Tenon Medical, Inc SC TO-I, filed Apr 8, 2024
Tenon Medical, Inc. (TNON)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(D)(1) OR SECTION 13(E)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934
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TENON MEDICAL, INC.
(Name of Subject Company)
TENON MEDICAL, INC.
(Offeror)
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Common Stock, par value $0.001 per share
(Title of Class of Securities)
88066N204
(CUSIP Number of Class of Securities)
Steven Foster
Chief Executive Officer and President
Tenon Medical, Inc.
104 Cooper Ct.
Los Gatos, CA 95032
Telephone: (408) 649-5760
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Filing Persons)
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Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
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Check the appropriate boxes below to designate any transactions to which the statement relates: |
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third-party tender offer subject to Rule 14d-1. |
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issuer tender offer subject to Rule 13e-4. |
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going-private transaction subject to Rule 13e-3. |
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amendment to Schedule 13D under Rule 13d-2. |
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Check the following box if the filing is a final amendment reporting the results of the tender offer: ☐ |
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This Tender Offer Statement on Schedule TO relates to an offer by Tenon Medical, Inc., a Delaware corporation (“Tenon” or the “Company”), to exchange (the “Option Exchange”) outstanding stock options (“eligible options”) to purchase up to an aggregate of 90,987 shares of Tenon’s common stock, whether vested or unvested, that were granted under the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) or the Tenon Medical, Inc. 2012 Equity Incentive Plan (the “2012 Plan”).
These options may be exchanged for a lesser number of new restricted stock units (“RSUs”) to be granted under the 2022 Plan upon the terms and subject to the conditions set forth in the Offer to Exchange Certain Outstanding Stock Options for Restricted Stock Units dated as of April 8, 2024 (the “Offer to Exchange”), attached hereto as Exhibit (a)(1)(i), the Election Terms and Conditions, attached hereto as Exhibit (a)(1)(v), the other exhibits attached hereto and other related materials as may be amended or supplemented from time to time.
These documents, as they may be amended or supplemented from time to time, together constitute the “Disclosure Documents.” Employees, non-employee directors or consultants of Tenon who are eligible for the Option Exchange include employees, non-employee directors or consultants who continue to provide services as of the commencement date of the Option Exchange and who remain eligible employees, non-employee directors or consultants through the completion date of the Option Exchange (“Eligible Participants”), as further described in the Disclosure Documents.
The information in the Disclosure Documents, including in all schedules and annexes to the Disclosure Documents, is incorporated herein by reference to answer the items required in this Schedule TO.
ITEM 1. SUMMARY TERM SHEET
The information set forth under the caption “Summary Term Sheet and Questions and Answers” in the Offer to Exchange is incorporated herein by reference.
ITEM 2. SUBJECT COMPANY INFORMATION
(a) Name and Address. The issuer is Tenon Medical, Inc., a Delaware corporation. The Company’s principal executive offices are located at 104 Cooper Ct., Los Gatos, CA 95032, and the telephone number of its principal executive offices is (408) 649-5760. The information set forth in Section 10 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Information Concerning Tenon” is incorporated herein by reference.
(b) Securities. The subject class of securities consists of the eligible options. The actual number of shares of common stock subject to the RSUs to be issued in the Option Exchange will depend on the number of shares of common stock subject to the unexercised eligible options tendered by Eligible Participants and accepted for exchange and canceled. The information set forth in the Offer to Exchange under the captions “Summary Term Sheet and Questions and Answers,” “Risks of Participating in the Option Exchange,” and Sections 2, 6 and 9 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Types of Awards Granted in the Option Exchange; Number of New RSUs; Completion Date,” “Acceptance of Options for Exchange; Grant of New RSUs” and “Source and Amount of Consideration; Terms of New RSUs” is incorporated herein by reference.
(c) Trading Market and Price. The information set forth in Section 8 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Price Range of Shares Underlying the Options” is incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON
(a) Name and Address. Tenon is both the filing person and the issuer. The information set forth under Item 2(a) above is incorporated herein by reference. Pursuant to General Instruction C to Schedule TO, the information set forth on Schedule A to the Offer to Exchange is incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION
(a) Material Terms. The information set forth in the Offer to Exchange under the caption “Summary Term Sheet and Questions and Answers” and Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 12, 13, 14 and 15 of the Offer to Exchange under the captions “The Offer to Exchange” entitled “Eligibility,” “Types of Awards Granted in the Option Exchange; Number of New RSUs; Completion Date,” “Purposes of the Option Exchange and Reasons for Structure of the Option Exchange,” “Procedures for Electing to Exchange Options,” “Withdrawal Rights and Change of Election,” “Acceptance of Options for Exchange; Grant of New RSUs,” “Conditions of the Option Exchange,” “Price Range of Shares Underlying the Options,” “Source and Amount of Consideration; Terms of New RSUs,” “Status of Options Acquired by Us in the
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Option Exchange; Accounting Consequences of the Option Exchange,” “Legal Matters; Regulatory Approvals,” “Material Income Tax Consequences,” and “Extension of Option Exchange; Termination; Amendment,” respectively, and Schedule B to the Offer to Exchange is incorporated herein by reference.
(b) Purchases. The information set forth in Section 11 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Interests of Directors and Executive Officers; Transactions and Arrangements Concerning our Securities” is incorporated herein by reference.
ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
(a) Agreements Involving the Subject Company’s Securities. The information set forth in Section 11 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Interests of Directors and Executive Officers; Transactions and Arrangements Concerning our Securities” is incorporated herein by reference. The terms and conditions of the 2022 Plan and related agreement listed as Exhibits (d)(1) and (d)(2) are incorporated herein by reference.
ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Purposes. The information set forth in the section of the Offer to Exchange under the caption “Summary Term Sheet and Questions and Answers” and Section 3 under the caption “The Offer to Exchange” entitled “Purposes of the Option Exchange and Reasons for Structure of the Option Exchange” is incorporated herein by reference.
(b) Use of Securities Acquired. The information set forth in Sections 6 and 12 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Acceptance of Options for Exchange; Grant of New RSUs” and “Status of Options Acquired by Us in the Option Exchange; Accounting Consequences of the Option Exchange,” respectively, is incorporated herein by reference.
(c) Plans. The information set forth in the Offer to Exchange under the caption “Summary Term Sheet and Questions and Answers” and Section 3 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Purposes of the Option Exchange and Reasons for Structure of the Option Exchange” is incorporated herein by reference.
ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) Source of Funds. The information set forth in Section 9 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Source and Amount of Consideration; Terms of New RSUs” is incorporated herein by reference.
(b) Conditions. The information set forth in Section 7 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Conditions of the Option Exchange” is incorporated herein by reference.
(d) Borrowed Funds. Not applicable.
ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) Securities Ownership. The information set forth in Section 11 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Interests of Directors and Executive Officers; Transactions and Arrangements Concerning our Securities” is incorporated herein by reference.
(b) Securities Transactions. The information set forth in Section 11 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Interests of Directors and Executive Officers; Transactions and Arrangements Concerning our Securities” is incorporated herein by reference.
ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
(a) Solicitations or Recommendations. Not applicable.
ITEM 10. FINANCIAL STATEMENTS
(a) Financial Information. The information set forth in the Offer to Exchange under “This Offer — Section 10 (Information Concerning Tenon)” and “This Offer — Section 17 (Additional Information)” is incorporated herein by reference. Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities
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and Exchange Commission (“SEC”) on March 29, 2024, including the financial information set forth or referenced in Item 8 — Financial Statements and Supplementary Data of our Annual Report on Form 10-K are incorporated herein by reference. Our Annual Report on Form 10-K is available electronically on the SEC’s website at www.sec.gov.
The information set forth in Schedule B to the Offer to Exchange and Sections 10 and 17 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Information Concerning Tenon” and “Additional Information,” respectively, is incorporated herein by reference. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 is available electronically on the Securities and Exchange Commission’s website at www.sec.gov.
(b) Pro Forma Financial Information. Not applicable.
ITEM 11. ADDITIONAL INFORMATION
(a) Agreements, Regulatory Requirements and Legal Proceedings. The information set forth in Sections 11 and 13 of the Offer to Exchange under the caption “The Offer to Exchange” entitled “Interests of Directors and Executive Officers; Transactions and Arrangements Concerning our Securities” and “Legal Matters; Regulatory Approvals,” respectively, is incorporated herein by reference.
(c) Other Material Information. Not applicable.
ITEM 12. EXHIBITS
The Exhibit Index attached to this Schedule TO is incorporated herein by reference.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3
Not applicable.
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
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Dated: April 8, 2024 |
TENON MEDICAL, INC. |
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By: |
/s/ Steven Foster |
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Name: |
Steven Foster |
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Title: |
Chief Executive Officer and President |
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EXHIBIT INDEX
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Exhibit |
Document |
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(a)(1)(A) |
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(a)(1)(B) |
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(a)(1)(C) |
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(a)(1)(D) |
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(a)(1)(E) |
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(a)(1)(F) |
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(a)(1)(G) |
Form of Email Confirming Receipt of Notice of Withdrawal of Election Form. |
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(a)(1)(H) |
Form of Reminder Email to Eligible Holders Regarding the Expiration of the Exchange Offer. |
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(a)(1)(I) |
Form of Email to Eligible Holders Confirming Acceptance of Eligible Options. |
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(a)(1)(J) |
Form of Email Notice Regarding Rejection of Options for Exchange. |
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(a)(1)(K) |
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(a)(1)(L) |
Option Exchange Presentation to Employees, Non-Employee Directors and Consultants. |
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(a)(2) |
Not applicable. |
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(a)(3) |
Not applicable. |
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(a)(4) |
Not applicable. |
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(a)(5) |
Not applicable. |
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(b) |
Not applicable. |
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(d)(1) |
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(d)(2) |
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(d)(3) |
Form of Incentive Stock Option Grant under 2022 Equity Incentive Plan |
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(d)(4) |
Form of Non-qualified Stock Option Grant under 2022 Equity Incentive Plan |
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(g) |
Not applicable. |
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(h) |
Not applicable. |
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Exhibit (a)(1)(A)
TENON MEDICAL, INC.
OFFER TO EXCHANGE
CERTAIN OUTSTANDING OPTIONS FOR
RESTRICTED STOCK UNITS
This document constitutes part of the prospectus relating to the securities registered under the Securities Act of 1933, as amended. The prospectus relates to an offer to exchange all, some or none of Eligible Participants Eligible Options under the Tenon Medical, Inc. 2022 Equity Incentive Plan.
April 8, 2024
TENON MEDICAL, INC.
OFFER TO EXCHANGE CERTAIN
OUTSTANDING STOCK OPTIONS FOR
RESTRICTED STOCK UNITS
THIS OFFER TO EXCHANGE AND YOUR WITHDRAWAL RIGHTS WILL EXPIRE
AT 11:59 P.M. EASTERN TIME,
ON MAY 6, 2024, UNLESS THE
OFFER IS EXTENDED
Tenon Medical, Inc., a Delaware corporation (the “Company,” “Tenon,” “our,” “us” or “we”), is offering employees, non-employee directors and consultants the opportunity to exchange outstanding stock options for a lesser number of new restricted stock units (“RSUs”) to be granted under the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “2022 Plan”). The new RSUs will be granted as of the completion date of this offer. We are making this offer upon the terms and subject to the conditions set forth in this Offer to Exchange Certain Outstanding Stock Options for Restricted Stock Units, which we refer to as the “Offer to Exchange.” We refer to the offer made pursuant to this Offer to Exchange as the “Option Exchange.”
Eligible Options. Stock options eligible for exchange, or eligible options, are those options, whether vested or unvested, that meet all of the following requirements:
• the options were granted under either (i) the 2022 Plan or (ii) the Tenon Medical, Inc. 2012 Equity Incentive Plan, which has been terminated (the “2012 Plan”), prior to April 8, 2024, the commencement date of this Offer to Exchange;
• the options are outstanding and unexercised as of the completion date of this Offer to Exchange; and
• the options are held by an eligible employee, non-employee director or consultant.
You are eligible to participate in the Option Exchange only if you meet all of the following requirements:
• you are an eligible employee, non-employee director or consultant of Tenon on the date this offer commences and remain an eligible employee, non-employee director or consultant through the completion date of the Option Exchange; and
• you hold at least one Eligible Option.
An individual is not an “eligible” employee, non-employee director or consultant if they (i) are on a leave that will result in a termination of employment with Tenon, (ii) have provided Tenon a notice of resignation or (iii) have received a notice of termination of employment or service from Tenon, in each case even if such resignation or termination will not take effect until following the completion of the Option Exchange. An eligible employee, non-employee director or consultant is referred to herein as an “Eligible Participant.”
Our 2012 Plan has been terminated and all outstanding options granted under our 2012 Plan are now being administered under our 2022 Plan. Any references herein to outstanding options held under or subject to our 2022 Plan include outstanding options granted under our 2012 Plan.
The outstanding Eligible Options you hold under our 2022 Plan give you the right, when vested, to purchase shares of our common stock once you exercise those options by paying the applicable exercise price of those options. Thus, wherever we use the term “option” in this Offer to Exchange, we refer to the actual options you hold to purchase shares of our common stock and not the shares of our common stock underlying those options.
As of April 8, 2024, 91,237 shares of our common stock were subject to outstanding options under our 2022 Plan, of which 90,987 options are eligible to participate in the Option Exchange as of the commencement date of the Option Exchange.
New RSUs. All Eligible Options that are properly surrendered in the Option Exchange and accepted by us for exchange pursuant to the Option Exchange will be canceled as of the completion date of this offer, and the options accepted for exchange will no longer be exercisable after that time.
The new RSUs will be granted in exchange for the canceled options as of the completion date of this offer under the 2022 Plan.
• If you participate in the Option Exchange, you will receive one (1) new RSU (representing the right to receive one share of our common stock) for every two (2) shares of our common stock underlying eligible stock options surrendered pursuant to the Option Exchange. The number of new RSUs will be rounded up to the nearest whole share on a grant-by-grant basis. Fractional RSUs will not be granted in the Option Exchange; and
• New RSUs granted in the Option Exchange will have the same vesting commencement date and vesting term as the exchanged Eligible Option except that any portion of the option not vested will vest quarterly over the remaining vesting period, subject to continued service on the applicable vesting date.
Your new RSUs will be subject to the terms and conditions of the 2022 Plan and an RSU agreement between you and Tenon. In all events, vesting is subject to continued service with us through the applicable vesting date. Your participation in the Option Exchange and receipt of any new RSUs does not provide any guarantee or promise of continued service with us.
If you are eligible to participate in the Option Exchange, you may elect whether to exchange your Eligible Options on a grant-by-grant basis. You may elect to exchange either all or none of the shares subject to any given Eligible Option grant. No partial exchanges of an Eligible Option grant will be permitted, except that if you exercised a portion of an Eligible Option grant prior to the commencement of this offer, only the portion of the option grant which has not yet been exercised will be eligible to be exchanged.
If you choose not to participate in the Option Exchange, you will continue to hold your Eligible Options on the same terms and conditions and pursuant to the 2022 Plan and the option agreements under which they were originally granted.
Shares of our common stock are quoted on The Nasdaq Capital Market under the symbol “TNON.” On April 5, 2024, the closing price of our common stock as quoted on The Nasdaq Capital Market was $0.93 per share. We recommend that you obtain current market quotations for our common stock before deciding whether to elect to exchange your Eligible Options.
Although our board of directors (“Board”) have approved this offer, neither we nor our Board nor our management will make any recommendation as to whether you should exchange, or refrain from exchanging, any or all of your Eligible Options for new RSUs in the Option Exchange. You must make your own decision regarding whether to surrender your Eligible Options for exchange after taking into account your own personal circumstances or preferences. You are encouraged to consult your personal legal counsel, accountant, financial and/or tax advisor(s) as you deem appropriate if you have questions about your financial or tax situation as it relates to this offer.
This offer is not conditioned upon a minimum total number of options being elected for exchange. This offer is subject to certain conditions which we describe under Section 7 of this Offer to Exchange, “Conditions of the Option Exchange,” and the terms and conditions described in this Offer to Exchange.
Please see the section entitled “Risks of Participating in the Option Exchange” in this Offer to Exchange for a discussion of risks and uncertainties that you should consider before surrendering your eligible stock options for exchange in the Option Exchange.
IMPORTANT
You will receive an email notification from DocuSign which contains a copy of the Election Form. If you choose to participate in the Option Exchange, you must properly complete and sign the Election Form via DocuSign, which will be automatically forwarded to us once submitted, so that we receive it before 11:59 p.m., Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended).
For subsequent withdrawals and elections, please deliver the properly completed and signed Election Form (or Notice of Withdrawal of Election Form) so that we receive it before 11:59 p.m., Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You are responsible for making sure that the Election Form is delivered as indicated above. You must allow for sufficient time to complete, sign and deliver your Election Form to ensure that we receive your Election Form before the expiration date. We intend to confirm the receipt of your Election Form by email within two (2) business days after receiving your Election Form. If you do not receive a confirmation, it is your responsibility to confirm that we have timely received your Election Form.
You do not need to return your award agreement(s) for your Eligible Options to be cancelled and exchanged in the Option Exchange because they will be automatically cancelled effective as of the expiration date if we accept your Eligible Options for exchange. The Election Form will include a consent to be subject to the terms and conditions of the new RSUs.
Neither the U.S. Securities and Exchange Commission (“SEC”) nor any state or other securities commission or regulator has approved or disapproved of these securities or passed judgment upon the accuracy or adequacy of this Offer to Exchange. Any representation to the contrary is a criminal offense.
You should direct questions about the Option Exchange or requests for additional copies of this Offer to Exchange and the other offer documents to:
Tenon Medical, Inc.
E-mail: svandick@tenonmed.com
We recommend that you discuss the personal tax consequences of the Option Exchange with your financial, legal and/or tax advisers.
You should rely only on the information contained in this Offer to Exchange or documents to which we have referred you. We have not authorized anyone to provide you with different information. You should not assume that the information provided in this Offer to Exchange is accurate as of any date other than the date on which it is shown on the first page of this Offer to Exchange. This Offer to Exchange summarizes various documents and other information. These summaries are qualified in their entirety by reference to the documents and information to which they relate.
OFFER TO EXCHANGE CERTAIN OUTSTANDING STOCK OPTIONS
FOR RESTRICTED STOCK UNITS
TABLE OF CONTENTS
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SUMMARY TERM SHEET AND QUESTIONS AND ANSWERS
The following are important terms and answers to some of the questions that you may have about the Option Exchange. You should carefully read this entire Offer to Exchange, the accompanying announcement emails from Tenon, and the Election Terms and Conditions, together with the associated instructions and agreement to the terms of the election. This Option Exchange is made subject to the terms and conditions of these documents as they may be amended. The information in this summary is not complete. Additional important information is contained in the remainder of this Offer to Exchange, the Election Terms and Conditions and other attached exhibits together with their associated instructions and agreement to the terms of the election and the other related documents referenced in the Offer to Exchange. We have included in this summary references to other sections in this Offer to Exchange to help you find more complete information with respect to these topics. Please review this Summary Term Sheet and Questions and Answers and the Offer to Exchange to ensure that you are making an informed decision regarding your participation in the Option Exchange.
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Key Terms and Definitions |
Understanding key terms and definitions used in the Option Exchange
Background Information
Q1. What is the Option Exchange?
Q2. Why is Tenon offering the Option Exchange?
Q3. How do RSUs differ from stock options?
Eligibility
Q4. How do I know whether I am eligible to participate in the Option Exchange?
Q5. How do I know which options are eligible for the Option Exchange?
Q6. Are there circumstances in which I would not be eligible to receive RSUs in the Option Exchange?
Q7. Can I exchange shares of Tenon common stock that I acquired upon a previous exercise of Tenon options?
Q8. How many new RSUs will I receive for the Eligible Options that I exchange?
Q9. Will the terms and conditions of my new RSUs be the same as my exchanged options?
Q10. When will I receive my new RSUs?
Q11. When will my new RSU awards vest?
Q12. Do I need to exercise my new RSUs in order to receive shares?
Participating in the Option Exchange
Q13. How do I participate in the Option Exchange?
Q14. Am I required to participate in the Option Exchange?
Q15. Can I choose which Eligible Options I want to exchange?
Q16. Are there any restrictions on the number of Eligible Options grants I must elect to exchange in order to participate in the Option Exchange?
Q17. What happens if I have an Eligible Option grant that is subject to a domestic relations order or comparable legal document as the result of the end of a marriage?
Q18. Do I have to pay for the new RSUs?
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Q19. How do I decide whether I should participate in the Option Exchange?
Q20. Is Tenon making any recommendation as to whether I should exchange my Eligible Options?
Q21. How will we determine whether an Eligible Option has been properly tendered?
Q22. Will my decision to participate in the Option Exchange have an impact on my ability to receive options or other equity awards in the future?
Exchanged Options
Q23. When will my exchanged options be canceled?
Q24. Will I be required to give up all of my rights under the exchanged options?
Q25. After I have elected to exchange Eligible Options, is there anything I must do to receive new RSUs after the completion date?
Tax Consequences
Q26. Will I have to pay taxes if I participate in the Option Exchange?
