld for payment of applicable employment taxes and/or withholding obligations resulting from the exercise of an option shall again be available for grant of Incentive Stock Options under the Plan, but shall not increase the maximum number of shares described in Section 5.1 above as the maximum number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options.
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Article 6
GRANT OF AWARDS
6.1 In General.
(a) The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common Stock subject to the Incentive(s), the Option Price (if applicable), the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, (ii) to the extent an Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee determines that an Award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the date of adoption of this Plan by the Board. The Plan shall be submitted to the Company’s stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of stockholder approval. Any such Award granted prior to such stockholder approval shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan.
(b) If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price.
(c) Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.
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6.2 Option Price. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant.
6.3 Maximum ISO Grants. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company’s stock transfer records.
6.4 Restricted Stock. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan, to the extent applicable and in the event the Committee determines that an Award shall comply with the requirements of Section 162(m) of the Code, in compliance with the requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder and, to the extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect to each Participant.
(a) Legend on Shares. The Company shall electronically register the Restricted Stock awarded to a Participant in the name of such Participant, which shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.10 of the Plan. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in Section 6.4(b)(i)(a)(i) ) without forfeiture in respect of such shares of Common Stock, the Participant requests delivery of the certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting delivery of the certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request.
(b) Restrictions and Conditions. Shares of Restricted Stock shall be subject to the following restrictions and conditions:
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(i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action is appropriate.
(ii) Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock or after any other restrictions imposed on such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company.
(iii) The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on such Performance Goals, as may be determined by the Committee in its sole discretion.
(iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company.
6.5 SARs. The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are (i) not inconsistent with the Plan, (ii) to the extent a SAR issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee determines that a SAR shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) and the regulations and other guidance issued thereunder. The grant of the SAR may provide that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the SAR Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (ii) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted.
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6.6 Restricted Stock Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee, provided, however, that such terms and conditions are (i) not inconsistent with the Plan, (ii) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder, and (iii) to the extent the Committee determines that a Restricted Stock Unit award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) and the regulations and other guidance issued thereunder. Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction.
6.7 Performance Awards.
(a) The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period, and the maximum or minimum settlement values, provided that such terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided , however , if shares of Common Stock are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and conditions.
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To the extent the Committee determines that a Performance Award shall comply with the requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder, and if it is determined to be necessary in order to satisfy Section 162(m) of the Code, at the time of the grant of a Performance Award (other than a Stock Option) and to the extent permitted under Section 162(m) of the Code and the regulations issued thereunder, the Committee shall provide for the manner in which the Performance Goals shall be reduced to take into account the negative effect on the achievement of specified levels of the Performance Goals which may result from enumerated corporate transactions, extraordinary events, accounting changes and other similar occurrences which were unanticipated at the time the Performance Goal was initially established. In no event, however, may the Committee increase the amount earned under such a Performance Award, unless the reduction in the Performance Goals would reduce or eliminate the amount to be earned under the Performance Award and the Committee determines not to make such reduction or elimination.
With respect to a Performance Award that is not intended to satisfy the requirements of Code Section 162(m), if the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure, or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.
(b) Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance Goals or other specific financial, production, sales or cost performance objectives that the Committee believes to be relevant to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the Committee.
(c) Notwithstanding the foregoing, in order to comply with the requirements of Section 162(m) of the Code, if applicable, no Participant may receive in any calendar year Performance Awards intended to comply with the requirements of Section 162(m) of the Code which have an aggregate value of more than $ 4,000,000, and if such Performance Awards involve the issuance of shares of Common Stock, said aggregate value shall be based on the Fair Market Value of such shares on the time of the grant of the Performance Award. In no event, however, shall any Performance Awards not intended to comply with the requirements of Section 162(m) of the Code be issued contingent upon the failure to attain the Performance Goals applicable to any Performance Awards granted hereunder that the Committee intends to comply with the requirements of Section 162(m) of the Code.
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6.8 Dividend Equivalent Rights. The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions different from such other Award.
