CTRVP Hepion Pharmaceuticals Inc (PK)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): July 19, 2024

 

Hepion Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		001-36856		46-2783806
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

399 Thornall Street, First Floor, Edison, NJ		08837
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (732) 902-4000

 

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

 

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

 

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

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		HEPA		Nasdaq Capital Market

 

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

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

Item 1.01 Entry into a Material Definitive Agreement.

 

Merger Agreement

 

Overview

 

On July 19, 2024, Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), Pharma Two B Ltd., a company organized under the laws of the State of Israel (“Parent”), and Pearl Merger Sub, Inc., a Delaware corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other things, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as an indirect wholly owned subsidiary of Parent. Terms capitalized but not defined herein have the meanings given in the Merger Agreement.

 

Merger Sub is a newly incorporated Delaware corporation and a wholly owned, direct subsidiary of P2B HoldCo, Inc., a Delaware corporation (“Holdco”). Holdco is a wholly owned, direct subsidiary of P2B Topco, Inc., a Delaware corporation (“Topco”). Topco is a wholly owned, direct subsidiary of Parent. Each of Merger Sub, Holdco and Topco were formed for purposes of consummating the transactions contemplated by the Merger Agreement and the other Transaction Agreements (as defined in the Merger Agreement).

 

The Board of Directors of the Company has (i) determined that the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, on the terms and subject to the conditions set forth therein, are in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement, the execution and delivery by the Company of the Merger Agreement, the performance by the Company of its obligations contained therein and the consummation of the Transactions, including the Merger, on the terms and subject to the conditions contained in the Merger Agreement and the other Transaction Agreements to which the Company is a party and (iii) resolved to recommend adoption and approval of the Merger Agreement, the other Transaction Agreements to which the Company is a party and the Transactions, including the Merger, to the Company’s stockholders.

 

Treatment of Company Common Stock and Parent Ordinary Shares

 

On the Closing Date (as defined in the Merger Agreement), subject to obtaining Parent’s shareholder approval and the Company’s stockholder approval, immediately prior to the Effective Time (as defined below) and prior to the consummation of any of the transactions contemplated by the PIPE Agreements (as defined in the Merger Agreement), the following actions shall take place or be effected: (A) the Company shall cause all of its issued capital stock which is not in the form of the Company’s common stock, par value $0.0001 per share (“Common Stock”) to be converted into shares of Common Stock in accordance with the Company’s organizational documents, and shall further cause any convertible instruments, including but not limited to warrants, to be converted into shares of Common Stock; and (B) (i) each Ordinary A Share of Parent, nominal value NIS 1 (“Parent Ordinary A Share”), Ordinary B Share of Parent, nominal value NIS 1 (“Parent Ordinary B Share”), and each of the outstanding classes of Parent’s preferred shares (collectively, the “Parent Preferred Share”) that is issued and outstanding immediately prior to the Effective Time shall be automatically converted into such number of Parent’s ordinary shares per the terms of the Merger Agreement; (ii) the amended and restated articles of association of Parent shall be adopted and become effective; (iii) each of Parent’s ordinary shares, issued and outstanding immediately prior to the Effective Time (including each of Parent’s ordinary shares that are issued upon the conversion of Parent Ordinary A Shares, Parent Ordinary B Shares and Parent Preferred Shares pursuant to clause (i) above), shall be split into such number of Parent’s ordinary shares as shall be necessary for purposes of the closing of the Merger (the “Closing”) and the initial listing of Parent’s ordinary shares on Nasdaq (the “Share Split”); provided that no fraction of a Parent’s ordinary share will be issued by virtue of the Share Split, and each of Parent’s shareholders that would otherwise be so entitled to a fraction of Parent’s ordinary shares (after aggregating all fractional Parent’s ordinary shares that otherwise would be received by such Parent’s shareholder) shall instead be entitled to receive such number of Parent’s ordinary shares to which such Parent’s shareholder would otherwise be entitled, rounded to the nearest whole number; and (iv) any outstanding options and warrants of Parent issued and outstanding immediately prior to the Effective Time shall be adjusted immediately upon the Share Split to give effect to the foregoing transactions, provided that to the extent such adjustment would result in (x) a fraction of share being subject to any outstanding stock option or warrant, such share shall be rounded down to the nearest whole share or (y) the exercise price of an option being a fraction of a cent, the exercise price will be rounded up to the nearest whole cent.

 

 

At the effective time of the Merger (the “Effective Time”), on the terms and subject to the conditions set forth in the Merger Agreement, each share of Common Stock that is issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, be converted into the right to receive such ordinary shares of Parent and shall no longer be outstanding and shall automatically be canceled and shall cease to exist (the “Merger Consideration”).

 

Additionally, each share of common stock of Merger Sub that shall be outstanding immediately prior to the Effective Time shall, by virtue of the Merger, be converted into the right to receive one share of Common Stock.

 

Closing Conditions

 

The Merger is expected to be consummated in the fourth quarter of 2024. The obligation of the parties to consummate the Merger is subject to various conditions, including, but not limited to: (i) adoption of the Merger Agreement and the approval of the Merger and the other Transactions by the required portion of the Company’s stockholders as determined in accordance with applicable law and the Company’s organizational documents; (ii) adoption of the Merger Agreement and the approval of the Merger and the other Transactions by Parent’s shareholders, as determined in accordance with applicable law and Parent’s organizational documents (iii) the absence of any judgment, order or law prohibiting the consummation of the Merger; (iv) upon the Closing, the approval for listing on Nasdaq of Parent’s ordinary shares to be issued in connection with the Closing of the Merger; (v) the effectiveness of the Registration Statement (as defined below) to be filed by Parent with the SEC with respect to Parent’s ordinary shares that constitute the Merger Consideration, (vi) the SPA (as defined below) shall be in full force and effect and concurrently with the Closing cash proceeds of not less than $8,600,000 (eight million six hundred thousand) shall have been received by Parent in connection with the consummation of the transactions contemplated by such SPA, (vii) the parties shall take all necessary action so that immediately after the Effective Time, the post-Closing board of directors of Parent (the “Post-Closing Parent Board”) shall be comprised of seven directors; whereby (a) Parent shall have the right to designate (i) three members to the Post-Closing Parent Board and (ii) two industry experts that shall qualify as independent directors (as defined under the Nasdaq listing rules); and (b) the Company shall have the right to designate two members to the Post-Closing Parent Board, (viii) Parent shall file a notice with the Israel Innovation Authority (the “IIA”) in accordance with applicable law and obtain the unconditional approval of the IIA to consummate the Transactions, (ix) the accuracy of the representations and warranties of the parties in the Merger Agreement (subject to customary materiality qualifiers except to the extent provided in the Merger Agreement); (x) each party’s performance in all material respects of its covenants and obligations contained in the Merger Agreement and (xi) the absence of a Material Adverse Effect. Following the execution of the Merger Agreement, Holdco, in its capacity as the sole stockholder of Merger Sub, executed and delivered to the Company a written consent approving the Merger Agreement and the Merger, thereby providing all required stockholder approvals for the Merger. No further action by holders of the Common Stock is required to complete the Merger.

 

No-Shop

 

Under the Merger Agreement, the Company is subject to a customary “no-shop” provision that restricts the Company and its representatives from soliciting any Acquisition Proposal or Acquisition Inquiry (each as defined in the Merger Agreement) from third parties or providing information to or participating in any discussions or negotiations with third parties regarding any Acquisition Proposal or Acquisition Inquiry.

 

Termination; Termination Fees

 

The Merger Agreement may be terminated, and the Transactions abandoned prior to the Closing as follows:

 

(a) by mutual written agreement of the Company and Parent;

 

(b) by either the Company or Parent, if there shall be in effect any (i) law or (ii) Governmental Order (as defined in the Merger Agreement), other than, for the avoidance of doubt, a temporary restraining order, that (x) in the case of each of clauses (i) and (ii), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the Merger, and (y) in the case of clause (ii) such Governmental Order shall have become final and non-appealable;

 

 

(c) by either the Company or Parent, if the Effective Time has not occurred by 11:59 p.m., New York City time, on the date that is 90 days following the date of the Merger Agreement (the “Termination Date”); provided, however, that if the SEC has not declared the Registration Statement (as defined below) effective on or prior to the date that is 90 days following the date of the Merger Agreement, the Termination Date shall be automatically extended to the date that is 180 days following the date of the Merger Agreement; provided, further, that the right to terminate the Merger Agreement pursuant to this subsection (c) will not be available to any party whose breach of any provision of the Merger Agreement caused or resulted in the failure of the Transactions to be consummated by such time;

 

(d) by the Company, if Parent or Merger Sub has breached or failed to perform any of its (i) representations or warranties or (ii) covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in Section 9.02(a) or 9.02(b) of the Merger Agreement to be satisfied at the Closing and (B) is not capable of being cured by the Termination Date or, if capable of being cured by the Termination Date, is not cured by Parent or Merger Sub before the earlier of (x) the fifth Business Day immediately prior to the Termination Date and (y) the 45th day following receipt of written notice from the Company of such breach or failure to perform; provided that the Company shall not have the right to terminate the Merger Agreement pursuant to this subsection (d) if it is then in material breach of any of its representations, warranties, covenants or other agreements contained in the Merger Agreement;

 

(e) by Parent, if the Company has breached or failed to perform any of its respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in Section 9.03(a) or 9.03(b) of the Merger Agreement to be satisfied at the Closing and (B) is not capable of being cured by the Termination Date or, if capable of being cured by the Termination Date, is not cured by the Company before the earlier of (x) the fifth Business Day immediately prior to the Termination Date and (y) the 45th day following receipt of written notice from Parent of such breach or failure to perform; provided that Parent shall not have the right to terminate the Merger Agreement pursuant to this subsection (e) if it is then in material breach of any of its representations, warranties, covenants or other agreements contained in the Merger Agreement;

 

(f) by either the Company or Parent, if the Company failed to obtain stockholder approval upon vote taken thereon at a duly convened special meeting (or at a meeting of its shareholders following any adjournment or postponement thereof); provided that the right to terminate the Merger Agreement under this subsection (f) shall not be available to the Company if the Company has breached the Merger Agreement;

 

(g) by either the Company or Parent, if, at the Parent special meeting (including any adjournments thereof), the Parent transaction proposals are not duly adopted by Parent’s shareholders by the requisite vote under applicable Law and the Organizational Documents of Parent; provided that the right to terminate the Merger Agreement under this subsection (g) shall not be available to Parent if Parent has breached the Merger Agreement; or

 

(h) by Parent, if the Company breaches its obligations relating to the special meeting of its stockholders pursuant to Section 8.02(b) of the Merger Agreement.

 

Representations, Warranties and Covenants

 

Each of the Company and Parent has agreed to customary representations, warranties and covenants of the Company, including, among others, covenants relating to (i) obtaining the requisite approval of their respective stockholders and shareholders, as applicable, (ii) use commercially reasonable efforts (taking into consideration the financial condition and cash runway of the Company) to carry on its business in all material respects in the ordinary course of business during the period between the execution of the Merger Agreement and the consummation of the Merger, (iii) non-solicitation of alternative acquisition proposals (iv) not engage in specified types of transactions or take specified actions during this period unless agreed to in writing by Parent, (v) Parent using its reasonable best efforts obtain approval from Nasdaq for its initial listing application in connection with the Transactions and cause Parent’s ordinary shares to be issued in connection with the Merger to be approved for listing on Nasdaq prior to the Closing and (vi) the parties filing with the U.S. Securities and Exchange Commission (the “SEC”) and causing to become effective a registration statement on Form F-4 to register Parent’s ordinary shares to be issued in connection with the Merger (the “Registration Statement”).

 

 

Delisting of Shares of Common Stock

 

If the Merger is consummated, the Common Stock will cease to be quoted on the Nasdaq Capital Market and will be eligible for deregistration under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Company Support Agreements

 

In connection with the execution of the Merger Agreement, stockholders of the Company entered into support agreements with the Company relating to the Merger covering approximately 0.025% of the outstanding shares of Common Stock, as of immediately prior to the signing of the Merger Agreement (the “Company Support Agreements”). The Company Support Agreements provide, among other things, that the stockholders party to the Company Support Agreements will vote all of the shares of Common Stock held by them in favor of the Merger and the other Transactions contemplated by the Merger Agreement.

 

A form of the Company Support Agreement is attached hereto as Exhibit 10.3.

 

Lock-Up Agreements

 

Concurrently with the execution of the Merger Agreement, certain stockholders of the Company entered into lock-up agreements (the “Lock-Up Agreements”), pursuant to which they accepted certain restrictions on transfers of shares of Common Stock held, or to be held, by them for the 180-day period following the Effective Time.

 

A form of Lock-Up Agreement is attached hereto as Exhibit 10.4.

 

Securities Purchase Agreement and Registration Rights Agreement

 

Concurrently with the Merger, on July 19, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain purchasers pursuant to which the Company sold an aggregate of $2.9 million in principal amount of the Company’s Original Issue Discount Senior Unsecured Nonconvertible Notes (the “Notes”). The Notes are due on the earlier of: (i) December 31, 2024, (ii) the date of the closing of the Merger, (iii) the date that the Merger is terminated pursuant to the terms of the Merger Agreement, or (iv) such earlier date as the Notes are required or permitted to be repaid as provided in the Note, as may be extended at the option of the holder of the Note as described in the Note.

 

Pursuant to the SPA, the Company shall, in addition to the other closing deliverables, deliver to each purchaser (i) a Note with a principal amount equal to such purchaser’s subscription amount multiplied by 1.16, and (ii) a number of shares of Common Stock equal to 19.99% of the total outstanding shares of Common Stock, multiplied by such purchaser’s subscription amount, divided by $2,500,000. The SPA also contains customary representations, warranties, covenants and conditions to close. A form of Note is filed herewith as Exhibit 4.1.

 

The Notes and the shares issued pursuant to the SPA have not been, and the Notes will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other jurisdiction. The Notes and the shares may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act and any applicable state securities laws. The Notes and shares were offered and sold in transactions exempt from registration under the Securities Act in reliance on Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder. The purchasers of the Notes and the shares are each an “accredited investor,” as defined in Regulation D, and are acquiring the Notes and shares for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

 

On July 19, 2024, in connection with the Merger and the Transactions contemplated by the Merger Agreement and the SPA, the Company entered into a Registration Rights Agreement (the “RRA”) with Parent and the purchasers identified therein pursuant to which Parent agreed to provide certain registration rights with respect to the Hepion Registrable Securities (as defined in the RRA), which securities include the shares of Common Stock issued by the Company pursuant to the SPA.

 

 

Description of Agreements Not Complete

 

The Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA and the RRA, and the above descriptions of the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA and the RRA have been included to provide investors with information regarding the terms of such agreements. It is not intended to provide any other factual information about the Company, Parent or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement, SPA and RRA were made only for purposes of the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, SPA and RRA, respectively, and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA and the RRA and may be subject to limitations agreed upon by the parties in connection with negotiating the terms of the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA and the RRA, including being qualified by confidential disclosures made by each party for the purposes of allocating contractual risk between the parties. In addition, certain representations and warranties may be subject to a contractual standard of materiality different from those generally applicable to investors and may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA and the RRA, which subsequent information may or may not be fully reflected in public disclosures by the Company. The Merger Agreement, the SPA and the RRA should not be read alone, but should instead be read in conjunction with the other information regarding the parties that is or will be contained in, or incorporated by reference into, the Registration Statement on Form F-4 to be filed by Parent in connection with the Merger, which will include a proxy statement/prospectus, as well as other filings made by the Company, Parent and certain other persons in connection with the Merger and related Transactions, such as the Company’s Annual Report on Form 10-K, as amended, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K and other documents that the parties will file with the SEC. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the Company, Parent or any of their respective subsidiaries, affiliates or businesses. The foregoing descriptions of the Merger Agreement, the Company Support Agreement, the Lock-Up Agreement, the SPA, the RRA and the Transactions contemplated thereby do not purport to be complete and are subject to, and qualified in their entirety by, the full text of such agreements, copies of which are filed as exhibits herewith, and are incorporated herein by reference.

 

This Current Report on Form 8-K does not, and the exhibits attached hereto do not, constitute an offer to sell any security, nor a solicitation for an offer to purchase any security, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration, qualification, or exemption under the securities laws of any such jurisdiction.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The information set forth in Item 1.01 in this Current Report on Form 8-K is incorporated herein by reference into this Item 2.03.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 3.02.

 

The Note and share issuance described in Item 1.01 was made in reliance on an exemption from the registration requirements pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, since the share issuance does not involve any public offering.

 

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

To the extent responsive to this item, the information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 5.02.

 

Item 7.01 Regulation FD Disclosure.

 

Attached as Exhibit 99.1 to this Current Report on Form 8-K is a transaction presentation used by the Company in relation to the Merger and Transactions.

 

The information in this Item 7.01 and Exhibit 99.1 of this Current Report on Form 8-K is furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information in this Item 7.01 and Exhibit 99.1 of this Current Report on Form 8-K shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in any such filing.

 

Item 8.01. Other Events.

 

On July 22, 2024, Parent and the Company issued a press release announcing the entry into the Merger Agreement, the SPA, the RRA and the transactions contemplated thereby. A copy of this press release is attached as Exhibit 99.2 to this Current Report on Form 8-K.

 

The information contained in this Current Report on Form 8-K under Item 8.01, including the accompanying Exhibit 99.2, is being furnished pursuant to Item 8.01 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. Such information shall not be incorporated by reference into any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

Exhibit No.		Exhibit
2.1*		Agreement and Plan of Merger, dated as of July 19, 2024, by and among the Company, Parent and Merger Sub.
4.1*		Form of Senior Unsecured Nonconvertible Note
10.1*		Form of Securities Purchase Agreement
10.2		Form of Registration Rights Agreement
10.3		Form of Company Support Agreement by and between the Company and each of the parties named in each agreement thereof.
10.4		Form of Lock-Up Agreement by and between the Company and each of the parties named in each agreement thereof.
99.1		Transaction Presentation dated July 22, 2024
99.2		Press Release, dated July 22, 2024
104		Cover Page Interactive Data File (embedded within the XBRL document)
*		This filing excludes certain schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K, which the registrant agrees to furnish supplementally to the SEC upon request by the SEC; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act, for any schedules or exhibits so furnished.

 

 

Forward-Looking Statements

 

Certain statements in this communication may be considered “forward-looking statements”. Forward-looking statements generally relate to future events or the Company’s or Parent’s future financial or operating performance. For example, statements regarding the Company and Parent’s expectations with respect to the Merger, including the timing of closing thereof and pro forma ownership of the combined company, the concurrent financing, the cash runway of the combined company; planned timing of New Drug Application (“NDA”) submission, P2B001 potential as a treatment for Parkinson’s disease (“PD”) and label expansion, projected net revenues, and related matters, as well as all other statements other than statements of historical fact included in this communication, are forward-looking statements. When used in this communication, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, as they relate to the Company or Parent, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s and Parent’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in the Company’s filings with the SEC. Most of these factors are outside the control of the Company and/or Parent and are difficult to predict. In addition to factors disclosed in the Company’s filings with the SEC, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the risk that the Merger may not be completed in a timely manner or at all, which may adversely affect the price of the securities of the Company; the inability to meet the closing conditions to the Merger, including the failure of Parent to meet Nasdaq initial listing standards in connection with the consummation of the Merger; costs related to the Merger and the failure to realize anticipated benefits of the Merger or to realize estimated pro forma results with respect thereto as well as other risks associated with biopharmaceutical companies generally, including the risks of filing an NDA, obtaining regulatory approval for any product candidates, commercialization of any approved product, including P2B001 for PD, as well as the total addressable market and potential for success of P2B001, the presentation of financial information in U.S. GAAP, completion of a PCAOB audit of U.S. GAAP financials, as well as other risks that will be set forth in more detail in the Registration Statement (which will include a proxy statement/prospectus), when filed with the SEC. The forward-looking statements are based upon management’s beliefs and assumptions; and other risks and uncertainties to be identified on the Registration Statement (when available) relating to the Merger, including those under “Risk Factors” therein, and in other filings with the SEC made by Merger. Each of the Company and Parent undertake no obligation to update these statements for revisions or changes after the date of this communication, except as required by law.

 

No Offer or Solicitation

 

This communication does not constitute an offer to sell or a solicitation of an offer to buy, or the solicitation of any vote or approval in any jurisdiction in connection with the proposed Merger or any related transactions, nor shall there be any sale, issuance or transfer of securities in any jurisdiction where, or to any person to whom, such offer, solicitation or sale may be unlawful. Any offering of securities or solicitation of votes regarding the proposed transaction will be made only by means of a proxy statement/prospectus that complies with applicable rules and regulations promulgated under the Securities Act and the Securities Exchange Act of 1934, as amended, or pursuant to an exemption from the Securities Act or in a transaction not subject to the registration requirements of the Securities Act.

 

 

Additional Information and Where to Find It

 

In connection with the proposed Merger, Parent intends to file the Registration Statement with the SEC, which will include a preliminary prospectus with respect to its securities to be issued in connection with the Merger, and a preliminary proxy statement with respect to the Company’s stockholder meeting at which the Company’s stockholders will be asked to vote on the proposed Merger and related matters. Each of the Company and Parent urge investors, stockholders, and other interested persons to read, when available, the Registration Statement, including the proxy statement/prospectus, any amendments thereto, and any other documents filed with the SEC, before making any voting or investment decision because these documents will contain important information about the proposed Merger. After the Registration Statement has been filed and declared effective, Parent and the Company will mail the definitive proxy statement/prospectus to stockholders of the Company as of a record date to be established for voting on the Merger. The Company’s stockholders will also be able to obtain a copy of such documents, without charge, by directing a request to c/o Executive Chairman, Hepion Pharmaceuticals, Inc., 399 Thornall Street, First Floor, Edison, NJ 08837.

 

Participants in the Solicitation

 

Parent and the Company and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in connection with the proposed Merger. Information about the Company’s directors and executive officers and their ownership of the Company’s securities is set forth in the Company’s filings with the SEC. To the extent that holdings of the Company’s securities have changed since the amounts printed in the Company’s Annual Report on Form 10-K/A, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. A list of the names of such directors and executive officers and information regarding their interests in the Merger will be contained in the proxy statement/prospectus when available. You may obtain free copies of these documents as described above.

 

 

SIGNATURES

 

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

 

	HEPION PHARMACEUTICALS, INC.
Date: July 22, 2024	By:	/s/ John Cavan
		John Cavan
		Interim Chief Executive Officer and Chief Financial Officer

 

 

Exhibit 2.1

 

EXECUTION

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

PHARMA TWO B LTD.

 

PEARL MERGER SUB, INC.

 

and

 

HEPION PHARMACEUTICALS, INC.

 

dated as of

 

JULY 19, 2024

 

 

TABLE OF CONTENTS

 

		Page
Article I CERTAIN DEFINITIONS		2
Section 1.01	Definitions	2
Section 1.02	Construction	11
Article II PRE-CLOSING TRANSACTIONS; THE MERGER		12
Section 2.01	Pre-Closing Transactions	12
Section 2.02	The Merger	12
Section 2.03	Effective Time	12
Section 2.04	Effect of the Merger	12
Section 2.05	Governing Documents	12
Section 2.06	Directors and Officers of the Surviving Company	13
Section 2.07	Further Assurances	13
Article III THE MERGER; CLOSING		13
Section 3.01	Effect of Merger on Securities of Hepion and Merger Sub	13
Section 3.02	Closing	13
Section 3.03	Delivery	14
Section 3.04	Withholding Rights.	14
Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY		16
Section 4.01	Corporate Organization of the Company	16
Section 4.02	Subsidiaries	16
Section 4.03	Due Authorization	16
Section 4.04	No Conflict	16
Section 4.05	Governmental Authorities; Consents	17
Section 4.06	Capitalization	17
Section 4.07	Capitalization of Subsidiaries	18
Section 4.08	Financial Statements; Absence of Changes	18
Section 4.09	No Undisclosed Liabilities	19
Section 4.10	Litigation and Proceedings	19
Section 4.11	Compliance with Laws	19
Section 4.12	Contracts; No Defaults	19
Section 4.13	Company Benefit Plans	21
Section 4.14	Labor Matters	23
Section 4.15	Taxes	23
Section 4.16	Insurance	26
Section 4.17	Real Property	26
Section 4.18	Intellectual Property and IT Security	26

 

 

Section 4.19	Environmental Matters	30
Section 4.20	Healthcare Matters	30
Section 4.21	Brokers’ Fees	31
Section 4.22	Related Party Transactions	31
Section 4.23	International Trade; Anti-Corruption	32
Section 4.24	Investment Company Act	32
Section 4.25	Product Liability	32
Section 4.26	No Other Representations	33
Article V REPRESENTATIONS AND WARRANTIES OF HEPION		33
Section 5.01	Corporate Organization	33
Section 5.02	Subsidiaries	33
Section 5.03	Due Authorization	33
Section 5.04	No Conflict	34
Section 5.05	Governmental Authorities; Consents	34
Section 5.06	Capitalization	34
Section 5.07	Capitalization of Subsidiaries	35
Section 5.08	SEC Reports; Financial Statements; Sarbanes-Oxley Act; Undisclosed Liabilities	36
Section 5.09	No Undisclosed Liabilities	37
Section 5.10	Litigation and Proceedings	37
Section 5.11	Compliance with Laws	37
Section 5.12	Hepion Benefit Plans.	37
Section 5.13	Labor and Employment Matters	39
Section 5.14	Tax Matters	40
Section 5.15	Insurance	41
Section 5.16	Real Property	42
Section 5.17	IT Security.	42
Section 5.18	Environmental Matters.	43
Section 5.19	Brokers’ Fees	43
Section 5.20	Related Party Transactions	43
Section 5.21	International Trade; Anti-Corruption	43
Section 5.22	Investment Company Act	44
Section 5.23	Product Liability	44
Section 5.24	Nasdaq Listing	44
Section 5.25	Material Contracts; No Defaults	44
Section 5.26	Hepion Support Agreement	45
Section 5.27	Absence of Changes	45
Section 5.28	Residency	45

 

 

Section 5.29	Shell Company Status	45
Section 5.30	Healthcare Matters	45
Section 5.31	No Other Representations	46
Article VI COVENANTS OF THE COMPANY		46
Section 6.01	Conduct of Business	46
Section 6.02	Inspection	48
Section 6.03	Company Securities Listing	49
Section 6.04	No Third-Party Beneficiaries	49
Section 6.05	Securities Laws	49
Article VII COVENANTS OF HEPION		49
Section 7.01	Indemnification and Directors’ and Officers’ Insurance	49
Section 7.02	Conduct of Hepion During the Interim Period	50
Section 7.03	Inspection	52
Section 7.04	Section 16 Matters	52
Section 7.05	Hepion Public Filings	52
Section 7.06	Hepion Securities Listing	52
Section 7.07	Hepion Board Recommendation	52
Section 7.08	IIA	52
Article VIII JOINT COVENANTS		53
Section 8.01	Efforts to Consummate	53
Section 8.02	Registration Statement; Shareholder Meetings	54
Section 8.03	Hepion Non-Solicitation	56
Section 8.04	Company Non-Solicitation.	57
Section 8.05	Tax Matters	58
Section 8.06	Confidentiality; Publicity	58
Section 8.07	Legacy Asset Disposition	58
Article IX CONDITIONS TO OBLIGATIONS		59
Section 9.01	Conditions to Obligations of All Parties	59
Section 9.02	Additional Conditions to Obligations of Hepion	60
Section 9.03	Additional Conditions to the Obligations of the Company and Merger Sub	61
Article X TERMINATION/EFFECTIVENESS		62
Section 10.01	Termination	62
Section 10.02	Effect of Termination	63
Article XI MISCELLANEOUS		63
Section 11.01	Waiver	63
Section 11.02	Notices	63
Section 11.03	Assignment	64

 

 

Section 11.04	Rights of Third Parties	64
Section 11.05	Expenses	64
Section 11.06	Governing Law	64
Section 11.07	Captions; Counterparts; Electronic Signatures	65
Section 11.08	Schedules and Exhibits	65
Section 11.09	Entire Agreement	65
Section 11.10	Amendments	65
Section 11.11	Severability	65
Section 11.12	Jurisdiction; WAIVER OF TRIAL BY JURY	65
Section 11.13	Enforcement	66
Section 11.14	Non-Recourse	66
Section 11.15	Non-Survival	66
Section 11.16	Acknowledgements	67
Section 11.17	Waiver of Conflicts Regarding Representations; Non-Assertion of Attorney-Client Privilege	67

 

Annex 1 – Hepion Support Agreement Signatories

Annex 2 – Lock-Up Agreement Signatories

Annex 3 – Company Knowledge

Annex 4 – Hepion Knowledge

Annex 5 – Permitted Liens

Annex 6 – Exchange Ratio

Annex 7 – Exchange Ratio Adjustment Illustration

Exhibit A – Form of Amended and Restated Articles of Association of the Company

Exhibit B – Form of Hepion Support Agreement

Exhibit C – Form of Amended Investors’ Rights Agreement

Exhibit D – Form of Lock-Up Agreement

Exhibit E – Form of Subscription Agreement

 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of July 19, 2024, by and among Hepion Pharmaceuticals, Inc., a Delaware corporation (“Hepion”), Pearl Merger Sub, Inc., a Delaware corporation (“Merger Sub”), and Pharma Two B Ltd., a company organized under the laws of the State of Israel (the “Company”). Hepion, Merger Sub and the Company are collectively referred to herein as the “Parties” and individually as a “Party.”

 

RECITALS

 

WHEREAS, Merger Sub is a newly incorporated Delaware corporation and a wholly owned, direct subsidiary of P2B HoldCo, Inc., a Delaware corporation (the “Holdco”). Holdco is a wholly owned, direct subsidiary of P2B Topco, Inc., a Delaware corporation (the “Topco”). Topco is a wholly owned, direct subsidiary of the Company.

 

WHEREAS, each of Merger Sub, Holdco and Topco were formed for purposes of consummating the transactions contemplated by this Agreement and the other Transaction Agreements (the “Transactions”).

 

WHEREAS, immediately following the Recapitalization (as defined herein), upon the terms and subject to the conditions hereof and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), at the Closing (as defined herein), Merger Sub will merge with and into Hepion (the “Merger”), with Hepion surviving the Merger as an indirect subsidiary of the Company (the “Surviving Company”).

 

WHEREAS, the board of directors of the Company has unanimously: (a) determined that it is in the best interests of the Company and the Company Shareholders, and declared it advisable, to enter into this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated thereby; and (b) approved and recommended to the Company Shareholders to approve, among other things, the adoption and approval of this Agreement, the other Transaction Agreements to which it is a party and the other Transactions contemplated hereby and thereby, including the Merger, and the consummation of such transactions.

 

WHEREAS, the board of directors of Merger Sub has unanimously determined that it is in the best interests of Merger Sub to enter into this Agreement and the other Transaction Agreements to which it is a party and to consummate the transactions contemplated thereby.

 

WHEREAS, the board of directors of Hepion has unanimously (i) determined that it is in the best interests of Hepion and the stockholders of Hepion, and declared it advisable, to enter into this Agreement and the Hepion Support Agreement, (ii) approved this Agreement and the Transactions, including the Merger, on the terms and subject to the conditions of this Agreement, and (iii) adopted a resolution recommending to its stockholders the approval of the Hepion Transaction Proposals (as defined herein) (the “Hepion Board Recommendation”).

 

WHEREAS, the Company, in its capacity as the sole stockholder of Merger Sub, has approved this Agreement, the other Transaction Agreements to which Merger Sub is a party and the Transactions contemplated hereby and thereby, including the Merger, in accordance with applicable Law, upon the terms and subject to the conditions of this Agreement.

 

WHEREAS, prior to the Closing, the Company shall, subject to obtaining the Company Shareholder Approval, adopt the amended and restated articles of association of the Company in substantially the form attached hereto as Exhibit A (the “A&R AoA”).

 

 

WHEREAS, concurrently with the execution and delivery of this Agreement, the Company, Hepion and each of the Hepion stockholders listed on Annex 1 hereto are entering into the transaction support agreement in the form attached hereto as Exhibit B (the “Hepion Support Agreement”).

 

WHEREAS, prior to the Closing, the Company shall amend and restate its Amended Investors’ Rights Agreement in the form attached hereto as Exhibit C (the “Amended IRA”).

 

WHEREAS, as a condition to the willingness of, and as an inducement to Hepion to enter into this Agreement, contemporaneously with the execution and delivery of this Agreement, each of the signatories listed on Annex 2 hereto is entering into a lock-up agreement, in the form attached hereto as Exhibit D (the “Lock-up Agreements”).

 

WHEREAS, on or prior to the date hereof, the Company has obtained commitments from certain investors for a private placement of Company Ordinary Shares (as defined herein) pursuant to the terms of the subscription agreements in the form attached hereto as Exhibit E (as may be amended or otherwise modified from time to time, collectively, the “PIPE Agreements”), such transactions to be consummated substantially concurrently with the Closing, in accordance with the terms of the PIPE Agreements (the “PIPE Financing”).

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

Article I
CERTAIN DEFINITIONS

 

Section 1.01 Definitions. For purposes of this Agreement, the following capitalized terms have the following meanings:

 

“Action” means any action, claim, suit, audit, arbitration or legal, judicial or administrative proceeding (whether at law or in equity) by or before any Governmental Authority.

 

“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person, through one or more intermediaries or otherwise. The term “control” means the ownership of a majority of the voting securities of the applicable Person or the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the applicable Person, whether through ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

 

“Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), the UK Bribery Act 2010, Sub-chapter 5 of Chapter 9 of Part B of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law (Bribery Transactions), 2000, and any other applicable anti-bribery, anti-corruption or anti-money laundering Laws.

 

“Acquisition Inquiry” means, with respect to a Party, an inquiry, indication of interest or request for information (other than an inquiry, indication of interest or request for information made or submitted by the Company, on the one hand, or Hepion, on the other hand, to the other Party) that would reasonably be expected to lead to an Acquisition Proposal.

 

“Acquisition Proposal” means, with respect to a Party, any offer or proposal, whether written or oral (other than an offer or proposal made or submitted by or on behalf of the Company or any of its Affiliates, on the one hand, or by or on behalf of Hepion or any of its Affiliates, on the other hand, to the other Party) contemplating or otherwise relating to any Acquisition Transaction with such Party.

 

 

“Acquisition Transaction” means any transaction or series of related transactions involving:

 

(i) any merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction: (i) in which a Party is a constituent entity; (ii) in which a Person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of Persons directly or indirectly acquires beneficial or record ownership of securities representing more than 20% of the outstanding securities of any class of voting securities of a Party or any of its Subsidiaries; or (iii) in which a Party or any of its Subsidiaries issues securities representing more than 20% of the outstanding securities of any class of voting securities of such Party or any of its Subsidiaries; provided, that in the case of Company, the PIPE Financing shall not be an “Acquisition Transaction”; or

 

(ii) any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated book value or the fair market value of the assets of a Party and its Subsidiaries, taken as a whole.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Tel Aviv, Israel are authorized or required by Law to close.

 

“Cash and Cash Equivalents” means all (a) cash (not including restricted cash) and cash equivalents (not including restricted cash) (including, for the avoidance of doubt, any cash received by Hepion pursuant to any promissory notes delivered concurrently with the signing of this Agreement or prior to the Closing Date or the PIPE Financing); (b) deposits; (c) marketable securities and (d) short term receivables, in each case determined in accordance with GAAP, consistently applied.

 

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

 

“Company Ordinary Shares” means Ordinary Shares nominal value NIS 1 each of the Company.

 

“Company Ordinary A Shares” means Ordinary A Shares nominal value NIS 1 each of the Company.

 

“Company Ordinary B Shares” means Ordinary B Shares nominal value NIS 1 each of the Company.

 

“Company Outstanding Shares” means the total number of Company Ordinary Shares outstanding immediately prior to the Effective Time. For clarity, all Company Ordinary Shares underlying outstanding options, warrants or any equity securities of the Company and outstanding Company Preferred Shares shall be included in the total number of Company Ordinary Shares for purposes of determining the Company Outstanding Shares, to the extent not terminated prior to the Closing Date, and no shares issued in connection with the PIPE Financing shall be included in the Company Outstanding Shares.

 

“Company Preferred C Shares” means Preferred C Shares nominal value NIS 1 each of the Company.

 

“Company Preferred D Shares” means Preferred D Shares nominal value NIS 1 each of the Company.

 

“Company Preferred E Shares” means Preferred E Shares nominal value NIS 1 each of the Company.

 

“Company Preferred E-1 Shares” means Preferred E-1 Shares nominal value NIS 1 each of the Company.

 

 

“Company Preferred E-2 Shares” means Preferred E-2 Shares nominal value NIS 1 each of the Company.

 

“Company Preferred E-3 Shares” means Preferred E-3 Shares nominal value NIS 1 each of the Company.

 

“Company Preferred F Shares” means Preferred F Shares nominal value NIS 1 each of the Company.

 

“Company Preferred F-1 Shares” means Preferred F-1 Shares nominal value NIS 1 each of the Company.

 

“Company Preferred F-2 Shares” means Preferred F-2 Shares nominal value NIS 1 each of the Company.

 

“Company Preferred F-3 Shares” means Preferred F-3 Shares nominal value NIS 1 each of the Company, as may be registered during the Interim Period.

 

“Company Preferred F-4 Shares” means Preferred F-4 Shares nominal value NIS 1 each of the Company, as may be registered during the Interim Period.

 

“Company Preferred Shares” means the Company Ordinary A Shares, Company Ordinary B Shares, Company Preferred C Shares, Company Preferred D Shares, Company Preferred E Shares, Company Preferred E-1 Shares, Company Preferred E-2 Shares, Company Preferred E-3 Shares, Company Preferred F Shares, Company Preferred F-1 Shares, Company Preferred F-2 Shares, Company Preferred F-3 Shares, and Company Preferred F-4 Shares.

 

“Company Shareholders” means, collectively, the holders of Company Ordinary Shares, Company Ordinary A Shares, Company Ordinary B Shares and Company Preferred Shares, as of any determination time prior to the Effective Time, as applicable.

 

“Company Shareholder Approval” means the vote of Company Shareholders required to approve the Company Transaction Proposals, as determined in accordance with applicable Law and the Organizational Documents of the Company.

 

“Company Transaction Proposals” means (i) approval of the A&R AoA, and (ii) such other matters as shall be determined by the Board of the Company.

 

“Company Valuation” means $40,000,000.

 

“Company Value Per Share” equals the Company Valuation divided by the number of Company Outstanding Shares.

 

“Competition Laws” means the Sherman Act of 1890, the Clayton Antitrust Act of 1914, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations promulgated thereunder, the Federal Trade Commission Act of 1914, EU Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EU Merger Regulation) and all other Laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization, abuse of dominance or restraint of trade or lessening competition through merger or acquisition, including all antitrust, competition, merger control and unfair competition Laws.

 

“Consent” means any approval, consent, clearance, waiver, exemption, waiting period expiration or termination, Governmental Order or other authorization issued by or obtained from any Governmental Authority.

 

 

“Contracts” means any legally binding contracts, agreements, licenses, subcontracts, leases, subleases and other commitment (excluding purchase orders entered into in the ordinary course of business).

 

“Environmental Laws” means any and all applicable Laws relating to pollution, protection of the environment (including natural resources), the use, storage, emission, distribution, transport, handling, disposal or release of, or exposure of any Person to, Hazardous Materials, or to the extent related to exposure to Hazardous Materials, public or worker health and safety.

 

“Equity Securities” means, with respect to any Person, (i) any shares of capital or capital stock, partnership, membership, joint venture or similar interest, or other voting securities of, or other ownership interest in, such Person, (ii) any securities of such Person convertible into or exchangeable for cash or shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person, (iii) any warrants, calls, options or other rights to acquire from such Person, or other obligations of such Person to issue, any shares of capital or capital stock or other voting securities of, or other ownership interests in, or securities convertible into or exchangeable for shares of capital or capital stock or other voting securities of, or other ownership interests in, such Person, and (iv) any restricted shares, stock appreciation rights, restricted units, performance units, contingent value rights, “phantom” stock or similar securities or rights issued by or with the approval of such Person that are derivative of, or provide economic benefits based, directly or indirectly, on the value or price of, any shares of capital or capital stock or other voting securities of, other ownership interests in, or any business, products or assets of, such Person.

 

“Exchange Act” means the Securities and Exchange Act of 1934, as amended.

 

“Existing AoA” means the amended and restated articles of association of the Company, last amended on September 15, 2022.

 

“Exchange Ratio” means the ratio (rounded to four decimal places) equal to (a) Hepion Value Per Share divided by (b) the Company Value Per Share. For the avoidance of doubt, an illustrative example of the calculation of the “Exchange Ratio” is set forth in Annex 6, which shall be subject to the Exchange Ratio Adjustment detailed in ‎Section 3.01(a) below.

 

“Fraud” means a misrepresentation or omission of a fact that constitutes common law fraud in the State of Delaware.

 

“Fully-Diluted” shall include (i) all issued and outstanding shares of the Company on an as-converted basis, with all securities convertible into share capital, and other rights (or promises or undertakings to grant such rights, including, without limitation, any written or oral undertaking with respect to such rights) to acquire and/or receive shares or securities exchangeable for shares (including, without limitation, options, warrants, convertible notes and SAFE’s) deemed converted or exercised, as the case may be, at their applicable conversion or exercise price, as the case may be, and including, without limitation, any pre-emptive rights, anti-dilution rights and adjustments that may be activated or triggered as a result of or in connection with the transactions contemplated under this Agreement and also taking into account any and all shares of the Company reserved for issuance upon exercise of options, whether promised, granted or to be granted to directors, employees and consultants of the Company under the Company’s Share Incentive Plan. “GAAP” means United States generally accepted accounting principles, consistently applied.

 

“Government Official” means any officer or employee of a Governmental Authority or any department, agency or instrumentality thereof, including state-owned entities, or of a public organization or any person acting in an official capacity for or on behalf of any such government, department, agency, or instrumentality or on behalf of any such public organization.

 

 

“Governmental Authority” means any federal, state, provincial, municipal, local or foreign government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, court, arbitral body (public or private) or tribunal.

 

“Governmental Order” means any order, judgment, injunction, decree, writ, ruling, stipulation, determination or award, in each case, entered by or with any Governmental Authority.

 

“Hazardous Material” means (i) any material, substance, chemical or waste, that is listed, regulated, or otherwise defined as “hazardous,” “toxic,” or “radioactive” or as a “pollutant” or “contaminant” (or words of similar intent or meaning) under Environmental Laws, and (ii) any radioactive substances, petroleum, petroleum byproducts, asbestos or asbestos containing materials, polychlorinated biphenyls, per and polyfluoroalkyl substances, flammable or explosive substances, or pesticides.

 

“Hepion Certificate of Incorporation” means Hepion’s Certificate of Incorporation, dated as of May 15, 2013, as amended.

 

“Hepion Common Stock” means each share of common stock, par value $0.0001 per share, of Hepion.

 

“Hepion Equity Plan” means each of Hepion’s 2013 Equity Incentive Plan and 2023 Omnibus Equity Incentive Plan.

 

“Hepion Net Cash” means a dollar amount which may be greater than or lower than zero, equal to the sum of (a) Hepion’s Cash and Cash Equivalents in each case as of the Closing Date, minus (b) the sum of Hepion’s short and long term liability or obligations accrued at Closing (as reasonably and in good faith estimated by Hepion, (including, for the avoidance of any doubt, any promissory notes delivered by Hepion concurrently with the signing of this Agreement or prior to the Closing Date), minus (c) all fees and expenses incurred in connection with this Agreement and the Transactions (including but not limited to, any professional and advisor fees, fees related to investment bankers, financial advisors, attorneys, accountants or other advisors, agents or representatives, the exchange agent and printer for SEC filings retained by Hepion or any of its Subsidiaries) outstanding and not paid as of the Closing, minus (d) expenses incurred by Hepion prior to the Closing associated with the disposition of its existing assets and any contingent obligations arising from such dispositions, minus (e) costs remaining to wind down Hepion’s operations, including severance, change-in-control, retention or other compensatory payments that may be payable as well as associated employer-side payroll taxes, remaining lease costs, unpaid accrued expenses, and long-term follow-up costs, cost of D&O policy plus the sum of (f) any prepaid expenses or deposits of Hepion that the Parties agree will be usable by or available to Hepion within ninety (90) days of Closing plus (g) amounts payable pursuant to any promissory notes delivered by Company to Hepion concurrently with the signing of this Agreement or prior to the Closing Date.

