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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule14A
Proxy Statement Pursuant to Section14(a)of
the
Securities ExchangeActof1934
Filed by the Registrant
☒
Filed by a party other than the Registrant
☐
Check the appropriate box:
☐
Preliminary Proxy Statement
☐
Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2))
☒
Definitive Proxy Statement
☐
Definitive Additional Materials
☐
Soliciting Material under Rule 14a-12
TENON MEDICAL, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the
appropriate box):
☒
No fee required.
☐
Fee paid previously with preliminary materials.
☐
Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a-6(i)(1) and 0-11
TENON MEDICAL, INC.
104 Cooper Ct.
Los Gatos, CA95032
(408)649-5760
www.tenonmed.com
June 13, 2024
Dear Stockholder:
We are pleased to invite you to attend the 2024
Annual Meeting of Stockholders of Tenon Medical, Inc. (the Annual Meeting). The Annual Meeting will be held virtually via
live webcast on Tuesday, July 23, 2024 at 10:30a.m. Pacific Time.
Stockholders will
NOT
be able to attend
the Annual Meeting in person. The Annual Meeting will be accessible only over the internet. Please see
Attending the Virtual
Annual Meeting
in the proxy statement (the Proxy Statement) accompanying this letter for information on how to
register, obtain the proxy materials, attend, submit questions and vote at the Annual Meeting.
We are making available to you the accompanying
Notice of Annual Meeting (Notice), Proxy Statement and form of proxy card or voting instruction form on or about June 13,
2024. We are pleased to furnish proxy materials to stockholders primarily over the internet. We believe that this process expedites stockholders
receipt of proxy materials, lowers the costs of our Annual Meeting and conserves natural resources. On or about June 13, 2024, we mailed
to our stockholders a Notice of Internet Availability of Proxy Materials (the Internet Availability Notice) that includes
instructions on how to access our Proxy Statement and 2023 Annual Report and how to vote online. The Internet Availability Notice also
includes instructions on how you can receive a paper copy of your Annual Meeting materials, including the Notice, Proxy Statement and
proxy card or voting instruction form. If you elected to receive your Annual Meeting materials by mail, the Notice, Proxy Statement and
proxy card or voting instruction form were enclosed. If you elected to receive your Annual Meeting materials via e-mail, the e-mail contains
voting instructions and links to the 2023 Annual Report and the Proxy Statement, both of which are available on the Companys website
at
www.tenonmed.com
. Additional details regarding admission to, and the business to be conducted at, the Annual Meeting are described
in the accompanying Notice and Proxy Statement.
Only stockholders of record at the close of business
on June 3, 2024 are entitled to notice of, and to vote at, the Annual Meeting.
Your vote is important
. Regardless of whether
you plan to attend the Annual Meeting, we hope that you will vote as soon as possible. You may vote over the internet, by telephone or
by mailing in a proxy card. Please review the instructions on the proxy card or voting instruction form regarding each of these voting
options. Voting will ensure your representation at the Annual Meeting regardless of whether you attend the Annual Meeting.
Thank you for your on-going support of Tenon Medical,
Inc.
Sincerely,
/s/ Steven Foster
Steven Foster
Director, Chief Executive Officer and President
TENON MEDICAL, INC.
104 COOPER CT.
LOS GATOS, CA95032
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON
TUESDAY, JULY 23, 2024 AT 10:30 A.M., PACIFIC TIME
VIA A LIVE WEBCAST ONLY
ITEMS OF BUSINESS:
The 2024 Annual Meeting of Stockholders (the Annual
Meeting) of Tenon Medical, Inc. (Tenon or the Company) will be held virtually via live webcast on Tuesday,
July 23, 2024 at 10:30a.m. Pacific Time for the following purposes:
(1)
to
elect Steven Foster, Richard Ginn, Ivan Howard, Richard Ferrari, Robert Weigle, Kristine Jacques and Stephen Hochschuler, M.D. as directors
to serve until the 2025 Annual Meeting of the Stockholders of the Company;
(2)
to approve the terms of
(i) our Series B Preferred Stock, (ii) the warrants to be issued on the issuance date of our Series B Preferred Stock and (iii) the
amendment to the terms of our Series A Preferred Stock to decrease the amount of the conversion price thereof, in each case, to comply
with Listing Rule 5635(d) of The Nasdaq Stock Market LLC (the Nasdaq Compliance Proposal)
;
(3)
to approve amendments to the Tenon Medical, Inc. 2022 Equity
Incentive Plan (the 2022 Plan) to (i) increase the total number of shares of the Companys common stock subject
to the 2022 Plan by 1,100,000 shares and (ii) permit the issuance of equity awards to individuals and legal entities (
together,
the 2022 Plan Amendment Proposal)
;
(4)
to ratify the appointment
of Haskell White LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31,
2024 (the Auditor Appointment Proposal)
; and
(5)
to approve adjourning
the Annual Meeting, if necessary, to solicit additional proxies in the event there are not sufficient votes in favor of the proposals
listed above at the time of the Annual Meeting (the Adjournment Proposal)
.
These items of business are more fully described
in the proxy statement (Proxy Statement) accompanying this Notice of Annual Meeting of Stockholders (Notice).
We are not aware of any other business to come before the Annual Meeting.
After careful consideration, the Board has determined
that each proposal listed above is in the best interests of the Company and its stockholders and has approved each proposal.
The Board
recommends a vote FOR the Election of each director nominee (Proposal 1), FOR the Nasdaq Compliance Proposal
(Proposal 2), FOR the approval of the 2022 Plan Amendment Proposal (Proposal 3), FOR the Auditor Appointment
Proposal (Proposal 4) and FOR the Adjournment Proposal (Proposal 5)
.
All stockholders are invited to attend the Annual
Meeting virtually and no stockholder will be able to attend the Annual Meeting in person. The Annual Meeting will be accessible via the
internet in accordance with the instructions contained in the Proxy Statement. Please see
Questions and Answers About the Meeting
and VotingHow Do I Vote At The Annual Meeting?
in the Proxy Statement accompanying this Notice for information on how
to attend, submit questions and vote at the Annual Meeting.
WHO CAN VOTE?
You can vote at the Annual Meeting if you were
a stockholder of record as of the close of business on June 3, 2024 (the Record Date). Only stockholders of record on the
Record Date are entitled to receive this Notice and to vote at the Annual Meeting or at any postponement(s) or, continuations(s) or adjournment(s)
of the Annual Meeting.
ANNUAL REPORT
A copy of our 2023 Annual Report on Form 10-K
(the 2023 Annual Report), accompanies the Proxy Statement.
REVIEW THE PROXY MATERIALS AND ANNUAL REPORT
ON OUR WEBSITE
You may also read the 2023 Annual Report, this
Notice and Proxy Statement at
www.tenonmed.com
.
AVAILABLE DATE
This Notice, the Proxy Statement and the form
of proxy are first being made available to stockholders on or about June 13, 2024 at
www.viewproxy.com/Tenonmedical/2024
.
YOUR VOTE IS IMPORTANT. YOU MAY VOTE OVER THE
INTERNET, BY TELEPHONE OR BY MAILING BACK A PROXY CARD. PLEASE REVIEW THE INSTRUCTIONS IN THE PROXY STATEMENT OR ON THE PROXY CARD OR
VOTING INSTRUCTION FORM REGARDING EACH OF THESE VOTING OPTIONS.
We hope you are able to attend the Annual Meeting
virtually via the internet. Whether or not you attend, it is important that your stock be represented and voted at the meeting. I urge
you to please complete, date and return the proxy card in the enclosed envelope, vote your shares electronically or vote by telephone
using the information provided in the attached Proxy Statement prior to the Annual Meeting date. The vote of each stockholder is very
important. You may revoke your written proxy at any time before it is voted at the Annual Meeting by giving written notice to the Companys
Chief Financial Officer, by submitting a properly executed paper proxy bearing a later date or by attending the Annual Meeting virtually
and voting online during the meeting. Stockholders may also revoke their proxies by entering a new vote over the internet or by telephone.
TENON MEDICAL, INC.
104 Cooper Ct.
Los Gatos, CA95032
PROXY STATEMENT
For Annual Meeting of Stockholders to Be Held
on July 23, 2024
The Board of Directors (the Board)
of Tenon Medical, Inc., a Delaware corporation (Tenon, Company, we, us or our),
solicits the enclosed proxy for use at the 2024 Annual Meeting of Stockholders of the Company (Annual Meeting) to be held
on July 23, 2024, only via live webcast accessible by following the instructions set forth here at
Questions and Answers About
the Meeting And Voting
How Do I Vote at the Annual Meeting?
This proxy statement (Proxy Statement)
and the accompanying Notice of Annual Meeting of Stockholders (the Notice) and form of proxy are first being made available
to stockholders on or about June 13, 2024.
We are furnishing proxy materials to our stockholders
primarily via the internet. On or about June 13, 2024, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials
(the Internet Availability Notice) containing instructions on how to access our proxy materials, including our Proxy Statement
and our 2023 Annual Report to Stockholders (the 2023 Annual Report). The Internet Availability Notice also provides information
on how to access your voting instructions to be able to vote through the internet or by telephone. Other stockholders, in accordance with
their prior requests, have received e-mail notification of how to access our proxy materials and vote via the internet, or have been mailed
paper copies of our proxy materials and a proxy card or voting instruction form. Internet distribution of our proxy materials helps to
expedite receipt by our stockholders, lowers the cost of the Annual Meeting and conserves natural resources. However, if you would prefer
to receive printed proxy materials, please follow the instructions included in the Internet Availability Notice. If you have previously
elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
The executive offices of the Company are located
at, and the mailing address of the Company is 104 Cooper Ct., Los Gatos, CA95032.
This Proxy Statement contains information about
the matters to be voted on at the Annual Meeting and the voting process, as well as information about our directors and executive officers.
Under Securities and Exchange Commission (SEC)
rules that allow companies to furnish proxy materials to stockholders over the Internet, we have elected to deliver our proxy materials
to the majority of our stockholders over the Internet. This delivery process allows us to provide stockholders with the information they
need, while at the same time conserving natural resources and lowering the cost of delivery. On or about June 13, 2024, we will begin
sending to our stockholders the Internet Availability Notice containing instructions on how to access our Proxy Statement for our Annual
Meeting and our 2023 Annual Report. The Internet Availability Notice also provides instructions on how to vote online or by telephone,
how to access the virtual Annual Meeting and how to receive a paper copy of the proxy materials by mail. The Notice and Proxy Statement
are also available at www.viewproxy.com/Tenonmedical/2024.
1
QUESTIONS AND ANSWERS ABOUT THE MEETING AND
VOTING
Q: What is a proxy?
A:
A proxy is another person that you legally
designate to vote your stock. If you designate someone as your proxy in a written document, that document is also called a proxy
or a proxy card. By using the methods discussed below, you will be appointing Steven Foster, the Chief Executive Officer,
President and a director of the Company, and Steven Van Dick, the Chief Financial Officer of the Company, as your proxy. The proxy agent
will vote on your behalf, and will have the authority to appoint a substitute to act as proxy. If you are unable to attend the Annual
Meeting, please vote by proxy so that your shares may be voted.
Q: What is a proxy statement?
A:
A proxy statement is a document that
regulations of the SEC require that we give to you when we ask you to sign a proxy card to vote your stock at the Annual Meeting.
Q: What is the purpose of the Annual Meeting?
A:
At our Annual Meeting, stockholders
will vote on: (i) the election of seven (7) directors; (ii)
the approval of the terms of the Series
B Preferred Stock, the warrants to be issued on the issuance date of the Series B Preferred Stock and the amendment to the terms of our
Series A Preferred Stock to decrease the amount of the conversion price thereof, in each case, to comply with Listing Rule 5635(d) of
The Nasdaq Stock Market LLC (the Nasdaq Compliance Proposal); (iii) to approve amendments to the Tenon Medical, Inc. 2022
Equity Incentive Plan (the 2022 Plan) to (A) increase the total number of shares of the Companys common stock subject
to the 2022 Plan by 1,100,000 and (B) permit the issuance of equity awards to individuals and legal entities (collectively, the 2022
Plan Amendment Proposal); (iv) to ratify the appointment of Haskell White LLP as the independent registered public accounting
firm for the Company for the fiscal year ending December 31, 2024 (the Auditor Appointment Proposal); (v) to approve adjourning
the Annual Meeting, if necessary, to solicit additional proxies in the event there are not sufficient votes in favor of the proposals
listed above at the time of the Annual Meeting and (vi)
such other matters as may come before the meeting. In addition, following
the meeting our management will report on the Companys performance over the last fiscal year and respond to questions from stockholders.
Q: Why am I receiving these materials?
A:
The Board has made these materials available
to you over the internet at
www.viewproxy.com/Tenonmedical/2024
, or has delivered printed versions of these materials to you by
mail, in connection with the Boards solicitation of proxies for use at the Annual Meeting. The Annual Meeting is scheduled to be
held on Tuesday, July 23, 2024 at 10:30 a.m. Pacific Time, via live webcast. This solicitation by the Board is for proxies for use at
the Annual Meeting.
Q: Why did I receive a one-page notice in the
mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?
A:
As permitted by SEC rules, we are making
this Proxy Statement and our Annual Report available to our stockholders electronically via the internet. On or about June 13, 2024, we
mailed to our stockholders the Internet Availability Notice containing instructions on how to access this Proxy Statement and our Annual
Report and vote online. If you received the Internet Availability Notice by mail you will not receive a printed copy of the proxy materials
in the mail unless you request a copy. The Internet Availability Notice instructs you on how to access and review all of the important
information contained in the Proxy Statement and Annual Report. The Internet Availability Notice also instructs you on how you may submit
your proxy over the internet or by telephone. If you received the Internet Availability Notice by mail and would like to receive a printed
copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Availability Notice.
We encourage you to take advantage of the availability of the proxy materials on the internet in order to help lower the costs of delivery
and reduce the Companys environmental impact.
Q: How do I obtain the materials for the Annual
Meeting?
A:
You should have received the Internet
Availability Notice in the mail of how to obtain materials for the Annual Meeting. Please follow the instructions on the Internet Availability
Notice to obtain the materials either via the internet, by telephone or by e-mail.
2
You may also view the following proxy materials
on the Companys website at
www.tenonmed.com
:
●
the Companys 2023 Annual Report; and
●
the Companys 2024 Proxy Statement.
You may not vote on the Companys website.
The Company urges you to request your materials
before July 16, 2024 so that you will receive them in a timely manner in order to vote at the Annual Meeting.
Q: Who may attend the Annual Meeting?
A:
The Annual Meeting is open to all
stockholders of record as of close of business on June 3, 2024 (the Record Date), or their duly appointed proxies.
Q: What will I need in order to attend the
Annual Meeting Online?
A:
You may attend the Annual Meeting
via the internet, vote your shares and, after the meeting adjourns, submit a question by first registering at
www.viewproxy.com/Tenonmedical/2024
using your Virtual Control Number that is on the Internet Availability Notice that you received previously in the mail. Your registration
must be received by 11:59 p.m. Eastern time on July 21, 2024. On the day of the Annual Meeting, if you have properly registered, you may
log in to attend the Annual Meeting by clicking on the link provided and the password you received by email in your registration confirmation
and follow the instructions to vote your shares. Please have your Virtual Control Number with you during the Annual Meeting in order to
vote. Further instructions on how to vote are set forth below in the question
How do I vote at the Annual Meeting?
If you do not comply with the procedures outlined in this Proxy Statement, you will not be admitted to the virtual Annual Meeting. Online
access will begin at 10:15 a.m. Pacific Time on July 23, 2024 and we encourage you to access the meeting prior to the start time. The
meeting webcast will begin promptly at 10:30 a.m. Pacific Time on July 23, 2024.
Q: May stockholders ask questions?
A:
Yes. Representatives of the Company
will answer stockholders questions of general interest after the adjournment of the Annual Meeting. Depending upon the number of
persons asking questions, the Chairman of the meeting may limit the number of questions one person may ask in order to give a greater
number of stockholders an opportunity to ask questions. If you choose to attend the online meeting, you may submit a question during the
Annual Meeting webcast by using your Virtual Control Number. Questions will be answered as time allows.
Q: Who may vote?
A:
You may vote if you owned Tenon Medical
common stock as of the close of business on June 3, 2024. Each share of Tenon Medical common stock is entitled to one vote. As of the
Record Date, the Company had 3,729,474 sharesof common stock outstanding.
Q: What am I voting on?
A:
You will be voting on the following
items of business at the Annual Meeting:
●
the
election of seven (7) directors to serve until the 2025 Annual Meeting of stockholders and until their respective successors are duly
elected and qualified;
●
the
approval of the Nasdaq Compliance Proposal
;
●
the
approval of the 2022 Plan Amendment Proposal;
●
the
approval of the Auditor Appointment Proposal; and
●
the
approval of the Adjournment Proposal.
3
Q: How does the Board recommend that I vote?
A:
Our Board recommends that you vote
your shares:
●
FOR
each of the nominees named
in this Proxy Statement for election to the Board;
●
FOR
the approval of the Nasdaq Compliance
Proposal;
●
FOR
the approval of the 2022 Plan Amendment
Proposal
;
●
FOR
the approval of the Auditor Appointment
Proposal; and
●
FOR
the approval of the Adjournment Proposal.
Q: How do I vote at the Annual Meeting?
A:
You should have received the Internet
Availability Notice in the mail that described the methods of voting at the virtual Annual Meeting. Please refer to that notice to vote.