6.9 Other Awards. The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant.
6.10 Performance Goals. Awards of Restricted Stock, Restricted Stock Units, Performance Award and Other Awards (whether relating to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or more business criteria which, where applicable, shall be within the meaning of Section 162(m) of the Code and consist of one or more or any combination of the following criteria: cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings or similar extraordinary business transactions; sales growth; price of the Company’s Common Stock; return on assets, equity or stockholders’ equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders (“ Performance Criteria ”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases, or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an Award which is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is applicable, the Committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a Performance Goal.
6.11 Tandem Awards. The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,” so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock.
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Article 7
AWARD PERIOD; VESTING
7.1 Award Period. Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive may not be exercised in whole or in part for any period or periods of time or beyond any date specified in the Award Agreement. Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The Award Period for an Incentive shall be reduced or terminated upon Termination of Service. No Incentive granted under the Plan may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date of Grant. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant.
7.2 Vesting. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested.
Article 8
EXERCISE OR CONVERSION OF INCENTIVE
8.1 In General. A vested Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions set forth in the Award Agreement.
8.2 Securities Law and Exchange Restrictions. In no event may an Incentive be exercised or shares of Common Stock issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished.
8.3 Exercise of Stock Option.
(a) In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option.
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(b) Notice and Payment. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash or check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered.
(c) Issuance of Certificate. Except as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless the Participant or such other person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established by the Committee. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the forgoing, if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. Any obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee.
(d) Failure to Pay. Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant.
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8.4 SARs. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and only if permissible under Section 409A of the Code and the regulations or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the regulations or other guidance issued thereunder), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and subject to the terms of the Award Agreement:
(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered;
(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or
(c) the Company may settle such obligation in part with shares of Common Stock and in part with cash.
The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award Agreement.
8.5 Disqualifying Disposition of Incentive Stock Option. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code.
Article 9
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 9 , the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment for which stockholder approval is required either (i) by any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or (ii) in order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 162(m), 421, and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant.
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Article 10
TERM
The Plan shall be effective from the date that this Plan is adopted by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on February 19, 2024, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions.
Article 11
CAPITAL ADJUSTMENTS
In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the fair value of the Award immediately prior to the transaction or event (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section 5.1 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.4 , and (vi) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject.
Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant.
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Article 12
RECAPITALIZATION, MERGER AND CONSOLIDATION
12.1 No Effect on Company’s Authority. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
12.2 Conversion of Incentives Where Company Survives. Subject to any required action by the stockholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled.
12.3 Exchange or Cancellation of Incentives Where Company Does Not Survive. Except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms.
12.4 Cancellation of Incentives. Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, all Incentives granted hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either:
(a) giving notice to each holder thereof or his personal representative of its intention to cancel those Incentives for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares of Common Stock subject to such outstanding Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise be vested and exercisable; or
(b) in the case of Incentives that are either (i) settled only in shares of Common Stock, or (ii) at the election of the Participant, settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the price per share of such Incentive to be paid by the Participant (hereinafter the “ Spread ”), multiplied by the number of shares subject to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, such as deeming the Incentives to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Incentives as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed.
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(c) An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable for purposes of Section 12.4(a) hereof.
Article 13
LIQUIDATION OR DISSOLUTION
Subject to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof.
Article 14
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER ENTITIES
Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees, independent contractors or directors of a corporation, partnership, or limited liability company who become or are about to become Employees, Contractors or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Incentives in substitution for which they are granted.
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Article 15
MISCELLANEOUS PROVISIONS
15.1 Investment Intent. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution.
15.2 No Right to Continued Employment. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary.
15.3 Indemnification of Board and Committee. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation.
15.4 Effect of the Plan. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein.
15.5 Compliance With Other Laws and Regulations. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act and Section 162(m) of the Code); and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required.
15.6 Foreign Participation. To assure the viability of Awards granted to Participants employed in foreign countries, the Committee may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Committee approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country.