 

“Hepion Preferred A Stock” means each share of Series A convertible preferred stock, par value $0.0001 per share, of Hepion.

 

“Hepion Preferred C Stock” means each share of Series C convertible preferred stock, par value $0.0001 per share, of Hepion.

 

“Hepion Preferred Stock” means Hepion Preferred A Stock and Hepion Preferred C Stock.

 

“Hepion Organizational Documents” means the Organizational Documents of Hepion, as amended and/or restated (where applicable).

 

 

“Hepion Stock Option” means an option to purchase Hepion Common Stock granted under a Hepion Equity Plan.

 

“Hepion Stockholder Approval” means the vote of the majority of the shareholders of Hepion cast at a meeting in which a quorum is present, reflecting the majority required to approve the Hepion Transaction Proposals, as determined in accordance with applicable Law and Hepion Organizational Documents.

 

“Hepion Stockholders” means any holder of Hepion Shares.

 

“Hepion Shares” means the Hepion Common Stock and Hepion Preferred Stock.

 

“Hepion Transaction Proposals” means (i) the adoption of this Agreement and approval of the Transactions, including the authorization of the Merger, (ii) the adoption and approval of each other proposal reasonably agreed to by Hepion and the Company as necessary or appropriate in connection with the consummation of the Transactions (including any proposal to alter the authorized share capital of Hepion to match the authorized share capital of Merger Sub), (iii) the adoption and approval of a proposal for the adjournment of the Hepion Special Meeting, if necessary, to permit further solicitation of proxies because there are not sufficient votes to approve and adopt any of the foregoing, and (iv) the adoption and approval of each other proposal that the SEC (or its staff members) indicates is necessary in its comments to the Proxy Statement or in correspondence related thereto.

 

“Hepion Outstanding Stock” means the total number of shares of Hepion Common Stock outstanding on a Fully Diluted basis (following the Hepion Stock Conversion) immediately prior to the Effective Time, assuming the exercise, conversion and exchange of all options, warrants, conversion rights, exchange rights or any other rights to receive shares of Hepion Common Stock which exists immediately prior to the Effective Time.

 

“Hepion Valuation” means $10,000,000, which shall be subject to the Exchange Ratio Adjustment detailed in ‎Section 3.01(a) below.

 

“Hepion Value Per Share” equals the Hepion Valuation divided by the number of Hepion Outstanding Stock.

 

“IFRS” means International Financial Reporting Standards, consistently applied.

 

“IIA” means the Israel Innovation Authority, formerly known as the Office of the Chief Scientist of the State of Israel.

 

“Intellectual Property” means (i) inventions (whether or not patentable and whether or not reduced to practice), improvements thereto, and patents, patent applications and patent disclosures, together with any reissuances, provisionals, divisionals, substitutions, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (ii) trademarks, service marks, trade names, trade dress, company names, doing business as names and fictitious names, together with translations, adaptations, derivations and combinations thereof and including goodwill associated therewith, and all registrations, applications and renewals in connection therewith, (iii) copyrightable works, copyrights and all registrations and applications in connection therewith, (iv) internet domain names, (v) design rights, (vi) database rights, (vii) trade secrets, (viii) know-how, (ix) any other intellectual property rights (registered or unregistered), (x) copies and tangible embodiments and expressions (in whatever form or medium), all improvements and modifications and derivative works of any of the foregoing, and (xi) all rights to sue at law or in equity for any past or future infringement or other impairment of any of the foregoing, including the right to receive all proceeds and damages therefrom.

 

“Israeli Income Tax Ordinance” means the Israeli Income Tax Ordinance (New Version), 5721-1961.

 

 

“ITA” means the Israel Tax Authority.

 

“IT Systems” means all software, computer systems, servers, networks, databases, computer hardware and equipment, information, record keeping, communications, telecommunications, interfaces, platforms, and peripherals that are owned or controlled by the Company or any of its Subsidiaries and used in the conduct of their business.

 

“Knowledge” means, with respect to the Company and Hepion, the knowledge that each of the individuals listed on Annex 3 (with respect to the Company), or Annex 4 (with respect to Hepion), actually has as of the date of this Agreement, or the knowledge that any of them would or would be reasonably expected to have following a reasonable inquiry conducted prior to the date of this Agreement; provided that, for the avoidance of doubt, other than such reasonable inquiry, no such individual will be under any express or implied duty to investigate.

 

“Law” means any statute, act, code, law (including common law), ordinance, rule, regulation or Governmental Order, in each case, of any Governmental Authority.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, encumbrance, easement, or other lien of any kind (other than, in the case of a security, any restriction on transfer of such security arising under Securities Laws).

 

“Material Adverse Effect” means a material adverse effect on (i) the Company and its Subsidiaries (taken as a whole) or Hepion, or (ii) the results of operations or financial condition of the Company and its Subsidiaries, in each case, taken as a whole, or of Hepion, provided, however, that in no event would any of the following (or the effect of any of the following), alone or in combination, be deemed to constitute, or be taken into account in determining whether there has been or will be, a “Material Adverse Effect” on or in respect of the Company and its Subsidiaries or Hepion: (a) any change in Law, regulatory policies, accounting standards or principles (including GAAP) or any guidance relating thereto or interpretation thereof; (b) any change in interest rates or economic, political, business or financial market conditions generally (including any changes in credit, financial, commodities, securities or banking markets); (c) any change generally affecting any of the industries in which the Company and its Subsidiaries or Hepion operates or the economy as a whole; (d) any epidemic, pandemic or disease outbreak, or any Law, directive, guidelines or recommendations issued by a Governmental Authority, the Centers for Disease Control and Prevention, the World Health Organization, any other Governmental Authority or industry group providing for business closures, “sheltering-in-place,” curfews or other restrictions that relate to, or arise out of, an epidemic, pandemic or disease outbreak, or any change in such Law, directive, guidelines, recommendations or interpretation thereof; (e) the announcement or the execution of this Agreement, the pendency of the Transactions, or the performance of this Agreement, including, with respect to the Company and its Subsidiaries, or Hepion, losses or threatened losses of employees, customers, suppliers, vendors, distributors or others having relationships with the Company and its Subsidiaries; or Hepion (f) any action taken or not taken at the request of Hepion, or the Company and its Subsidiaries (taken as a whole); (g) any change in budgets, planning, priorities or policies of any Governmental Authority; (h) any weather conditions, earthquake, hurricane, tsunami, tornado, flood, mudslide, wild fire or other natural disaster, act of God or other force majeure event; (i) any acts of terrorism, sabotage, war, riot, the outbreak or escalation of hostilities, or change in geopolitical conditions; or (j) with respect to the Company and its Subsidiaries, or Hepion, any failure of the Company or its Subsidiaries, or Hepion, to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates, expected milestones or business plans (provided, however, that this clause (j) shall not prevent a determination that any change or effect underlying such failure to meet projections or forecasts has resulted in a Material Adverse Effect (to the extent such change or effect is not otherwise excluded from this definition of Material Adverse Effect)); except, in the case of clauses (a), (b), (c), (d), (h) or (i) above, to the extent that any such change, event or effect has a materially disproportionate and adverse effect on Hepion or the Company and its Subsidiaries relative to other similarly situated businesses in the industries in which Hepion or the Company and its Subsidiaries operate.

 

 

“Nasdaq” means the Nasdaq Stock Market LLC.

 

“NIS” means New Israeli Shekels.

 

“Organizational Documents” means, with respect to any Person that is not an individual, the articles or certificate of incorporation or organization, bylaws, memorandum and articles of association, limited partnership agreement, partnership agreement, limited liability company agreement, shareholders agreement and other similar organizational documents of such Person.

 

“Owned Intellectual Property” means all Intellectual Property that is owned by the Company or its Subsidiaries.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Permitted Liens” means (i) statutory or common law Liens of mechanics, materialmen, warehousemen, landlords, carriers, repairmen, construction contractors and other similar Liens that arise in the ordinary course of business, that relate to amounts not yet delinquent or that are being contested in good faith through appropriate Actions or that may thereafter be paid without penalty to the extent appropriate reserves have been established in accordance with GAAP or IFRS, (ii) Liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business, (iii) Liens for Taxes not yet delinquent or which are being contested in good faith through appropriate Actions for which appropriate reserves have been established in accordance with GAAP or IFRS, (iv) leases, subleases and similar agreements with respect to the Leased Company Real Property or Leased Hepion Real Property, (v) Liens, defects or imperfections on title, encumbrances and restrictions on real property (including easements, covenants, rights of way and similar restrictions of record) that (A) are matters of record, (B) would be discovered by a current, accurate survey or physical inspection of such real property and (C) do not materially interfere with the present uses of such real property, (vi) Liens that are not material to the Company and its Subsidiaries, taken as a whole, (vii) non-exclusive licenses of Intellectual Property entered into in the ordinary course of business, (viii) Liens that secure obligations that are reflected as liabilities on the Most Recent Balance Sheet (which such Liens are referenced, or the existence of which such Liens is referred to, in the notes to Most Recent Balance Sheet), (ix) Liens securing any indebtedness of the Company or its Subsidiaries (including pursuant to existing credit facilities), (x) Liens arising under applicable Securities Laws, (xi) with respect to an entity, Liens arising under the Organizational Documents of such entity, and (xii) Liens described on Annex 5.

 

“Person” means any individual, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, Governmental Authority or other entity of any kind.

 

“Product” means investigational and/or approved products, as the context requires.

 

“Registration Statement” means the Registration Statement on Form F-4, or other appropriate form, including any pre-effective or post-effective amendments or supplements thereto, to be filed with the SEC by the Company under the Securities Act with respect to the Company Ordinary Shares that constitute the Hepion Shares Merger Consideration.

 

“Representative” means, as to any Person, any of the officers, directors, managers, employees, counsel, accountants, financial advisors, and consultants of such Person.

 

“Sanctioned Country” means any country or region that is the subject or target of a country-wide or territory-wide embargo under Sanctions Laws (as of the date of this Agreement, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine).

 

 

“Sanctioned Person” means any individual or entity that is the subject or target of Sanctions Laws, including: (i) any Person listed on any list of designated Persons maintained by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or other U.S. or non-U.S. Governmental Authority under Sanctions Laws; or (ii) any Person organized, resident in, or operating from a Sanctioned Country.

 

“Sanctions Laws” means all applicable U.S. and non-U.S. Laws relating to economic or trade sanctions, including the Laws administered or enforced by the United States (including by OFAC or the U.S. Department of State), the United Nations Security Council, and the European Union.

 

“Schedules” means the disclosure schedules of the Company or Hepion, as applicable.

 

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

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Securities Laws” means the securities Laws of any state, federal or foreign entity and the rules and regulations promulgated thereunder (including the Securities Act, the Exchange Act and the Israeli Securities Law, 1968, and the rules and regulations thereunder).

 

“Subsidiary” means, with respect to a Person, any corporation or other organization (including a limited liability company or a partnership), whether incorporated or unincorporated, of which such Person directly or indirectly owns or controls a majority of the Equity Securities having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization or any organization of which such Person or any of its Subsidiaries is, directly or indirectly, a general partner or managing member.

 

“Tax” means any federal, state, provincial, territorial, local, foreign and other net income tax, alternative or add-on minimum tax, withholding, franchise tax, gross income, adjusted gross income or gross receipts tax, employment related tax (including employee withholding or employer payroll tax, including social security, national health insurance and wage tax) ad valorem, transfer, franchise, license, excise, severance, stamp, occupation, premium, personal property, real property, capital stock, profits, disability, registration, value added, estimated, customs duties, and sales or use tax, or other tax or like assessment or charge, in each case imposed by any Governmental Authority, together with any interest, indexation, penalty, addition to tax or additional amount imposed with respect thereto (or in lieu thereof) by a Governmental Authority.

 

“Tax Return” means any return, report, statement, refund, claim, declaration, information return, statement, estimate or other document filed or required to be filed with a Governmental Authority in respect of Taxes, including any schedule or attachment thereto and including any amendments thereof.

 

“Trade Control Laws” means all applicable laws and regulations relating to the export, reexport, transfer, import of products, software or technology.

 

“Transaction Agreements” means this Agreement, the Hepion Support Agreement, the PIPE Agreements, the Amended IRA, and all the agreements, documents, instruments and certificates entered into in connection herewith or therewith and any and all exhibits and schedules thereto.

 

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

 

“Valid Certificate” means, in respect of a payor, a valid certificate or ruling issued by the ITA in form and substance reasonably acceptable to the Company and the Exchange Agent: (a) exempting such payor from the duty to withhold Israeli Taxes with respect to the applicable payment, (b) determining the applicable rate of Israeli Taxes to be withheld from the applicable payment or (c) providing any other instructions regarding the payment or withholding with respect to the applicable payment.

 

 

Section 1.02 Construction.

 

(a) Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender, (ii) words using the singular or plural number also include the plural or singular number, respectively, (iii) the terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement, (iv) the terms “Article”, “Section”, “Schedule”, “Exhibit” and “Annex” refer to the specified Article, Section, Schedule, Exhibit or Annex of or to this Agreement unless otherwise specified, (v) the word “including” shall mean “including without limitation,” (vi) the word “or” shall be disjunctive but not exclusive and have the meaning represented by the term “and/or”, and (vii) the phrase “to the extent” means the degree to which a subject matter or other thing extends, and such phrase shall not mean simply “if”.

 

(b) Unless the context of this Agreement otherwise requires, references to Contracts shall be deemed to include all subsequent amendments and other modifications thereto (subject to any restrictions on amendments or modifications set forth in this Agreement).

 

(c) Unless the context of this Agreement otherwise requires, references to statutes shall include all regulations promulgated thereunder and references to Laws shall be construed as including all Laws consolidating, amending or replacing the Law.

 

(d) The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent and no rule of strict construction shall be applied against any Party.

 

(e) Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. If any action is to be taken or given on or by a particular calendar day, and such calendar day is not a Business Day, then such action may be deferred until the next Business Day.

 

(f) The phrases “provided to Hepion,” “delivered to Hepion”, “furnished to Hepion,” “made available to Hepion” and phrases of similar import when used herein, unless the context otherwise requires, means that a copy of the information or material referred to has been made available to Hepion no later than 11:59 p.m. (Israel time) on the day prior to the date of this Agreement in the virtual “data room” maintained by DataRooms.com that has been set up by the Company in connection with this Agreement.

 

(g) The phrases “provided to the Company,” “delivered to the Company”, “furnished to the Company,” “made available to the Company” and phrases of similar import when used herein, unless the context otherwise requires, means that a copy of the information or material referred to has been made available to the Company no later than 11:59 p.m. (Israel time) on the day prior to the date of this Agreement in the virtual “data room” maintained by DataRooms.com that has been set up by Hepion in connection with this Agreement.

 

(h) References to “$” or “dollar” or “US$” shall be references to United States dollars.

 

 

Article II
PRE-CLOSING TRANSACTIONS; THE MERGER

 

Section 2.01 Pre-Closing Transactions. On the Closing Date, subject to obtaining the Company Shareholder Approval, immediately prior to the Effective Time and prior to the consummation of any of the transactions contemplated by the PIPE Agreements, the following actions shall take place or be effected (in the order set forth in this Section 2.01): (A) Hepion shall cause all of its issued capital stock which is not in the form of Hepion Common Stock to be converted into shares of Hepion Common Stock in accordance with the Hepion Organizational Documents, and shall further cause any convertible instruments, including but not limited to warrants, to be converted into shares of Hepion Common Stock (the “Hepion Stock Conversion”); and (B) (i) each Company Ordinary A Shares, Company Ordinary B Shares, and Company Preferred Share that is issued and outstanding immediately prior to the Effective Time shall be automatically converted into such number of Company Ordinary Shares as determined in accordance with the Existing AoA (as may be amended during the interim period); (ii) the A&R AoA shall be adopted and become effective; (iii) each Company Ordinary Share that is issued and outstanding immediately prior to the Effective Time (including each Company Ordinary Share that is issued upon conversion pursuant to clause (i) above) shall be split into such number of Company Ordinary Shares as shall be necessary for purposes of the Closing and the initial listing of the Company Ordinary Shares on Nasdaq (the “Share Split”); provided that no fraction of a Company Ordinary Share will be issued by virtue of the Share Split, and each Company Shareholder that would otherwise be so entitled to a fraction of a Company Ordinary Share (after aggregating all fractional Company Ordinary Shares that otherwise would be received by such Company Shareholder) shall instead be entitled to receive such number of Company Ordinary Shares to which such Company Shareholder would otherwise be entitled, rounded to the nearest whole number; and (iv) any outstanding options and warrants of the Company issued and outstanding immediately prior to the Effective Time shall be adjusted immediately upon the Share Split to give effect to the foregoing transactions, provided that to the extent such adjustment would result in (x) a fraction of share being subject to any outstanding stock option or warrant, such share shall be rounded down to the nearest whole share or (y) the exercise price of an option being a fraction of a cent, the exercise price will be rounded up to the nearest whole cent (clauses (i) through (iv), the “Recapitalization”).

 

Section 2.02 The Merger. At the Effective Time, on the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the DGCL, Merger Sub and Hepion shall consummate the Merger, pursuant to which Merger Sub shall be merged with and into Hepion, following which the separate corporate existence of Merger Sub shall cease and Hepion shall continue as the Surviving Company after the Merger and as an indirect subsidiary of the Company.

 

Section 2.03 Effective Time. On the terms and subject to the conditions set forth herein, on the Closing Date, following the consummation of the Recapitalization, Hepion and Merger Sub shall cause the Merger to be consummated by filing the certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL. The Merger shall become effective at the time of the filing of the Certificate of Merger, or such later time as may be agreed by the Company and Hepion and specified in the Certificate of Merger (the “Effective Time”).

 

Section 2.04 Effect of the Merger. The effect of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of Merger Sub and Hepion shall become the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Company, which shall include the assumption by the Surviving Company of any and all agreements, covenants, duties and obligations of Merger Sub and Hepion set forth in this Agreement to be performed after the Effective Time.

 

Section 2.05 Governing Documents. At the Effective Time, the Hepion Certificate of Incorporation shall be amended and restated in its entirety to read the same as the certificate of incorporation of Merger Sub, and the bylaws of Hepion shall be amended and restated in their entirety to read the same as the bylaws of Merger Sub, in each case, as in effect immediately prior to the Effective Time, except all references to the name of the Merger Sub shall be replaced by the name of the Surviving Company, until, thereafter changed or amended as provided therein or by applicable Law.

 

 

Section 2.06 Directors and Officers of the Surviving Company. At the Effective Time, the directors and officers of Merger Sub immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Company, each to hold office in accordance with the Organizational Documents of the Surviving Company until such director’s or officer’s successor is duly elected or appointed and qualified, or until the earlier of their death, resignation or removal.

 

Section 2.07 Further Assurances. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Company following the Merger with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the applicable directors, officers and members of the Company and Merger Sub (or their designees) are fully authorized in the name of their respective corporations or otherwise to take, and shall take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreement.

 

Article III
THE MERGER; CLOSING

 

Section 3.01 Effect of Merger on Securities of Hepion and Merger Sub. On the terms and subject to the conditions set forth herein, at the Closing, by virtue of the Merger and without any further action on the part of any Party or any other Person, the following shall occur:

 

(a) Each share of Hepion Common Stock issued and outstanding as of immediately prior to the Effective Time including following the Hepion Stock Conversion (i) shall be converted automatically into, and the holder of such share of Hepion Common Stock shall be entitled to receive from the Exchange Agent, for each such share of Hepion Common Stock, such number of Company Ordinary Shares calculated in accordance with the Exchange Ratio (for the avoidance of doubt, after giving effect to the Recapitalization) (the “Hepion Shares Merger Consideration”), and (ii) shall no longer be outstanding and shall automatically be canceled and shall cease to exist by virtue of the Merger and each former holder of Hepion Common Stock shall thereafter cease to have any rights with respect to such securities, except as expressly provided herein. In any event, the entire Hepion Shares Merger Consideration shall not reflect more than 17% and not less than 13% of the Fully Diluted share capital of the Surviving Company immediately prior to the Closing. As such, the Exchange Ratio shall be adjusted, if necessary, to result in a percentage between 17% and 13%, as applicable, within these thresholds and in accordance with the illustrative Exchange Ratio adjustment set forth in Annex 7 (the “Exchange Ratio Adjustment”).

 

(b) Each share of common stock, par value $0.01 per share, of Merger Sub that is issued and outstanding immediately prior to the Effective Time shall automatically convert into one share of common stock, par value $0.01 per share, of the Surviving Company. The common stock of the Surviving Company shall have the same rights, powers and privileges as the shares so converted and shall constitute the only issued and outstanding share capital of the Surviving Company.

 

Section 3.02 Closing. On the terms and subject to the conditions of this Agreement, the consummation of the Merger (the “Closing”) shall take place electronically by the mutual exchange of electronic signatures (including portable document format (“pdf”)) on the first Business Day following the date on which all conditions set forth in Article IX have been satisfied or waived (other than those conditions that by their terms or nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at the Closing), or at such other place, time or date as Hepion and the Company may mutually agree in writing. The date on which the Closing occurs is referred to herein as the “Closing Date.”

 

 

Section 3.03 Delivery.

 

(a) Prior to the Effective Time, the Company shall appoint a Person authorized to act as exchange agent in connection with the transactions contemplated by Section 3.01, which Person shall be selected by the Company and be reasonably acceptable to Hepion (the “Exchange Agent”) and enter into an exchange agent agreement reasonably acceptable to the Company and Hepion with the Exchange Agent (the “Exchange Agent Agreement”) for the purpose of exchanging, upon the terms and subject to the conditions set forth in this Agreement, each share of Hepion Common Stock on the register of stockholders of Hepion as of immediately prior to the Effective Time for the Hepion Shares Merger Consideration issuable in respect of such Hepion Common Stock. At least two Business Days prior to the Closing, the Company and Hepion shall direct the Exchange Agent to, at the Effective Time, exchange each such share of Hepion Common Stock for the applicable Merger Consideration pursuant to the Exchange Agent Agreement and perform the Exchange Agent’s other obligations thereunder.

 

(b) All Company Ordinary Shares delivered upon the exchange of Hepion Common Stock in accordance with the terms of this Article III shall be deemed to have been exchanged in full satisfaction of all rights pertaining to the securities represented by such shares of Hepion Common Stock and there shall be no further registration of transfers on the register of shareholders of Hepion of the Hepion Common Stock. From and after the Effective Time, holders of shares of Hepion Common Stock shall cease to have any rights as shareholders of Hepion, except the right to receive Company Ordinary Shares in exchange therefor, as provided in this Agreement.

 

(c) From and after the Effective Time, until surrendered or transferred, as applicable, in accordance with this Section 3.03, each share of Hepion Common Stock shall solely represent the right to receive the Hepion Shares Merger Consideration to which such Hepion Common Stock is entitled to receive pursuant to this Agreement.

 

(d) Notwithstanding anything to the contrary in this Agreement, none of the Parties or the Surviving Company or the Exchange Agent shall be liable to any Person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar applicable Law. Any portion of the Merger Consideration remaining unclaimed by Hepion Stockholders immediately prior to such time when the amounts would otherwise escheat to, or become property of, any Governmental Authority shall become, to the extent permitted by applicable Law, the property of the Company free and clear of any claims or interest of any Person previously entitled thereto.

 

Section 3.04 Withholding Rights.

 

(a) Each of the Company, Merger Sub, the Exchange Agent and each of their respective Affiliates and any other Person making a payment under this Agreement (each, a “Payor”) shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any consideration payable or issued pursuant to this Agreement such amounts as are required to be deducted and withheld under applicable Tax Law. To the extent that amounts are so withheld and timely remitted to the applicable Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. The Parties shall cooperate in good faith to eliminate or reduce any such deduction or withholding (including through the request and provision of any statements, forms or other documents to reduce or eliminate any such deduction or withholding).

 

 

(b) With respect to Israeli Taxes, as soon as reasonably practicable after the execution of this Agreement, the Company will cause its Israeli advisors, in coordination with Hepion and its Israeli counsel and subject to its written confirmation, to prepare and file with the ITA an application for a ruling, requesting (i) the exemption of each Payor and its respective agents from any obligation to withhold Israeli Tax from any consideration payable, issued or otherwise deliverable to the holders of Hepion Common Stock (each, a “Payee”) pursuant to this Agreement or clarifying that no such obligation exists, or (ii) instructing the Payor and its agents as to the amount and from of such withholding Tax to be withheld from such consideration (the “Withholding Ruling”). If the Withholding Ruling is obtained by the Closing Date, then the Payor shall comply with the provisions of the Withholding Ruling; provided, however, that if the Withholding Ruling is not obtained for any reason whatsoever prior to the Closing Date, the Closing will not be delayed, postponed or otherwise effected. Each Payor shall be entitled to deduct and withhold (or cause to be deducted and withheld) from any amount payable or issued pursuant to this Agreement to a Payee who holds 5% or more in the Hepion share capital (on an issued and Fully Diluted basis) immediately prior to the Closing (each, a “5% Payee”). The consideration payable or issued to each 5% Payee shall be retained by the Exchange Agent for the benefit of each such 5% Payee for a period of up to 180 days from the Closing Date (which may be extended as the parties agree in good faith) or as otherwise requested in writing by the ITA (the “Withholding Drop Date”) (during which time (i) no Payor shall make any payments to any 5% Payee or withhold any amounts for Israeli Taxes from the payments deliverable pursuant to this Agreement, except as provided below and during which time each 5% Payee may obtain a Valid Certificate and (ii) a Payee may order the Exchange Agent to sell such Payee’s retained Company Ordinary Shares, or a portion thereof). If a 5% Payee delivers, no later than three Business Days prior to the Withholding Drop Date, a Valid Certificate to the Payor, then the deduction and withholding of any Israeli Taxes shall be made only in accordance with the provisions of such Valid Certificate, and the balance of the consideration that is not withheld shall be transferred to such 5% Payee concurrently therewith subject to any non-Israeli withholding which is applicable to the payment (if any). If any 5% Payee (i) fails to provide the Payor with a Valid Certificate at least three Business Days prior to the Withholding Drop Date, or (ii) submits a written request to the Exchange Agent to release its portion of the consideration prior to the Withholding Drop Date and fails to submit a Valid Certificate at or before such time, then the amount to be withheld from such Payee’s portion of the consideration shall be calculated according to the applicable withholding rate in accordance with Applicable Law.

 

(c) To the extent that the Exchange Agent is obliged to withhold Israeli Taxes, the Payee shall provide the Exchange Agent with the amount due with regards to such Israeli Taxes prior to the release of the consideration to the Payee. In the event that the Payee fails to provide the Exchange Agent with the full amount necessary to satisfy such Israeli Taxes no later than three Business Days before the Withholding Drop Date, the Exchange Agent shall be entitled to sell the Payee’s retained Company Ordinary Shares to the extent necessary to satisfy the full amount due with regards to such Israeli Taxes.

 

(d) Any withholding made in NIS with respect to payments made hereunder in dollars shall be calculated based on a dollars-to-NIS exchange rate known on the date of the actual payment.

 

(e) Each Payee hereby shall be deemed, by virtue of the Merger, to have waived, released and absolutely and forever discharged the Payor from and against any and all claims for any losses in connection with the forfeiture or sale of any portion of the Company Ordinary Shares otherwise deliverable to such Payee in compliance with the withholding requirements under this Section 3.04. To the extent that the Exchange Agent is unable, for whatever reason, to sell the applicable portion of Company Ordinary Shares required to finance applicable deduction or withholding requirements, then the Exchange Agent shall be entitled to hold all of the Company Ordinary Shares otherwise deliverable to the applicable Payee until the earlier of: (i) the receipt of a Valid Certificate fully exempting the Exchange Agent from tax withholding or receipt of cash amount equal to the tax that should be withheld by the Exchange Agent; or (ii) such time when the Exchange Agent is able to sell the portion of such Company Ordinary Shares otherwise deliverable to such Payee that is required to enable the Exchange Agent to comply with such applicable deduction or withholding requirements. Any costs or expenses incurred by the Exchange Agent in connection with such sale shall be borne by, and deducted from the payment to, the applicable Payee.

 

 

Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the Schedules to this Agreement delivered by the Company to Hepion, dated as of the date of this Agreement, the Company represents and warrants to Hepion as follows:

 

Section 4.01 Corporate Organization of the Company. The Company has been duly incorporated and is validly existing as a limited company under the Laws of the State of Israel and has the company power and authority to own, operate and lease its properties, rights and assets and to conduct its business as it is now being conducted. The Company has made available to Hepion true and correct copies of its Organizational Documents as in effect as of the date hereof. The Company is duly licensed or qualified and in good standing (where such concept is applicable) as a foreign entity in each jurisdiction in which the ownership of its property or the character of its activities is such as to require it to be so licensed or qualified, except where failure to be so licensed or qualified has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.02 Subsidiaries. The Subsidiaries of the Company (including Topco, Holdco and Merger Sub), together with details of their respective jurisdiction of incorporation or organization, are set forth on Schedule ‎4.02. The Subsidiaries of the Company have been duly formed or organized, are validly existing under the laws of their jurisdiction of incorporation or organization and have the power and authority to own, operate and lease their respective properties, rights and assets and to conduct their business as it is now being conducted, except in each case as has not had, and would not, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. Each Subsidiary of the Company is duly licensed or qualified as a foreign entity in each jurisdiction in which its ownership of property or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.03 Due Authorization. Each of the Company and Merger Sub has the requisite power and authority to execute and deliver this Agreement and each other Transaction Agreement to which it is or will be a party and (subject to the consents, approvals, authorizations and other requirements described in Section 4.04 or Section 4.05) to perform all obligations to be performed by it hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such other Transaction Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the board of directors of the Company and Merger Sub, and other than the consents, approvals, authorizations and other requirements described in Section 4.04 or Section 4.05 and the Company Shareholder Approval, no other corporate proceeding on the part of the Company or Merger Sub is necessary to authorize this Agreement or any other Transaction Agreements or the Company’s performance hereunder or thereunder. This Agreement has been, and each such other Transaction Agreement (when executed and delivered by the Company or Merger Sub, as applicable) will be, duly and validly executed and delivered by the Company or Merger Sub, as applicable, and, assuming due and valid authorization, execution and delivery by each other party hereto and thereto, this Agreement constitutes, and each such other Transaction Agreement will constitute, a valid and binding obligation of the Company or Merger Sub, as applicable, enforceable against the Company or Merger Sub, as applicable, in accordance with its terms, subject to (x) obtaining the Company Shareholder Approval and (y) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar Laws affecting or relating to creditors’ rights generally and subject, as to enforceability, to general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law (the “Enforceability Exceptions”).

 

Section 4.04 No Conflict. Subject to the receipt of the consents, approvals, authorizations, and other requirements set forth in Section 4.05 and obtaining the Company Shareholder Approval, the execution, delivery and performance by each of the Company and Merger Sub of this Agreement and the Transaction Agreements to which each is a party and the consummation by each of the Company and Merger Sub of the transactions contemplated hereby and thereby do not and will not, (a) contravene or conflict with the Organizational Documents of the Company or Merger Sub, (b) contravene or conflict with or constitute a violation of any provision of any Law, Permit or Governmental Order binding upon or applicable to the Company or any of its Subsidiaries or any of their respective assets or properties, (c) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default under, or result in the termination or acceleration of, or a right of termination, cancellation, modification, acceleration or amendment under, accelerate the performance required by, any of the terms, conditions or provisions of any Company Specified Contract or (d) result in the creation or imposition of any Lien on any asset, property or Equity Security of the Company or any of its Subsidiaries (other than any Permitted Liens), except in the case of each of clauses (c) through ‎(d) as would not, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

 

Section 4.05 Governmental Authorities; Consents. No notice to, action by, consent, approval, permit or authorization of, or designation, declaration or filing with, any Governmental Authority is required on the part of the Company or Merger Sub with respect to each of their execution, delivery and performance of this Agreement and the other Transaction Agreements to which each is a party and the consummation by the Company or Merger Sub of the transactions contemplated hereby and thereby, except for (i) obtaining the consents of, or submitting notifications, filings, notices or other submissions to, the Governmental Authorities listed on Schedule ‎4.05, (ii) the filing (A) with the SEC of the Proxy Statement/Prospectus and the declaration of the effectiveness thereof by the SEC and (B) any other documents or information required pursuant to applicable requirements, if any, of applicable Securities Laws, (iii) compliance with and filings or notifications required to be filed with the state securities regulators pursuant to “blue sky” Laws and state takeover Laws as may be required in connection with this Agreement, the other Transaction Agreements or the Transactions, (iv) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the DGCL, and (v) any actions, consents, approvals, permits or authorizations, designations, declarations or filings, the absence of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.06 Capitalization.

 

(a) As of the date of this Agreement, the authorized share capital of the Company is comprised of 916,921 Company Ordinary Shares, 3,453 Company Ordinary A Shares, 2,000 Company Ordinary B Shares, 7,862 Company Preferred C Shares, 2,618 Company Preferred D Shares, 18,521 Company Preferred E Shares, 10,398 Company Preferred E-1 Shares, 1,623 Company Preferred E-2 Shares, 3,890 Company Preferred E-3 Shares, 17,161 Company Preferred F Shares, 7,161 Company Preferred F-1 Shares, and 10,000 Company Preferred F-2 Shares. The number and class of securities (if applicable) of all of the issued and outstanding Equity Securities of the Company as of the date of this Agreement are set forth on Schedule ‎4.06(a). The issued and outstanding Equity Securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of preemptive or similar rights or applicable Law.

 

(b) Except as set forth on Schedule 4.06(b), there are no outstanding options, warrants, call rights, restricted stock, restricted stock units, equity appreciation, phantom stock, profit participation or similar rights with respect to the Equity Securities of, or other equity or voting interest in, the Company. Except as set forth in the Organizational Documents of the Company, the Transaction Agreements, and Schedule 4.06(b), (i) no Person is entitled to any preemptive or similar rights to subscribe for Equity Securities of the Company, (ii) there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Equity Securities of the Company, and (iii) there are no outstanding bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which the Company’s shareholders may vote.

 

(c) (i) There are no declared but unpaid dividends or distributions in respect of any Equity Securities of the Company and (ii) since the date of the Most Recent Balance Sheet through the date of this Agreement, the Company has not made, declared, set aside, established a record date for or paid any dividends.

 

 

Section 4.07 Capitalization of Subsidiaries.

 

(a) The issued and outstanding Equity Securities of each of the Company’s Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable. All of the issued and outstanding Equity Securities of each Subsidiary of the Company are owned as set forth on Schedule ‎4.07(a), free and clear of any Liens (other than Permitted Liens) and have not been issued in violation of preemptive or similar rights.

 

(b) There are no outstanding equity appreciation, phantom stock, profit participation or similar rights with respect to the Equity Securities of, or other equity or voting interest in, any Subsidiary of the Company. No Person is entitled to any preemptive or similar rights to subscribe for Equity Securities of any Subsidiary of the Company. There are no outstanding contractual obligations of any Subsidiary of the Company to repurchase, redeem or otherwise acquire any Equity Securities of any Subsidiary of Company. There are no outstanding bonds, debentures, notes or other indebtedness of any Subsidiary of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which the shareholders of the Company’s Subsidiaries may vote.

 

(c) Except as set forth on Schedule 4.07(c), as of the date of this Agreement, neither the Company nor any of its Subsidiaries owns any Equity Securities in any Person, other than shares publicly traded on a stock exchange held for cash management purposes.

 

Section 4.08 Financial Statements; Absence of Changes.

 

(a) Attached as Schedule ‎4.08 hereto are copies of the unaudited consolidated balance sheets of the Company and its Subsidiaries as of December 31, 2022 (the latter, the “Most Recent Balance Sheet”), and the related unaudited consolidated statements of operations, of changes in shareholders’ equity and of cash flows as of September 30, 2023 (together with, once available and delivered by the Company, the Additional Financial Statements (but only as of the time so available and delivered), the “Financial Statements”).

 

(b) Other than as set forth on Schedule 4.08, each of the Financial Statements (including the notes thereto) (i) was prepared in accordance with IFRS applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (ii) present fairly, in all material respects, the financial position of the Company and its Subsidiaries as of the dates and for the periods indicated in such Financial Statements, and the results of their operations and cash flows for the periods then ended in conformity with IFRS.

 

(c) The Company and its Subsidiaries have established and maintain systems of internal accounting controls. Such systems are designed to provide, in all material respects, reasonable assurance that (i) all transactions are executed in accordance with management’s authorization and (ii) all transactions are recorded as necessary to permit preparation of proper and accurate financial statements in accordance with IFRS and to maintain accountability for the Company’s and its Subsidiaries’ assets.

 

(d) Since the date of the Most Recent Balance Sheet, through and including the date of this Agreement no Material Adverse Effect has occurred that is continuing.

 

(e) Since the date of the Most Recent Balance Sheet, through and including the date of this Agreement, except as expressly contemplated by this Agreement, the other Transaction Agreements or in connection with the transactions contemplated hereby and thereby or as required by applicable Law, the Company and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business.

 

(f) Merger Sub was formed solely for the purpose of engaging in the Transactions, has not conducted any business and has no assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and any other Transaction Agreement to which it is a party, as applicable, and the other transactions contemplated by this Agreement and such Transaction Agreements, as applicable.

 

 

Section 4.09 No Undisclosed Liabilities. As of the date of this Agreement, neither the Company nor any of its Subsidiaries has any liability, indebtedness or obligation, whether accrued, contingent, absolute, determined, determinable or otherwise, required to be reflected or reserved for on a balance sheet prepared in accordance with IFRS, except for liabilities, indebtedness or obligations (a) reflected or reserved for in the Financial Statements or disclosed in any notes thereto, (b) that have arisen since the date of the Most Recent Balance Sheet in the ordinary course of business of the Company and its Subsidiaries, (c) incurred or arising under or in connection with the Transactions, including expenses related thereto, (d) disclosed in the Schedules or (e) that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.10 Litigation and Proceedings. Since January 1, 2021, there has been no pending or, to the Knowledge of the Company, threatened (in writing) Actions by or against the Company or any of its Subsidiaries that, if adversely decided or resolved, had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. There is no Governmental Order imposed upon the Company or any of its Subsidiaries that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is party to a settlement or similar agreement regarding any of the matters set forth in the two preceding sentences that contains any ongoing obligations, restrictions or liabilities (of any nature) that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.11 Compliance with Laws. The Company and its Subsidiaries are, and since January 1, 2021, have been, in compliance in all material respects with all applicable material Laws. None of the Company or its Subsidiaries has received any written notice from any Governmental Authority of a material violation of any applicable Law at any time since January 1, 2021. The Company and its Subsidiaries hold, and since January 1, 2021 have held, all material licenses, approvals, consents, registrations, franchises and permits necessary for the lawful conduct of the business of the Company as currently conducted (the “Company Permits”). The Company and its Subsidiaries are, and since January 1, 2022 have been, in material compliance with and not in material default under such Company Permits.

 

Section 4.12 Contracts; No Defaults.

 

(a) Schedule 4.12(a) contains a list of all Contracts described in clauses (i) through (xi) of this Section 4.12(a) to which, as of the date of this Agreement, the Company or any of its Subsidiaries is a party other than Company Benefit Plans and Company Leases (all such Contracts as described in clauses (i) through (xi), collectively, the “Company Specified Contracts”). True, correct and complete copies of the Company Specified Contracts have been made available to Hepion.

 

(i) Each Contract that involves aggregate payments or consideration furnished (x) by the Company or by any of its Subsidiaries of more than $1,000,000 or (y) to the Company or to any of its Subsidiaries of more than $1,000,000, in each case, in the calendar year ended December 31, 2023 or during the term of the Contract;

 

(ii) Each Contract relating to indebtedness for borrowed money having an outstanding principal amount in excess of $1,000,000;

 

(iii) Each Contract that is a purchase and sale or similar agreement for the acquisition of any Person or any business unit thereof, in each case, involving payments in excess of $1,000,000 and with respect to which there are any material ongoing obligations;

 

(iv) Each joint venture or similar Contract (other than Contracts between wholly owned Subsidiaries of the Company);

 

 

(v) Each Contract requiring capital expenditures after the date of this Agreement in an amount in excess of $1,000,000 in the aggregate;

 

(vi) Each Contract under which the Company or any of its Subsidiaries (x) is an exclusive licensee of material Intellectual Property (excluding (A) click-wrap, shrink-wrap and off-the-shelf software licenses, (B) other licenses of software that are commercially available to the public generally, (C) agreements between the Company and its Subsidiaries on the one hand, and their respective employees on the other hand, entered into in the ordinary course of business and pursuant to which such employees assign to the Company or one of its Subsidiaries all right, title and interest in and to all Intellectual Property developed by such employees, and (D) non-exclusive licenses included in sponsored research agreements, material transfer agreements, consulting or service agreements or other similar agreements entered into by the Company in the ordinary course of business);

 

(vii) Each collective bargaining agreement or other Contract with any labor union, labor organization, works council or other employee representative organization (each a “CBA”);

 

(viii) Each Contract which grants any Person a right of first refusal, right of first offer or similar right with respect to any material properties, assets or businesses of the Company and its Subsidiaries, taken as a whole;

 

(ix) Each Contract expressly limiting, in any material manner, the type of business in which the Company or its Subsidiaries may engage, the geographic area in which they may engage in business or the ability to sell or purchase to or from any Person;

 

(x) Each Contract the primary purpose of which is indemnification and that represents a material obligation of the Company or its Subsidiaries, other than in the ordinary course of business;

 

(xi) Each Contract that is a settlement, conciliation or similar agreement with any Governmental Authority pursuant to which the Company or any of its Subsidiaries will have any material outstanding obligation after the date of this Agreement;

 

(xii) Each Contract entered into primarily for the purpose of interest rate or foreign currency hedging;

 

(b) Each Contract that relates to the acquisition or disposition of any Equity Securities in, or assets or properties of, the Company or any of its Subsidiaries (whether by merger, sale of stock, sale of assets or otherwise) pursuant to which (A) payment obligations by or to the Company or any of its Subsidiaries remain outstanding or (B) any earn-out, indemnification, deferred or contingent payment obligations remain outstanding (excluding acquisitions or dispositions in the ordinary course of business consistent with past practice or of assets that are obsolete, worn out, surplus or no longer used in the conduct of the Company’s business); and except (x) for any Contract that has terminated, or will terminate, upon the expiration of the stated term thereof prior to the Closing Date or (y) as would not reasonably be expected to have a Material Adverse Effect, each Company Specified Contract is (i) in full force and effect and (ii) represents the legal, valid and binding obligations of the Company or one or more of its Subsidiaries party thereto and, to the Knowledge of the Company, represents the legal, valid and binding obligations of the other parties thereto, in each case, subject to the Enforceability Exceptions. None of the Company, any of its Subsidiaries or, to the Knowledge of the Company, any other party thereto is in material breach or default of any Company Specified Contract. Neither the Company nor any Subsidiary thereof has received written notice from any other party to any such Company Specified Contract that such party intends to terminate any such Company Specified Contract.

 

 

Section 4.13 Company Benefit Plans.

 

(a) Schedule 4.13(a) sets forth a true and complete list of each material Company Benefit Plan maintained for the benefit of employees. For purposes of this Agreement, a “Company Benefit Plan” is each “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and any material vacation, paid time off (“PTO”), education assistance, cafeteria, flexible spending account, stock ownership, stock purchase, stock option, phantom stock, equity or other equity-based, severance, employment (other than offer letters that do not provide severance benefits or notice periods in excess of 30 days upon termination of the employment relationship), individual consulting, retention, change-in-control, transaction, fringe benefit, pension (including pension fund, managers’ insurance and/or similar fund), education fund (‘keren hishtalmut’), expansion orders (except for those which generally apply to all employees in Israel), bonus, incentive, profit sharing, profits interest, deferred compensation, employee loan and all other benefit or compensation plans, agreements or other general arrangements, whether or not subject to ERISA, which are, in each case, material and contributed to, required to be contributed to, sponsored by or maintained by the Company or any of its Subsidiaries for the benefit of any current employee, officer or director of the Company or its Subsidiaries (without regarding to materiality, the “Company Employees”) or under or with respect to which the Company or any of its Subsidiaries has any material liability, contingent or otherwise, but not including (x) any multiemployer plan or any plan, policy, program, arrangement or agreement that covers only former directors, officers, employees, independent contractors and service providers and with respect to which the Company and its Subsidiaries have no remaining obligations or liabilities, or (y) any personal employment, engagement or similar agreements with employees, consultants, or independent contractors of the Company or any of its Subsidiaries.