If you received a paper proxy card, you may vote
by mail by returning the proxy card to the address on the enclosed envelope.
If you are a stockholder of record, you must
:
●
First
register at
www.viewproxy.com/Tenonmedical/2024
by 11:59 p.m., Eastern time, on July 22, 2024. You will need to enter your name,
phone number, email address and Virtual Control Number (included on your proxy card that was included with the proxy materials) as part
of the registration, following which, you will receive an email confirming your registration, as well as the password you will need to
enter the Annual Meeting.
If you do not have your Virtual Control Number,
you may still attend the Annual Meeting as a guest (non-stockholder) but you will not have the option to participate in or vote your shares
electronically at the Annual Meeting.
●
On
the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by logging in using the password you
received via email in your registration confirmation (you will need the Virtual Control Number included on your proxy card that was included
with the proxy materials.
●
If
you wish to vote your shares electronically at the Annual Meeting, you will need to visit
www.viewproxy.com/Tenonmedical/2024
during the Annual Meeting while the polls are open (you will need the Virtual Control Number included on your proxy card that was included
with the proxy materials).
If your shares are held in a street
name, you must
:
●
Obtain
a legal proxy from your broker, bank or other nominee.
●
Register
at
www.viewproxy.com/Tenonmedical/2024
by 11:59 p.m., Eastern time, on July 22, 2024.
You must enter your name, phone number and email
address and provide a copy of the legal proxy (which may be uploaded to the registration website or sent via email to VirtualMeeting@viewproxy.com)
as part of the registration, following which, you will receive an email confirming your registration, your Virtual Control Number, as
well as the password to attend the Annual Meeting.
4
Please note, if you do not provide a copy of the
legal proxy, you may still attend the Annual Meeting as a guest (non- stockholder) but you will not have the option to participate in
or vote your shares electronically at the Annual Meeting.
●
On
the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by logging in using the password you
received via email in your registration confirmation (you will need the Virtual Control Number included on your proxy card that was included
with the proxy materials.
●
If
you wish to vote your shares electronically at the Annual Meeting, you will need to visit
www.viewproxy.com/Tenonmedical/2024
during the Annual Meeting while the polls are open (you will need the Virtual Control Number included on your proxy card that was included
with the proxy materials).
If you encounter technical difficulties
:
We will have technicians ready to assist you with
any technical difficulties you may have in accessing the Annual Meeting live webcast. Please be sure to check in by 10:15 a.m., Eastern
time, on July 23, 2024, the day of the Annual Meeting, so that we may address any technical difficulties before the Annual Meeting live
webcast begins. If you encounter any difficulties accessing the Annual Meeting live webcast during the check-in or meeting time, please
email VirtualMeeting@viewproxy.com or call866-612-893.
The Company urges you to vote before July 21,
2024 to ensure that your vote is timely received and counted.
Q: Can I change my mind after I vote?
A:
You may change your vote at any
time before the polls close at the Annual Meeting. You may do this by:
●
signing
another proxy card with a later date and returning it to us prior to the Annual Meeting; or
●
voting
again by telephone or through the Internet during the virtual Annual Meeting.
Your attendance at the Annual Meeting will not
have the effect of revoking a proxy unless you take any of the actions noted above.
Q: Who will count the votes?
A:
A person that is affiliated with
Alliance Advisors, who is an independent inspector and not affiliated with the Company or any director, director nominee or officer of
the Company, will count the votes and will serve as the inspector of election.
Q: What if I return my proxy card but do not
provide voting instructions?
A:
If you vote by proxy card, your
shares will be voted as you instruct by the individuals named as proxies on the proxy card. If you sign and return a proxy card but do
not specify how your shares are to be voted, the persons named as proxies on the proxy card will vote your shares in accordance with the
recommendations of the Board. These recommendations are:
●
FOR
the election of the seven (7) nominees for director named
in this Proxy Statement (Proposal 1);
●
FOR
the approval of the terms of
the Series B Preferred Stock, the warrants issued with the Series
B Preferred Stock and
an amendment to the terms of
the Series A Preferred Stock to decrease the conversion price thereof
(Proposal 2);
●
FOR
the approval of
an amendment to the 2022 Plan to increase the total number of shares subject
to the 2022 Plan by 1,100,000 shares and permit the issuance of equity awards to individuals and legal entities
(Proposal 3);
●
FOR
the ratification of the selection by our Board of
Haskell White
LLP as our independent
auditor
for the fiscal year ending December 31, 2024 (Proposal 4); and
●
FOR
the approval of the adjournment of the Annual Meeting, if necessary, to solicit additional proxies in the event there are not sufficient
votes in favor of any of the proposals listed above at the time of the Annual Meeting (Proposal 5).
5
Q: What does it mean if I receive more than
one proxy card?
A:
It means that you have multiple
accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you contact your broker and/or our
transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer agent is Vstock Transfer, LLC,
which may be reached at (212) 828-8436.
Q: Will my shares be voted if I do not provide
my proxy?
A:
Your shares may be voted if they
are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Brokerage firms have
the authority under the rules of Nasdaq to vote shares for which their customers do not provide voting instructions on certain routine
matters. The proposal to ratify the selection of
Haskell White
LLP as our independent
auditor for fiscal year 2024 is considered a routine matter for which brokerage firms may vote shares for which they have not received
voting instructions. The other proposals to be voted on at our Annual Meeting are not considered routine under applicable
rules. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of
the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a broker non-vote.
Abstentions and broker non-votes will have no effect on the outcome of the vote on these proposals.
Q: How many votes must be present to hold the
Annual Meeting?
A:
Your shares are counted as present at
the Annual Meeting if you attend the Annual Meeting online or if you properly return a proxy by internet, telephone or mail. In order
for us to conduct our Annual Meeting, a majority of the outstanding shares of stock, as of the Record Date, entitled to vote must be present
or represented by proxy at the Annual Meeting. This is referred to as a quorum. Abstentions and broker non-votes will be counted for purposes
of establishing a quorum at the Annual Meeting.
Q: How many votes are needed to elect directors?
A:
You may vote FOR each
nominee or WITHHOLD AUTHORITY to vote for each nominee. Unless you mark WITHHOLD AUTHORITY with respect to
a particular nominee or nominees, your proxy will be voted FOR each of the director nominees named in this proxy statement.
In an uncontested election, a nominee will be elected as a director if the number of FOR votes exceeds the number of votes
withholding authority. In a contested election, a nominee will be elected director if he receives more votes than another nominee. Thus,
the seven (7) directors with the most votes FOR will be elected to the Board. Broker non-votes and withheld votes will not
affect the outcome of the vote on directors.
Q: How many votes are needed to approve the
other proposals?
A:
The affirmative vote of a majority of
the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote is required to approve the
Nasdaq Compliance Proposal
, the 2022 Plan Amendment Proposal, the Auditor Appointment Proposal and
the Adjournment Proposal
. Abstentions will be treated as votes against these proposals. Brokerage firms do not have authority to
vote customers unvoted shares held by the firms in street name on these proposals other than the Auditor Appointment Proposal and
the Adjournment Proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this
vote. We are not required to obtain the approval of our stockholders to appoint our independent registered public accounting firm. However,
if our stockholders do not ratify the appointment of
Haskell White
LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2024, the audit committee of our Board (Audit Committee)
will reconsider its appointment.
6
Q: Is voting confidential?
A:
We will keep all the proxies, ballots
and voting tabulations private. We only let our Inspectors of Election, representatives of Alliance Advisors, examine these documents.
Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward
to management any written comments you make on the proxy card or that you otherwise provide.
Q: When will the Company announce the voting
results?
A:
The Company may announce preliminary
voting results after the adjournment of the Annual Meeting and will announce the final voting results of the Annual Meeting on a Current
Report on Form 8-K filed with the SEC within four business days after the Annual Meeting.
Q: Do any directors or officers of the Company
have a personal interest in the matter to be acted upon at the Annual Meeting?
A:
Except for those directors who are nominated
for election at the Annual Meeting, no officer or director has any substantial interest, direct or indirect, by security holdings or otherwise,
in Proposal 2, Proposal 3 and Proposal 4, that is not shared by all other stockholders.
Q: What if other matters are presented for
consideration at the Annual Meeting?
A:
The Company knows of no other matters
to be submitted to the stockholders at the Annual Meeting, other than those described herein. If other matters do arise, the Board has
made no recommendation as to how the proxies will vote on such other matters. If any other matters properly come before the stockholders
at the Annual Meeting, it is the intention of the persons named on the proxy card as proxies to vote the shares represented thereby on
such matters in their discretion and in accordance with their best judgment.
Q: Whom do I call if I have questions?
A:
If you have any questions, need additional
material, or need assistance in voting your shares, please feel free to contact Alliance Advisors via e-mailat virtualmeeting@viewproxy.com
or via telephone at (866) 612-8937.
7
MATTERS REQUIRING STOCKHOLDER ACTION
PROPOSAL 1
ELECTION OF DIRECTORS (Item 1 on the Proxy Card)
Nominees
There are seven (7) nominees recommended by the
nominating and corporate governance committee of the Board (the Nominating and Corporate Governance Committee) for election
this year to hold office until the 2025 Annual Meeting of the Stockholders and until their respective successors are elected and qualified.
Our Board has nominated: (i) Steven Foster; (ii) Richard Ginn; (iii) Ivan Howard; (vi) Richard Ferrari; (v) Robert Weigle; (vi) Kristine
Jacques; and (vii) Stephen Hochschuler, M.D. and our management has no reason to believe that any nominee will be unable to serve. Their
biographies are provided at pages 9 to 10. The biographies of each of the nominees contains information regarding the persons
service as a director, business experience, public-company director positions held currently or at any time during the last five years,
information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications,
attributes or skills that caused the Nominating and Corporate Governance Committee and the Board to determine that the person should serve
as a director for the Company. In addition to the information presented above regarding each nominees specific experience, qualifications,
attributes and skills that led our Board to the conclusion that he or she should serve as a director, we also believe that all of our
director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business
acumen and an ability to exercise sound judgment, as well as a commitment of service to Tenon Medical and our Board. Finally, we value
their significant experience on other public company boards of directors and board committees.
A nominee will be elected as a director if he
or she receives a plurality of the votes cast, in person or by proxy, at the Annual Meeting. This means that the nominees for election
as director who receive the highest number of affirmative votes at the Annual Meeting will be elected as director. Withheld votes and
broker non-votes will have no effect on the outcome of the vote.
Unless otherwise instructed, the proxy holders
will vote the proxies received by them
FOR
each of the nominees named above. If any nominee becomes unavailable for
election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election
of a substitute nominee proposed by our Board.
The Board recommends that you vote FOR
the election of all of these nominees.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information
regarding our directors and executive officers:
Name
(1)
Age
Position
Director Since
Board Committee
Steven M. Foster
56
Chief Executive Officer
and President, Director
2021
None
Richard Ginn
58
Chief Technology Officer
and Director
2012
None
Steven Van Dick
69
EVP, Finance and
Administration and
Chief Financial Officer
Richard Ferrari
70
Executive Chairman of the Board
2012
Ivan Howard
57
Director
2022
Audit Chairman; Compensation
Robert Weigle
64
Director
2022
Audit; Chair Compensation; Chair Nominating and Corporate Governance
Kristine M. Jacques
57
Director
2024
Audit; Compensation
Stephen H. Hochschuler, M.D.
81
Director
2022
Nominating and Corporate Governance
8
Steven M. Foster
is our Chief Executive
Officer and President, and is also a director of the Company. Mr Foster has over 30 years of marketing, sales, operations and general
management experience. From 2015 to present Mr. Foster has been a principal with CTB Advisors, LLC in Brentwood, Tennessee. CTB Advisors
was founded as a single member limited liability company for the purpose of providing medical device organizations and physicians with
consultative assistance on commercialization focused projects. Projects included: CRM based clinician engagement program design, training
and implementation for NuVasive (NUVA). Valuation assessment / business plan development of early-stage spine technology including IP
assessment and regulatory pathway definition. MA (SafeOp Surgical) integration project, Alphatec Spine (ATEC). Current Status: Exclusive
to ATEC. From 2012 to 2014 Mr. Foster was Global Commercialization President of Safe Orthopedics SAS, Paris, FR (based in Michigan): There
Mr Foster worked on early-stage commercialization of a novel single-use / sterile / traceable surgical kit for lumbar spine fusion. His
focus included pre-clinical design, clinician advisor team development, early marketing, web design, convention presence and PL preparation
and management. Technology reached 200 global surgeries in first 12 months of commercialization. From 1992 to 2012 Mr. Foster was part
of the Danek Group Inc., Sofamor Danek, Medtronic Spine organization where he held a variety of marketing, sales administration and general
management roles, including as VP / GM of Medtronic Spines Western Europe operations from 2007-2010. Mr. Foster received a Bachelor
of Science, Business Administration with a concentration in Marketing and Management from Central Michigan University in 1990.
Richard Ginn
is a founder, the Chief Technology
Officer and a director of the Company. Mr. Ginns focus is primarily on intellectual property and product development, he has travelled
throughout the world to train physicians and participated in multiple FIH trials and is a named inventor on more than 300 patents for
medical devices. Over the course of his career, he has helped raise more than $100 million in venture capital and has provided an average
10x return to his investors. Mr. Ginn is the founder of TransAortic Medical, an embolic protection device company, and is its President,
CEO and a director from 2013 to present. At TransAortic, Mr. Ginn Managed all corporate operations, raised capital to support company
needs; managed acquisition of technology by strategic partner; managed all Intellectual Property; and set up European distribution for
CE Marked device. Mr. Ginn is the founder of Promed, a large hole femoral closure device company and was the CEO, President and a director
from 2012 to 2019. At Promed he managed all corporate operations; raised capital to support company needs; and managed all intellectual
property.
Steven Van Dick
is our Executive Vice President,
Finance and Administration and Chief Financial Officer. Mr. Van Dick has been the Chief Financial Officer for the Company since June 1,
2021. Mr. Van Dick is a strategic financial and accounting executive with a record of transitioning early-stage companies to commercialization
through astute financial management. Respected in the medical device startup community, he develops and leads comprehensive, world-class
financial and accounting groups credited for propelling startup companies forward. Across his career Steve has played a key role on the
Executive Leadership Teams that successfully completed three separate Initial Public Offering (IPOs) and three mergers/integrations. From
2016 to 2017 Mr. Van Dick was the Chief Financial Officer for Benvenue Medical Inc., a minimally invasive spine company in Santa Clara,
California. At Benvenue, Mr. Van Dick was responsible for all accounting, finance and IT functions with his primary focus on developing
a long-range financial model and reducing cash burn. From 2010 to 2016, Mr Van Dick was the Vice President, Finance AdministrationChief
Financial Officer for Spiracur Inc., a disposable/portable negative pressure wound therapy company in Sunnyvale California. At Spiracur,
Mr. Van Dick was responsible for all accounting, finance and IT functions. He managed growth of company from initial commercialization
to $12 million annualized run rate, lead the conversion to fully integrated ERP system and developed controls to become Hipaa compliant.
Mr Van Dick received a Bachelor of Science, Business Administration with a concentration in Accounting from San Jose University in 1977
and an MBA from Santa Clara University in 1984.
Richard Ferrari
is a founder, a director
and Executive Chairman of the Company. Since 2000, Mr. Ferrari has been and currently is a Managing Director of Denovo Ventures a $650Mill
venture firm specializing in Medical Devices and Biotechnology. From January 2019 until April 2021 Mr. Ferrari was employed as CEO and
Chairman of the Board of Directors of PQ Bypass which culminated is a successful acquisition by Endologix. During the last five years
Mr. Ferrari has been and currently is a board member (Executive Chairman) of Medlumics, S.L., a medical device company founded in 2011;
a board member (Vice Chairman) of ABS Interventional; a board member (Executive Chairman) of Heart Beam Inc.; a board member of Biomodex
Corporation; a board member of Retriever Medical Inc.; a board member of RMx Medical; a board member of Hawthorne Effect, Inc.; a board
member and co-founder of TransAortic acquired by Medtronic; Executive Chairman of Sentreheart acquired by Atricure, a board member of
Spinal Modualtion sold to St Jude and a board member of Hands of Hope. Mr. Ferrari has raised over $1billion for the companies he has
been involved with and been a key member of the various boards MA teams achieving over $2Bill in Acquisitions. Mr. Ferrari continues
to mentor and advise a number of CEOs and start-up companies on strategy and building organizations dedicated to delivering excellence.
Mr. Ferrari is the creator of Excellence by Choice a series of lectures and presentations to help early-stage companies perform at the
highest level of execution. Mr. Ferrari received a Bachelors Degree in Education from Ashland University and a MBA from University
of South Florida.
9
Ivan Howard
is a director of the Company.
Mr. Howard has been since 2019 and currently is a Vice President and Sr. Specialist in Alternative Investment Fiduciary Risk for Banco
Santander, a multinational financial services company. From 2020 Mr. Howard has been and currently serves as Director on the Collier County
Farm Bureau board of directors. From 2016, Mr. Howard has been and currently serves as Chairman of the Hendry/Glades County Farm Service
Agency. From 2020 Mr. Howard has been and currently serves on the U.S. Department of Agriculture Advisory Committee on Minority Farmers.
From 2018 Mr. Howard has been and is currently a member of the University of Florida College of Biomedical Engineering External Advisory
board. Mr. Howard holds an MBA from Mercer University and a Masters Degree in Biomedical Engineering from the University of Florida.