15.7 Tax Requirements. The Company or, if applicable, any Subsidiary (for purposes of this Section 15.7 , the term “ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, local, or other taxes required by law to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is required to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by Company and may be required to be made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six (6) months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable.
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15.8 Assignability. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.8 that is not required for compliance with Section 422 of the Code.
Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. The Committee may, in its discretion, authorize all or a portion of an Award to be granted to a Participant on terms which permit transfer by such Participant to (i) the spouse (or former spouse), children or grandchildren of the Participant (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Award is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Awards shall be prohibited except those by will or the laws of descent and distribution.
Following any transfer, any such Nonqualified Stock Option and SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term “ Participant ” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which the Nonqualified Stock Options and SARs shall be exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of a Nonqualified Stock Option or SAR of any expiration, termination, lapse or acceleration of such Stock Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Nonqualified Stock Option or SAR that has been transferred by a Participant under this Section 15.8 .
15.9 Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company.
15.10 Legend. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
“Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate.”
On the reverse:
“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Nano Vibronix, Inc. 2014 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Melville, New York. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.”
The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws:
“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.”
A copy of this Plan shall be kept on file in the principal office of the Company in Melville, New York.
***************
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IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of February 28, 2014, by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board.
NANO VIBRONIX, INC. | |
By: | /s/ Harold Jacob |
Name | Harold Jacob |
Title | Chief Executive Officer |
By: | |
Name | |
Title | Secretary |
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EXHIBIT 10.28
Void after November 15, 2018 | Warrant No. ________ |
This Warrant and any shares acquired upon the exercise of this Warrant have not been registered under the Securities Act of 1933. This Warrant and such shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act. This Warrant and such shares may not be transferred except upon the conditions specified in this Warrant, and no transfer of this Warrant or such shares shall be valid or effective unless and until such conditions shall have been complied with. |
NANO VIBRONIX, INC.
FORM OF AMENDED AND RESTATED
SERIES B-2 PARTICIPATING CONVERTIBLE PREFERRED STOCK PURCHASE WARRANT
Nano Vibronix, Inc. (the “ Company ”), having its principal office at 105 Maxess Road, Suite S124, Melville, NY 11747, hereby certifies that, for value received, _____________ (“Investor”), or assigns, is entitled, subject to the terms set forth below, to purchase from the Company at any time on, or from time to time after, November___, 2011 and before 5:00 P.M., New York City time, on November 15 , 2018, or as curtailed in accordance with the terms hereof (the “ Expiration Date ”), ______________ fully paid and non-assessable shares of Warrant Shares of the Company, at the Purchase Price per share of $0.199. The number and character of such shares of Warrant Shares and the Purchase Price per share are subject to adjustment as provided herein.
This Amended and Restated Series B-2 Participating Convertible Preferred Stock Purchase Warrant amends, restates and supersedes in all respects that certain Warrant No. ____ issued to the Holder on November___, 2011 (the “ Original Warrant ”). The Original Warrant is henceforth void and shall be of no further force or effect as of the date hereof. However, the Company and the Holder hereby agree that (i) no consideration was paid by the Holder in connection with the amendment and restatement of the Original Warrant, (ii) this Warrant shall be treated as a continuation of the Original Warrant for U.S. tax purposes and (iii) for purposes of calculating any holding periods under Rule 144 of the Securities Act of 1933, as amended, the original issuance date of this Warrant shall be November___, 2011.
As used herein, the following terms have the following respective meanings:
“ Warrant Shares ” means the Series B-2 Participating Convertible Preferred Stock of the Company Stock, par value $0.001 per share, of the Company.
“ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.
“ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in the city of New York, New York are authorized or required by law to remain closed.
“ Common Stock ” means the common stock, par value $0.001 per share, of the Company.
“ Common Stock Equivalent ” means any Convertible Security or warrant, option or other right to subscribe for or purchase any additional shares of Common Stock or any Convertible Security.
“ Convertible Security ” means any stock or other security (other than options) that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any shares of Common Stock.