 

(b) With respect to each material Company Benefit Plan, the Company has made available to Hepion (i) copies of the Company Benefit Plan and any trust agreement or other funding instrument relating to such plan and to the extent any Company Benefit Plan is not set forth in writing, a written summary of the material terms thereof; and (ii) any material notices, letters or correspondence to or from any Governmental Authority with respect to such Company Benefit Plan within the past three (3) years from the date hereof.

 

(c) Except as would not have, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

 

(i) each Company Benefit Plan has been established, maintained, funded and administered in compliance in all material respects with its terms and all applicable Laws, including, where applicable, ERISA and the Code;

 

(ii) each Company Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and (A) has received a favorable determination or opinion letter as to its qualification prior to the date of this Agreement or (B) has been established under a standardized master and prototype or volume submitter plan for which a current favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer, and any trusts related thereto that are intended to be exempt from taxation under Section 501(a) of the Code are so exempt. To the Knowledge of the Company, nothing has occurred, whether by action or failure to act, that would reasonably be expected to adversely affect such qualification. All benefits, contributions, and premiums relating to each Company Benefit Plan have been timely paid in accordance with the terms of such Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, generally accepted accounting principles. To the Knowledge of the Company, no fact or set of circumstances exists and no event has occurred with respect to any Company Benefit Plan that would reasonably be expected to result in any Company Benefit Plan or the Company (or any Subsidiary thereof) being required to pay any material Tax or penalty under applicable Law; and

 

 

(iii) each Company Benefit Plan that is subject to the Laws of a jurisdiction other than the United States has been maintained, funded and administered in compliance in all material respects with applicable Law.

 

(d) Except as would not have a Material Adverse Effect, (i) all of the Company’s and its Subsidiaries’ liabilities to Company Employees regarding severance pay, accrued vacation, recreation pay, sick pay, and contributions to all pension plans or Company Benefit Plans are fully funded or, if not, are accrued on the Financial Statements as of the date of such Financial Statements, and (ii) the Company’s arrangement under Section 14 the Severance Pay Law 5723-1963 (the “Section 14 Arrangement”) was properly applied in accordance with the terms of the general permit issued by the Israeli Minister of Labor regarding mandatory pension arrangement regarding all Company Employees based on their full salaries and from their commencement date of employment and, upon the termination of employment of any Company Employees, the Company will not have to make any payment under the Severance Pay Law 5723-1963, except for release of the funds accumulated in accordance with the applicable Section 14 Arrangement.

 

(e) Neither the Company, its Subsidiaries, nor any ERISA Affiliate has at any time sponsored, maintained, contributed to or had any liability (contingent or otherwise) in respect of (i) any “defined benefit plan” (as defined in Section 3(35) of ERISA), (ii) any plan subject to Section 412 of the Code or Section 302 or Title IV of ERISA, including any “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, (iii) any “multiple employer plan” within the meaning of Section 413(c) of the Code or (iv) any “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA). Except as required under Section 601 eq seq. of ERISA or similar state or local Law pursuant to which the covered individual pays the full cost of coverage, no Company Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment.

 

(f) Other than as set forth on Schedule 4.13(f), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (either alone or upon the occurrence of any additional or subsequent event or events) (i) entitle any Company service providers to receive any compensation or benefit (or increase thereto); (ii) accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation or benefits; or (iii) limit or restrict the right of the Company to merge, amend or terminate any Company Benefit Plan.

 

(g) Each Company Benefit Plan that is subject to Section 409A of the Code has been adopted and administered in compliance with its terms and the operational and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including notices, rulings and proposed and final regulations) thereunder.

 

(h) No Company Benefit Plan provides for any tax gross-up payments to any Company employees.

 

(i) There are no material claims or causes of action pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened against the Company in connection with any Company Benefit Plan, and no Company Benefit Plan has within the six (6) years prior to the date hereof been the subject of an examination, investigation or audit by a Governmental Authority or the subject of an application or filing under or is a participant in any amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority. The Company is not engaged in any legal proceedings brought by or on behalf of any Company employee and, to the Knowledge of the Company, no such proceedings have been threatened which, if determined adversely, would have a Material Adverse Effect on the Company.

 

 

(j) With respect to each Company Benefit Plan that is subject to the laws of a jurisdiction outside of the United States (a “Foreign Company Plan”) (i) if required to be registered or approved by a non-U.S. Governmental Authority, has been registered or approved and has been maintained in good standing with the applicable Governmental Authority, and, to the Knowledge of the Company, no event has occurred since the date of the most recent approval or application therefore relating to any such Foreign Company Plan that would reasonably be expected to adversely affect any such approval or good standing; (ii) that is intended to qualify for special Tax treatment meets all requirements for such treatment; (iii) is not a defined benefit pension plan (as defined in ERISA, whether or not subject to ERISA) or a similar arrangement and has no material unfunded or underfunded liabilities. All employer and employee contributions to each Foreign Company Plan have been timely made in all material respects, or, if applicable, accrued in accordance with normal accounting practices.

 

Section 4.14 Labor Matters.

 

(a) Neither the Company nor any of its Subsidiaries is party to or bound by any CBA. To the Knowledge of the Company, no employees are represented by any labor organization, labor union, or works council or other similar employee representative organization with respect to their employment with the Company or any of its Subsidiaries. Except as would not have, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) there are no activities or proceedings of any labor union, works council or labor organization to organize any of the Company Employees; and (ii) there is no, and since January 1, 2022 there has been no, organized labor dispute, labor grievance or strike, lockout, picketing, hand billing, slowdown, concerted refusal to work overtime, or work stoppage against the Company or any of its Subsidiaries, in each case, pending or, to the Knowledge of the Company, threatened.

 

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, neither the Company nor any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied.

 

Section 4.15 Taxes.

 

(a) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(i) all Tax Returns required to be filed by the Company or its Subsidiaries have been duly and timely filed (taking into account extensions) and all such Tax Returns are true, correct and complete in all material respects;

 

(ii) all Taxes required to be paid by the Company and its Subsidiaries have been duly and timely paid in full when due, regardless of whether shown on a Tax Return;

 

(iii) to the Knowledge of the Company, no Tax audit, examination or other proceeding with respect to Taxes of the Company or any of its Subsidiaries is pending or has been threatened in writing since January 1, 2022;

 

(iv) the Company and each of its Subsidiaries has complied in all material respects with all applicable Laws relating to the collection and withholding of Taxes, including with respect to (x) any amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party and (y) the Recapitalization;

 

(v) there are no Liens for Taxes on any of the assets of the Company or its Subsidiaries, other than Permitted Liens;

 

(vi) (x) there are no written assessments, deficiencies, adjustments or other written claims with respect to Taxes that have been claimed, asserted or assessed against the Company or its Subsidiaries, (y) there are no ongoing or pending, nor has the Company or any of its Subsidiaries received written notice of the expected commencement of any actions with respect to any material Taxes of the Company or any Subsidiary and (z) there are no waivers or extensions of any statute of limitations currently in effect with respect to any Taxes of the Company or any of its Subsidiaries (other than extensions that arise as a result of filing Tax Returns by the extended due date therefor);

 

 

(vii) Neither the Company nor any of its Subsidiaries has any material liability for the Taxes of any Person (other than the Company or its Subsidiaries) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or (ii) as a transferee or successor, or by Contract (except for liabilities pursuant to commercial contracts not primarily relating to Taxes); and

 

(viii) Neither the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) installment sale made prior to the Closing Date; (iii) prepaid amount received on or prior to the Closing Date; or (iv) use of an improper method of accounting for a taxable period on or prior to the Closing Date. Neither the Company nor any of its Subsidiaries has made an election pursuant to Section 965(h) of the Code.

 

(b) No “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax Law), private letter rulings, tax opinions, technical advice memoranda or similar agreements or rulings have been entered into or issued by any Tax Authority with respect to the Company and its Subsidiaries.

 

(c) To the Knowledge of the Company, the Company and each of its Subsidiaries is in compliance, in all material respects, with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order of a Governmental Authority.

 

(d) To the Knowledge of the Company, no claims have been made by any Tax Authority in a jurisdiction where the Company and its Subsidiaries do not file Tax Returns that the Company and its Subsidiaries is or may be subject to income taxation (other than an obligation to withhold tax) by that jurisdiction.

 

(e) Neither the Company nor any of its Subsidiaries is a party to or bound by any Tax allocation, indemnification or sharing agreement (other than any such agreement between solely the Company and its Subsidiaries or any Tax indemnification provisions in commercial agreements that are not primarily related to Taxes).

 

(f) Neither the Company nor any of its Subsidiaries (or any predecessor thereof) has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for income tax-free treatment under Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) in the last two (2) years.

 

(g) Each of the Company and its Subsidiaries is a Tax resident only in its jurisdiction of formation.

 

(h) Neither the Company nor any of its Subsidiaries organized or formed under the laws of a jurisdiction outside of the United States (i) is a “surrogate foreign corporation” or “expatriated entity” within the meaning of Section 7874 of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) or is treated as a U.S. corporation for U.S. federal Tax purposes by reason of the application of Sections 269B or 7874(b) of the Code (or any corresponding or similar provision of state, local or non-U.S. Tax Law) or (ii) was created or organized in the United States such that such entity would be taxable in the United States as a domestic entity pursuant to the dual charter provision of Treasury Regulation Section 301.7701-5(a) (or any corresponding or similar provision of state, local or non-U.S. Tax Law).

 

 

(i) The Company has no Knowledge of any fact or any reason that (when taken together with the Company’s understanding of other relevant facts) would reasonably be expected to cause the Company to be treated, following the completion of the Transactions, as a Tax resident of a country other than Israel.

 

(j) Neither the Company nor any of its Subsidiaries has a permanent establishment (within the meaning of an applicable Tax treaty) in a country other than the country in which it is organized.

 

(k) Neither the Company nor any of its Subsidiaries (i) participated or engaged in any transaction listed in Section 131(g) of the Israeli Income Tax Ordinance and the Israeli Income Tax Regulations (Reportable Tax Planning), 2006, promulgated thereunder, (ii) taken a tax position that is subject to reporting under Section 131E of the Israeli Income Tax Ordinance, (iii) obtained a legal or tax opinion that is subject to reporting under Section 131D of the Israeli Income Tax Ordinance, (iv) performed any action or transaction that is classified as a “reportable opinion” under Section 67C of the Israeli Value Added Tax Law, 1975 (the “Israeli VAT Law”) or a “reportable position” under Section 67D of the Israeli VAT Law.

 

(l) The Company is duly registered for the purposes of Israeli value added tax (VAT) and has complied in all material respects with all requirements concerning VAT. The Company (i) has not made any exempt transactions (as defined in the Israeli VAT Law) and there are no circumstances by reason of which there might not be an entitlement to full credit of all VAT chargeable or paid on inputs, supplies and other transactions and imports made by it or them, (ii) has collected and remitted in a timely manner to the ITA all output VAT which it is required to collect and remit under any applicable Law and (iii) has not received a refund for input VAT for which it is not entitled under any applicable Law. Except for the Company, none of its Subsidiaries has ever been or currently is, required to effect Israeli VAT registration.

 

(m) The Company and its Subsidiaries have complied and are in compliance with all relevant requirements of (i) Section 102 of the Israeli Income Tax Ordinance and the regulations promulgated thereunder, with respect to any equity awards issued pursuant to the provisions of such section, and (ii) Section 3(i) of the Israeli Income Tax Ordinance with respect to the grant of options or shares to independent contractors or “controlling shareholders” (as defined in such section). The Company incentive equity plan and any amendments thereto were filed with the ITA, and the issuance of all Section 102 equity awards were timely and duly filed with, or reported to, the 102 trustee in accordance with the time specifications set forth in the Israeli Income Tax Ordinance and all such equity awards purported by the terms of the grant thereof to be granted under Section 102(b)(2) of the Israeli Income Tax Ordinance (capital gains route) are in full compliance with the provisions of Section 102 of the Israeli Income Tax Ordinance, including with respect to the due deposit of Section 102 equity awards with the Section 102 Trustee pursuant to the terms of Section 102 of the Israeli Income Tax Ordinance and any regulation or publication issued by the ITA. Each equity awarded pursuant to the incentive equity plan intended to qualify for the capital gains route under Section 102 are so qualified. No adjustment mechanism was implemented to any outstanding equity awarded under Section 102 of the Israeli Income Tax Ordinance which would require the pre-approval of the ITA.

 

(n) The Company, or any of its Subsidiaries, are not and have not been a real property corporation (Igud Mekarke’in) within the meaning of such term under Section 1 of the Israeli Land Taxation Law (Appreciation and Acquisition), 5723-1963.

 

(o) Neither the Company nor any of its Subsidiaries is subject to any restrictions or limitations pursuant to Part E2 of the Israeli Income Tax Ordinance or pursuant to any Tax ruling made with reference to the provisions of Part E2.

 

 

(p) Neither the Company nor any of its Subsidiaries own any interest in any controlled foreign corporation pursuant to Section 75B of the Israeli Income Tax Ordinance, or other entity the income of which is required to be included in the income of the Company.

 

(q) The Company is not a “controlled foreign corporation” as defined under Section 957(a) of the Code.

 

Section 4.16 Insurance. The Company and its Subsidiaries are covered by valid and currently effective insurance policies issued in favor of the Company and its Subsidiaries that are customary and adequate for companies of a similar size and nature in the industries and locations in which the Company operates. Schedule 4.16 sets forth, as of the date hereof, a true and complete list of all current, material insurance policies issued in favor of the Company and its Subsidiaries, or pursuant to which the Company or its Subsidiaries are a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force. With respect to each such insurance policy, (a) such policy is in full force and effect and all premiums due thereon have been paid, (b) the Company and its Subsidiaries are not in breach or default thereof, and have not taken any action or failed to take any action which (with or without notice or lapse of time, or both) would be reasonably expected to constitute such a breach or default, or would permit termination or modification of, any such policy and (c) to the Company’s Knowledge, no insurer issuing any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation. No written notice of cancellation or termination has been received by the Company with respect to any such policy, nor will any such cancellation or termination result from the consummation of the transactions contemplated by this Agreement.

 

Section 4.17 Real Property.

 

(a) Neither the Company nor any of its Subsidiaries owns any real property.

 

(b) Except as would not reasonably be expected to have a Material Adverse Effect, the Company or its applicable Subsidiary, has a valid leasehold interest in all real property leased by the Company or any of its Subsidiaries (“Leased Company Real Property”). All material leases for the Leased Company Real Property under which the Company or any of its Subsidiaries is a lessee (collectively, the “Company Leases”) are in full force and effect and are enforceable in accordance with their respective terms, subject to the Enforceability Exceptions, except as would not reasonably be expected to have a Material Adverse Effect. None of the Company or any of its Subsidiaries has received any written notice of any, and to the Knowledge of the Company there is no, material default under any such Company Lease.

 

Section 4.18 Intellectual Property and IT Security.

 

(a) All right, title and interest in Owned Intellectual Property is owned by the Company or one or more of its Subsidiaries. Without limiting the generality of the foregoing, to the Knowledge of the Company, (A) no former or current shareholder, founder, director, officer, employee, independent contractor, consultant or agent of the Company or any of its Subsidiaries have filed or delivered to the Company (or its Subsidiaries) any written claim, or, to the Knowledge of the Company, have any claim or any license, right (whether or not currently exercisable) or interest in or to any Owned Intellectual Property and (B), to the Knowledge of the Company, no former or current shareholder, founder, director, officer, employee, independent contractor, consultant or agent of the Company or any of its Subsidiaries is in breach of any Contract with his or her former employer or other Person concerning Owned Intellectual Property or confidentiality, where the cause or nature of the breach allegedly arises out of the performance of any services on behalf of the Company (or any of its Subsidiaries) related to the development of any Owned Intellectual Property, in each case of (A) and (B), except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

 

(b) To the Knowledge of the Company, the Company and its Subsidiaries are in compliance in all material respects with the terms of all material agreements relating to the Owned Intellectual Property. Except as set forth in Schedule 4.18(b), as of the date hereof, neither the Company nor any of its Subsidiaries has assigned, licensed, transferred, or conveyed any Owned Intellectual Property to a third party. To the knowledge of the Company, the execution and delivery of this Agreement by the Company and the consummation of the Transactions (alone or in combination with any other event) and the compliance with the provisions of this Agreement and the other Transaction Agreements do not and will not: result in (A) a loss, alteration, or impairment (in whole or in part) of any of the rights of the Company or its Subsidiaries in or to any of the Owned Intellectual Property that is assignable by its terms, or the validity, enforceability, use, right to use, ownership, duration, scope or effectiveness of the Owned Intellectual Property, or (B) the grant, assignment, or transfer to any Person of any license or other right, authorization, or interest under, to or in any of the Owned Intellectual Property.

 

(c) Schedule 4.18(c)(i) lists all patents, patent applications, trademark or service mark registrations, applications for the registration of trademark or service marks, copyright registrations, and domain name registrations included in the Owned Intellectual Property as of the date of this Agreement (“Registered Intellectual Property”) indicating for each item (as applicable): (i) all registration numbers, issuance numbers and application numbers, as applicable; (ii) all filing, registration, issuance, and grant dates, as applicable; and (iii) all jurisdictions in which such Registered Intellectual Property has been or is registered, granted, issued or in which registrations, grants or issuances have been applied for. To the Knowledge of the Company, each item of Registered Intellectual Property is subsisting. Except as set forth in Schedule 4.18(c)(ii), there is no Action pending or, to the Knowledge of the Company, threatened against the Company in writing, challenging the validity, enforceability, ownership, registration, or use of any Registered Intellectual Property, except for ordinary course patent, trademark, or service mark prosecution communications. To the Knowledge of the Company, (A) none of the Registered Intellectual Property has expired, lapsed, been abandoned, been disclaimed, or been cancelled or been declared invalid or unenforceable, in whole or in part, by any Governmental Authority, and (B) neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would reasonably be expected to result in abandonment, cancellation, invalidity, or unenforceability of any Registered Intellectual Property or an inventorship claim by a third party to any Registered Intellectual Property.

 

(d) (i) Each issued or granted Intellectual Property right that is a patent included in the Registered Intellectual Property identifies all inventors thereof, (ii) each inventor of each such Intellectual Property right has executed a valid and enforceable written agreement assigning all of such inventor’s rights, title, and interests in and to such Intellectual Property right (and the inventions and discoveries claimed or otherwise disclosed therein) to the Company or applicable Subsidiary (or a Third Party Assignor), (iii) to the Company’s Knowledge, the compliance by each such inventor with each such written agreement does not conflict with any of such inventor’s obligations to third parties, and (iv) all such assignments have been timely and properly recorded with the U.S. Patent and Trademark Office or its foreign equivalent(s), as and to the extent applicable. To the extent any such Intellectual Property right included in the issued or granted Registered Intellectual Property has been assigned to the Company by any Person who is not an inventor of such Intellectual Property right (“Third Party Assignor”), (A) any and all such Third Party Assignors of such Intellectual Property rights have each executed a valid and enforceable written agreement assigning all of such third party’s rights, title, and interests in and to such Intellectual Property rights (and the inventions and discoveries claimed or otherwise disclosed therein) to the Company, and (B) all such assignments have been timely and properly recorded with the U.S. Patent and Trademark Office or its foreign equivalent(s), as and to the extent applicable.

 

(e) To the Knowledge of the Company, for each patent right listed in Schedule 4.18(c), that is a U.S. patent right, the duty of disclosure and candor and good faith as required under 37 C.F.R. § 1.56 has been complied with, or that is a non-US patent right, analogous Laws outside the U.S. have been compiled with.

 

 

(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) to the Knowledge of the Company, the conduct of the business of the Company and its Subsidiaries as currently conducted (including the research, development, testing, manufacture, distribution, use, sale, offer for sale, importation, exportation, commercialization, marketing, supply, licensing and other exploitation of any of the Company’s Products or services) is not infringing upon, misappropriating or otherwise violating any Intellectual Property rights of any third party, and has not infringed upon, misappropriated or otherwise violated any Intellectual Property rights of any third party since January 1, 2020, (ii) to the Knowledge of the Company, no third party is infringing upon, misappropriating or otherwise violating any Owned Intellectual Property and (iii) the Company and its Subsidiaries have not received from any Person any written notice since January 1, 2020 that the Company or any of its Subsidiaries is infringing upon, misappropriating or otherwise violating any Intellectual Property rights of such Person that has not been resolved.

 

(g) The Company and its Subsidiaries have in place commercially reasonable measures designed to protect and maintain the confidentiality of any material trade secrets included in the Owned Intellectual Property, including by requiring all current and former employees and consultants, and any other Person who has had access at any time to any confidential Company information to execute and deliver to the Company a written Contract that includes customary confidentiality provisions and restrictions on use sufficient to maintain the confidential status and limit the use of such confidential Company information. To the Knowledge of the Company, no current or former employees or consultants are, and no other Person who has executed such confidentiality agreements is, in violation of any such confidentiality agreements. To the Knowledge of the Company, there has been no unauthorized access, use or disclosure of any such material trade secrets included in the Owned Intellectual Property, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(h) Each of the Company and its Subsidiaries has obtained from (i) each of its current and former employees and (ii) all other Persons, who are or were involved in, or who have participated in or contributed to, the conception, creation, development, reduction to practice, improvement to or modification of Owned Intellectual Property (or any portion thereof), a written Contract that assigns solely and exclusively to the Company or its applicable Subsidiary all rights, title and interests in and to any and all such Owned Intellectual Property arising out of such Person’s activities in the course of its engagement with Company or its Subsidiaries or with respect to the Company’s business. To the Knowledge of the Company, no current or former employees or consultants are, and no other Person who has executed such invention assignment agreements with the Company or the applicable Subsidiary is, in violation in any material respect of any such invention assignment agreements, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(i) Schedule 4.18(i) sets forth: (i) each grant that has been received from a Governmental Authority by the Company (“Governmental Grant”); and (ii) the aggregate outstanding obligations of the Company under each Governmental Grant with respect to royalties or other payments. Except as set forth in Schedule 4.18(i), no Governmental Authority has any right to (including any “step-in” or “march-in” rights with respect to), ownership of, or right to royalties for, or to impose any requirement on the manufacture or commercialization of any Product incorporating, any Owned Intellectual Property. Without limiting the generality of the foregoing, except as set forth in Schedule 4.18(i), no invention claimed or covered within the Owned Intellectual Property (i) was conceived or reduced to practice in connection with any research activities funded, in whole or in part, by any Governmental Authority or the Israeli Defense Force. Except as set forth in Schedule 4.18(i), (A) no funding, facilities, or personnel of any educational or research institution were used, directly or indirectly, to develop or create in whole or in part, any of the Owned Intellectual Property, and (B) no educational institution has any right to, or right to royalties for, or to impose any requirement on the manufacture or commercialization of any product incorporating, any Intellectual Property that is, or is purportedly, owned by the Company or any Subsidiary.

 

 

(j) To the Knowledge of the Company, (i) no Person other than the Company possesses any current or contingent rights to any source code that is a material part of the Owned Intellectual Property (including any software), and (ii) the Company or any Subsidiary has not granted any current or contingent rights to any source code that is a material part of the Owned Intellectual Property (including any software) (including any escrow arrangements).

 

(k) To the Knowledge of the Company, the Company and its Subsidiaries have in place commercially reasonable measures designed to protect the confidentiality, integrity and security of the IT Systems, and commercially reasonable back up and disaster recovery procedures designed for the continued operation of their businesses in the event of a failure of the IT Systems. To the Knowledge of the Company, the IT Systems operate and perform in all material respects as is necessary and sufficient for the conduct of the business of the Company and, as applicable, its Subsidiaries as currently conducted. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the Knowledge of the Company, there has been no outage of the IT Systems, security breach or other unauthorized access to the IT Systems that has resulted in the unauthorized access, use, disclosure, modification, encryption, loss, or destruction of any material information or data contained or stored therein since January 1, 2020.

 

(l) The Company and each Subsidiary is in compliance in all material respects with (i) all applicable Laws pertaining to (A) data security and privacy and (B) the collection, storage, use, access, disclosure, processing, security and transfer of Personal Information (defined below) (referred to collectively in this Agreement as “Data Activities”), including, in each case to the extent applicable, the Israeli Privacy Protection Law, 5741-1981 (“IPPL”) and the regulations promulgated thereunder, and the applicable guidelines and policies of the Israeli Data Base Registrar and the Privacy Protection Authority (to the extent binding under applicable Law) applicable to the Company and the Subsidiaries (clauses (A) and (B) together, “Privacy Law”); and (ii) all Contracts to which the Company or any Subsidiary is a party that are applicable to Data Activities (collectively, “Privacy Agreements”). “Personal Information” means any information which alone or in combination with other information can reasonably identify a single individual, including, but not limited to, an individual’s: (a) personally identifiable information (e.g., name, address, telephone number, email address, financial account number, government-issued identifier, and any other data used or intended to be used to identify a person), (b) Internet Protocol address or other persistent or unique identifier and (c) in each case to the extent the IPPL and the regulations promulgated thereunder, and the applicable guidelines and policies of the Israeli Data Base Registrar and the Privacy Protection Authority (to the extent binding under applicable Law) are applicable to the Company and the Subsidiaries, “information” as defined by the IPPL and applicable Israeli judicial precedents defining that term.

 

(m) To the Knowledge of the Company, the Company and its Subsidiaries have implemented written policies relating to Data Activities, including, without limitation, a publicly posted website privacy policy and commercially reasonable written information security policies (each, a “Privacy and Data Security Policy”) which are compliant in all material respects with the requirements under applicable Privacy Law. The Company and each Subsidiary is in compliance in all material respects with each Privacy and Data Security Policy. To the extent required by applicable Law for Data Activities, the Company and its Subsidiaries have provided necessary notifications to, and where required by Privacy Law, have obtained necessary consents from, Persons regarding its Data Activities. None of the disclosures made or contained in any Privacy and Data Security Policy has been inaccurate, misleading or deceptive in any material respect or in material non-compliance with any applicable Privacy Laws. Neither the execution, delivery nor performance of this Agreement and the other Transaction Agreements, nor the consummation of any of the Transactions, results in a material non-compliance with any of the Privacy Agreements, Privacy and Data Security Policies, or any applicable Privacy Law.

 

 

(n) To the Knowledge of the Company, there is no pending, nor has there been any written complaint, audit, proceeding, investigation or claim against the Company or any Subsidiary initiated by (i) any Person, (ii) any Governmental Authority, foreign or domestic, or (iii) any regulatory entity alleging that any Data Activity of the Company or any Subsidiary (A) is in violation of any applicable Privacy Law in any material respect, (B) is in violation of any Privacy Agreements in any material respect, (C) is in violation of any Privacy and Data Security Policy in any material respect, or (D) otherwise constitutes an unfair, deceptive or misleading trade practice in any material respect.

 

Section 4.19 Environmental Matters.

 

(a) The Company and its Subsidiaries are, and since January 1, 2021 have been, in compliance with all Environmental Laws applicable thereto and have no material liability under any Environmental Laws, except where any such failure to comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b) As of the date hereof, neither the Company nor any of its Subsidiaries has received written notice of any Actions (including notices of violation) alleging violations of or liability under Environmental Laws and, to the Knowledge of the Company, no such matter is otherwise pending or threatened, against the Company or any of its Subsidiaries, except for any such matter that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(c) Neither the Company nor any of its Subsidiaries has treated, stored, manufactured, transported, handled, disposed or released any Hazardous Materials, except in compliance with Environmental Laws in all material respects and in a quantity or manner reasonably required for the conduct of the business of the Company and its Subsidiaries or so as to give rise to liabilities for remedial obligations pursuant to Environmental Laws except for any such noncompliance or liabilities that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(d) Neither the Company nor any of its Subsidiaries has contractually assumed or provided any indemnity with respect to liability of any other Person under any Environmental Laws that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 4.20 Healthcare Matters.

 

(a) The preclinical and clinical studies conducted by or on behalf of or sponsored by the Company, and that are intended to be submitted to Healthcare Regulatory Authorities as a basis for product approval (collectively, “Studies”), were and, if still pending, are being conducted by the Company or, to the Knowledge of the Company, on behalf of the Company in all material respects in accordance with all applicable statutes, rules and regulations of the United States Food and Drug Administration (the “FDA”) or comparable drug regulatory agencies outside of the United States to which such Studies are subject (collectively, the “Healthcare Regulatory Authorities”). The Company has not received any written notices or correspondence from the Healthcare Regulatory Authorities or any other Governmental Authority requiring the premature termination or suspension of such Studies and, to the Company’s Knowledge, there are no reasonable grounds for the same.

 

(b) The Company has, since January 1, 2022, operated and currently is in compliance with all applicable health care Laws, including, (i) the Federal Food, Drug and Cosmetic Act (21 U.S.C. §§ 301 et seq.); (ii) all applicable federal, state, local and all applicable foreign healthcare related fraud and abuse Laws, including the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the U.S. Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), the civil False Claims Act (31 U.S.C. §§ 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), all criminal laws relating to healthcare fraud and abuse, including 18 U.S.C. Sections 286 and 287, the healthcare fraud criminal provisions under the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) (42 U.S.C. Section 1320d et seq.), the exclusion laws (42 U.S.C. § 1320a-7), and the civil monetary penalties law (42 U.S.C. § 1320a-7a); (iii) HIPAA, as amended by the Health Information Technology for Economic Clinical Health Act (42 U.S.C. Section 17921 et seq.); (iv) the regulations promulgated pursuant to such Laws; and (v) any other comparable local, state, federal, or foreign Laws (collectively, the “Healthcare Laws”). The Company has not received written notice or other written correspondence of any Action from any Governmental Authority or third party alleging that any Product, operation or activity is in violation of any Healthcare Laws, and, to the Company’s Knowledge, no such Action is threatened. The Company is not a party to and does not have any ongoing reporting obligations pursuant to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, plan of correction or similar agreement imposed by any Governmental Authority. Additionally, neither the Company, nor to the Company’s Knowledge, any of its employees, officers or directors, has been excluded, suspended or debarred from participation in any U.S. state or federal health care program or human clinical research or, to the Knowledge of the Company, is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.

 

 

(c) The Company holds all material certificates, authorizations, registrations, permits or licenses required to be filed, maintained or furnished under applicable Healthcare Laws (“Healthcare Permits”). All Healthcare Permits are in full force and effect in all material respects and no suspension, revocation, cancellation, or withdrawal of such Healthcare Permits has been threatened in writing.

 

(d) The Company has not received any written notice or communication from any Healthcare Regulatory Authority or Governmental Authority of any actual or threatened investigation, inquiry, or administrative, judicial, or regulatory action, hearing, or enforcement proceeding against the Company regarding any violation of applicable Healthcare Laws or other applicable local, state, and federal laws and regulations of the relevant Healthcare Regulatory Authority or Governmental Authority, including but not limited to a notice of adverse finding, warning letter, untitled letter, or Form FDA-483.

 

(e) To the Knowledge of the Company, no officer, employee, or agent of the Company is or has been threatened in writing to be (i) disqualified under any FDA investigator qualification proceedings; (ii) subject to the FDA’s Application Integrity Policy; or (iii) subject to any enforcement proceeding arising from material false statements to the FDA pursuant to 18 U.S.C. § 1001.

 

(f) Neither the Company nor any of its managers, directors, officers, agents, or employees have (i) used any corporate funds of the Company for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made any unlawful payments to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds or violated any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other U.S. or foreign Laws concerning corrupt payments applicable to its business or (iii) made or received any other payment, contribution, gift, bribe, rebate, payoff or kick-back prohibited under any applicable Law. Neither the Company nor any of its managers, directors, officers, stockholders, agents, or employees is or has been the subject of any investigation, inquiry or enforcement Proceeding by any Governmental Authority regarding any offense or alleged offense under anti-bribery, anti-corruption, or anti-fraud Law in any jurisdiction and, no such investigation, inquiry or Proceedings have been threatened.

 

Section 4.21 Brokers’ Fees. Other than as set forth on Schedule ‎4.21, no broker, finder, financial advisor, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other similar fee, commission or other similar payment in connection with the Transactions based upon arrangements made by or on behalf of the Company or any of its Subsidiaries.

 

Section 4.22 Related Party Transactions. Except for the Contracts set forth on Schedule ‎4.22, and Contracts that will be terminated prior to the Closing without any liability to the Company or its Subsidiaries continuing following the Closing, there are no Contracts between the Company or any of its Subsidiaries, on the one hand, and any Affiliate, officer or director of the Company or its Subsidiaries, on the other hand, except in each case, for (i) employment or consulting agreements, fringe benefits and other compensation paid to directors, officers and employees, (ii) reimbursements of expenses incurred in the ordinary course of business in connection with their employment or service, (iii) amounts paid pursuant to Company Benefit Plans, (iv) powers of attorney and similar grants of authority made in the ordinary course of business and (v) intercompany Contracts that are between the Company and its wholly-owned Subsidiaries.

 

 

Section 4.23 International Trade; Anti-Corruption.

 

(a) Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any of their respective directors, officers, employees, agents or other third-party representatives acting on behalf of the Company or any of its Subsidiaries, is currently, or has been since January 1, 2022: (i) a Sanctioned Person; (ii) organized, resident or operating from a Sanctioned Country; (iii) knowingly engaged in any dealings or transactions with any Sanctioned Person or in any Sanctioned Country, in violation of Sanctions Laws; or (iv) otherwise in violation of applicable Sanctions Laws or Trade Control Laws (collectively, “Trade Controls”), except as would not be material to the Company and its Subsidiaries, taken as a whole.

 

(b) Neither the Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any of their respective directors, officers, employees, agents or other third-party representatives acting on behalf of the Company or any of its Subsidiaries, has since January 1, 2022 been the subject of written any claim or allegation by any Governmental Authority that such Person has made any unlawful payment or given, offered, promised, or authorized or agreed to give, or received, any money or thing of value, directly or indirectly, to or from any Government Official or other Person in violation of any Anti-Corruption Laws, except as would not be material to the Company and its Subsidiaries, taken as a whole.

 

(c) Since January 1, 2022, neither the Company nor any of its Subsidiaries has received from any Governmental Authority or any other Person any notice, inquiry, or internal or external allegation; made any voluntary or involuntary disclosure to a Governmental Authority; or conducted any internal investigation or audit concerning any actual or potential violation or wrongdoing related to Trade Controls or Anti-Corruption Laws, except as would not be material to the Company and its Subsidiaries, taken as a whole. The Company and its Subsidiaries maintain and enforce policies, procedures and internal controls reasonably designed to promote compliance with Anti-Corruption Laws and Trade Controls.

 

Section 4.24 Investment Company Act. As of the date hereof, neither the Company nor any of its Subsidiaries is an “investment company” or a Person directly or indirectly “controlled” by or acting on behalf of an “investment company”, or required to register as an “investment company”, in each case within the meaning of the Investment Company Act of 1940, as amended.

 

Section 4.25 Product Liability.

 

(a) For the past three (3) years, neither the Company nor any of its Subsidiaries have received any written notice from any Person regarding any actual, alleged, possible or potential claim by any Person or group of Persons, including any Governmental Authority, for money damages or any other form of relief, whether in law or equity, in respect of potential or actual injury or harm allegedly resulting from or due and owing in connection with the purchase, use, application of or defect (including alleged failure to warn) relating to any Product of the Company and its Subsidiaries, irrespective of the legal theory of liability. To the Company’s Knowledge, no injury or harm has occurred to any Person or group of Persons related to (i) any Product of the Company or its Subsidiaries or (ii) the purchase, use or application of (including alleged failure to warn in respect of) any Product of the Company or its Subsidiaries or any defect in any such Product.

 

(b) In the past three (3) years, no Products sold by the Company or any of its Subsidiaries have been subject to a recall, market withdrawal, or stock recovery.

 

 

Section 4.26 No Other Representations. Except as provided in this Article IV, neither the Company, nor the Company Shareholders, nor any other Person has made, or is making, any representation or warranty whatsoever in respect of the Company, the Company’s Subsidiaries or their respective businesses.

 

Article V
REPRESENTATIONS AND WARRANTIES OF HEPION

 

Except as set forth in (i) the Schedules to this Agreement delivered by Hepion, dated as of the date of this Agreement or (ii) the SEC Reports that are available on the SEC’s website through EDGAR as of the date hereof (excluding (x) any disclosures in such SEC Reports under the headings “Risk Factors,” “Forward-Looking Statements” or “Qualitative Disclosures About Market Risk” or other disclosures that are predictive, cautionary or forward-looking in nature and (y) any exhibits or other documents appended thereto), Hepion represents and warrants to the Company as follows:

 

Section 5.01 Corporate Organization. Hepion is a corporation duly incorporated, validly existing and is in good standing under the Laws of the State of Delaware and has the corporate power and authority to own, lease or operate its assets and properties and to conduct its business as it is now being conducted. Hepion has made available to the Company true and correct copies of each of the Hepion Organizational Documents as in effect as of the date hereof. Hepion is, and at all times has been, in compliance in all material respects with all restrictions, covenants, terms and provisions set forth in the Hepion Organizational Documents. Hepion is duly licensed or qualified and in good standing as a foreign corporation in all jurisdictions in which its ownership of property or the character of its activities is such as to require it to be so licensed or qualified, except where failure to be so licensed or qualified would not, individually or in the aggregate, reasonably be expected to prevent or materially delay or materially impair the ability of Hepion to consummate the Transactions or otherwise have a material adverse effect on the Transactions (a “Hepion Material Adverse Effect”).

 

Section 5.02 Subsidiaries. The Subsidiaries of Hepion, together with details of their respective jurisdiction of incorporation or organization, are set forth on Schedule ‎5.02. The Subsidiaries of Hepion have been duly formed or organized, are validly existing under the laws of their jurisdiction of incorporation or organization and have the power and authority to own, operate and lease their respective properties, rights and assets and to conduct their business as it is now being conducted, except in each case as has not had, and would not, individually or in the aggregate, reasonably be expected to have, a Material Adverse Effect. Each Subsidiary of Hepion is duly licensed or qualified as a foreign entity in each jurisdiction in which its ownership of property or the character of its activities is such as to require it to be so licensed or qualified, except where the failure to be so licensed or qualified has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 5.03 Due Authorization.

 

(a) Hepion has all requisite corporate power and authority to execute and deliver this Agreement and each other Transaction Agreement to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and such other Transaction Agreements and the consummation of the transactions contemplated hereby and thereby have been duly, validly and unanimously authorized and approved by the board of directors of Hepion and no other corporate or equivalent proceeding on the part of Hepion is necessary to authorize this Agreement or such other Transaction Agreements or Hepion’s performance hereunder or thereunder (except that the Hepion Stockholder Approval is a condition to the consummation of the Merger). This Agreement has been, and each such other Transaction Agreement (when executed and delivered by Hepion) will be, duly and validly executed and delivered by Hepion and, assuming due authorization and execution by each other party hereto and thereto, this Agreement constitutes, and each such other Transaction Agreement will constitute a legal, valid and binding obligation of Hepion, enforceable against each Hepion in accordance with its terms, subject to the Enforceability Exceptions.

 

 

(b) The only approvals or votes required from the holders of Hepion’s Equity Securities in connection with the entry into this Agreement by Hepion, the consummation of the Transactions, including the Closing, and the approval of the Hepion Transaction Proposals are as set forth on Schedule ‎5.02(b).

 

(c) At a meeting duly called and held, the board of directors of Hepion has unanimously: (i) determined that this Agreement and the Transactions are fair to and in the best interests of Hepion and Hepion’s shareholders, (ii) approved the Transactions and (iii) resolved to recommend that Hepion’s stockholders approve each of the Hepion Transaction Proposals.

 

Section 5.04 No Conflict. Subject to the receipt of the consents, approvals, authorizations, and other requirements set forth in Section 5.05 and obtaining the Hepion Stockholder Approval, the execution, delivery and performance by Hepion of this Agreement and the Transaction Agreements and the consummation by Hepion of the transactions contemplated hereby and thereby do not and will not, (a) contravene or conflict with the Organizational Documents of Hepion, (b) contravene or conflict with or constitute a violation of any provision of any Law, Permit or Governmental Order binding upon or applicable to Hepion or any of its respective assets or properties, (c) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default under, or result in the termination or acceleration of, or a right of termination, cancellation, modification, acceleration or amendment under, accelerate the performance required by, any of the terms, conditions or provisions of any Hepion Specified Contract or (d) result in the creation or imposition of any Lien on any asset, property or Equity Security of Hepion or any of its Subsidiaries (other than any Permitted Liens), except in the case of each of clauses (c) through ‎(d) as would not, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 5.05 Governmental Authorities; Consents. No action by, consent, approval, permit or authorization of, or designation, declaration or filing with, any Governmental Authority or notice, approval, consent waiver or authorization from any Governmental Authority is required on the part of Hepion with respect to Hepion’s execution, delivery and performance of this Agreement and the other Transaction Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby, except for (i) obtaining the consents of, or submitting notifications, filings, notices or other submissions to, the Governmental Authorities listed on Schedule ‎5.05, (ii) the filing with the SEC of (A) the Proxy Statement/Prospectus and the declaration of the effectiveness thereof by the SEC, (B) any other documents or information required pursuant to applicable requirements, if any, of applicable Securities Laws, and (C) such reports under Section 13(a) or 15(d) of the Exchange Act as may be required in connection with this Agreement, the other Transaction Agreements or the Transactions, (iii) compliance with and filings or notifications required to be filed with the state securities regulators pursuant to “blue sky” Laws and state takeover Laws as may be required in connection with this Agreement, the other Transaction Agreements or the Transactions, (iv) the filing of the Certificate of Merger in accordance with the DGCL, and (v) the Hepion Stockholder Approval.

 

Section 5.06 Capitalization.

 

(a) The authorized, issued and outstanding capital stock of Hepion is set forth in the SEC Reports, which were true and correct in all material respects as of the respective dates of their filing. The issued and outstanding Hepion Common Stock and Convertible Preferred Stock were validly issued, fully paid and nonassessable (which term means that no further sums are required to be paid by the holders thereof in connection with the issue of such shares) and were free of preemptive rights. The SEC Reports (which were true and correct in all material respects as of the respective dates of their filings) set forth the total number and amount of all of the issued and outstanding Equity Securities of Hepion, and further sets forth the amount and type of Equity Securities of Hepion owned or held by Hepion’s Affiliates. All of the issued and outstanding shares of Equity Securities of Hepion (i) have been duly authorized and validly issued and are fully paid and non-assessable, (ii) were issued in full compliance with applicable Law and the Hepion Organizational Documents and (iii) were not issued in breach or violation of any preemptive rights or Contract.

 

 

(b) Except as set forth on Schedule 5.06(b), there are no outstanding options, warrants, call rights, restricted stock, restricted stock units, equity appreciation, phantom stock, profit participation or similar rights with respect to the Equity Securities of, or other equity or voting interest in, Hepion. Except as set forth in the Organizational Documents of Hepion, the Transaction Agreements, and Schedule 5.06(b), (i) no Person is entitled to any preemptive or similar rights to subscribe for Equity Securities of Hepion, (ii) there are no outstanding contractual obligations of Hepion to repurchase, redeem or otherwise acquire any Equity Securities of Hepion, and (iii) there are no outstanding bonds, debentures, notes or other indebtedness of Hepion having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which the Hepion’s shareholders may vote.

 

(c) Except as set forth on Schedule 5.06(c), Hepion has not granted or promised to any Person any options or other rights to acquire any Equity Securities of Hepion, and there are no outstanding or promised options or other rights to acquire any Equity Securities of Hepion. Schedule 5.06(c) sets forth, with respect to each Person who holds an outstanding option or other right to purchase Equity Securities of Hepion as of the date of this Agreement, the following information: (i) the name and status of such Person (and whether such Person is an employee or consultant of Hepion); (ii) the number and class of shares underlying the option; (iii) the vesting terms and conditions of the option; (iv) the exercise price and period of the option; (v) the plan and agreement under which the option was issued, and (vi) any other material terms or conditions underlying such option. Except for the Hepion Equity Plans, Hepion has no incentive stock plan or any similar plan.