We believe that Mr. Howard is well qualified to
serve as a Director on our Board with his financial services and board membership experience.
Robert K. Weigle
is
a director of the Company. He currently is and has been since October 2020, the CEO of Prime Genomics, a saliva-based diagnostics company
utilizing Genomics. Mr. Weigle is also currently an executive in residence with DigitalDX, a venture capital firm. Mr. Weigle was CEO
and a director of Benvenue Medical from May 2009 until August 2020. Benvenue was a Silicon Valley based medical device company, which
raised over $200 million in funding. At Benvenue Mr. Weigle led growth from pre-clinical to successful clinical trials to commercial launch
of first-generation devices in two distinct markets, one for the treatment of compression fractures in the spine and the second for the
treatment of degenerative disc disease, resulting in a first full-year run rate exceeding $1 million per month. Mr. Weigle oversaw all
early aspects of corporate strategy, including defining, communicating and executing the companys overall business model; and represented
Benvenue to the investment community. Mr. Weigle was also a senior executive at numerous healthcare/medical device companies, including
TherOx, Inc, Cardiac Pathways, Baxter Healthcare and Cardima Corporation. Mr. Weigle also has relevant experience at Johnson Johnson.
Mr. Weigle holds a BA in Political Science from University of California, Berkeley.
We believe that Mr. Weigle
is well qualified to serve as a Director on our Board with his experience in leading medical device companies both as a senior executive
and as a member of the board of directors.
Kristine M. Jacques
was appointed as a
director of the Company on March 25, 2024. From 2017 until 2023, Ms. Jacques was Vice President and General Manager, Interventional Pain
Therapies at Vivex Biologics, Inc., a medical device company where she implemented a comprehensive strategic plan of a disruptive technology
in the interventional spine market serving a significant unmet clinical need and potential $38 billion plus total addressable market,
non-surgical treatment for chronic low back pain. From 2007 to 2017 Ms. Jacques was a Vice President at Alphatec Spine, Inc (Nasdaq:ATEC),
a medical device company where she led the development and execution of a 3-year portfolio strategy to grow market share through identifying
opportunities for innovation, maximizing product positioning and differentiation and delivering high quality products to meet the clinical
and unmet needs of surgeons and their patients. From 1995 until 2007, Ms. Jacques served in various management positions at General Electric
Corporation, prior to which she served from 1991 until 1994 at various management positions at Smith Nephew, PLC, both of which
are publicly traded. Previously, she was an Account Manager, Senior Investment Analyst for General Electric Capital Corporation from 1988
until 1991. Ms. Jacques received a Bachelor of Arts degree in Finance Administration from Michigan State University.
We believe that Ms. Jacques is well qualified
to serve as a Director on our Board with her experience as a senior executive in the spine and medical device industries.
Stephen H. Hochschuler, M.D.
is a director
of the Company. Dr. Hochschuler is a world-renowned orthopedic spine surgeon. Dr. Hochschuler is the co-founder of the Texas Back Institute
and founder of Back Systems, Inc., and founding Chairman of Innovative Spinal Technologies, Dr. Hochschuler has severed on numerous boards
of directors and advisory boards for medical and scientific institutions. Dr. Hochschuler is a member of numerous national and international
professional organizations including the American Academy of Orthopedic Surgeons; the American Pain Society; North American Spine Society;
and the Southwest Chapter of the Society of International Business Fellows. Internationally, he is a member of the International Intradiscal
Therapy Society; the International Society for Minimal Intervention in Spinal Surgery; the International Society for the Study of the
Lumbar Spine; and is a founding board member of the Spinal Arthroplasty Society. He has also been a founding board member of The American
Board of Spine Surgery and The American College of Spine Surgery. He is published in a wide range of professional journals, and has delivered
numerous presentations worldwide. Dr. Hochschuler holds a BA from Columbia College and his medical degree from Harvard Medical School.
We believe that Dr. Hochschuler is well qualified
to serve as a Director on our Board with his experience in as an orthopedic spine surgeon and his service on boards of directors and advisory
boards of medical and scientific institutions as a member of the board of directors.
Family Relationships
There are no family relationships among any of
our executive officers or directors.
Legal Proceedings
To the best of our knowledge, none of our directors
or executive officers have, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401
of Regulation S-K.
10
CORPORATE GOVERNANCE
The business and affairs of the Company are managed
under the direction of the Board. The Board believes that good corporate governance is a critical factor in achieving business success
and in fulfilling the Boards responsibilities to the Companys stockholders. The Board believes that its practices align
management and stockholder interests.
The Governance section of the Company website
makes available the Companys corporate governance materials, including the Second Amended and Restated Certificate of Incorporation,
as corrected and amended (Certificate of Incorporation), as of the date of this Proxy Statement, and bylaws, the charters
for each Board committee, the Companys Code of Conduct and information about how to report concerns about the Company. To access
these documents on the Companys website, please visit
https://ir.tenonmed.com/corporate-governance/governance-documents
.
Board Composition/Election
Our Board presently consists of seven (7) directors
whose terms expire at this Annual Meeting. Our directors are elected annually. Other than Kristine Jacques, all of the current directors
have served on the Board since the effective date of the Companys registration statement for its initial public offering in April
2022.
The Board has fixed the number of directors at
seven (7).
As discussed in more detail later in this section,
the Board has determined that four (4) of the seven (7) individuals standing for election are independent under the rules of Nasdaq.
Board Meetings
The Board met a total of 5 times during fiscal
year 2023 in person or via video or teleconference and acted by unanimous written consent 6 times. Each of the directors who served in
the fiscal year 2023 attended at least 83% of the meetings of the Board and the committees of which he was a member and that were held
during the period he served as a director.
Selection of Nominees for The Board of Directors
The Nominating and Corporate Governance Committee
considers candidates for Board membership suggested by its members and other Board members, as well as management and stockholders. The
Nominating and Corporate Governance Committees charter provides that it may retain a third-party executive search firm to identify
candidates from time to time. Our Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience
and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be
leaders in the companies or institutions with which they are affiliated and are selected based upon contributions they can make to the
Board and management. The Nominating and Corporate Governance Committees assessment of a proposed candidate may include a review
of the persons judgment, experience, independence, understanding of the Companys business or other related industries and
such other factors as the Nominating and Corporate Governance Committee determines are relevant in light of the needs of the Board. The
Nominating and Corporate Governance Committee believes that its nominees should reflect a diversity of experience, gender, race, ethnicity
and age. The Board does not have a specific policy regarding director diversity. The Nominating and Corporate Governance Committee also
considers such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management
and independent directors, and the evaluations of other prospective nominees, if any.
In connection with this evaluation, it is expected
that each member of the Nominating and Corporate Governance Committee will interview the prospective nominee before the prospective nominee
is presented to the full Board for consideration. After completing this evaluation and interview process, the Nominating and Corporate
Governance Committee will make a recommendation to the full Board as to the person(s) who should be nominated by the Board, and the Board
determines the nominee(s) after considering the recommendation and report of the Nominating and Corporate Governance Committee. We look
for director candidates who have the skills and experience necessary to help us achieve success within our industry.
We believe that each of our directors has the
necessary qualifications to be a value-added member of our Board. As noted in the director biographies, our directors have experience,
qualifications and skills across a wide range of public and private companies, possessing a broad spectrum of experience both individually
and collectively.
There are no arrangements or understanding between
any of the directors or the director nominee or officers of our Company or any other person pursuant to which any officer or director
or director nominee was or is to be selected as an officer or director or director nominee.
11
Nominees for Director
The Board nominated Mr. Foster, Mr. Ginn, Mr.
Howard, Mr. Ferrari, Mr. Weigle, Ms. Jacques and Dr. Hochschuler to stand for election for the seven (7) Board seats. Each such individual
has consented to serve if elected.
If elected, we expect that all of the aforementioned
nominees will serve as directors and hold office until the 2025 Annual Meeting of Stockholders and until their respective successors have
been elected and qualified or until their death, retirement or resignation.
Stockholder Nominations
For nominations or other business to be properly
brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Nominating
and Corporate Governance Committee.
To be timely, a stockholders notice shall
be delivered to the Chief Financial Officer at the principal executive offices of the Company not later than the close of business on
the ninetieth (90
th
) day nor earlier than the close of business on the one hundred twentieth (120
th
) day prior to
the first anniversary of the preceding years annual meeting; provided, however, that in the event that the date of the annual meeting
is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding years
annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred
twentieth (120
th
) day prior to such annual meeting and not later than the close of business on the later of the ninetieth (90
th
)
day prior to such annual meeting or the tenth (10
th
) day following the day on which public announcement of the date of such
meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for
the giving of a stockholders notice as described above.
Such stockholders notice shall set forth:
(A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such
person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the Exchange Act),
and Rule 14a-4(d) thereunder (including such persons written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (B) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination
is made: (i) the name and address of such stockholder, as they appear on the Companys books, and of such beneficial owner, (ii)
the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner
and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the Companys voting shares required under applicable law to carry the proposal
or, in the case of a nomination or nominations, a sufficient number of holders of the Companys voting shares to elect such nominee
or nominees.
Nominations and the solicitation notice should
be sent to the Nominating and Corporate Governance Committee, Tenon Medical, Inc., 104 Cooper Ct., Los Gatos, CA95032.
As of the date of this Proxy Statement, we have
not received timely notice of any nomination by a stockholder.
Ethical Guidelines
Tenon Medical, Inc.s code of business conduct
and ethics (Code) was adopted to emphasize the Companys commitment to the highest standards of business conduct.
The Code applies to our directors, officers and employees, including our principal executive officer, principal financial officer and
principal accounting officer or controller, or persons performing similar functions. The Code is available on our corporate website at
https://ir.tenonmed.com/corporate-governance/governance-documents
. The Code requires compliance with applicable law, discusses
how conflicts of interest are handled, requires familiarity with the Companys disclosure requirements and provides for waivers
under certain circumstances. We intend to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements,
on our website or in filings under the Exchange Act to the extent required by applicable rules and exchange requirements.
Board Leadership
The Nominating and Corporate Governance Committee
annually reviews the Boards leadership structure and evaluates the performance and effectiveness of the Board. The Board retains
the authority to modify its leadership structure in order to stay current with our Companys circumstances and advance the best
interests of the Company and its stockholders as and when appropriate. The Boards annual self-evaluation includes questions regarding
the Boards opportunities for open communication and the effectiveness of executive sessions.
12
Director Independence
Our Board is composed of a majority of independent
directors as defined under the rules of Nasdaq. We use the definition of
independence
applied by Nasdaq to
make this determination. Nasdaq Listing Rule 5605(a)(2) provides that an
independent director
is a person other than
an officer or employee of the company or any other individual having a relationship which, in the opinion of the Board, would interfere
with the exercise of independent judgment in carrying out the responsibilities of a director. The Nasdaq listing rules provide that a
director cannot be considered independent if:
●
the director is, or at any time during the past three years was, an employee of the company;
●
the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the 3 years preceding the independence determination (subject to certain exemptions, including, among other things, compensation for board or board committee service);
●
the director or a family member of the director is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipients consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exemptions);
●
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; and
●
the director or a family member of the director is a current partner of the Companys outside auditor, or at any time during the past three years was a partner or employee of the Companys outside auditor, and who worked on the companys audit.
Under such definitions, our Board has undertaken
a review of the independence of each director. Based on the information provided by each director concerning his or her background, employment
and affiliations, our Board has determined that Ivan Howard, Kristine M. Jacques and Stephen H. Hochschuler, M.D. are independent directors
of the Company.
Role of Board in Risk Oversight Process
Our Board has responsibility for the oversight
of our risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk
exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes receiving
regular reports from board committees and members of senior management to enable our Board to understand our risk identification, risk
management, and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory,
cybersecurity, strategic and reputational risk.
Board Committees
The Board has established three standing committees:
(i) Audit Committee; (ii) compensation committee of the Board (Compensation Committee); and (iii) Nominating and Corporate
Governance Committee. Each of the committees operates pursuant to its charter. The committee charters will be reviewed annually by the
Nominating and Corporate Governance Committee. If appropriate, and in consultation with the chairs of the other committees, the Nominating
and Corporate Governance Committee may propose revisions to the charters. The responsibilities of each committee are described in more
detail below.
Audit Committee
. The Audit Committee
consists of three directors, Ivan Howard, Kristine Jacques and Robert Weigle, all of which are currently independent as
defined by Nasdaq and includes an audit committee financial expert, Mr. Howard, within the meaning of Item 407(d) of Regulation S-K under
the Securities Act of 1933, as amended, or the Securities Act. The audit committees duties are specified in a charter and include,
but not be limited to:
●
reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our annual disclosure report;
●
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;
13
●
discussing with management major risk assessment and risk management policies;
●
monitoring the independence of the independent auditor;
●
verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;
●
reviewing and approving all related-party transactions;
●
inquiring and discussing with management our compliance with applicable laws and regulations;
●
pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;
●
appointing or replacing the independent auditor;
●
determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;
●
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies; and
●
approving reimbursement of expenses incurred by our management team in identifying potential target businesses.
The Audit Committee is composed exclusively of
independent directors who are financially literate as defined under the Nasdaq listing standards. The Nasdaq
listing standards define financially literate as being able to read and understand fundamental financial statements, including
a companys balance sheet, income statement and cash flow statement.
Compensation Committee
. The Compensation
Committee consists of three directors, Ivan Howard, Robert Weigle and Kristine Jacques, who are independent as defined by
Nasdaq. The Compensation Committees duties are specified in a charter and include, but not be limited to:
●
reviews, approves and determines, or makes recommendations to our Board regarding, the compensation of our executive officers;
●
administers our equity compensation plans;
●
reviews and approves, or makes recommendations to our Board, regarding incentive compensation and equity compensation plans; and
●
establishes and reviews general policies relating to compensation and benefits of our employees.
Nominating and Corporate Governance Committee
.
The Nominating and Corporate Governance Committee consists of two directors, Robert Weigle and Stephen Hochschuler, MD, both of which
are independent as defined by Nasdaq. The nominating and corporate governance committees duties are specified in
a charter and include, but not be limited to:
●
identifying, reviewing and evaluating candidates to serve on our Board consistent with criteria approved by our Board;
●
evaluating director performance on our Board and applicable committees of our Board and determining whether continued service on our Board is appropriate;
●
evaluating nominations by stockholders of candidates for election to our Board; and
●
corporate governance matters.
14
AUDIT COMMITTEE REPORT
The Audit Committee:
The members of
the Audit Committee (for purposes of this report, the Committee) are Messrs. Ivan Howard, who serves as Chairman, and Robert
Weigle and Ms. Kristine Jacques. The Board has determined that all of the members of the Committee are independent within the meaning
of applicable SEC regulations and the listing standards of the Nasdaq and that Mr. Howard, the Chair of the Committee, is qualified as
an audit committee financial expert within the meaning of SEC regulations. The Board has also determined that Mr. Howard has accounting
and related financial management expertise within the meaning of the listing standards of the Nasdaq and that each member of the Committee
is financially literate within the meaning of the Nasdaq listing standards.
Audit Committee Charter:
The Audit
Committee operates under a written charter adopted by the Board. The charter is reviewed by management at least annually, and any recommended
changes are presented to the Committee for review and approval. The charter is available on our website at:
https://ir.tenonmed.com/corporate-governance/governance-documents
.
Audit Committee Responsibilities:
The
Committee assists the Board in fulfilling its responsibilities for general oversight of the integrity of the Companys financial
statements, the adequacy of the Companys system of internal controls and procedures and disclosure controls and procedures, the
Companys risk management, the Companys compliance with legal and regulatory requirements, the independent auditors
qualifications and independence and the performance of the Companys internal audit function and independent auditors. The Committee
has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Committee deems necessary to
carry out its duties and receive appropriate funding, as determined by the Committee, from the Company for such advice and assistance.
The Committee has sole authority over the selection
of the Companys independent auditors and manages the Companys relationship with its independent auditors (who report directly
to the Committee). Each year, the Committee evaluates the performance, qualifications and independence of the independent auditors. The
Committee is also involved in the selection of the lead audit partner. In evaluating the Companys independent auditors, the Committee
considers the quality of the services provided, as well as the independent auditors and lead partners capabilities and technical
expertise and knowledge of the Companys operations and industry.
The Committee met 4 times during the fiscal year
ended 2023. The Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its tasks. The
Committees meetings generally include private sessions with the Companys independent auditors, without the presence of the
Companys management. In addition to the scheduled meetings, senior management confers with the Committee or its Chair from time
to time, as senior management deems advisable or appropriate, in connection with issues or concerns that arise throughout the year.
Management is responsible for the Companys
financial reporting process, including its system of internal control over financial reporting, and for the preparation of consolidated
financial statements in accordance with accounting principles generally accepted in the United States. The Companys independent
auditors are responsible for auditing those financial statements in accordance with professional standards and expressing an opinion as
to their material conformity with U.S. generally accepted accounting principles and for auditing the effectiveness of the Companys
internal control over financial reporting. The Committees responsibility is to monitor and review the Companys financial
reporting process and discuss managements report on the Companys internal control over financial reporting. It is not the
Committees duty or responsibility to conduct audits or accounting reviews or procedures. The Committee has relied, without independent
verification, on managements representations that the financial statements have been prepared with integrity and objectivity and
in conformity with accounting principles generally accepted in the U.S. and that the Companys internal control over financial reporting
is effective. The Committee has also relied, without independent verification, on the opinion of the independent auditors included in
their report regarding the Companys financial statements and effectiveness of internal control over financial reporting.