Q27. Are there tax considerations relating to my Eligible Options that are Incentive Stock Options?
Options Not Exchanged
Q28. What happens to my Eligible Option grants if I choose not to participate?
Changing or Withdrawing Previous Elections
Q29. Can I change my mind about which Eligible Options I want to exchange?
Q30. Can I change my mind and withdraw from the Option Exchange?
Q31. What if I withdraw my election and then decide again that I want to participate in the Option Exchange?
Changes to the Offer to Exchange and Conditions to the Option Exchange
Q32. If Tenon extends the Option Exchange or changes the Offer to Exchange, how will you notify me?
Q33. Are there any conditions to the completion of the Option Exchange?
Availability of Additional Information
Q34. Whom can I contact if I have questions about the Option Exchange, or if I need additional copies of communications issued to date?
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Below are key terms used when describing the Option Exchange. Please read through each term and definition to ensure your understanding of the Option Exchange and corresponding materials.
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Commencement date |
April 8, 2024, the date the Option Exchange opens. |
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Completion date |
The date and time the offering period for the Option Exchange expires, which is expected to be May 6, 2024, at 11:59 p.m., Eastern Time, but is subject to change. Tenon may extend the offering period and delay the completion date in its sole discretion. |
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Eligible Participants |
Eligible Participants as of the commencement date who remain Eligible Participants in the United States through the completion date. An individual is not an Eligible Participant if they (i) are on a leave that will result in a termination of employment with Tenon, (ii) have provided Tenon a notice of resignation or (iii) have received a notice of termination of employment or service from Tenon, in each case even if such resignation or termination will not take effect until following the completion of the Option Exchange. |
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Eligible Option |
A stock option grant that was granted under the 2022 Plan or 2012 Plan prior to April 8, 2024, the commencement date of this Offer to Exchange, that remains outstanding and unexercised as of the completion date and is held by an Eligible Participant. |
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Exchanged options |
Eligible Options that, as of the completion date, an Eligible Participant elects to exchange for new RSUs in the Option Exchange. |
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Exercise price |
The purchase price per share of the common stock underlying an Eligible Stock Option as determined by an independent third-party valuation firm, if granted prior to April 27, 2022 (the listing date of our common stock) or is equal to the per share closing price of Tenon’s common stock on the grant date as reported on The Nasdaq Capital Market, if granted on or after April 27, 2022. The exercise price is a fixed price per share at which you can purchase Tenon common stock once the stock options vest. |
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Full vesting date |
The date you fully own your Eligible Stock Option and can exercise or sell all the shares underlying the Eligible Stock Option. For most stock options granted by Tenon, this date will be three years after the vesting commencement date of the option, which is usually the date of hire or grant, assuming continued employment with Tenon. |
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Grant date |
The date an equity award, such as a stock option or RSU, is granted. |
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Incentive Stock Option |
An Incentive Stock Option (“ISO”) is a type of compensatory stock option that can be granted only to employees and provide potentially preferential tax treatment if certain conditions are met. Your Eligible Options may be either Incentive Stock Options or Non-qualified Stock Options (“NSO”. The type of options you hold are listed in your brokerage account and in a Statement of Eligible Options attached to a DocuSign email. See Section 14 of this Offer to Exchange, “Material Income Tax Consequences,” for further information. |
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Intrinsic value |
Intrinsic value with respect to an option is the absolute value of the difference between the trading price of Tenon’s common stock and the exercise price of the option. An underwater option has no intrinsic value since its exercise price is higher than the current trading price of the underlying common stock. |
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New RSUs |
New RSUs that are granted to Eligible Participants who choose to participate in the Option Exchange in exchange for the cancellation of their Eligible Options. |
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Non-qualified Stock Option |
A Non-qualified Stock Option (“NSO”) is a type of compensatory stock option. Any option that does not qualify as an Incentive Stock Option is a Non-qualified Stock Option. Your Eligible Options may be either Incentive Stock Options or Non-qualified Stock Options. The type of options you hold are listed in your E*Trade account and in the Statement of Eligible Options we will provide to you as an attachment to the Election Form that will be sent to you via DocuSign email. See Section 14 of this Offer to Exchange, “Material Income Tax Consequences,” for further information. |
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Offer to Exchange |
The legal document entitled “Offer to Exchange Certain Outstanding Stock Options for Restricted Stock Units.” The Offer to Exchange contains the terms and conditions of the Option Exchange and may be amended and supplemented from time to time. This document may be obtained on the SEC website at www.sec.gov and on our website at the investor section under Financials — SEC filings (ir.tenonmed.com/financials/sec-filings). |
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Offering period |
The period between the commencement date and the completion date, during which Eligible Participants can choose to exchange Eligible Options in and pursuant to the terms of the Option Exchange. Currently, the offering period is April 8, 2024 through 11:59 p.m., Eastern Time, on May 6, 2024 but is subject to change. Tenon may extend the offering period and delay the completion date in its sole discretion. |
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Option Exchange |
The exchange of Eligible Options for new RSUs pursuant to the offer in this Offer to Exchange. |
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Restricted stock unit (RSU) |
The right to receive shares of Tenon’s common stock in the future; however, that right is “restricted” until the vesting criteria and other terms and conditions set forth in the 2022 Plan and the relevant RSU agreements are satisfied. |
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SEC |
The U.S. Securities and Exchange Commission. |
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Statement of Eligible Options |
The Statement of Eligible Options described in the answer to Question 13, “How do I participate in the Option Exchange?” This document will be an attachment to the Election Form sent to you vis DocuSign email. |
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Stock option expiration date |
The date a stock option expires and is no longer available for exercise. For Tenon, this is typically 10 years following the grant date of a stock option. |
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Underwater |
Stock option grants that have an exercise price that is higher than the current trading price of Tenon’s common stock are considered to be underwater. |
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Vesting date |
The date on which a portion of your stock option grant vests and becomes available for exercise or a portion of your RSU grant vests and shares are released. Once an RSU vests, it becomes a share of Tenon common stock that you can hold, transfer, or sell. |
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Q1. What is the Option Exchange?
A1. The Option Exchange is a one-time, voluntary opportunity for Eligible Participants to exchange Eligible Options for a lesser number of RSUs.
Further details can be found in Section 2 of the Offer to Exchange under “Types of Awards Granted in the Option Exchange; Number of New RSUs; Completion Date.”
See also: Answer to Question 6, “Are there circumstances in which I would not be eligible for RSUs in the Option Exchange?” of this Summary Term Sheet and Questions and Answers.
Q2. Why is Tenon offering the Option Exchange?
A2. Tenon believes our Eligible Participants should be rewarded when value has been created for shareholders. Tenon’s equity programs (e.g., stock options, RSUs) and offerings reinforce this “stake in the result” approach which we believe is critical to the company’s success.
We have experienced a significant decline in our stock price since our initial public offering. This decline in price, as well as the impact of our 1:10 reverse stock split that was effected in November 2023, have resulted in all of our Eligible Participants holding stock options that are deeply “underwater” — making them less effective as employee incentive and retention tools and therefore not helpful in meeting our strategic objectives.
Tenon is offering the Option Exchange to (i) realign Eligible Participant and stockholder interests and (ii) provide a way for Eligible Participants to realize value from eligible underwater options. The Option Exchange gives Eligible Participants an opportunity to exchange certain options that are significantly “underwater” as of the commencement date for new RSUs that may provide value even if Tenon’s stock price does not increase. This approach of exchanging Eligible Options for a lesser number of new RSUs is consistent with Tenon’s current compensation strategy and provides what Tenon believes is a meaningful incentive for Eligible Participants all of whose options are currently underwater.
Q3. How do RSUs differ from stock options?
A3. The table below outlines some key differences between stock options and RSUs:
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Stock Options |
RSUs |
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What they are |
The right to purchase a fixed number of shares of Tenon common stock at a fixed price for a fixed period of time. |
The right to receive shares of Tenon common stock in the future upon vesting at no cost to the holder. |
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How they work |
Once a stock option grant vests, you can exercise the vested portion at any time until the expiration date of that option. Exercising an option means you buy the stock at the exercise price set on the date of the grant. If the price of Tenon’s stock is greater than the exercise price when you exercise and sell the shares, you receive the gain (after any taxes). However, when Tenon’s stock price is less than the exercise price, the stock option has no intrinsic value and is considered to be underwater. |
Once an RSU vests, a share of Tenon stock is issued to you and at no cost to you, other than withholding for applicable taxes associated with the RSU. An RSU has value equal to the then-current Tenon stock price. Once Tenon stock is issued to you following the vesting of the RSU, you can either keep it as an investment or sell it. |
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Stock Options |
RSUs |
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Example (assumes vested options and RSUs and no taxes) |
If you are awarded a stock option with a per share exercise price of $3.00 and the Tenon stock price subsequently increases to $5.00, the option will be worth $2.00 if exercised on that later date. If you are awarded a stock option with a per share exercise price of $3.00 and the Tenon stock price subsequently decreases to $1.00, the option will have no intrinsic value as of that later date. |
If the stock price on the grant date of your RSU is $3.00, and the Tenon stock price subsequently increases to $5.00, each RSU will be worth $5.00 as of that later date. If the stock price on the grant date of your RSU is $3.00, and the Tenon stock price subsequently decreases to $1.00, each RSU will be worth $1.00 as of that later date. |
Q4. How do I know whether I am eligible to participate in the Option Exchange?
A4. You will be eligible to participate in the Option Exchange if:
• you are an Eligible Participant on the date this offer commences and remain an Eligible Participant through the completion date of the Option Exchange; and
• you hold at least one Eligible Option.
An individual is not an Eligible Participant if they (i) are on a leave that will result in a termination of employment with Tenon, (ii) have provided Tenon a notice of resignation or (iii) have received a notice of termination of employment or service from Tenon, in each case even if such resignation or termination will not take effect until following the completion of the Option Exchange.
Tenon reserves the right to withdraw the Option Exchange in any jurisdiction for which it determines that the Option Exchange would have regulatory, tax or other implications that are inconsistent with Tenon’s compensation policies and practices. If Tenon withdraws the Option Exchange in a particular jurisdiction, the Option Exchange will not be made to, nor will Eligible Options be accepted for exchange from or on behalf of, Eligible Participants in that jurisdiction.
See also: Section 1 of the Offer to Exchange.
Q5. How do I know which options are eligible for the Option Exchange?
A5. If you are an Eligible Participant you will received a Statement of Eligible Options that is attached to the Election Form that will be sent to you via DocuSign email that will indicate which of your stock options are eligible for exchange. In order for your Eligible Options to remain eligible, they must remain outstanding and unexercised on the commencement date and the completion date.
An Eligible Option consists of a stock option grant that was granted under the 2022 Plan or 2012 Plan and that remains outstanding and unexercised as of the completion date and is held by an Eligible Participant.
See also:
• Answer to Question 26, “Will I have to pay taxes if I participate in the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Sections 2 and 14 of the Offer to Exchange.
Q6. Are there circumstances in which I would not be eligible to receive RSUs in the Option Exchange?
A6. Yes, if you do not have any Eligible Options or if you cease being an Eligible Participant prior to the completion date.
See also: Sections 1 and 2 of the Offer to Exchange.
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Q7. Can I exchange shares of Tenon common stock that I acquired upon a previous exercise of Tenon options?
A7. No. This Option Exchange relates only to outstanding Tenon options to purchase shares of our common stock. You may not exchange in this Option Exchange any shares of our common stock that you acquired upon a prior exercise of options, or by any other means.
See also: Section 2 of the Offer to Exchange.
Q8. How many new RSUs will I receive for the Eligible Options that I exchange?
A8. If you participate in the Option Exchange, you will receive one (1) new RSU (representing the right to receive one share of our common stock) for every two (2) shares of our common stock underlying eligible stock options surrendered pursuant to the Offer to Exchange. Fractional RSUs will not be granted in the Option Exchange. Any fractional number of new RSUs will be rounded up to the nearest whole number on a grant-by-grant basis.
Most of the grants of Eligible Options are initial grants of options held by employees. These Eligible Option grants all have vesting periods of three years that commence either on the date of hire or the date of grant. For the first year of vesting (the “One Year Cliff Period”), these option grants vest on the one-year anniversary of the vesting commencement date and thereafter vest evenly on a monthly basis. For example, for a grant of 3,600 options that commenced vesting on March 1, 2023, 1,200 options would have vested on March 1, 2024, with 100, options vesting the first day of every subsequent month for the next two years, subject to continued service on the applicable vesting date.
New RSUs granted in the Option Exchange will have the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be that (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. If the exchanged options were fully or partially vested, the New RSUs will also be fully or partially vested in the same percentage as the exchanged options. Any RSUs that are vested when granted in the Option Exchange will immediately convert into shares of Tenon common stock on a one for one basis. The unvested portion of any new RSUs granted in the Option Exchange will proportionally vest on the same schedule as the surrendered options, subject to continued service on the applicable vesting date. The Statement of Eligible Options attached to the Election Form sent to you via DocuSign email will include the number of RSUs you would receive in exchange for each of your Eligible Option grants, including the number of your RSUs which will be vested at the time of the grant and the vesting schedule of your unvested RSUs.
Your new RSUs will be subject to the terms and conditions of the 2022 Plan and an RSU agreement between you and Tenon. In all events, vesting is subject to continued service with us through the applicable vesting date. Your participation in the Option Exchange and receipt of any new RSUs does not provide any guarantee or promise of continued service with us.
Examples
1. If on May 6, 2024 you exchange an Eligible Option grant to purchase 3,600 shares of Tenon common stock (not subject to a One Year Cliff Period) that vests monthly (100 shares per month) over a three year period that commences vesting on June 1, 2024, with the first vesting date being July 1, 2024, you will receive 1,800 new RSUs on the completion date that vest quarterly (150 shares per quarter) over a three year period with the first vesting date being September 1, 2024.
2. If on May 6, 2024 you exchange an Eligible Option to purchase 3,600 shares of Tenon common stock (not subject to a One Year Cliff Period) that vest monthly (100 shares per month) over a three year period that commenced vesting on March 1, 2024, with the first vesting date being April 1, 2024, you will receive 100 vested RSUs (equivalent of 2 months of exchanged Eligible Option vesting), which will immediately convert into 100 shares of Tenon common stock and 1,700 unvested new RSUs that vest quarterly (150 shares per quarter) over a three year period with the next vesting date being August 1, 2024.
3. If on May 6, 2024 you exchange an Eligible Option grant to purchase 3,600 shares of Tenon common stock that is subject to a One Year Cliff Period, where 1,200 shares vest at the end of such period and 100 shares vest monthly over the remaining two year period and if vesting on the exchanged option
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grant commenced on June 1, 2024, with the first vesting date (the end of the One Year Cliff Period) being June 1, 2025, you will receive 1,800 new RSUs on the completion date, with 600 RSUs vesting on June 1, 2025, and the remaining RSUs vesting quarterly (150 shares per quarter) over the remaining two year period with the first quarterly vesting date being September 1, 2025.
4. If on May 6, 2024 you exchange an Eligible Option grant to purchase 3,600 shares of Tenon common stock that is subject to a One Year Cliff Period, where 1,200 shares would vest at the end of such period and 100 shares vest monthly over the remaining two year period and if vesting on the exchanged option grant commenced on March 1, 2023, with the first vesting date (the end of the One Year Cliff Period) being March 1, 2024, you will receive (i) 700 vested RSUs (equivalent of One Year Cliff period and two months of exchanged Eligible Option grant vesting), which will immediately convert into 7000 shares of Tenon common stock and (ii) 1,100 unvested new RSUs that vest quarterly (150 shares per quarter) over the remaining vesting period with the next vesting date being August 1, 2024.
Note: Any fractional RSUs that are obtained by the application of the exchange ratio will be rounded up to the next whole number.
See also:
• Answer to Question 5, “How do I know which options are eligible for the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Sections 2 and 14 of the Offer to Exchange.
Q9. Will the terms and conditions of my new RSUs be the same as my exchanged options?
A9. No. RSUs are a different type of award than stock options, and the terms and conditions of your new RSUs, other than the vesting schedule, will be different from the exchanged options.
Options represent the right to purchase Tenon shares at a fixed price for a specified term (generally ten years from the date of grant, subject to earlier termination in the event of your termination of employment or service). While the Eligible Options are all currently underwater, in the event Tenon’s stock price increases in the future, the Eligible Options may have a greater value in the future than the new RSUs to be granted in the Option Exchange given that fewer new RSUs will be granted in exchange for the surrender of Eligible Options.
However, the vesting commencement date and vesting term of new RSUs will be the same as the vesting schedule of the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be that (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. Any RSUs that are vested when granted in the Option Exchange will immediately convert into shares of Tenon common stock on a one for one basis. The unvested portion of any new RSUs granted in the Option Exchange will proportionally vest on the same schedule as the surrendered options, subject to continued service on the applicable vesting date. The Statement of Eligible of Eligible Options attached to the Election Form sent to you via DocuSign email will include the number of RSUs you would receive in exchange for each of your Eligible Option grants, including the number of your RSUs which will be vested at the time of the grant and the vesting schedule of your unvested RSUs.
Your new RSUs will be subject to the terms and conditions of the 2022 Plan and an RSU agreement between you and Tenon. In all events, vesting is subject to continued service with us through the applicable vesting date. Your participation in the Option Exchange and receipt of any new RSUs does not provide any guarantee or promise of continued service with us.
Links to the 2022 Plan and the current form of RSU agreement under the 2022 Plan will be included as exhibits to a document Tenon filed with the SEC called a “Schedule TO,” which is available on the SEC’s website at www.sec.gov and our website at the investor section under Financials — SEC filings (ir.tenonmed.com/financials/sec-filings).
In addition, the tax treatment of the new RSUs may differ significantly from the tax treatment of your exchanged options.
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See also:
• Answers to Question 5, “How many new RSUs will I receive for the Eligible Options that I exchange?” Question 8, “How many new RSUs will I receive for the Eligible Options that I exchange?” Question 11, “When will my new RSU awards vest?” and Question 26, “Will I have to pay taxes if I participate in the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Sections 2 and 14 of the Offer to Exchange.
Q10. When will I receive my new RSUs?
A10. The grant date of the new RSUs will be the completion date (May 6, 2024) and the new RSUs will be issued immediately. If the offering period is extended, the completion date and the grant of the new RSUs will be correspondingly delayed. Please note that it may take a few weeks from the completion date for you to receive an email related to your new RSUs and for the grant of new RSUs to be reflected in your E*Trade account. Please review and accept your grant documents in your E*Trade account. If your account has not been updated for the new RSUs within a few weeks following the completion date, please contact jhanson@tenonmed.com. You will receive the shares of Tenon common stock subject to your new RSUs if and when your new RSUs vest.
See also:
• Answer to Question 11, “When will my new RSU awards vest?” of this Summary Term Sheet and Questions and Answers; and
• Sections 2 and 14 of the Offer to Exchange.
Q11. When will my new RSU awards vest?
A11. New RSUs granted in the Option Exchange will commence vesting and have the same vesting term as the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be that (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. If the exchanged options were fully or partially vested, the New RSUs will also be fully or partially vested in the same percentage as the exchanged options. Any RSUs that are vested when granted in the Option Exchange will immediately convert into shares of Tenon common stock on a one for one basis. The unvested portion of any new RSUs granted in the Option Exchange will proportionally vest on the same schedule as the surrendered options, subject to continued service on the applicable vesting date. The Statement of Eligible of Eligible Options attached to the Election Form that will be sent to you via DocuSign email will include the number of RSUs you would receive in exchange for each of your Eligible Option grants, including the number of your RSUs which will be vested at the time of the grant and the vesting schedule of your unvested RSUs.
Your new RSUs will be subject to the terms and conditions of the 2022 Plan and an RSU agreement between you and Tenon. New RSUs granted in the Option Exchange will only vest if the holder remains in continuous service under the terms and conditions of the 2022 Plan, the applicable RSU agreement and other relevant Tenon policies, as each may be amended from time to time. Generally, new RSUs that are not vested at termination of continuous service to Tenon, as determined in accordance with the 2022 Plan, will be forfeited. Your participation in the Option Exchange and receipt of any new RSUs does not provide any guarantee or promise of continued service with us.
See also: Answer to Question 8, “How many new RSUs will I receive for the Eligible Options that I exchange?”
Q12. Do I need to exercise my new RSUs in order to receive shares?
A12. No. Unlike stock options, which you must exercise in order to receive the vested shares subject to the option, you do not need to exercise RSUs in order to receive shares. If your new RSUs vest in accordance with the vesting schedule set forth in the applicable RSU agreement, you will automatically receive the shares subject to the new RSUs promptly thereafter (less taxes). Generally, new RSUs that do not vest will be forfeited to Tenon, as determined in accordance with the 2022 Plan.
See also: Section 9 of the Offer to Exchange.
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Participating in the Option Exchange
Q13. How do I participate in the Option Exchange?
A13. If you are an Eligible Participant you will receive notifying you of your eligibility. If you choose to participate in the Option Exchange, you must take action no later than 11:59 p.m., Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended).