“ Exchange Act ” means the Securities Exchange Act of 1934 as the same shall be in effect at the time.
“ Holder ” means any record owner of this Warrant.
“ Per Share Market Value ” has the meaning set forth in Section 2.3.
“ Original Issue Date ” means November ___, 2011.
“ Other Securities ” refers to any stock (other than Warrant Shares) and other securities of the Company or any other entity which the Holder of this Warrant at any time shall be entitled to receive, or shall have received, upon the exercise of this Warrant, in lieu of or in addition to Warrant Shares, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Warrant Shares or Other Securities pursuant to Section 5 or otherwise.
“ Securities Act ” means the Securities Act of 1933 as the same shall be in effect at the time.
“ Underlying Securities ” means any Warrant Shares or Other Securities issued or issuable upon exercise of this Warrant.
“ Warrant ” means, as applicable, this Warrant, as amended and restated, or each right as set forth in this Warrant to purchase one share of Warrant Shares, as adjusted.
1. Sale or Exercise Without Registration . If, at the time of any exercise, transfer or surrender for exchange of a Warrant or of Underlying Securities previously issued upon the exercise of Warrants, such Warrant or Underlying Securities shall not be registered under the Securities Act, the Company may require, as a condition of allowing such exercise, transfer or exchange, that the Holder or transferee of such Warrant or Underlying Securities, as the case may be, furnish to the Company an opinion of counsel, reasonably satisfactory to the Company, to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act.
2 |
2. Exercise of Warrant .
2.1. Exercise in Full . Subject to the provisions hereof, this Warrant may be exercised in full by the Holder hereof by surrender of this Warrant, with the form of subscription at the end hereof duly executed by such Holder, to the Company at its principal office accompanied by payment, in cash or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Purchase Stock issuable upon exercise of this Warrant by the Purchase Price per share, after giving effect to all adjustments through the date of exercise.
2.2. Partial Exercise . Subject to the provisions hereof, this Warrant may be exercised in part by surrender of this Warrant in the manner and at the place provided in Section 3.1 except that the amount payable by the Holder upon any partial exercise shall be the amount obtained by multiplying (a) the number of shares of Warrant Shares (without giving effect to any adjustment therein) designated by the Holder in the subscription at the end hereof, by (b) the Purchase Price per share. Upon any such partial exercise, the Company at its expense will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, for the remaining number of shares of Warrant Shares which may be purchased hereunder.
2.3 Cashless Exercise . In addition to the method of payment set forth in Sections 2.1 and 2.2 and in lieu of any cash payment required thereunder, the Holder of the Warrant shall have the right at any time and from time to time to exercise the Warrant in full or in part by surrendering this Warrant in the manner and at the place specified in Section 3.1, specifying the number of shares for which this Warrant is being exercised. The Company shall issue Holder the number of shares computed using the following formula:
X = |
|
where: | X = the number of Underlying Securities to be issued to Holder. | |
Y = the number of Underlying Securities for which this Warrant is being exercised. | ||
A = the Purchase Price. | ||
B = the Per Share Market Value of one share of Underlying Securities on the business day immediately preceding the date of such election |
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“ Per Share Market Value ” means on any particular date (a) the closing sales price per share of the Underlying Securities on such date on any registered national stock exchange on which the Underlying Securities is then listed, or if there is no such closing sales price on such date, then the closing sales price on such exchange or quotation system on the date nearest preceding such date, or (b) if the Underlying Securities is not then listed on a registered national stock exchange, the closing sales price for a share of Underlying Securities in the over-the-counter market, as reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (c) if the Underlying Securities is not then reported by the OTC Bulletin Board or the OTC Markets Group, Inc. (or similar organization or agency succeeding to its functions of reporting prices), the fair market value of a share of Underlying Securities as determined by the Board, acting in good faith. In determining the fair market value of any shares of Underlying Securities no consideration shall be given to any restrictions on transfer of the Underlying Securities imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.