15
Oversight Matters:
As part of its
oversight of the Companys financial statements, the Committee reviews and discusses with both management and the Companys
independent auditors all annual and quarterly financial statements prior to their issuance. With respect to each 2023 fiscal reporting
period, management advised the Committee that each set of financial statements reviewed had been prepared in accordance with accounting
principles generally accepted in the U.S., and reviewed significant accounting and disclosure issues with the Committee. These reviews
included discussions with the independent auditors of matters required to be discussed pursuant to Public Company Accounting Oversight
Board (PCAOB) Auditing Standard No. 1301 (Communication with Audit Committees), including the quality (not merely the acceptability)
of the Companys accounting principles, the reasonableness of significant judgments, the clarity of disclosures in the financial
statements and disclosures related to critical accounting practices. The Committee has also discussed with RBSM matters relating to their
respective independence, including a review of audit and non-audit fees and the written disclosures and letter received from RBSM required
by applicable requirements of the PCAOB regarding their respective communications with the Committee concerning independence. The Committee
also considered whether non-audit services provided by the independent auditors are compatible with the independent auditors independence.
The Committee also received regular updates, and written summaries as required by the PCAOB rules (for tax and other services), on the
amount of fees and scope of audit, audit-related, tax and other services provided.
In addition, the Committee reviewed key initiatives
and programs aimed at strengthening the effectiveness of the Companys internal and disclosure control structure. As part of this
process, the Committee continued to monitor the scope and adequacy of the Companys internal auditing program, reviewing staffing
levels and steps taken to implement recommended improvements in internal procedures and controls. The Committee also reviews and discusses
legal and compliance matters with management, and, as necessary or advisable, the Companys independent auditors.
Audit Committee Recommendation
: Based on
the Committees discussions with management and the independent auditors and the Committees review of the representations
of management and the report of the independent auditors to the Board and stockholders, and subject to the limitations on the Committees
role and responsibilities referred to above and in the Audit Committee Charter, the Committee recommended to the Board that it include
the audited consolidated financial statements in the Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2023 for filing with the SEC.
This report has been furnished by the members
of the Audit Committee:
1
Ivan Howard, Chairman
Robert Weigle
1
Kristine Jacques joined the Audit Committee in 2024
16
DIRECTOR COMPENSATION
The Compensation Committee establishes
and reevaluates if it deems necessary or prudent in its discretion, the cash and equity awards (amount and manner or method of payment)
to be made to non-employee directors for such fiscal year. In making this determination, the Compensation Committee may utilize such market
standard metrics as it deems appropriate, including, without limitation, an analysis of cash compensation paid to our peer groups
independent directors.
The Compensation Committee has
the power and discretion to determine in the future whether non-employee directors should receive annual or other grants of options to
purchase shares of common stock or other equity incentive awards in such amounts and under such policies as the Compensation Committee
may determine utilizing such market standard metrics as it deems appropriate, including, without limitation, an analysis of equity awards
granted to independent directors of our peer group.
The following table illustrates the compensation
paid by the Company to its directors. The disclosure is provided for the fiscal yearended December 31, 2023.
Director
Cash
Compensation
1
Equity
Compensation
2
Total
Compensation
Frank Fischer
4
$
60,000
$
$
60,000
Ivan Howard
$
60,000
$
$
60,000
Kristine M. Jacques
3
$
$
$
Robert Weigle
$
67,500
$
$
67,500
Stephen Hochschuler
$
45,000
$
$
45,000
Total
232,500
$
$
232,500
(1)
Frank
Fischer received $40,000 as a board retainer and $20,000 for being Compensation Committee Chairman; Ivan Howard received $40,000 as a
board retainer and $20,000 for being Audit Committee Chairman; Robert Weigle received $40,000 as a board retainer, $10,000 for being
Nominating and Corporate Governance Committee Chairman, $7,500 for being a member of the Compensation Committee and $10,000 for being
a member of the Audit Committee; and Stephen Hochschuler received $40,000 as a board retainer and $5,000 for being a member of the Nominating
and Corporate Governance Committee.
(2)
No
equity compensation was issued to board members in 2023.
(3)
Appointed as a director on March 25, 2024.
(4)
Frank Fischer resigned from his position as a member of the Board and committees as of November 30, 2023.
EXECUTIVE COMPENSATION
The following summary compensation table provides
information regarding the compensation paid during our fiscal years ended December 31, 2023 and 2022 to our Chief Executive Officer and
President (principal executive officer), our Chief Financial Officer and Chief Technology Officer. We refer to these individuals as our
named executive officers.
Summary Compensation Table
Name and Principal Position
(Salary $)
($)Bonus
Option/RSU
Awards
(1)
($)
Total ($)
Steven M. Foster, Chief Executive Officer and President
2023
$
400,000
$
87,600
$
$
487,600
2022
$
300,000
$
70,000
$
1,926,634
$
2,296,634
Steven Van Dick, Chief Financial Officer
2023
$
325,000
$
60,225
$
$
385,225
2022
$
275,000
$
148,125
$
808,998
$
1,232,123
Richard Ginn, Chief Technology Officer
2023
$
290,000
$
60,225
$
$
350,225
2022
$
275,000
$
148,125
$
3,995,603
$
4,418,728
(1)
In
2022 the named executives received restricted stock units (RSUs). No options or RSUs were granted to the named executives
in 2023.
17
Employment Agreements
Foster Employment Agreement
.
Steven M. Foster, our Chief Executive Officer and President and a member of our Board, and the Company entered into an Employment
Agreement dated as of June 1, 2021 (the Foster Employment Agreement). The Foster Employment Agreement provides Mr. Foster
an annual base salary of $300,000, an annual bonus of up to $120,000 based upon achievement of mutually agreed upon milestones, options
to purchase shares of our common stock in an amount sufficient to maintain Mr. Fosters equity ownership at 4%, which were granted
at the closing of our initial public offering and employee benefits that are generally given to our senior executives.
Under the Foster Employment Agreement, in the
event that Mr. Fosters employment is terminated by us without cause (as described in the Foster Employment Agreement) or by Mr.
Foster for good reason (as described in the Foster Employment Agreement), Mr. Foster would be entitled to (1)severance equal to
his base salary at termination, payable in instalments over the 12-monthperiod following termination and (2)payments in respect
of continuing health care coverage for up to twelve months following termination. In addition, upon a change in control of the Company,
Mr. Foster would be entitled to (1) vesting of his options granted prior to the date of the Foster Employment Agreement and (2) a lump
sum cash payment of one year of his base salary and bonus opportunity then in effect.
If Mr. Foster is terminated for cause or because
of death or disability or resigns without good reason, then all vesting of Mr. Fosters equity awards and payments of compensation
will immediately terminate and any severance benefits will be paid in accordance with established policies, if any, then in effect.
The Foster Employment Agreement contains restrictive
covenants and other obligations relating tonon-solicitationof our employees,non-disclosureof our proprietary information
and assignment of inventions.
Ginn Employment Agreement
.
Richard Ginn, our founder, Chief Technology Officer and a director of the Company, and the Company entered into an Employment Agreement
dated as of June 1, 2021 (the Ginn Employment Agreement). The Ginn Employment Agreement provides Mr. Ginn an annual base
salary of $275,000, an annual bonus of up to 30% of base salary based upon achievement of mutually agreed upon milestones, a second bonus
of up to $200,000 based on certain milestones determined by our Board and employee benefits that are generally given to our senior executives.
Under the Ginn Employment Agreement, in the event
that Mr. Ginns employment is terminated by us without cause (as described in the Ginn Employment Agreement) or by Mr. Ginn for
good reason (as described in the Foster Employment Agreement), Mr. Ginn would be entitled to (1)severance equal to his base salary
at termination, payable in instalments over the 12-monthperiod following termination and (2)payments in respect of continuing
health care coverage for up to twelve months following termination. In addition, upon a change in control of the Company, Mr. Ginn would
be entitled to (1) vesting of his options granted prior to the date of the Ginn Employment Agreement and (2) a lump sum cash payment of
one year of his base salary and bonus opportunity.
If Mr. Ginn is terminated for cause or because
of death or disability or resigns without good reason, then all vesting of Mr. Ginns equity awards and payments of compensation
will immediately terminate and any severance benefits will be paid in accordance with established policies, if any, then in effect.
The Ginn Employment Agreement contains restrictive
covenants and other obligations relating tonon-solicitationof our employees,non-disclosureof our proprietary information
and assignment of inventions.
Van Dick Employment Agreement
.
Steven Van Dick, our Executive Vice President, Finance and Administration and Chief Financial Officer, and the Company entered into
that certain Employment Agreement dated as of June 1, 2021 (the Van Dick Employment Agreement). The Van Dick Employment
Agreement provides Mr. Van Dick an annual base salary of $275,000, an annual bonus of up to 30% of base salary based upon achievement
of mutually agreed upon milestones and employee benefits that are generally given to our senior executives.
Under the Van Dick Employment Agreement, in the
event that Mr. Van Dicks employment is terminated by us without cause (as described in the Van Dick Employment Agreement) or by
Mr. Van Dick for good reason (as described in the Van Dick Employment Agreement), Mr. Van Dick would be entitled to (1)severance
equal to his base salary at termination, payable in instalments over the 12-monthperiod following termination and (2)payments
in respect of continuing health care coverage for up to twelve months following termination. In addition, upon a change in control of
the Company, Mr. Van Dick would be entitled to (1) vesting of his options granted prior to the date of the Van Dick Employment Agreement
and (2) a lump sum cash payment of one year of his base salary and bonus opportunity.
18
If Mr. Van Dick is terminated for cause or because
of death or disability or resigns without good reason, then all vesting of Mr. Van Dicks equity awards and payments of compensation
will immediately terminate and any severance benefits will be paid in accordance with established policies, if any, then in effect.
The Van Dick Employment Agreement contains restrictive
covenants and other obligations relating tonon-solicitationof our employees,non-disclosureof our proprietary information
and assignment of inventions.
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the number of RSUs
and shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.
Option Awards
Equity Awards (RSUs)
Name
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option Exercise
Price ($)
Option
Expiration
Date
Number of RSUs
that have not Vested
Market Value of RSUs
Steven M. Foster
9,687
1,563
$
52.00
May 1, 2031
10,874
$
17,181
Steven Van Dick
4,865
785
$
52.00
May 1, 2031
4,566
$
7,214
2,786
673
$
70.60
July 19, 2031
Richard Ginn
4,865
785
$
52.00
May 1, 2031
22,551
$
35,631
443
107
$
70.60
July 19, 2031
Stock Options
We granted Steven M. Foster (i) an option to purchase
11,250 shares of common stock at an exercise price of $52.00 per share with a grant date of May 1, 2021, subject to monthly equal vesting
over a three-year period and adjustment in certain circumstances as provided therein (9,687 shares of which are vested), and (ii) a restricted
stock unit consisting of 21,746 shares of common stock with a grant date of May 12, 2022, subject to semi-annual vesting over a three-year
period commencing May 22, 2022, with a one-year cliff.
We granted Steven Van Dick (i) an option to purchase
5,650 shares of common stock at an exercise of $52.00 per share with a grant date of May 1, 2021, subject to monthly equal vesting over
a three-year period that commenced on November 1, 2020 (4,865 shares of which are vested), (ii) an option to purchase 3,459 shares of
common stock at an exercise price of $70.60 per share with a grant date of July 19, 2021, subject to monthly equal vesting over a three-year
period commencing July 19, 2021 (2,786 shares of which are vested), and (iii) a restricted stock unit consisting of 9,131 shares of common
stock with a grant date of May 12, 2022, subject to semi-annual vesting over a three-year period commencing May 22, 2022, with a one-year
cliff.
We granted Richard Ginn (i) an option to purchase
5,650 shares of common stock at an exercise price of $52.00 per share with a grant date of May 1, 2021, subject to monthly equal vesting
over a three-year period commencing April 1, 2021 (4,865 shares of which are vested), (ii) an option to purchase 550 shares of common
stock at an exercise price of $70.60 per share with a grant date of July 19, 2021, subject to monthly equal vesting over a three-year
period commencing July 19, 2021 (443 shares of which are vested) and (iii) a restricted stock unit consisting of 45,098 shares of common
stock with a grant date of May 12, 2022, subject to semi-annual vesting over a three-year period commencing May 22, 2022, with a one-year
cliff.
19
RSUs
All of the RSUs were granted on May 12, 2022 and
have the following vesting schedule: one-third vest on May 22, 2023 and the remaining two thirds vesting equally every six months over
the following two years.
Executive Chairman
On May 7, 2021, the Company entered into a Consulting
Agreement (the Ferrari Consulting Agreement) with Richard Ferrari, a founder of the Company and its Executive Chairman,
pursuant to which Mr. Ferrari was to assume the role of Executive Chairman of the Company in exchange for compensation of $22,500 per
month starting September 1, 2021. Under this consulting agreement Mr. Ferrari was paid a bonus of $350,000, as a result of the closing
of our initial public offering in April 2022. In May of 2022 Mr. Ferrari was granted RSUs which had a grant date fair value of $2,427,020
and vest over three years, with one-third vesting in May of 2023 and the remaining two thirds vesting equally every six months over the
following two years. The compensation paid to Mr. Ferrari during the fiscal year ended December 31, 2023, totaled $247,500.
Policies and Practices for Granting Certain
Equity Awards
Our policies and practices regarding the granting
of equity awards are carefully designed to ensure compliance with applicable securities laws and to maintain the integrity of our executive
compensation program. The Compensation Committee is responsible for the timing and terms of equity awards to executives and other eligible
employees.
The timing of equity award grants is determined
with consideration to a variety of factors, including but not limited to, the achievement of pre-established performance targets, market
conditions and internal milestones. The Company does not follow a predetermined schedule for the granting of equity awards; instead, each
grant is considered on a case-by-case basis to align with the Companys strategic objectives and to ensure the competitiveness of
our compensation packages.
In determining the timing and terms of an equity
award, the Board or the Compensation Committee may consider material nonpublic information to ensure that such grants are made in compliance
with applicable laws and regulations. The Boards or the Compensation Committees procedures to prevent the improper use of
material nonpublic information in connection with the granting of equity awards include oversight by legal counsel and, where appropriate,
delaying the grant of equity awards until the public disclosure of such material nonpublic information.
The Company is committed to maintaining transparency
in its executive compensation practices and to making equity awards in a manner that is not influenced by the timing of the disclosure
of material nonpublic information for the purpose of affecting the value of executive compensation. The Company regularly reviews its
policies and practices related to equity awards to ensure they meet the evolving standards of corporate governance and continue to serve
the best interests of the Company and its shareholders.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information,
as of June 13, 2024, with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of a class of Company voting
stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group.
Beneficial ownership of a class of voting stock
is determined in accordance with the rules of the SEC and includes any shares of such class of the Companys voting stock over which
a person exercises sole or shared voting or investment power, or of which a person has a right to acquire ownership at any time within
60 days. Except as otherwise indicated, we believe that the persons named in this table have sole voting and investment power with respect
to all shares of voting stock held by them. Applicable percentage ownership in the following table is based on 3,780,820 shares of common
stock and 256,968 shares of Series A Preferred Stock (which are entitled to vote with our common stock on a 1:1 as converted basis), in
each case, issued and outstanding on June 13, 2024, plus, for each individual, any common stock that individual has the right to acquire
within 60 days of June 13, 2024.
20
To the best of our knowledge, except as otherwise
indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our common stock
beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed
below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge
by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
Number of Shares
Beneficially Owned
Beneficial Ownership Percentages
Name and Address of Beneficial Owner
(1)
Common
Stock
Series A Preferred
Stock
(2)
Percent of
Common
Stock
Percent of Series A Preferred
Stock
Percent of
Voting
Stock
(3)
Officers and Directors
Steven M. Foster, Chief Executive Officer and President
16,196
*
*
Richard Ginn, Chief Technology Officer
80,405
(4)
2.1
%
1.3
%
Steven Van Dick, EVP, Finance and Admin and Chief Financial Officer
17,642
(5)
*
*
Richard Ferrari, Chairman of the Board
48,421
(6)
1.3
%
*
Ivan Howard, Director
8,517
(7)
*
*
Stephen H. Hochschuler, M.D., Director
6,133
(8)
*
*
Kristine M. Jacques, Director
Robert Weigle, Director
1,242
*
*
Officers and Directors as a Group
178,557
(9)
4.7
%
2.8
%
5%+ Stockholders
Zuhlke Ventures AG
244,773
6.5
%
3.9
%
TMD Wealth Management
870,237
(10)
23.0
%
13.7
%
The Beckham-Shufeldt Family Trust
66,116
25.7
%
10.4
%
Ascent Special Ventures LLC
67,783
26.4
%
10.7
%
(1)
The principal address of the named officers, directors and 5%+ stockholders of the Company is c/o Tenon Medical, Inc., 104 Cooper Court, Los Gatos, CA 95032.
(2)
Entitles the holder to 10 votes per share and votes with the common as a single class.
(3)
Represents total ownership percentage with respect to all shares of common stock and Series A Preferred Stock, as a single class.
(4)
Includes 23 shares of our common stock underlying restricted stock units that vest within 60 days of June 13, 2024.
(5)
Consists of 1,999 shares held by the Van Dick Family Trust-1998 for which Steven Van Dick is trustee and 145 shares of our common stock underlying restricted stock units that vest within 60 days of June 13, 2024.