You will receive an email notification from DocuSign which contains a copy of the Election Form. Prior to executing the Election Form, please do the following:
• First, you need to learn about the Offer to Exchange — what it is, and which stock options can be exchanged by reading this Offer to Exchange in full and the Statement of Eligible Options attached to the Election Form which will include for each of your Eligible Option grants:
• the grant date of such Eligible Option grant;
• the per share exercise price of such the Eligible Option grant;
• the number of vested and unvested shares of our common stock subject to the Eligible Option grant as of May 6, 2024 (assuming vesting in accordance with the applicable vesting schedule, and no exercise or early termination occurs, through such date);
• the number of new RSUs you would receive, including the number of such RSUs that are vested and unvested; and
• the new vesting schedule applicable to the unvested RSUs that would be issued in exchange for such Eligible Option grant.
• Next, evaluate your options. You will be able to calculate how many new RSUs you would receive for your Eligible Options by dividing by two and rounding up any fraction to the next whole number on a grant-by-grant basis. Keep in mind that you can exchange some, all or none of your Eligible Option grants for new RSUs, but any exchange must be made on a grant-by-grant basis.
If you choose to participate in the Option Exchange, in order to validly tender your Eligible Options, you must properly complete and sign the Election Form via DocuSign, which will be automatically forwarded to Tenon once submitted, so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended). For subsequent withdrawals and elections, please deliver the properly completed and signed Election Form (or Notice of Withdrawal of Election Form) so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You are responsible for making sure that the Election Form is delivered as indicated above. You must allow for sufficient time to complete, sign and deliver your Election Form to ensure that we receive your Election Form before the expiration date.
You do not need to return your award agreement(s) for your Eligible Options to be cancelled and exchanged in the Option Exchange because they will be automatically cancelled effective as of the expiration date if we accept your Eligible Options for exchange. The Election Form will include a consent to be subject to the terms and conditions of the RSUs.
If you elect to exchange any portion of an individual Eligible Option grant in the Option Exchange, you must elect to exchange the entire individual Eligible Option grant. If you hold more than one individual Eligible Option grant, however, you may choose to exchange one or more of such individual Eligible Option grants, on a grant-by-grant basis, without having to exchange all of your individual Eligible Option grants. No partial exchanges of an Eligible Option grant will be permitted. If you are eligible to participate in the Option Exchange, your Statement of Eligible Options will list all of your Eligible Options.
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We will accept delivery of the signed Election Form for the initial election only by DocuSign. For subsequent elections, delivery of a signed Election Form must be made by email (by PDF or similar imaged document file) delivered to cphillips@tenonmed.com. You are responsible for making sure that the Election Form is returned via DocuSign and/or delivered to this email address, as applicable. You must allow for sufficient time to complete and deliver your Election Form to ensure that we receive your Election Form before the expiration date.
Your Eligible Options will not be considered tendered until we receive your properly completed and signed Election Form. We must receive your properly completed and signed Election Form before 11:59 p.m., Eastern Standard Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended). This is a one-time offer, and we will strictly enforce the offering period. We reserve the right to reject any option tendered for exchange that we determine is not in the appropriate form or that we determine is unlawful to accept. If you miss this deadline, you will not be permitted to participate in the Option Exchange.
We may extend this Option Exchange. If we extend the offering period, we will issue a press release, email or other communication disclosing the extension no later than 9:00 a.m., Eastern Time, on May 6, 2024 (the U.S. business day following the previously scheduled completion date).
See also:
• Answers to Question 5, “How do I know which options are eligible for the Option Exchange?” of this Summary Term Sheet and Questions and Answers; Question 14, “Am I required to participate in the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Sections 4 and 14 of the Offer to Exchange.
Q14. Am I required to participate in the Option Exchange?
A14. No. Participation in the Option Exchange is voluntary. If you choose not to participate in the Option Exchange, you will continue to hold your Eligible Options on the same terms and conditions and pursuant to which they were originally granted.
See also: Section 2 of the Offer to Exchange.
Q15. Can I choose which Eligible Options I want to exchange?
A15. You may choose to exchange some, all or none of your Eligible Option grants in the Option Exchange entirely at your discretion. However, if you elect to participate in the Option Exchange, to exchange an individual Eligible Option, you must elect to exchange the entire outstanding individual Eligible Option grant that includes such option.
Tenon is not accepting partial tenders of individual Eligible Option grants, except that you may elect to exchange the entire remaining portion of an Eligible Option grant that you have exercised partially. You otherwise may not elect to exchange only some of the shares covered by any particular individual Eligible Option grant.
See also:
• Answer to Question 5, “How do I know which options are eligible for the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Section 2 of the Offer to Exchange.
Q16. Are there any restrictions on the number of Eligible Options grants I must elect to exchange in order to participate in the Option Exchange?
A16. No. There is no minimum number of Eligible Options that you must elect to exchange in order to participate. However, if you elect to participate in the Option Exchange, to exchange an individual Eligible Option grant, you must elect to exchange the entire individual Eligible Option grant. Tenon is not accepting partial tenders of individual Eligible Option grants, except that you may elect to exchange the entire remaining portion of an Eligible Option grant that you have exercised partially. You otherwise may not elect to exchange only some of the shares covered by any particular individual Eligible Option grant.
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Please note that there may be brokerage and/or wire fees associated with selling the shares of Tenon common stock acquired upon vesting of new RSUs which could affect the benefit you can realize from such sale.
See also:
• Answer to Question 18, “Do I have to pay for the new RSUs?” of this Summary Term Sheet and Questions and Answers; and
• Section 9 of the Offer to Exchange.
Q17. What happens if I have an Eligible Option grant that is subject to a domestic relations order or comparable legal document as the result of the end of a marriage?
A17. If you have an Eligible Option grant that is subject to a domestic relations order (or comparable legal document as the result of the end of a marriage) and a person who is not an Eligible Participant beneficially owns a portion of that Eligible Option grant, then in order to participate in the Option Exchange with respect to such Eligible Option grant, you may accept this Option Exchange with respect to the entire remaining outstanding portion of the Eligible Option grant, including the portion beneficially owned by the other person, as long as you are the legal owner of the Eligible Option grant. As described in Answer to Question 15, we are not accepting partial tenders of an Eligible Option grant, so you may not accept this Option Exchange with respect to a portion of an Eligible Option grant that is beneficially owned by you while rejecting it with respect to the portion beneficially owned by someone else. As you are the legal owner of the Eligible Option grant, we will respect an election properly made by you, but will not be responsible to you or the beneficial owner of the Eligible Option grant for any errors made by you with respect to such Eligible Option grant.
See also: Section 2 of the Offer to Exchange.
Q18. Do I have to pay for the new RSUs?
A18. You do not have to make any cash payment to Tenon to receive a grant of new RSUs in exchange for your exchanged options. You also do not have to pay Tenon to receive the shares of Tenon common stock that become issuable to you if your new RSUs vest; however, you may have taxes due on the vesting of the RSUs.
Please also note that you will incur brokerage and/or wire fees in the event you decide to sell the shares of Tenon common stock issued to you upon vesting of your new RSUs.
See also:
• Answer to Question 26, “Will I have to pay taxes if I participate in the Option Exchange?” of this Summary Term Sheet and Questions and Answers; and
• Sections 9 and 14 of the Offer to Exchange.
Q19. How do I decide whether I should participate in the Option Exchange?
First, review all of the materials provided to you in connection with the Offer to Exchange, including this Summary Term Sheet and Questions and Answers. These materials will be provided to you via the DocuSign email that has your Election Form and in, or filed as exhibits to, a document filed by Tenon with the SEC called a “Schedule TO,” which is available on the SEC website at www.sec.gov.
In addition to reviewing the materials, please note the following:
• This is not a one-for-one exchange. You will receive a number of new RSUs that are one-half the number of shares of our common stock underlying Eligible Options that you surrender for exchange.
• RSUs provide value upon vesting even if Tenon’s stock price does not increase after the grant date. However, because you will receive fewer new RSUs than the options you elect to exchange, it is possible that, at some point in the future, options you choose to exchange could be economically more valuable than the new RSUs received by you pursuant to the Option Exchange.
• New RSUs granted in the Option Exchange will not be subject to a new vesting schedule. Even if the Eligible Options you exchange were vested in whole or in part, all of your new RSUs will have the same vesting commencement date and the same vesting schedule as your Eligible Option except that monthly vesting will be replaced with quarterly vesting.
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• Do not forget to consider taxes. In general, your new RSUs will be taxed when they vest. If you are a resident of or subject to the tax laws in more than one country, you should be aware that there may be additional or different tax consequences and social insurance contributions that may apply to you.
Please also note that no one from Tenon is, or will be, authorized to provide you with advice or recommendations or to provide you additional information not included in the Offer to Exchange or the documents referenced in the Offer to Exchange. You must make your own personal decision as to whether or not to participate in the Option Exchange. You are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax advisor(s) for further advice.
See also:
• Sections 3 and 9 of the Offer to Exchange; and
• Risks of Participating in the Option Exchange in the Offer to Exchange.
Q20. Is Tenon making any recommendation as to whether I should exchange my Eligible Options?
A20. No. Tenon is providing you with as much information as possible to assist you in making your own informed decision. However, Tenon is not making any recommendation as to whether you should accept the Option Exchange. No one from Tenon is, or will be, authorized to provide you with advice or recommendations or to provide you additional information not included in the Offer to Exchange or the documents referenced in the Offer to Exchange. You must make your own personal decision as to whether or not to participate in the Option Exchange. You are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax advisor for further advice.
See also: Section 4 of the Offer to Exchange.
Q21. How will we determine whether an Eligible Option has been properly tendered?
A21. We will determine, in our discretion, all questions about the validity, form, eligibility (including time of receipt) and acceptance of the documents you submit to accept the Option Exchange for any of your Eligible Options. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable law to challenge such determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties. We reserve the right to reject any election or any options tendered for exchange that we determine is not in appropriate form or that we determine is unlawful to accept. We will accept all properly tendered Eligible Options that are not validly withdrawn, subject to the terms of this Option Exchange. No tender of Eligible Options will be deemed to have been made properly until all defects or irregularities have been cured or waived by us. We have no obligation to give notice of any defects or irregularities in any election, and we will not incur any liability for failure to give any notice.
See also: Section 4 of the Offer to Exchange.
Q22. Will my decision to participate in the Option Exchange have an impact on my ability to receive options or other equity awards in the future?
A22. No. Your election to participate or abstain from participating in the Option Exchange will have no effect on our making future grants of options, other equity awards or any other rights to you or anyone else.
See also: Section 1 of the Offer to Exchange.
Q23. When will my exchanged options be canceled?
A23. Your exchanged options will be canceled as of the completion date. If the Option Exchange is extended and the completion date delayed, the cancellation of your exchanged options and the grant date of any new RSUs will be correspondingly delayed. Exchanged options that are canceled will no longer be displayed through your E*Trade account following the completion date.
See also: Section 6 of the Offer to Exchange.
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Q24. Will I be required to give up all of my rights under the exchanged options?
A24. Yes. Once Tenon has accepted your exchanged options, your exchanged options will be canceled and you will no longer have any rights under those exchanged options. Tenon will cancel all exchanged options as of the completion date. However, if the completion date is delayed, the date the exchanged options are canceled and the grant date of any new RSUs will be correspondingly delayed.
See also: Section 6 of the Offer to Exchange.
Q25. After I have elected to exchange Eligible Options, is there anything I must do to receive new RSUs after the completion date?
A25. No. Once your exchanged options are canceled, you do not need to take additional action in order to receive your new RSUs. Your new RSUs will be granted to you as of the completion date. If the Option Exchange is extended and the completion date delayed, the date on which new RSUs are granted will be correspondingly delayed. In order to receive the shares covered by the new RSU grant, you must continue to be an Eligible Participant and eligible for vesting under Tenon’s policies, as amended from time to time, through the applicable vesting date.
Please note that it may take a few weeks from the completion date for you to receive an email related to your new RSUs and for the grant of new RSUs to be reflected in your E*Trade account. You will be required to accept your grant documents in your E*Trade account.
See also:
• Answer to Question 11, “When will my new RSU awards vest?” of this Summary Term Sheet and Questions and Answers; and
• Section 9 of the Offer to Exchange.
Q26. Will I have to pay taxes if I participate in the Option Exchange?
A26. If you participate in the Option Exchange, you will be required to recognize income for income taxes or other tax purposes at the time of the exchange if the RSU’s are vested at that time. If the RSU’s are not vested at the time of the exchange, you will recognize income for income taxes or other tax purposes when and as the RSU’s vest and the shares underlying the new RSUs are issued to you. Income tax withholding and social security tax obligations will arise when income is recognized, and to meet your share of these obligations you may provide Tenon with the cash, or E*Trade may sell a sufficient number of shares otherwise due you in order to raise the cash, required to satisfy those obligations.
You should consult with your personal legal counsel, accountant, financial and/or tax advisor(s) to determine the personal tax consequences to you of participating in the Option Exchange. If you are a resident of or subject to the tax laws in more than one country, you should be aware that there may be additional or different income tax, social insurance contributions and other tax consequences that may apply to you.
If your Eligible Options were granted while you were providing services in one jurisdiction and you now work for Tenon in another jurisdiction, you may be subject to income taxes and other taxes at the time of the exchange in the jurisdiction in which the Eligible Option was originally granted. You should consult with your personal legal counsel, accountant, financial and/or tax advisor(s) to determine the tax effect of your individual circumstances.
See also: Section 14 of the Offer to Exchange.
Q27. Are there tax considerations relating to my Eligible Options that are Incentive Stock Options?
A27. To the extent the Option Exchange remains open for thirty (30) calendar days (or longer), then all eligible Incentive Stock Options which are not accepted in the Option Exchange will be considered “modified.” This will result in a deemed re-grant of such Incentive Stock Options such that the date of grant for purposes of the two (2)-year holding period necessary to receive favorable U.S. tax treatment for your Incentive Stock Options will restart. The Option Exchange is not currently scheduled to remain outstanding for thirty (30) calendar days or more, and therefore should not result in an automatic modification of Incentive Stock Options not exchanged,
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but if we decide to extend the Option Exchange for business or other reasons, a modification may result. In the event of such a modification, your Eligible Options may continue to be Incentive Stock Options (subject to the limitations on Incentive Stock Options under U.S. tax rules), but the date of grant for purposes of the Incentive Stock Option holding periods applicable to such Eligible Options will be the date the Option Exchange commenced April 8, 2024). Therefore, in order to receive favorable tax treatment with respect to such Eligible Options in the event of a deemed modification, you must not dispose of the shares received from the exercise of the Eligible Options within two (2) years from the date the Option Exchange commenced (April 8, 2024) or within one (1) year from the date of exercise.
You should consult with your personal legal counsel, accountant, financial and/or tax advisor(s) to determine the personal tax consequences to you of participating in the Option Exchange. If you are a resident of or subject to the tax laws in more than one country, you should be aware that there may be additional or different income tax, social insurance contributions and other tax consequences that may apply to you.
See also: Section 14 of the Offer to Exchange.
Q28. What happens to my Eligible Option grants if I choose not to participate?
A28. If you choose not to participate, your Eligible Option grants will remain outstanding until they are exercised or expire by their terms, retain their current exercise price, retain their current vesting schedule and retain all of the other terms and conditions as set forth in the 2022 Plan and option agreement related to such Eligible Option grants.
See also: Section 6 of the Offer to Exchange.
Changing or Withdrawing Previous Elections
Q29. Can I change my mind about which Eligible Options I want to exchange?
A29. To change an election you previously made with respect to some or all of your Eligible Option grants, including an election to withdraw all of your Eligible Options from this Option Exchange, you must deliver a valid new election indicating only the Eligible Option grants you wish to exchange in the Option Exchange or a valid new election indicating that you reject the Option Exchange with respect to all of your Eligible Options, by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign on or before the completion date, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024, unless otherwise extended.
See also:
• Answer to Question 14, “Am I required to participate in the Option Exchange” of this Summary Term Sheet and Questions and Answers; and
• Sections 4 and 5 of the Offer to Exchange.
Q30. Can I change my mind and withdraw from the Option Exchange?
A30. Yes. You may change your mind after you have submitted an election and withdraw from the Option Exchange at any time on or before the completion date (which currently is expected to be May 6, 2024, at 11:59 p.m., Eastern Time) and retain your Eligible Options under their existing terms. If we extend the completion date, you may withdraw your election at any time until the extended Option Exchange expires. You may change your mind as many times as you wish, but you will be bound by the properly submitted election we receive last on or before the completion date.
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See also:
• Answer to Question 14, “Am I required to participate in the Option Exchange” of this Summary Term Sheet and Questions and Answers; and
• Section 5 of the Offer to Exchange.
Q31. What if I withdraw my election and then decide again that I want to participate in the Option Exchange?
A31. If you have withdrawn your election to participate with respect to some or all of your Eligible Option grants and then decide again that you would like to participate in this Option Exchange, you may reelect to participate by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign on or before the completion date, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024, unless otherwise extended, in accordance with the procedures described in Question 29, “Can I change my mind about which Eligible Options I want to exchange?” and Section 4 of the Offer to Exchange.
Changes to the Offer to Exchange and Conditions to the Option Exchange
Q32. If Tenon extends the Option Exchange or changes the Offer to Exchange, how will you notify me?
A32. If Tenon extends the Option Exchange or otherwise changes the Offer to Exchange, Tenon will issue an email and/or other form of communication disclosing the extension no later than 9:00 a.m., Eastern Time, on the next U.S. business day following the previously scheduled completion date.
See also: Sections 2 and 14 of the Offer to Exchange.
Q33. Are there any conditions to the completion of the Option Exchange?
A33. Yes. The completion of the Option Exchange is subject to a number of customary conditions that are described in Section 7 of the Offer to Exchange. If any of these conditions are not satisfied, Tenon will not be obligated to accept and exchange properly tendered Eligible Option grants, though Tenon may elect to do so at its sole discretion.
The offer is not conditioned upon a minimum number of eligible stock options being surrendered for exchange or a minimum number of Eligible Participants participating.
See also: Sections 2 and 7 of the Offer to Exchange.
Availability of Additional Information
Q34. Whom can I contact if I have questions about the Option Exchange, or if I need additional copies of communications issued to date?
A34. Tenon has publicly filed the documents with the SEC on exhibits to a document called a “Schedule TO,” which is available at www.sec.gov and our website at the investor section under Financials — SEC filings (ir.tenonmed.com/financials/sec-filings).
You may also direct questions about the Offer to Exchange and requests for additional copies of the Offer to Exchange and the other documents to herein to:
Email: jhanson@tenonmed.com
See also: Section 17 of the Offer to Exchange.
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Participating in the Option Exchange involves a number of risks, including those described below. The risks described below, as well as the risk factors in our Annual Report on Form 10-K for our fiscal year ended December 31, 2023, filed with the SEC, highlight some of the material risks related to Tenon and which may impact your decision whether to participate in this Option Exchange. You should consider these risks carefully, and you are encouraged to speak with an investment and tax adviser as necessary before deciding whether to participate in the Option Exchange. In addition, we urge you to read the sections in this Offer to Exchange discussing the tax consequences of participating in the exchange of options pursuant to the Option Exchange, as well as the rest of this Offer to Exchange document, for a more in-depth discussion of the risks that may apply to you before deciding to participate in the Option Exchange.
In addition, this Offer to Exchange and our Annual Report on Form 10-K referred to above include “forward-looking statements.” These statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. The documents we file with the SEC, including the Annual Report on Form 10-K referred to above, discuss some of the risks that could cause our actual results to differ from those contained or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk factors” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Furthermore, such forward-looking statements speak only as of the date hereof. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
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RISKS OF PARTICIPATING IN THE OPTION EXCHANGE
Risks that are Specific to this Offer
Because the Option Exchange is not on a one-for-one basis, your new RSUs may not be worth as much as your exchanged options if our stock price increases following the completion date.
If the price of our common stock increases after the date on which your exchanged options are canceled, your exchanged options might be worth more than the new RSUs that you receive in exchange for them.
Because the exchange ratio of this offer is not one-for-one with respect to exchanged options, it is possible that, at some point in the future, your exchanged options could be economically more valuable than the new RSUs received by you pursuant to the Option Exchange. For example, if you exchange an Eligible Option to purchase 2,000 shares with an exercise price of $3.00 per share and a stock option expiration date of January 2031, you would receive 1,000 new RSUs. Assume, for illustrative purposes only, that the price of our common stock increases to $40 per share following the completion date of the Option Exchange. Under this example, if you had kept your exchanged options and exercised and sold the underlying shares at $40.00 per share, you would have realized a pre-tax gain of $74,000, but if you exchanged your Eligible Option grant for new RSUs, and immediately sold the shares subject to the new RSU grant upon vesting when the price of our common stock is $40.00 per share, you would realize a pre-tax gain of only $40,000.
In addition, you may pay more taxes on your new RSUs than you would on your Eligible Option grant that you surrendered. For example, if you exercised an Eligible Option grant for 2,000 shares with an exercise price of $3.00 and a stock option expiration date of January 2031, at a time when our stock was trading at $3.50 per share, you would receive 2000 shares of our common stock but you would realize no taxable income at that time. If you later sold the shares at $5.00 per share, you would have capital gain of $2.00 per share, which is the difference between the sale price of $5.00 and the $3.00 exercise price that you paid. If you held the shares more than 12 months, this gain would be taxed at long-term capital gains rates (currently a maximum of 25%), and if you held the shares for 12 months or less, this gain would be taxed at short-term capital gains rates (currently a maximum of 37%).