2.4. Certain Exercises . If this Warrant is to be exercised in connection with a registered public offering or sale of the Company, such exercise may, at the election of the Holder, be conditioned on the consummation of the public offering or sale of the Company, in which case such exercise shall not be deemed effective until the consummation of such transaction.
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2.5. Holder’s Exercise Limitations . The Company shall not affect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Exercise Notice, 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), 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 shall include the number of shares of Common Stock issuable upon conversion of the shares acquired upon exercise of this Warrant 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 shares acquirable upon exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2.5, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2.5 applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a form of subscription shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2.5, in determining the number of outstanding shares of Common Stock, a 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 its 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 two Business Days 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 Warrant, 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 potential issuance of shares of Common Stock issuable upon conversion of the shares acquired upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior written notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2.5, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to potential issuance of shares of Common Stock issuable upon conversion of the shares acquired upon exercise of this Warrant held by the Holder and the provisions of this Section 2.5 shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such written notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.5 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant. The Beneficial Ownership Limitation provisions of this Section 2.5 may be waived at the election of the Holder upon not less than 61 days’ prior written notice to the Company. Any such waiver will not be effective and the provisions of this paragraph shall continue to apply until the 61st day (or later, if stated in the notice) after such notice of waiver is delivered to the Company. Unless earlier waived, the provisions of this Section 2.5 shall expire and be of no further force or effect as of _________, 20__.
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3. Delivery of Stock Certificates, etc., on Exercise . As soon as practicable after the exercise of this Warrant in full or in part, the Company at its own expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct, a certificate or certificates for the number of fully paid and non-assessable shares of Warrant Shares or Other Securities to which such Holder shall be entitled upon such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then-current Market Price of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 4 or otherwise.
4. Adjustment for Dividends in Other Stock, Property, etc.; Reclassification, etc. In case at any time or from time to time after the Original Issue Date, the holders of Warrant Shares (or, if applicable, Other Securities) shall have received, or (on or after the record date fixed for the determination of stockholders eligible to receive) shall have become entitled to receive, without payment therefor
(a) other or additional stock or other securities or property (other than cash) by way of dividend, or
(b) any cash paid or payable (including, without limitation, by way of dividend), or
(c) other or additional stock or other securities or property (including cash) by way of spin-off, split-up, reclassification, recapitalization, combination of shares or similar corporate rearrangement,
then, and in each such case the Holder of this Warrant, upon the exercise hereof as provided in Section 2, shall be entitled to receive the amount of stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) which such Holder would hold on the date of such exercise if on the Original Issue Date such Holder had been the Holder of record of the number of shares of Warrant Shares called for on the face of this Warrant and had thereafter, during the period from the Original Issue Date to and including the date of such exercise, retained such shares and all such other or additional stock and other securities and property (including cash in the cases referred to in subdivisions (b) and (c) of this Section 4) receivable by such Holder as aforesaid during such period, giving effect to all adjustments called for during such period by Section 5 hereof. If the number of shares of Warrant Shares outstanding at any time after the date hereof is decreased by a combination or reverse stock split of the outstanding shares of Common Stock, the Purchase Price per share shall be increased, and the number of shares of Warrant Shares purchasable under this Warrant shall be decreased in proportion to such decrease in outstanding shares of Warrant Shares.
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5. Reorganization, Consolidation, Merger, etc. In case the Company after the Original Issue Date shall (a) effect a reorganization, (b) consolidate with or merge into any other entity or (c) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, the Holder of this Warrant, upon the exercise hereof as provided in Section 3 at any time after the consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall be entitled to receive (and the Company shall be entitled to deliver), in lieu of the Underlying Securities issuable upon such exercise prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, all subject to further adjustment thereafter as provided in this Section 5; provided that if the sole consideration to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant immediately prior thereto, is cash, the Warrant shall be terminated upon such consummation or dissolution. The Company shall not effect any such reorganization, consolidation, merger or sale, unless prior to or simultaneously with the consummation thereof, the successor corporation resulting from such consolidation or merger or the corporation purchasing such assets or the appropriate corporation or entity shall assume, by written instrument, the obligation to deliver to each Holder the shares of stock, cash, other securities or assets to which, in accordance with the foregoing provisions, each Holder may be entitled to and all other obligations of the Company under this Warrant. In any such case, if necessary, the provisions set forth in this Section 5 with respect to the rights thereafter of the Holders shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any Other Securities or assets thereafter deliverable on the exercise of the Warrants.