(6)
Consists of 9,222 shares held by the Ferrari Family Trust for which Richard Ferrari is trustee and 1,354 shares of our common stock underlying restricted stock units that vest within 60 days of June 13, 2024 (includes 684 shares of our common stock underlying restricted stock units held by TCTIG, LLC for which Richard Ferrari is the beneficial owner) and 6,592 shares of our common stock held by TCTIG, LLC and for which Richard Ferrari has voting control.
(7)
Includes 684 shares of our common stock underlying restricted stock units held by TCTIG, LLC for which Ivan Howard is the beneficial owner and 6,592 shares of our common stock, in each case, held by TCTIG, LLC and for which Ivan Howard is either the beneficial owner or has voting control.
(8)
Includes 1,974 shares of our common that are held by SHKH, LLC, an entity for which Stephen H. Hochschuler has a controlling interest.
(9)
Includes 2,205 shares of our common stock underlying restricted stock units that vest within 60 days of June 13, 2024.
(10)
Consists of (i) 358,137 shares of our Common Stock issued to individuals and legal entities that are clients of TMD Wealth Management and for which TMD Wealth Management has sole or shared power of disposition and (ii) 512,100 share of our common stock underlying warrants issued to individuals and legal entities that are clients of TMD Wealth Management that may be exercised within 60 days of June 13, 2024 and TMD Wealth Management has sole or shared power to dispose of the shares issued as result of any such exercise.
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Companys policies and procedures
for the review of related person transactions the Audit Committee reviews related person transactions in which we are or will be a participant
to determine if they are in the best interests of our stockholders and the Company. Transactions, arrangements or relationships or any
series of similar transactions, arrangements or relationships in which a related person had or will have a material interest and that
exceed $120,000 are subject to the Audit Committees review. Any member of the Audit Committee who is a related person with respect
to a transaction under review may not participate in the deliberation or vote respecting approval or ratification of the transaction.
Related persons are directors, director nominees,
executive officers, holders of 5% or more of our voting stock and their immediate family members. Immediate family members are spouses,
parents, stepparents, children, stepchildren, siblings, daughters-in-law, sons-in-law and any person, other than a tenant or domestic
employee, who resides in the household of a director, director nominee, executive officer or holder of 5% or more of our voting stock.
After its review, the Audit Committee may approve or ratify the transaction.
On May 7, 2021, the Company entered into the Ferrari
Consulting Agreement with Richard Ferrari, a founder of the Company and its Executive Chairman, pursuant to which Mr. Ferrari was to assume
the role of Executive Chairman of the Company in exchange for compensation of $22,500 per month starting September 1, 2021. Under this
consulting agreement Mr. Ferrari was paid a bonus of $350,000, as a result of the closing of our initial public offering in April 2022.
In May of 2022 Mr. Ferrari was granted RSUs which had a grant date fair value of $2,427,020 and vest over three years, with one-third
vesting in May of 2023 and the remaining two thirds vesting equally every six months over the following two years. The compensation paid
to Mr. Ferrari during the fiscal year ended December 31, 2023, totaled $247,500.
Other than the Ferrari Consulting Agreement and
regular salary and bonus payments made to our directors and officers in the ordinary course of business as described in the section
Executive
Compensation
, there have been no transactions since January 1, 2022 or any currently proposed transaction or series of similar
transactions to which the Company was or is to be a party, in which the amount involved exceeds USD$120,000 and in which any current or
former director or officer of the Company, any 5% or greater stockholder of the Company or any member of the immediate family of any such
persons had or will have a direct or indirect material interest.
PROPOSAL 2
APPROVAL OF THE NASDAQ COMPLIANCE PROPOSAL
(Item 2 on the Proxy Card)
On or before October 23, 2024, we plan to issue
up to 1,500,000 shares of our Series B Preferred Stock (the Series B Preferred Stock) to investors in a in a private placement
offering (the Series B Offering) at a per share purchase price (the Series B Offering Price) equal to 10 multiplied
by the greater of (x) the Minimum Price (as defined in Nasdaq Rule 5635) and (y) 125% of the average of the VWAPs for the 10 trading days
prior to the issuance of the Series B Preferred Stock. Each share of Series B Preferred Stock will initially be convertible into 10 shares
of our common stock. We will also issue to each investor in the Series B Preferred Offering, warrants (the Series B Warrants)
to purchase 15% of the shares of common stock initially underlying the shares of Series B preferred Stock purchased by such investor.
The exercise price of the Series B warrants will be 105% of the Series B Offering Price of the Series B Preferred Stock.
22
Additionally, on the closing date of the Series
B Offering we will amend (i) the Certificate of Designations, Rights, and Preferences (the Series A Certificate of Designations)
of our SeriesA Preferred Stock (the Series A Preferred Stock) to decrease the initial conversion price of the Series A Preferred
Stock and (ii) the warrants we issued with the Series A Preferred Stock in February 2024 (the 2024 Warrants) to decrease
the exercise price thereof to equal the Series B Offering Price. As of June 13, 2024, there were 256,968 shares of Series A Preferred
Stock and 415,468 2024 Warrants issued and outstanding.
The Series B Preferred Stock and Series B Warrants
each have anti-dilution provisions which if triggered could cause the Company to be in violation of Nasdaq Listing Rule 5635(d), which
prohibits us from issuing in a private offering more than 20% of our outstanding common stock at a price that is below the minimum price
set forth in such rule without previously obtaining stockholder approval. We are therefore asking our stockholders to approve for purposes
of Nasdaq Listing Rule5635(d), the terms of the Certification of Designations, Rights, and Preferences of the SeriesB Preferred
Stock (the Series B Certificate of Designations) and the Series B Warrants.
Summary of terms of the Series B Preferred
Stock and Series B Warrants
Series B Preferred Stock
A summary of the Series B Certificate of Designations
is set forth below. This summary is qualified in its entirety by the full text of the Form of Series B Certificate of Designations, which
is attached to this proxy statement as
Annex A
.
The Series B Certificate of Designations will be filed in Delaware prior to the issuance of the Series B Preferred Stock and contains the terms of the Series B Preferred Stock. The Certificate of Designations
designates 1,500,000 shares of our preferred stock as Series B Preferred Stock.
Conversion
. The Series B Preferred
Stock is convertible, at any time, at the option of the holder into shares of common stock. Each share of Series B Preferred Stock shall
be convertible, at any time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion (as defined
below), at the option of the Company), into that number of shares of common stock determined by dividing the Stated Value (as defined
below) for such share of Series B Preferred Stock by the Conversion Price (as defined below). Stated Value means for any
share of Series B Preferred Stock, an amount equal to the product of (x) the Series B Offering Price multiplied by (y) the sum of 1 plus
the product of (A) 0.06 multiplied by (B) a fraction equal to the number of days that such share of Series B Preferred Stock has been
issued divided by 365. Conversion Price means an amount equal to the Series B Offering Price divided by 10, subject to adjustment
as described in the Series B Certificate of Designations, including for anti-dilution. On any date that ten out of the last 15 daily VWAPs
of the common stock is 250% higher than the Conversion Price on such date, then the Company will have the right to require 50%of
the Series B Preferred Stock to be converted into shares of common stock. Additionally, on and after the time on which the Company has
$2.25million in revenues in any single financial quarter, the Company will have the right to require 50%of the Series B Preferred
Stock to be converted into shares of common stock (a Required Conversion). The Conversion Price is subject to anti-dilutionadjustment
as the result of any subdivision, combination of shares or recapitalization, stock dividends, stock splits and similar transactions affecting
the common stock.
Dilutive Issuance
. The Series B
Preferred Stock will have weighted average anti-dilutionprotection providing for adjustment of the Conversion Price in the event
of issuance of, or commitments to issue, common stock for less than the Conversion Price then in effect immediately prior to such issue
or sale (a Dilutive Issuance), subject to customary exceptions.
Dividends
. No dividends are payable
on the Series B Preferred Stock.
Voting Rights
. The Series B Preferred
Stock will vote together with the common stock on all matters other than as required by law; provided, however that any additional shares
underlying the Series B Preferred Stock as a result of the anti-dilutionprovision described below shall not vote on an as
converted basis and shall only vote when issued upon conversion. Notwithstanding the foregoing, the vote of an individual holder
of Series B Preferred Stock (and underlying common stock) shall be capped at 9.99% (or 4.99% if selected by the holder). The holders of
the Series B Preferred Stock are entitled to 10 votes for every share of Series B Preferred Stock held.
23
Liquidation
. Upon any liquidation
or winding up of the Company (a Liquidation), the holders of Series B Preferred Stock will be entitled to receive in preference
to any other class or series of the Companys equity securities the greater of (i)the Stated Value plus accrued and unpaid
dividends and (ii)what would be paid if the Series B Preferred Stock plus accrued and unpaid dividends had been converted into common
stock. A consolidation or merger of the Company or sale or transfer of all or substantially all of its assets, or any transaction which
results in the stockholders of the Company owning less than 50% of the equity or voting power of the surviving entity (excluding the issuance
of common stock in any financing transaction unless more than 50% of the Companys shares are issued to one stockholder or a number
of stockholders who act as a one group) shall be deemed a Liquidation (a Deemed Liquidation) with respect to the shares
of Series B Preferred Stock of any holder who opts to have such occurrence treated as a Deemed Liquidation; provided that if the liquidation
preference payable on a Deemed Liquidation is less than 110% of the stated value of the Series B Preferred Stock, the dividend rate on
any accrued and unpaid dividends payable with respect to such Deemed Liquidation will increase to 10%. All liquidation preferences payable
in respect of a Deemed Liquidation will be payable in shares of common stock based on the closing price of the common stock on the date
of such Deemed Liquidation.
Other Matters
. Consent of the majority
of the Series B holders will be required to (i)amend the Certificate of Incorporation or bylaws of the Company so as to adversely
alter the rights, preferences, privileges of the Series B Preferred Stock, (ii)create any new class of shares
pari passu
or
senior to the Series B Preferred Stock or increase or decrease the number of authorized shares of common stock or preferred stock, (iii)pay
or declare any dividend on common stock or other junior securities, or incur indebtedness in any single transaction in excess of $1million
or (iv)redeem, purchase or otherwise acquire any share or shares of preferred stock or common stock (other than (a)the repurchase
of shares of common stock pursuant to a written benefit plan or employment or consulting agreement, or (b)the repurchase of any
equity securities in connection with the Companys right of first offer with respect to those securities contained in any written
agreement with the Company).
Summary of terms of the Series B Warrants
A summary of the terms of the Series B Warrants
is set forth below. This summary is qualified in its entirety by the full text of the Series B Warrants, which is attached to this proxy
statement as
Annex B
.
Exercisability
. The Series B Warrants
are exercisable at any time after their original issuance up to the date that is five years after their original issuance. The Series
B Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice
accompanied by payment in full in immediately available funds for the number of shares of our common stock subscribed for upon such exercise
(except in the case of a cashless exercise as discussed below). If a registration statement registering the issuance of the shares of
our common stock underlying the Series B Warrants under the Securities Act is not effective or available, the holder may, in its sole
discretion, elect to exercise the Series B Warrants through a cashless exercise, in which case the holder would receive upon such exercise
the net number of shares of our common stock determined according to the formula set forth in the Series B Warrants, as applicable. No
fractional shares of our common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will
pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise Limitation
. A holder will
not have the right to exercise any portion of the Series B Warrants if the holder (together with its affiliates) would beneficially own
in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage
ownership is determined in accordance with the terms of the Series B Warrants.
Exercise Price
. The exercise price
per share of the Series B Warrants will be equal to 105% of the Series B Offering Price. The exercise price and number of shares of common
stock issuable upon exercise will adjust in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications, dilutive issuances or similar events.
Dilutive Issuances
. If we issue
shares of common stock or securities that are common stock equivalents at a price less than the current exercise price of the Warrants
(Dilutive Issuance), the exercise price of the Warrants will be reduced using a weighted average formula to match the effective
price of the Dilutive Issuance, subject to exceptions.
24
Rights as a Shareholder
.Except
as otherwise provided in the Series B Warrants or by virtue of such holders ownership of our shares of common stock, the holder
of a warrant does not have the rights or privileges of a holder of our shares of common stock, including any voting rights, until the
holder exercises the warrant.
Transferability
. Subject to applicable
laws, the Series B Warrants may be offered for sale, sold, transferred or assigned without our consent.
Governing Law
. The Series B Warrants
are governed by New York law.
The Board recommends that you vote FOR
the Nasdaq Compliance Proposal.
PROPOSAL 3
APPROVAL OF THE 2022 PLAN AMENDMENT PROPOSAL
(Item 3 on the Proxy Card)
Our Board has adopted a resolution declaring it
advisable and in the best interests of the Company and its stockholders to approve the amendments to the 2022 Plan to increase the total
number of shares of common stock subject to the 2022 Plan by 1,100,000 shares
to ensure sufficient
shares are available for future grants
and permit the issuance of equity awards to individuals and legal entities (the Plan
Amendment)
.
On January 10, 2022, our Board approved the 2022 Plan and on February
2, 2020, our stockholders approved the 2022 Plan. The 2022 Plan governs equity awards to our employees, directors, officers, consultants
and other eligible participants. Initially, the maximum number of shares of our common stock that may be subject to awards under the
2022 Plan is equal to (i) 160,000 plus (ii) the lesser of (a) 75,000 and (b) the number of shares of our common stock subject to awards
granted under the 2012 Plan that after the 2012 Plan is terminated are canceled, expired or otherwise terminated without having been
exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or
are forfeited to or repurchased by the Company due to failure to vest. The maximum number of shares that are subject to awards under
the 2022 is initially subject to an annual increase equal to the lesser of (i) 110,000 shares of our common stock, (ii) a number of shares
of our common stock equal to 4% of the prior years maximum number and (iii) such number of shares of our common stock as determined
by the 2022 Plan administrator.As of the Record Date, the maximum shares of our common stock that may be subject to awards under
the 2022 Plan is equal to 308,959.
In order to give the
Company the flexibility to responsibly address its future equity compensation needs, the Company is requesting that stockholders approve
the Plan Amendment, which will increase the total number of shares subject to the 2022 Plan by 1,100,000 so that an overall total of 1,408,959
shares will be subject to the 2022 Plan and permit the Company to issue equity awards to individuals and legal entities. In addition,
the Plan Amendment will amend the number of shares that will be used in calculating the automatic adjustment of shares subject to the
2022 Plan at the beginning of each fiscal year. Having a sufficient number of shares under the 2022 Plan is critical to our ability to
continue to attract, retain, engage and focus highly motivated and qualified employees, particularly in the competitive labor market that
exists today in our industry. In addition, being able to issue equity awards to individuals and legal entities will allow us the ability
to preserve our working capital by issuing equity instead of paying cash in connection with the retainment of consulting services provided
by legal entities. A copy of the Plan Amendment is attached to this proxy statement as
Annex C
.
25
Equity Compensation
Plan Information
The table below sets forth information as of December 31, 2023.
Plan Category
Number of
securities
to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-
average
exercise
price of
outstanding
options, warrants
and rights
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
179,005
$
42.54
37,486
Equity compensation plans not approved by security holders
$
Total
179,005
$
42.54
37,486
Policies and Practices for Granting Certain
Equity Awards
Our policies and practices regarding the granting
of equity awards are carefully designed to ensure compliance with applicable securities laws and to maintain the integrity of our executive
compensation program. The Compensation Committee is responsible for the timing and terms of equity awards to executives and other eligible
employees.
The timing of equity award grants is determined
with consideration to a variety of factors, including but not limited to, the achievement of pre-established performance targets, market
conditions and internal milestones. The Company does not follow a predetermined schedule for the granting of equity awards; instead, each
grant is considered on a case-by-case basis to align with the Companys strategic objectives and to ensure the competitiveness of
our compensation packages.
In determining the timing and terms of an equity
award, the Board or the Compensation Committee may consider material nonpublic information to ensure that such grants are made in compliance
with applicable laws and regulations. The Boards or the Compensation Committees procedures to prevent the improper use of
material nonpublic information in connection with the granting of equity awards include oversight by legal counsel and, where appropriate,
delaying the grant of equity awards until the public disclosure of such material nonpublic information.
The Company is committed to maintaining transparency
in its executive compensation practices and to making equity awards in a manner that is not influenced by the timing of the disclosure
of material nonpublic information for the purpose of affecting the value of executive compensation. The Company regularly reviews its
policies and practices related to equity awards to ensure they meet the evolving standards of corporate governance and continue to serve
the best interests of the Company and its shareholders.
The Board recommends that you vote FOR
the 2022 Plan Amendment Proposal.
PROPOSAL 4
APPROVAL OF THE AUDITOR APPOINTMENT PROPOSAL
(Item 4 on the Proxy Card)
Proposal
: The Board of Directors is asking
that you vote to ratify the Boards selection of Haskell White LLP as our independent registered public accounting firm for
fiscal year 2024.
Armanino LLP (Armanino) served as
our independent registered public accounting firm to audit our books and accounts for the fiscal year ended December 31, 2022. Armanino
also served as our independent registered public accountant prior to September 7, 2023. On September 7, 2023, Haskell White LLP
(HW) became engaged as the Companys independent registered public accounting firm for the fiscal year ended
December 31, 2023.
26
The table below presents the aggregate fees for
professional services rendered by HW for the year ended December 31, 2023:
2023
Audit fees
$
158,500
Audit-related fees
All other fees
Total fees
$
158,500
The table below presents the aggregate fees billed
for professional services rendered by Armanino for fiscal year 2023 (up to September 7, 2023) and the year ended December 31, 2022.