If, instead, you exchange your Eligible Option grant for new RSUs, you would recognize ordinary income (currently at a maximum rate of 37%) on the full fair market value of the shares you receive at the time you receive them (i.e., when they vested). For instance, if you vest in 1,000 new RSUs on a day when the fair market value of our stock is $3.50 per share, you will recognize ordinary income on $3,500 and you would be taxable on that income at that time (at rates as high as 37%). When you later sold the shares, you would then be subject to additional long- or short-term capital gain, as applicable (depending on the length of time you have held such shares) on any additional gain at the time of the sale. For instance, if you sold the shares at $5.00 per share, you would have a capital gain of $1.50 per share (which is the difference between the sale price of $5.00 and the $3.50 value of the shares when you received them).
When analyzing the tax consequences to you, you should keep in mind that you do not pay a cash purchase price for new RSUs or the shares thereunder, while, in the example above, you would have paid $3.00 per share of post-tax dollars for the shares subject to your Eligible Option grant. You should consult your own tax advisor to determine the overall amount of tax that you would pay under each the options described above.
If your provision of continuous service to us terminates for any reason before your new RSUs vest, you will not receive any value from your new RSUs.
If your employment or service with Tenon terminates (whether voluntarily or involuntarily) prior to the date your new RSUs are scheduled to vest, you will not receive the shares subject to those new RSUs. Instead, your new RSUs will expire immediately upon your termination of continuous service, within the meaning of the 2022 Plan and applicable RSU agreement. As a result, you would not receive full value (or potentially, any value) from your new RSUs. See Section 9 of this Offer to Exchange entitled “Source and Amount of Consideration; Terms of New RSUs” for more information.
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If your provision of continuous service to us terminates for any reason in the second or third month of a quarterly vesting period, your RSUs will vest to a lesser extent than if they vested monthly and you will not receive as many shares of Tenon common stock.
In most cases your Eligible Options vest on a monthly basis after the one year anniversary, however, the new RSUs you will receive in the Option Exchange will vest on a quarterly basis after the one year anniversary. Therefore, if your service or employment to us terminate during the second or third month of a quarterly vesting period for your RSUs you will not receive any shares of Tenon common stock for the first, second or third vesting months of such period that you would have otherwise received if the vesting schedule was on a monthly basis. As an example, if 150 of your RSUs vest on September 1 and your employment or service terminates on August 25, your RSUs would not vest after June 1 and you would not receive any of the 150 shares of Tenon common stock you would have received if your employment or service had not terminated prior to September 1. However, if your RSUs vested on a monthly basis you would have received in aggregate 100 shares of Tenon common stock related to the July 1 and August 1 vesting dates. Therefore, the change from monthly to quarterly vesting could result in you losing up to two months of vesting on your RSUs and the number shares applicable to those two months.
The Option Exchange currently is expected to remain open for less than thirty (30) calendar days. If the offering period is extended, even if you choose not to participate in the Option Exchange, the holding periods required to be eligible for favorable tax treatment for your existing Eligible Options that are Incentive Stock Options will restart.
Generally, if your Eligible Options are Incentive Stock Options, they may qualify for favorable tax treatment if you hold them for more than two (2) years after the grant date and for more than one (1) year after the date of exercise. Under the U.S. tax rules governing Incentive Stock Options, if an offer to modify an Incentive Stock Option remains outstanding for thirty (30) or more calendar days, then the Incentive Stock Option is deemed modified regardless of whether you participate in the offer. The Option Exchange currently is expected to remain open for less than thirty (30) calendar days, and therefore should not result in a modification of your Incentive Stock Options, but if we decide to extend the Option Exchange for business or other reasons, a modification may result.
In the event of a deemed modification, your Eligible Options may continue to be Incentive Stock Options depending on the application of certain limits on Incentive Stock Options under US. Tax rules, but the date of grant for purposes of the Incentive Stock Option holding periods applicable to such Eligible Options will be the date the Option Exchange commenced (April 8, 2024). Therefore, in order to receive favorable tax treatment with respect to such Eligible Options in the event of a deemed modification, you must not dispose of the shares received from the exercise of the Eligible Options within two (2) years from the date the Option Exchange commenced (April 8, 2024) or within one (1) year from the date of exercise.
For more detailed information, please read the rest of this Offer to Exchange, and see the tax disclosure set forth under Section 14 of “The Offer to Exchange” below.
The Option Exchange may have tax ramifications to you.
If you are a U.S. taxpayer and participate in the Option Exchange, you will be required under current U.S. law to recognize income for U.S. federal income tax purposes and possibly state income tax purposes at the time of the exchange if the RSU’s are vested at that time. If the RSU’s are not vested at that time, you generally will have taxable ordinary income when the new RSUs vest and the shares underlying your new RSUs are issued to you, at which time Tenon generally also will have a tax withholding obligation and you will be required to provide Tenon with cash sufficient for it to meet your share of that obligation or Tenon will be required to sell a sufficient number of RSU shares otherwise due to you in order to raise the cash needed to meet your share of that obligation. You also may have taxable capital gains when you sell the shares underlying the new RSUs. Note that the tax treatment of new RSUs differs significantly from the tax treatment of your exchanged options, and as a result of your participation in this offer, your tax liability could be higher than if you had kept your exchanged options. Please see Section 14 of the Offer to Exchange entitled “Material Income Tax Consequences” for a discussion of the general tax consequences associated with exchanged options.
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Risks that are Related to Our Business and Common Stock
You should carefully review the risk factors contained in our periodic and other reports filed with the SEC, including those in our Annual Report on Form 10-K for the year ended December 31, 2023, and also the other information provided in this Offer to Exchange (including the Schedules to this Offer to Exchange) and the other materials that we have filed with the SEC, before making a decision on whether to surrender your eligible stock options for exchange. You may access these filings electronically at the SEC’s website at www.sec.gov or on our Investor Relations website at ir.tenonmed.com. In addition, upon request we will provide you with a copy of any or all of the documents to which we have referred you (without charge to you). See Section 17 entitled “Additional Information” for more information regarding reports we filed with the SEC and how to obtain copies of or otherwise review these reports.
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THE OFFER TO EXCHANGE
INDEX OF THE OFFER TO EXCHANGE
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Section |
Title |
Page |
||
|
1. |
22 |
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2. |
Types of Awards Granted in the Option Exchange; Number of New RSUs; Completion Date |
23 |
||
|
3. |
Purposes of the Option Exchange and Reasons for Structure of the Option Exchange. |
23 |
||
|
4. |
24 |
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5. |
27 |
|||
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6. |
28 |
|||
|
7. |
28 |
|||
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8. |
30 |
|||
|
9. |
30 |
|||
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10. |
32 |
|||
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11. |
33 |
|||
|
12. |
34 |
|||
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13. |
35 |
|||
|
14. |
35 |
|||
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15. |
38 |
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16. |
38 |
|||
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17. |
38 |
|||
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18. |
39 |
|||
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SCHEDULE A: Information Concerning the Executive Officers and Directors of Tenon Medical, Inc. |
40 |
|||
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SCHEDULE B: Summary Financial Information of Tenon Medical, Inc. |
41 |
|||
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The following represents the Offer to Exchange. You should read carefully this entire Offer to Exchange, the Summary Term Sheet and Questions and Answers, the Election Terms and Conditions and other attached exhibits together with their associated instructions, and the other related documents referenced in this Offer to Exchange. This Offer to Exchange is made subject to the terms and conditions of these documents, which may be amended from time to time hereafter. The information in this Offer to Exchange is not complete and may not contain all of the information that is important to you. Additional important and material information is contained in the related documents referenced in this Offer to Exchange. Please review this Offer to Exchange to ensure that you are making an informed decision regarding your participation in the Option Exchange. Certain terms used in this Offer to Exchange are defined in the answer to Question 2 of the Summary Term Sheet and Questions and Answers, “What are some key terms used in the Option Exchange?”
In order to participate in the Option Exchange, you must be an Eligible Participant holding outstanding Eligible Options as of the commencement date and the completion date.
You are an Eligible Participant if you are an Eligible Participant as of the commencement date and you remain an Eligible Participant through the completion date. You will not be an Eligible Participant for purposes of this offer if you cease to be an Eligible Participant for any reason prior to the completion of the Option Exchange, including a termination of your employment or service by reason of retirement, disability, death or for cause. You will also not be considered to be an Eligible Participant if you are (i) on a leave that will result in a termination of employment with Tenon, (ii) have provided a notice of resignation to Tenon; or (iii) have received a notice of termination of employment or service from Tenon, in each case even if such resignation or termination will not take effect until following the completion of the Option Exchange.
To receive a grant of new RSUs, you must remain an Eligible Participant through the completion date. If you do not remain an Eligible Participant through the completion date, you will keep your current Eligible Options and they will vest and expire in accordance with their existing terms. If the offering period is extended and the completion date delayed, then the cancellation date of the exchanged options and the grant of new RSUs will be correspondingly delayed.
If you are an employee, except as provided by applicable law and/or any employment agreement between you and Tenon, your employment with Tenon remains “at-will” and can be terminated by you or your employer at any time, with or without cause or notice. Participation in Tenon’s equity plans is entirely voluntary, and the benefits afforded under the 2022 Plan do not form an employment or service contract with Tenon or any of its affiliates. The grant of new RSUs in connection with the Option Exchange is a one-time benefit and will not provide you with the right to receive any future equity award grants under Tenon’s equity plan or otherwise. In order to vest in your new RSUs and receive the shares subject to the new RSUs, you generally must provide continuous service to Tenon through each scheduled vesting date. If you cease providing continuous service to Tenon before your new RSUs vest, your new RSUs will expire unvested and you will not be issued any shares of common stock pursuant to any unvested portion of your new RSUs.
Only Eligible Options will be accepted for exchange in the Option Exchange. An “Eligible Option” must meet all of the following criteria:
• the options were granted under the 2022 Plan or the 2012 Plan prior to April 8, 2024, the commencement date of this Offer to Exchange;
• the option is held by an Eligible Participant;
• the option is outstanding and unexercised as of the completion date;
• the option is properly elected to be exchanged; and
• the election to exchange the option is not validly withdrawn before 11:59 p.m., Eastern Time, on the completion date.
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Section 2. Types of Awards Granted in the Option Exchange; Number of New RSUs; Completion Date.
Tenon will be granting new RSUs to Eligible Participants in exchange for the cancellation of Eligible Options. If you elect to participate in the Option Exchange, you will receive new RSUs in exchange for the cancellation of your Eligible Options.
Fractional RSUs will be rounded up to the nearest whole RSU on a grant-by-grant basis. Fractional RSUs will not be granted in the Option Exchange.
Participation in this offer is completely voluntary. You may decide which of your Eligible Options you wish to exchange. If you hold more than one Eligible Option grant, you may choose to exchange one or more Eligible Option grants without having to exchange all of your Eligible Option grants. If you elect to participate in the Option Exchange, you must exchange all of the shares subject to any individual Eligible Option grant that you choose to exchange. We are not accepting partial tenders of Eligible Option grants. However, if you elect to participate in this offer with respect to any partially exercised Eligible Option grant, you must exchange the entire remaining portion of such Eligible Option grant.
For example (and except as otherwise described below), if you hold (i) an Eligible Option grant to purchase 1,000 shares, 700 of which you have already exercised, (ii) an Eligible Option grant to purchase 1,000 shares, and (iii) an Eligible Option grant to purchase 3,000 shares, you may choose to exchange all three Eligible Option grants, or only two of the three Eligible Option grants, or only one of the three grants, or none at all. However, you may not elect to exchange a partial amount under any Eligible Option grant (such as an election to exchange only 150 shares of the remaining 300 shares under the first Eligible Option grant).
All Eligible Options that are properly surrendered in the Option Exchange and accepted by us for exchange pursuant to this Option Exchange will be canceled as of the completion date, and Eligible Options elected for exchange will no longer be exercisable after that time. The new RSUs will be granted in exchange for the exchanged options as of the completion date.
The completion date will be 11:59 p.m., Eastern Time, on May 6, 2024 unless we extend the offer at our sole discretion. If we extend the offer, the completion date will refer to the latest time and date at which the extended offer expires. See Section 15 of this Offer to Exchange for a description of our rights to extend, terminate and amend the offer.
Section 3. Purposes of the Option Exchange and Reasons for Structure of the Option Exchange.
Purpose of the Option Exchange
Tenon believes our Eligible Participants should be rewarded when value has been created for shareholders. Tenon’s equity programs (e.g., stock options, RSUs) and offerings reinforce this “stake in the result” approach which we believe is critical to the company’s success. We have experienced a significant decline in our stock price since our initial public offering. This decline in price, as well as the impact of our 1:10 reverse stock split that was effected in November 2023, have resulted in a considerable number of Eligible Participants holding stock options that are deeply “underwater” — making them less effective as employee incentive and retention tools and therefore helpful in meeting our strategic objectives.
Tenon is offering the Option Exchange to (i) realign Eligible Participant and stockholder interests and (ii) provide a way for Eligible Participants to realize value from eligible underwater options. The Option Exchange gives Eligible Participants an opportunity to exchange certain options that are significantly “underwater” as of the commencement date for new RSUs that may provide value even if Tenon’s stock price does not increase. This approach of exchanging Eligible Options for a lesser number of new RSUs is consistent with Tenon’s current compensation strategy and provides what Tenon believes is a meaningful incentive for Eligible Participants whose options are currently underwater.
In determining how to increase the retentive and motivational value of equity awards for Eligible Participants, different alternatives were considered. The structure of the Option Exchange was chosen as it provides the further benefit of reducing the overhang represented by the outstanding Eligible Options. Although these options are not likely to be exercised as long as our stock price is lower than the applicable exercise price, they will remain on our books with the potential to dilute stockholders’ interests for up to the full term of the options unless they are surrendered or canceled. The Option Exchange will help to remedy the fact that we are obligated to recognize compensation expense for the underwater options, even though they are not providing their intended incentive and retention benefits, which we feel is not an efficient use of our resources. We also believe that the structure of the offer is in accordance with our current compensation philosophy to align equity incentives with current compensation.
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We have adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation (“Topic 718”). Under Topic 718, the Option Exchange with respect to all Eligible Options is considered a modification of those options exchanged and as a result we may be required to recognize incremental compensation expense, if any, resulting from the new RSUs granted in the Option Exchange. The incremental compensation will be measured as the excess, if any, of the fair value of each new RSU granted to Eligible Participants in exchange for the exchanged options, measured as of the date the new RSUs are granted, over the fair value of the Eligible Options exchanged for the new RSUs, measured immediately prior to the exchange. This incremental compensation expense will be recognized over the remaining requisite service period of the new RSUs. In the event that any of the new RSUs are forfeited prior to their vesting due to termination of employment or other service, any incremental compensation expense of the forfeited new RSUs will not be recognized.
Plans and Proposals
Except as otherwise disclosed in or incorporated by reference into this Offer to Exchange, while we regularly review our strategic alternatives, we presently have no plans, proposals or negotiations that relate to or would result in:
• any extraordinary transaction, such as a merger, reorganization or liquidation, involving us or our subsidiaries;
• any purchase, sale or transfer of a material amount of our assets;
• any material change in our present dividend rate or policy, or our indebtedness or capitalization;
• any change in our present board of directors or management, including, but not limited to, any plans or proposals to change the number or the term of directors or to change any named executive officer’s material terms of employment;
• any other material change in our corporate structure or business;
• our common stock being delisted from any national securities exchange or ceasing to be authorized for quotation in an automated quotation system operated by a national securities association;
• our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”);
• the suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act; or
• any change in our certificate of incorporation or bylaws, or any actions that may impede the acquisition of control of us by any person.
In the ordinary course of business, Tenon makes changes in the composition and structure of its Board and/or management. Tenon expects that it will continue to make changes in this regard. Also, to date Tenon has primarily financed its operations through the issuance of public and private equity, convertible securities and debt securities and expects that it will need to continue to rely on such financings in the future.
Section 4. Procedures for Electing to Exchange Options.
Proper election to exchange options
Participation in this Option Exchange is voluntary.
If you choose to participate in the Option Exchange, you must take action no later than 11:59 p.m., Eastern Time on May 6, 2024 (or such later date as may apply if the Option Exchange is extended).
You will receive an email notification from DocuSign which contains a copy of the Election Form. Prior to executing the Election Form, please do the following:
• First, you need to learn about the Offer to Exchange — what it is, and which stock options can be exchanged by reading this Offer to Exchange in full and the Statement of Eligible Options attached to the Election Form which will include for each of your Eligible Option grants:
• the grant date of such Eligible Option grant;
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• the per share exercise price of such the Eligible Option grant;
• the number of vested and unvested shares of our common stock subject to the Eligible Option grant as of May 6, 2024 (assuming vesting in accordance with the applicable vesting schedule, and no exercise or early termination occurs, through such date);
• the number of new RSUs you would receive, including the number of such RSUs that are vested and unvested; and
• the new vesting schedule applicable to the unvested RSUs that would be issued in exchange for such Eligible Option grant.
• Next, evaluate your options. You will be able to calculate how many new RSUs you would receive for your Eligible Options by dividing by two and rounding up any fraction to the next whole number on a grant-by-grant basis. Keep in mind that you can exchange some, all or none of your Eligible Option grants for new RSUs, but any exchange must be made on a grant-by-grant basis.
If you choose to participate in the Option Exchange, in order to validly tender your Eligible Options, you must properly complete and sign the Election Form via DocuSign, which will be automatically forwarded to Tenon once submitted, so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended). For subsequent withdrawals and elections, please deliver the properly completed and signed Election Form (or Notice of Withdrawal of Election Form) so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You are responsible for making sure that the Election Form is delivered as indicated above. You must allow for sufficient time to complete, sign and deliver your Election Form to ensure that we receive your Election Form before the expiration date.
You do not need to return your award agreement(s) for your Eligible Options to be cancelled and exchanged in the Option Exchange because they will be automatically cancelled effective as of the expiration date if we accept your Eligible Options for exchange. The Election Form will include a consent to be subject to the terms and conditions of the RSUs.
If you elect to exchange any portion of an individual Eligible Option grant in the Option Exchange, you must elect to exchange the entire individual Eligible Option grant. If you hold more than one individual Eligible Option grant, however, you may choose to exchange one or more of such individual Eligible Option grants, on a grant-by-grant basis, without having to exchange all of your individual Eligible Option grants. No partial exchanges of an Eligible Option grant will be permitted. If you are eligible to participate in the Option Exchange, your Statement of Eligible Options will list all of your Eligible Options.
We will accept delivery of the signed Election Form for the initial election only by DocuSign. For subsequent elections, delivery of a signed Election Form must be made by email (by PDF or similar imaged document file) delivered to cphillips@tenonmed.com. You are responsible for making sure that the Election Form is returned via DocuSign and/or delivered to this email address, as applicable. You must allow for sufficient time to complete and deliver your Election form to ensure that we receive your Election Form before the expiration date.
Your Eligible Options will not be considered tendered until we receive your properly completed and signed Election Form. We must receive your properly completed and signed Election Form before 11:59 p.m., Eastern Standard Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended). This is a one-time offer, and we will strictly enforce the offering period. We reserve the right to reject any option tendered for exchange that we determine is not in the appropriate form or that we determine is unlawful to accept. If you miss this deadline, you will not be permitted to participate in the Option Exchange.
We may extend this Option Exchange. If we extend the offering period, we will issue a press release, email or other communication disclosing the extension no later than 9:00 a.m., Eastern Time, on May 7, 2024 (the U.S. business day following the previously scheduled completion date).
You may change your mind after you have submitted an election and withdraw from the Option Exchange at any time on or before the completion date, as described in Section 5 below. You may change your mind as many times as you wish, but you will be bound by the properly submitted election we receive last on or before the completion date.
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You also may change your mind about which of your Eligible Option grants you wish to have exchanged. If you wish to include more or fewer Eligible Option grants in your election, you must complete and submit a new election on or before the completion date by following the procedures described in Section 5 below. This new election must be properly submitted after any prior elections you have submitted and must list all Eligible Option grants you wish to exchange. Any prior election will be disregarded. If you wish to withdraw some or all of the Eligible Option grants you elected for exchange, you may do so at any time on or before the completion date by following the procedures described in Section 5 below.
Your delivery of all documents regarding the Option Exchange, including elections, is at your risk. If you submit your election via DocuSign, a copy of the completed Election Form will be emailed to you from DocuSign. You should print and keep a copy of the completed Election Form for your records. The completed Election Form will provide evidence that you submitted your election. If you do not receive a completed Election Form, it is your responsibility to confirm that we have received your election. If you do not receive a completed Election Form, we recommend that you confirm that we have received your election by emailing cphillips@tenonmed.com. Only responses that are properly completed and actually received by us by the deadline through emailing cphillips@tenonmed.com will be accepted. Responses submitted by any other means, including hand delivery, interoffice, email, U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted.