 

(d) (i) There are no declared but unpaid dividends or distributions in respect of any Equity Securities of Hepion and (ii) since January 1, 2020 through the date of this Agreement, Hepion has not made, declared, set aside, established a record date for or paid any dividends.

 

Section 5.07 Capitalization of Subsidiaries.

 

(a) The issued and outstanding Equity Securities of each of Hepion’s Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable. All of the issued and outstanding Equity Securities of each Subsidiary of Hepion are owned as set forth on Schedule ‎5.07(a), free and clear of any Liens (other than Permitted Liens) and have not been issued in violation of preemptive or similar rights.

 

(b) There are no outstanding equity appreciation, phantom stock, profit participation or similar rights with respect to the Equity Securities of, or other equity or voting interest in, any Subsidiary of Hepion. No Person is entitled to any preemptive or similar rights to subscribe for Equity Securities of any Subsidiary of Hepion. There are no outstanding contractual obligations of any Subsidiary of Hepion to repurchase, redeem or otherwise acquire any Equity Securities of any Subsidiary of Hepion. There are no outstanding bonds, debentures, notes or other indebtedness of any Subsidiary of Hepion having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter for which the shareholders of Hepion’s Subsidiaries may vote.

 

(c) Except as set forth on Schedule 5.07(c), as of the date of this Agreement, neither Hepion nor any of its Subsidiaries owns any Equity Securities in any Person, other than shares publicly traded on a stock exchange held for cash management purposes.

 

 

Section 5.08 SEC Reports; Financial Statements; Sarbanes-Oxley Act; Undisclosed Liabilities.

 

(a) Other than as set forth in Schedule 5.08, for the past two (2) years Hepion has filed or furnished in a timely manner all required registration statements, reports, schedules, forms, statements and other documents required to be filed or furnished by it with the SEC (collectively, including any statements, reports, schedules, forms, statements and other documents required to be filed or furnished by it with the SEC subsequent to the date of this Agreement, each as it has been amended since the time of its filing and including all exhibits thereto, the “SEC Reports”). Each SEC Report, as of their respective dates (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), complied in all material respects with the applicable requirements of the Exchange Act, the Securities Act and the other U.S. federal securities laws and the rules and regulations of the SEC promulgated thereunder or otherwise (collectively, the “Federal Securities Laws”) (including, as applicable, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any rules and regulations promulgated thereunder). None of the SEC Reports, as of their respective dates (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contains any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. As of the date of this Agreement, there are no outstanding or unresolved comments from the SEC with respect to the SEC Reports. None of the SEC Reports filed on or prior to the date hereof is subject to ongoing SEC review or investigation as of the date hereof.

 

(b) The SEC Reports contain true and complete copies of the applicable financial statements of Hepion. The audited financial statements and unaudited interim financial statements (including, in each case, the notes and schedules thereto) included in the SEC Reports complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto, none of which is expected to be material) and fairly present (subject, in the case of the unaudited interim financial statements included therein, to normal year-end adjustments and the absence of complete footnotes) in all material respects the financial position of Hepion as of the respective dates thereof and the results of their operations and cash flows for the respective periods then ended. Hepion does not have any material off-balance sheet arrangements that are not disclosed in the SEC Reports.

 

(c) Hepion has established and maintains disclosure controls and procedures (as defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act). Such disclosure controls and procedures are designed to ensure that material information relating to Hepion is made known to Hepion’s principal executive officer and its principal financial officer. Such disclosure controls and procedures are effective in timely alerting Hepion’s principal executive officer and principal financial officer to material information required to be included in Hepion’s financial statements included in Hepion’s periodic reports required under the Exchange Act.

 

(d) Hepion has established and maintains systems of internal accounting controls that are sufficient to provide reasonable assurance that (i) all transactions are executed in accordance with management’s authorization and (ii) all transactions are recorded as necessary to permit preparation of proper and accurate financial statements in accordance with GAAP and to maintain accountability for Hepion’s assets. Hepion maintains, and since its incorporation has maintained, its books and records in the ordinary course of business that are accurate and complete and reflect the revenues, expenses, assets and liabilities of Hepion in all material respects.

 

(e) Except as set forth in the SEC Reports, there is no, and for the last two years there has not been, a (i) “significant deficiency” in the internal controls over financial reporting of Hepion, (ii) “material weakness” in the internal controls over financial reporting of Hepion or (iii) Fraud, whether or not material, that involves management or other employees of Hepion who have a significant role in the internal controls over financial reporting of Hepion.

 

 

(f) In the last two (2) years, each director and executive officer of Hepion has filed with the SEC on a timely basis all statements required by Section 16(a) of the Exchange Act and the rules and regulations promulgated thereunder.

 

(g) Hepion has not taken any action prohibited by Section 402 of the Sarbanes-Oxley Act. There are no outstanding loans or other extensions of credit made by Hepion to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of Hepion.

 

(h) Hepion has no liabilities, debts or obligations, whether accrued, contingent, absolute, determined, determinable or otherwise, required to be reflected or reserved for on a balance sheet prepared in accordance with GAAP, except for liabilities, debts or obligations (i) incurred or arising under or in connection with the Transactions, including expenses related thereto, or (ii) incurred in connection with or incident or related to Hepion’s incorporation or continuing corporate existence, which are immaterial in nature.

 

Section 5.09 No Undisclosed Liabilities. As of the date of this Agreement, neither Hepion nor any of its Subsidiaries has any liability, indebtedness or obligation, whether accrued, contingent, absolute, determined, determinable or otherwise, required to be reflected or reserved for on a balance sheet prepared in accordance with GAAP, except for liabilities, indebtedness or obligations (a) reflected or reserved for in the Financial Statements or disclosed in any notes thereto, (b) that have arisen since January 1, 2020 in the ordinary course of business of Hepion and its Subsidiaries, (c) incurred or arising under or in connection with the Transactions, including expenses related thereto, (d) disclosed in the Schedules or (e) that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 5.10 Litigation and Proceedings. Since January 1, 2021, there has been no pending or, to the Knowledge of Hepion, threatened (in writing) Actions by or against Hepion or any of its Subsidiaries that, if adversely decided or resolved, had, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. There is no Governmental Order imposed upon Hepion or any of its Subsidiaries that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Neither Hepion nor any of its Subsidiaries is party to a settlement or similar agreement regarding any of the matters set forth in the two preceding sentences that contains any ongoing obligations, restrictions or liabilities (of any nature) that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 5.11 Compliance with Laws. Hepion and its Subsidiaries are, and since January 1, 2021, have been, in compliance in all material respects with all applicable material Laws. None of Hepion or its Subsidiaries has received any written notice from any Governmental Authority of a material violation of any applicable Law at any time since January 1, 2021. Hepion and its Subsidiaries hold, and since January 1, 2021 have held, all material licenses, approvals, consents, registrations, franchises and permits necessary for the lawful conduct of the business of Hepion as currently conducted (the “Hepion Permits”). Hepion and its Subsidiaries are, and since January 1, 2022 have been, in material compliance with and not in material default under such Hepion Permits.

 

Section 5.12 Hepion Benefit Plans.

 

(a) Schedule 5.12(a) sets forth a true and complete list of each material Hepion Benefit Plan maintained for the benefit of employees. For purposes of this Agreement, a “Hepion Benefit Plan” is each “employee benefit plan” as defined in Section 3(3) of ERISA, and any material vacation, PTO, education assistance, cafeteria, flexible spending account, stock ownership, stock purchase, stock option, phantom stock, equity or other equity-based, severance, employment (other than offer letters that do not provide severance benefits or notice periods in excess of 30 days upon termination of the employment relationship), individual consulting, retention, change-in-control, transaction, fringe benefit, pension (including pension fund, managers’ insurance and/or similar fund), expansion orders, bonus, incentive, profit sharing, profits interest, deferred compensation, employee loan and all other benefit or compensation plans, agreements or other general arrangements, whether or not subject to ERISA, which are, in each case, material and contributed to, required to be contributed to, sponsored by or maintained by Hepion or any of its Subsidiaries for the benefit of any current employee, officer or director of Hepion or its Subsidiaries (the “Hepion Employees”) or under or with respect to which Hepion or any of its Subsidiaries has any material liability, contingent or otherwise, but not including (x) any multiemployer plan or any plan, policy, program, arrangement or agreement that covers only former directors, officers, employees, independent contractors and service providers and with respect to which Hepion and its Subsidiaries have no remaining obligations or liabilities, or (y) any personal employment, engagement or similar agreements with employees, consultants, or independent contractors of Hepion or any of its Subsidiaries.

 

 

(b) With respect to each material Hepion Benefit Plan, Hepion has made available to the Company (i) copies of Hepion Benefit Plan and any trust agreement or other funding instrument relating to such plan, and to the extent any Hepion Benefit Plan is not set forth in writing, a written summary of the material terms thereof; (ii) the most recent summary plan description currently in effect and any summaries of material modifications thereto; and (iii) any material notices, letters or correspondence to or from any Governmental Authority with respect to such Hepion Benefit Plan within the past three (3) years from the date hereof; (iv) the Forms 5500 annual return (or local non-US equivalent) and all schedules thereto with respect to the most recent three (3) years; (v) the most recent determination, opinion or advisory letter issued from the IRS (or local non-US equivalent from applicable similar Governmental Authority); (vi) the most recent actuarial valuation report or trust statement for any Hepion Benefit Plan that is either funded or has assets set aside to pay Company Benefit Plan benefits; and (vii) the most recent nondiscrimination tests performed under the Code (or local non-US equivalent).

 

(c) Except as would not have, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:

 

(i) each Hepion Benefit Plan has been established, maintained, funded and administered in compliance in all material respects with its terms and all applicable Laws, including, where applicable, ERISA and the Code;

 

(ii) each Hepion Benefit Plan which is intended to be qualified within the meaning of Section 401(a) of the Code is so qualified and (A) has received a favorable determination or opinion letter as to its qualification prior to the date of this Agreement or (B) has been established under a standardized master and prototype or volume submitter plan for which a current favorable Internal Revenue Service advisory letter or opinion letter has been obtained by the plan sponsor and is valid as to the adopting employer, and any trusts related thereto that are intended to be exempt from taxation under Section 501(a) of the Code are so exempt. To the Knowledge of Hepion, nothing has occurred, whether by action or failure to act, that would reasonably be expected to adversely affect such qualification. All benefits, contributions, and premiums relating to each Hepion Benefit Plan have been timely paid in accordance with the terms of such Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, generally accepted accounting principles. To the Knowledge of Hepion, no fact or set of circumstances exists and no event has occurred with respect to any Hepion Benefit Plan that would reasonably be expected to result in any Hepion Benefit Plan or Hepion (or any Subsidiary thereof) being required to pay any material Tax or penalty under applicable Law; and

 

(iii) each Hepion Benefit Plan that is subject to the Laws of a jurisdiction other than the United States has been maintained, funded and administered in compliance in all material respects with applicable Law.

 

 

(d) Neither Hepion, its Subsidiaries, nor any ERISA Affiliate has at any time sponsored, maintained, contributed to or had any liability (contingent or otherwise) in respect of (i) any “defined benefit plan” (as defined in Section 3(35) of ERISA), (ii) any plan subject to Section 412 of the Code or Section 302 or Title IV of ERISA, including any “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, (iii) any “multiple employer plan” within the meaning of Section 413(c) of the Code or (iv) any “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA). Except as required under Section 601 eq seq. of ERISA or similar state or local Law pursuant to which the covered individual pays the full cost of coverage, no Hepion Benefit Plan provides benefits or coverage in the nature of health, life or disability insurance following retirement or other termination of employment.

 

(e) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby (either alone or upon the occurrence of any additional or subsequent event or events) (i) entitle any Hepion service providers to receive any compensation or benefit (or increase thereto); (ii) accelerate the time of payment or vesting, or trigger any payment or funding, of any compensation or benefits; or (iii) limit or restrict the right of Hepion to merge, amend or terminate any Hepion Benefit Plan.

 

(f) Each Hepion Benefit Plan that is subject to Section 409A of the Code has been adopted and administered in compliance with its terms and the operational and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including notices, rulings and proposed and final regulations) thereunder.

 

(g) No Hepion Benefit Plan provides for any tax gross-up payments to any Hepion employees.

 

(h) There are no material claims or causes of action pending (other than routine claims for benefits) or, to the Knowledge of Hepion, threatened against Hepion in connection with any Hepion Benefit Plan, and no Hepion Benefit Plan has within the six (6) years prior to the date hereof been the subject of an examination, investigation or audit by a Governmental Authority or the subject of an application or filing under or is a participant in any amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority. Hepion is not engaged in any legal proceedings brought by or on behalf of any Hepion employee and, to the Knowledge of Hepion, no such proceedings have been threatened which, if determined adversely, would have a Material Adverse Effect on Hepion.

 

(i) No Hepion Benefit Plan is subject to the laws of any jurisdiction outside the United States.

 

Section 5.13 Labor and Employment Matters.

 

(a) Neither Hepion nor any of its Subsidiaries is party to or bound by any CBA. To the Knowledge of Hepion, no employees are represented by any labor organization, labor union, or works council or other similar employee representative organization with respect to their employment with Hepion or any of its Subsidiaries. Except as would not have, or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) there are no activities or proceedings of any labor union, works council or labor organization to organize any of Hepion Employees; and (ii) there is no, and since January 1, 2022 there has been no, organized labor dispute, labor grievance or strike, lockout, picketing, hand billing, slowdown, concerted refusal to work overtime, or work stoppage against Hepion or any of its Subsidiaries, in each case, pending or, to the Knowledge of Hepion, threatened.

 

(b) Hepion currently classifies, and for the past three (3) years has properly classified, each of its employees as exempt or non-exempt for purposes of the Fair Labor Standards Act and state and local wage and hour laws, and is and has been otherwise in compliance with all such laws.

 

 

(c) Hepion currently classifies, and for the past three (3) years has properly classified, each of its workers as employees or independent contractors.

 

(d) Hepion is not delinquent in any payments to any worker for any wages, salaries, fees, or other compensation due with respect to any services performed for it or amounts required to be reimbursed to such workers.

 

(e) Hepion is, and for the past three (3) years has been, in compliance in all material respects with all applicable laws and regulations respecting employment matters, including all laws regarding wages and hours, payment of minimum wages, meal and rest breaks, and overtime.

 

(f) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, neither Hepion nor any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or any similar state or local Law that remains unsatisfied.

 

Section 5.14 Tax Matters.

 

(a) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

 

(i) all Tax Returns required to be filed by Hepion have been filed (taking into account extensions) and all such Tax Returns are true, correct and complete in all material respects;

 

(ii) all Taxes required to be paid by Hepion have been duly and timely paid in full when due, regardless of whether shown on a Tax Return;

 

(iii) To the Knowledge of Hepion, no Tax audit, examination or other proceeding with respect to Taxes of Hepion is pending or has been threatened in writing;

 

(iv) Hepion has complied in all material respects with all applicable Laws relating to the collection and withholding of Taxes, including with respect to any amounts paid or owing to any employee, independent contractor, creditor, shareholder, or other third party;

 

(v) Hepion has not participated in any “listed transaction” within the meaning of Treasury Regulations Section 1.6011-4;

 

(vi) there are no written assessments, deficiencies, adjustments or other claims with respect to Taxes that have been asserted or assessed against Hepion that have not been paid or otherwise resolved, (y) there are no ongoing or pending, nor has Hepion received written notice of the expected commencement of, any actions with respect to any material Taxes of Hepion and (z) there are no waivers or extensions of any statute of limitations currently in effect with respect to any Taxes of Hepion (other than extensions that arise as a result of filing Tax Returns by the extended due date therefor);

 

(vii) Hepion is not subject to any Tax sharing, allocation or similar agreement (other than such Agreements that have been disclosed in public filings with respect to Hepion);

 

(viii) There are no Liens with respect to Taxes on any of the assets of Hepion, other than Permitted Liens;

 

(ix) Hepion does not have any material liability for the Taxes of any Person (other than Hepion) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or (ii) as a transferee or successor, or by Contract (except for liabilities pursuant to commercial contracts not primarily relating to Taxes);

 

 

(x) Hepion does not have a permanent establishment (within the meaning of an applicable Tax treaty) or otherwise have an office or fixed place of business in a country other than the country in which it is organized;

 

(xi) Hepion will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) installment sale made prior to the Closing Date; (iii) prepaid amount received on or prior to the Closing Date; or (iv) use of an improper method of accounting for a taxable period on or prior to the Closing Date. Hepion has not made an election pursuant to Section 965(h) of the Code.

 

(b) No “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or non-U.S. income Tax Law), private letter rulings, tax opinions, technical advice memoranda or similar agreements or rulings have been entered into or issued by any Tax Authority with respect to Hepion.

 

(c) To the Knowledge of the Hepion, Hepion is in compliance, in all material respects, with all terms and conditions of any Tax exemption, Tax holiday or other Tax reduction agreement or order of a Governmental Entity.

 

(d) To the Knowledge of Hepion, no claims have been made by any Tax Authority in a jurisdiction where Hepion does not file Tax Returns that Hepion is or may be subject to income taxation (other than an obligation to withhold tax) by that jurisdiction.

 

(e) Hepion is not a party to or bound by any Tax allocation, indemnification or sharing agreement (other than any Tax indemnification provisions in commercial agreements that are not primarily related to Taxes).

 

(f) Hepion (or any predecessor thereof) has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying for income tax-free treatment under Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) since January 1, 2022.

 

(g) Hepion is a Tax resident only in its jurisdiction of formation.

 

(h) Hepion does not have Knowledge of any fact or any reason that (when taken together with Hepion’s understanding of other relevant facts) would reasonably be expected to cause the Company to be treated, following the completion of the Transactions, as a Tax resident of a country other than Israel.

 

(i) Hepion is and has since incorporation been treated as a corporation for U.S. federal (and applicable state and local) income Tax purposes.

 

Section 5.15 Insurance. Hepion and its Subsidiaries are covered by valid and currently effective insurance policies issued in favor of Hepion and its Subsidiaries that are customary and adequate for companies of a similar size and nature in the industries and locations in which Hepion operates. Schedule 5.15 sets forth, as of the date hereof, a true and complete list of all current, material insurance policies issued in favor of Hepion and its Subsidiaries, or pursuant to which Hepion or its Subsidiaries are a named insured or otherwise a beneficiary, as well as any historic incurrence-based policies still in force. With respect to each such insurance policy, (a) such policy is in full force and effect and all premiums due thereon have been paid, (b) Hepion and its Subsidiaries are not in breach or default thereof, and have not taken any action or failed to take any action which (with or without notice or lapse of time, or both) would be reasonably expected to constitute such a breach or default, or would permit termination or modification of, any such policy and (c) to Hepion’s Knowledge, no insurer issuing any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation. No written notice of cancellation or termination has been received by Hepion with respect to any such policy, nor will any such cancellation or termination result from the consummation of the transactions contemplated by this Agreement.

 

 

Section 5.16 Real Property.

 

(a) Neither Hepion nor any of its Subsidiaries owns any real property.

 

(b) Except as would not reasonably be expected to have a Material Adverse Effect, Hepion or its applicable Subsidiary, has a valid leasehold interest in all real property leased by Hepion or any of its Subsidiaries (“Leased Hepion Real Property”). All material leases for the Leased Hepion Real Property under which Hepion or any of its Subsidiaries is a lessee (collectively, the “Hepion Leases”) are in full force and effect and are enforceable in accordance with their respective terms, subject to the Enforceability Exceptions, except as would not reasonably be expected to have a Material Adverse Effect. None of Hepion or any of its Subsidiaries has received any written notice of any, and to the Knowledge of Hepion there is no, material default under any such Hepion Lease.

 

Section 5.17 IT Security.

 

(a) To the Knowledge of Hepion, Hepion and its Subsidiaries have in place commercially reasonable measures designed to protect the confidentiality, integrity and security of the IT Systems, and commercially reasonable back up and disaster recovery procedures designed for the continued operation of their businesses in the event of a failure of the IT Systems. To the Knowledge of Hepion, the IT Systems operate and perform in all material respects as is necessary and sufficient for the conduct of the business of Hepion and, as applicable, its Subsidiaries as currently conducted. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the Knowledge of Hepion, to the Knowledge of Hepion, there has been no outage of the IT Systems, security breach or other unauthorized access to the IT Systems that has resulted in the unauthorized access, use, disclosure, modification, encryption, loss, or destruction of any material information or data contained or stored therein since January 1, 2020.

 

(b) Hepion and each Subsidiary is in compliance in all respects with (i) all applicable Laws pertaining to Data Activities; and (ii) all Contracts to which Hepion or any Subsidiary is a party that are applicable to Data Activities (collectively, “Hepion Privacy Agreements”).

 

(c) To the Knowledge of Hepion, Hepion and its Subsidiaries have implemented written policies relating to Data Activities, including, without limitation, a publicly posted website privacy policy and commercially reasonable written information security policies (each, a “Hepion Privacy and Data Security Policy”) which are also compliant in all material respects with the requirements under any applicable Privacy Law. Hepion and each Subsidiary is in compliance in all material respects with each Hepion Privacy and Data Security Policy. To the extent required by applicable Law for Data Activities, Hepion and its Subsidiaries have provided necessary notifications to, and have obtained necessary consents from, Persons regarding its Data Activities. None of the disclosures made or contained in any Hepion Privacy and Data Security Policy has been inaccurate, misleading or deceptive in a material manner or in material non-compliance with any applicable Privacy Laws. Neither the execution, delivery nor performance of this Agreement and the other Transaction Agreements, nor the consummation of any of the Transactions, results in a material non-compliance with any of the Hepion Privacy Agreements, Privacy and Data Security Policies, or any applicable Privacy Law.

 

 

(d) To the Knowledge of Hepion, there is no pending, nor has there been any written complaint, audit, proceeding, investigation or claim against Hepion or any Subsidiary initiated by (i) any Person, (ii) any Governmental Authority, foreign or domestic, or (iii) any regulatory or self-regulatory entity alleging that any Data Activity of any of Hepion or any Subsidiary (A) is in violation of any applicable Privacy Law in any material respect, (B) is in violation of any Hepion Privacy Agreements in any material respect, (C) is in violation of any Hepion Privacy and Data Security Policy in any material respect, or (D) otherwise constitutes an unfair, deceptive or misleading trade practice in any material respect.

 

Section 5.18 Environmental Matters.

 

(a) Hepion and its Subsidiaries are, and since January 1, 2021 have been, in compliance with all Environmental Laws applicable thereto and have no material liability under any Environmental Laws, except where any such failure to comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(b) As of the date hereof, neither Hepion nor any of its Subsidiaries has received written notice of any Actions (including notices of violation) alleging violations of or liability under Environmental Laws and, to the Knowledge of Hepion, no such matter is otherwise pending or threatened, against Hepion or any of its Subsidiaries, except for any such matter that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(c) Neither Hepion nor any of its Subsidiaries has treated, stored, manufactured, transported, handled, disposed or released any Hazardous Materials, except in compliance with Environmental Laws in all material respects and in a quantity or manner reasonably required for the conduct of the business of Hepion and its Subsidiaries or so as to give rise to liabilities for remedial obligations pursuant to Environmental Laws except for any such noncompliance or liabilities that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(d) Neither Hepion nor any of its Subsidiaries has contractually assumed or provided any indemnity with respect to liability of any other Person under any Environmental Laws that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

Section 5.19 Brokers’ Fees. Other than as set forth on Schedule ‎5.19, no broker, finder, financial advisor, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other similar fee, commission or other similar payment in connection with the Transactions based upon arrangements made by or on behalf of Hepion or any of its Subsidiaries.

 

Section 5.20 Related Party Transactions. Schedule ‎5.20 sets forth all Contracts, transactions, arrangements or understandings between (a) Hepion, on the one hand, and (b) any officer, director, employee, partner, member, manager, direct or indirect equityholder or warrant holder or Affiliate of either Hepion or any of the respective officers, directors, employees, partners, members, managers or direct or indirect equityholders of any of the foregoing Persons, on the other hand (each Person identified in this clause ‎(b), a “Hepion Related Party”). Except as set forth in Schedule ‎5.20, no Hepion Related Party (i) owns any interest in any asset used by Hepion, or (ii) owes any material amount to, or is owed any material amount by, Hepion.

 

Section 5.21 International Trade; Anti-Corruption.

 

(a) Neither Hepion nor any of its Subsidiaries, nor, to the Knowledge of Hepion, any of their respective directors, officers, employees, agents or other third-party representatives acting on behalf of Hepion or any of its Subsidiaries, is currently, or has been since January 1, 2022: (i) a Sanctioned Person; (ii) organized, resident or operating from a Sanctioned Country; (iii) knowingly engaged in any dealings or transactions with any Sanctioned Person or in any Sanctioned Country, in violation of Sanctions Laws; or (iv) otherwise in violation of Trade Controls, except as would not be material to Hepion and its Subsidiaries, taken as a whole.

 

 

(b) Neither Hepion nor any of its Subsidiaries, nor, to the Knowledge of Hepion, any of their respective directors, officers, employees, agents or other third-party representatives acting on behalf of Hepion or any of its Subsidiaries, has since January 1, 2022 been the subject of written any claim or allegation by any Governmental Authority that such Person has made any unlawful payment or given, offered, promised, or authorized or agreed to give, or received, any money or thing of value, directly or indirectly, to or from any Government Official or other Person in violation of any Anti-Corruption Laws, except as would not be material to Hepion and its Subsidiaries, taken as a whole.

 

(c) Since January 1, 2022, neither Hepion nor any of its Subsidiaries has received from any Governmental Authority or any other Person any notice, inquiry, or internal or external allegation; made any voluntary or involuntary disclosure to a Governmental Authority; or conducted any internal investigation or audit concerning any actual or potential violation or wrongdoing related to Trade Controls or Anti-Corruption Laws, except as would not be material to Hepion and its Subsidiaries, taken as a whole. Hepion and its Subsidiaries maintain and enforce policies, procedures and internal controls reasonably designed to promote compliance with Anti-Corruption Laws and Trade Controls.

 

Section 5.22 Investment Company Act. As of the date hereof, neither Hepion nor any of its Subsidiaries is an “investment company” or a Person directly or indirectly “controlled” by or acting on behalf of an “investment company”, or required to register as an “investment company”, in each case within the meaning of the Investment Company Act of 1940, as amended.

 

Section 5.23 Product Liability.

 

(a) For the past three (3) years, neither Hepion nor any of its Subsidiaries have received any written notice from any Person regarding any actual, alleged, possible or potential claim by any Person or group of Persons, including any Governmental Authority, for money damages or any other form of relief, whether in law or equity, in respect of potential or actual injury or harm allegedly resulting from or due and owing in connection with the purchase, use, application of or defect (including alleged failure to warn) relating to any Product of Hepion and its Subsidiaries, irrespective of the legal theory of liability. To Hepion’s Knowledge, no injury or harm has occurred to any Person or group of Persons related to (i) any Product of Hepion or its Subsidiaries or (ii) the purchase, use or application of (including alleged failure to warn in respect of) any Product of Hepion or its Subsidiaries or any defect in any such Product.

 

(b) In the past three (3) years, no Products sold by Hepion or any of its Subsidiaries have been subject to a recall, market withdrawal, or stock recovery.

 

Section 5.24 Nasdaq Listing. The Hepion Common Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq under the symbol “HEPA.” Hepion is in compliance with and has complied with the applicable listing requirements of the Nasdaq. There is no Action pending or, to the Knowledge of Hepion, threatened against Hepion by the Nasdaq or the SEC with respect to any intention by such entity to deregister the Hepion Common Stock or terminate the listing of Hepion Common Stock on the Nasdaq. None of Hepion or its Affiliates has taken any action in an attempt to terminate the registration of the Hepion Common Stock under the Exchange Act except as contemplated by this Agreement. Hepion has not received any notice from the Nasdaq or the SEC regarding the revocation of such listing or otherwise regarding the delisting of the Hepion Common Stock from the Nasdaq or the SEC.

 

Section 5.25 Material Contracts; No Defaults.

 

(a) Hepion has filed as an exhibit to the SEC Reports all Contracts, including every “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) (other than confidentiality and non-disclosure agreements and this Agreement) to which, as of the date of this Agreement, Hepion is a party or by which any of its respective assets are bound.

 

 

(b) Each Contract of a type required to be filed as an exhibit to the SEC Reports, whether or not filed, was entered into at arm’s length. Except for any Contract that has terminated or will terminate upon the expiration of the stated term thereof prior to the Closing Date, with respect to any Contract of the type required to be filed as an exhibit to the SEC Reports, whether or not filed, (i) such Contracts are in full force and effect and represent the legal, valid and binding obligations of Hepion, and, to the Knowledge of Hepion, the other parties thereto, and are enforceable by Hepion to the extent a party thereto in accordance with their terms, subject in all respects to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other Laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law), (ii) Hepion and, to the Knowledge of Hepion, the counterparties thereto, are not in material breach of or material default (or would be in material breach, violation or default but for the existence of a cure period) under any such Contract, (iii) Hepion has not received any written or oral claim or notice of material breach of or material default under any such Contract, (iv) no event has occurred which, individually or together with other events, would reasonably be expected to result in a material breach of or a material default under any such Contract by Hepion or any other party thereto (in each case, with or without notice or lapse of time or both) and (v) Hepion has not received written notice from any other party to any such Contract that such party intends to terminate or not renew any such Contract.

 

Section 5.26 Hepion Support Agreement. Hepion has delivered to the Company a true, correct and complete copy of the Hepion Support Agreement. The Hepion Support Agreement is in full force and effect and has not been withdrawn or terminated, or otherwise amended or modified, in any respect, and no withdrawal, termination, amendment or modification is contemplated by Hepion. The Hepion Support Agreement is a legal, valid and binding obligation of Hepion and, each other party thereto and neither the execution or delivery by any party thereto, nor the performance of any party’s obligations under, the Hepion Support Agreement violates any provision of, or results in the breach of or default under, or require any filing, registration or qualification under, any applicable Law. No event has occurred that, with or without notice, lapse of time or both, would constitute a default or breach of any party under the Hepion Support Agreement.

 

Section 5.27 Absence of Changes. Since the date of Hepion’s incorporation (a) there has not been any event or occurrence that has had, or would reasonably be expected to have, individually or in the aggregate, a Hepion Material Adverse Effect, and (b) except as expressly contemplated by this Agreement, the other Transaction Agreements or in connection with the Transactions, Hepion has carried on its business in all material respects in the ordinary course of business.

 

Section 5.28 Residency. Hepion is a non-Israeli resident company that has no activities in Israel, and its activity is controlled and managed outside of Israel. Each of Hepion’s directors, officers and managers are non-Israeli residents and conduct Hepion’s activity outside of Israel.

 

Section 5.29 Shell Company Status. Hepion is not an issuer identified in Rule 144(i)(1) promulgated under the Securities Act or a shell company as defined in Rule 12b-2 promulgated under the Exchange Act.

 

Section 5.30 Healthcare Matters. Except as would not, individually or in the aggregate, reasonably be expected to have a Hepion Material Adverse Effect, since the date of Hepion’s incorporation:

 

(a) The clinical studies conducted by or on behalf of or sponsored by Hepion or in which Hepion has participated (collectively, “Studies”), were and, if still pending, are being conducted by Hepion or, to the Knowledge of Hepion, on behalf of Hepion in all material respects in accordance with all applicable statutes, rules and regulations of the applicable Healthcare Regulatory Authorities. Hepion has not received any written notices or correspondence from the Healthcare Regulatory Authorities or any other Governmental Authority requiring or threatening the premature termination or suspension of such Studies and, to the Knowledge of Hepion, there are no reasonable grounds for the same.

 

 

(b) Hepion has since its incorporation operated and is currently in compliance with all applicable Healthcare Laws. Hepion has not received written notice or other correspondence of any Action from any Governmental Authority, institutional review board, ethics committee, or other third party alleging that any product, operation or activity is in violation of any Healthcare Laws, and, to the Knowledge of Hepion, no such Action is threatened. Hepion is not a party to and does not have any ongoing reporting obligations pursuant to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, plan of correction or similar agreement imposed by any Governmental Authority. Additionally, neither Hepion, nor any of its employees, officers or directors, has been excluded, suspended or debarred from participation in any U.S. state or federal health care program or human clinical research or is subject to a governmental inquiry, investigation, proceeding, or other similar action that could reasonably be expected to result in debarment, suspension, or exclusion.

 

(c) Hepion has filed with the applicable Healthcare Regulatory Authorities all required material filings, declarations, listings, registrations, reports or submissions, including adverse event reports, with respect to its products, operations, and activities (collectively, “Healthcare Submissions”). All Healthcare Submissions were complete and accurate in all material respects and in material compliance with applicable Laws when filed, or were subsequently corrected or completed by a subsequent filing made prior to the date hereof. Hepion has made available to the Company true, correct and complete copies of all Healthcare Submissions and all material correspondence with and from all Healthcare Regulatory Authorities. No deficiencies have been asserted by any Healthcare Regulatory Authority with respect to any Healthcare Submission, except as are not, and would not reasonably be expected to be, individually or in the aggregate, material to Hepion, taken as a whole.

 

(d) Neither Hepion, nor any authorized person acting on its behalf, has (i) made an untrue statement of a material fact or a fraudulent statement to the FDA or any other Healthcare Regulatory Authority, (ii) failed to disclose a material fact required to be disclosed to the FDA or any other Healthcare Regulatory Authority, or (iii) committed any act, made any statement or failed to make a statement to the FDA or any other Healthcare Regulatory Authority, in each such case, that, at the time such statement was made or such disclosure or statement was not made, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities,” set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for any Healthcare Regulatory Authority to invoke any similar policy.

 

Section 5.31 No Other Representations. Except as provided in this Article V, neither Hepion nor any other Person has made, or is making, any representation or warranty whatsoever in respect of Hepion or its business.

 

Article VI
COVENANTS OF THE COMPANY

 

Section 6.01 Conduct of Business. From the date of this Agreement until the earlier of the Closing or the termination of this Agreement in accordance with its terms (the “Interim Period”), the Company shall, and shall cause its Subsidiaries to, except (i) as expressly contemplated by this Agreement (including the Recapitalization) or any other Transaction Agreement, (ii) as set forth on Schedule ‎6.01, (iii) as consented to in writing by Hepion (which consent shall not be unreasonably conditioned, withheld or delayed), or (iv) as required by applicable Law, use reasonable best efforts to conduct and operate its business in the ordinary course of business, consistent with past practice. Without limiting the generality of the foregoing, except (i) as contemplated by this Agreement (including the Recapitalization) or in any other Transaction Agreement, (ii) as set forth on Schedule ‎6.01, (iii) as consented to by Hepion in writing (such consent not to be unreasonably conditioned, withheld or delayed), or (iv) as required by applicable Law, the Company shall not, and the Company shall cause its Subsidiaries not to, during the Interim Period:

 

(a) change or amend its Organizational Documents in any material respect;

 

 

(b) make, declare, set aside, establish a record date for or pay any dividend or distribution, other than any dividends or distributions from any wholly owned Subsidiary of the Company either to the Company or any other wholly owned Subsidiaries of the Company;

 

(c) except for entries, modifications, amendments, waivers or terminations in the ordinary course of business, enter into, materially modify, materially amend, waive any material right under or terminate, any Company Specified Contract, or any Company Lease;

 

(d) issue, deliver, sell, transfer, pledge or dispose of, or place any Lien (other than a Permitted Lien) on, any Equity Securities of the Company or any of its Subsidiaries;

 

(e) sell, assign, transfer, convey, lease, license, abandon, allow to lapse or expire, subject to or grant any material Lien (other than Permitted Liens) on, or otherwise dispose of, any material assets, rights or properties (including material Intellectual Property), other than (i) the sale or license of goods and services to customers in the ordinary course of business, (ii) the sale or other disposition of assets or equipment deemed by the Company in its reasonable business judgment to be obsolete or otherwise warranted in the ordinary course of business, (iii) grants of non-exclusive licenses of Intellectual Property, (iv) as already contracted by the Company or any of its Subsidiaries, or (v) transactions among the Company and its Subsidiaries or among its Subsidiaries;

 

(f) settle any pending or threatened Action, if such settlement would require payment by the Company or any Subsidiary thereof in an amount greater than $1,000,000, or admit criminal wrongdoing;

 

(g) except required by the terms of any existing Company Benefit Plan or under applicable Law, (i) promise award, amend, terminate or grant any severance, change in control, transaction bonus, equity or equity-based, retention or termination payment, award or arrangement to any officer-level Company Employee, (ii) take any action to increase or accelerate any compensation or benefits, or the funding of any compensation or benefits, payable or to become payable to any Company Employees; (iii) hire, terminate or promote any employee, except in the ordinary course of business with respect to employees whose base salary is less than $100,000; (iv) establish, adopt, enter into, amend or terminate any material Company Benefit Plan or any Contract that would be a material Company Benefit Plan if it were in existence as of the date of this Agreement, or (v) provide loans to any individual service provider of the Company;

 

(h) make any loans or advance any money or other property to any Person, except for (A) advances in the ordinary course of business to employees, officers or directors of the Company or any of its Subsidiaries for expenses, (B) prepayments and deposits paid to suppliers of the Company or any of its Subsidiaries in the ordinary course of business, (C) trade credit extended to customers of the Company or any of its Subsidiaries in the ordinary course of business and (D) advances or other payments among the Company and its Subsidiaries;

 

(i) redeem, purchase, repurchase or otherwise acquire, or offer to redeem, purchase, repurchase or acquire, any Equity Securities of the Company any of its Subsidiaries other than transactions among the Company and its Subsidiaries or among the Subsidiaries of the Company;

 

(j) adjust, split, combine, subdivide, recapitalize, reclassify or otherwise effect any change in respect of any Equity Securities of the Company or any of its Subsidiaries;

 

 

(k) adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or its Subsidiaries;

 

(l) other than in the ordinary course of business or as required by applicable Laws, make, change or revoke any material Tax election in a manner inconsistent with past practice, change or revoke any material accounting method with respect to Taxes, file any material Tax Return in a manner materially inconsistent with past practice, settle or compromise any material Tax claim or Tax liability, enter into any material closing agreement with respect to any Tax, or surrender any right to claim a material refund of Taxes, in each case, if such action would be reasonably expected to have an adverse and disproportionate impact on Hepion and its equity holders (as compared to the impact of such actions on the Company and its pre-Merger equity holders);

 

(m) incur, create or assume any indebtedness for borrowed money in excess of $1,000,000, other than (x) ordinary course trade payables, (y) between the Company and any of its wholly owned Subsidiaries or between any of such wholly owned Subsidiaries or (z) in connection with borrowings, extensions of credit and other financial accommodations under the Company’s and Subsidiaries’ existing credit facilities, notes and other existing indebtedness and, in each case, any refinancings thereof;

 

(n) other than in the ordinary course of business, enter into any agreement that materially restricts the ability of the Company or its Subsidiaries to engage or compete in any line of business, enter into any agreement that materially restricts the ability of the Company or its Subsidiaries to enter into a new line of business or enter into any new line of business;

 

(o) make any capital expenditures that in the aggregate exceed $1,000,000, other than any capital expenditure (or series of related capital expenditures) consistent in all material respects with the Company’s annual capital expenditures budget for periods following the date hereof, made available to Hepion;

 

(p) enter into any Contract with any broker, finder, investment banker or other Person under which such Person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the Transactions; or

 

(q) enter into any Contract to do any action prohibited under Section 6.01 above.

 

Notwithstanding anything to the contrary contained herein (including this Section 6.01), nothing in this Section 6.01 is intended to give Hepion or any of its Affiliates, directly or indirectly, the right to control or direct the business or operations of the Company or its Subsidiaries prior to the Closing, and prior to the Closing, the Company and its Subsidiaries shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their respective businesses and operations.

 

Section 6.02 Inspection. Subject to confidentiality obligations and similar restrictions that may be applicable to information furnished to the Company or any of its Subsidiaries by third parties that may be in the Company’s or any of its Subsidiaries’ possession from time to time, and except for any information which (x) relates to the negotiation of this Agreement or the Transactions, (y) is prohibited from being disclosed by applicable Law or (z) on the advice of legal counsel of the Company would result in the loss of attorney-client privilege or other privilege from disclosure, the Company shall, and shall cause its Subsidiaries to, afford to Hepion and its Representatives reasonable access during the Interim Period, and with reasonable advance notice, in such manner as to not interfere with the normal operation of the Company and its Subsidiaries and so long as reasonably feasible or permissible under applicable Law, to the properties, books, Tax Returns, records and appropriate officers and employees of the Company and its Subsidiaries, and shall use its reasonable best efforts to furnish such Representatives with all financial and operating data and other information concerning the affairs of the Company and its Subsidiaries that are in the possession of the Company or its Subsidiaries, in each case, as Hepion and its Representatives may reasonably request solely for purposes of consummating the Transactions; provided that such access shall not include any invasive or intrusive investigations or testing, sampling or analysis of any properties, facilities or equipment of the Company or its Subsidiaries. All information obtained by Hepion and its Representatives under this Agreement shall be subject to the Confidentiality Agreement.

 

 

Section 6.03 Company Securities Listing. The Company will use its reasonable best efforts to cause: (i) the Company’s initial listing application with the Nasdaq in connection with the Transactions to have been approved; (ii) the Company to satisfy all applicable initial listing requirements of the Nasdaq; and (iii) the Company Ordinary Shares issuable in accordance with this Agreement, including the Merger, to be approved for listing on the Nasdaq (and Hepion shall reasonably cooperate in connection therewith), subject to official notice of issuance, in each case, as promptly as reasonably practicable after the date of this Agreement, and in any event, with respect to clauses (i) and (ii), prior to the Effective Time.

 

Section 6.04 No Third-Party Beneficiaries. Notwithstanding anything herein or otherwise to the contrary, all provisions contained in this Section 6.04 are included for the sole benefit of Hepion, Merger Sub and the Company, and that nothing in this Agreement, whether express or implied, (i) shall limit the right of the Company or its Affiliates to amend, terminate or otherwise modify any Company Benefit Plan or other employee benefit plan, agreement or other arrangement following the Closing Date, or (ii) shall confer upon any Person who is not a party to this Agreement (including any equity holder, any current or former director, manager, officer, employee or independent contractor of the Company, or any participant in any Company Benefit Plan or other employee benefit plan, agreement or other arrangement (or any dependent or beneficiary thereof)), any right to continued or resumed employment or recall, any right to compensation or benefits, or any third-party beneficiary or other right of any kind or nature whatsoever.

 

Section 6.05 Securities Laws. Each of the Company and Hepion acknowledges and agrees that it is aware of the restrictions imposed by U.S. Federal Securities Laws and the rules and regulations of Nasdaq promulgated thereunder or otherwise and other applicable foreign and domestic Laws on a Person possessing material nonpublic information about a publicly traded company.

 

Section 6.06 Indemnification Agreements. At the Closing, the Company shall execute and enter into an Indemnification Agreement with each Hepion Designee, which shall be in the same form as the Indemnification Agreements entered into with the Company Designees.

 

Article VII
COVENANTS OF HEPION

 

Section 7.01 Indemnification and Directors’ and Officers’ Insurance.

 

(a) All rights to exculpation, indemnification and advancement of expenses existing as of the date of this Agreement in favor of the current or former directors or officers of Hepion (each, together with such person’s heirs, executors or administrators, a “D&O Indemnitees”) under the Hepion Organizational Documents or under any indemnification agreement such D&O Indemnitee may have with Hepion that has been made available to the Company prior to the date of this Agreement, in each case, as in effect as of immediately prior to the date of this Agreement (collectively, the “Existing D&O Arrangements”), shall survive the Closing and shall continue in full force and effect for a period of six years from the Closing Date. For a period of six years from the Closing Date, to the maximum extent permitted under applicable Law, the Company shall cause the Surviving Company to maintain in effect the Existing D&O Arrangements, and the Company shall, and shall cause the Surviving Company to, not amend, repeal or otherwise modify any such provisions in any manner that would materially and adversely affect the rights thereunder of any D&O Indemnitee; provided, however, that all rights to indemnification or advancement of expenses in respect of any Action pending or asserted or any claim made within such period shall continue until the disposition of such Action or resolution of such claim. The Company shall not have any obligation under this Section 7.01 to any D&O Indemnitee when and if a court of competent jurisdiction shall determine that the indemnification of such D&O Indemnitee in the manner contemplated hereby is prohibited by applicable Law.