2023
2022
Audit fees
$
179,102
$
338,253
Audit-related fees
54,981
72,640
All other fees
Total fees
$
234,083
$
410,893
In the above tables, audit fees
are fees billed for services provided related to the audit of our annual financial statements, quarterly reviews of our interim financial
statements, and services normally provided by the independent accountant in connection with regulatory filings or engagements for those
fiscal periods. Audit-related fees are fees not included in audit fees that are billed by the independent accountant for
assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. These
audit-related fees also consist of the review of our registration statements filed with the SEC and related services normally provided
in connection with regulatory filings or engagements. All other fees are fees billed by the independent accountant for products
and services not included in the foregoing categories.
CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
On July 28, 2023, we were informed by Armanino,
our independent registered public accountant prior to September 7, 2023, that Armanino would resign effective as of the earlier of (i)
the date we engaged a new independent registered public accounting firm and (ii) the filing of our Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 2023, as a result of Armaninos determination to cease providing certain services to public companies.
On September 5, 2023, the Audit Committee appointed Haskell White LLP as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2023, effective September 7, 2023 (the Engagement Date).
Armaninos audit reports on the Companys
consolidated financial statements as of and for the fiscal years ended December 31, 2022 and December 31, 2021 did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles, other
than the explanatory paragraph regarding the Companys ability to continue as a going concern.
During the fiscal years ended December 31, 2022
and December 31, 2021, and subsequent interim periods through the Engagement Date, there were no disagreements with Armanino on any matter
of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement(s), if not resolved
to the satisfaction of Armanino, would have caused it to make reference to the subject matter of the disagreement(s) in connection with
its opinion orreportable events under Item 304(a)(1)(v) of Regulation S-K, except that Armanino concurred with the Companys
assessment of a material weakness related to the Companys internal controls over financial reporting.
The Audit Committee of
the Company approved the engagement of Haskell White LLP. During the two most recent fiscal years and through the Engagement Date,
the Company did not consult with Haskell White LLP regarding either:
1.
application
of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered
on the Companys financial statements, and neither a written report was provided to the Company nor oral advice was provided that
Haskell White LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing
or financial reporting issue; or
27
2.
any
matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions)
or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).
In accordance with Item 304(a)(3) of Regulation
S-K, the Company provided Armanino with a copy of the disclosures made in the Current Report on Form 8-K filed on September 8, 2023 (Form
8-K) and requested from Armanino a letter addressed to the SEC indicating whether it agrees with such disclosures. A copy of Armaninos
letter dated as of September 8, 2023 is attached as Exhibit 16.1 to the Form 8-K.
The Board of Directors recommends that you vote
FOR approval of this proposal.
PROPOSAL 5
APPROVAL
OF THE ADJOURNMENT PROPOSAL (Item 5
on the Proxy Card)
Proposal 5 is to consider and vote upon the proposal
to approve adjourning the Annual Meeting, if necessary or appropriate in the discretion of the Board, to solicit additional proxies in
the event that there are not sufficient votes at the time of the Annual Meeting to any of Proposals 1 through 4.
General
The Annual Meeting may be adjourned to another
time or place, if necessary or appropriate in the discretion of the Board, to permit further solicitation of proxies to obtain additional
votes in favor of any of Proposals 1 through 4 (the Adjournment).
If, at the Annual Meeting, the number of shares
of common stock present or represented and voting in favor of any of Proposals 1 through 4 is insufficient to approve either such proposal,
the Company intends to move for the Adjournment in order to enable our Board to solicit additional proxies for approval of such proposal.
We are asking our stockholders to approve this Proposal 5 for the Adjournment if necessary or appropriate in the discretion of the Board.
Vote Required
The affirmative vote of a majority of the votes
cast is required for approval of the Adjournment. For the purpose of the vote on this proposal, abstentions, broker non-votes and other
shares not voted will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered
present for the purpose of determining the presence of a quorum.
Recommendation
The Board recommends that you vote FOR
the approval of the Adjournment.
ADDITIONAL INFORMATION
Solicitation Expenses:
Expenses in
connection with the solicitation of proxies will be paid by the Company. Proxies are being solicited principally by mail, by telephone
and through the internet. In addition, our directors, officers and regular employees, without additional compensation, may solicit proxies
personally, by e-mail, telephone, fax or special letter. We will reimburse brokerage firms and others for their expenses in forwarding
proxy materials to the beneficial owners of our shares.
How To Receive Additional Paper Copies of the
Proxy Statement
: The Company has adopted a procedure called householding which has been approved by the SEC. The Company
and some brokers household proxy materials, delivering a single notice and, if applicable, this Proxy Statement and Annual Report, to
multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders or they participate
in electronic delivery of proxy materials. Stockholders who participate in householding will continue to access and receive separate proxy
cards. This process will help reduce our printing and postage fees, as well as save natural resources. If at any time you no longer wish
to participate in householding and would prefer to receive a separate Proxy Statement, or if you are receiving multiple copies of the
Proxy Statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or us if you hold
registered shares. You can notify us by sending a written request to Tenon Medical, Inc., Investor Relations, 104 Cooper Ct., Los Gatos,
CA95032 or by calling Investor Relations at (408)649-5760, or by sending an e-mail to svandick@tenonmed.com.
28
Stockholder Proposals for Consideration at
the 2025 Annual Meeting of Stockholders
:Under the rules of the SEC, if a stockholder wants us to include a proposal in our Proxy
Statement and proxy card for presentation at our 2025 Annual Meeting of Stockholders, the proposal must be received by us at our principal
executive offices at Tenon Medical, Inc., Investor Relations, 104 Cooper Ct., Los Gatos, CA95032 by April 24, 2025. The proposal
should be sent to the attention of the Chief Financial Officer.
Under our bylaws, certain procedures are provided
that a stockholder must follow to introduce an item of business, including the nomination of someone as a director, at an Annual Meeting
of Stockholders that is not included in our Proxy Statement. These procedures provide that an item of business to be introduced at an
Annual Meeting of Stockholders must be submitted in writing to our Nominating and Corporate Governance Committee at our principal executive
offices and you must include information set forth in our bylaws. See
Governance of the Company Stockholder Nominations
above.
We must receive the notice of your intention to
propose an item of business at our 2025 Annual Meeting no later than the close of business on the ninetieth (90
th
) day nor
earlier than the close of business on the one hundred twentieth (120
th
) day prior to the first anniversary of the preceding
years annual meeting as specified in our bylaws. If the 2025 Annual Meeting is not held within 30 days before or after the anniversary
of the date of this years Annual Meeting, then the item of business must be received by the tenth day following the earlier of
the date of mailing of the notice of the meeting or the public disclosure of the date of the meeting. Assuming that our 2025 Annual Meeting
is held within 30 days of the anniversary of this Annual Meeting, we must receive notice of your intention to introduce a nomination or
other item of business at that meeting by April 24, 2025.
You may contact Tenon Medicals Chief Financial
Officer at the address mentioned above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals
and nominating director candidates.
The chairperson of the Annual Meeting may refuse
to allow the transaction of any business, or to acknowledge the nomination of any person, not made in compliance with the foregoing procedures.
2023 Annual Report
: A copy of our 2023
Annual Report, as filed with the SEC on March 29, 2024, is available to stockholders without charge upon written request directed to our
Secretary at 104 Cooper Ct., Los Gatos, CA95032 or by phone at (408)649-5760. The Company makes available free of charge on
or through its website,
www.tenonmed.com
, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and all amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable
after filing.
Other Matters To Be Considered At The Annual
Meeting
: The Board is not aware of any other matters that are expected to come before the 2024 Annual Meeting other than those referred
to in this proxy statement and as set forth above. The Board has made no recommendation as to how the proxies will vote on such other
matters. If any other matter should come before the Annual Meeting, the individuals named on the proxy card intend to vote the proxies
in accordance with their best judgment.
By Order of the Board of Directors
/s/ Richard Ferrari
Richard Ferrari
Executive Chairman of the Board
29
Annex A
FORM OF
CERTIFICATE OF DESIGNATIONS, RIGHTS, AND PREFERENCES
OF THE SERIES B PREFERRED STOCK
TENON MEDICAL, INC.
CERTIFICATE OF DESIGNATIONS, RIGHTS, AND PREFERENCES
OF
SERIES B PREFERRED STOCK
Pursuant to Section 151 of the Delaware General
Corporation Law
Tenon Medical, Inc., a Delaware corporation (the
Corporation
), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation
(the
Board of Directors
) pursuant to the authority of the Board of Directors as required by Section 151 of the Delaware
General Corporation Law.
WHEREAS, the Second Amended and Restated Certificate
of Incorporation of the Corporation, as amended (the
Certificate of Incorporation
), provides for a class of its authorized
stock known as preferred stock, comprised of 20,000,000 shares, $0.001 par value per share (the
Preferred Stock
),
issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized
by the provisions of the Certificate of Incorporation to fix the powers, designations, preferences and relative, participating, optional
or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, including dividend rights, dividend rate,
voting rights, conversion rights, rights and terms of redemption and liquidation preferences, of any series of Preferred Stock and the
number of shares constituting any such series;
NOW, THEREFORE, BE IT RESOLVED, that pursuant
to this authority granted to and vested in the Board of Directors in accordance with the provisions of the Certificate of Incorporation,
the Board of Directors hereby adopts this Certificate of Designations, Rights, and Preferences (the
Certificate of Designation
)
for the purpose of creating a series of Preferred Stock of the Corporation designated as Series B Preferred Stock, par value $0.001 per
share (the
Series B Preferred Stock
), and hereby states the designation and number of shares, and fixes the relative
rights, powers and preferences, and qualifications, limitations and restrictions of the Series B Preferred Stock as follows:
1.
Designation and Amount
. The shares of
such series of Preferred Stock shall be designated as Series B Preferred Stock and the number of shares constituting such
series shall be 1,500,000 shares. Each share of Series B Preferred Stock shall be identical in all respects to every other share of Series
B Preferred Stock. Such number of shares of Series B Preferred Stock may from time to time be increased (but not in excess of the total
number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series B Preferred Stock then outstanding)
by further resolution duly adopted by the Board of Directors and by the filing of a certificate pursuant to the provisions of the Delaware
General Corporation Law stating that such increase or decrease, as the case may be, has been so authorized.
2.
No Maturity, Sinking Fund, Mandatory Redemption.
Except as otherwise provided herein, the Series B Preferred Stock has no stated maturity and will not be subject to any sinking fund for
the payment of the redemption price or mandatory redemption, and will remain outstanding indefinitely unless the Series B Preferred Stock
is redeemed or otherwise repurchased in accordance with this Certificate of Designations. The Corporation is not required to set aside
funds to redeem the Series B Preferred Stock.
3.
Ranking
. With respect to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the Series B Preferred Stock will rank: (i) Pari passu with the Corporations Series A Preferred Stock; (ii) senior to all other
classes or series of capital stock of the Corporation now existing or hereafter authorized, classified or reclassified (other than the
Corporations Series A Preferred Stock), and (ii) junior to all Indebtedness of the Corporation now existing or hereafter authorized
(including Indebtedness convertible into Common Stock).
4.
Dividends
. No dividends shall be payable
on the Series B Preferred Stock.
A-
1
5.
Liquidation Preference
.
(a) Upon any voluntary or involuntary liquidation,
dissolution, or winding up of the Corporation, before any distribution or payment shall be made to holders of shares of Common Stock or
any other class or series of capital stock of the Corporation, the holders of shares of Series B Preferred Stock then outstanding shall
be entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, a per share liquidation
preference equal to the greater of (x) the aggregate of the Stated Values of the Series B Preferred Stock and (y) the amount that would
be paid to the holders of the Series B Preferred Stock (including any accrued and unpaid dividends thereon) if, prior to such voluntary
or involuntary liquidation, dissolution, or winding up of the Corporation, the Series B Preferred Stock had been converted into shares
of Common Stock pursuant to
Section 9
and the Common Stock that has accrued thereon had been issued. In the event that, upon such
voluntary or involuntary liquidation, dissolution, or winding up, the available assets of the Corporation are insufficient to pay the
full amount of the liquidating distributions on all outstanding shares of Series B Preferred Stock, then the holders of the Series B Preferred
Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise
be respectively entitled. Written notice of any such voluntary or involuntary liquidation, dissolution, or winding up of the Corporation,
stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable,
shall be given within ten (10) days of the date the Board of Directors approves such action, or no later than twenty (20) days of any
stockholders meeting called to approve such action, or within twenty (20) days of the commencement of any involuntary proceeding,
whichever is earlier, , to each record holder of shares of Series B Preferred Stock at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Corporation. After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Series B Preferred Stock will have no right or claim to any of the remaining assets of the
Corporation.
(b) If, at any time while the Series B Preferred
Stock is outstanding, (i) the Corporation, directly or indirectly, in one or more related transactions effects any merger or consolidation
of the Corporation with or into another entity, (ii) the Corporation, directly or indirectly, effects any sale, assignment, transfer,
conveyance, or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer, or exchange offer (whether by the Corporation or another person or entity) is completed pursuant
to which holders of Common Stock are permitted to sell, tender, or exchange their shares for other securities, cash, or property and has
been accepted by the holders of more than 50% of the outstanding Common Stock or more than 50% of the voting power of the common equity
of the Corporation, or (iv) the Corporation, directly or indirectly, in one or more related transactions consummates a stock or share
purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger,
or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the voting
power of the Common Stock of the Corporation (each a
Deemed Liquidation
); provided, however, that the issuance of
Common Stock in a financing transaction engaged in by the Corporation shall not be a Deemed Liquidation unless it results in more than
50% of the voting power of Common Stock being issued to one stockholder or a number of stockholders who report on a Schedule 13G or Schedule
13D pursuant to Section 13(d) of the Exchange Act that they are acting as a single group in holding the Common Stock, then the Corporation
shall provide at least 10 days notice to the holders of the Series B Preferred Stock prior to the consummation of the Deemed Liquidation,
which shall be deemed given by the Corporation upon the disclosure of the potential Deemed Liquidation in any of the Corporations
public filings with the SEC. If a Deemed Liquidation occurs, any holder of Series B Preferred Stock will have the option (the
Deemed
Liquidation Option
) to receive the liquidation preference it would have been entitled to receive under
Section 5(a)
if a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation had occurred (the Deemed Liquidation Preference
Amount);
provided, however
, if the amount payable in a Deemed Liquidation is less than the product of (x) 110% of the amount
set forth in clause (x) of the definition of Stated Value multiplied by (y) the number of outstanding shares of Series B
Preferred Stock, then for purposes of calculating the Deemed Liquidation Preference Amount only, Stated Value will be calculated from
issuance at the increased rate per annum of 10%. A holder of the Series B Preferred Stock may elect to exercise its Deemed Liquidation
Option by providing the Corporation with written notice of such election within five (5) business days from the consummation of the Deemed
Liquidation pursuant to
Section 5(d)
. All payments in respect of a Deemed Liquidation will be paid in shares of Common Stock based
on the Conversion Price.
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(c) In determining whether a distribution (other
than upon voluntary or involuntary liquidation), by dividend, redemption, or other acquisition of shares of capital stock of the Corporation
or otherwise, is permitted under the Delaware General Corporation Law, amounts that would be needed, if the Corporation were to be dissolved
at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of shares of Series B Preferred
Stock shall not be added to the Corporations total liabilities
(d) Holders of the Series B Preferred Stock shall
send notices pursuant to
Section 5(b)
to the Chief Financial Officer of the Company at 104 Cooper Ct, Los Gatos, CA 95032.
6.
Conversion at the Option of the Corporation
.
On any date that ten (10) of the last fifteen (15) daily VWAPs of the Common Stock is 250% higher than the Conversion Price on such date,
then the Corporation has the right, but not the obligation, to require and cause 50% of the number of outstanding shares of Series B Preferred
Stock held by each holder of Series B Preferred Stock to be converted into shares of Common Stock using the then current Conversion Price
without the approval of any holder of Series B Preferred Stock (
VWAP Required Conversion
). Additionally, on and after
the date on which the Corporation receives at least $2.25 million in revenues in any single financial quarter, the Corporation has the
right, but not the obligation, to require and cause 50% of the number of outstanding shares of Series B Preferred Stock held by each holder
of Series B Preferred Stock to be converted into shares of Common Stock using the then current Conversion Price without the approval of
any holder of Series B Preferred Stock (the
Revenue Required Conversion
and collectively with the VWAP Required Conversion,
the
Required Conversions
). If the criteria for both Required Conversions are met, the Corporation may exercise its
rights to require either or both Required Conversion and if the Corporation exercises its rights to require both Required Conversions,
100% of the shares of the Series B Preferred Stock will be converted into Common Stock. The conversions effected under this
Section
6
will be implemented in accordance with the provisions of
Section 8
, including the Beneficial Ownership Limitations set forth
therein.
7.
Voting Rights
.
(a) For so long as any shares of the Series B
Preferred Stock remain issued and outstanding, each share of Series B Preferred Stock shall entitle the holder thereof to the right to
vote in respect of all matters concerning the Common Stock in an amount equal to the number of shares of Common Stock underlying a share
of Series B Preferred Stock on an as-converted basis on the record date for such vote;
provided, however
, the Series B Preferred
Stock shall not be entitled to any additional votes resulting from a decrease in the Conversion Price caused by the application of
Section
9(b)
. The Common Stock (and any other class or series of capital stock of the Corporation entitled to vote generally with the Common
Stock) and the Series B Preferred Stock shall vote as a single class and such voting rights shall be identical in all respects.