This is a one-time offer, and we will strictly enforce the offering period. We reserve the right to reject any option tendered for exchange that we determine is not in the appropriate form or that we determine it is unlawful to accept. Subject to the terms and conditions of this Option Exchange, we will accept all properly tendered Eligible Option grants promptly after the expiration of this Option Exchange.
Our receipt of your election is not by itself an acceptance of your options for exchange. For purposes of this Option Exchange, we will be deemed to have accepted options for exchange that are validly elected to be exchanged and are not properly withdrawn as of the time when we give oral or written notice to the option holders generally of our acceptance of options for exchange. We may issue this notice of acceptance by press release, email or other form of communication. Options accepted for exchange will be canceled on the cancellation date, which we presently expect will be May 6, 2024.
Determination of validity; rejection of options; waiver of defects; no obligation to give notice of defects
We will determine, in our discretion, all questions about the validity, form, eligibility (including time of receipt) and acceptance of any Eligible Options. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable law to challenge such determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties. We reserve the right to reject any election of any option tendered for exchange that we determine is not in an appropriate form or that we determine is unlawful to accept. We will accept all properly tendered Eligible Options that are not validly withdrawn, subject to the terms of this Option Exchange. We also reserve the right to waive any of the conditions of the Option Exchange or any defect or irregularity in any tender of any particular options or for any particular option holder, provided that if we grant any such waiver, it will be granted with respect to all option holders and tendered options in a uniform and nondiscriminatory manner. No tender of options will be deemed to have been made properly until all defects or irregularities have been cured or waived by us. We have no obligation to give notice of any defects or irregularities in any election and we will not incur any liability for failure to give any such notice. This is a one-time offer. We will strictly enforce the offering period, subject only to an extension that we may grant in our discretion.
Our acceptance constitutes an agreement
Your election to exchange options through the procedures described above constitutes your acceptance of the terms and conditions of this Option Exchange. Our acceptance of your options for exchange will constitute a binding agreement between Tenon and you upon the terms and subject to the conditions of this Option Exchange.
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Section 5. Withdrawal Rights and Change of Election.
You may change an election you previously made with respect to some or all of your Eligible Options, including an election to withdraw all of your Eligible Options from this Option Exchange, only in accordance with the provisions of this section. You may change your mind after you have submitted an election and withdraw some or all of your elected Eligible Options from the Option Exchange at any time before the expiration of the Option Exchange, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024. If we extend the completion date, you may change or withdraw your election of tendered options at any time until the extended Option Exchange expires. In addition, under U.S. securities laws, if we have not accepted your options by 11:59 p.m., Eastern Time, on June 4, 2024 (which is the 40th U.S. business day following the commencement of the Option Exchange), you may withdraw your options at any time thereafter up to such time as Tenon does accept your properly tendered options.
To change an election you previously made with respect to some or all of your Eligible Option grants, including an election to withdraw all of your Eligible Option grants from this Option Exchange, you must deliver a valid new election indicating only the Eligible Option grants you wish to exchange in the Option Exchange or a valid new election indicating that you reject the Option Exchange with respect to all of your Eligible Options, by completing the election process via the following method outlined below on or before the expiration of the Option Exchange, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024, unless otherwise extended.
Proper election changes and withdrawals
To change an election you previously made with respect to some or all of your eligible option grants, including an election to withdraw all of your eligible options from this Option Exchange, you must deliver a valid new election indicating only the eligible option grants you wish to exchange in the Option Exchange or a valid new election indicating that you reject the Option Exchange with respect to all of your eligible options, by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign on or before the completion date, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024, unless otherwise extended.:
You may change your mind as many times as you wish, but you will be bound by the properly submitted election we receive last on or before the expiration of the Option Exchange, currently expected to be 11:59 p.m., Eastern Time, on May 6, 2024. Any options with respect to which you do not revise your election will be bound to your prior election.
If you change your election to withdraw some or all of your Eligible Option grants, you may elect later to exchange the withdrawn Eligible Option grants again by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign at any time on or before the expiration of the Option Exchange. All Eligible Option grants that you withdraw will be deemed not properly tendered for purposes of the Option Exchange, unless you subsequently properly elect to exchange such Eligible Option grants on or before the expiration of the Option Exchange. To reelect to exchange some or all of your Eligible Option grants, you must submit a new election by completing a new election on the “Election Form” page of the Option Exchange website on or before the expiration of the Option Exchange by following the procedures described in Section 4 of this Offer to Exchange. This new election must be properly submitted after your previously submitted election and must list all Eligible Option grants you wish to exchange. Upon our receipt of your properly submitted election, any prior election will be disregarded in its entirety and will be considered replaced in full by the new election. Each time you make an election on the Tenon Option Exchange website, please be sure to make an election with respect to each of your Eligible Option grants.
Neither we nor any other person is obligated to give you notice of any defects or irregularities in any election, nor will anyone incur any liability for failure to give any notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of elections. Our determination of these matters will be given the maximum deference permitted by law. However, you have all rights accorded to you under applicable law to challenge such determination in a court of competent jurisdiction. Only a court of competent jurisdiction can make a determination that will be final and binding upon the parties.
Your delivery of all documents regarding the Option Exchange, including elections, is at your risk. If you submit your election via DocuSign, a copy of the completed Election Form will be emailed to you from DocuSign. You should print and keep a copy of the completed Election Form for your records. The completed Election Form will provide evidence that you submitted your election. If you do not receive a completed
27
Election Form, it is your responsibility to confirm that we have received your election. If you do not receive a completed Election Form, we recommend that you confirm that we have received your election by emailing cphillips@tenonmed.com. Only responses that are properly completed and actually received by us by the deadline through emailing cphillips@tenonmed.com will be accepted. Responses submitted by any other means, including hand delivery, interoffice, email, U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted.
Section 6. Acceptance of Options for Exchange; Grant of New RSUs.
Upon the terms and conditions of this Option Exchange and promptly following the expiration of this Option Exchange on the completion date, we will accept for exchange and cancel all Eligible Options properly elected for exchange and not validly withdrawn before the expiration of this Option Exchange. Once the Eligible Options are canceled, you no longer will have any rights with respect to those Eligible Options. Subject to the terms and conditions of this Option Exchange, if your Eligible Options are properly tendered by you for exchange and accepted by us, these Eligible Options will be canceled as of the cancellation date, which we anticipate being May 6, 2024.
For purposes of the Option Exchange, we will be deemed to have accepted options for exchange that are validly tendered and are not properly withdrawn as of the expiration of the Option Exchange and the cancellation date. Promptly following the completion date and cancellation date, we will give oral or written notice to the option holders generally of our acceptance for exchange of the options. This notice may be made by press release, email or other method of communication. Subject to our rights to terminate the Option Exchange, discussed in Section 15 of this Offer to Exchange, we currently expect that we will accept, promptly after the expiration of this Option Exchange, all properly tendered options that are not validly withdrawn.
We will grant the new RSUs on the new RSU grant date, which is the same calendar day as the cancellation date. We expect the new RSU grant date will be May 6, 2024. All new RSUs granted to you will be granted under our 2022 Plan and will be subject to a new RSU agreement between you and Tenon. You will receive one (1) new RSU in exchange for every two (2) shares of our common stock underlying Eligible Options that are exchanged. You should follow the same electronic procedures that ordinarily apply to any Tenon equity awards granted to you in the normal course. Your new RSUs will vest in accordance with the vesting schedule described in Section 9 of this Offer to Exchange. Please note that it may take a few weeks from the completion date for you to receive an email related to your new RSUs and for the grant of new RSUs to be reflected in your E*Trade account. Please review and accept your grant documents in your E*Trade account. If your account has not been updated for the new RSUs within a few weeks following the completion date, please contact jhanson@tenonmed.com.
Options that we do not accept for exchange will remain outstanding until they are exercised or canceled or expire by their terms and will retain their current exercise price, current vesting schedule and current term.
Section 7. Conditions of the Option Exchange.
Notwithstanding any other provision of this offer, we will not be required to accept any options tendered for exchange, and we may terminate the offer or postpone our acceptance and cancellation of any options tendered for exchange (in each case, subject to Rule 13e-4(f)(5) under the Exchange Act), if at any time on or after the commencement date and before the completion date, any of the following events shall have occurred, or shall have been determined by us, in our reasonable judgment, to have occurred:
• any general suspension of trading in, or limitation on prices for, our securities on any national securities exchange or in an over-the-counter market in the U.S.;
• the declaration of a banking moratorium or any suspension of payments in respect of banks in the U.S. or abroad;
• any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that, in our reasonable judgment, might affect the extension of credit to us by banks or other lending institutions in the U.S. or abroad;
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• in our reasonable judgment, any extraordinary or material adverse change in U.S. financial markets generally, including without limitation a decline of at least 10% in either the Dow Jones Industrial Average, the Nasdaq Index or the Standard & Poor’s 500 Index measured during any time period after the date of commencement of the offer;
• any significant change in the market price of the shares of our common stock or any changes in the general political, market, economic or financial conditions in the U.S. or abroad that have resulted or are reasonably likely to result in a material adverse effect on our business, condition (financial or other), operating results, operations or prospects or on the trading in our common stock;
• the commencement, continuation or escalation of a war or other national or international calamity which reasonably could be expected to affect materially or adversely, or to delay materially, the completion of the offer;
• if any of the situations described above existed at the time of commencement of the offer and that situation, in our reasonable judgment, deteriorates or worsens materially after commencement of the offer;
• a written threat, instituted or pending action, proceeding or litigation seeking to enjoin, make illegal or delay completion of the offer or otherwise relating in any manner, to the offer;
• any order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority and is in effect, or any statute, rule, regulation, governmental order or injunction will have been proposed, enacted, enforced or deemed applicable to us or the offer, any of which might restrain, prohibit or delay completion of the offer or impair the contemplated benefits of the offer to us (see Section 3 of this Offer to Exchange for a description of the contemplated benefits of the offer to us);
• a tender or exchange offer, other than this offer by us, for some or all of our shares of outstanding common stock, or a merger, acquisition or other business combination proposal involving us, will have been proposed, announced or made by another person or entity or will have been disclosed publicly or we will have learned that:
• any person, entity or “group” within the meaning of Section 13(d)(3) of the Exchange Act acquires more than 5% of our outstanding shares of stock, other than a person, entity or group which had publicly disclosed such ownership with the SEC prior to the date of commencement of the offer,
• any such person, entity or group which had publicly disclosed such ownership prior to such date will acquire additional shares constituting more than 1% of our outstanding shares, or
• any new group will have been formed that beneficially owns more than 5% of our outstanding shares that in our judgment in any such case, and regardless of the circumstances, makes it inadvisable to proceed with the offer or with such acceptance for exchange of Eligible Options;
• there will have occurred any change, development, clarification or position taken in generally accepted accounting principles that could or would require us to record for financial reporting purposes compensation expense against our earnings in connection with the offer, other than as contemplated as of the commencement date of this offer (as described in Section 12 of this Offer to Exchange);
• any event or events occur that have resulted or may result, in our reasonable judgment in a material impairment of the contemplated benefits of the offer to us (see Section 3 of this Offer to Exchange for a description of the contemplated benefits of the offer to us); or
• any rules or regulations by any governmental authority, Nasdaq, or other regulatory or administrative authority or any national securities exchange have been enacted, enforced, or deemed applicable to Tenon.
If any of the above events occur, we may, in our sole discretion:
• terminate the offer and promptly return all tendered Eligible Options to tendering holders;
• complete and/or extend the offer and, subject to your withdrawal rights, retain all tendered Eligible Options until the extended offer expires;
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• amend the terms of the offer; or
• waive any unsatisfied condition and, subject to any requirement to extend the period of time during which the offer is open, complete the offer.
The conditions to this offer are for our benefit. We may assert them in our sole discretion regardless of the circumstances giving rise to them before the completion date. We may waive any condition to this offer, in whole or in part, at any time and from time to time before the completion date, in our discretion, whether or not we waive any other condition to this offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights but will be deemed a waiver of our ability to assert the condition that was triggered with respect to the particular circumstances under which we failed to exercise our rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 7 may be challenged only in a court of competent jurisdiction. A nonappealable determination with respect to such matter by a court of competent jurisdiction will be final and binding upon all persons.
Section 8. Price Range of Shares Underlying the Options.
The shares of Tenon common stock underlying your options are traded on The Nasdaq Capital Market under the symbol “TNON.” The following table shows, for the periods indicated, the high and low intraday sales price per share of our shares as reported on The Nasdaq Capital Market.
|
High |
Low |
|||||
|
Fiscal Year Ended December 31, 2024 |
|
|
||||
|
Second Quarter (through April 5, 2024) |
$ |
0.952 |
$ |
0.9113 |
||
|
First Quarter |
$ |
1.7212 |
$ |
0.8306 |
||
|
Fiscal Year Ended December 31, 2023 |
|
|
||||
|
Fourth Quarter |
$ |
4.70 |
$ |
0.7680 |
||
|
Third Quarter |
$ |
13.70 |
$ |
1.43 |
||
|
Second Quarter |
$ |
23.00 |
$ |
2.50 |
||
|
First Quarter |
$ |
27.40 |
$ |
9.58 |
||
|
Fiscal Year Ended December 31, 2022 |
|
|
||||
|
Fourth Quarter |
$ |
31.10 |
$ |
11.40 |
||
|
Third Quarter |
$ |
31.00 |
$ |
12.80 |
||
|
Second Quarter |
$ |
598.90 |
$ |
19.50 |
||
|
First Quarter |
|
— |
|
— |
||
As of April 5, 2024, the last sale price of our shares, as reported on The Nasdaq Capital Market, was $0.93 per share. As of April 8, 2024, there were 3,726,974 outstanding shares of Tenon common stock.
Among other things, you should evaluate current market quotations for shares of our common stock before deciding whether or not to accept this offer.
Section 9. Source and Amount of Consideration; Terms of New RSUs.
Consideration
We will grant new RSUs in exchange for Eligible Options properly elected to be exchanged by you and accepted by us for exchange. New RSUs are equity awards under which Tenon promises to issue shares in the future, provided the vesting criteria are satisfied. Subject to the terms and conditions of this offer, upon our acceptance of your properly tendered Eligible Options, you will be entitled to receive a lesser number of new RSUs as described in Section 2 of this Offer to Exchange. Fractional RSUs will be rounded up to the nearest whole RSU or nearest whole share on a grant-by-grant basis. Fractional RSUs will not be granted in the Option Exchange. You do not have to make any cash payment to Tenon to receive your new RSUs. You also do not have to make any cash payment to Tenon to receive the shares subject to RSUs upon vesting (although tax withholding will apply to the vesting of your RSUs and, as discussed in Section 14 of this Offer to Exchange, you will be required to provide the cash needed to satisfy your share of
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withholding tax). The receipt of shares upon vesting of new RSUs will be subject to taxation as described in Section 14 of this Offer to Exchange. In addition, you may incur brokerage and/or wire fees if you sell shares of Tenon common stock issued to you upon vesting of new RSUs.
If we receive and accept tenders from Eligible Participants of all options eligible to be tendered, options to purchase an aggregate of 90,987 shares would be surrendered and we will grant new RSUs covering a total of approximately 49,497 shares of Tenon common stock.
The following description summarizes the material terms of the 2022 Plan. Our statements in this Offer to Exchange concerning the 2022 Plan and the new RSUs are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, the 2022 Plan, the form of RSU agreement under the 2022 Plan and the form of option agreement under the 2022 Plan. Each of these documents is included as an exhibit to the Schedule TO, which is available on the SEC website at www.sec.gov and our website at the investor section under Financials — SEC filings (ir.tenonmed.com/financials/sec-filings). We will promptly furnish you copies of these documents upon request at our expense.
2022 Equity Incentive Plan
In January and February of 2022 our board of directors and our shareholders approved our 2022 Plan. The 2022 Plan governs equity awards to our employees, non-employee directors, directors, officers, consultants and other eligible participants. Initially, the maximum number of shares of our common stock that may be subject to awards under the 2022 Plan are equal to (i) 1,600,000 plus (ii) the lesser of (a) 750,000 shares of our common stock and (b) the number of shares of our common stock subject to awards granted under the 2012 Plan that after the 2012 Plan is terminated are cancelled, expired or otherwise terminated without having been exercised in full, are tendered to or withheld by the Company for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by the Company due to failure to vest. The maximum number of shares that are subject to awards under the 2022 is subject to an annual increase equal to the lesser of (i) 1,100,000 shares of our common stock; (ii) a number of shares of our common stock equal to 4% of the prior year’s maximum number or (iii) such number of shares of our common stock as determined by the 2022 Plan administrator.
The types of awards permitted under the Plans include nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards. Each option shall be exercisable at such times and subject to such terms and conditions as the Board may specify.
The Board of Directors has the power to amend, suspend or terminate the Plans without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of our common stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year.
General Terms of New RSUs
New RSUs will be granted under the 2022 Plan and will be subject to an RSU agreement between you and Tenon. RSUs are a different type of equity award than stock options and, therefore, the terms and conditions of the RSUs will vary from the terms and conditions of the Eligible Options that you tendered for exchange. You should also note that the vesting schedule of your new RSUs will differ from your exchanged options, as described below.
Options represent the right to purchase shares of Tenon common stock at a fixed price for a specified term (generally ten years from the date of grant, subject to earlier termination in the event of your termination of employment or service). Each new RSU will represent a right to receive one share of Tenon’s common stock on a specified future date but only if the new RSU vests. Your RSUs will not have a cash purchase price and you do not have to make any cash payment to Tenon to receive your new RSUs or the shares upon vesting, though the receipt of shares may be subject to taxation and withholding requirements.
New RSUs granted in the Option Exchange will have the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be that (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior
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to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. In addition, to the extent that any exchanged Eligible Option is subject to any portion of an initial one year vesting period, the new RSU granted in exchange will for such option will be subject to such initial vesting period. New RSUs granted in the Option Exchange will only vest if the holder remains an Eligible Participant who is eligible for vesting under the terms and conditions of the applicable RSU agreement, the relevant terms of the 2022 Plan and the RSU agreement.
New RSUs generally may not be transferred, other than by will or the laws of descent and distribution, unless indicated otherwise in your RSU agreement. In the event of your death, any person who acquires your new RSUs by bequest or inheritance may be issued the shares subject to the new RSUs if vested or exercised, respectively.
Registration and Sale of Shares Underlying New RSUs
All of the shares of our common stock issuable upon the vesting of the new RSUs have been registered under the Securities Act of 1933, as amended (the “Securities Act”) on registration statements on Form S-8 filed with the SEC. Unless you are an employee who is considered an affiliate of Tenon for purposes of the Securities Act, you will be able to sell the shares issuable upon vesting of your RSUs free of any transfer restrictions under applicable U.S. securities laws.
U.S. Federal Income Tax Consequences
You should refer to Section 14 of this Offer to Exchange for a discussion of the U.S. federal income tax consequences of the new RSUs and exchanged options, as well as the consequences of accepting or rejecting this offer. If you are a citizen or tax resident of the U.S. and are also subject to the tax laws of another non-U.S. jurisdiction, you should be aware that there might be other tax and social insurance contribution consequences that may apply to you. Certain Eligible Participants may be subject to the tax laws in the U.S. and to the tax laws in other jurisdictions. We strongly recommend that you consult with your personal legal counsel, accountant, financial, and/or tax advisor(s) to discuss the consequences to you of this transaction.
Section 10. Information Concerning Tenon
General
Tenon is a medical device company formed in Delaware in 2012, that has developed The Catamaran™ SI Joint Fusion System (the “Catamaran System”) that offers a novel, less invasive approach to the sacroiliac joint (the “SI Joint”) using a single, robust, titanium implant for treatment of the most common types of SI Joint disorders that cause lower back pain. The Company received U.S. Food and Drug Administration clearance in 2018 for the Catamaran System and is currently focused on the US market. Since the national launch of the Catamaran System in October 2022, the Company is focused on three commercial opportunities: 1) Primary SI Joint procedures, 2) Revision procedures of failed SI Joint implants and 3) SI Joint fusion adjunct to a spine fusion construct.
On April 27, 2022, we became a publicly traded company with our common stock traded on The Nasdaq Capital Market under the ticker symbol “TNON.” The address and phone number for our principal executive offices are: 104 Cooper Court, Los Gatos, CA 95032; (408) 649-5760. Our website is located at www.tenonmed.com. Information contained on our website is not a part of the Offer to Exchange.
Availability of Reports and Other Information
We are subject to the informational filing requirements of the Exchange Act, which obligate us to file reports, statements and other information with the SEC relating to our business, financial condition and other matters. Information, as of particular dates, concerning our directors and officers, their remuneration, options granted to them, the principal holders of our securities and any material interest of these persons in transactions with us is required to be disclosed in proxy statements distributed to our stockholders and filed with the SEC. As required by Exchange Act Rule 13e-4(c)(2), we have also filed with the SEC the Schedule TO, which includes additional information relating to the Option Exchange.
32
These reports, statements and other information, including the Schedule TO and documents incorporated by reference, are available to the public on the SEC’s site at www.sec.gov. This website address is not intended to function as a hyperlink, and the information contained on the SEC’s website is not incorporated by reference in this Offer to Exchange and it should not be considered to be a part of this Offer to Exchange.