 

 

(b) Prior to the Closing, Hepion shall purchase a six year “tail” or “runoff” directors’ and officers’ liability insurance policy (the “D&O Tail”) in respect of acts or omissions occurring prior to the Effective Time covering each individual who is a director or officer of Hepion currently covered by the directors’ and officers’ liability insurance policy of Hepion on terms with respect to coverage, deductibles and amounts no less favorable than those of such policy in effect on the date of this Agreement. The Company shall, and shall cause the Surviving Company to, use reasonable best efforts to maintain the D&O Tail in full force and effect for its full term.

 

Section 7.02 Conduct of Hepion During the Interim Period.

 

(a) During the Interim Period, except as (i) set forth on Schedule 7.02, (ii) required by this Agreement, (ii) consented to by the Company in writing (which consent shall not be unreasonably withheld, delayed or conditioned), or (iii) required by applicable Law, Hepion shall not:

 

(i) change, amend, restate, supplement or otherwise modify any of the Hepion Organizational Documents;

 

(ii) (A) declare, set aside or pay any dividends on, or make any other distribution in respect of any outstanding Equity Securities of Hepion; (B) split, combine or reclassify any Equity Securities of Hepion; or (C) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any Equity Securities of Hepion;

 

(iii) except for entries, modifications, amendments, waivers or terminations in the ordinary course of business, enter into, materially modify, materially amend, waive any material right under or terminate, any Hepion Specified Contract, or any Hepion Lease;

 

(iv) issue, deliver, sell, transfer, pledge or dispose of, or place any Lien (other than a Permitted Lien) on, any Equity Securities of the Company or any of its Subsidiaries;

 

(v) (A) merge, consolidate, combine or amalgamate Hepion with any Person or (B) purchase or otherwise acquire (whether by merging or consolidating with, purchasing any Equity Security in or a substantial portion of the assets of, or by any other manner) any corporation, partnership, association or other business entity or organization or division thereof;

 

(vi) make, change or revoke any material Tax election, adopt, change or revoke any material accounting method with respect to Taxes, settle or compromise any material Tax claim or Tax liability, enter into any material closing agreement with respect to any Tax, file any material Tax Return in a manner materially inconsistent with past practice, or surrender any right to claim a material refund of Taxes, in each case, if such action would be reasonably expected to materially increase the present or future Tax liability of Hepion, the Company or any of its Subsidiaries;

 

(vii) enter into, renew or amend in any respect, any transaction or Contract with an Hepion Related Party (including any agreement or arrangements related to transaction bonuses or similar payments, however effected or whenever paid);

 

 

(viii) waive, release, compromise, settle or satisfy any pending or threatened material claim or Action or compromise or settle any liability;

 

(ix) incur, guarantee or otherwise become liable for (whether directly, contingently or otherwise) any indebtedness; provided that, subject to and without limiting anything contained in this Agreement (including Article IX), this Section 7.02(a)(ix) shall not prevent Hepion from borrowing funds necessary to finance its ordinary course administrative costs and expenses incurred in connection with the consummation of the Merger and the other transactions contemplated by this Agreement in an aggregate amount not to exceed $1,000,000;

 

(x) except for extensions of currently outstanding Hepion options issued to Hepion board members, offer, issue, deliver, grant or sell, or authorize or propose to offer, issue, deliver, grant or sell, any Equity Securities;

 

(xi) engage in any activities or business, other than activities or business (A) in connection with or incident or related to Hepion’s formation or continuing corporate (or similar) existence, (B) contemplated by, or incident or related to, this Agreement, any other Transaction Agreement, the performance of covenants or agreements hereunder or thereunder or the consummation of the Transactions or (C) those that are administrative or ministerial, in each case, which are immaterial in nature;

 

(xii) enter into any settlement, conciliation or similar Contract that would impose non-monetary obligations on Hepion or any of its Affiliates (or the Company or any of its Subsidiaries after the Closing);

 

(xiii) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation, restructuring, recapitalization, dissolution or winding-up of Hepion or liquidate, dissolve, reorganize or otherwise wind-up the business or operations of Hepion or resolve to approve any of the foregoing;

 

(xiv) change Hepion’s methods of accounting in any material respect, other than changes that are made in accordance with PCAOB standards;

 

(xv) (A) enter into any Contract with any broker, finder, investment banker or other Person under which such Person is or will be entitled to any brokerage fee, finders’ fee or other commission in connection with the Transactions, or (B) incur any liabilities or obligations in connection with this Agreement or the Transactions other than as set forth on Schedule 7.02(a)(xv);

 

(xvi) except in the ordinary course of business or as otherwise required by the terms of any existing Hepion Benefit Plan or existing employment Contract as in effect on the date hereof or as otherwise required under applicable Law, (i) pay or promise to pay, fund any new, enter into or make any grant of any material severance, change in control, transaction bonus, equity or equity-based, retention or termination payment or arrangement to any officer-level Hepion Employee, except in connection with the promotion, hiring or termination of employment of any employee of Hepion or its Subsidiaries in the ordinary course of business, (ii) take any action to accelerate any material payments or benefits, or the funding of any material payments or benefits, payable or to become payable to any officer-level Hepion Employees or (iii) establish, adopt, enter into, amend or terminate any material Hepion Benefit Plan or any Contract that would be a material Hepion Benefit Plan if it were in existence as of the date of this Agreement; or

 

(xvii) enter into any agreement, or otherwise become obligated, to do any action prohibited under this Section 7.02(a).

 

 

(b) During the Interim Period, Hepion shall comply with, and continue performing under, as applicable, the Hepion Organizational Documents, the Transaction Agreements and all other agreements or Contracts to which Hepion is party.

 

Section 7.03 Inspection. Hepion shall afford to the Company, its Affiliates and their respective Representatives reasonable access during the Interim Period, and with reasonable advance notice, to the books, Tax Returns, records and appropriate officers and employees of Hepion, and shall use its reasonable best efforts to furnish such Representatives with all financial and operating data and other information concerning the affairs of Hepion, in each case as the Company and its Representatives may reasonably request for purposes of the Transactions.

 

Section 7.04 Section 16 Matters. Prior to the Effective Time, Hepion shall take all reasonable steps as may be required to cause any acquisition or disposition of the Hepion Common Stock that occurs or is deemed to occur by reason of or pursuant to the Transactions by each Person who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Hepion to be exempt under Rule 16b-3 promulgated under the Exchange Act, including by taking steps in accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC regarding such matters.

 

Section 7.05 Hepion Public Filings.

 

(a) From the date hereof through the Closing, Hepion will keep current and timely file all SEC Reports required to be filed or furnished with the SEC and otherwise comply in all material respects with its reporting obligations under applicable Laws.

 

(b) As promptly as practicable after execution of this Agreement, Hepion will prepare and file a Current Report on Form 8-K pursuant to the Exchange Act to report the execution of this Agreement, the form and substance of which has been approved by the Company prior to the execution of this Agreement.

 

Section 7.06 Hepion Securities Listing. From the date hereof through the Closing, Hepion shall ensure Hepion remains listed as a public company on, and for Hepion Common Stock to be listed on, the Nasdaq. Prior to the Closing Date, Hepion shall cooperate with the Company and use commercially reasonable efforts to take such actions as are reasonably necessary or advisable to cause the Hepion Common Stock to be delisted from the Nasdaq and deregistered under the Exchange Act as soon as practicable following the Effective Time.

 

Section 7.07 Hepion Board Recommendation. The board of directors of Hepion shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, amend, qualify or modify, or (privately or publicly) propose to change, withdraw, withhold, amend, qualify or modify, the Hepion Board Recommendation for any reason.

 

Section 7.08 IIA. (i) Hepion shall sign an undertaking to the IIA (as required under applicable Law) in such customary form and in connection with the filing and/or approval process with the IIA and in accordance with applicable law, and (ii) each Stockholder of Hepion who is not an Israeli citizen, resident or entity, and who immediately following the Closing shall hold more than 5% of the share capital of the Company, on an as issued and as converted basis, shall deliver to the Company, immediately prior to the Closing a duly executed undertaking towards the IIA, in a form mutually agreed to by the parties.

 

 

Article VIII
JOINT COVENANTS

 

Section 8.01 Efforts to Consummate.

 

(a) Subject to the terms and conditions herein, each of the Parties shall use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary or advisable to consummate and make effective as promptly as reasonably practicable the Transactions contemplated by this Agreement (including (i) the satisfaction of the closing conditions set forth in Article IX and (ii) using reasonable best efforts to consummate the PIPE Financing on the terms and subject to the conditions set forth in the PIPE Agreements). Without limiting the generality of the foregoing, each of the Parties shall use reasonable best efforts to obtain, file with or deliver to, as applicable, any Consents of any Governmental Authorities (including notice to the IIA) or other Persons necessary to consummate the Transactions and the transactions contemplated by the Transaction Agreements. Each Party shall respond as promptly as reasonably practicable to any requests by any Governmental Authority (including notice to the IIA) for additional information and documentary material that may be requested pursuant to any Competition Laws. Hepion shall promptly inform the Company of any communication between Hepion, on the one hand, and any Governmental Authority, on the other hand, and the Company shall promptly inform Hepion of any communication between the Company, on the one hand, and any Governmental Authority, on the other hand, in either case, regarding any of the Transactions or any Transaction Agreement. Without limiting the foregoing, each Party and their respective Affiliates shall not extend any waiting period, review period or comparable period under any Competition Laws or enter into any agreement with any Governmental Authority not to consummate the Transactions or by the other Transaction Agreements, except with the prior written consent of Hepion and the Company.

 

(b) During the Interim Period, Hepion, on the one hand, and the Company, on the other hand, shall give counsel for the Company (in the case of Hepion) or Hepion (in the case of the Company), a reasonable opportunity to review in advance, and consider in good faith the views of the other in connection with, any proposed written communication to any Governmental Authority (including notice to the IIA) relating to the Transactions or the Transaction Agreements. Each of the Parties agrees not to participate in any substantive meeting or discussion, either in person or by telephone with any Governmental Authority in connection with the Transactions unless it consults with, in the case of Hepion, the Company, or, in the case of the Company, Hepion in advance and, to the extent not prohibited by such Governmental Authority, gives, in the case of Hepion, the Company, or, in the case of the Company, Hepion, the opportunity to attend and participate in such meeting or discussion.

 

(c) Notwithstanding anything to the contrary in the Agreement, (i) in the event that this Section 8.01 conflicts with any other covenant or agreement in this Agreement that is intended to specifically address any subject matter, then such other covenant or agreement shall govern and control solely to the extent of such conflict, (ii) in no event shall the Company or its Subsidiaries be obligated to bear any expense or pay any fee or grant any concession in connection with obtaining any consents, authorizations or approvals pursuant to the terms of any Contract to which the Company or its Subsidiaries is a party or otherwise in connection with the consummation of the Transactions, and (iii) in no event shall the failure to obtain any Consent (including of the IIA), except to the extent expressly provided in Section 9.01, be considered, constitute, triggered or give any rights in respect of, failure of a condition to the Closing.

 

(d) During the Interim Period, Hepion, on the one hand, and the Company, on the other hand, shall each notify the other in writing promptly after learning of any shareholder demands or other shareholder proceedings (including derivative claims) relating to this Agreement, any other Transaction Agreements or any matters relating thereto (collectively, the “Transaction Litigation”) commenced against, in the case of Hepion, Hepion or any of its Representatives (in their capacity as a representative of Hepion) or, in the case of the Company, any Subsidiary of the Company or any of their respective Representatives (in their capacity as a representative of the Company or any Subsidiary of the Company). Hepion and the Company shall each (i) keep the other reasonably informed regarding any Transaction Litigation, (ii) give the other the opportunity to, at its own cost and expense, participate in the defense, settlement and compromise of any such Transaction Litigation and reasonably cooperate with the other in connection with the defense, settlement and compromise of any such Transaction Litigation, (iii) consider in good faith the other’s advice with respect to any such Transaction Litigation and (iv) reasonably cooperate with each other. Notwithstanding anything to the contrary, (i) Hepion and the Company shall jointly control the negotiation, defense and settlement of any such Transaction Litigation brought against Hepion or its Representatives and (ii) in no event shall Hepion (or any of its Representatives) settle or compromise any Transaction Litigation brought against Hepion or its Representatives without the prior written consent of the Company.

 

 

Section 8.02 Registration Statement; Shareholder Meetings.

 

(a) Proxy Statement/Registration Statement.

 

(i) As promptly as practicable after the execution of this Agreement, (x) Hepion and the Company shall jointly prepare and the Company shall file with the SEC, mutually acceptable materials which shall include the proxy statement to be filed with the SEC as part of the Registration Statement and sent to the Hepion Stockholders relating to the Hepion Special Meeting (such proxy statement, together with any amendments or supplements thereto, the “Proxy Statement”), and (y) the Company shall prepare (with Hepion’s cooperation) and file with the SEC the Registration Statement, in which the Proxy Statement will be included as a prospectus (the “Proxy Statement/Prospectus”), in connection with the registration under the Securities Act of Company Ordinary Shares to be issued in exchange for the issued and outstanding Hepion Common Stock. Subject to Schedule 8.02, each of Hepion and the Company shall use its reasonable best efforts to cause the Registration Statement, including the Proxy Statement/Prospectus, to comply with the rules and regulations promulgated by the SEC, to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing and to keep the Registration Statement, including the Proxy Statement/Prospectus, effective as long as is necessary to consummate the Transactions. In the event there is any tax opinion required to be provided in connection with the Registration Statement, counsel to Hepion shall provide such tax opinion(s), and the costs and expenses associate with obtaining such tax opinion(s) shall be borne equally by the Company and Hepion. The Company also agrees to use its reasonable best efforts to obtain all necessary state Securities Laws or “blue sky” permits and approvals required to carry out the Transactions, and Hepion shall furnish all information concerning itself and its equityholders as may be reasonably requested in connection with any such action. Each of Hepion and the Company agrees to furnish to the other Party and its Representatives all information concerning itself, its Subsidiaries, officers, directors, managers, shareholders, and other equityholders and information regarding such other matters as may be reasonably necessary or advisable or as may be reasonably requested in connection with the Registration Statement, including the Proxy Statement/Prospectus, a Current Report on Form 8-K or 6-K, as applicable, pursuant to the Exchange Act in connection with the Transactions, or any other statement, filing, notice or application made by or on behalf of Hepion or the Company to any regulatory authority (including the Nasdaq) in connection with the Merger and the Transactions (the “Transaction Filings”). Hepion will cause the Proxy Statement to be mailed to the Hepion Stockholders as promptly as practicable after the Registration Statement is declared effective under the Securities Act.

 

(ii) To the extent not prohibited by applicable Law, the Company will advise Hepion, reasonably promptly after the Company receives notice thereof, of the time when the Registration Statement has become effective or any supplement or amendment has been filed, of the issuance of any stop order or the suspension of the qualification of the Company Ordinary Shares for offering or sale in any jurisdiction, of the initiation or written threat of any proceeding for any such purpose, or of any request by the SEC for the amendment or supplement of the Registration Statement or for additional information. To the extent not prohibited by applicable Law, Hepion and its counsel, on the one hand, and the Company and its counsel, on the other hand, shall be given a reasonable opportunity to review and comment on the Registration Statement, the Proxy Statement and any Transaction Filings each time before any such document is filed with the SEC, and the other Party shall give reasonable and good faith consideration to any comments made by Hepion and its counsel or the Company and its counsel, as applicable. To the extent not prohibited by applicable Law, the Company, on the one hand, and Hepion, on the other hand, shall provide the other Party and its counsel with (i) any comments or other communications, whether written or oral, that Hepion or its counsel or the Company or its counsel, as the case may be, may receive from time to time from the SEC or its staff with respect to the Registration Statement, the Proxy Statement or any Transaction Filings promptly after receipt of those comments or other communications and (ii) a reasonable opportunity to participate in the response of Hepion or the Company, as applicable, to those comments and to provide comments on that response (to which reasonable and good faith consideration shall be given), including, to the extent reasonably practicable, by participating with Hepion or its counsel or the Company or its counsel, as the case may be, in any discussions or meetings with the SEC.

 

 

(iii) If at any time prior to the Effective Time any information relating to the Company, Hepion or any of their respective Subsidiaries, Affiliates, directors or officers is discovered by the Company or Hepion, which is required to be set forth in an amendment or supplement to the Registration Statement or the Proxy Statement, so that neither of such documents would include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, with respect to the Registration Statement or the Proxy Statement, in light of the circumstances under which they were made, not misleading, the Party which discovers such information shall promptly notify the other Parties and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by applicable Law, disseminated to Hepion Stockholders.

 

(b) Hepion Special Meeting. Hepion shall, as promptly as reasonably practicable following the date the Registration Statement is declared effective by the SEC under the Securities Act, establish a record date for, duly call and give notice of, convene and hold a meeting of Hepion Stockholders (the “Hepion Special Meeting”), and Hepion shall convene and hold the Hepion Special Meeting, in each case in accordance with Hepion’s Organizational Documents and applicable Law, solely for the purpose of (i) obtaining the Hepion Stockholders Approval, and (ii) related and customary procedural and administrative matters. Hepion shall use its reasonable best efforts to obtain such approvals and authorizations from the Hepion Stockholders at the Hepion Special Meeting, including by soliciting proxies as promptly as practicable in accordance with applicable Law for the purpose of seeking such approvals and authorizations from the Hepion Stockholders. Hepion shall include the Hepion Board Recommendation in the Proxy Statement. Notwithstanding anything to the contrary contained in this Agreement, Hepion shall be entitled to postpone or adjourn the Hepion Special Meeting solely to the extent necessary (a “Hepion Meeting Change”): (i) to comply with applicable Law, (ii) to ensure that any supplement or amendment to the Proxy Statement that the board of directors of Hepion has determined in good faith is required by applicable Law is disclosed to Hepion Stockholders and for such supplement or amendment to be promptly disseminated to Hepion Stockholders with sufficient time prior to the Hepion Special Meeting for Hepion Stockholders to consider the disclosures contained in such supplement or amendment; or (iii) if, as of the time for which the Hepion Special Meeting is originally scheduled (as set forth in the Proxy Statement), there are insufficient Hepion Shares represented (either in person or by proxy) to constitute a quorum necessary conduct the business to be conducted at the Hepion Special Meeting; provided that, without the prior written consent of the Company, Hepion may only be entitled to one Hepion Meeting Change (excluding any postponements or adjournments required by applicable Law), and the Hepion Special Meeting may not be adjourned or postponed to a date that is more than five Business Days after the date for which the Hepion Special Meeting was originally scheduled (excluding any postponements or adjournments mandated by applicable Law) and provided it is held no later than three Business Days prior to the Termination Date; provided, further, that in the event of a postponement or adjournment pursuant to clauses (ii) or (iii), the Hepion Special Meeting shall be reconvened as promptly as practicable following such time as the matters described in such clauses have been resolved.

 

 

(c) Company Special Meeting. The Company shall, as promptly as practicable following the date the Registration Statement is declared effective by the SEC under the Securities Act, establish a record date for, duly call and give notice of a meeting of the Company Shareholders (the “Company Special Meeting”) and the Company shall convene and hold the Company Special Meeting, in each case, in accordance with the Organizational Documents of the Company and applicable Law, for the purpose of, inter alia, obtaining all requisite approvals and authorizations from the Company Shareholders in connection with the Transactions (including the Company Shareholder Approval). The Company shall, through approval of its board of directors, recommend to the Company Shareholders the adoption and approval of the Company Transaction Proposals by the Company Shareholders (the “Company Board Recommendation”). The Company shall use its reasonable best efforts to obtain such approvals and recommendations from the Company Shareholders at the Company Special Meeting, including by soliciting approvals as promptly as practicable after the date hereof in accordance with applicable Law for the purpose of obtaining such approvals and authorizations from the Company Shareholders. The Company shall, through its board of directors, recommend to Company Shareholders that they provide the Company Shareholder Approval. The board of directors of the Company shall not (and no committee or subgroup thereof shall) change, withdraw, withhold, qualify or modify, or publicly propose to change, withdraw, withhold, qualify or modify, the Company Board Recommendation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall be entitled to postpone or adjourn the Company Special Meeting (a “Company Meeting Change”): (i) to the extent required by applicable Law, (ii) if, as of the time for which the Company Special Meeting is originally scheduled, there are insufficient shares of stock entitled to vote represented (either in person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the Company Special Meeting; or (iii) in order to solicit additional approvals from shareholders for purposes of obtaining approval from the Company Shareholders; provided that, without the prior written consent of Hepion, the Company may only be entitled to one Company Meeting Change (excluding any postponements or adjournments required by applicable Law), and the Company Special Meeting may not be adjourned or postponed to a date that is more than five Business Days after the date for which the Company Special Meeting was originally scheduled (excluding any postponements or adjournments required by applicable Law) and provided it is held no later than three Business Days prior to the Termination Date; provided further, that in the event of a postponement or adjournment pursuant to clauses (ii) or (iii) above, the Company Special Meeting shall be reconvened as promptly as practicable following such time as the matters described in such clauses have been resolved.

 

Section 8.03 Hepion Non-Solicitation.

 

(a) Hepion agrees that, during the Interim Period, neither it nor any of its Subsidiaries shall, and it shall not authorize any of its Representatives to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry or take any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry; (ii) furnish any non-public information regarding Hepion or any of its Subsidiaries to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; (iii) engage in discussions (other than to inform any Person of the existence of the provisions in this Section 8.03(a)) or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approve, endorse or recommend any Acquisition Proposal; (v) execute or enter into any letter of intent or any Contract contemplating or otherwise relating to any Acquisition Transaction (other than a confidentiality agreement permitted under this Section 8.03(a)); or (vi) publicly propose to do any of the foregoing. Without limiting the generality of the foregoing, Hepion acknowledges and agrees that, in the event any Representative of Hepion (whether or not such Representative is purporting to act on behalf of Hepion) takes any action that, if taken by Hepion, would constitute a breach of this Section 8.03, the taking of such action by such Representative shall be deemed to constitute a breach of this Section 8.03 by Hepion for purposes of this Agreement.

 

 

(b) If Hepion or any Representative of Hepion receives an Acquisition Proposal or Acquisition Inquiry at any time during the Interim Period, then Hepion shall promptly (and in no event later than one Business Day after Hepion becomes aware of such Acquisition Proposal or Acquisition Inquiry) advise the Company orally and in writing of such Acquisition Proposal or Acquisition Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry, and the material terms thereof). Hepion shall keep the Company reasonably informed with respect to the status and material terms of any such Acquisition Proposal or Acquisition Inquiry and any material modification or proposed material modification thereto.

 

(c) Hepion shall immediately cease and cause to be terminated any existing discussions, negotiations and communications with any Person that relate to any Acquisition Proposal or Acquisition Inquiry that has not already been terminated as of the date of this Agreement and request the destruction or return of any nonpublic information of Hepion provided to such Person.

 

Section 8.04 Company Non-Solicitation.

 

(a) The Company agrees that, during the Interim Period, the Company shall not, nor shall it authorize any of its Representatives to, directly or indirectly: (i) solicit, initiate or knowingly encourage, induce or facilitate the communication, making, submission or announcement of any Acquisition Proposal or Acquisition Inquiry or take any action that could reasonably be expected to lead to an Acquisition Proposal or Acquisition Inquiry; (ii) furnish any non-public information regarding the Company to any Person in connection with or in response to an Acquisition Proposal or Acquisition Inquiry; (iii) engage in discussions (other than to inform any Person of the existence of the provisions in this Section 8.04) or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Inquiry; (iv) approve, endorse or recommend any Acquisition Proposal; (v) execute or enter into any letter of intent or any Contract contemplating or otherwise relating to any Acquisition Transaction (other than a confidentiality agreement permitted under this Section 8.04(a)); or (vi) publicly propose to do any of the foregoing. Without limiting the generality of the foregoing, the Company acknowledges and agrees that, in the event any Representative of the Company (whether or not such Representative is purporting to act on behalf of the Company) takes any action that, if taken by the Company, would constitute a breach of this Section 8.04, the taking of such action by such Representative shall be deemed to constitute a breach of this Section 8.04 by the Company for purposes of this Agreement. Notwithstanding the above, it is acknowledged and agreed that the Company has and shall continue to have communications and discussions with various companies relating to its business (including with pharmaceutical companies) and provide information to such companies or enter into confidentiality agreements with such companies, provided, however, that the Company (and its Representatives) shall not engage in any discussions (other than to inform any Person of the existence of the provisions in this Section 8.04) or negotiations with any Person with respect to any Acquisition Proposal or Acquisition Transaction.

 

(b) If the Company or any Representative of the Company receives an Acquisition Proposal or Acquisition Inquiry at any time during the Interim Period, then the Company shall promptly (and in no event later than one Business Day after the Company becomes aware of such Acquisition Proposal or Acquisition Inquiry) advise Hepion orally and in writing of such Acquisition Proposal or Acquisition Inquiry (including the identity of the Person making or submitting such Acquisition Proposal or Acquisition Inquiry, and the material terms thereof). The Company shall keep Hepion reasonably informed with respect to the status and material terms of any such Acquisition Proposal or Acquisition Inquiry and any material modification or proposed material modification thereto.

 

(c) The Company shall immediately cease and cause to be terminated any existing discussions, negotiations and communications with any Person that relate to any Acquisition Proposal or Acquisition Inquiry that has not already been terminated as of the date of this Agreement and request the destruction or return of any nonpublic information of the Company provided to such Person.

 

 

Section 8.05 Tax Matters.

 

(a) With respect to each taxable year of the Company ending after the Closing Date, the Company shall use best efforts to (i) determine if it is a “passive foreign investment company” within the meaning of Section 1297 of the Code (a “PFIC”) for such taxable year, and (ii) make such determination within ninety (90) days after the end of such taxable year. If the Company determines that it is a PFIC for a taxable year ending after the Closing Date, the Company shall use best efforts to timely provide to its U.S. shareholders all information (for such taxable year and for subsequent taxable years) with respect to the Company and its Subsidiaries that is reasonably necessary for any such shareholder (or any direct or indirect owner of such shareholder) to make and maintain a qualified electing fund election pursuant to Section 1295 of the Code with respect to the Company (and any of its Subsidiaries that is a PFIC), including by posting such information to the Company’s website.

 

(b) All transfer, stamp, documentary, sales, use, registration, value-added and other similar Taxes incurred in connection with this Agreement and the transactions contemplated hereby (“Transfer Taxes”) will be borne by the party responsible therefor under applicable Law. Each of Hepion, Merger Sub and the Company shall use reasonable best efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Transfer Tax that could be imposed in connection with the transactions contemplated hereby.

 

Section 8.06 Confidentiality; Publicity.

 

(a) Hepion acknowledges that the information being provided to it in connection with this Agreement and the Transactions is subject to the terms of the Confidentiality Agreement, the terms of which are incorporated herein by reference. The Confidentiality Agreement shall survive the execution and delivery of this Agreement and shall apply to all information furnished thereunder or hereunder and any other activities contemplated thereby.

 

(b) None of Hepion, the Company or any of their respective Affiliates, or their respective Representatives (acting on their behalf), shall make any public announcement or issue any public communication regarding this Agreement or the Transactions, or any matter related to the foregoing, without first obtaining the prior consent of the Company or Hepion, as applicable (which consent shall not be unreasonably withheld, conditioned or delayed), except if such announcement or other communication is required by applicable Law, in which case Hepion or the Company, as applicable, shall use their reasonable best efforts to coordinate such announcement or communication with the other Party, prior to announcement or issuance; provided that each Party and its Affiliates may make announcements regarding the status and terms (including price terms) of this Agreement and the Transactions to their respective Representatives and indirect current or prospective limited partners or investors or otherwise in the ordinary course of their respective businesses, in each case, so long as such recipients are obligated to keep such information confidential without the consent of any other Party; and provided that the foregoing shall not prohibit any Party from communicating with third parties to the extent necessary for the purpose of seeking any third party consent or with any Governmental Authorities under Section 8.01.

 

Section 8.07 Legacy Asset Disposition.

 

(a) Prior to the first anniversary of the Closing, Hepion shall use its reasonable best efforts to sell, transfer, license, assign or otherwise divest any or all of the assets and rights exclusively relating to Hepion’s Rencofilstat (formerly CRV431) drug (the “Legacy Assets”) in a transaction or series of transactions (the “Legacy Asset Disposition”), and shall, as promptly as practicable thereafter, notify the Company in writing of any such Legacy Asset Disposition. Each Party acknowledges that Hepion may, in contemplation of the Legacy Asset Disposition, (a) establish one or more Subsidiaries to hold the Legacy Assets, (b) transfer to any such Subsidiary any or all of the Legacy Assets and the liabilities and obligations related thereto and (c) take such other steps that are reasonably necessary to prepare for the Legacy Asset Disposition. For the avoidance of doubt, if Hepion transfers the Legacy Assets to one or more Subsidiaries, the terms of this Section 8.07 shall apply to such Subsidiaries in addition to Hepion. Each Party further acknowledges that Hepion may not be successful in completing, or may determine not to proceed, with the Legacy Asset Disposition. Notwithstanding the foregoing, Hepion may not enter into any agreement with respect to the Legacy Asset Disposition that would result in a continuing obligation or liability without the prior written consent of the Company (such consent shall not be unreasonably withheld, conditioned or delayed); provided, further, that Hepion shall provide the Company with a copy of any agreement with respect to an Legacy Asset Disposition that would be reasonably likely to result in a continuing obligation or liability of either Hepion or the Company on or after the Effective Time, at least five Business Days prior to entry into such agreement.

 

 

(b) Notwithstanding the terms and obligations set forth in Section 8.07(a), in the event that Hepion determines following the Effective Time to proceed with any form of monetization of its assets contemplated under the Legacy Assets, Hepion shall be obligated to reimburse the Company with respect to any deficit resulting therefrom.

 

Article IX
CONDITIONS TO OBLIGATIONS

 

Section 9.01 Conditions to Obligations of All Parties. The obligations of the Parties to consummate, or cause to be consummated, the Merger is subject to the satisfaction at the Closing of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of the Parties:

 

(a) No Prohibition. There shall not be in force and effect any (i) Law or (ii) Governmental Order by any Governmental Authority of competent jurisdiction, in either case, enjoining, prohibiting, or making illegal the consummation of the Merger.

 

(b) Hepion Stockholder Approval. The Hepion Stockholder Approval shall have been obtained.

 

(c) Company Shareholder Approval. The Company Shareholder Approval shall have been obtained.

 

(d) Nasdaq Listing. The Company Ordinary Shares to be issued pursuant to Section 3.01(b), in connection with the Closing shall be approved for listing upon the Closing on the Nasdaq, subject to official notice of issuance thereof.

 

(e) Registration Statement. The Registration Statement shall have become effective, and no stop order with respect thereto shall be in effect.

 

(f) PIPE Financing. The share purchase agreement in respect of the PIPE Financing shall be in full force and effect and shall provide for cash proceeds of not less than $10,000,000 (ten million) to be received by the Company in connection with the consummation of the transactions contemplated by such share purchase agreement immediately after the Effective Time.

 

(g) Directors and Officers. The Parties shall take all necessary action so that immediately after the Effective Time, the post-Closing board of directors of the Company (the “Post-Closing Company Board”) shall be comprised of seven directors; whereby (a) the Company shall have the right to designate (i) three members to the Post-Closing Company Board (“Company Designees”) and (ii) two industry experts that shall qualify as independent directors (as defined under the Nasdaq listing rules); and (b) Hepion shall have the right to designate two members to the Post-Closing Company Board (the “Hepion Designees”); provided further, and notwithstanding the foregoing, in the event that the A&R AOA includes for a classified board of directors, the Hepion Designees shall be classified as Class III directors (or such class that shall provide the Hepion Designees to be subject to re-election to the Post-Closing Company Board the maximum term following the Closing).

 

 

(h) IIA Approval. The Company shall file a notice with the IIA in accordance with applicable Law and obtain the approval of the IIA to consummate the Transactions.

 

Section 9.02 Additional Conditions to Obligations of Hepion. The obligations of Hepion to consummate, or cause to be consummated, the Merger is subject to the satisfaction as of the Closing of each of the following additional conditions, any one or more of which may be waived (in whole or in part) in writing by Hepion:

 

(a) Representations and Warranties.

 

(i) Each of the representations and warranties of the Company contained in Section 4.01 (Corporation Organization of the Company), Section 4.03 (Due Authorization) and Section 4.21 (Brokers’ Fees) (collectively, the “Specified Representations”) shall be true and correct (without giving any effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth therein) in all material respects as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date).

 

(ii) Each of the representations and warranties of the Company contained in Article IV (other than the Specified Representations and the representations and warranties of the Company contained in Section 4.06 or Section 4.08(d)), shall be true and correct (without giving any effect to any limitation as to “materiality” or “Material Adverse Effect” or any similar limitation set forth therein) as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date), except, in either case, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to have, a Material Adverse Effect.

 

(iii) The representations and warranties set forth in Section 4.06 (Capitalization) shall be true and correct in all respects, other than de minimis inaccuracies, as of the Closing Date, as though then made.

 

(iv) The representations and warranties set forth in Section 4.08(d) (Absence of Changes) shall be true and correct as of the Closing Date as though then made.

 

(b) Agreements and Covenants. The covenants and agreements of the Company in this Agreement to be performed as of or prior to the Closing shall have been performed in all material respects.

 

(c) No Material Adverse Effect. Since the date of this Agreement, no Material Adverse Effect has occurred that is continuing.

 

(d) Officer’s Certificate. The Company shall have delivered to Hepion a certificate, dated the Closing Date, to the effect that the conditions specified in Section 9.02(a), Section 9.02(b) and Section 9.02(c) have been fulfilled.

 

(e) Lock-up Agreements. The Lock-up Agreements will continue to be in full force and effect as of immediately following the Effective Time.

 

 

Section 9.03 Additional Conditions to the Obligations of the Company and Merger Sub. The obligation of the Company and Merger Sub to consummate, or cause to be consummated, the Merger is subject to the satisfaction as of the Closing of each of the following additional conditions, any one or more of which may be waived (in whole or in part) in writing by the Company:

 

(a) Representations and Warranties.

 

(i) Each of the representations and warranties of Hepion contained in Article V (other than the representations and warranties of Hepion contained in Section 5.01 (Organization), Section 5.03 (Authorization) and Section 5.19 (Brokers Fees)) shall be true and correct (without giving any effect to any limitation as to “materiality” or any similar limitation set forth therein) in all material respects as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date).

 

(ii) Each of the representations and warranties of Hepion contained in Section 5.01 (Organization), Section 5.03 (Authorization) and Section 5.19 (Brokers Fees) shall be true and correct (without giving any effect to any limitation as to “materiality” or any similar limitation set forth therein) in all respects as of the Closing Date as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be true and correct on and as of such earlier date).

 

(iii) The representations and warranties of Hepion contained in Section 5.06 (Capitalization) shall be true and correct in all respects, other than de minimis inaccuracies, as of the Closing Date, as though then made.

 

(b) Agreements and Covenants. The covenants and agreements of Hepion in this Agreement to be performed as of or prior to the Closing shall have been performed in all material respects.

 

(c) No Material Adverse Effect. Since the date of this Agreement, no Material Adverse Effect has occurred that is continuing.

 

(d) Officer’s Certificate. Hepion shall have delivered to the Company a certificate signed by an officer of Hepion, dated the Closing Date, to the effect that the conditions specified in Section 9.03(a), Section 9.03(b) and Section 9.03(c) have been fulfilled.

 

(e) Lock-up Agreements. The Lock-up Agreements will continue to be in full force and effect as of immediately following the Effective Time.

 

(f) Minimum Cash Condition. The amount of (a) Hepion Net Cash on Hepion’s balance sheet as of immediately prior to Closing and (b) cash proceeds to be received from the PIPE Financing (following expenses related to the Transactions), shall be at least $10,000,000 (the “Minimum Cash Condition”).

 

(g) Financial Obligations. Hepion shall have settled and satisfied in full all financial obligations in connection with any and all clinical trials of Hepion outstanding as of immediately prior to Closing.

 

(h) Conversion of Hepion Preferred Stock. Hepion shall have caused all Hepion Preferred Stock to have converted into shares of Hepion Common Stock in accordance with the terms of the Hepion Organizational Documents.

 

(i) Cancellation of Hepion Equity Awards. Prior to the Closing, Hepion shall cause (i) all outstanding options, stock appreciation rights, restricted stock, restricted stock units and any other awards granted or promised under any Hepion Equity Plan to be cancelled and forfeited without any consideration, and (ii) each Hepion Equity Plan to be terminated and cease to have any further force or effect.

 

 

Article X
TERMINATION/EFFECTIVENESS

 

Section 10.01 Termination. This Agreement may be validly terminated and the Transactions may be abandoned at any time prior to the Closing only as follows (it being understood and agreed that this Agreement may not be terminated for any other reason or on any other basis):

 

(a) by mutual written agreement of Hepion and the Company;

 

(b) by either Hepion or the Company, if there shall be in effect any (i) Law or (ii) Governmental Order (other than, for the avoidance of doubt, a temporary restraining order), that (x) in the case of each of clauses (i) and (ii), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the Merger, and (y) in the case of clause (ii) such Governmental Order shall have become final and non-appealable;

 

(c) by either Hepion or the Company, if the Effective Time has not occurred by 11:59 p.m., New York City time, on the date that is 90 days following the date hereof (the “Termination Date”); provided, however, that if the SEC has not declared the Proxy Statement/Registration Statement effective on or prior to the date that is 90 days following the date hereof, the Termination Date shall be automatically extended to the date that is 180 days following the date hereof; provided, further, that the right to terminate this Agreement pursuant to this Section 10.01(c) will not be available to any Party whose breach of any provision of this Agreement caused or resulted in the failure of the Transactions to be consummated by such time;

 

(d) by Hepion, if the Company or Merger Sub has breached or failed to perform any of its (i) representations or warranties or (ii) covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in Section 9.02(a) and Section 9.02(b) to be satisfied at the Closing and (B) is not capable of being cured by the Termination Date or, if capable of being cured by the Termination Date, is not cured by the Company or Merger Sub before the earlier of (x) the fifth Business Day immediately prior to the Termination Date and (y) the 45th day following receipt of written notice from Hepion of such breach or failure to perform: provided that Hepion shall not have the right to terminate this Agreement pursuant to this Section 10.01(d) if it is then in material breach of any of its representations, warranties, covenants or other agreements contained in this Agreement;

 

(e) by the Company, if Hepion has breached or failed to perform any of its respective representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (A) would result in the failure of a condition set forth in Section 9.03(a) and Section 9.03(b) to be satisfied at the Closing and (B) is not capable of being cured by the Termination Date or, if capable of being cured by the Termination Date, is not cured by Hepion before the earlier of (x) the fifth Business Day immediately prior to the Termination Date and (y) the 45th day following receipt of written notice from the Company of such breach or failure to perform; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 10.01(e) if it is then in material breach of any of its representations, warranties, covenants or other agreements contained in this Agreement;

 

(f) by either Hepion or the Company, if Hepion failed to obtain the Hepion Stockholder Approval upon vote taken thereon at a duly convened Hepion Special Meeting (or at a meeting of its shareholders following any adjournment or postponement thereof); provided that the right to terminate this Agreement under this Section 10.01(f) shall not be available to Hepion if Hepion has breached this Agreement (including Section 8.02(b));

 

(g) by either Hepion or the Company, if, at the Company Special Meeting (including any adjournments thereof), the Company Transaction Proposals are not duly adopted by the Company Shareholders by the requisite vote under applicable Law and the Organizational Documents of the Company; provided that the right to terminate this Agreement under this Section 10.01(g) shall not be available to the Company if the Company has breached this Agreement (including Section 8.02(c)); or

 

 

(h) by the Company, if Hepion breaches its obligations under Section 8.02(b).

 

Section 10.02 Effect of Termination. Except as otherwise set forth in this Section 10.02 or Section 11.13, in the event of the termination of this Agreement pursuant to Section ‎10.01, this Agreement shall forthwith become void and have no effect, without any liability on the part of any Party or its Affiliates, or its Affiliates’ Representatives, other than liability of any Party for any Fraud or any intentional and willful breach of this Agreement by such Party occurring prior to such termination. The provisions of Section 8.06 (Confidentiality; Publicity), this Section 10.02 (Effect of Termination) and Article XI and the Confidentiality Agreement, shall in each case survive any termination of this Agreement.

 

Article XI
MISCELLANEOUS

 

Section 11.01 Waiver. At any time and from time to time prior to the Effective Time, Hepion and the Company may, to the extent legally allowed and except as otherwise set forth herein, (a) extend the time for the performance of any of the obligations or other acts of the other Party, as applicable; (b) waive any inaccuracies in the representations and warranties of the other Party contained herein or in any document delivered pursuant hereto; and (c) subject to the requirements of applicable Law, waive compliance by the other Party with any of the agreements or conditions contained herein applicable to such Party. Any agreement on the part of a Party to any such extension or waiver will be valid only if set forth in an instrument in writing signed by such Party. Any delay in exercising any right pursuant to this Agreement will not constitute a waiver of such right.

 

Section 11.02 Notices. All notices and other communications among the Parties shall be in writing and shall be deemed to have been duly given (i) when delivered in person, (ii) when delivered after posting in the United States mail having been sent registered or certified mail return receipt requested, postage prepaid, (iii) when delivered by FedEx or other nationally recognized overnight delivery service or (iv) when e-mailed during normal business hours (and otherwise as of the immediately following Business Day), addressed as follows:

 

(a) If to Hepion, prior to the Closing, to:

 

Hepion Pharmaceuticals, Inc.

399 Thornall Street, First Floor

Edison, New Jersey 08837

Tel: (732) 902-4000

Attn: John Brancaccio

E-mail: Brancaccio1234@gmail.com

 

with copies (which shall not constitute notice) to:

 

Sheppard, Mullin, Richter & Hampton LLP

30 Rockefeller Plaza, 39th Floor

New York, New York 10112

Attn: Jeffrey Fessler and Lindsay Ferguson

E-mail: JFessler@sheppardmullin.com and LFerguson@sheppardmullin.com

 

 

If to the Company or Merger Sub, or Hepion following the Closing, to:

 

Pharma Two B Ltd.

Dan Teleman, Chief Executive Officer

E-mail: dan@pharma2b.com

 

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

 

Meitar | Law Offices

16 Abba Hillel Road

Ramat Gan, Israel 5250608

Attention: Mike Rimon

Matthew Rudolph

Email: mrimon@meitar.com

  matthewr@meitar.com

 

and

 

Goodwin Procter LLP

620 Eighth Avenue

New York, NY 10018-1405

Attention: Mayan Katz

Marianne C. Sarrazin

E-mail: mkatz@goodwinlaw.com

  msarrazin@goodwinlaw.com

 

or to such other address or addresses as the Parties may from time to time designate in writing. Without limiting the foregoing, any Party may give any notice, request, instruction, demand, document or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, ordinary mail or electronic mail), but no such notice, request, instruction, demand, document or other communication shall be deemed to have been duly given unless and until it actually is received by the Party for whom it is intended.

 

Section 11.03 Assignment. No Party shall assign this Agreement or any part hereof without the prior written consent of the other Parties. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Any attempted assignment in violation of the terms of this Section 11.03 shall be null and void, ab initio.

 

Section 11.04 Rights of Third Parties. Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give any Person, other than the Parties, any right or remedies under or by reason of this Agreement; provided that notwithstanding the foregoing (a) in the event the Closing occurs, D&O Indemnitees are intended third-party beneficiaries of, and may enforce, Section 7.01, (b) the Non-Recourse Parties are intended third-party beneficiaries of, and may enforce, Section 11.13 and Section 11.14 and (c) Prior Counsel is an intended third-party beneficiary of, and may enforce, Section 11.17.

 

Section 11.05 Expenses. Except as otherwise expressly provided herein, each Party shall bear its own expenses incurred in connection with this Agreement and the Transactions, whether or not such transactions shall be consummated, including all fees of its legal counsel, financial advisors and accountants.

 

Section 11.06 Governing Law. This Agreement, and all Actions or causes of action based upon, arising out of, or related to this Agreement or the Transactions, shall be governed by, and construed in accordance with, the internal substantive Laws of the State of Delaware applicable to contracts entered into and to be performed solely within such state, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction.