(b) As long as any shares of Series B Preferred
Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation, domestication, transfer,
continuance, recapitalization, reclassification, waiver, statutory conversion, or otherwise, effect any of the following acts or transactions
without (in addition to any other vote required by law or this Certificate of Incorporation) the written consent or affirmative vote of
the holders of a majority of the then outstanding shares of the Series B Preferred Stock, and any such act or transaction that has not
been approved by such consent or vote prior to such act or transaction being effected shall be null and void
ab initio
, and of
no force or effect: (i) amend the Corporations Certificate of Incorporation or Bylaws so as to adversely alter the rights, preferences,
privileges or powers of the Series B Preferred Stock; (ii) create any new class or series of shares
pari passu
or senior to the
Series B Preferred Stock or increase or decrease the number of authorized shares, or change the par value, of Common Stock or Preferred
Stock; (iii) pay or declare any dividend on Common Stock or junior securities of the Corporation, or incur Indebtedness in any single
transaction in excess of $1 million; or (iv) redeem, purchase or otherwise acquire any share or shares of Preferred Stock or Common
Stock (other than (x) the repurchase of shares of Common Stock pursuant to a written benefit plan or employment or consulting agreement,
or (y) the repurchase of any equity securities in connection with the Corporations right of first offer with respect to those securities
contained in any written agreement with the Corporation).
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8.
Conversion
.
(a) Each share of Series B Preferred Stock shall
be convertible, at any time after the date of issuance, at the option of the holder thereof (or, upon a Required Conversion, at the option
of the Corporation), into that number of shares of Common Stock determined by dividing the Stated Value for such share of Series B Preferred
Stock by the Conversion Price. In order for the holder of Series B Preferred Stock to convert such Series B Preferred Stock into shares
of Common Stock pursuant to this
Section 8
, such holder will provide the Corporation with a completed duly executed form
of conversion notice attached hereto as
Exhibit A
(a
Notice of Conversion
). The date on which the Notice of
Conversion is delivered to the Corporation with respect to any share of Series B Preferred Stock shall be the conversion date (the Conversion
Date) for such share of Series B Preferred Stock.
(b) Notwithstanding anything herein to the contrary,
the Corporation shall not effect any conversion of the Series B Preferred Stock, and a holder shall not have the right (or obligation)
to convert any portion of the Series B Preferred Stock, to the extent that, after giving effect to an attempted conversion set forth on
an applicable Notice of Conversion, such holder (together with such holders affiliates, and any other Person whose beneficial ownership
of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act and the applicable regulations
of the Securities Exchange Commission (SEC), including any group of which the holder is a member) would beneficially
own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below);
provided, however
,
that, to the extent that a Series B Preferred Stock holders right to convert would result in such holder exceeding the Beneficial
Ownership Limitation, then such holder shall not be entitled to convert its Series B Preferred Stock to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such conversion to such extent) and the portion of such conversion shall be held
in abeyance for the benefit of such holder until such time, if ever, as its right thereto would not result in the holder exceeding the
Beneficial Ownership Limitation. To the extent that any Series B preferred Stock has not been partially or completely converted at the
time of such conversion, such portion of the conversion shall be held in abeyance for the benefit of the holder of such Series B Preferred
Stock until such holders have converted such Series B Preferred Stock. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such holder and its affiliates shall include the number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock subject to the Notice of Conversion with respect to which such determination is being made, but shall
exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series B Preferred Stock
beneficially owned by such holder or any of its affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of
any other securities of the Corporation (including any warrants) beneficially owned by such holder or any of its affiliates that are subject
to a limitation on conversion or exercise similar to the limitation contained herein. Except as set forth in the preceding sentence, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the SEC. In addition,
for purposes hereof, group has the meaning set forth in Section 13(d) of the Exchange Act and the applicable regulations
of the SEC. For purposes of this
Section 8(b)
in determining the number of outstanding shares of Common Stock, a holder may rely
on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Corporations most recent
periodic or annual filing with SEC, as the case maybe, (B) a more recent public announcement by the Corporation that is filed with the
SEC, or (C) a more recent notice by the Corporation or the Corporations transfer agent to the holder setting forth the number of
shares of Common Stock then outstanding. Upon the written request of a holder (which may be by email), the Corporation shall, within three
(3) Trading Days thereof, confirm in writing to such holder (which may be via email) the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual conversion or exercise
of securities of the Corporation, including shares of Series B Preferred Stock, by such 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 holder. The
Beneficial
Ownership Limitation
shall be 4.99% (or 9.99% if specified by the holder) 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 Notice of Conversion. The Corporation shall
be entitled to rely on representations made to it by the holder in any Notice of Conversion regarding its Beneficial Ownership Limitation.
(c)
Mechanics of Conversion
.
(i) Not later than three (3) Trading Days after
the applicable Conversion Date , or if the holder requests the issuance of physical certificate(s), two (2) Trading Days after receipt
by the Corporation of the original certificate(s) representing such shares of Series B Preferred Stock being converted, duly endorsed,
and the accompanying Notice of Conversion (the
Share Delivery Date
), the Corporation shall deliver, or cause to be
delivered, to the converting holder a book entry statement from the Corporations transfer agent (or if requested by the holder,
a physical certificate or certificates) representing the number of shares (the
Conversion Shares
) being acquired
upon the conversion of shares of Series B Preferred Stock If in the case of any Notice of Conversion such statement is not, or if applicable,
such certificate or certificates are not delivered to or as directed by the applicable holder by the Share Delivery Date, the applicable
holder shall be entitled to elect to rescind such Notice of Conversion by written notice to the Corporation at any time on or before its
receipt of such statement or certificate or certificates for Conversion Shares or electronic receipt of such shares, as applicable, in
which event the Corporation shall promptly return to such holder any original Series B Preferred Stock certificate delivered to the Corporation
and such holder shall promptly return to the Corporation any Common Stock any certificates representing the shares of Series B Preferred
Stock unsuccessfully tendered for conversion to the Corporation.
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(ii) 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 B Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the
holders of the Series B Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable upon the
conversion of all outstanding shares of Series B 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.
(iii) No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon the conversion of the Series B Preferred Stock. As to any fraction of a share which
a holder would otherwise be entitled to receive upon such conversion, the Corporation shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction
multiplied
by the Conversion Price or round up to the next
whole share.
(iv) The issuance of certificates for shares of
the Common Stock upon conversion of the Series B Preferred Stock shall be made without charge to any holder for any documentary stamp
or similar taxes that may be payable in respect of the issue or delivery of such certificates,
provided
that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the registered holder(s) of such shares of Series B Preferred Stock and the Corporation shall
not be required to issue or deliver such certificates unless or until the Person 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.
(v) Upon each Conversion Date, (i) the shares
of Series B Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the holders rights as
a holder of such converted shares of Series B Preferred Stock shall cease and terminate, excepting only the right to receive certificates
for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such holder because
of a failure by the Corporation to comply with the terms of this Certificate of Designation. In all cases, the holder shall retain all
of its rights and remedies for the Corporations failure to convert Series B Preferred Stock.
9.
Certain Adjustments
.
(a)
Stock Dividends and Stock Splits
. If
the Corporation, at any time while the Series B Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution
that is payable in shares of Common Stock on shares of Common Stock or any other Common Stock Equivalents (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Corporation upon conversion of, or payment of a dividend on, the Series B Preferred
Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse
stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately
before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.
Any adjustment made pursuant to this
Section 9(a)
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and, in the case of a subdivision, combination or re-classification,
shall become effective immediately after the effective date of such subdivision, combination or re-classification. Notwithstanding the
foregoing in no event may the Conversion Price be less than the par value per share of Series B Preferred Stock.
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(b)
Pro Rata Distributions
. During such
time as the Series B Preferred Stock is outstanding, if the Corporation shall declare or make any dividend or other distribution of its
assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without
limitation, any distribution of cash, stock or other securities, property, or options by way of a dividend, spin off, reclassification,
corporate rearrangement, scheme of arrangement, or other similar transaction) (a
Distribution
), at any time after
the issuance of the Series B Preferred Stock, then, in each such case, the holder of Series B Preferred Stock shall be entitled to participate
in such Distribution to the same extent that the holder of Series B Preferred Stock would have participated therein if the holder of Series
B Preferred Stock had held the number of shares of Common Stock acquirable upon complete conversion of the Series B Preferred Stock (without
regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the
date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such Distribution (
provided, however
, that, to the extent that a
Series B Preferred Stock holders right to participate in any such Distribution would result in such holder exceeding the Beneficial
Ownership Limitation, then such holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial
ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be
held in abeyance for the benefit of such holder until such time, if ever, as its right thereto would not result in the holder exceeding
the Beneficial Ownership Limitation). To the extent that any Series B preferred Stock has not been partially or completely converted at
the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the holder of such Series
B Preferred Stock until such holders have converted such Series B Preferred Stock.
(c)
Subsequent Equity Offerings
. If the
Corporation at any time while the Series B Preferred Stock is outstanding, shall sell, enter into an agreement to sell or grant any option
to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option
to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Conversion
Price then in effect (such issuances collectively, a
Dilutive Issuance
), then simultaneously with the consummation
of each Dilutive Issuance, the Conversion Price shall be reduced to equal the Weighted Average Price. Notwithstanding the foregoing, no
adjustments shall be made, paid or issued under this
Section 9(c)
in respect of an Exempt Issuance. The Corporation shall notify
the holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common Stock Equivalents
subject to this
Section 9(c)
, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion
price and other pricing terms (such notice, the
Dilutive Issuance Notice
). For purposes of clarification, whether
or not the Corporation provides a Dilutive Issuance Notice pursuant to this
Section 9(c)
, upon the occurrence of any Dilutive Issuance,
the Conversion Price will be adjusted to equal the Weighted Average Price. Notwithstanding anything to the contrary contained in this
Section 9(c), no adjustments to the Conversion Price will be made for any Dilutive Issuance until after Stockholder Approval has been
obtained. For purposes of clarity, with respect to Dilutive Issuances that occur prior to Stockholder Approval, the Conversion Price will
be adjusted immediately after Stockholder Approval is obtained to reflect the lowest Weighted Average Price that would have resulted from
the Dilutive Issuances if no Stockholder Approval requirement was contained in this Section 9(c).
The Weighted Average Price for the Series B Preferred
Stock on any date of determination shall be calculated as follows:
CP
2
=
CP
1
* (A+B) / (A+C),
where:
CP
2
=
New Conversion Price
CP
1
=
Conversion Price in effect immediately prior to new issue
A
=
Number of shares of Common Stock deemed to be outstanding immediately prior to new issue (includes all shares of outstanding common stock, all shares of outstanding preferred stock on an as-converted basis and all outstanding options on an as-exercised basis)
B
=
Aggregate consideration received by the Corporation with respect to the new issue divided by CP
1
C
=
Number of shares of stock issued in the subject transaction
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(d)
Calculations
. All calculations under
this
Section 9
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
9
, 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 treasury shares, if any) issued and outstanding.
(e)
Notice to Holder
.
i.
Adjustment to Conversion
Price
. Whenever the Conversion Price is adjusted pursuant to any provision of this
Section 9
, the Corporation shall promptly
deliver by email to the holder a notice setting forth the Conversion Price after such adjustment and any resulting adjustment to the number
of Conversion Shares and setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow Exercise
by Holder
. If (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the
Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize
the granting to all holders of the Common Stock 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, merger, statutory conversion, transfer, domestication, or continuance to which the Corporation or
any Subsidiary 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 a Deemed
Liquidation or 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 delivered to each holder of Series B Preferred Stock, in writing or by electronic transmission, 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 (or other
applicable transaction) 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
transaction; provided that the failure to deliver such notice or any defect therein or in the mailing thereof shall not affect the validity
of the corporate action required to be specified in such notice.
(f)
Voluntary Adjustment by Corporation
.
Subject to the rules and regulations of the Trading Market, the Corporation may at any time while the Series B Preferred Stock is outstanding
reduce the then current Conversion Price to any amount and for any period of time deemed appropriate by the Board of Directors so long
as not adverse to any holder of Series B Preferred Stock whose shares are being converted to Common Stock pursuant to such holders
conversion option or a Required Conversion.
10.
Record Holders
. The Corporation and
its transfer agent may deem and treat the record holder of any Series B Preferred Stock as the true and lawful owner thereof for all purposes,
and neither the Corporation nor its transfer agent shall be affected by any notice to the contrary.
11.
No Preemptive Rights
. No holders of
the Series B Preferred Stock will, as holders of Series B Preferred Stock, have any preemptive rights to purchase or subscribe for Common
Stock or any other security of the Corporation.
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12.
Exclusion of Other Rights
. The Series
B Preferred Stock shall not have any preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions,
qualifications, or terms or conditions of redemption other than expressly set forth in the Certificate of Incorporation and this Certificate
of Designation, as each may be amended from time to time.
13.
Headings of Subdivisions
. The headings
of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions
hereof.
14.
Severability of Provisions.
If any
preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications, or terms
or conditions of redemption of the Series B Preferred Stock set forth in this Certificate of Designation are invalid, unlawful, or incapable
of being enforced by reason of any rule of law or public policy, all other preferences or other rights, voting powers, restrictions, limitations
as to dividends or other distributions, qualifications, or terms or conditions of redemption of Series B Preferred Stock set forth in
this Certificate of Designation which can be given effect without the invalid, unlawful, or unenforceable provision thereof shall, nevertheless,
remain in full force and effect and no preferences or other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications, or terms or conditions of redemption of the Series B Preferred Stock herein set forth shall be deemed dependent
upon any other provision thereof unless so expressed therein.
15.
Definitions
. As used herein the following terms shall have
the following meanings:
Common Stock
means the Corporations common
stock, par value $0.001 per share.
Common Stock Equivalents
means any securities of the Corporation which would entitle the holder thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, right, option, warrant, or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
Conversion Price
means [*]
2
,
subject to adjustment as set forth herein.
Exempt Issuance
means the
issuance of (a) shares of Common Stock, options or restricted stock units to employees, officers, directors or eligible service providers
of the Corporation pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of the
Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose for services rendered
to the Corporation, provided that such issuances to service providers are issued as restricted securities (as defined in
Rule 144 under the Securities Act of 1933, as amended), and (b) securities issued pursuant to acquisitions or strategic transactions approved
by a majority of the disinterested directors of the Corporation, provided that such securities are issued as restricted securities
(as defined in Rule 144 under the Securities Act of 1933, as amended).
Indebtedness
means (a) all
obligations of the Corporation or any Subsidiary for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of the Corporation or any of its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, (c) all letters of credit
and letters of guaranty in respect of which the Corporation or any of its Subsidiaries is an account party, (d) all securitization or
similar facilities of the Corporation or any of its Subsidiaries, and (e) all guarantees by the Corporation or any of its Subsidiaries
of any of the foregoing.
2
125% of the average of the VWAPs for the 10 Trading Days
prior the issuance date of such share of Series B Preferred Stock.
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Person
means any individual,
corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization
or any other entity.
Stockholder Approval
means
the approval from the stockholders of the Company of the terms of this Certificate of Designation.
Stated Value
means for
any share of Series B Preferred Stock, an amount equal to the product of (x) [*]
3
multiplied by (y) the sum of 1 plus the product of (A) 0.06 multiplied by
(B) a fraction equal to the number of days that such share of Series B Preferred Stock has been issued divided by 365.
Subsidiary
of any Person
means any corporation, limited liability company, partnership, association, trust or other entity of which securities or other ownership
interests representing more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership
interests) are owned by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such
Person.
Trading Day
means a day on which the Common Stock
is traded on a Trading Market.
Trading Market
means any
of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American,
The Nasdaq Capital Market, The Nasdaq Global Market, The Nasdaq Global Select Market, or the New York Stock Exchange (or any successors
to any of the foregoing).
VWAP
means, for any
date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is
not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market
(or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the holders of a majority in interest of the Series B Preferred Stock then
outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation.
{Signature page follows}
3
10 times the initial Conversion Price on the first issuance
date of the Series B Preferred Stock.
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IN WITNESS WHEREOF, the Corporation has caused
this Certificate of Designation to be signed in its name and on its behalf on this [*] day of June, 2024.
TENON MEDICAL, INC.
By:
/s/ Steven Foster
Name:
Steven Foster
Title:
Chief Executive Officer
Signature Page to Certificate of Designation,
Rights, and Preferences of
Series B Preferred Stock
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EXHIBIT A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER
TO CONVERT SHARES OF SERIES B PREFERRED STOCK)
The undersigned holder hereby irrevocably elects
to convert the number of shares of Series B Preferred Stock indicated below, represented by stock certificate No(s). (the
Preferred
Stock Certificates
), into shares of common stock, par value $0.001 per share (the
Common Stock
), of Tenon
Medical, Inc., a Delaware corporation, as of the date written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Capitalized terms utilized but not defined
herein shall have the meaning ascribed to such terms in that certain Certificate of Designations, Rights, and Preferences of Series B
Preferred Stock (the
Certificate of Designation
) filed by the Corporation on [*], 2024.