Incorporation by Reference
The rules of the SEC allow us to “incorporate by reference” information into this document, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The following documents contain important information about us, and we incorporate them by reference (other than any portions of the respective filings that were furnished to, rather than filed with, the SEC under applicable SEC rules):
|
SEC Filings |
Date Filed |
|
|
Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”) |
March 29, 2024 |
|
|
Current Reports on Form 8-K |
April 1, 2024, March 14, 2024, February 22, 2024; January 31, 2024; January 11, 2024; January 10, 2024 |
Any statement contained in any document incorporated by reference into this Offer to Exchange shall be deemed to be modified or superseded to the extent that an inconsistent statement is made in this Offer to Exchange or any subsequently filed document. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Offer to Exchange.
You can obtain any of the documents incorporated by reference in this document from us or from the SEC’s website at the address described above. Documents incorporated by reference are available from us without charge, excluding any exhibits to those documents, at our principal executive offices located at Secretary, Tenon Medical, Inc., 104 Cooper Court, Los Gatos, CA 95032. Please be sure to include your complete name and address in your request. If you request any incorporated documents, we will promptly mail them to you by first class mail, or another equally prompt means. You may also find additional information by visiting our website at www.tenonmed.com. Information on our website does not form part of the Option Exchange and is not incorporated by reference in this Offer to Exchange.
We had a book value of $0.30 per share as of December 31, 2023 (calculated using the book value of $0.8 million as of December 31, 2023, divided by the number of outstanding shares of 2,600,311 as of December 31, 2023).
Section 11. Interests of Directors and Executive Officers; Transactions and Arrangements Concerning Our Securities.
A list of our current directors and executive officers as of April 8, 2024 is attached to this Offer to Exchange as Schedule A. Our executive officers may participate in the Option Exchange. As of April 8, 2024, our executive officers and directors (8 persons) as a group held options unexercised and outstanding options under our 2022 Plan to purchase a total of 54,739 of our shares and 55,415 RSUs, which collectively represented approximately 52% of the shares subject to all equity awards outstanding under our 2022 Plan as of that date.
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The table below sets forth the beneficial ownership of each of our non-employee directors, executive officers and our directors and executive officers as a group of options and RSUs granted under the 2022 Plan and outstanding as of April 8, 2024. The percentages in the tables below are based on the total number of outstanding options (i.e., whether or not eligible for exchange) and RSUs under our 2022 Plan, which was 91,237 and 122,095, respectively, as of April 8, 2024.
|
Name of Beneficial Owner |
Title |
Number of |
Percentage |
Number of |
Percentage |
|||||||
|
Officers and Directors |
|
|
||||||||||
|
Steven M. Foster |
Chief Executive Officer and President |
11,250 |
12 |
% |
10,874 |
9 |
% |
|||||
|
Richard Ginn |
Chief Technology Officer |
6,200 |
7 |
% |
22,551 |
18 |
% |
|||||
|
Steven Van Dick |
EVP, Finance and Admin and Chief Financial Officer |
9,109 |
10 |
% |
4,566 |
4 |
% |
|||||
|
Richard Ferrari |
Chairman of the Board |
27,326 |
30 |
% |
13,698 |
11 |
% |
|||||
|
Kristine M. Jacques |
Director |
— |
— |
% |
— |
— |
% |
|||||
|
Ivan Howard |
Director |
— |
— |
% |
1,242 |
1 |
% |
|||||
|
Robert K. Weigle |
Director |
— |
— |
% |
1,242 |
1 |
% |
|||||
|
Stephen H. Hochschuler, M.D. |
Director |
854 |
1 |
% |
1,242 |
1 |
% |
|||||
|
Officers and Directors as a Group (total of 8 persons) |
54,739 |
60 |
% |
55,415 |
45 |
% |
||||||
Except as otherwise described in this Offer to Exchange or in our filings with the SEC, and other than outstanding options to purchase our shares of common stock or RSUs granted from time to time to our executive officers and directors under our 2022 Plan, neither we nor, to the best of our knowledge, any of our executive officers or directors is a party to any agreement, arrangement or understanding with respect to any of our securities, including, but not limited to, any agreement, arrangement or understanding concerning the transfer or the voting of any of our securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations.
Except as otherwise described in this Offer to Exchange or in our filings with the SEC, and other than outstanding options to purchase our shares of common stock or RSUs granted from time to time to our executive officers and directors under our equity plans, neither we nor, to the best of our knowledge, any of our executive officers or directors is a party to any agreement, arrangement or understanding with respect to any of our securities, including, but not limited to, any agreement, arrangement or understanding concerning the transfer or the voting of any of our securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations.
Section 12. Status of Options Acquired by Us in the Option Exchange; Accounting Consequences of the Option Exchange.
Exchanged options that we acquire through the Option Exchange will be canceled and the shares of our common stock subject to those options will be returned to the pool of shares of our common stock available for grants of awards under the 2022 Plan, including any new RSUs granted under the Option Exchange. To the extent shares returning to the 2022 Plan are not fully reserved for issuance upon receipt of the new RSUs to be granted in connection with the Option Exchange, the shares will be available for issuance pursuant to future equity awards to employees, non-employee directors and other eligible 2022 Plan participants without further stockholder action.
We have adopted the provisions of FASB Topic 718. Under Topic 718, the Option Exchange with respect to all Eligible Options is considered a modification of those options exchanged and as a result we may be required to recognize incremental compensation expense, if any, resulting from the new RSUs granted in the Option Exchange. The incremental compensation will be measured as the excess, if any, of the fair value of each new RSU granted to Eligible Participants in exchange for the exchanged options, measured as of the date the new RSUs are granted, over
34
the fair value of the Eligible Options exchanged for the new RSUs, measured immediately prior to the exchange. This incremental compensation expense will be recognized over the remaining requisite service period of the new RSUs. In the event that any of the new RSUs are forfeited prior to their vesting due to termination of employment or other service, any incremental compensation expense of the forfeited new RSUs will not be recognized.
Section 13. Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory permit that appears to be material to our business that might be affected adversely by our exchange of options and grant of new RSUs as contemplated by the Option Exchange, or any listing requirements of The Nasdaq Stock Market LLC that would be required for the acquisition or ownership of new RSUs or the shares subject thereto as contemplated herein. Should any additional approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We cannot assure you that any such approval or other action, if needed, could be obtained or what the conditions imposed in connection with such approvals would entail or whether the failure to obtain any such approval or other action would result in adverse consequences to our business. Our obligation under the Option Exchange to accept tendered options for exchange and to grant new RSUs for exchanged options is subject to the conditions described in Section 7 of this Offer to Exchange.
If we are prohibited by applicable laws or regulations from granting new RSUs on the grant date, we will not grant such new RSUs. We are unaware of any such prohibition at this time, and we will use reasonable efforts to effect the grant, but if the grant is prohibited on the grant date we will not grant the new RSUs and you will not receive any other benefit for the options you tendered and your Eligible Options will not be accepted for exchange.
Section 14. Material Income Tax Consequences.
Material U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences of the exchange of options for new RSUs pursuant to the Option Exchange for those Eligible Participants subject to U.S. federal income tax. This discussion is based on the U.S. Internal Revenue Code, its legislative history, treasury regulations promulgated thereunder and administrative and judicial interpretations as of the date of this Offer to Exchange, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of Eligible Participants. This summary does not address applicable state or local taxes to which you may be subject.
If you are a citizen or a resident of the U.S., but also are subject to the tax laws of another country, you should be aware that there might be other tax and social insurance consequences that may apply to you.
Eligible Participants who are U.S. taxpayers who exchange outstanding options for new RSUs will be required to recognize income for U.S. federal income tax purposes on the exchanged options at the time of the exchange if the RSUs are vested at that time. Please refer to the tax discussion below regarding a discussion of the tax consequences of receiving new RSUs in connection with the Option Exchange.
We strongly recommend that you consult your personal legal counsel, accountant, financial and/or tax advisor(s) with respect to the federal, state, local and foreign tax consequences of participating in the offer, as the tax consequences to you are dependent on your individual tax situation.
Restricted Stock Units
You will recognize ordinary taxable income at the time you are granted an RSU if the RSU is vested at the time of the grant. If the RSU is vested at the time of the grant, Tenon will have, with respect to employees, an obligation to withhold applicable federal and state income taxes as well as social security taxes. You may provide Tenon with the cash needed to satisfy the income tax withholding obligation and your share of the social security taxes, or E*Trade may sell shares of stock otherwise due you in order to raise the cash needed to meet the income tax withholding obligation and your share of the social security taxes.
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If the RSU is not vested at the time of the grant, you will recognize ordinary income as the RSUs vest and we deliver the shares to you, at which time Tenon generally will have an obligation to withhold applicable federal and state income taxes as well as social security taxes (and at that time you may, as described above, provide the cash needed to satisfy these obligations or E*Trade may sell shares otherwise due to you in order to raise the cash needed to satisfy these obligations).
The amount of ordinary income you recognize will equal the fair market value of the shares delivered to you. Any gain or loss you recognize upon the sale or exchange of shares that you acquire through a grant of RSUs generally will be treated as capital gain or loss and will be long-term or short-term depending upon how long you hold the shares. Shares held more than twelve (12) months are subject to long-term capital gain or loss, while shares held twelve (12) months or less are subject to short-term capital gain or loss.
We strongly recommend that you consult your personal legal counsel, accountant, financial and/or tax advisor(s) with respect to the federal, state and local tax consequences of participating in the Option Exchange.
In addition, if you are a resident of more than one country, you should be aware that there might be tax and social insurance consequences for more than one country that may apply to you. We strongly recommend that you consult with your personal legal counsel, accountant, financial and/or tax advisor(s) to discuss the consequences to you of this transaction.
Stock Options
If you are employed by us in the U.S. and participate in this Option Exchange, your Eligible Options will be exchanged for new RSUs. So that you are able to compare the tax consequences of the new RSUs to that of your Eligible Options, we have included the following summary as a reminder of the tax consequences generally applicable to options under U.S. federal tax law.
There are two types of stock options — Incentive Stock Options and Non-qualified Stock Options — and the tax treatment of each type is different. Specifically, under current U.S. tax law, there is a limit to the annual benefit a single person may receive from Incentive Stock Options, preventing more than $100,000 worth of Incentive Stock Options from becoming exercisable for the first time in a calendar year. The fair market value of the shares subject to an Incentive Stock Option for purposes of this “$100,000 rule” is determined as of the grant date for each such option. To the extent more than $100,000 of options granted as Incentive Stock Options first become exercisable in any calendar year, the options in excess of $100,000 are treated as Non-qualified Stock Options for U.S. tax purposes. This “split” is determined automatically at the time of grant and is reflected in your brokerage account and will also be reflected on the Option Exchange website. For this reason, some of your Eligible Option grants may consist entirely of one of these two types of options and some of your Eligible Option grants may consist of a mix of both types due to the application of these limits on Incentive Stock Options under U.S. tax laws.
Non-qualified Stock Options
Under current law, an option holder generally will not realize taxable income upon the grant of a Non-qualified Stock Option. When you exercise a Non-qualified Stock Option, you generally will have ordinary income to the extent that the fair market value of the shares that you receive on the date of exercise is greater than the exercise price that you pay.
Upon disposition of the shares, any gain or loss is treated as capital gain or loss. The capital gain or loss will be long-term or short-term depending on whether the shares were held for more than one year. The holding period for the shares generally will begin upon exercise. The amount of such gain or loss will be the difference between: (i) the amount realized upon the sale or exchange of the shares and (ii) the value of the shares at the time of exercise.
If you were an employee at the time of the grant of the option, any income recognized upon exercise of a Non-qualified Stock Option generally will constitute wages for which applicable federal, state and local income taxes and social security tax withholdings will be required.
Incentive Stock Options
Under current law, an option holder generally will not realize taxable income upon the grant of an Incentive Stock Option. In addition, an option holder generally will not realize taxable income upon the exercise of an Incentive Stock Option. However, the exercise of an Incentive Stock Option may affect an option holder’s alternative minimum taxable income. Upon exercise of an Incentive Stock Option, the option holder will be required to include the amount
36
equal to the excess of the fair market value of the exercised shares on the date of exercise over the exercise price as an adjustment item in the determination of any alternative minimum tax. However, if the option holder disposes of the exercised shares in the same calendar year as the date of exercise of the Incentive Stock Option, then no adjustment will be made in determining such alternative minimum tax. Except in the case of an option holder’s death or disability, if an option is exercised more than three (3) months after the option holder’s termination of employment, the option ceases to be treated as an Incentive Stock Option and is subject to taxation under the rules that apply to Non-qualified Stock Options.
If an option holder sells the option shares acquired upon exercise of an Incentive Stock Option, the tax consequences of the disposition depend upon whether the disposition is qualifying or disqualifying. The disposition of the option shares is qualifying if it is made:
• more than two (2) years after the date the Incentive Stock Option was granted (however, as discussed below under “IMPORTANT NOTE”, if the Incentive Stock Option is deemed to be “modified” by this Option Exchange then the grant date of the Incentive Stock Option will become the date that the Option Exchange commences (April 8, 2024); and
• more than one (1) year after the date the Incentive Stock Option was exercised.
If the disposition of the option shares is qualifying, any excess of the sale price of the option shares over the exercise price of the option will be treated as long-term capital gain taxable to the option holder at the time of the sale. Any such capital gain will be taxed at the long-term capital gain rate in effect at the time of sale.
If the disposition is not qualifying, which we refer to as a “disqualifying disposition,” the excess of the fair market value of the option shares on the date the option was exercised (or, if less, the amount realized on the disposition of the shares) over the exercise price will be treated as ordinary income to the option holder at the time of the disposition. Any additional gain generally will be taxable at long-term or short-term capital gain rates, depending on whether the option holder has held the shares for more than one (1) year.
IMPORTANT NOTE: To the extent the Option Exchange remains open for more than thirty (30) calendar days, then all eligible Incentive Stock Options for which the Offer to Exchange is not accepted, will be considered “modified.” This will result in a deemed re-grant of such Incentive Stock Options such that the date of grant for purposes of the two (2)-year holding period necessary to receive favorable U.S. tax treatment will restart. The Option Exchange is not currently scheduled to remain outstanding for thirty (30) calendar days or more, and therefore should not result in an automatic modification of Incentive Stock Options not exchanged, but if we decide to extend the Offer for business or other reasons, a modification may result. In the event of such a modification, your Eligible Options that are Incentive Stock Options will continue to be Incentive Stock Options, but the date of grant for purposes of the Incentive Stock Option holding periods applicable to such Eligible Options will be the date the Option Exchange commenced (April 8, 2024). Therefore, in order to receive favorable tax treatment with respect to such Eligible Options in the event of a deemed modification, you must not dispose of the shares received from the exercise of the Eligible Options within two years from the date the Option Exchange commenced (April 8, 2024) or within one (1) year from the date of exercise.
Material Non-U.S. Tax Consequences
The tax consequences for individuals employed by us or providing services to us outside of the U.S. and individuals otherwise subject to income tax and social insurance contributions outside of the U.S. may differ from the U.S. federal income tax consequences summarized above and will depend on the tax rules and regulations in the applicable jurisdiction.
We strongly recommend that you consult your personal legal counsel, accountant, financial and/or tax advisor(s) with respect to the federal, state, local and foreign tax consequences of participating in the offer.
In addition, if you are a resident of more than one country, you should be aware that there might be tax and social insurance consequences for more than one country that may apply to you. We strongly recommend that you consult with your personal legal counsel, accountant, financial and/or tax advisor(s) to discuss the consequences to you of this transaction.
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Section 15. Extension of Option Exchange; Termination; Amendment.
We reserve the right, in our sole discretion, at any time and regardless of whether or not any event listed in Section 7 of this Offer to Exchange has occurred or is deemed by us to have occurred, to extend the period of time during which the offer is open and delay the acceptance for exchange of any surrendered Eligible Options. If we elect to extend the period of time during which this offer is open, we will give you written notice of the extension and delay, as described below. If we extend the offer and delay the completion date, we also will extend your right to withdraw tenders of Eligible Options until such delayed completion date. In the case of an extension, we will issue a press release, email or other form of communication no later than 9:00 a.m., Eastern Time, on the next U.S. business day following the previously scheduled completion date. We also reserve the right, in our discretion, before the completion date to terminate or amend the offer and to postpone our acceptance and cancellation of any options elected to be exchanged if any of the events listed in Section 7 of this Offer to Exchange occurs, by giving oral or written notice of the termination or postponement to you or by making a public announcement of the termination. Our reservation of the right to delay our acceptance and cancellation of options elected to be exchanged is limited by Rule 13e-4(f)(5) under the Exchange Act, which requires that we must pay the consideration offered or return the options promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law, we further reserve the right, before the completion date, in our discretion, and regardless of whether any event listed in Section 7 of this Offer to Exchange has occurred or is deemed by us to have occurred, to amend the offer in any respect, including by decreasing or increasing the consideration offered in this offer to option holders or by decreasing or increasing the number of options being sought in this offer.
The minimum period during which the offer will remain open following material changes in the terms of the offer or in the information concerning the offer, other than a change in the consideration being offered by us or a change in amount of existing options sought, will depend on the facts and circumstances of such change, including the relative materiality of the terms or information changes. If we modify the number of Eligible Options being sought in this offer or the consideration being offered by us for the Eligible Options in this offer, the offer will remain open for at least ten U.S. business days from the date of notice of such modification. If any term of the offer is amended in a manner that we determine constitutes a material change adversely affecting any holder of Eligible Options, we promptly will disclose the amendments in a manner reasonably calculated to inform holders of Eligible Options of such amendment, and we will extend the offer’s period so that at least ten (10) U.S. business days, or such longer period as may be required by the tender offer rules, remain after such change.
For purposes of the offer, a “business day” means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern Time.
Section 16. Fees and Expenses.
We will not pay any fees or commissions to any broker, dealer or other person for soliciting the surrender of Eligible Options to be exchanged through this offer. You will be responsible for any expenses incurred by you in connection with your election to participate in the offer, including, but not limited to, any expenses associated with any personal legal counsel, accountant, financial and/or tax advisor(s) consulted or retained by you in connection with this offer.
Section 17. Additional Information.
This Offer to Exchange is part of a Tender Offer Statement on Schedule TO that we have filed with the SEC. This Offer to Exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials that we have filed with the SEC before making a decision on whether to elect to exchange your options:
1. Our Annual Report on Form 10-K for our fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024; and
2. Our Current Reports on Form 8-K filed with the SEC on April 1, 2024, March 14, 2024, February 22, 2024, January 31, 2024, January 11, 2024, and January 10, 2024,
38
You can obtain any of the documents incorporated by reference in this document from us or from the SEC’s website at the address described above. Documents incorporated by reference are available from us without charge, excluding any exhibits to those documents, at our principal executive offices located at Secretary, Tenon Medical, Inc., 104 Cooper Court, Los Gatos, CA 95032. Please be sure to include your complete name and address in your request. If you request any incorporated documents, we will promptly mail them to you by first class mail, or another equally prompt means. You may also find additional information by visiting our website at www.tenonmed.com. Information on our website does not form part of the Option Exchange and is not incorporated by reference in this Offer to Exchange.
The information contained in this Offer to Exchange about us should be read together with the information contained in the documents to which we have referred you in making your decision as to whether or not to participate in this offer.
We are not aware of any jurisdiction where the making of the offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the offer is not in compliance with any applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer will not be made to, nor will any Eligible Options be accepted from the option holders employed by us in such jurisdiction.
You should rely only on the information contained in this Offer to Exchange or documents to which we have referred you. We have not authorized anyone to provide you with different information. We are not making an offer of the new RSUs in any jurisdiction where the Offer to Exchange is not permitted. However, at our discretion, we may take actions necessary for us to make an offer to option holders in any of these jurisdictions. You should not assume that the information provided in this Offer to Exchange is accurate as of any date other than the date as of which it is shown on the first page of this Offer to Exchange. This Offer to Exchange summarizes various documents and other information. These summaries are qualified in their entirety by reference to the documents and information to which they relate.
Tenon Medical, Inc.
April 8, 2024
39
INFORMATION CONCERNING THE EXECUTIVE OFFICERS AND DIRECTORS OF TENON MEDICAL, INC.
Our executive officers and directors as of April 8, 2024 are set forth in the following table:
|
Name |
Title |
|
|
Steven M. Foster |
Chief Executive Officer and President and Director |
|
|
Richard Ginn |
Chief Technology Officer and Director |
|
|
Steven Van Dick |
EVP, Finance and Admin and Chief Financial Officer |
|
|
Richard Ferrari |
Chairman of the Board |
|
|
Ivan Howard |
Director |
|
|
Robert K. Weigle |
Director |
|
|
Stephen H. Hochschuler, M.D. |
Director |
|
|
Kristine M Jacques |
Director |
The address of each executive officer and director is:
Tenon Medical, Inc.
104 Cooper Court
Los Gatos, CA 95032
40
SUMMARY FINANCIAL INFORMATION OF TENON MEDICAL, INC.