6. Further Assurances . The Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non-assessable shares of stock upon the exercise of all Warrants from time to time outstanding.
7. Officer's Certificate as to Adjustments . In each case of any adjustment or readjustment in the shares of Warrant Shares (or Other Securities) issuable upon the exercise of the Warrants, the Company will issue a certificate setting forth such adjustment or readjustment and the basis therefor.
8. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of its stockholders for the purpose of determining the stockholders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or for the purpose of determining stockholders who are entitled to vote in connection with any proposed capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all the assets of the Company to or consolidation or merger of the Company with or into any other person, or
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(b) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, or
(c) any proposed issue or grant by the Company of any Common Stock, or any other securities, or any right or option to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities (other than the issue of Common Stock on the exercise of the Warrants),
then and in each such event the Company will mail or cause to be mailed to each Holder of a Warrant a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up is to take place, and the time, if any, as of which the Holders of record of Underlying Securities shall be entitled to exchange their shares of Underlying Securities for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up and (iii) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant and the persons or class of persons to whom such proposed issue or grant is to be offered or made. Such notice shall be given at least 10 days prior to the date therein specified.
9. Reservation of Stock, etc., Issuable on Exercise of Warrants . The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of the Warrants, all shares of Warrant Shares (or Other Securities) from time to time issuable upon the exercise of the Warrants.
10. Notices, etc. All notices and other communications from the Company to the Holder of this Warrant shall be delivered by fax or courier, at such address as may have been furnished to the Company in writing by such Holder, or, until an address is so furnished, to and at the address of the last Holder of this Warrant who has so furnished an address to the Company.
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11. Miscellaneous . This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder or as otherwise provided in the Subscription Agreement. This Warrant shall be governed by and construed and enforced in accordance with the General Corporation Law of the State of Delaware without regard to principles of conflicts of law. Each party hereby irrevocably consents and submits to the jurisdiction of any New York State or United States Federal Court sitting in the State of New York, County of New York, over any action or proceeding arising out of or relating to this Agreement and irrevocably consents to the service of any and all process in any such action or proceeding by registered mail addressed to such party at its address specified herein (or as otherwise noticed to the other party). Each party further waives any objection to venue in New York and any objection to an action or proceeding in such state and county on the basis of forum non conveniens . Each party also waives any right to trial by jury.
Dated: __________ __, 20__ | NANO VIBRONIX, INC. | ||
By: | |||
Name: | |||
Attest: _________________________________ | Title: |
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FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: NANO VIBRONIX, INC.
The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, _________ shares of Warrant Shares of Nano Vibronix, Inc., and herewith makes payment therefor
(i) of $_____________ or
(ii) by surrender of the number of Warrants included in the within Warrant required for full exercise pursuant to Section 2.3 of the Warrant,
and requests that the certificates for such shares be issued in the name of, and delivered to, ___________________, whose address is _______________________.
Dated:
(Signature must conform in all respects to name of Holder
as specified on the face of the Warrant) |
||
(Address) | ||
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EXHIBIT 21.1
NANO VIBRONIX, INC.
Subsidiaries of the Registrant | State or Other Jurisdiction of Incorporation | |
NanoVibronix Ltd. | Israel |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the caption “Experts” and to the use of our report dated March 6, 2014, in the Registration Statement (Form S-1 No. 333-193784) and related prospectus of Nano Vibronix Inc. dated March 6, 2014.
/s/ KOST FORER GABBAY & KASIERER | |
Tel-Aviv, Israel | KOST FORER GABBAY & KASIERER |
March 6, 2014 | A Member of Ernst & Young Global |