 

 

Section 11.07 Captions; Counterparts; Electronic Signatures. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement or any Transaction Agreement (including any of the closing deliverables contemplated hereby) by electronic means, including docusign, e-mail, or scanned pages shall be effective as delivery of a manually executed counterpart to this Agreement or any such Transaction Agreement.

 

Section 11.08 Schedules and Exhibits. The Schedules and Exhibits referenced herein are a part of this Agreement as if fully set forth herein. All references herein to Schedules and Exhibits shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. Any disclosure made by a Party in the Schedules with reference to any section or schedule of this Agreement shall be deemed to be a disclosure with respect to all other sections or schedules to which such disclosure may apply solely to the extent the relevance of such disclosure is reasonably apparent on the face of the disclosure in such Schedule. Certain information set forth in the Schedules is included solely for informational purposes. The disclosure of any information shall not be deemed to constitute an acknowledgment that such information is required to be disclosed in connection with the representations and warranties made in this Agreement, nor shall such information be deemed to establish a standard of materiality.

 

Section 11.09 Entire Agreement. This Agreement (together with the Schedules and Exhibits to this Agreement), the other Transaction Agreements and that certain mutual confidentiality agreement, dated as of February 29, 2024 by and between the Company and Hepion (as amended, modified or supplemented from time to time, the “Confidentiality Agreement”), constitute the entire agreement among the Parties relating to the transactions contemplated hereby and thereby and supersede any other agreements, whether written or oral, that may have been made or entered into by or among any of the Parties or any of their respective Subsidiaries relating to the Transactions.

 

Section 11.10 Amendments. This Agreement may be amended or modified in whole or in part, only by an agreement in writing executed by each of the Parties in the same manner as this Agreement and which makes reference to this Agreement. The approval of this Agreement by the shareholders of any of the Parties shall not restrict the ability of the board of directors (or other body performing similar functions) of any of the Parties to terminate this Agreement in accordance with Section 10.01 or to cause such Party to enter into an amendment to this Agreement pursuant to this Section 11.10.

 

Section 11.11 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. The Parties further agree that if any provision contained herein is, to any extent, held invalid or unenforceable in any respect under the Laws governing this Agreement, they shall take any actions necessary to render the remaining provisions of this Agreement valid and enforceable to the fullest extent permitted by Law.

 

Section 11.12 Jurisdiction; WAIVER OF TRIAL BY JURY. Any Action based upon, arising out of or related to this Agreement or the Transactions shall be brought in the Delaware Court of Chancery, and if the Delaware Court of Chancery does not have or take jurisdiction over such Action, any other federal or state courts located in the State of Delaware, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the Transactions in any other court. Nothing herein contained shall be deemed to affect the right of any Party to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other Party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 11.12. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.

 

 

Section 11.13 Enforcement. The Parties agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that the Parties do not perform their obligations under the provisions of this Agreement (including failing to take such actions as are required of them hereunder to consummate this Agreement) in accordance with its specified terms or otherwise breach such provisions. The Parties acknowledge and agree that (i) the Parties shall be entitled to an injunction, specific performance, or other equitable relief, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, without proof of damages, prior to the valid termination of this Agreement in accordance with Section 10.01, this being in addition to any other remedy to which they are entitled under this Agreement or any Transaction Agreement, and (ii) the right of specific enforcement is an integral part of the transactions contemplated by this Agreement and without that right, none of the Parties would have entered into this Agreement. Each Party agrees that it will not allege, and each Party hereby waives the defense, that the other Parties have an adequate remedy at Law or that an award of specific performance is not an appropriate remedy for any reason at Law or equity. The Parties acknowledge and agree that any Party seeking an injunction to prevent breaches of this and to enforce specifically the terms and provisions of this Agreement in accordance with this Section 11.13 shall not be required to provide any bond or other security in connection with any such injunction. The Parties hereby agree that, in the event that any Action is brought against either Party as contemplated by this Section 11.13, the Termination Date shall be extended until 30 days following the date of resolution of such Action.

 

Section 11.14 Non-Recourse. This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of, or related to this Agreement or the Transactions may only be brought against, the entities that are expressly named as Parties and then only with respect to the specific obligations set forth herein with respect to such Party. Except to the extent a Party (and then only to the extent of the specific obligations undertaken by such Party in this Agreement), (a) no past, present or future director, officer, employee, sponsor, incorporator, member, partner, shareholder, Affiliate, agent, attorney, advisor or representative or Affiliate of any Party and (b) no past, present or future director, officer, employee, sponsor, incorporator, member, partner, shareholder, Affiliate, agent, attorney, advisor or representative or Affiliate of any of the foregoing shall have any liability (whether in contract, tort, equity or otherwise) for any one or more of the representations, warranties, covenants, agreements or other obligations or liabilities of any one or more of the Company, Hepion or Merger Sub under this Agreement of or for any claim based on, arising out of, or related to this Agreement or the Transactions (each of the Persons identified in clauses ‎(a) or ‎(b), a “Non-Recourse Party”, and collectively, the “Non-Recourse Parties”).

 

Section 11.15 Non-Survival. Notwithstanding anything herein or otherwise to the contrary, none of the representations, warranties, covenants, obligations or other agreements of the Parties contained in this Agreement or in any certificate delivered pursuant to this Agreement, including any rights arising out of any breach of such representations, warranties, covenants, obligations, agreements and other provisions, shall survive the Closing, and, from and after the Closing, no Action shall be brought and no recourse shall be had against or from any Person in respect of such non-surviving representations, warranties, covenants or agreements, other than in the case of Fraud against the Party committing such Fraud. All such representations, warranties, covenants, obligations and other agreements shall terminate and expire upon the occurrence of the Effective Time (and there shall be no liability after the Closing in respect thereof). Notwithstanding the foregoing, (a) those covenants and agreements contained herein that by their terms expressly require performance after the Closing shall survive the Effective Time but only with respect to that portion of such covenant or agreement that is expressly to be performed following the Closing and (b) this Article XI shall survive the Closing. For the avoidance of doubt, the terms of the Hepion Support Agreement, the Company Shareholder Support Agreements, the Amended IRA and the Joinder shall not be affected by this Section 11.15.

 

 

Section 11.16 Acknowledgements. Each of the Parties acknowledges and agrees (on its own behalf and on behalf of its respective Affiliates and its and their respective Representatives) that: (i) it has conducted its own independent investigation of the financial condition, results of operations, assets, liabilities, properties and projected operations of the other Parties (and, in the case of the Company, its Subsidiaries) and has been afforded satisfactory access to the books and records, facilities and personnel of the other Parties (and their respective Subsidiaries) for purposes of conducting such investigation; (ii) the representations and warranties in Article IV constitute the sole and exclusive representations and warranties in respect of the Company and its Subsidiaries; (iii) the representations and warranties in Article V constitute the sole and exclusive representations and warranties in respect of Hepion; (iv) except for the representations and warranties in Article IV by the Company and the representations and warranties in Article V by Hepion, none of the Parties or any other Person (including any of the Non-Recourse Parties) makes, or has made, any other express or implied representation or warranty with respect to any Party (or any Party’s Subsidiaries), including any implied warranty or representation as to condition, merchantability, suitability or fitness for a particular purpose or trade as to any of the assets of the such Party or its Subsidiaries or the transactions contemplated by this Agreement and all other representations and warranties of any kind or nature expressed or implied (including (x) regarding the completeness or accuracy of, or any omission to state or to disclose, any information, including in the estimates, projections or forecasts or any other information, document or material provided to or made available to any Party or their respective Affiliates or Representatives in certain “data rooms,” management presentations or in any other form in expectation of the Transactions, including meetings, calls or correspondence with management of any Party (or any Party’s Subsidiaries), and (y) any relating to the future or historical business, condition (financial or otherwise), results of operations, prospects, assets or liabilities of any Party (or its Subsidiaries), or the quality, quantity or condition of any Party’s or its Subsidiaries’ assets) are specifically disclaimed by all Parties and their respective Subsidiaries and all other Persons (including the Representatives and Affiliates of any Party or its Subsidiaries); and (v) neither Party nor any of its Affiliates is relying on any representations and warranties in connection with the Transactions except the representations and warranties in Article IV by the Company and the representations and warranties in Article V by Hepion. The foregoing does not limit any rights of any Party (or any other Person party to any other Transaction Agreements) pursuant to any other Transaction Agreement against any other Party (or any other Person party to any other Transaction Agreements) pursuant to such Transaction Agreement to which it is a party or an express third party beneficiary thereof.

 

Section 11.17 Waiver of Conflicts Regarding Representations; Non-Assertion of Attorney-Client Privilege.

 

(a) Conflicts of Interest. Each Party acknowledges that each of Sheppard, Mullin, Richter & Hampton LLP, Meitar Law Offices and Goodwin Procter LLP (each of them, the “Prior Counsel”) has on or prior to the Closing Date represented, as applicable, the Company, its Subsidiaries, the Company Shareholders, Hepion, the Hepion Stockholders, and any of their respective Affiliates, and their respective officers, employees and directors (each such Person, in such pre-Closing capacity, a “Designated Person”) in one or more matters relating to this Agreement or any other Transaction Agreements or transactions contemplated hereby or thereby (including any matter that may be related a litigation, claim or dispute arising under or related to this Agreement or such other Transaction Agreements or in connection with such transactions) (each, an “Existing Representation”), and that, in the event of any post-Closing matters (x) relating to this Agreement or any other agreements or transactions contemplated hereby (including any matter that may be related to a litigation, claim or dispute arising under or related to this Agreement or such other Transaction Agreements or in connection with such transactions), and (y) in which the Company or its Subsidiaries (including Hepion) or Hepion Stockholders (for the purposes of this Section 11.17, in such post-Closing capacity, the “Post-Closing Group”), on the one hand, and one or more Designated Persons, on the other hand, are or may be adverse to each other (each, a “Post-Closing Matters”), the Designated Persons reasonably anticipate that the Prior Counsel may represent them in connection with such matters. Accordingly, each member of the Post-Closing Group hereby (i) waives and shall not assert, and agrees after the Closing to not assert, any conflict of interest arising out of or relating to the representation by the Prior Counsel of one or more Designated Persons in connection with one or more Post-Closing Matters (the “Post-Closing Representations”), and (ii) agrees that, in the event that a Post-Closing Matter arises, any Prior Counsel may represent one or more Designated Persons in such Post-Closing Matter even though the interests of such Person(s) may be directly adverse to any member of the Post-Closing Group.

 

 

(b) Attorney-Client Privilege. Each member of the Post-Closing Group waives and shall not assert, and agrees after the Closing to waive and to not assert, any attorney-client privilege, attorney work-product protection or expectation of client confidence with respect to any communication between the Prior Counsel, on the one hand, and any Designated Person (collectively, the “Pre-Closing Designated Persons”), or any advice given to any Pre-Closing Designated Person by the Prior Counsel, occurring during one or more Existing Representations (collectively, “Pre-Closing Privileges”) in connection with any Post-Closing Representation, including in connection with a dispute between any Designated Person and any member of the Post-Closing Group, it being the intention of the Parties that all rights to such Pre-Closing Privileges, and all rights to waiver or otherwise control such Pre-Closing Privilege, shall be retained by the Designated Persons. Furthermore, each member of the Post-Closing Group acknowledges and agrees that any advice given to or communication with any of the Designated Persons shall not be subject to any joint privilege and shall be owned solely by such Designated Persons.

 

(c) Privileged Materials. All such Pre-Closing Privileges, and all books and records and other documents of the Company and its Subsidiaries containing any advice or communication that is subject to any Pre-Closing Privilege (“Privileged Materials”), shall be retained by the Designated Persons. No member of the Post-Closing Group shall have a right of access to such Privileged Materials.

 

(d) Miscellaneous. Each Party hereby acknowledges that it has had the opportunity (including on behalf of its Affiliates) to discuss and obtain adequate information concerning the significance and material risks of, and reasonable available alternatives to, the waivers, permissions and other provisions of this Agreement, including the opportunity to consult with counsel other than Prior Counsel. This Section 11.17 shall be irrevocable, and no term of this Section 11.17 may be amended, waived or modified, without the prior written consent of the Prior Counsels.

 

[Signature pages follow.]

 

 

IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement and Plan of Merger to be duly executed as of the date hereof.

 

	Pharma Two B Ltd.
	By:	/s/ Dan Teleman
	Name:	Dan Teleman
	Title:	Chief Executive Officer
	Pearl Merger Sub, Inc.
	By:	/s/ Dan Teleman
	Name:	Dan Teleman
	Title:	President

 

IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement and Plan of Merger to be duly executed as of the date hereof.

 

	Hepion Pharmaceuticals, Inc.
	By:	/s/ John Brancaccio
	Name:	John Brancaccio
	Title:	Executive Chairman

 

 

ANNEX 1

 

Hepion Support Agreement Signatories

 

1.

Armistice Capital, LLC

 

2.

John Brancaccio

 

3.

Kaouthar Lbiati

 

4.

Tim Block

 

5.

Mike Purcell

 

6.

John Cavan

 

 

ANNEX 2

 

Lock-Up Agreement Signatories

 

[To be completed prior to Closing]²

 

² Note: Parties have agreed this Annex will be completed prior to Closing with any individual that fits within the lock-up category (i.e., post closing director, officer, and affiliate stockholders).

 

 

ANNEX 3

 

Company Knowledge

 

1.

Dan Teleman

 

 

ANNEX 4

 

Hepion Knowledge

 

1.

John Cavan

 

2.

John Brancaccio

 

 

ANNEX 5

 

Permitted Liens

 

 

ANNEX 6

 

Exchange Ratio Model

 

 

ANNEX 7

 

Exchange Ratio Adjustment Illustration

 

Term Sheet
		Market Cap		Cash		Split
Hepion		$10		$0		$10		15%
P2B		$56				$56		85%
						$66

 

Scenario #1
		Market Cap		Hepion Deficit		Split
Hepion		$10		-$4		$6		13%
P2B		$40				$40		87%
						$46

 

Scenario #2
		Market Cap		Hepion Deficit		Split
Hepion		$10		-$3		$7		15%
P2B		$40				$40		85%
						$47

 

Scenario #3
		Market Cap		Hepion Deficit		Split
Hepion		$10		-$2		$8		17%
P2B		$40				$40		83%
						$48

 

 

EXHIBIT A

 

Form of Amended and Restated Articles of Association of the Company

 

 

EXHIBIT B

 

Form of Hepion Support Agreement

 

 

EXHIBIT C

 

Form of Amended Investors’ Rights Agreement

 

 

EXHIBIT D

 

Form of Lock-Up Agreement

 

 

EXHIBIT E

 

Form of Subscription Agreement

 

 

 

Exhibit 4.1

 

[FORM OF SENIOR UNSECURED NONCONVERTIBLE NOTE]

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 3 AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE AMOUNT SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3) OF THIS NOTE.

 

THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”). PURSUANT TO TREASURY REGULATION §1.1275-3(b)(1), A REPRESENTATIVE OF THE COMPANY HEREOF WILL, BEGINNING TEN DAYS AFTER THE ISSUANCE DATE OF THIS NOTE, PROMPTLY MAKE AVAILABLE TO THE HOLDER UPON REQUEST THE INFORMATION DESCRIBED IN TREASURY REGULATION §1.1275-3(b)(1)(i).

 

HEPION PHARMACEUTICALS, INC.

SENIOR UNSECURED NONCONVERTIBLE NOTE

 

Issuance Date: July 19, 2024	Original Principal Amount: U.S. $[●]
	Purchase Price: U.S. $[●]

 

FOR VALUE RECEIVED, Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”), hereby promises to pay to _________ or registered assigns (the “Holder”) in cash the amount set forth above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”), if applicable, on any outstanding Principal at the applicable Default Rate at any time during the occurrence and continuance of an Event of Default occurring from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date, acceleration, redemption or otherwise (in each case in accordance with the terms hereof). This Senior Unsecured Nonconvertible Note (including all Senior Unsecured Nonconvertible Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior Unsecured Nonconvertible Notes issued pursuant to the Securities Purchase Agreement on the Closing Date (collectively, the “Notes” and such other Senior Unsecured Nonconvertible Notes, the “Other Notes”). Certain capitalized terms used herein are defined in Section 31.

 

 

(1) ORIGINAL ISSUE DISCOUNT; PAYMENTS OF PRINCIPAL; PREPAYMENT. The Company acknowledges and agrees that this Note was issued at an original issue discount. On the Maturity Date, if any portion of this Note remains outstanding, the Company shall pay to the Holder an amount in cash representing all outstanding Principal and any accrued and unpaid Interest. The “Maturity Date” shall be the earlier of: (i) December 31, 2024, (ii) the date of the closing of the Business Combination, (iii) the date that the Business Combination is terminated pursuant to the terms of the Merger Agreement, and (iv) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, as may be extended at the option of the Holder (x) in the event that, and for so long as, an Event of Default (as defined in Section 4(a)) shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default and/or (y) through the date that is ten (10) Business Days after the consummation of a Change of Control in the event that a Change of Control is publicly announced or a Change of Control Notice (as defined in Section 5(b)) is delivered prior to the Maturity Date. Other than as specifically permitted by this Note, the Company may not prepay any portion of the outstanding Principal or accrued and unpaid Interest, if any.

 

(2) INTEREST. No Interest shall accrue hereunder unless and until an Event of Default has occurred. From and after the occurrence and during the continuance of any Event of Default, Interest shall accrue hereunder at fourteen percent (14.0%) per annum (the “Default Rate”) and shall be computed on the basis of a 360-day year and twelve 30-day months and shall be payable, if applicable, on the Maturity Date to the record holder of this Note in cash by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in writing to the Company. Accrued and unpaid Interest, if any, may also be payable, at the election of the Holder, by way of inclusion of the Interest in the Note Amount (as defined below) upon any redemption hereunder occurring prior to the Maturity Date, including, without limitation, upon a Bankruptcy Event of Default redemption. In the event that an Event of Default is subsequently cured (and no other Event of Default then exists (including, without limitation, for the Company’s failure to pay such Interest at the Default Rate on the Maturity Date)), Interest shall cease to accrue hereunder as of the calendar day immediately following the date of such cure; provided that the Interest as calculated and unpaid during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default; provided, further, that for the purpose of this Section 2, such Event of Default shall not be deemed cured unless and until any accrued and unpaid Interest shall be paid to the Holder. As used herein, “Note Amount” means the sum of (x) the portion of the Principal to be redeemed or otherwise with respect to which this determination is being made, and (y) accrued and unpaid Interest, if any, with respect to such Principal.

 

 

(3) NOTE REGISTRATION; BOOK ENTRY. The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the holders of each Note and the Principal amount of the Notes (and stated interest thereon) held by such holders (the “Registered Notes”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of Principal and Interest, if any, hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a request to assign or sell all or part of any Registered Note by the Holder, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate Principal amount as the Principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 18. Notwithstanding anything to the contrary in this Section 3, the Holder may assign any Note or any portion thereof to an Affiliate of the Holder or a Related Fund of the Holder without delivering a request to assign or sell the Note to the Company and the recordation of such assignment or sale in the Register (a “Related Party Assignment”); provided, that (x) the Company may continue to deal solely with such assigning or selling Holder unless and until the Holder has delivered a request to assign or sell the Note or portion thereof to the Company for recordation in the Register; (y) the failure of such assigning or selling Holder to deliver a request to assign or sell the Note or portion thereof to the Company shall not affect the legality, validity, or binding effect of such assignment or sale and (z) such assigning or selling Holder shall, acting solely for this purpose as a non-fiduciary agent of the Company, maintain a register (the “Related Party Register”) comparable to the Register on behalf of the Company, and any such assignment or sale shall be effective upon recordation of such assignment or sale in the Related Party Register.

 

(4) RIGHTS UPON EVENT OF DEFAULT.

 

(a) Event of Default. Each of the following events or failure to comply therewith shall constitute an “Event of Default” and each of the events described in clauses (iii) and (iv) shall also constitute a “Bankruptcy Event of Default”:

 

(i) the Company’s failure to pay to the Holder any amount of Principal, Interest, Redemption Price or other amounts when and as due under this Note or any other Transaction Document, except, in the case of a failure to pay Interest when and as due, in which case only if such failure continues for a period of at least an aggregate of two (2) Business Days;

 

(ii) any default under, redemption of or acceleration prior to maturity of any Indebtedness of the Company or any of its Subsidiaries other than with respect to this Note or any Other Notes;

 

(iii) the Company or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S. Code, or any similar federal, foreign or state law for the relief of debtors (collectively, “Bankruptcy Law”), (A) commences a bankruptcy voluntary case, (B) consents to the entry of an order for relief against it in an involuntary bankruptcy case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;

 

 

(iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the Company or any of its Subsidiaries or (C) orders the liquidation of the Company or any of its Subsidiaries;

 

(v) a final judgment or judgments for the payment of money aggregating in excess of $250,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $250,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;

 

(vi) other than as specifically set forth in another clause of this Section 4(a), the Company or any of its Subsidiaries breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition of any Transaction Document which is curable, only if such breach continues for a period of at least an aggregate of five (5) Business Days;

 

(vii) any breach or failure in any respect to comply with either Sections 14 or 15 of this Note;

 

(viii) any material damage to, or loss, theft or destruction of a material amount of property of the Company, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of the Company or any Subsidiary, if any such event or circumstance would reasonably be expected to have a Material Adverse Effect;

 

(ix) any Material Adverse Effect occurs;

 

(x) the Company fails to comply with Section 4.4 of the Securities Purchase Agreement;

 

(xi) any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

 

 

(b) Redemption Right. At any time after the earlier of the Holder’s receipt of an Event of Default Notice (as defined in Section 15(f)) and the Holder becoming aware of an Event of Default, the Holder may require the Company to redeem (an “Event of Default Redemption”) all or any portion of this Note by delivering written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice shall indicate the portion of this Note the Holder is electing to require the Company to redeem. Each portion of this Note subject to redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the product of (A) the Redemption Premium and (B) the Note Amount being redeemed (the “Event of Default Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section 11. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any Redemption Premium with respect to an Event of Default due under this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

 

(c) Redemption upon Bankruptcy Event of Default. Notwithstanding anything to the contrary herein upon any Bankruptcy Event of Default, whether occurring prior to or following the Maturity Date, the Company shall immediately pay to the Holder an amount in cash representing 100% of all outstanding Principal, accrued and unpaid Interest, if any, in addition to any and all other amounts due hereunder (the “Bankruptcy Event of Default Redemption Price”), without the requirement for any notice or demand or other action by the Holder or any other Person; provided that the Holder may, in its sole discretion, waive such right to receive payment upon a Bankruptcy Event of Default, in whole or in part, and any such waiver shall not affect any other rights of the Holder hereunder, including any other rights in respect of such Bankruptcy Event of Default, and any right to payment of the Event of Default Redemption Price or any other Redemption Price, as applicable. Redemptions required by this Section 4(c) shall be made in accordance with the provisions of Section 11.

 

(5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

 

(a) Assumption. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall be added to the term “Company” under this Note (so that from and after the occurrence or consummation of such Fundamental Transaction, each and every provision of this Note and the other Transaction Documents referring to the “Company” shall refer instead to each of the Company and the Successor Entity or Successor Entities, jointly and severally), and the Successor Entity or Successor Entities, jointly and severally with the Company, may exercise every right and power of the Company prior thereto and the Successor Entity or Successor Entities shall assume all of the obligations of the Company prior thereto under this Note and the other Transaction Documents with the same effect as if the Company and such Successor Entity or Successor Entities, jointly and severally, had been named as the Company in this Note.

 

 

(b) Redemption Right. No later than ten (10) days prior to the consummation of a Change of Control, except for a Change of Control as a result of the Business Combination, the Company shall deliver written notice thereof via electronic mail and overnight courier to the Holder (a “Change of Control Notice”) setting forth a description of such transaction in reasonable detail and the anticipated Change of Control Redemption Date (as defined in Section 11(a)) if then known. At any time during the period beginning on the earlier to occur of (x) any oral or written agreement by the Company or any of its Subsidiaries, upon consummation of which the transaction contemplated thereby would reasonably be expected to result in a Change of Control, (y) the Holder becoming aware of a Change of Control and (z) the Holder’s receipt of a Change of Control Notice and ending twenty-five (25) days after the date of the consummation of such Change of Control, the Holder may require the Company to redeem (a “Change of Control Redemption”) all or any portion of this Note by delivering written notice thereof (“Change of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the Note Amount the Holder is electing to require the Company to redeem. The portion of this Note subject to redemption pursuant to this Section 5(b) shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the Note Amount being redeemed (the “Change of Control Redemption Price”). Redemptions required by this Section 5 shall be made in accordance with the provisions of Section 11 and shall have priority to payments to stockholders in connection with a Change of Control. To the extent redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of the Note by the Company, such redemptions shall be deemed to be voluntary prepayments. The parties hereto agree that in the event of the Company’s redemption of any portion of the Note under this Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder.

 

(6) [Intentionally Omitted]

 

(7) MANDATORY REDEMPTION.

 

(a) Occurrence of Mandatory Redemption. While this Note is outstanding, the Company shall use at least 100% of the net proceeds of any offering of its securities, including any underwritten or other public offering of securities (any such offering, a “Subsequent Offering”) to first redeem this Note in full, including the Note Amount and all other amounts due and payable pursuant to this Note, and all other then outstanding Notes (a “Mandatory Redemption”); provided, however, that if 100% of the net proceeds of the Subsequent Offering are less than the amount required to repay all of the Notes in full, (i) the Company’s repayment obligation under this Section 6(a) shall be limited to the amount of such net proceeds, (ii) the net proceeds shall be applied to all of the Notes then outstanding pro rata based on the principal amount of such Notes then outstanding and (iii) the Company shall effect successive Mandatory Redemptions upon each Subsequent Offering until the Notes are repaid in full or otherwise no longer outstanding.

 

 

(b) Mandatory Notices. With respect to each Mandatory Redemption, the Company shall deliver a written notice to all, but not less than all, of the holders of Notes (the “Mandatory Redemption Notice” and the date such notice is delivered to all such holders is referred to as a “Mandatory Redemption Notice Date”) (a) stating the date on which the Mandatory Redemption shall occur (a “Mandatory Redemption Date”), which date shall be the date of the consummation of the applicable Subsequent Offering, (b) stating the expected amount of Net Proceeds with respect to the applicable Subsequent Offering and (c) contain a certification from the Chief Executive Officer or Chief Financial Officer of the Company that the Company has simultaneously taken the same action with respect to all of the Notes. Each Mandatory Redemption Notice shall be delivered no later than the first (1st) Business Day following the announcement of the pricing of the applicable Subsequent Offering, and the Company shall make a public announcement containing the information set forth in the applicable Mandatory Redemption Notice on or before the related Mandatory Redemption Notice Date to the extent that the notice contains any, or constitutes, material, non-public information.

 

(c) Mandatory Redemption Procedure. The payment of cash pursuant to the Mandatory Redemption shall be payable in full on the Business Day immediately following the Mandatory Redemption Date by wire transfer of immediately available funds in accordance with the Holder’s wire instructions. If any portion of the payment pursuant to a Mandatory Redemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of eighteen percent (18%) per annum or the maximum rate permitted by applicable law until such amount is paid in full. Notwithstanding anything to the contrary in this Section 6(c), the Net Proceeds shall be applied ratably among the Holders of the Notes.

 

(8) OPTIONAL PREPAYMENT. The Company may prepay (each, an “Optional Prepayment”) the Note in whole or in part at any time or from time to time by paying the Holder in cash by wire transaction of immediately available funds 100% of the Note Amount being prepaid. The Company may exercise its right to require prepayment under this Section 8 by delivering a written notice thereof by electronic mail and overnight courier to the Holder and all, but not less than all, of the holders of the Other Notes (an “Optional Prepayment Notice” and the date all of the holders of the Notes received such notice is referred to as the “Optional Prepayment Notice Date”). Each Optional Prepayment Notice shall be irrevocable. Each Optional Prepayment Notice shall (i) state the date on which the Optional Prepayment shall occur (the “Optional Prepayment Date”), which date shall not be less than two (2) Business Days following the applicable Optional Prepayment Notice Date, and (ii) state the aggregate Note Amount of the Notes which the Company has elected to be subject to Optional Prepayment from the Holder and all of the other holders of the Other Notes pursuant to this Section 8 (and analogous provisions under the Other Notes) on the related Optional Prepayment Date. If the Company elects to cause an Optional Prepayment pursuant to this Section 8, then it must simultaneously take the same action in the same proportion with respect to the Other Notes.

 

(9) NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this Note.

 

 

(10) Most-Favored Nation. So long as the Notes are outstanding, upon any issuance by the Company of any new security, with any term that the Purchasers reasonably believe is more favorable to the holder of such security or with a term in favor of the holder of such security that the Purchasers reasonably believe was not similarly provided to the holder of such security in these Transaction Documents, then (i) the Purchaser shall notify the Company of such additional or more favorable term within one (1) Business Day of the issuance or amendment (as applicable) of the respective security, and (ii) such term, at Purchaser’s option, shall become a part of the Note (regardless of whether the Company or the Purchaser complied with the notification provision of the Note). The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion or exercise discounts, conversion or exercise lookback periods, and discounts to the effective price per share. If the Purchaser elects to have the term become a part of the Note, then the Company shall immediately deliver acknowledgment of such adjustment in form and substance reasonably satisfactory to the Purchaser within one (1) Business Day of Company’s receipt of request from the Purchaser, provided that Company’s failure to timely provide the acknowledgement shall not affect the automatic amendments contemplated hereby.

 

(11) REDEMPTIONS.

 

(a) Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder within three (3) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice; provided that upon a Bankruptcy Event of Default, the Company shall deliver the applicable Bankruptcy Event of Default Redemption Price in accordance with Section 4(c) (as applicable, the “Event of Default Redemption Date”). If the Holder has submitted a Change of Control Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Change of Control Redemption Price to the Holder (i) concurrently with the consummation of such Change of Control if such notice is received prior to the consummation of such Change of Control and (ii) within three (3) Business Days after the Company’s receipt of such notice otherwise (such date, the “Change of Control Redemption Date”). The Company shall deliver the applicable Note Amount being prepaid to the Holder on the applicable Optional Prepayment Date. The Company shall pay the applicable Redemption Price to the Holder in cash by wire transfer of immediately available funds pursuant to wire instructions provided by the Holder in writing to the Company on the applicable due date. In the event of a redemption of less than all of the Note Amount of this Note, the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal which has not been redeemed and any accrued Interest on such Principal which shall be calculated as if no Redemption Notice has been delivered. In the event that the Company does not pay a Redemption Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any portion of this Note representing the Note Amount that was submitted for redemption and for which the applicable Redemption Price has not been paid. Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such Note Amount, and (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 18(d)) to the Holder representing such Note Amount to be redeemed.

 

 

(b) Redemption by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b), Section 5(b) or Section 8 or pursuant to corresponding provisions set forth in the Other Notes (each, an “Other Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day of its receipt thereof, forward to the Holder by electronic mail a copy of such notice. If the Company receives a Redemption Notice and one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three (3) Business Days prior to the Company’s receipt of the Holder’s Redemption Notice and ending on and including the date which is three (3) Business Days after the Company’s receipt of the Holder’s Redemption Notice and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem, a pro rata amount from the Holder and each holder of the Other Notes based on the Principal amount of this Note and the Other Notes submitted for redemption pursuant to such Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.

 

(c) Insufficient Assets. If upon a Redemption Date, the assets of the Company are insufficient to pay the applicable Redemption Price, the Company shall (i) take all appropriate action reasonably within its means to maximize the assets available for paying the applicable Redemption Price, (ii) redeem out of all such assets available therefor on the applicable Redemption Date the maximum possible portion of the applicable Redemption Price that it can redeem on such date, pro rata among the Holder and the holders of the Other Notes to be redeemed in proportion to the aggregate Principal amount of this Note and the Other Notes outstanding on the applicable Redemption Date and (iii) following the applicable Redemption Date, at any time and from time to time when additional assets of the Company become available to pay the balance of the applicable Redemption Price of this Note and the Other Notes, the Company shall use such assets, at the end of the then current fiscal quarter, to pay the balance of such Redemption Price of this Note and the Other Notes, or such portion thereof for which assets are then available, on the basis set forth above at the applicable Redemption Price, and such assets will not be used prior to the end of such fiscal quarter for any other purpose. Interest on the Principal amount of this Note and the Other Notes that have not been redeemed shall continue to accrue until such time as the Company redeems this Note and the Other Notes. The Company shall pay to the Holder the applicable Redemption Price without regard to the legal availability of funds unless expressly prohibited by applicable law or unless the payment of the applicable Redemption Price could reasonably be expected to result in personal liability to the directors of the Company.

 

(12) VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law and as expressly provided in this Note.

 

(13) RANK. All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries.

 

(14) NEGATIVE COVENANTS. Except as noted below, until all of the Notes have been redeemed or otherwise satisfied in full in accordance with their terms, the Company shall not, and the Company shall not permit any of its Subsidiaries without the prior written consent of the Required Holders to, directly or indirectly by merger or otherwise:

 

 

(a) while any Notes remain outstanding, incur or guarantee, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness;

 

(b) allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens;

 

(c) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than this Note and the Other Notes), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing;

 

(d) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (including, without limitation Permitted Indebtedness other than this Note and the Other Notes), by way of payment in respect of principal of (or premium, if any) such Indebtedness. For clarity, such restriction shall not preclude the payment of regularly scheduled interest payments which may accrue under such Permitted Indebtedness;

 

(e) redeem or repurchase any Equity Interest of the Company;

 

(f) declare or pay any cash dividend or distribution on any Equity Interest of the Company or of its Subsidiaries other than wholly-owned Subsidiaries;

 

(g) make, any change in the nature of its business as described in the Company’s most recent Annual Report filed on Form 10-K with the United States Securities and Exchange Commission (the “Commission”) or modify its corporate structure or purpose; or

 

(h) encumber, license or otherwise allow any Liens on any Intellectual Property Rights, including, without limitation, any claims for damage by way of any past, present, or future infringement of any of the foregoing, in each case, other than Permitted Liens;

 

(i) enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, license, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable arm’s length transaction with a Person that is not an Affiliate thereof;

 

 

(j) issue any Notes or issue any other securities that would cause a breach or default under the Notes;

 

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

 

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

 

(m) amend the Merger Agreement or the Loan Agreement by and between the Company and P2B, dated as of [●], 2024, the executed copy of which is attached hereto as Exhibit A and Exhibit B, respectively; and

 

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

 

Notwithstanding anything to the contrary in this Section 14, the consummation of the Business Combination pursuant to the Merger Agreement, as in effect on the date hereof, shall not be deemed a violation of this Section 14.

 

(15) AFFIRMATIVE COVENANTS. Until all of the Notes have been redeemed or otherwise satisfied in full in accordance with their terms, the Company shall, and the Company shall cause each Subsidiary to, unless otherwise agreed to by the Required Holders, directly and indirectly:

 

(a) maintain and preserve its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary;

 

(b) maintain and preserve all of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder;

 

(c) take all action necessary or advisable to maintain all of the Intellectual Property Rights that is necessary or material to the conduct of its business in full force and effect;

 

(d) maintain insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated; and

 

 

(e) promptly, but in any event within one (1) Business Day, notify the Holder and the holders of the Other Notes in writing whenever an Event of Default (an “Event of Default Notice”) occurs, and simultaneously with the delivery of such notice to the Holder and the holders of the Other Notes, file a Current Report on Form 8-K with the Commission to state such fact.

 

(16) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting of the Required Holders shall be required for any exchange, change or amendment or waiver of any provision to this Note or any of the Other Notes. Any exchange, change, amendment or waiver by the Company and the Required Holders shall be binding on the Holder of this Note and all holders of the Other Notes. The Holder hereby acknowledges and agrees that any action taken pursuant to this Section may result in, or be perceived to result in, a disproportionate impact on the Holder compared to the impact of such action on one or more holder(s) of Other Notes. This provision constitutes a separate right granted to each of the holders of Notes by the Company and shall not in any way be construed as such holders acting in concert or as a group with respect to the purchase, disposition or voting of securities or otherwise.

 

(17) TRANSFER. This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 4.1 of the Securities Purchase Agreement.

 

(18) REISSUANCE OF THIS NOTE.

 

(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 18(d) and subject to Section 3), registered as the Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred, a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3 following redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.

 

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form (but without any obligation to post a surety or other bond) and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal.

 

 

(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 18(d)) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

 

(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest, if any, from the Issuance Date.

 

(19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law or in equity (including a decree of specific performance and/or other injunctive relief). No remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, redemption and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

(20) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original Principal amount hereof.

 

(21) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and all the Purchasers and shall not be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

 

 

(22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

(23) DISPUTE RESOLUTION. In the case of a dispute as to the determination of any Redemption Price, the Company shall pay the applicable Redemption Price that is not disputed, and the Company shall submit the disputed determinations or arithmetic calculations via electronic mail within one (1) Business Day of receipt, or deemed receipt, of the Redemption Notice or other event giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one (1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within one (1) Business Day submit via electronic mail the disputed arithmetic calculation of any Redemption Price to an independent, outside accountant, selected by the Holder and approved by the Company, such approval not to be unreasonably withheld, conditioned or delayed. The Company, at the Company’s expense, shall cause the accountant to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

(24) NOTICES; PAYMENTS.

 

(a) Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 5.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefor.

 

(b) Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful money of the United States of America via wire transfer of immediately available funds to an account designated by the Holder; provided, that the Holder, upon written notice to the Company, may elect to receive a payment of cash in lawful money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing (which address, in the case of each of the Purchasers, shall initially be as set forth on the signature pages attached to the Securities Purchase Agreement). Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day.

 

(25) CANCELLATION. After all Principal, any accrued Interest and any other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled and shall not be reissued, sold or transferred.

 

 

(26) WAIVER OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Securities Purchase Agreement.

 

(27) GOVERNING LAW; JURISDICTION; JURY TRIAL. This Note shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth on the Company’s signature page to the Securities Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(28) Severability. If any provision of this Note is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Note so long as this Note as so modified continues to express, without material change, the original intentions of the Company and the Holder as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the Company or the Holder or the practical realization of the benefits that would otherwise be conferred upon the Company or the Holder. The Company and the Holder will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

 

(29) DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries, the Company shall contemporaneously with any such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries, the Company so shall indicate to the Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information relating to the Company or its Subsidiaries.

 

(30) USURY. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest hereunder at a rate or in an amount which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum interest rate or amount which the Company is permitted by applicable law to contract or agree to pay. If by the terms of this Note, the Company is at any time required or obligated to pay interest hereunder, including by way of an original issue discount, at a rate or in an amount in excess of such maximum rate or amount, the rate or amount of interest under this Note shall be deemed to be immediately reduced to such maximum rate or amount and the interest payable shall be computed at such maximum rate or be in such maximum amount and all prior interest payments in excess of such maximum rate or amount shall be applied and shall be deemed to have been payments in reduction of the principal balance of this Note.

 

(31) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

 

(a) “Affiliate” shall have the meaning ascribed to such term in Rule 405 of the Securities Act.

 

(b) “Business Combination” shall mean the proposed merger pursuant to the Merger Agreement, in which Pharma Two B Ltd., a company organized under the laws of the State of Israel (“P2B”) is selling certain of its securities to the buyers identified therein pursuant to the terms and subject to the conditions thereunder.

 

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

 

(d) “Change of Control” means any Fundamental Transaction other than (i) any reorganization, recapitalization or reclassification of the Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities and, directly or indirectly, are the holders of a majority of the voting power of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification or (ii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company.

 

 

(e) “Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially issued Notes pursuant to the terms of the Securities Purchase Agreement.

 

(f) “Common Stock” means (i) the Company’s shares of common stock, par value $0.0001 per share, and (ii) any capital stock into which such Common Stock shall be changed or any capital stock resulting from a reorganization, recapitalization or reclassification of such Common Stock.

 

(g) “Contingent Obligation” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

 

(h) “Convertible Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

 

(i) “Equity Interests” means (a) all shares of capital stock (whether denominated as common capital stock or preferred capital stock), equity interests, beneficial, partnership or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person (other than an individual), whether voting or non-voting and (b) all securities convertible into or exchangeable for any of the foregoing and all warrants, Options or other rights to purchase, subscribe for or otherwise acquire any of the foregoing, whether or not presently convertible, exchangeable or exercisable.

 

(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

 

(k) “Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities as of the Subscription Date calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company or (C) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(l) “GAAP” means United States generally accepted accounting principles, consistently applied during the periods involved.

 

(m) “Group” means a “group” as that term is used in Section 13(d) of the Exchange Act and as defined in Rule 13d-5 thereunder.

 

 

(n) “Indebtedness” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “finance leases” in accordance with GAAP (other than trade payables entered into in the ordinary course of business consistent with past practice), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in connection with GAAP, is classified as a finance lease, (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, lien, pledge, charge, security interest or other encumbrance of any nature whatsoever in or upon any property or assets (including accounts and contract rights) with respect to any asset or property owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (vii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above.

 

(o) “Intellectual Property Rights” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

(p) “Material Adverse Effect” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

(q) “Merger Agreement” shall mean the Agreement and Plan of Merger by and among P2B, [Pearl] Merger Sub., Inc., a Delaware corporation, and the Company, dated as of [●], 2024.

 

(r) “Options” means any rights, warrants or options to subscribe for or purchase (i) shares of Common Stock or (ii) Convertible Securities.

 

(s) “Permitted Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes, (ii) trade payables incurred in the ordinary course of business and consistent with past practice and (iii) unsecured Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement acceptable to the Required Holders and approved by the Required Holders in writing, and which Indebtedness (a) does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date or later and (b) includes terms and conditions acceptable to the Required Holders.

 

 

(t) “Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or Indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods and (vii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 4(a)(ix).

 

(u) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.

 

(v) “Purchaser” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

(w) “Redemption Dates” means, collectively, the Event of Default Redemption Dates and the Change of Control Redemption Dates and the Optional Prepayment Date, as applicable, each of the foregoing, individually, a Redemption Date.

 

(x) “Redemption Notices” means, collectively, the Event of Default Redemption Notices and the Change of Control Redemption Notices and the Optional Prepayment Notice, each of the foregoing, individually, a Redemption Notice.

 

(y) “Redemption Premium” means [125%].

 

(z) “Redemption Prices” means, collectively, the Event of Default Redemption Prices and the Change of Control Redemption Prices and the Note Amount being prepaid upon any Optional Prepayment, each of the foregoing, individually, a Redemption Price.

 

(aa) “Related Fund” means, with respect to any Person, a fund or account managed by such Person or an Affiliate of such Person.

 

(bb) “Required Holders” means the holders of Notes representing at least [a majority] of the aggregate principal amount of the Notes then outstanding.

 

(cc) “SEC” means the United States Securities and Exchange Commission.

 

 

(dd) “Securities Act” means the Securities Act of 1933, as amended.

 

(ee) “Securities Purchase Agreement” means that certain securities purchase agreement dated as of the Subscription Date by and among the Company and the investors listed on the signature pages attached thereto pursuant to which the Company issued the Notes, as may be amended, amended and restated, supplemented or otherwise modified from time to time.

 

(ff) “Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(gg) “Subscription Date” means [●], 2024.

 

(hh) “Subsidiary” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

(ii) “Transaction Documents” shall have the meaning ascribed to such term in the Securities Purchase Agreement.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

Hepion Pharmaceuticals, Inc.
By:
Name:	John Cavan
Title:	Interim Chief Executive Officer and Chief Financial Officer

 

 

EXHIBIT A

 

MERGER AGREEMENT

 

(see attached)

 

 

EXHIBIT B

 

LOAN AGREEMENT

 

(see attached)

 

 

Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement”) is dated as of July [●], 2024, between Hepion Pharmaceuticals, Inc., a Delaware corporation (the “Company”) and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively, the “Purchasers”).

 

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

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering that certain Registration Rights Agreement, by and among the Company, P2B (as defined below) and the Purchasers (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement) under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

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

 

ARTICLE I.

DEFINITIONS

 

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

 

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

 

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

 

“Aggregate Notes” means, collectively, the Notes.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Combination” means the proposed merger pursuant to the Merger Agreement, in which Pharma Two B Ltd., a company organized under the laws of the State of Israel (“P2B”) is selling certain of its securities to the buyers identified therein pursuant to the terms and subject to the conditions thereunder.