The following summary financial information has been derived from and should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2023 and December 31, 2022 that are incorporated by reference in this document.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS INFORMATION
(In thousands, except per share amounts)
|
Years Ended |
||||||||
|
2023 |
2022 |
|||||||
|
Loss from operations |
$ |
(15,727 |
) |
$ |
(18,725 |
) |
||
|
Total other income (expense), net |
|
146 |
|
|
(192 |
) |
||
|
Net loss |
$ |
(15,581 |
) |
$ |
(18,917 |
) |
||
|
Net loss per share of common stock: |
|
|
|
|
||||
|
Basic and diluted |
$ |
(8.59 |
) |
$ |
(23.62 |
) |
||
|
Weighted-average shares of common stock outstanding: |
|
|
|
|
||||
|
Basic and diluted |
|
1,814 |
|
|
801 |
|
||
CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands)
|
December 31, |
December31, |
|||||
|
Total current assets |
$ |
3,889 |
$ |
9,347 |
||
|
Total assets |
$ |
6,345 |
$ |
11,089 |
||
|
Total current liabilities |
$ |
3,140 |
$ |
2,530 |
||
|
Total liabilities |
$ |
5,567 |
$ |
4,837 |
||
|
Total stockholders’ equity |
$ |
778 |
$ |
6,252 |
||
|
Total liabilities and stockholders’ equity |
$ |
6,345 |
$ |
11,089 |
||
41
Exhibit (a)(1)(B)
FORM OF LAUNCH EMAIL
|
To: |
||
|
From: |
cphillips@tenonmed.com |
|
|
Date: |
Friday, April 8, 2024 |
|
|
Subject: |
Launch of Stock Option Exchange |
IMPORTANT NEWS — PLEASE READ IMMEDIATELY. SHOULD YOU CHOOSE TO PARTICIPATE IN THIS OPTION EXCHANGE, YOU MUST TAKE ACTION BY 11:59 P.M., EASTERN TIME, ON May 6, 2024.
Tenon Medical, Inc. (“Tenon,” “we,” “us” or “our”) is commencing a voluntary stock option exchange for restricted stock units program (the “Option Exchange”) today, April 8, 2024. You are receiving this email because you are currently eligible to participate and exchange certain outstanding stock options for replacement restricted stock units with modified terms (“Replacement RSUs”). As an eligible participant, we encourage you to carefully read the Offer to Exchange Certain Outstanding Options for Restricted Stock Units (the “Offer to Exchange”) as well as the other offering materials contained in the Schedule TO we are filing with the Securities and Exchange Commission today (collectively, the “Offering Materials”) on www.sec.gov. These materials will help you to understand the risks and benefits of the Option Exchange and its terms and conditions. These materials will also be posted on our website at (ir.tenonmed.com/financials/sec-filings).
OPTION EXCHANGE PROCEDURES
You will receive an email notification from DocuSign which contains a copy of the election form. If you choose to participate in the Option Exchange, in order to validly tender your eligible options, you must properly complete and sign the accompanying election form via DocuSign, which will be automatically forwarded to Tenon once submitted, so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended). For subsequent withdrawals, please deliver the properly completed and signed notice of withdrawal (attached to this email) so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com. Once you have withdrawn Eligible Options, you may elect later to exchange the withdrawn Eligible Option grants again by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
ELIGIBILITY
The Option Exchange is open to Eligible Participants (as defined below) of outstanding options (the “Eligible Options”) to purchase shares of Tenon’s common stock, whether vested or unvested, that were issued under the Tenon Medical, Inc. Equity Incentive Plan or the Tenon Medical, Inc. 2012 Equity Incentive Plan.
An “Eligible Holder” refers to employees, non-employee directors and consultants that are employed or in service as of today and remain employed following the closing of the Offering Period (as described below).
EXCHANGE DETAILS
• Exchange Ratio: Eligible Options may be exchanged on a 1:2 basis, or two stock options for one Replacement RSU.
• Vesting: Replacement RSUs granted in exchange for Eligible Options will have the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be that (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. Each Eligible Participant’s vesting schedule for the RSUs it may receive for each of its Eligible Option grants is included in a Statement of Eligible Options attached to the election form included in the DocuSign email that will be sent to such Eligible Participant.
OFFERING PERIOD
Opens April 8, 2024.
Closes May 6, 2024, at 11:59 P.M., Eastern Time, unless we extend the expiration date.
HOW TO LEARN MORE
The offering period for the Option Exchange begins today. There are many things to consider when deciding whether or not to participate and we encourage you to carefully read the more detailed Offering Materials before deciding to participate. Please review the Schedule TO filed with the SEC today at www.sec.gov for more information and instructions on how to elect to participate, change a prior election and withdraw your election before the end of the offering period. If you choose to participate in the Option Exchange, for your initial election please use the election form that will be sent to via DocuSign email.
Tenon makes no recommendation as to whether you should participate in the Option Exchange. You must make your own decision whether to participate. We encourage you to speak with your financial, legal and/or tax advisors as necessary, before deciding whether to participate in the Option Exchange.
If you have any questions about the Option Exchange, please contact the Corporate Secretary at svandick@tenonmed.com or (408) 649-5761.
The Option Exchange is being made pursuant to the terms and conditions set forth in the Tenon Tender Offer Statement on Schedule TO, including the Offering to Exchange, and other related materials filed with the Securities and Exchange Commission and available to you free of charge at www.sec.gov and on our website at (ir.tenonmed.com/financials/sec-filings). You should read these written materials carefully because they contain important information about the Option Exchange, including risks related thereto.
Exhibit (a)(1)(C)
TENON MEDICAL, INC.
OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS
FOR RESTRICTED STOCK UNITS
ELECTION FORM
THE OFFER EXPIRES AT 11:59 P.M., EASTERN TIME, ON MAY 6, 2024,
UNLESS THE OFFER IS EXTENDED
Before completing and signing this election form, please make sure you received, read and understand the documents that comprise this offer to exchange certain outstanding options for restricted stock units (the “Option Exchange”), including (1) the Offer to Exchange Certain Outstanding Options for Restricted Stock Units (referred to as the “Offer to Exchange”); (2) the launch email, dated April 8, 2024, announcing this Option Exchange; and (3) this election form, together with its instructions, all of which are attached as exhibits to the Tender Offer Statement on Schedule TO filed by Tenon Medical, Inc. with the U.S. Securities and Exchange Commission on April 8, 2024 (together, the “Offer Documents”). The Option Exchange is subject to the terms of these Offer Documents, as they may be amended. The Option Exchange provides eligible participants the opportunity to exchange eligible options for one-half the number of restricted stock units (“RSUs”) with the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only difference in vesting schedules will be that the monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule as set forth in Section 9 of the Offer to Exchange. This Option Exchange expires at 11:59 p.m., Eastern Time, on May 6, 2024 (the “expiration date”), unless extended. All capitalized terms used in this election form but not defined herein shall have the meanings given in the Offer Documents. PLEASE FOLLOW THE INSTRUCTIONS ATTACHED TO THIS FORM.
In accordance with the terms outlined in the Offer Documents, if you elect to exchange your Eligible Options (as defined below), the number of RSUs you receive will be one-half of the number of Eligible Options that you elect to exchange pursuant to the Option Exchange, as described in Section 2 of the Offer to Exchange. If you participate in this Option Exchange, you may exchange Eligible Options granted to you by Tenon that remain outstanding and unexercised by the expiration date of the Option Exchange, currently expected to be May 6, 2024. New RSUs granted in the Option Exchange will have the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only differences in vesting schedules will be (i) any monthly vesting schedule of the exchanged options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. The Statement of Eligible of Eligible Options attached to this election form includes the number of RSUs you would receive in exchange for each of your Eligible Option grants, including the number of your RSUs which will be vested at the time of the grant and the vesting schedule of your unvested RSU. If you do not remain an employee of Tenon or its subsidiaries or in service to Tenon or its subsidiaries, as applicable, through the date your RSUs vest, you will not receive the shares subject to the unvested RSUs. Instead, your RSUs will expire immediately upon your termination.
“Eligible Options” refers to vested or unvested outstanding options to purchase shares of the Company’s common stock granted under the Tenon Medical, Inc. 2022 Equity Incentive Plan or the Tenon Medical 2012 Equity Incentive Plan.
BY PARTICIPATING, YOU AGREE TO ALL TERMS OF THE OPTION EXCHANGE AS SET FORTH IN THE OFFER DOCUMENTS. Please be sure to follow the instructions, which follow.
To participate in the Option Exchange, you must complete and submit your election form via DocuSign by 11:59 p.m., Eastern Time, on May 6, 2024 (unless we extend the Option Exchange). Only responses that are properly completed, signed and actually received via DocuSign by Tenon prior to the deadline will be accepted. Responses submitted by any other means, including email, hand delivery, interoffice, U.S. mail (or other post) and Federal Express (or similar delivery service), are not permitted.
If you make no election, or do not return this election form before this Option Exchange expires, you will retain your Eligible Options, subject to their original terms, and no Replacement RSUs will be granted to you.
Please submit your initial acceptance and/or rejection by completing this election form, which once submitted will automatically be forwarded to Tenon, so that we receive it before 11:59 p.m., Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended).
If you choose to subsequently withdraw from the Option Exchange and revoke your prior election to tender your Eligible Options, please deliver the properly completed and signed Notice of Withdrawal of election form to Tenon via email (by PDF or similar imaged document file) to: cphillips@tenonmed.com. The Notice of Withdrawal of election form was previously provided to you by email and is attached as an exhibit to the Offer Documents.
If you change your mind after you have submitted an election form (e.g., choose to withdraw from the Option Exchange but subsequently decide to participate in the Option Exchange), you may elect later to exchange the withdrawn Eligible Option grants again by notifying Colleen Phillips at cphillips@tenonmed.com and requesting and completing a new Election Form be sent to you via DocuSign at any time on or before the expiration of the Option Exchange.
You may elect to exchange additional eligible option grants, fewer eligible option grants, all of your eligible option grants or none of your eligible option grants. You may change your mind as many times as you wish, but you will be bound by the last properly submitted election form we receive before the expiration of the Option Exchange.
Please check the appropriate box:
¨ Yes, I wish to participate in the Option Exchange as to ALL of my eligible option grants.
All of my eligible options will be cancelled irrevocably on the cancellation date, currently expected to be (enter date), 2024.
¨ Yes, I wish to participate in the Option Exchange as to my eligible option grants listed below (please list by date of grant):
(Previously submitted election forms, if any, will be disregarded upon submitting a new, properly completed election form. As a result, any new election form must indicate all eligible option grants you wish to exchange in the Option Exchange.)
Option Grant
Number of Shares: ______________
Grant Date: _____________
My eligible option grants that are specifically listed above will be canceled irrevocably on the cancellation date, currently expected to be (enter date), 2024.
OR
¨ No, I wish to REJECT the offer with respect to all of my eligible option grants.
If I previously have accepted the offer with respect to some or all of my eligible options, this will act as a withdrawal of that acceptance and I will not participate in the Option Exchange.
I understand that this election form will replace in its entirety any election I previously submitted.
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SUBMIT THIS ELECTION FORM NO LATER THAN 11:59 P.M., EASTERN TIME,
ON MAY 6, 2024 (UNLESS THE OFFER IS EXTENDED).
Election Terms & Conditions
1. I agree that my decision to accept or reject the Option Exchange with respect to some or all of my eligible option grants is entirely voluntary and is subject to the terms and conditions of the Offer to Exchange and the Offer Documents.
2. I understand that I may change my election at any time by completing and submitting a new election form no later than 11:59 p.m., Eastern Time, on May 6, 2024 (unless the Option Exchange is extended), and that any election form submitted and/or received after such time will be void and of no further force and effect.
3. If my employment or other service with Tenon or its subsidiaries terminates before the Option Exchange expires, I understand that my exchange election will be cancelled and I will not receive the new RSU grant. I understand that, if this occurs, no changes will be made to the terms of my current stock options and such stock options will be treated as if I had declined to participate in the Option Exchange.
4. I understand and agree that if my employment with Tenon or any of its subsidiaries ends for any reason (whether or not in breach of local labor laws) after I receive the new RSU grant, my exchange election will have been processed and my new RSU grant will have the applicable terms and conditions, including the vesting requirements and schedule, as described in the Offer to Exchange. I further understand and agree that if I leave Tenon prior to the vesting of RSUs, my unvested RSUs will be forfeited.
5. I agree that decisions with respect to future grants under any Tenon equity compensation plan will be at the sole discretion of Tenon.
6. I agree that: (i) the Option Exchange is discretionary in nature and may be suspended or terminated by Tenon, in accordance with the terms set forth in the Offer Documents, at any time prior to the expiration of the Option Exchange; (ii) Tenon may, at its discretion, refuse to accept my election to participate; and (iii) the Option Exchange is a one-time offer that does not create any contractual or other right to receive future offers, options or benefits in lieu of offers.
7. I agree that: (i) the value of any RSUs and participation in the Option Exchange made pursuant to the Option Exchange is an extraordinary item of income which is outside the scope of my employment contract or other service contract, if any; (ii) the value of any RSUs granted pursuant to the Option Exchange is not part of normal or expected compensation for any purpose, including but not limited to purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for Tenon, any subsidiary or affiliate of Tenon or my current employer or entity with which I am engaged to provide services.
8. Neither my participation in the Option Exchange nor this election will be construed so as to grant me any right to remain in the employ of Tenon or any of its subsidiaries and will not interfere with the ability of my current employer, or applicable entity with which I am engaged to provide services, to terminate my employment or other service relationship at any time with or without cause (subject to the terms of my employment contract or other service contract, if any).
9. Neither my participation in the Option Exchange nor this election will be interpreted to form an employment or service contract or relationship with Tenon or any subsidiary or affiliate of Tenon.
10. I understand that the future value of the shares of Tenon’s common stock underlying the RSUs is unknown and cannot be predicted with certainty.
11. I acknowledge and agree that none of Tenon or a subsidiary or affiliate of Tenon, or any of their respective employees or agents, has made any recommendation to me as to whether or not I should accept the offer to exchange my eligible options and that I am not relying on any information or representation made by any such person in accepting or rejecting the offer, other than any information contained in the Offer Documents.
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12. I agree that participation in the Option Exchange is governed by the terms and conditions set forth in the Offer Documents and this election form. I acknowledge that I have received the Offer Documents and have been afforded the opportunity to consult with my own investment, legal and/or tax advisers before making this election and that I have knowingly accepted or rejected the offer. I agree that any and all decisions or interpretations of Tenon upon any questions relating to the Option Exchange and this election form will be given the maximum deference permitted by law.
13. I agree that the terms of the RSUs, if any, that I receive pursuant to the Option Exchange will be subject to the terms and conditions of the applicable RSU agreement, including any or all federal, state and local income tax, social insurance and social security liabilities or premium, payroll tax or other tax-related withholding.
14. I understand and agree that the Option Exchange and the RSUs granted pursuant to the Option Exchange are governed by the laws of the State of Delaware.
15. I may receive certain future confirmation letters or other communications from Tenon in connection with the Option Exchange, including a communication confirming that Tenon has received the election form and whether Tenon ultimately accepts or rejects this election form. If I do not receive a confirmation from Tenon, I understand that it is my responsibility to ensure that my election form has been received no later than 11:59 p.m., Eastern Time, on May 6, 2024. I understand that only responses that are properly completed, signed (electronically or otherwise), dated and actually received by Tenon by the deadline will be accepted.
(Election and Signature are Required)
¨ I acknowledge and agree with the terms and conditions stated above and as set forth in the Offer Documents comprising this Option Exchange.
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Eligible Participant Signature |
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Eligible Participant Name (Please Print) |
Eligible Participant Email Address |
[Signature Page to the Election Form]
Instructions to election form
1. EXPIRATION TIME. The Option Exchange and any rights to tender or to withdraw a tender of Eligible Options expire at 11:59 p.m., Eastern Time, on May 6, 2024. If we extend the Option Exchange, you may withdraw your Eligible Option grants at any time until the extended expiration date. In addition, although we intend to accept all validly tendered options promptly after the expiration of the Offer, due to certain requirements under U.S. securities laws, if we have not accepted your options by 11:59 p.m., Eastern Time, on June 3, 2024 (which is the 40th U.S. business day following the commencement of the Offer), you may withdraw your options at any time thereafter but prior to our acceptance.
2. DELIVERY OF ELECTION FORM. If you intend to tender Eligible Options, under the Option Exchange, a signed copy of the election form must be received by Tenon before 11:59 p.m., Eastern Time, on May 6, 2024 (or such later date as may apply if the Option Exchange is extended) by the following means:
• For the initial election, via DocuSign (sent by Tenon to you); and
• For subsequent withdrawals and elections, via email (by PDF or similar imaged document file) to: cphillips@tenonmed.com.
Your election form will be effective only upon receipt by us. You are responsible for completing the DocuSign process for your initial election and making sure that the election form for any subsequent elections is delivered to the electronic mail address indicated above. You must allow for sufficient time to complete and deliver the election form to ensure that we receive your election form on time.
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You are not required to tender any of your Eligible Options for exchange. You do not need to return your stock option agreements relating to any tendered Eligible Options, as they will be automatically cancelled if we accept your Eligible Options for exchange and grant you Replacement RSUs.
3. WITHDRAWAL OF ELECTION. Tenders of Eligible Options made under the Option Exchange may be withdrawn at any time before 11:59 p.m., Eastern Time, on May 6, 2024, unless we extend the expiration date, in which case withdrawals must be received before such later expiration date and time.
To withdraw tendered Eligible Options, you must deliver a properly completed and signed Notice of Withdrawal via email (by PDF or similar imaged document file) to: cphillips@tenonmed.com.
If you wish to rescind a withdrawal election, you must resubmit your election form before the expiration date by following the procedures described in Instruction 2 above and submitting your election form by email.
4. SIGNATURES. Your initial election must be completed via DocuSign as described above. For subsequent elections and withdrawals, please sign and date the election form and Notice of Withdrawal, as applicable. Except as described in the following sentence, this election form must be signed by the Eligible Participant who holds the Eligible Options to be tendered using the same name for such Eligible Participant as appears on the applicable stock option agreement. If the signature is by an attorney-in-fact or another person acting in a fiduciary or representative capacity, the signer’s full title and proper evidence of the authority of such person to act in such capacity must be identified on the election form.
5. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests for assistance regarding the Option Exchange (including requests for additional or hard copies of the Offer Documents or the election form) should be directed via email to svandick@tenonmed.com.
6. IRREGULARITIES. We will determine all questions as to the number of shares subject to Eligible Options tendered and the validity, form, eligibility (including time of receipt) and acceptance of any tender of Eligible Options for exchange. Subject to any order or decision by a court or arbitrator of competent jurisdiction, our determination of these matters will be final and binding on all parties. We may reject any or all tenders of Eligible Options for exchange that we determine are not in appropriate form or that we determine are unlawful to accept. We may waive any defect or irregularity in any tender with respect to any particular Eligible Options or any particular Eligible Participant before the expiration date. No Eligible Options will be accepted for exchange until the Eligible Participant exchanging the Eligible Options has cured all defects or irregularities to our satisfaction, or they have been waived by us, prior to the expiration date. Neither we nor any other person is obligated to give notice of any defects or irregularities involved in the exchange of any Eligible Options.
7. ALTERNATIVE, CONDITIONAL OR CONTINGENT OFFERS. We will not accept any alternative, conditional or contingent tenders.
8. IMPORTANT TAX INFORMATION. You should refer to Section 14 of the Offer to Exchange included in the Offer Documents, which contains important U.S. and foreign tax information. We encourage you to consult with your own financial and tax advisors if you have questions about your financial or tax situation.
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Exhibit (a)(1)(D)
TENON MEDICAL, INC.
OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS
FOR RESTRICTED STOCK UNITS
INSTRUCTIONS TO NOTICE OF WITHDRAWAL OF ELECTION FORM
If you previously elected to accept the offer by Tenon Medical, Inc. (“Tenon”) to exchange some or all of your outstanding Eligible Options for Replacement RSUs (the “Option Exchange”), subject to the terms and conditions of the Offer to Exchange Certain Outstanding Options for Restricted Stock Units (the “Offer to Exchange”), and you would like to change your election and withdraw the tender of your Eligible Options, you must complete and sign this Notice of Withdrawal of election form (this “Notice of Withdrawal”) and return it to Tenon before 11:59 p.m., Eastern Time, May 6, 2024, unless extended (the “expiration date”). Once you have completed and signed this Notice of Withdrawal, please return it to Tenon by the following means:
Return via email (by PDF or similar imaged document file) to: cphillips@tenonmed.com.
Your tendered Eligible Options will not be considered withdrawn from the Option Exchange until we receive your properly completed and signed Notice of Withdrawal. If you miss the deadline to submit the Notice of Withdrawal but remain an Eligible Participant, any previously tendered Eligible Options, will be canceled pursuant to the Option Exchange in exchange for the grant of Replacement RSUs. You must sign the Notice of Withdrawal using the same name that appears on the election form you previously submitted. If your signature is by an attorney-in-fact or another person acting in a fiduciary or representative capacity for you, the signer’s full title and proper evidence of the authority of that person to act in that capacity must be identified on this Notice of Withdrawal.