As of the date hereof, the number of shares of
Common Stock beneficially owned by the undersigned holder (together with such holders affiliates, and any other person or entity
whose beneficial ownership of Common Stock would be aggregated with the holders for purposes of Section 13(d) of the Exchange Act
and the applicable regulations of the SEC, including any group of which the holder is a member), including the number of
shares of Common Stock issuable upon conversion of the Series B Preferred Stock subject to this Notice of Conversion, but excluding the
number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series B Preferred Stock beneficially
owned by such holder or any of its affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities
of the Corporation (including any warrants) beneficially owned by such holder or any of its Affiliates that are subject to a limitation
on conversion of the Certificate of Designation, is no more than 4.99% (or 9.99% if specified by the holder). For purposes hereof, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the SEC. In addition,
for purposes hereof, group has the meaning set forth in Section 13(d) of the Exchange Act and the applicable regulations
of the SEC.
Conversion calculations:
Date to Effect Conversion:
Number of shares of Series B Preferred Stock owned
prior to Conversion:
Number of shares of Series B Preferred Stock to
be Converted:
Number of shares of Common Stock to be Issued:
Address for delivery of physical certificates:
A-
11
Annex B
FORM OF WARRANT
NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS SECURITY HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER
OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN ACCREDITED INVESTOR AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
TENON MEDICAL, INC.
Warrant No. _____
Issue Date: [*], 2024
THIS COMMON STOCK PURCHASE WARRANT (the
Warrant
)
certifies that, for value received,
[]
or any registered assigns (the
Holder
) is
entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time following the
Issue Date (the
Initial Exercise Date
) and on or prior to the close of business on [*]
,
2029 (the
Termination
Date
) but not thereafter, to subscribe for and purchase from
Tenon Medical Inc.,
a Delaware corporation (the
Company
),
up to []
1
shares (subject to adjustment) of Common Stock (the
Warrant Shares
).
The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price.
Section 1
.
Definitions
. For the
purposes hereof, in addition to the terms defined elsewhere in this Warrant, (a) capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:
Affiliate
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
Attribution Parties
shall have the meaning ascribed to such term in Section 2(d) below.
Business Day
means any day except any Saturday, any 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.
Common Stock
means the shares of common stock, $0.001 par value per share, of the Company.
Common Stock
Equivalents
means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at
any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive Common Stock.
Exercise Period
shall have the meaning as that term is defined in Section 2(a) below.
Exercise Price
shall have the meaning as that term is defined in Section 2(b) below.
1
15%
of the shares of Common Stock initially underlying the Series B Preferred Stock.
B-
1
Person
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
Purchase Agreement
means the securities purchase agreement between the Company and the signatory purchasers thereto, dated February 15, 2024
Securities Act
means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Series B Preferred
Stock
means the Companys Series B Preferred Stock, par value, $0.001 per share.
Stockholder Approval
means the approval from the stockholders of the Company of the terms of this Warrant.
Trading Day
means a day on which the Nasdaq Capital Market is open for business.
Trading Market
means the following markets or exchanges on which the Common Stock may be listed or quoted for trading on the date in question: the NYSE
MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange.
Transfer Agent
means Vstock Transfer, LLC, the current transfer agent of the Company, with offices located at 18 Lafayette Pl, Woodmere, NY 11598, and
any successor transfer agent of the Company.
VWAP
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not
then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported on the Pink Open Market (or a
similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock
so reported, or (d)in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser
selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company,
the fees and expenses of which shall be paid by the Company.
Warrant Shares
shall have the meaning ascribed to such term in the Preamble.
Warrants
means this Warrant and other Common Stock purchase warrants issued by the Company pursuant to the Purchase Agreement.
Section 2
.
Exercise
.
a)
Exercise of Warrant
.
Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial
Exercise Date and on or before the Termination Date (the
Exercise Period
) by delivery to the Company of a
duly executed PDF copy submitted by e-mail (or e-mail attachment) (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed notice
of exercise (
Notice of Exercise
) form attached hereto as Exhibit 1-A; and, within three (3) Trading Days of
the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price
of the shares specified in the applicable Notice of Exercise by wire transfer or cashiers check drawn on a United States bank unless
the cashless exercise procedure specified in
Section 2(c)
below is specified in the applicable Notice of Exercise. No ink-original
Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of
Exercise be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final
Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number
of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder
in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases. In the event of any dispute or discrepancy, the records of the Company
shall be controlling and determinative in the absence of manifest error.
B-
2
b)
Exercise Price
.
The exercise price per share of the Common Stock under this Warrant shall be equal to 105% of the average of the VWAPs for the 10 Trading
Days prior the issuance of this Warrant, subject to adjustment hereunder (the Exercise Price).
c)
Cashless Exercise
.
This Warrant may also be exercised, in whole or in part, at such time by means of a cashless exercise in which the Holder
shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A)
=
as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of regular trading hours (as defined in Rule 600(b) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) at the option of the Holder, either (y) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise or (z) the Bid Price of the Common Stock on the principal Trading Market as reported by Bloomberg as of the time of the Holders execution of the applicable Notice of Exercise if such Notice of Exercise is executed during regular trading hours on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of regular trading hours on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of regular trading hours on such Trading Day;
(B)
=
the Exercise Price of this Warrant, as adjusted hereunder; and
(X)
=
the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
If Warrant Shares are issued in such a cashless
exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take
on the registered characteristics of the Warrants being exercised. The Company agrees not to take any position contrary to this
Section
2(c)
.
As to any fraction of a share which the Holder
would otherwise be entitled to upon exercise pursuant to this
Section 2(c)
, the Company shall round down to the next whole share.
Notwithstanding anything herein to the contrary,
on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this
Section 2(c)
.
c)
Mechanics of Exercise
.
i.
Delivery of Warrant Shares
Upon Exercise
. Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holders broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (
DWAC
)
system if the Company is then a participant in such system and either (A) there is a registration statement permitting the resale of the
Warrant Shares by the Holder or (B) the shares are eligible for resale without volume or manner-of-sale limitations pursuant to Rule 144,
and otherwise by physical delivery of certificates to the address specified by the Holder in the Notice of Exercise within five (5) Trading
Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required) and payment of the aggregate
Exercise Price as set forth above (the
Warrant Share Delivery Date
). This Warrant shall be deemed to have
been exercised on the date the Exercise Price is received by the Company, or in the case of a cashless exercise, the date on which the
Notice of Exercise, is received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the
Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant
to Section 2(d)(vi) prior to the issuance of such shares, have been paid. If the Company fails for any reason to deliver to the Holder
the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock
on the date of the applicable Notice of Exercise), $5 per Trading Day for each Trading Day after such Warrant Share Delivery Date until
such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant
in the Fast Automated Securities Transfer Program so long as this Warrant remains outstanding and exercisable. As used herein,
Standard
Settlement Period
means the standard settlement period, expressed in a number of Trading Days, on the Companys primary
Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise
B-
3
ii.
Delivery of Warrants
Upon Exercise
. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender
of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder
a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
iii.
Rescission Rights
.
If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant
Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
iv.
No Fractional Shares
or Scrip
. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either
pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round
up to the next whole share.
v.
Charges, Taxes and Expenses
.
Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental
expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be directed by the Holder;
provided
,
however
,
that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered
for exercise shall be accompanied by the assignment form (
Assignment Form
) attached hereto as Exhibit 1-B
duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any
transfer tax incidental thereto. The Company will pay all fees associated with the issuance of the Warrant Shares.
vi.
Closing of Books
.
The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant
to the terms hereof.
d)
Holders
Exercise Limitations
. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to
Section 2
or otherwise, to the extent that after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holders Affiliates,
and any other Persons acting as a group together with the Holder or any of the Holders Affiliates (such Persons,
Attribution Parties
)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its
Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon 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
or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other 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 or Attribution Parties.
Except as set forth in the preceding sentence, for purposes of this
Section 2(d)
, 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(d)
applies, the determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is
exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holders determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together
with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this
Section 2(e)
, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in
(A) the Companys most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent
public announcement by the Company, or (C) a more recent written notice by the Company or the Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one (1) Trading
Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the
Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties 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 provisions of this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this
Section 2(e)
to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
B-
4
Section 3
.
Certain Adjustments
.
a)
Stock Dividends and
Splits
. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which,
for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding
shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock
of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) 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 the number of shares issuable upon exercise of this Warrant
shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the record date for the determination of shareholders entitled to receive
such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination
or re-classification.
b)
Pro Rata Distributions
.
During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property, or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement, or other similar transaction) (a
Distribution
), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the
Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of
this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the participation in such Distribution (
provided
,
however
,
that, to the extent that the Holders right to participate in any such Distribution would result in the Holder exceeding the Beneficial
Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership
of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance
for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership
Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion
of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
c)
Subsequent Equity Offerings.
(i)
Dilutive Issuances
.
If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell, enter into an agreement
to sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue any shares of Common
Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect (such issuances collectively,
a
Dilutive Issuance
), then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive
Issuance the Exercise Price shall be reduced and only reduced to equal the Weighted Average Price. Notwithstanding the foregoing, no adjustments
shall be made, paid or issued under this Section 3(c) in respect of an Exempt Issuance (as defined in the Purchase Agreement). The Company
shall notify the Holder, in writing, no later than the Trading Day following the issuance or deemed issuance of any Common Stock or Common
Stock Equivalents subject to this Section 3(c), indicating therein the applicable issuance price, or applicable reset price, exchange
price, conversion price and other pricing terms (such notice, the
Dilutive Issuance Notice
). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(c), upon the occurrence of any Dilutive Issuance,
the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately
refers to the Base Share Price in the Notice of Exercise. Notwithstanding anything to the contrary contained in this Section 3(c), no
adjustments to the Exercise Price will be made for any Dilutive Issuance until after Stockholder Approval has been obtained. For purposes
of clarity, with respect to Dilutive Issuances that occur prior to Stockholder Approval, the Conversion Price will be adjusted immediately
after Stockholder Approval is obtained to reflect the lowest Weighted Average Price that would have resulted from the Dilutive Issuances
if no Stockholder Approval requirement was contained in this Section 3(c)
B-
5
(ii)
Calculation of Weighted
Average Price.
The Weighted Average Price of the Warrant on any date of determination shall be calculated as follows:
CP
2
=
CP
1
* (A+B) / (A+C)
, where:
CP
2
=
New Warrant Exercise Price
CP
1
=
Warrant Exercise Price in effect immediately prior to new issue
A
=
Number of shares of Common Stock deemed to be outstanding immediately prior to new issue (includes all shares of outstanding common stock, all shares of outstanding preferred stock on an as-converted basis, and all outstanding options on an as-exercised basis)
B
=
Aggregate consideration received by the Corporation with respect to the new issue divided by CP
1
C
=
Number of shares of stock issued in the subject transaction
d)
Calculations
. All
calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes
of this Section 3, 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 treasury shares, if any) issued and outstanding.
e)
Notice to Holder
.
i.
Adjustment to Exercise
Price
. Whenever the Exercise Price is adjusted pursuant to any provision of this
Section 3
, the Company shall promptly deliver
by email to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant
Shares and setting forth a brief statement of the facts requiring such adjustment.
ii.
Notice to Allow
Exercise by Holder
. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize
the granting to all holders of the Common Stock 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 shareholders of the Company shall be required in connection with any reclassification of the
Common Stock, any consolidation or merger to which the Company or any Subsidiary is a party, any sale or transfer of all or substantially
all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or
property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be emailed to the Holder at its last email address as it shall appear upon the
Warrant Register of the Company, 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 mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled
to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.
B-
6
h)
Voluntary Adjustment
by Company
. Subject to the rules and regulations of the Trading Market, the Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors.
Section 4
.
Transfer of Warrant
.
a)
Transferability
.
This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay
any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required
to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.
b)
Warrant Register
.
The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the
Warrant Register
),
in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.
Section 5
.
Miscellaneous
.
a)
No Rights as Shareholder
Until Exercise
. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior
to the exercise hereof.
b)
Loss, Theft, Destruction
or Mutilation of Warrant
. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft
or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting
of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver
a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c)
Saturdays, Sundays,
Holidays, etc
. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.
d)
Authorized Shares
.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock
one hundred (100%) of the number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant. In case such amount of Common Stock is insufficient at any time, the Company shall call and hold a special meeting
to increase the number of authorized shares of common stock. Management of the Company shall recommend to shareholders to vote in favor
of increasing the number of authorized shares of common stock.
B-
7
The Company further covenants
that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.
The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable
and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except and to the extent as
waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its amended and restated
certificate of incorporation, as amended, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise
immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially
reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof,
as may be, necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which
would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.
e)
Jurisdiction
. All
questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with
the provisions of the laws of the State of Delaware.
f)
Restrictions
. The
Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon
resale imposed by state and federal securities laws.
g)
Nonwaiver and Expenses
.
No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right
or otherwise prejudice Holders rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the
Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material
damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys fees, including those of appellate proceedings, incurred by Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h)
Notices
. Any and
all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of
Exercise, shall be in writing and delivered personally, by e-mail, or sent by a nationally recognized overnight courier service, addressed
to the Company, at 104 Cooper Ct., Los Gatos, CA 95032, Attention:
Steve Van Dick
, email address: svandick@tenonmed.com, or such
other email address or address as the Company may specify for such purposes by notice to the Holders. Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by e-mail, or sent by a nationally
recognized overnight courier service addressed to each Holder at the e-mail address or address of such Holder appearing on the books of
the Company. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the
time of transmission, if such notice or communication is delivered via e-mail at the e-mail address set forth in this Section prior to
5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after the time of transmission, if such notice or communication
is delivered via e-mail at the e-mail address set forth in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (iii) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
B-
8
i)
Limitation of Liability
.
No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or
as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j)
Remedies
. The Holder,
in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance
of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for
specific performance that a remedy at law would be adequate.
k)
Successors and Assigns
.
Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and
be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l)
Amendment
. This
Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m)
Severability
. Wherever
possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if
any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n)
Headings
. The headings
used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
[Signature Page Follows.]
B-
9
IN WITNESS WHEREOF, the Company has caused this
Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
TENON MEDICAL, INC.
By:
Name:
Steven Foster
Title:
President CEO
B-
10
EXHIBIT 1-A
NOTICE OF EXERCISE
TO:
(1) The undersigned hereby elects
to purchase Warrant Shares of the Company pursuant to the terms of the attached Warrant and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form
of (check applicable box):
☐ in lawful money of the United States; or
☐ if permitted
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise
this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in
subsection 2(c).
(3) Please issue a certificate
or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:
(3)
Accredited Investor
.
The undersigned is an accredited investor as defined in Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
Name of Investing Entity:
Signature of Authorized Signatory of Investing Entity
:
Name of Authorized Signatory:
Title of Authorized Signatory:
Date:
B-
11
EXHIBIT 1-B
ASSIGNMENT FORM
(To assign the foregoing warrant, execute this
form and supply required information. Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [] all of or [] shares
of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
whose address is
Dated:
_______________________,________
Holders Signature:
Holders Address:
Signature Guaranteed:
NOTE: The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must
be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should
file proper evidence of authority to assign the foregoing Warrant.
B-
12
Annex C
AMENDMENT TO TENON MEDICAL, INC. 2022 EQUITY
INCENTIVE PLAN
[*], 2024
Subject to the approval of
the stockholders (the
Stockholder Approval
) of Tenon Medical, Inc., a Delaware corporation (the
Company
),
at the Companys 2024 Annual Meeting of Stockholders, the Tenon Medical, Inc. 2022 Equity Incentive Plan (the
2022 Plan
)
is hereby amended as follows:
1.
Section
3
. Sections 3.1 and 3.2 of the 2022 Plan are hereby amended and restated in its entirety as follows:
3.1
Stock
Subject to the Plan
. Subject to adjustment upon changes in capitalization of the Company as provided in Section 15 of the Plan
and the automatic increase set forth in Section 3.2 of the Plan, the maximum aggregate number of Shares that may be subject to
Awards and sold under the Plan will be equal to 1,408,959 Shares. In addition, Shares may become available for issuance under
Section 3.2 of the Plan. The Shares may be authorized but unissued, or reacquired Common Stock.
3.2
Automatic
Share Reserve Increase
. Subject to adjustment upon changes in capitalization of the Company as provided in Section 15, the
number of Shares available for issuance under the Plan will be increased on the first day of each Fiscal Year beginning with the
2025 Fiscal Year, in an amount equal to the least of (a) 2,200,000 Shares, (b) a number of Shares equal to four percent (4%) of the
total number of shares of all classes of common stock of the Company outstanding on the last day of the immediately preceding Fiscal
Year, and (c) such number of Shares determined by the Administrator no later than the last day of the immediately preceding Fiscal
Year.
2.
Section 2.12
. Section 2.12 of the 2022 Plan is hereby amended and restated in its entirety as follows:
2.12
Consultant
means any natural person, including an advisor, or any legal entity, engaged by the Company or any of its Parent or Subsidiaries to render
bona fide services to such entity, provided the services (a) are not in connection with the offer or sale of securities in a capital-raising
transaction, and (b) do not directly promote or maintain a market for the Companys securities.
Except as expressly amended
hereby, the terms of the 2022 Plan shall be and remain unchanged and the 2022 Plan as amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, the Company
has caused this Amendment to be executed by its duly authorized representative on the day and year first above written.
TENON MEDICAL, INC.
By:
Name:
Steven Foster
Title:
Chief Executive Officer and President
C-1
TABLE OF CONTENTS
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* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR
WHICH
THE 13F WAS FILED.
FUND
NUMBER OF SHARES
VALUE ($)
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