 

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

 

“Company’s Knowledge” means the actual knowledge of the Company’s Interim Chief Executive Officer and Chief Financial Officer, John Cavan (including in his capacity as the Company’s principal financial and accounting officer), after reasonable inquiry.

 

 

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

 

“Closing Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.

 

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

 

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

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

 

“Data Privacy and Security Laws” shall have the meaning ascribed to such term in Section 3.1(hh).

 

“Disclosure Time” means, (i) if this Agreement is signed on a day that is not a Trading Day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any Trading Day, 9:01 a.m. (New York City time) on the Trading Day immediately following the date hereof, and (ii) if this Agreement is signed between midnight (New York City time) and 9:00 a.m. (New York City time) on any Trading Day, no later than 9:01 a.m. (New York City time) on the date hereof.

 

“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(s).

 

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

 

“FCPA” means the Foreign Corrupt Practices Act of 1977, as amended.

 

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

 

“Indebtedness” shall have the meaning ascribed to such term in the Notes.

 

“Intellectual Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).

 

“IT Systems” shall have the meaning ascribed to such term in Section 3.1(hh).

 

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

 

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

 

“Material Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).

 

“Material Permits” shall have the meaning ascribed to such term in Section 3.1(n).

 

“Maximum Rate” shall have the meaning ascribed to such term in Section 5.17.

 

“Merger Agreement” means the Agreement and Plan of Merger by and among P2B, [Pearl] Merger Sub., Inc., a Delaware corporation, and the Company, dated as of [●], 2024.

 

 

“Notes” means the Original Issue Discount Senior Unsecured Nonconvertible Notes due, subject to the terms therein, on the earlier of: (i) December 31, 2024, (ii) one Business Day after the closing of the Business Combination, and (iii) the date that the Business Combination is terminated pursuant to the terms of the Merger Agreement, issued by the Company to the Purchasers hereunder, in the form of Exhibit A attached hereto.

 

“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.

 

“Personal Data” shall have the meaning ascribed to such term in Section 3.1(hh).

 

“Principal Amount” means, as to each Purchaser, the amounts set forth below such Purchaser’s signature block on the signature pages hereto next to the heading “Principal Amount,” in United States Dollars, which shall equal such Purchaser’s Subscription Amount multiplied by 1.16.

 

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

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

 

“Required Approvals” shall have the meaning ascribed to such term in Section 3.1(e).

 

“Required Holders” means (I) prior to the Closing Date, each of the Purchasers and (II) on or after the Closing Date, holders of at least a majority of the aggregate Principal Amount of Notes issued.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.

 

“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(h).

 

“Securities” means the Notes and the Shares.

 

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

 

“Shares” means the shares of Common Stock issuable pursuant to this Agreement.

 

“Short Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include locating and/or borrowing shares of Common Stock).

 

“Standard Settlement Period” shall have the meaning ascribed to such term in Section 4.1(c).

 

“Subscription Amount” means, as to each Purchaser, the aggregate amount to be paid for Notes and Shares purchased hereunder as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds. The aggregate Subscription Amount paid by all Purchasers hereunder shall be $2,500,000.

 

 

“Subsidiary” means any subsidiary of the Company as set forth on Schedule 3.1(a) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof. “Subsidiary” of any Person shall include any corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity (a) the accounts of which would be consolidated with those of such Person in such Person’s consolidated financial statements if such financial statements were prepared in accordance with GAAP or (b) of which more than 50% of (i) the outstanding equity interests having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors of such Person, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such Person.

 

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

 

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

 

“Transaction Documents” means this Agreement, the Notes and all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

“Transfer Agent” means Pacific Stock Transfer Company, the current transfer agent of the Company and any successor transfer agent of the Company.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1. Closing. On the Closing Date, upon the terms and subject to the conditions set forth herein, the Company agrees to sell, and the Purchasers, severally and not jointly, agree to purchase, up to an aggregate of $2,900,000 in principal amount of the Notes. Each Purchaser shall deliver to the Company’s bank account specified in the Company’s wire instructions, as set forth in a letter addressed to the Purchasers on the Company’s letterhead and executed by the Company’s Interim Chief Executive Officer and Chief Financial Officer, via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set forth on the signature page hereto executed by such Purchaser and the Company shall deliver to each Purchaser its respective Note and Shares, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items set forth in Section 2.2 at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall take place remotely by electronic transfer of the Closing documentation.

 

2.2. Deliveries.

 

(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:

 

(i) this Agreement duly executed by the Company;

 

(ii) a Note with a principal amount equal to such Purchaser’s Subscription Amount multiplied by 1.16, registered in the name of such Purchaser;

 

(iii) a copy of the duly executed loan agreement by and between the Company and P2B, dated the date hereof (the “Loan Agreement”);

 

(iv) a copy of the duly executed Merger Agreement;

 

(v) a copy of the duly executed Registration Rights Agreement,

 

 

(vi) an amount of Shares equal to (i) [●]¹ multiplied by (ii) such Purchaser’s Subscription Amount divided by (iii) $2,500,000, registered in the name of such Purchaser;

 

(vii) the Company shall have provided each Purchaser with the wire instructions of the Company, on Company letterhead and executed by the Interim Chief Executive Officer and Chief Financial Officer;

 

(viii) an officer’s certificate and legal opinion of the legal counsel of the Company, each in a form reasonably acceptable to such Purchaser; and

 

(ix) the Company shall have delivered to such Purchaser such other documents relating to the transactions contemplated by this Agreement as such Purchaser or its counsel may reasonably request.

 

(b) On or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:

 

(i) this Agreement duly executed by such Purchaser;

 

(ii) a copy of the duly executed Registration Rights Agreement; and

 

(iii) such Purchaser’s Subscription Amount by wire transfer to the account specified in writing by the Company.

 

2.3. Closing Conditions.

 

(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects (or, to the extent representations or warranties are qualified by materiality, in all respects) as of such date);

 

(ii) all obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been performed; and

 

(iii) the delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.

 

(b) The respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being met:

 

(i) the accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of a specific date therein in which case they shall be accurate in all material respects or, to the extent representations or warranties are qualified by materiality or Material Adverse Effect, in all respects) as of such date;

 

¹NTD: 19.99% of the total outstanding shares of Common Stock.

 

 

(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;

 

(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;

 

(iv) there shall have been no Material Adverse Effect with respect to the Company;

 

(v) submission of a listing application to the Nasdaq Capital Market regarding the issuance of the Shares in accordance with the terms of the Transaction Documents, and notification from Nasdaq that the obligation to notify Nasdaq is completed; and

 

(vi) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

 

3.1. Representations and Warranties of the Company. Except as set forth in the disclosure schedules (the “Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to each Purchaser:

 

(a) Subsidiaries. All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary free and clear of any Liens, and all of the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities.

 

(b) Organization and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

 

(c) Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally or (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

 

(d) No Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) subject to the Required Approvals, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, anti-dilution or similar adjustments, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not have or reasonably be expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and Approvals. Except as set forth on Schedule 3.1(e), the Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Shares for trading thereon and (ii) the filing of Form D with the Commission and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

 

(f) Issuance of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents or under federal or state securities laws. The Shares, when issued in accordance with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Shares.

 

 

(g) Capitalization. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act. Except as set forth on Schedule 3.1(g), (i) no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents; (ii) the issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of Common Stock or other securities to any Person (other than the Purchasers); (iii) there are no outstanding securities or instruments of the Company or any Subsidiary with any provision that adjusts the exercise, conversion, exchange or reset price of such security or instrument upon an issuance of securities by the Company or any Subsidiary; and (iv) there are no outstanding securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to redeem a security of the Company or such Subsidiary. Except for the Company’s 2023 Omnibus Equity Incentive Plan, the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the Company’s Knowledge, between or among any of the Company’s stockholders.

 

(h) SEC Reports; Financial Statements. Except as set forth on Schedule 3.1(h), the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis (except as set forth in the SEC Reports) or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

 

(i) Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as set forth on Schedule 3.1(i), (i) the Company has not altered its method of accounting, (ii) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (iii) the Company has not issued any equity securities to any officer, director or Affiliate, except pursuant to existing Company stock award plans. The Company does not have pending before the Commission any request for confidential treatment of information (excluding redactions permitted by Item 6.01 of Regulation S-K).

 

(j) Litigation. Except as set forth on Schedule 3.1(j), there is no action, suit, proceeding or investigation pending against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) that (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. To the Company’s Knowledge, there has not been, and there is not pending or contemplated, any investigation by the Commission involving the Company or any current director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

 

 

(k) Labor Relations. No labor dispute exists or, to the Company’s Knowledge, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’ employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that their relationships with their employees are good. To Company’s Knowledge, no executive officer of the Company or any Subsidiary, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of any third party, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(l) Compliance. Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not have or reasonably be expected to result in a Material Adverse Effect.

 

(m) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder (“Environmental Laws”); (ii) have received all permits licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(n) Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

 

(o) Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and (ii) Liens for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP and, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.

 

(p) Intellectual Property. The Company and its Subsidiaries exclusively own (free and clear of all liens, encumbrances and defects) or possess a valid license or other lawful right to use all Intellectual Property Rights necessary, used or held for use to conduct its business as presently conducted and as presently proposed to be conducted. To the Company’s Knowledge, each item of such Intellectual Property Rights is valid and enforceable. To the Company’s Knowledge, each of the licenses (in-bound or out-bound) of Intellectual Property Rights or other contracts (including settlement agreements) is valid and enforceable, and none of the Company or its Subsidiaries and none of the counterparties to any such contract, is in default or breach thereunder or thereof. The conduct of the business of the Company and its Subsidiaries does not infringe, misappropriate or otherwise violate or conflict with the Intellectual Property Rights of others. To the Company’s Knowledge and its Subsidiaries, no third party is infringing, misappropriating or otherwise conflicting with its Intellectual Property Rights. None of the Company or its Subsidiaries are aware of any facts or circumstances which might give rise to any of the foregoing infringements, misappropriations or other conflicts, or claims, actions or proceedings. Each of the Company and its Subsidiaries has taken reasonable measures to protect the secrecy, confidentiality and value of all of its Intellectual Property Rights, as applicable, and no unauthorized disclosure of any information comprising any Intellectual Property Rights has occurred. All present and former employees, consultants and independent contractors of each of the Company and its Subsidiaries that have been involved in the development of any Intellectual Property Rights used in the business of the Company and its Subsidiaries have entered into written agreements under which such Persons (A) agree to protect the trade secrets, know-how and other confidential information of the Company and its Subsidiaries, as applicable, and (B) assign to one of the Company or its Subsidiaries, as applicable, all right, title and interest in and to all Intellectual Property Rights created by such Person in the course of his, her or its employment or other engagement by the Company or any of its Subsidiaries. For purposes of this Agreement, “Intellectual Property Rights” means all intellectual property and proprietary rights, including all (i) trademarks, trade names, service marks, service names, domain names, and other designation of origin, together with all goodwill associated therewith, (ii) original works of authorship and copyrights, (iii) patents and patent applications, together with all divisionals, continuations, continuations-in-part, reissues and reexaminations thereof, including all rights to file applications for patent, (iv) trade secrets, know-how and other confidential information, (v) software, including data, databases and documentation therefor, and (vi) inventions, licenses, approvals and governmental authorizations.

 

(q) Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business.

 

(r) Transactions with Affiliates and Employees. Except as set forth on Schedule 3.1(r), none of the officers or directors of the Company or any Subsidiary and none of the employees of the Company or any Subsidiary is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from providing for the borrowing of money from or lending of money to, or otherwise requiring payments to or from any officer, director or such employee or any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner (each a “Related Party”), in each case in excess of $120,000 other than for (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock award plan of the Company.

 

 

(s) Sarbanes-Oxley; Internal Accounting Controls. The Company and the Subsidiaries are in compliance in all material respects with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. Except as set forth in the SEC Reports, the Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.

 

(t) Certain Fees. Except as set forth on Schedule 3.1(t), no brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. To the Company’s Knowledge, the Purchasers shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents.

 

(u) Private Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated hereby.

 

(v) Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

(w) Listing and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. Except as set forth on Schedule 3.1(w), the Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Common Stock is currently eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.

 

 

(x) No Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.

 

(y) Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company or of any Subsidiary know of no basis for any such claim.

 

(z) No General Solicitation. Neither the Company nor any Person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

 

(aa) Foreign Corrupt Practices. Neither the Company nor any Subsidiary, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision of FCPA.

 

(bb) Accountants. The Company’s accounting firm (i) is a registered public accounting firm as required by the Exchange Act and (ii) shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for the fiscal year ending December 31, 2024.

 

(cc) Seniority. As of the Closing Date, no Indebtedness or other claim against the Company is senior to the Notes in right of payment or security, whether with respect to interest or upon liquidation or dissolution, or otherwise, other than indebtedness secured by purchase money security interests (which is senior only as to underlying assets covered thereby) and capital lease obligations (which is senior only as to the property covered thereby). The Notes and all other obligations of the Company of any kind whatsoever under or in respect of the Notes (the “Senior Obligations”) constitute senior unsubordinated obligations of the Company, other than any obligations which have priority under applicable law.

 

(dd) No Disagreements with Accountants and Lawyers. There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any of the Transaction Documents.

 

(ee) Acknowledgment Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

 

(ff) Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the case of clauses (ii) and (iii).

 

(gg) Equity Incentive Plans. Each stock option granted by the Company under the Company’s equity incentive plans was granted (i) in accordance with the terms of the Company’s equity incentive plans and (ii) with an exercise price at least equal to the fair market value of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted under the Company’s equity incentive plans has been backdated. The Company has not knowingly granted, and there is no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries or their financial results or prospects.

 

(hh) IT Systems; Data Privacy and Security. The information technology and computer systems, including the software, firmware, hardware, equipment, networks, data communication lines, interfaces, databases, storage media, websites, platforms and related systems, owned, licensed or leased by the Company and its Subsidiaries (collectively, “IT Systems”) are sufficient in all material respects for the conduct of each of the business of the Company and its Subsidiaries, do not contain any “viruses,” “worms,” “time-bombs,” “key-locks,” or any other devices intentionally designed to disrupt or interfere with the operation of any of the IT Systems; and during the last two (2) years, there have been no material failures, breakdowns, continued substandard performance or other adverse events affecting any of the IT Systems. Each of the Company and its Subsidiaries has and maintains commercially reasonable business continuity and disaster recovery plans, procedures and facilities appropriate for its business and has taken commercially reasonable steps to safeguard the integrity and security of IT Systems, including all data stored therein. Each of the Company and its Subsidiaries is, and during the last three (3) years has been, in compliance in all material respects with all Data Privacy and Security Laws applicable to it. Each of the Company and its Subsidiaries has commercially reasonable security measures in place designed to protect all Personal Data under its control or in its possession from unauthorized use, access, modification or destruction. There are no material claims, actions or proceedings against or affecting any of the Company or its Subsidiaries pending, threatened in writing, relating to or arising under Data Privacy and Security Laws. None of the Company nor its Subsidiaries has received any written notices from the Department of Justice, U.S. Department of Education, Federal Trade Commission, or the Attorney General of any state, or any equivalent foreign governmental authority, relating to possible violations of Data Privacy and Security Laws. For purposes of this Agreement, (i) “Data Privacy and Security Laws” shall mean (a) all applicable laws relating to the Processing of Personal Data or otherwise relating to privacy, data protection, data security, cyber security, breach notification or data localization, and (b) all published policies of the Company and its Subsidiaries relating to the Processing of Personal Data or otherwise relating to privacy, data protection, data security, cyber security, breach notification or data localization; (ii) “Processing” shall mean the collection, use, storage, processing, recording, distribution, transfer, import, export, protection, disposal or disclosure or other activity regarding or operations performed on data or information (whether electronically or in any other form or medium); and (iii) “Personal Data” shall mean any information that, alone or in combination with other information held by the Company and its Subsidiaries, identifies or could reasonably be associated with an individual, including any individual’s name, street address, telephone number, e-mail address, photograph, social security number, driver’s license number, passport number, customer or account number, biometrics, IP address, geolocation data or persistent device identifier, or any other information that is otherwise considered personal information, personal data, protected health information by applicable Data Privacy and Security Laws.

 

(ii) Office of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).

 

 

(jj) U.S. Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s request.

 

(kk) Bank Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve.

 

(ll) Money Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money Laundering Laws”), and no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the Company’s Knowledge, or any Subsidiary, threatened.

 

(mm) No Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(c), and has furnished to the Purchasers a copy of any disclosures provided thereunder.

 

(nn) Other Covered Persons. The Company is not aware of any person (other than any Issuer Covered Person) that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of any Securities.

 

(oo) Notice of Disqualification Events. The Company will notify the Purchasers in writing, prior to the Closing Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification Event relating to any Issuer Covered Person.

 

(pp) Shell Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i)(1) of the Securities Act.

 

 

3.2. Representations and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):

 

(a) Organization; Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies or (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b) Own Account. Such Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a registration statement, or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities hereunder in the ordinary course of its business.

 

(c) Purchaser Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12) or (a)(13) under the Securities Act.

 

(d) Experience of Such Purchaser. Such Purchaser, either alone or together with its representatives, (i) is knowledgeable with respect to the Company and its subsidiaries, and their respective conditions (financial and otherwise), results of operations, businesses, properties, assets, liabilities, plans, management, financing and prospects and (ii) has such knowledge and experience in financial and business matters and in transactions of this type that it is capable of evaluating the merits and risks of the prospective investment in the Securities and of making an informed investment decision and has so evaluated the merits and risks of such investment and without reliance upon the Company, its subsidiaries or affiliates or any other person, has made its own analysis and decision to consummate such investment. Such Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

Such Purchaser understands that that this is a speculative investment. As further disclosed in the Company’s Form 10-Q for the quarter ended March 31, 2024, as filed with the Commission on May 21, 2024, the Company expects that it will need to raise a material amount of additional capital in the imminent near-term to continue its operations, and that absent such near-term funding, it will likely run out of available cash resources in the near-term. Such Purchaser understands that the Subscription Amount does not constitute a material amount of necessary financing in order to continue the Company’s operations beyond the near term and that Company will need to conduct further additional capital raises in order to continue as a going concern.

 

(e) General Solicitation. Such Purchaser is not, to such Purchaser’s knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the knowledge of such Purchaser, any other general solicitation or general advertisement.

 

 

(f) Access to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.

 

Such Purchaser acknowledges and understands that the Company may possess material nonpublic information regarding the Company not known to the Purchaser that may impact the value of the Company. The Purchaser understands, based on its experience, the disadvantage to which the Purchaser is subject due to the disparity of information between the Purchaser and the Company. Notwithstanding such disparity, the Purchaser has deemed it appropriate to enter into this Agreement and to consummate the transactions contemplated hereunder.

 

(g) Certain Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, directly or indirectly executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives, including, without limitation, its officers, directors, partners, legal and other advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty against, or a prohibition of, any actions with respect to the borrowing of, arrangement to borrow, identification of the availability of, and/or securing of, securities of the Company in order for such Purchaser (or its broker or other financial representative) to effect Short Sales or similar transactions in the future.

 

The Company acknowledges and agrees that the representations contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of the transactions contemplated hereby. Notwithstanding the foregoing, for the avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to locating or borrowing shares in order to effect Short Sales or similar transactions in the future.

 

ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES

 

4.1. Transfer Restrictions.

 

(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement.

 

 

 

(b) The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in substantially the following form:

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, such Purchaser may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities, including, if the Securities are subject to registration, the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of selling stockholders thereunder.

 

(c) Certificates evidencing the Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) following any sale of such Shares pursuant to Rule 144, (iii) if such Shares are eligible for sale under Rule 144, without the volume or manner-of-sale restrictions or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company shall cause its counsel, if permissible under applicable law, to issue a legal opinion to the Transfer Agent or the Purchaser promptly if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by a Purchaser, respectively. The Company agrees that at such time as such legend is no longer required under this Section 4.1(c), it will, no later than the earlier of (i) one (1) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate representing Shares, as applicable, issued with a restrictive legend (such date, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Shares subject to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s prime broker with the Depository Trust Company System as directed by such Purchaser. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of a certificate representing Shares, as applicable, issued with a restrictive legend.

 

(d) Each Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.

 

 

4.2. Acknowledgment of Dilution. The Company acknowledges that the issuance of the Shares may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Shares pursuant to the Transaction Documents, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other stockholders of the Company.

 

4.3. Securities Laws Disclosure; Publicity. The Company shall file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the Commission within the time required by the Exchange Act.

 

4.4. Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for [●] and as set forth in the Loan Agreement and shall not use such proceeds (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices); (b) for the redemption of any Common Stock or Common Stock Equivalents; (c) for the settlement of any outstanding litigation; or (d) in violation of FCPA or OFAC regulations.

 

4.5. Certain Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly disclosed by the Company as described in Section 4.3 hereof. Each Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company such Purchaser will maintain the confidentiality of the existence and terms of this transaction (other than as disclosed to its legal and other representatives).

 

4.6. Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of any Purchaser.

 

4.7. Nasdaq Approvals. To the extent required under the applicable rules and regulations of the Nasdaq Stock Market, the Company shall, as soon as practicable after the date hereof, seek approvals with respect to the Business Combination and the transactions contemplated by the Securities Purchase Agreement by and among P2B and the buyers identified therein, dated as of the date hereof.

 

4.8. Seniority. Notwithstanding the foregoing or anything else set forth in the Aggregate Notes, the Company agrees that the Company may not incur or guarantee additional indebtedness at any time after the date hereof, whether such indebtedness and/or the liens securing such indebtedness are senior, pari passu or junior to the Senior Obligations unless the new lender enters into a subordination agreement acceptable to the Purchasers.

 

4.9. Participation in Future Financing.

 

(a) Upon any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, indebtedness or a combination of units hereof that occurs on or before the 18-month anniversary of the Closing Date (a “Subsequent Financing”), each Purchaser shall have the right to participate in (a) any Subsequent Financing that occurs on or before [●], 2026, that is not intended to be marketed as a “public offering” under the rules of Nasdaq, up to an amount equal to 30% of such financing, and (b) any other Subsequent Financing up to an amount equal to 100% of such financing, in each case on the same terms, conditions and price provided to other investors in the applicable Subsequent Financing. The maximum amount calculated with the applicable percentage in the prior sentence is referred to as the “Participation Maximum.”

 

 

(b) At least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”). Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing, the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.

 

(c) Any Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice that such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser shall be deemed to have notified the Company that it does not elect to participate.

 

(d) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees to participate) is, in the aggregate, less than the total amount of the Subsequent Financing, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth in the Subsequent Financing Notice.

 

(e) If by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice, the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing Date by a Purchaser participating under this Section 4.9 and (y) the sum of the aggregate Subscription Amounts of Securities purchased on the Closing Date by all Purchasers participating under this Section 4.9.

 

(f) The Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of participation set forth above in this Section 4.9, if the Subsequent Financing subject to the initial Subsequent Financing Notice is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after the date of the initial Subsequent Financing Notice.

 

(g) The Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written consent of such Purchaser.

 

(h) Notwithstanding anything to the contrary in this Section 4.9 and unless otherwise agreed to by such Purchaser, the Company shall either confirm in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material, non-public information with respect to the Company or any of its Subsidiaries.

 

 

(i) The Company and each Purchaser agree that the participation rights granted herein supersede and replace any and all pre-existing rights granted to each such Purchaser to participate in any financing by the Company.

 

ARTICLE V.

MISCELLANEOUS

 

5.1. Termination. This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before the fifth (5^th) Trading Day following the date hereof, provided, however, that no such termination will affect the right of any party to sue for any breach by any other party (or parties).

 

5.2. Fees and Expenses. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by any Purchaser) relating to or arising out of the transactions contemplated hereby. The Company shall pay, and hold each Purchaser harmless against, any liability, loss or expense (including, without limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided, however, that the Company shall pay the fees and expenses of its financial advisors and expenses of legal counsel for the Purchasers in an aggregate amount not to exceed $235,000. The Company shall pay all Transfer Agent fees (including, without limitation, any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers.

 

5.3. Entire Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

5.4. Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the time of transmission, if such notice or communication is delivered via facsimile at the facsimile number or email attachment as set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2^nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.

 

5.5. Amendments; Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Required Holders (or, prior to the Closing, the Company and each Purchaser) or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right. Any amendment effected in accordance with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.

 

 

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

 

5.7. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”

 

5.8. No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in this Section 5.8.

 

5.9. Governing Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Action or Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Action or Proceeding is improper or is an inconvenient venue for such Proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such Action or Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If any party shall commence an Action or Proceeding to enforce any provisions of the Transaction Documents, then, the prevailing party in such Action or Proceeding shall be reimbursed by the non-prevailing party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Action or Proceeding. Notwithstanding the foregoing, each Purchaser may choose, at its election, Delaware as the governing law, jurisdiction and venue as set forth on Purchaser’s signature block on the signature pages hereto.

 

5.10. Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.

 

5.11. Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page was an original thereof.

 

 

5.12. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

5.13. Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

5.14. Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.

 

5.15. Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any Action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

5.16. Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

5.17. Usury. To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any Action or Proceeding that may be brought by any Purchaser in order to enforce any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the effective date thereof forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Purchaser’s election.

 

 

5.18. Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any Proceeding for such purpose. Each Purchaser has been represented by its own separate legal counsel in its review and negotiation of the Transaction Documents. The Company has elected to provide all Purchasers with the same terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers.

 

5.19. Liquidated Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages or other amounts are due and payable shall have been canceled.

 

5.20. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding Business Day.

 

5.21. Construction. The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.

 

5.22. WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

 

(Signature Pages Follow)

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

HEPION PHARMACEUTICALS, inc.			Address for Notice:
By:			Email:	[●]
Name:	John Cavan		Fax:	[●]
Title:	Interim Chief Executive Officer and Chief Financial Officer

 

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

 

Sheppard, Mullin, Richter & Hampton LLP
[●]

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 

 

[PURCHASER SIGNATURE PAGES TO HEPA SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

Name of Purchaser: ____________________________________________________________________________

 

Signature of Authorized Signatory of Purchaser: _____________________________________________________

 

Name of Authorized Signatory: ___________________________________________________________________

 

Title of Authorized Signatory: ____________________________________________________________________

 

Email Address of Authorized Signatory: ____________________________________________________________

 

Address for Notice to Purchaser:

 

 

 

 

Address for Delivery of Securities to Purchaser (if not same as address for notice):

 

 

 

 

Subscription Amount: $_____________

 

Principal Amount of Notes: $_____________

 

Shares: _______________

 

EIN Number: _______________________

 

 

EXHIBIT A

 

FORM OF NOTE

 

(see attached)

 

 

 

 

Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of [●], 2024, by and among Pharma Two B Ltd, a corporation incorporated in Israel, with headquarters located at 4 Oppenheimer Street, Rehovot, Israel 7670104 (the “Company”), Hepion Pharmaceuticals, Inc., a Delaware corporation (“Hepion”) and the Buyers (as defined below).

 

WHEREAS:

 

A. In connection with the Securities Purchase Agreement by and among the Company and each of the several buyers signatory thereto (each such buyer, a “Company Buyer” and, collectively, the “Company Buyers”) of even date herewith (the “Company Securities Purchase Agreement”), the Company has agreed, upon the terms and subject to the conditions of the Company Securities Purchase Agreement, to issue and sell to each Company Buyer, of the following securities: (i) shares (the “Purchased Shares”) of the Company’s ordinary shares, nominal value 1 NIS per share (the “Ordinary Shares”), and/or pre-funded warrants (the “Pre-Funded Warrants”) to purchase Ordinary Shares (such underlying Ordinary Shares, the “Pre-Funded Warrant Shares”) in accordance with the terms of the Pre-Funded Warrants and (ii) two (2) series of warrants (the “Series A and Series B Warrants” and together with the Pre-Funded Warrants, the “Warrants”) to purchase Ordinary Shares (such underlying Ordinary Shares, collectively, the “Series A and Series B Warrant Shares” and together with the Pre-Funded Warrant Shares, the “Warrant Shares”) in accordance with the terms of the Series A and Series B Warrants.

 

B. In connection with the Securities Purchase Agreement by and among Hepion and each of the several buyers signatory thereto (each such buyer, a “Hepion Buyer” and, collectively, the “Hepion Buyers” and collectively with the Company Buyers and Advisor (as defined below), the “Buyers”) of even date herewith (the “Hepion Securities Purchase Agreement” and together with the Company Securities Purchase Agreement, the “Securities Purchase Agreements”), Hepion has agreed to issue and sell to the Hepion Buyers an aggregate of [●] shares of common stock of Hepion (the “Hepion Shares”).¹

 

C. In connection with the Agreement and Plan of Merger, dated [●], 2024 (the “Merger Agreement”), by and among the Company, [Pearl] Merger Sub, Inc., a Delaware corporation, and Hepion, Herpion will become a wholly owned, indirect subsidiary of the Company, and the Hepion Shares shall convert to Ordinary Shares following the consummation of the transactions contemplated therein.

 

D. In connection with the transactions contemplated above, the Company agreed to issue to Laidlaw & Company (UK) Ltd., as financial advisor to the Company (the “Advisor”) warrants (the “Advisor Warrants”) to purchase [●] Ordinary Shares (the “Advisor Warrant Shares”).

 

E. In accordance with the terms of the Securities Purchase Agreements, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “1933 Act”), and applicable state securities laws.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

 

1. Definitions.

 

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Company Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

 

(a) “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

 

¹ NTD: Please confirm timing of the issuance of the Hepion Shares. IF not issued until immediately prior to the merger, they cannot be included on the F-4. Hepion Shares will be issued at signing of the SPA, and well before the merger closes, so can be included on the F-4.

 

 

(b) “effective” and “effectiveness” refer to a Remaining Registration Statement that has been declared effective by the SEC and is available for the resale of the Remaining Registrable Securities required to be covered thereby.

 

(c) “Effective Date” means the date that the Remaining Registration Statement has been declared effective by the SEC.

 

(d) “Effectiveness Deadline” means the date which is the earlier of (x) (i) in the event that the Remaining Registration Statement is not subject to a review by the SEC, 60 calendar days after the Effective Time or (ii) in the event that the Remaining Registration Statement is subject to a review by the SEC or in the event that the Company is notified by the SEC to refile the Remaining Registration Statement on Form F-1, 90 calendar days after the Effective Time and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

 

(e) “Effective Time” means the time at which, following the consummation of the Merger, the Ordinary Shares begin trading on the trading market on which the Ordinary Shares are listed.

 

(f) “Eligible Market” means the Principal Market, The New York Stock Exchange, Inc., the NYSE American, The Nasdaq Global Select Market, The Nasdaq Global Market, OTC QB or OTC QX.

 

(g) “Filing Deadline” means the date that is 30 calendar days after the Effective Time.

 

(h) “Hepion Registrable Securities” means all the Hepion Shares, and any capital stock of Hepion issued or issuable with respect to the Hepion Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.

 

(i) “Initial Registrable Securities” means the Hepion Registrable Securities.

 

(j) “Initial Registration Statement” means a registration statement or registration statements of the Company on Form F-4 filed under the 1933 Act for the purpose of effecting the Merger.

 

(k) “Investor” means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

 

(l) “Merger” means the proposed merger pursuant to the Merger Agreement, in which the Company is selling certain of its securities to the buyers identified therein pursuant to the terms and subject to the conditions thereunder.

 

(m) “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

(n) “Pharma Two B Registrable Securities” means (i) the Purchased Shares issued; (ii) the maximum number of Warrant Shares issued or issuable upon exercise of the Warrants without regard to any limitations on the exercise of the Warrants; (iii) the maximum number of Advisor Warrant Shares issued or issuable upon exercise of the Advisor Warrants without regard to any limitations on the exercise of the Advisor Warrants and (iv) any capital stock of the Company issued or issuable with respect to the Purchased Shares, the Warrant Shares, the Warrants, the Advisor Warrant Shares or the Advisor Warrants, in each case, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, and without regard to any limitations on the exercise of the Warrants or the Advisor Warrants, as applicable.

 

 

(o) “Principal Market” means The Nasdaq Capital Market.

 

(p) “register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

 

(q) “Registrable Securities” means collectively, the Initial Registrable Securities and the Remaining Registrable Securities.

 

(r) “Registration Statements” means collectively, the Initial Registration Statement and the Remaining Registration Statement.

 

(s) “Remaining Registrable Securities” means any Hepion Registrable Securities that were not covered by the Initial Registration Statement declared effective by the SEC and the Pharma Two B Registrable Securities.

 

(t) “Remaining Registration Statement” means a registration statement or registration statements of the Company filed under the 1933 Act covering the resale of Remaining Registrable Securities.

 

(u) “Required Holders” means the holders of at least a majority of the Registrable Securities then outstanding.

 

(v) “Rule 415” means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

 

(w) “SEC” means the United States Securities and Exchange Commission.

 

(x) “Trading Day” means any day on which the Ordinary Shares are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Ordinary Shares on such day, then on the principal securities exchange or securities market on which the Ordinary Shares are then traded.

 

2. Registration.

 

(a) Mandatory Registration.

 

(i) The Company shall include all Initial Registrable Securities on the Initial Registration Statement filed for the purpose of effecting the Merger, to the extent such Initial Registration Statement may be used to register such Initial Registrable Securities. If the Initial Registration Statement is unavailable for any portion of such Initial Registrable Securities, the Company shall include that portion of the Initial Registrable Securities that are available to be included on such Initial Registration Statement, on such Initial Registration Statement, and the Company shall prepare, and, as soon as practicable following the Effective Time but in no event later than the Filing Deadline, file with the SEC the Remaining Registration Statement on Form F-1 covering the resale of the Remaining Registrable Securities. The Remaining Registration Statement shall contain (except if otherwise directed by the Required Holders) the “Plan of Distribution” and “Selling Shareholders” sections in substantially the form attached hereto as Exhibit B. Notwithstanding the foregoing, the Company shall have no obligation to include Remaining Registrable Securities for any investor that has not complied with its obligations in Section 4(a). The Company shall use its reasonable best efforts to have the Remaining Registration Statement declared effective by the SEC as soon as practicable following the Effective Time, but in no event later than the Effectiveness Deadline. By 9:30 a.m. New York time on the second (2^nd) Business Day following the Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Remaining Registration Statement. In no event shall the Company include any securities other than Remaining Registrable Securities on any Remaining Registration Statement without the prior written consent of the Required Holders.

 

 

(b) Legal Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel at their own expense to review and oversee any registration pursuant to this Section 2 (“Legal Counsel”), which shall be designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company’s obligations under this Agreement.

 

(c) Ineligibility for Form F-3. In the event that Form F-3 is not available for the registration of the resale of Remaining Registrable Securities hereunder, the Company shall (i) register the resale of the Remaining Registrable Securities on Form F-1 or another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the Remaining Registrable Securities on Form F-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Remaining Registration Statement then in effect until such time as a Remaining Registration Statement on Form F-3 covering the Remaining Registrable Securities has been declared effective by the SEC.

 

(d) Sufficient Number of Shares Registered. In the event the number of shares available under a Remaining Registration Statement filed pursuant to Section 2(a) is insufficient to cover all of the Registrable Securities required to be covered by such Remaining Registration Statement, the Company shall amend the applicable Remaining Registration Statement, or file a new Remaining Registration Statement (on the short form available therefor, if applicable), or both, so as to cover the Remaining Registrable Securities as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its reasonable best efforts to cause such amendment and/or new Remaining Registration Statement to become effective as soon as practicable following the filing thereof.

 

(e) Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statements. If (i) any of the Registration Statements when declared effective fails to register the full amount of Registrable Securities required hereby (a “Registration Failure”), (ii) the Remaining Registration Statement covering all of the Remaining Registrable Securities required to be covered pursuant to this Agreement is (A) not filed with the SEC on or before the applicable Filing Deadline (a “Filing Failure”) or (B) not declared effective by the SEC on or before the applicable Effectiveness Deadline, (an “Effectiveness Failure”) or (iii) on any day after the applicable Effective Date sales of all of the Remaining Registrable Securities required to be included on such Remaining Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such Remaining Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other limitation imposed by an Eligible Market, a failure to keep such Remaining Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Remaining Registration Statement, a failure to register a sufficient number of Ordinary Shares or a failure to maintain the listing of the Ordinary Shares) (a “Maintenance Failure”) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying Ordinary Shares (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), the Company shall pay to each holder of Remaining Registrable Securities relating to such Remaining Registration Statement an amount in cash equal to two percent (2.0%) of the aggregate Purchase Price (as such term is defined in the Company Securities Purchase Agreement) of such Investor’s Remaining Registrable Securities whether or not included in such Remaining Registration Statement on each of the following dates: (i) the day of a Registration Failure and on each thirtieth Trading Day thereafter (pro-rated for periods totaling less than thirty Trading Days) until such Registration Failure is cured, (ii) the day of a Filing Failure and on each thirtieth Trading Day thereafter (pro-rated for periods totaling less than thirty Trading Days) until such Filing Failure is cured; (iii) the day of an Effectiveness Failure and on each thirtieth Trading Day thereafter (pro-rated for periods totaling less than thirty Trading Days) until such Effectiveness Failure is cured; and (iv) the initial day of a Maintenance Failure and on each thirtieth Trading Day thereafter (pro-rated for periods totaling less than thirty Trading Days) until such Maintenance Failure is cured; provided, that aggregate amount of all Registration Delay Payments to all holders shall not exceed $5,000 per Trading Day and ten percent (10%) of the aggregate Purchase Price (and such reduced amount will be distributed pro rata amongst such holders based on the aggregate Purchase Price), and provided further, that for purposes of this sentence only, “Trading Day” shall include only Trading Days on which the SEC’s EDGAR system accepts filings. Notwithstanding anything to the contrary contained herein, no Registration Failure, Filing Failure, Effectiveness Failure or Maintenance Failure shall continue to accrue Registration Delay Payments after the end of the Registration Period. For the avoidance of doubt, in the event of a simultaneous occurrence of a Registration Failure, Filing Failure, Maintenance Failure or Effectiveness Failure, the Company shall only be required to make Registration Delay Payments with respect to one such event. The payments to which a holder shall be entitled pursuant to this Section 2(e) are referred to herein as “Registration Delay Payments.” Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one and one-half percent (1.5%) per month (prorated for partial months) until paid in full.

 

 

3. Related Obligations. At such time as the Company is obligated to file a Remaining Registration Statement with the SEC pursuant to Section 2(a), 2(c) or 2(d), the Company will use its reasonable best efforts to effect the registration of the Remaining Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

 

(a) The Company shall promptly prepare and file with the SEC a Remaining Registration Statement with respect to the Remaining Registrable Securities and use its reasonable best efforts to cause such Remaining Registration Statement relating to the Remaining Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Remaining Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Remaining Registrable Securities covered by such Remaining Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the Remaining Registrable Securities covered by such Remaining Registration Statement (the “Registration Period”). The Company shall ensure that each Remaining Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The term “best efforts” shall mean, among other things, that the Company shall submit to the SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of a particular Remaining Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Remaining Registration Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c) (which approval is promptly sought), a request for acceleration of effectiveness of such Remaining Registration Statement to a time and date not later than two (2) Business Days after the submission of such request, unless the Company is directed to a submit a request for acceleration of effectiveness of such Remaining Registration Statement to a later time and date by the SEC. The Company shall respond in writing to comments made by the SEC in respect of a Remaining Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Remaining Registration Statement to be declared effective.

 

(b) The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Remaining Registration Statement and the prospectus used in connection with such Remaining Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Remaining Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Remaining Registrable Securities of the Company covered by such Remaining Registration Statement until such time as all of such Remaining Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Remaining Registration Statement. In the case of amendments and supplements to a Remaining Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 20-F or Form 6-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall have incorporated such report by reference into such Remaining Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Remaining Registration Statement.

 

 

(c) The Company shall (A) permit Legal Counsel to review and comment upon (i) a Remaining Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Remaining Registration Statements (except for Annual Reports on Form 20-F, Reports of Foreign Private issuer on Form 6-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Remaining Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects. The Company shall not submit a request for acceleration of the effectiveness of a Remaining Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld or delayed. The Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Remaining Registration Statement, (ii) promptly after the same is prepared and filed with the SEC, one copy of any Remaining Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the effectiveness of any Remaining Registration Statement, one copy of the prospectus included in such Remaining Registration Statement and all amendments and supplements thereto; provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form. The Company shall reasonably cooperate with Legal Counsel in performing the Company’s obligations pursuant to this Section 3.

 

(d) The Company shall furnish to each Investor whose Remaining Registrable Securities are included in any Remaining Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Remaining Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Remaining Registration Statement, ten (10) copies of the prospectus included in such Remaining Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Remaining Registrable Securities owned by such Investor; provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form.

 

(e) The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Remaining Registrable Securities covered by a Remaining Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Remaining Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and each Investor who holds Remaining Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Remaining Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

 

(f) The Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event but in any event on the same Trading Day as such event, as a result of which the prospectus included in a Remaining Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Remaining Registration Statement to correct such untrue statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request); provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished in physical form. The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Remaining Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to Legal Counsel and each Investor by facsimile or email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Remaining Registration Statement or related prospectus or related information and (iii) of the Company’s reasonable determination that a post-effective amendment to a Remaining Registration Statement would be appropriate. By 9:30 a.m. New York City time on the date following the date any post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Remaining Registration Statement.

 

 

(g) The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Remaining Registration Statement, or the suspension of the qualification of any of the Remaining Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and each Investor who holds Remaining Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

 

(h) If any Investor is required under applicable securities laws to be described in the Remaining Registration Statement as an underwriter or an Investor believes that it could reasonably be deemed to be an underwriter of Remaining Registrable Securities, at the reasonable request of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Remaining Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (and at Investor’s cost and expense) (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Remaining Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

 

(i) If any Investor is required under applicable securities laws to be described in the Remaining Registration Statement as an underwriter or an Investor believes that it could reasonably be deemed to be an underwriter of Remaining Registrable Securities, the Company shall make available for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors (collectively, the “Inspectors”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Remaining Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to sell Remaining Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

 

(j) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Remaining Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

 

 

(k) The Company shall use its reasonable best efforts either to (i) cause all of the Remaining Registrable Securities covered by a Remaining Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Remaining Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion for quotation of all of the Remaining Registrable Securities on the Principal Market or (iii) if, despite the Company’s reasonable best efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on an Eligible Market for such Remaining Registrable Securities and, without limiting the generality of the foregoing, to use its reasonable best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. as such with respect to such Remaining Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(k).

 

(l) The Company shall cooperate with the Investors who hold Remaining Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of book-entry registrations representing the Remaining Registrable Securities to be offered pursuant to a Remaining Registration Statement and enable such book-entry registrations to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

 

(m) If requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Remaining Registrable Securities, including, without limitation, information with respect to the number of Remaining Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Remaining Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Remaining Registration Statement if reasonably requested by an Investor holding any Remaining Registrable Securities.

 

(n) The Company shall use its reasonable best efforts to cause the Remaining Registrable Securities covered by a Remaining Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Remaining Registrable Securities.

 

[(o) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of a Remaining Registration Statement.]²

 

(p) The Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

 

(q) Within two (2) Business Days after a Remaining Registration Statement which covers Remaining Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Remaining Registrable Securities (with copies to the Investors whose Remaining Registrable Securities are included in such Remaining Registration Statement) confirmation that such Remaining Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

 

² NTD: FPI are not required to do quarterly financials. P2B to advise if plan to do quarterly financials.

 

 

(r) Notwithstanding anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed five (5) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of twenty (20) days and the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an “Allowable Grace Period”). For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended Ordinary Shares to a transferee of an Investor in accordance with the terms of the Company Securities Purchase Agreement or the Hepion Securities Purchase Agreement, as applicable, in connection with any sale of Remaining Registrable Securities with respect to which an Investor has entered into a contract for sale that would permit the delivery of unlegended Ordinary Shares, prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

 

(s) Neither the Company nor any subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market without the consent of the Investor, and any Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement, the Company Securities Purchase Agreement, Hepion Securities Purchase Agreement or any other Transaction Document (as defined in the Company Securities Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Exhibit B in a Remaining Registration Statement.

 

(t) Neither the Company nor any of its subsidiaries has entered, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.

 

4. Obligations of the Investors.

 

(a) At least five (5) Business Days prior to the first anticipated filing date of a Remaining Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor’s Remaining Registrable Securities included in such Remaining Registration Statement. It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Remaining Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Remaining Registrable Securities held by it and the intended method of disposition of the Remaining Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Remaining Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

 

(b) Each Investor, by such Investor’s acceptance of the Remaining Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Remaining Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Remaining Registrable Securities from such Remaining Registration Statement.

 

 

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f), such Investor will immediately discontinue disposition of Remaining Registrable Securities pursuant to any Remaining Registration Statement(s) covering such Remaining Registrable Securities until such Investor’s receipt of copies of the supplemented or amended prospectus as contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended Ordinary Shares to a transferee of an Investor in accordance with the terms of the Company Securities Purchase Agreement or the Hepion Securities Purchase Agreement, as applicable, in connection with any sale of Remaining Registrable Securities with respect to which an Investor has entered into a contract for sale that would permit delivery of unlegended Ordinary Shares prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which the Investor has not yet settled.

 

(d) Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Remaining Registrable Securities pursuant to the Remaining Registration Statement.

 

5. Expenses of Registration.

 

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.

 

6. Indemnification.

 

In the event any Remaining Registrable Securities are included in a Remaining Registration Statement under this Agreement:

 

(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Person”), against any losses, claims (including causes of action, suits or claims asserted directly by or between an Indemnitee and the Company), damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Remaining Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Remaining Registrable Securities are offered, or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the Effective Date of such Remaining Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Remaining Registrable Securities pursuant to a Remaining Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Remaining Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed; and (iii) shall not apply to amounts paid in settlement of any direct Claim by or between an Indemnitee and the Company. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Remaining Registrable Securities by the Investors pursuant to Section 9.

 

 

(b) In connection with any Remaining Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Remaining Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Remaining Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Remaining Registrable Securities pursuant to such Remaining Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Remaining Registrable Securities by the Investors pursuant to Section 9.

 

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and, except in the case of a direct Claim, for which the remainder of this Section 6(c) shall not apply, the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable, the representation by such counsel of the Indemnified Person or Indemnified Party, as the case may be, and the indemnifying party would be inappropriate due to actual differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Remaining Registrable Securities included in the Remaining Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnified Party or Indemnified Person. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action by such lack of notice.

 

 

(d) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

 

(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

 

7. Contribution.

 

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no Person involved in the sale of Remaining Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Remaining Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Remaining Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such Remaining Registrable Securities pursuant to such Remaining Registration Statement.

 

8. Reports Under the 1934 Act.

 

With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees to:

 

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

 

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

 

(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or [quarterly/interim] report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

 

9. Assignment of Registration Rights.

 

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Company Securities Purchase Agreement or the Hepion Securities Purchase Agreement, as applicable.

 

 

10. Amendment of Registration Rights.

 

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders; provided that any such amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to this Agreement.

 

11. Miscellaneous.

 

(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

 

(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon delivery, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party), (iii) upon delivery, when sent by electronic mail (provided that the sending party does not receive an automated rejection notice); or (iv) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:

 

If to the Company:

 

Pharma Two B Ltd.

4 Oppenheimer Street

Rehovot, Israel 7670104

Telephone: +[●]

Attention: [●]

E-mail: [●]

 

With a copy (for informational purposes only) to:

 

Meitar | Law Offices

16 Abba Hillel Road

Ramat-Gan 5250608 Israel

Telephone: +972-3-6103766

Attention: [●]

E-mail: [●]

 

If to a Buyer, to its address, facsimile number or email address set forth on the Schedule of Buyers attached hereto, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers, or to such other address, facsimile number and/or email address to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or e-mail transmission containing the time, date, recipient facsimile number or e-mail address and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

 

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

 

(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(e) If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

(f) This Agreement, the other Transaction Documents, the Company Securities Purchase Agreement, Hepion Securities Purchase Agreement and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents, the Company Securities Purchase Agreement, the Hepion Securities Purchase Agreement and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

 

(g) Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

 

(h) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

(i) This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

 

 

(j) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(k) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the Warrants held by Investors then outstanding have been exercised for Registrable Securities without regard to any limitations on exercise of the Warrants.

 

(l) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

 

(m) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(n) The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

 

* * * * * *

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, each Buyer, Hepion and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	COMPANY:
	PHARMA TWO B LTD
	By:
	Name:
	Title:

 

[Signature Page to Registration Rights Agreement] 

 

 

IN WITNESS WHEREOF, each Buyer, Hepion and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	HEPION:
	HEPION PHARMACEUTICALS, INC.
	By:
	Name:
	Title:

 

[Signature Page to Registration Rights Agreement] 

 

 

IN WITNESS WHEREOF, each Buyer, Hepion and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

 

	BUYERS:
	By:
	Name:
	Title:

 

[Signature Page to Registration Rights Agreement] 

 

 

SCHEDULE OF BUYERS

 

Buyer		Buyer Address, Facsimile Number and E-mail		Buyer’s Representative’s Address, Facsimile Number and E-Mail
[●]		[●]		[●]

 

 

EXHIBIT A

 

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

 

[  ]

[Address]

[Address]

Telephone: [  ]

Facsimile: [  ]

Attention: [  ]

E-mail: [  ]

 

Re:	Pharma Two B Ltd.

 

Ladies and Gentlemen:

 

[We are][I am] counsel to Pharma Two B Ltd, a corporation incorporated in Israel (the “Company”), and have represented the Company in connection with that certain Securities Purchase Agreement, dated as of [●], 2024 (the “Company Securities Purchase Agreement”), entered into by and among the Company and the buyers named therein (collectively, the “Holders”) pursuant to which the Company issued to the Holders shares (“Purchased Shares”) of the Company’s ordinary shares, [no par value] (the “Ordinary Shares”) and three series of warrants exercisable for Ordinary Shares (the “Warrants”). In connection with the transactions contemplated in the Company Securities Purchase Agreement, the Company agreed to issue to Laidlaw & Company (UK) Ltd., as financial advisor to the Company, warrants exercisable for Ordinary Shares (the “Advisor Warrants”). The Company also has entered into a Registration Rights Agreement with the Holders (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the Purchased Shares and the Ordinary Shares issuable upon exercise of the Warrants under the Securities Act of 1933, as amended (the “1933 Act”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, 2024, the Company filed a Remaining Registration Statement on Form [F-1/F-3] (File No. 333-_____________) (the “Remaining Registration Statement”) with the Securities and Exchange Commission (the “SEC”) relating to the Remaining Registrable Securities which names each of the Holders as a selling shareholder thereunder.

 

In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered an order declaring the Remaining Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Remaining Registrable Securities are available for resale under the 1933 Act pursuant to the Remaining Registration Statement.

 

This letter shall serve as our standing instruction to you that the Ordinary Shares are freely transferable by the Holders pursuant to the Registration Statement.

 

Very truly yours,
[ISSUER’S COUNSEL]
By:

 

CC:	[LIST NAMES OF HOLDERS]

 

 

EXHIBIT B

 

SELLING SHAREHOLDERS

 

The ordinary shares being offered by the selling shareholders are those previously issued to the selling shareholders, and those issuable to the selling shareholders, upon exercise of the warrants. For additional information regarding the issuances of those ordinary shares and the warrants, see “Private Placement of Purchased Shares and Warrants” above. We are registering the ordinary shares in order to permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the ordinary shares and the warrants, the selling shareholders have not had any material relationship with us within the past three years.

 

The table below lists the selling shareholders and other information regarding the beneficial ownership of the ordinary shares by each of the selling shareholders. The second column lists the number of ordinary shares beneficially owned by each selling shareholders, based on its ownership of the ordinary shares and the warrants, as of ________, 202_, assuming exercise of the warrants held by the selling shareholders on that date, without regard to any limitations on exercises.

 

The third column lists the ordinary shares being offered by this prospectus by the selling shareholders.

 

In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of at least the sum of (i) the maximum number of ordinary shares issued and (ii) the maximum number of ordinary shares issuable upon exercise of the related warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the warrants. The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

 

Under the terms of the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder, together with its affiliates, to beneficially own a number of ordinary shares which would exceed 4.99% (or 9.99% for certain selling shareholders) of our then outstanding ordinary shares following such exercise, excluding for purposes of such determination ordinary shares issuable upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling shareholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

 

Name of Selling Shareholder		Number of Ordinary Shares Owned Prior to Offering		Maximum Number of Ordinary Shares to be Sold Pursuant to this Prospectus		Number of Ordinary Shares Owned After Offering

 

 

PLAN OF DISTRIBUTION

 

We are registering the ordinary shares previously issued and upon exercise of the warrants to permit the resale of these ordinary shares by the holders thereof and holders of the ordinary shares and warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the ordinary shares. We will bear all fees and expenses incident to our obligation to register the ordinary shares.

 

The selling shareholders may sell all or a portion of the ordinary shares beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the ordinary shares are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent’s commissions. The ordinary shares may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

 

●	on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
●	in the over-the-counter market;
●	in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
●	through the writing of options, whether such options are listed on an options exchange or otherwise;
●	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
●	block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
●	purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
●	an exchange distribution in accordance with the rules of the applicable exchange;
●	privately negotiated transactions;
●	short sales;
●	sales pursuant to Rule 144;
●	broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
●	a combination of any such methods of sale; and
●	any other method permitted pursuant to applicable law.

 

If the selling shareholders effect such transactions by selling ordinary shares to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the ordinary shares for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the ordinary shares or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the ordinary shares in the course of hedging in positions they assume. The selling shareholders may also sell ordinary shares short and ordinary shares covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling shareholders may also loan or pledge ordinary shares to broker-dealers that in turn may sell such shares.

 

 

The selling shareholders may pledge or grant a security interest in some or all of the warrants or ordinary shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the ordinary shares from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate the ordinary shares in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

 

The selling shareholder and any broker-dealer participating in the distribution of the ordinary shares may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the ordinary shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of ordinary shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the ordinary shares may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the ordinary shares may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling shareholder will sell any or all of the ordinary shares registered pursuant to the registration statement, of which this prospectus forms a part.

 

The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the ordinary shares by the selling shareholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the ordinary shares to engage in market-making activities with respect to the ordinary shares. All of the foregoing may affect the marketability of the ordinary shares and the ability of any person or entity to engage in market-making activities with respect to the ordinary shares.

 

We will pay all expenses of the registration of the ordinary shares pursuant to the registration rights agreement, estimated to be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling shareholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling shareholders will be entitled to contribution. We may be indemnified by the selling shareholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling shareholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

 

Once sold under the registration statement, of which this prospectus forms a part, the ordinary shares will be freely tradable in the hands of persons other than our affiliates.

 

 

 

Exhibit 10.3

 

FORM OF SUPPORT AGREEMENT

 

This Support Agreement (this “Agreement”) is made as of [●], 2024 by and among (i) Hepion Pharmaceuticals, Inc., a Delaware corporation (“Hepion”), (ii) Pharma Two B Ltd., a company organized under the laws of the State of Israel (the “Company”), and (iii) the undersigned shareholder (“Holder”) of Hepion. Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Merger Agreement.

 

WHEREAS, on or about the date hereof, Hepion, the Company, and [Pearl Merger Sub], Inc., a Delaware corporation and an indirect subsidiary of the Company (“Merger Sub”), have entered into that certain Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into Hepion, with the Hepion continuing as the surviving entity and as an indirect subsidiary of the Company (the “Merger”), all upon the terms and subject to the conditions set forth in the Merger Agreement and in accordance with the applicable provisions of the DGCL; and

 

WHEREAS, as a condition to the willingness of the Company to enter into the Merger Agreement, and as an inducement and in consideration therefor, and in view of the valuable consideration to be received by Holder thereunder, and the expenses and efforts to be undertaken by the Company to consummate the Merger Transactions (as defined below), Hepion, the Company and Holder desire to enter into this Agreement in order for Holder to provide certain assurances to the Company regarding the manner in which Holder is bound hereunder to vote any shares of capital stock of the Company which Holder Beneficially Owns (the “Covered Shares”) during the period from and including the date hereof through and including the date on which this Agreement is terminated in accordance with its terms (the “Voting Period”) and the other matters set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the premises set forth above, and intending to be legally bound hereby, the parties hereby agree as follows:

 

1. Covenant to Vote in Favor of the Merger. Holder irrevocably agrees, with respect to all of the Covered Shares:

 

(a) during the Voting Period, Holder hereby agrees that it, he or she shall (i) vote all Covered Shares Beneficially Owned by it, him or her in favor of the Merger and the other transactions contemplated by the Merger Agreement (collectively, the “Merger Transactions”) and each other proposal related to the Merger Transactions included on the agenda for the special meeting of the Hepion Stockholders relating to the Merger Transactions, (ii) when such meeting of Hepion Stockholders is held, appear at such meeting or otherwise cause such Covered Shares to be counted as present thereat for the purpose of establishing a quorum; and (iii) vote (or execute and return an action by written consent), or cause to be voted at such meeting, or validly execute and return and cause such consent to be granted with respect to, all of such Covered Shares against any action that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement or result in a breach of any covenant, representation or warranty or other obligation or agreement of Hepion under the Merger Agreement or any other agreement entered into in connection with the Merger Transactions or result in any of the conditions set forth in Article IX of the Merger Agreement not being fulfilled, result in a breach of any covenant, representation or warranty or other obligation or agreement of Holder contained in this Agreement or change in any manner the dividend policy or capitalization of, including the voting rights of, any class of Equity Securities of Hepion;

 

(b) not to deposit, except as provided in this Agreement, any Covered Shares Beneficially Owned by Holder in a voting trust that would not be subject to the terms of this Agreement in respect of such Covered Shares;

 

(c) except as contemplated by the Merger Agreement or the Transaction Agreements, make, or in any manner participate in, directly or indirectly, a “solicitation” of “proxies” or consents (as such terms are used in the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or influence any Person with respect to the voting of, any shares of Hepion capital stock in connection with any vote or other action with respect to the Merger Transactions, other than to recommend that stockholders of Hepion vote in favor of adoption of the Merger Agreement; and

 

(d) to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to the Merger Transactions, the Merger Agreement, and the other Transaction Agreements.

 

 

2. Representations and Warranties of Holder. Holder hereby represents and warrants to the Company as follows:

 

(a) (i) if Holder is not an individual, it is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized, and such party has all necessary power and authority to execute, deliver and perform this Agreement and consummate the transactions contemplated hereby; (ii) if Holder is an individual, Holder has full legal capacity, right and authority to execute and deliver this Agreement and to perform his or her obligations hereunder;

 

(b) this Agreement has been duly executed and delivered by Holder and, assuming due authorization, execution and delivery by the other parties to this Agreement, this Agreement constitutes a legally valid and binding obligation of Holder, enforceable against Holder in accordance with the terms hereof (subject to the Enforceability Exceptions);

 

(c) the execution and delivery of this Agreement by Holder does not, and the performance by Holder of his, her or its obligations hereunder will not, (i) if Holder is not an individual, conflict with or result in a violation of the organizational documents of Holder, or (ii) require any consent or approval that has not been given or other action that has not been taken by any third party (including under any Contract binding upon Holder or the Covered Shares), in each case, to the extent such consent, approval or other action would prevent, enjoin or materially delay the performance by Holder of his, her or its obligations under this Agreement;

 

(d) there are no Actions pending against Holder or, to the knowledge of Holder, threatened against Holder, before (or, in the case of threatened Actions, that would be before) any arbitrator or any Governmental Authority, which in any manner challenges or seeks to prevent, enjoin or materially delay the performance by Holder of its, his or her obligations under this Agreement;

 

(e) Holder has not entered into, and shall not enter into, any agreement that would restrict, limit or interfere with the performance of Holder’s obligations hereunder; and

 

(f) the Covered Shares are the only shares of capital stock of Hepion owned of record or Beneficially Owned by Holder as of the date hereof, and none of such Covered Shares is subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Covered Shares.

 

3. New Securities. If, and as often as, (a) there are any changes in Hepion or the Equity Securities of Hepion by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization, recapitalization or business combination, or by any other similar means that result in Holder acquiring new Equity Securities of Hepion, (b) Holder purchases or otherwise acquires beneficial ownership of any Equity Securities of Hepion after the date of this Agreement, or (c) Holder acquires the right to vote or share in the voting of any Equity Securities of Hepion after the date of this Agreement (such other Equity Securities of Hepion, collectively the “New Securities”), then, in each case, such New Securities acquired or purchased by Holder shall be subject to the terms of this Agreement to the same extent as if they constituted Covered Securities owned by Holder as of the date hereof.

 

4. Miscellaneous.

 

(a) Entire Agreement; Amendment; Waiver. This Agreement and the other agreements referenced herein constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersede all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby, including, without limitation, with respect to Holder. This Agreement may not be changed, amended, modified or waived as to any particular provision, except by a written instrument executed by Hepion, the Company and the other parties charged with such change, amendment, modification or waiver, it being acknowledged and agreed that the Company’s execution of such an instrument will not be required after any valid termination of the Merger Agreement. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

(b) Assignment; Binding Effect. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder, without the prior written consent of the other parties. Any purported assignment in violation of this Section 4(b) shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on Holder, Hepion and the Company and their respective successors, heirs and permitted assigns or transferees.

 

 

(c) No Third Party Beneficiaries. Nothing in this Agreement shall be construed to confer upon, or give to, any Person other than the parties hereto any right, remedy or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise or agreement hereof. All covenants, conditions, stipulations, promises and agreements contained in this Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors, heirs, personal representatives and permitted assigns or transferees.

 

(d) Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

(e) Governing Law; Jurisdiction; Waiver of Jury Trial. All Actions or causes of action based upon, arising out of, or related to this Agreement or the transactions contemplated hereby, shall be governed by, and construed in accordance with, the internal substantive Laws of the State of Delaware applicable to contracts entered into and to be performed solely within such state, without giving effect to principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction. Any Action based upon, arising out of or related to this Agreement or the transactions contemplated hereby shall be brought in the Delaware Court of Chancery, and if the Delaware Court of Chancery does not have or take jurisdiction over such Action, any other federal or state courts located in the State of Delaware, and each of the Parties irrevocably submits to the exclusive jurisdiction of each such court in any such Action, waives any objection it may now or hereafter have to personal jurisdiction, venue or to convenience of forum, agrees that all claims in respect of the Action shall be heard and determined only in any such court, and agrees not to bring any Action arising out of or relating to this Agreement or the transactions contemplated hereby in any other court. Nothing herein contained shall be deemed to affect the right of any Party to serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed against any other Party in any other jurisdiction, in each case, to enforce judgments obtained in any Action brought pursuant to this Section 4(e). Each of the parties hereby irrevocably waives any and all right to trial by jury in any action based upon, arising out of or related to this agreement or the transactions contemplated hereby.

 

(f) Notices. Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent or given in accordance with the terms of Section 11.02 of the Merger Agreement to the applicable party at its principal place of business.

 

(g) Termination. This Agreement shall terminate on the valid termination of the Merger Agreement in accordance with its terms. In the event of a valid termination of the Merger Agreement in accordance with its terms, this Agreement shall be of no force and effect. No such termination or reversion shall relieve Holder, Hepion or the Company from any liability resulting from a breach of this Agreement occurring prior to such termination.

 

(h) Remedies. Holder hereby agrees and acknowledges that Hepion and the Company, would be irreparably injured in the event of a breach by Holder of its, his or her obligations under Section 1 or Section 2, as applicable, of this Agreement. Further, monetary damages would not be an adequate remedy for any breach described in the foregoing sentence and the non-breaching party shall be entitled to an injunction, specific performance or other equitable relief, in addition to any other remedy that such party may have in law or in equity, in the event of any such breach (without providing any bond or other security in connection with any such remedy). Holder hereby agrees that it will not allege, and hereby waives the defense, that Hepion or the Company, has an adequate remedy at law or that an award of specific performance is not an appropriate remedy for any reason at law or equity.

 

(i) Definitions. As used herein, (i) “Beneficially Own” has the meaning ascribed to it in Section 13(d) of the Securities Exchange Act; (ii) “Transfer” means the (A) sale or assignment of, offer to sell, contract or agreement to sell, hypothecate, pledge, grant of any option to purchase or otherwise dispose of or agreement to dispose of, in each case, directly or indirectly, or establishment or increase of a put equivalent position or liquidation with respect to or decrease of a call equivalent position within the meaning of Section 16 of the Exchange Act and the rules and regulations of the SEC promulgated thereunder with respect to any security, (B) entry into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of, or interest in, any security, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (C) public announcement of any intention to effect any transaction specified in clause (A) or (B).

 

 

(j) Interpretation. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) the term “including” (and with correlative meaning “include”) shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

(k) Further Assurances. Each of the parties hereto agrees to execute and deliver hereafter any further document, agreement or instrument of assignment, transfer or conveyance as may be necessary or desirable to effectuate the purposes hereof and as may be reasonably requested in writing by another party hereto.

 

(l) Counterparts; Facsimile. This Agreement may be executed in any number of counterparts, including by electronic signature (e.g., DocuSign), each of which shall be an original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic mail transmission of a “.pdf” or other similar data file shall be effective as delivery of a manually executed counterpart to this Agreement. No party hereto or to any such agreement or instrument will raise the use of electronic signature to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of electronic transmission as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense related to lack of authenticity.

 

[Remainder of Page Intentionally Left Blank;
Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Support Agreement as of the date first written above.

 

	The Purchaser:
	HEPION PHARMACEUTICALS, INC.
	By:	/s/
	Name:
	Title:
	The Company:
	PHARMA TWO B LTD.
	By:	/s/
	Name:
	Title:

 

{Signature Page to Stockholder  Support Agreement}

 

 

Holder:
By:
Name:
Number and Type of Covered Shares:

 

__________ Hepion Common Stock

 

Address for Notice:

 

Address:                                                       

Facsimile No.:

Telephone No.:

Email:

:

 

{Signature Page to Stockholder Support Agreement}

 

 

 

Exhibit 10.4

 

Lock-Up Agreement

[●], 2024

 

Ladies and Gentlemen:

 

The undersigned stockholder of Hepion or shareholder of the Company (as the case may be) (the “Shareholder”) understands that: (i) Hepion Pharmaceuticals, Inc., a Delaware corporation (“Hepion”), has entered into an Agreement and Plan of Merger, dated as of July [●], 2024 (the “Merger Agreement”), with Pharma Two B Ltd., an Israeli limited company (the “Company”) and [Pearl Merger Sub, Inc.], a Delaware corporation and an indirect subsidiary of the Company (“Merger Sub”), pursuant to which Merger Sub will be merged with and into Hepion (the “Merger”) and the separate corporate existence of Merger Sub will cease and Hepion will continue as the surviving corporation and an indirect subsidiary of the Company; and (ii) in connection with the Merger, stockholders of Hepion will receive ordinary shares of the Company, par value NIS 1.00 (“Company Ordinary Shares”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement.

 

As a material inducement to the willingness of each of the Company and Hepion to enter into the Merger Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Shareholder hereby agrees that the Shareholder will not, subject to the exceptions set forth in this letter agreement, without the prior written consent of the Company and during the period commencing at the Effective Time and ending on the date that is 180 days after the Closing Date (the “Restricted Period”), directly or indirectly (a) lend, grant, offer, pledge, encumber, sell, contract to sell, sell any option or contract to purchase from Shareholder, purchase any option or contract to sell, grant any option, right or warrant to purchase from Shareholder, or otherwise transfer or dispose of any Company Ordinary Shares, or any securities convertible into or exercisable or exchangeable for Company Ordinary Shares, whether now owned or hereinafter acquired, including without limitation, Company Ordinary Shares or such other securities which may be deemed to be beneficially owned by the Shareholder in accordance with the rules and regulations of the Securities and Exchange Commission and securities of the Company that may be issued upon exercise of a share option or warrant (collectively, the “Shareholder’s Shares”), (b) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Shareholder’s Shares, regardless of whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Company Ordinary Shares or such other securities, in cash or otherwise, in each case other than (i) transfers of the Shareholder’s Shares as bona fide charitable contributions, gifts or donations, (ii) transfers or dispositions of the Shareholder’s Shares to an immediate family member of the Shareholder or to any trust for the direct or indirect benefit of the Shareholder or the immediate family of the Shareholder, (iii) transfers or dispositions of the Shareholder’s Shares by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of the Shareholder, (iv) if the Shareholder is a partnership, limited liability company, corporation or other entity, transfers of the Shareholder’s Shares to the shareholders, partners (general or limited), members, managers, other equity holders or affiliates (within the meaning set forth in Rule 405 under the Securities Act of 1933, as amended), of the Shareholder, as applicable, or to the estates of any such shareholders, partners, members, managers, other equity holders or affiliates, or to another corporation, partnership, limited liability company or other entity that controls, is controlled by or is under common control with the Shareholder or with any of the Shareholder’s partners, members, managers or other equity holders or affiliates (v) transfers that occur by operation of law pursuant to a qualified domestic relations order or in connection with a divorce settlement, (vi) transfers or dispositions not involving a change in beneficial ownership, and (vii) if the Shareholder is a trust, transfers or dispositions to any beneficiary of the Shareholder or the estate of any such beneficiary; provided that, in each case, such transferee (each, a “Permitted Transferee”) agrees in writing to be bound by the terms and conditions of this letter agreement, and either the Shareholder or the transferee provides the Company with a copy of such letter agreement promptly upon consummation of any such transfer; and provided, further, that in each case, no filing by any party (donor, donee, transferor or transferee) under the Exchange Act or other public announcement shall report an overall reduction in shares held by the Shareholder together with such transferee on an aggregate basis (which fact shall be referenced in footnotes to such filing or announcement) in connection with such transfer or distribution (other than filings made in respect of involuntary transfers or dispositions or a filing on a Form 5, Schedule 13G or 13D (or 13D/A or 13G/A) made after the expiration of the Restricted Period, so long as such required filing includes a reasonably detailed explanation of such transfer or distribution). For purposes of this letter agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin.

 

 

Anything else herein notwithstanding, in the event that during the Restricted Period, the Board of Directors of the Company (following the Closing) waives any prohibition on the transfer of the securities held by any record or beneficial holder(s) of the Company Ordinary Shares who executed a lock-up agreement, which in the aggregate exceeds more than 1% of the Company’s total outstanding ordinary shares (determined as of the date of such waiver), the Board of Directors of the Company (following the Closing) shall be deemed to have also waived, immediately and irrevocably, for, on the same terms, the prohibitions set forth in this letter agreement that would otherwise have applied to such Shareholder with respect to the same percentage of such Shareholder’s securities as the relative percentage of aggregate securities held by such party(ies) receiving the waiver which are subject to such waiver. The Company shall promptly notify the Shareholder of any applicable waiver and release of securities.

 

Notwithstanding the restrictions imposed by this letter agreement, the Shareholder may (a) (A) exercise an option or warrant (including a net or cashless exercise of such option or warrant) to purchase Company Ordinary Shares, and (B) transfer Company Ordinary Shares to cover tax withholding obligations of the Shareholder in connection with any such option exercise, provided that, in the case of (A), the underlying Company Ordinary Shares shall continue to be subject to the restrictions on transfer set forth in this letter agreement, (b) establish a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Company Ordinary Shares, provided that such plan does not provide for any transfers of Company Ordinary Shares during the Restricted Period, and (c) transfer or dispose of Company Ordinary Shares acquired on the open market following the Closing Date, provided that, with respect to (a)(B) above, any filing under the Exchange Act, if required, shall include a footnote disclosure explaining that such exercise and sale was to cover tax withholding obligations of such Shareholder, and with respect to (b) above, no filing under the Exchange Act or other public announcement shall be required or shall be made voluntarily in connection with the establishment of such a plan, provided that, for the avoidance of doubt, and except as aforesaid, the underlying Company Ordinary Shares shall continue to be subject to the restrictions on transfer set forth in this letter agreement.

 

Notwithstanding the foregoing, the undersigned may transfer or otherwise dispose of the undersigned’s Company Ordinary Shares (and the foregoing restrictions shall not apply to such transfers or dispositions) with the prior written consent of the Board of Directors of the Company (following the Closing) on behalf of the Company.

 

An attempted transfer in violation of this letter agreement will be of no effect and null and void, regardless of whether the purported transferee has any actual or constructive knowledge of the transfer restrictions set forth in this letter agreement, and will not be recorded on the share transfer books of the Company. In order to ensure compliance with the restrictions referred to herein, the Shareholder agrees and consents that the Company may issue appropriate “stop transfer” certificates or instructions with any duly appointed transfer agent for the registration or transfer of the Company Ordinary Shares or other securities described herein. The Company and any duly appointed transfer agent are hereby authorized to decline to make any transfer of such securities if such transfer would constitute a violation or breach of this letter agreement. the Company may cause the legend set forth below, or a legend substantially equivalent thereto, to be placed upon any certificate(s) or other documents or instruments (including book-entry positions, and statements in respect thereof) evidencing ownership of the Shareholder’s Shares:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AND MAY ONLY BE TRANSFERRED IN COMPLIANCE WITH A LOCK-UP AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

The Shareholder hereby represents and warrants that the Shareholder has full power and authority to enter into this letter agreement.

 

Upon the release of any of the Shareholder’s Shares from this letter agreement, the Company will cooperate with the Shareholder to facilitate the timely preparation and delivery of certificates (or book-entry positions) representing the Shareholder’s Shares without the restrictive legend above or the withdrawal of any stop transfer instructions.

 

 

The Shareholder understands that each of Hepion and the Company is relying upon this letter agreement in proceeding toward consummation of the Merger. The Shareholder further understands that this letter agreement is irrevocable and is binding upon the Shareholder’s heirs, legal representatives, successors and assigns.

 

This letter agreement and any claim, controversy or dispute arising under or related to this letter agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

 

The Shareholder understands that if the Merger Agreement is terminated in accordance with its terms, the Shareholder will be released from all obligations under this letter agreement.

 

This letter agreement may be executed in any number of counterparts, including by electronic signature (e.g., DocuSign), each of which shall be an original but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this letter agreement by electronic mail transmission of a “.pdf” or other similar data file shall be effective as delivery of a manually executed counterpart to this letter agreement. No party hereto or to any such agreement or instrument will raise the use of electronic signature to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of electronic transmission as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense related to lack of authenticity.

 

[Signature Page Follows]

 

 

Very truly yours,
Print Name of
Shareholder:
Signature (for individuals):
Signature (for entities):
By:
Name:
Title:

 

[SIGNATURE PAGE TO LOCK-UP AGREEMENT]

 

 

Acknowledged and accepted:
Pharma Two B Ltd.
By:
Name:
Title:

 

[SIGNATURE PAGE TO LOCK-UP AGREEMENT]

 

 

 

Exhibit 99.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 99.2

 

Pharma Two B Announces Plans to Go Public via Merger with Hepion Pharmaceuticals, Inc. and Concurrent $11.5 Million Private Placement

 

	●	Pharma Two B Ltd. (“Pharma Two B”) has entered into a merger agreement with Hepion Pharmaceuticals, Inc. (“Hepion”) (Nasdaq: HEPA)
	●	Immediately upon completion of the merger, current Pharma Two B equity-holders will own approximately 85% of the combined company and current Hepion equity-holders will own approximately 15% of the combined company, in each case on a pro forma basis, subject to certain adjustments set forth in the merger agreement and prior to closing of the concurrent private financing
	●	Immediately upon closing of the $11.5 million concurrent private financing, current Pharma Two B equity-holders will own approximately 44.5% of the combined company, current Hepion equity-holders will own approximately 7.8% of the combined company, and investors in the concurrent private financing will own approximately 47.7% of the combined company, in each case on a pro forma basis, subject to certain adjustments set forth in the merger agreement
	●	NDA submission for P2B001, in development as a treatment for Parkinson’s disease, planned for first half of 2026
	●	Hepion has entered into a purchase agreement with institutional investors for the sale of a $2.9 million Senior Unsecured Note ($600.0 Thousand of which was advanced to Pharma Two B)

 

KIRYAT ONO, ISRAEL and EDISON, N.J., July 22, 2024 (GLOBE NEWSWIRE) — Hepion Pharmaceuticals, Inc. (Nasdaq: HEPA), a clinical stage biopharmaceutical company that has been developing a treatment for non-alcoholic steatohepatitis (“NASH”), hepatocellular carcinoma (“HCC”), and other chronic liver diseases, today announced it has entered into a definitive merger agreement (the “Merger Agreement”) with Pharma Two B Ltd., a late-clinical stage private Israeli company that is developing P2B001, an innovative combination product candidate in development for the treatment of Parkinson’s Disease (“PD”). Under the Merger Agreement, Hepion will merge into and become an indirectly wholly-owned subsidiary of Pharma Two B (the “Merger”). The combined company will continue to operate under the “Pharma Two B” name and Pharma Two B has agreed to file a registration statement on Form F-4 (the “Form F-4”) with the U.S. Securities and Exchange Commission (the “SEC”) to register the ordinary shares proposed to be issued (or reserved for issuance) to Hepion’s equity-holders in the acquisition, and will also apply to list its ordinary shares on Nasdaq under the ticker symbol “PHTB”.

 

“P2B001 offers a novel, easy-to-use therapeutic approach, that is designed to address the unmet need for an effective, safe, once-daily, no titration required treatment with a lower incidence of excessive daytime sleepiness—a common side effect of currently available dopamine agonist treatments in Parkinson’s disease patients” said Dan Teleman, Chief Executive Officer of Pharma Two B. “As we advance P2B001’s development following the successful completion of our Phase 3 clinical trial, we believe it is the right time to enter the public equity markets. Our company is in a stage that we believe meets the public market and investors’ expectations. We are excited about Pharma Two B’s next growth phase, moving P2B001 towards an NDA submission targeted for the first half of 2026 and making this potential treatment available to patients,” he continued.

 

“Consistent with our December 7, 2023 announcement, the Hepion Board of Directors conducted a review of multiple strategic alternatives to identify paths to provide value to our stockholders. We believe the transaction we are announcing today with Pharma Two B Ltd. presents an excellent opportunity for our shareholders to become a part of a company poised to file an NDA in a therapeutic area with a major unmet medical need,” said John Brancaccio, Executive Chairman.

 

 

Hepion has also announced a private placement of $2.9 million non-convertible senior notes to qualified institutional investors. The notes are unsecured, interest-free, and were issued with an aggregate $400.0 thousand original issue discount, and mature at the earlier of: (i) December 31, 2024; (ii) the closing of Merger; or (iii) the termination of Merger pursuant to terms of Merger Agreement. Hepion also loaned $600.0 thousand of the proceeds to Pharma Two B through a non-convertible unsecured note that bears nominal interest and matures on the same terms as the $2.9 million notes, but which will be forgiven and cancelled upon consummation of the Merger. In connection with the purchase of the notes, the investors received 1,159,245 shares of Hepion common stock, or approximately 19.99% of Hepion’s outstanding common stock immediately prior to the issuance.

 

In support of the Merger, Pharma Two B has entered into a securities purchase agreement for an $11.5 million private placement of ordinary shares (or pre-funded warrants in lieu thereof) and accompanying Series A warrants and Series B warrants with a syndicate of new and existing institutional life science investors. The private placement is expected to close immediately after the closing of the Merger. The Series A warrants will have a 5-year term, and an exercise price of $6.00 per ordinary share. The Series B warrants will have a 2.5-year term, and an exercise price of $6.00 per ordinary share. The warrants will have customary anti-dilution adjustments as well as anti-dilution price protection and share adjustment features, subject to a floor price of 20% of the initial exercise price per share, as well as a cash true up feature, in each case subject to certain limitations. Pharma Two B has agreed to register for resale the shares (including shares underlying the warrants) to be issued in the concurrent private financing.

 

The securities offered and sold in the private placements by each of Hepion and Pharma Two B will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other applicable jurisdiction’s securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state or other jurisdictions’ securities laws.

 

Merger Overview

 

Under the terms of the Merger Agreement, the Merger is valued at an estimated pro-forma implied equity value of approximately $58.5 million. At close, Pharma Two B expects up to $11.5 million of gross cash proceeds, and intends to use net proceeds to fund continuing growth and expansion of its lead product candidate P2B001 and repay up to $2.9 million of Hepion’s senior unsecured notes to the extent outstanding at closing of the Merger.

 

Following the Merger, the combined company will continue to be led by Pharma Two B’s management, a highly experienced team in PD, supported by top-tier scientific and clinical key opinion leaders and backed by a dedicated group of investors.

 

Additional information about the Merger and the private placements will be provided in a Current Report on Form 8-K that will be filed by Hepion with the SEC and will be available at www.sec.gov. The Merger is expected to close in the fourth quarter of 2024 and is subject to approval by Hepion’s stockholders, regulatory approval, and other customary closing conditions.

 

 

Advisors

 

A.G.P./Alliance Global Partners is serving as financial advisor to Hepion and Sheppard, Mullin, Richter & Hampton LLP is acting as U.S. legal advisor to Hepion and Lipa Meir & Co.is acting as Israeli legal advisor to Hepion. Sullivan & Worcester LLP is serving as legal advisor to A.G.P.

 

Laidlaw & Company (UK) Ltd. is acting as financial advisor to Pharma Two B. and Meitar Law Offices and Goodwin Procter LLP are acting as legal advisors to Pharma Two B.

 

About Pharma Two B

 

Pharma Two B is a private, late-stage pharmaceutical company. Pharma Two B’s mission is to improve patients’ quality of life by developing innovative, value-added combination drugs for neurological disorders, with a clear unmet need, that are based on previously approved oral drugs and that may offer meaningful clinical benefits, as well as improved safety and enhanced convenience. Pharma Two B’s lead product is P2B001. For more information, please visit: www.pharma2b.com.

 

About P2B001

 

P2B001 is an investigational, novel, fixed-dose, extended-release combination of pramipexole and rasagiline (0.6 mg/0.75 mg), both at low doses that are not commercially available. Marketed pramipexole and rasagiline are currently indicated for the treatment of PD (as monotherapy and adjunct therapy for early and more advanced patients). P2B001 is being developed for potential use as a first-line therapy for people with PD. Extended release rasagiline is a new and proprietary formulation of rasagiline developed by Pharma Two B.

 

In a Phase 3 clinical trial, P2B001 demonstrated that it provides benefits comparable with commercially used doses of marketed pramipexole-ER (PramiER) while minimizing associated daytime sleep-related and dopaminergic side effects associated.

 

Pharma Two B owns worldwide-granted patents for both pharmaceutical composition and method of treatment with P2B001.

 

About Hepion Pharmaceuticals

 

Hepion’s primary asset, Rencofilstat, is a potent inhibitor of cyclophilins, which are involved in many disease processes. Rencofilstat has been shown to reduce liver fibrosis and hepatocellular carcinoma tumor burden in experimental disease models. In November 2021, the U.S. Food and Drug Administration (“FDA”) granted Fast Track designation for rencofilstat for the treatment of NASH. That was followed in June 2022 by the FDA’s granting of Orphan Drug designation to rencofilstat for the treatment of HCC.

 

In April 2024, Hepion announced that it was winding down its ASCEND-NASH clinical trial. This trial was designed as a Phase 2b, randomized, multi-center, double-blinded study with first patient screened in August 2022, to evaluate the safety and efficacy of Rencofilstat dosed for 12 months, with a target enrollment of 336 subjects. Enrollment was paused in April 2023, with 151 subjects randomized. To date, approximately 80 subjects have completed their Day 365 visits and are evaluable for both safety and efficacy. An additional 40 subjects will provide significant safety data for evaluation. These patients will be added to Hepion’s existing safety database. The data from this trial and all rights to Reconfilstat will belong to existing stockholders of Hepion and to the extent that cash resources are available, Hepion will continue efforts to provide any value derived to its stockholders.

 

 

Forward-Looking Statements

 

Certain statements in this press release may be considered “forward-looking statements”. Forward-looking statements generally relate to future events or Hepion’s or Pharma Two B’s future financial or operating performance. For example, statements regarding Hepion and Pharma Two B’s expectations with respect to the Merger, including the timing of closing thereof and pro forma ownership of the combined company, the concurrent financing, the cash runway of the combined company; planned timing of New Drug Application (“NDA”) submission, P2B001 potential as a treatment for PD and label expansion, projected net revenues, and related matters, as well as all other statements other than statements of historical fact included in this press release, are forward-looking statements. When used in this press release, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions, as they relate to Hepion or Pharma Two B, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, Hepion’s and Pharma Two B’s management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in Hepion’s filings with the SEC. Most of these factors are outside the control of Hepion and/or Pharma Two B and are difficult to predict. In addition to factors disclosed in Hepion’s filings with the SEC, the following factors, among others, could cause actual results and the timing of events to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: the risk that the Merger may not be completed in a timely manner or at all, which may adversely affect the price of the securities of Hepion; the inability to meet the closing conditions to the Merger, including the failure of Pharma Two B to meet Nasdaq initial listing standards in connection with the consummation of the Merger; costs related to the Merger and the failure to realize anticipated benefits of the Merger or to realize estimated pro forma results with respect thereto as well as other risks associated with biopharmaceutical companies generally, including the risks of filing an NDA, obtaining regulatory approval for any product candidates, commercialization of any approved product, including P2B001 for PD, as well as the total addressable market and potential for success of P2B001, the presentation of financial information in U.S. GAAP, completion of a PCAOB audit of U.S. GAAP financials, as well as other risks that will be set forth in more detail in the registration statement on Form F-4 (which will include a proxy statement/prospectus), when filed with the SEC. The forward-looking statements are based upon management’s beliefs and assumptions; and other risks and uncertainties to be identified on Form F-4 (when available) relating to the Merger, including those under “Risk Factors” therein, and in other filings with the SEC made by Hepion. Each of Hepion and Pharma Two B undertake no obligation to update these statements for revisions or changes after the date of press release, except as required by law.

 

No Offer or Solicitation

 

This press release does not constitute an offer to sell or a solicitation of an offer to buy, or the solicitation of any vote or approval in any jurisdiction in connection with the proposed Merger or any related transactions, nor shall there be any sale, issuance or transfer of securities in any jurisdiction where, or to any person to whom, such offer, solicitation or sale may be unlawful. Any offering of securities or solicitation of votes regarding the proposed transaction will be made only by means of a proxy statement/prospectus that complies with applicable rules and regulations promulgated under the Securities Act, and the Securities Exchange Act of 1934, as amended, or pursuant to an exemption from the Securities Act or in a transaction not subject to the registration requirements of the Securities Act.

 

 

Additional Information and Where to Find It

 

In connection with the proposed Merger, Pharma Two B intends to file the Form F-4 with the SEC, which will include a preliminary prospectus with respect to its securities to be issued in connection with the Merger, and a preliminary proxy statement with respect to Hepion’s stockholder meeting at which Hepion’s stockholders will be asked to vote on the proposed Merger and related matters. Each of Hepion and Pharma Two B urge investors, stockholders, and other interested persons to read, when available, the Form F-4, including the proxy statement/prospectus, any amendments thereto, and any other documents filed with the SEC, before making any voting or investment decision because these documents will contain important information about the proposed Merger. After the Form F-4 has been filed and declared effective, Pharma Two B and Hepion will mail the definitive proxy statement/prospectus to stockholders of Hepion as of a record date to be established for voting on the Merger. Hepion’s stockholders will also be able to obtain a copy of such documents, without charge, by directing a request to: Executive Chairman at info@hepionpharma.com.

 

Participants in the Solicitation

 

Pharma Two B and Hepion and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Hepion’s stockholders in connection with the proposed Merger. Information about Hepion’s directors and executive officers and their ownership of Hepion’s securities is set forth in Hepion’s filings with the SEC. To the extent that holdings of Hepion’s securities have changed since the amounts printed in Hepion’s Annual Report on Form 10-K/A, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. A list of the names of such directors and executive officers and information regarding their interests in the Merger will be contained in the proxy statement/prospectus when available. You may obtain free copies of these documents as described in the preceding paragraph.

 

Contact Information

 

Hepion Pharmaceuticals

732-902-4000

info@hepionpharma.com

 

Pharma Two B Ltd.

Dan Teleman, CEO

Email: dan@pharma2b.com

www.pharma2b.com

 

 

v3.24.2

Cover	Jul. 19, 2024
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Jul. 19, 2024
Entity File Number	001-36856
Entity Registrant Name	Hepion Pharmaceuticals, Inc.
Entity Central Index Key	0001583771
Entity Tax Identification Number	46-2783806
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	399 Thornall Street
Entity Address, Address Line Two	First Floor
Entity Address, City or Town	Edison
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	08837
City Area Code	(732)
Local Phone Number	902-4000
Written Communications	true
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock
Trading Symbol	HEPA
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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