Once you have withdrawn Eligible Options, you may elect later to exchange the withdrawn Eligible Option grants again by notifying Colleen Phillips at cphillips@tenonmed.com and requesting a new Election Form be sent to you via DocuSign and completing such Election Form via DocuSign so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You should receive a confirmation of receipt after submitting your Notice of Withdrawal. If you have not received a confirmation of receipt before May 6, 2024, please contact us promptly via email at cphillips@tenonmed.com to confirm that we received your Notice of Withdrawal.
DO NOT COMPLETE AND RETURN THIS NOTICE OF WITHDRAWAL UNLESS YOU WISH TO WITHDRAW YOUR PREVIOUS TENDER OF ELIGIBLE OPTIONS, AS APPLICABLE, FOR EXCHANGE PURSUANT TO THE EXCHANGE OFFER.
TENON MEDICAL, INC.
OFFER TO EXCHANGE CERTAIN OUTSTANDING OPTIONS
FOR RESTRICTED STOCK UNITS
NOTICE OF WITHDRAWAL OF ELECTION FORM
Return via email (by PDF or similar imaged document file) to: cphillips@tenonmed.com
I previously received from Tenon Medical, Inc. (“Tenon”) the Tender Offer Statement on Schedule TO and the exhibits thereto including the Offer to Exchange Certain Outstanding Options for Restricted Stock Units (collectively, the “Offer Documents”) and the election form. I executed the election form via DocuSign (and if applicable, for subsequent elections, by email), in which I elected to tender all or some of my Eligible Options, in exchange for Replacement RSUs. By submitting this Notice of Withdrawal of election form (this “Notice of Withdrawal”), I am revoking that election and hereby withdraw from the Option Exchange with respect to my Eligible Options. All capitalized terms used in this Notice of Withdrawal but not defined herein shall have the meanings given in the Offer Documents.
I understand that, by signing this Notice of Withdrawal and delivering it to Tenon, I withdraw my acceptance of the Option Exchange with respect to all of my Eligible Options. By rejecting the Option Exchange with respect to my Eligible Options, I understand that none of my Eligible Options, will be cancelled in exchange for the grant of Replacement RSUs, and I will retain the Eligible Options not tendered in connection with the Option Exchange, subject to their existing exercise price, term, vesting schedule and other terms and conditions. I agree that Tenon has made no representations or warranties to me regarding my rejection of the Option Exchange. The withdrawal of my Eligible Options from the Option Exchange is at my sole and exclusive discretion. I agree that Tenon will not be liable for any costs, taxes, losses or damages I may incur as a result of my decision to withdraw my Eligible Options.
By signing below, I revoke my prior election to tender all of my Eligible Options.
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Exhibit (a)(1)(E)
TENON MEDICAL, INC.
FORM OF Statement of Eligible Options
[Name of Eligible Participant]
As of April 8, 2024
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Grant |
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Granted |
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Vested |
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Exhibit (a)(1)(F)
FORM OF ELECTION CONFIRMATION TO ELIGIBLE HOLDERS
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Option Exchange — Election Confirmation |
This message confirms that Tenon Medical, Inc. has received your election form for the Option Exchange. This confirmation should not, however, be construed to confirm that the election form you submitted has been properly completed or signed or that we have accepted any of your Eligible Options for exchange. If your election form has been properly completed and signed, and all eligibility requirements are otherwise met, we expect to accept all of your Eligible Options for exchange and to grant you Replacement RSUs upon the expiration date, subject to the terms and conditions of the Option Exchange. If you do not deliver a signed Notice of Withdrawal before the expiration date, and we accept your tendered Eligible Options for exchange, we will provide you with a confirmation letter promptly following the expiration date confirming that your Eligible Options have been accepted for exchange. In addition, your submission of an election form constitutes acceptance of the applicable Replacement RSU award agreement.
Your election form may be withdrawn by subsequently delivering a properly completed and signed Notice of Withdrawal at any time before 11:59 p.m., Eastern Time, on May 6, 2024, unless the Option Exchange is extended (the “expiration date”). A form Notice of Withdrawal may be found in the Option Exchange materials.
If you want to revise the selection of your Eligible Options (on a grant-by-grant basis), you may submit a new election form before the expiration date. You may change your mind as many times as you wish, but you will be bound by the last properly submitted election form we receive before the expiration of the Option Exchange. If you decide to tender a different selection of your eligible options, you may notify Colleen Phillips at cphillips@tenonmed.com and request a new Election Form be sent to you via DocuSign and complete such Election Form via DocuSign so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You should direct questions about the Option Exchange or requests for assistance (including requests for additional or paper copies of the Offer Documents, election form, Notice of Withdrawal or any other documents relating to the Option Exchange) by email to cphillips@tenonmed.com. Capitalized terms used but not otherwise defined in this email shall have the meanings set forth in the Offer to Exchange Certain Outstanding Options for Restricted Stock Units (“Offering Memorandum”) attached as an exhibit to the Tender Offer Statement on Schedule TO filed by Tenon Medical, Inc. with the U.S. Securities and Exchange Commission on April 8, 2024.
The Option Exchange is being made pursuant to the terms and conditions set forth in the Tenon Tender Offer Statement on Schedule TO, including the Offer to Exchange, and other related materials filed with the Securities and Exchange Commission and available to you free of charge at www.sec.gov. You should read these written materials carefully because they contain important information about the Option Exchange, including risks related thereto.
Exhibit (a)(1)(G)
FORM OF CONFIRMATION OF WITHDRAWAL
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Acknowledgment of Receipt of Notice of Withdrawal of Election Form |
This message confirms that Tenon Medical, Inc. has received your Notice of Withdrawal of Election Form (“Notice of Withdrawal”). This confirmation should not, however, be construed to imply that the Notice of Withdrawal or any other documents that you have submitted have been properly completed.
If your Notice of Withdrawal is properly completed and signed and timely delivered to us, you will have revoked your election submitted to us in your previous election form, solely with respect to the Eligible Options selected in your Notice of Withdrawal. You may elect later to exchange the withdrawn Eligible Option grants again by notifying Colleen Phillips at cphillips@tenonmed.com and requesting a new Election Form be sent to you via DocuSign and completing the Election Form via DocuSign so that we receive it before 11:59 p.m. Eastern Time, on May 6, 2024 (or such later date as may apply if the Offer is extended), by email (by PDF or similar imaged document file) delivered to: cphillips@tenonmed.com.
You should direct questions about the Option Exchange or requests for assistance (including requests for additional or paper copies of the Option Exchange, election form or any other documents relating to the Option Exchange) by email to svandick@tenonmed.com.
Capitalized terms used but not otherwise defined in this email shall have the meaning set forth in the Offer to Exchange Certain Outstanding Options for Restricted Stock Units attached as an exhibit to the Tender Offer Statement on Schedule TO filed by Tenon Medical with the U.S. Securities and Exchange Commission on April 8, 2024.
Exhibit (a)(1)(H)
FORM OF REMINDER EMAIL
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Option Exchange Election Reminder |
Our records show that you have not made an election to participate in Tenon Medical, Inc.’s Option Exchange. This email is to remind you that May 6, 2024 at 11:59 p.m., Eastern Time, is the final deadline to participate in the Option Exchange. To participate in the Option Exchange, you must properly sign and deliver to us an election form before the expiration date via DocuSign or email. To withdraw your prior election to participate with respect to any Eligible Options, you must properly sign and deliver a Notice of Withdrawal before the expiration date. We will not accept late submissions. You should direct questions about the Option Exchange or requests for assistance (including requests for additional or paper copies of the Offer Documents, election form, Notice of Withdrawal or any other documents relating to the Option Exchange) by email to cphillips@tenonmed.com.
There are no exceptions to this deadline. We encourage you not to wait until the last day to make your election if you wish to participate.
Your participation in the Option Exchange is completely voluntary. You are not obligated to participate in the Option Exchange. Any stock options you do not elect to surrender for exchange will not be canceled and will remain subject to their present terms.
The Option Exchange is being made pursuant to the terms and conditions set forth in the Tenon Tender Offer Statement on Schedule TO, including the Offer to Exchange, and other related materials filed with the Securities and Exchange Commission and available to you free of charge at www.sec.gov. You should read these written materials carefully because they contain important information about the Option Exchange, including risks related thereto.
Exhibit (a)(1)(I)
FORM OF CONFIRMATION OF ACCEPTANCE OF ELIGIBLE OPTIONS
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cphillips@tenonmed.com |
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Confirmation of Acceptance of Eligible Options |
Thank you for your submission of the election form pursuant to the Offer to Exchange Certain Outstanding Options for Restricted Stock Units attached to the Tender Offer Statement on Schedule TO filed by Tenon Medical, Inc. with the U.S. Securities and Exchange Commission on April 8, 2024 (the “Offer Documents”). With this letter, we confirm that Tenon Medical, Inc. has accepted all of your tendered Eligible Options for exchange in the Option Exchange. Subject to the terms and conditions of the Option Exchange, as described in the Offer Documents, your tendered Eligible Options will be cancelled and Replacement RSUs will be granted to you. Your Replacement RSUs will appear shortly in the E*Trade account, along with the RSU award agreement which you accepted by your election. If you have any questions, please contact us at cphillips@tenonmed.com. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Offer Documents.
Exhibit (a)(1)(J)
FORM OF CONFIRMATION OF REJECTION OF ELIGIBLE OPTIONS
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cphillips@tenonmed.com |
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Confirmation of Rejection of Eligible Options |
Thank you for your submission of the election form pursuant to the Tender Offer Statement on Schedule TO and the exhibits thereto including the Offer to Exchange Certain Outstanding Options for Restricted Stock Units filed by Tenon Medical, Inc. with the U.S. Securities and Exchange Commission on April 8, 2024 (the “Offer Documents”). With this letter, we are notifying you that our records indicate that you recently attempted to make an election regarding your eligible options. Unfortunately, Tenon Medical, Inc. has rejected your election because it was invalid with respect to the following number of options:
________________ options granted on _______________
Accordingly, such options will remain outstanding and subject to their current terms and conditions. For additional information regarding the rejection of your options for exchange, please contact us at cphillips@tenonmed.com. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Offer Documents.
Exhibit (a)(1)(K)
FORM OF NOTICE TO ELIGIBLE HOLDERS REGARDING EXPIRATION OF OFFER PERIOD
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cphillips@tenonmed.com |
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(date), 2024 |
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Expiration of Option Exchange |
As of 11:59 p.m., Eastern Time, on May 6, 2024, Tenon Medical, Inc.’s Offer to Exchange Certain Outstanding Options for Restricted Stock Units (the “Option Exchange”) has expired, and no additional election forms or Notices of Withdrawal may be submitted. If you are an Eligible Holder and delivered a properly completed and signed election form to tender your Eligible Options before the expiration date, and did not subsequently deliver a Notice of Withdrawal, you will receive a separate email confirming our acceptance of all of your tendered Eligible Options. Such accepted options have been cancelled and you no longer have any rights with respect to those options. You will be granted restricted stock units in exchange for the cancelled options, in accordance with the terms and conditions of the Option Exchange.
If you have any questions, please contact Tenon’s Corporate Secretary by email at svandick@tenonmed.com or by phone at (408) 649-5761.
The Option Exchange was made pursuant to the terms and conditions set forth in the Tenon Tender Offer Statement on Schedule TO, including the Offer to Exchange, and other related materials filed with the Securities and Exchange Commission are available to you free of charge at www.sec.gov and are also posted on our website at (ir.tenonmed.com/financials/sec-filings). You should read these written materials carefully because they contain important information about the Option Exchange, including risks related thereto.
Exhibit (a)(1)(L)
Option Exchange April 8, 2024
Option Exchange The Option Exchange is being made pursuant to the terms and conditions set forth in the Tenon Medical, Inc. Tender Offer Statement on Schedule TO, including the Offer to Exchange and other related materials filed with the Securities and Exchange Commission, which are available to you from Tenon Medical or at www.sec.gov. You should read these materials carefully because they contain important information about the Option Exchange, including risks related thereto.
Purpose and Description of Option Exchange Tenon Medical is offering to exchange stock options held by eligible employees, consultants and non-employee directors (“Eligible Participants”) for new restricted stock units (RSUs) (the “Option Exchange”) Tenon is offering the exchange to retain employees and provide incentives to employees and consultants Equity compensation is a key component of our incentive and long-term compensation program A large number of the outstanding stock options have an exercise price that is significantly higher than our stock price
The Option Exchange will provide value to Tenon and to employees, non-employee directors and consultants: Retention of employees, non-employee directors and consultants who are key to our success Reduction of potential stockholder dilution The Option Exchange was approved by the Tenon Board of directors on February 28, 2024
Do Not Copy, Duplicate, or Distribute | Property of Tenon Medical, Inc.
Terms of Option Exchange Who is Eligible: Current employees, consultants and non-employee directors of Tenon We estimate 29 individuals are eligible to participate in the Option Exchange Former employees, former non-employee directors, and former consultants are not eligible to participate in the Option Exchange
What Options are Eligible: All outstanding stock options held by Eligible Participants Timing of the Option Exchange: The Exchange launched on April 8, 2024 The Exchange will be open for 20 business days only and will close at 11:59 p.m. Eastern Time on May 6, 2024
After the close of the Option Exchange, stock options will not be eligible for the exchange Do Not Copy, Duplicate, or Distribute | Property of Tenon Medical, Inc.
Terms of New Restricted Stock Units Two stock options are exchanged for 1 restricted stock unit (New RSU) Regardless of whether the stock option was vested or unvested, the New RSUs granted in the Option Exchange will have the same vesting commencement date and vesting term as the options exchanged by the Eligible Participant, and the only difference in vesting schedules will be that (i) any monthly vesting schedule of the ex-changed options will be replaced with a quarterly vesting schedule and (ii) if prior to the expiration of the Option Exchange a vesting date has occurred with respect to the exchanged option grant, the first vesting date for the unvested portion of such new RSUs will be three months from the last vesting date of such options. The new quarterly vesting schedule will be included on the Statement of Eligible Options Treatment of the New RSUs on termination of employment, etc., will be the same as the exchanged option New RSUs are paid in shares of Tenon upon vesting, and are subject to tax withholding as applicable
Exchange Procedures Eligible Participants will receive the Election Form and Statement of Eligible Options via DocuSign email Complete the Election Form to exchange all eligible options or eligible options on a grant-by-grant basis (no partial exchanges of an individual grant)
The completed Election Form will be sent to the Eligible Participant’s email and cphillips@tenonmed.com Elections to exchange options can be withdrawn during the 20-day period Failure to make an election will be treated as a decision not to participate
New RSUs are granted upon the close of the Option Exchange and pursuant to award agreements and the 2022 Equity Incentive Plan Direct all questions to Steve Van Dick at 408-391-0613 or svandick@tenonmed.com
End of Presentation
Exhibit (d)(3)
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
NOTICE OF STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Stock Option Agreement, which includes the Notice of Stock Option Grant (the “Notice of Grant”), the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, the Exercise Notice, attached hereto as Exhibit B, and all other exhibits, appendices, and addenda attached hereto (the “Option Agreement”).
Participant Name:
Address:
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
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Vesting Commencement Date: |
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Exercise Price per Share: |
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Total Number of Shares Subject to Option: |
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Total Exercise Price: |
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Type of Option: |
Incentive Stock Option |
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Term/Expiration Date: |
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Vesting Schedule:
Subject to any acceleration provisions contained in the Plan, this Option Agreement or any other written agreement authorized by the Administrator between Participant and the Company (or any Parent or Subsidiary of the Company, as applicable) governing the terms of this Option, this Option will vest and be exercisable, in whole or in part, according to the following vesting schedule:
One third (1/3rd) of the Shares subject to the Option shall vest on the one (1) year anniversary of the Vesting Commencement Date, and thirty-sixth (1/36th) of the Shares subject to the Option shall vest every month thereafter (and if there is no corresponding day, on the last day of the month), subject to the Participant continuing to be engaged with the Company through each such date.
Notwithstanding the foregoing vesting schedule, 100% of the then-unvested Options subject to the Option Agreement shall immediately vest and become exercisable if, within the twelve (12) month period following a Change in Control, Participant’s status as a Service Provider is terminated by the Company other than for Cause (as defined below), death or Disability, or by the Participant for Good Reason.
For purposes of this Option Agreement, “Cause” means: (a) an unauthorized use or disclosure by the Participant of the confidential information or trade secrets of the Company or any Parent or Subsidiary of the Company, which use or disclosure causes material harm to the Company or any Parent or Subsidiary of the Company; (b) a material breach by the Participant of any agreement between the Participant and the Company or any Parent or Subsidiary of the Company, and the Participant fails to substantially remedy such condition within thirty (30) days of such breach; (c) a material failure by the Participant to comply with the written policies or rules of the Company or any Parent or Subsidiary of the Company and the Participant fails to remedy such non-compliance within thirty (30) days of such failure to comply; (d) the Participant’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof; (e) the Participant’s gross negligence or willful misconduct; (f) a continuing failure by the Participant to perform Participant’s assigned duties after receiving written notification of such failure from the Board and the Participant’s failure to remedy such condition within thirty (30) days after receiving such written
notification; or (g) a failure by the Participant to cooperate in good faith with a governmental or internal investigation of the Company (or any Parent or Subsidiary of the Company) or its directors, officers or employees, if the Company has requested the Participant’s cooperation. For purposes of this Option Agreement, “Good Reason” means Participant’s resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Participant’s express written consent: (a) a reduction in the Participant’s base salary (as in effect immediately prior to such reduction) by more than 10%; (b) a material diminution of the Participant’s authority, duties or responsibilities; or (c) a relocation of the Participant’s principal workplace by more than fifty (50) miles from the Participant’s then-present location. Participant’s resignation will not be deemed to be for Good Reason unless Participant has first provided the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date the Company receives such notice, and such condition has not been cured during such period.
Termination Period:
This Option shall be exercisable, to the extent vested, for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability. If Participant ceases to be a Service Provider due to Participant’s death or Disability, this Option shall be exercisable, to the extent vested, for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing, in the event that Participant’s status as a Service Provider is terminated by the Company (or any of its Parents or Subsidiaries, as applicable) for Cause, this Option shall terminate immediately upon such termination of Participant’s Service Provider status. Further, and notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 15 of the Plan.
By Participant’s signature and the signature of the representative of the Company below, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement, including the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, the Exercise Notice, attached hereto as Exhibit B, and all other exhibits, appendices and addenda attached hereto, all of which are made a part of this document. Participant acknowledges receipt of a copy of the Plan. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and the Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan or this Option Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address indicated below.
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PARTICIPANT |
TENON MEDICAL, INC. |
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Steve Van Dick |
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Chief Financial Officer |
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EXHIBIT A
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
TERMS AND CONDITIONS OF STOCK OPTION GRANT
1. Grant of Option.
(a) The Company hereby grants to the individual (“Participant”) named in the Notice of Stock Option Grant of this Option Agreement (the “Notice of Grant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions in this Option Agreement and the Plan, which is incorporated herein by reference. Subject to Section 20 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
(b) For U.S. taxpayers, if designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event shall the Administrator, the Company, or any Parent or Subsidiary of the Company or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
(c) For non-U.S. taxpayers, the Option will be designated as an NSO.
2. Vesting Schedule. Except as provided in Section 3, the Option awarded by this Option Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Unless specifically provided otherwise in this Option Agreement or other written agreement authorized by the Administrator between Participant and the Company or any Parent or Subsidiary of the Company, as applicable, Shares subject to this Option that are scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Option Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.
3. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will be considered as having vested as of the date specified by the Administrator.
4. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice (the “Exercise Notice”) in the form attached as Exhibit B to the Notice of Grant or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be completed by Participant and delivered to the Company, accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable Withholding Obligations (as defined below). This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable Withholding Obligations.
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No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) if Participant is a U.S. employee, surrender of other Shares which (i) shall be valued at its fair market value on the date of surrender, and (ii) must be owned free and clear of any liens, claims, encumbrances, or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
A non-U.S. resident’s methods of exercise may be restricted by the terms and conditions of any appendix to this Agreement for Participant’s country (including the Country Addendum, as defined below). The Company from time to time may engage a stock plan service provider to assist the Company with the implementation, administration, and management of the Plan and Awards granted thereunder. For clarity, the Administrator may establish procedures that require any exercise of this Option, including without limitation the method of payment of the applicable Exercise Price and any applicable Withholding Obligations, to be satisfied through such stock plan service provider.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.
7. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
8. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer or any Parent or Subsidiary of the Company to which Participant is providing services (together, the “Service Recipients”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Option, including, without limitation, (i) all federal, state, and local taxes (including Participant’s Federal Insurance Contributions Act (FICA) obligations) that are required to be withheld by any Service Recipient or other payment of tax-related items related to Participant’s participation in the Plan and legally applicable to Participant, (ii) Participant’s and, to the extent required by any Service Recipient, the Service Recipient’s fringe benefit tax liability, if any, associated with the grant, vesting, or exercise of the Option or sale of Shares, and (iii) any other Service Recipient taxes the responsibility for which Participant has, or has agreed to bear, with respect to the Option (or exercise thereof or issuance of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s sole responsibility and may exceed the amount actually withheld by the applicable Service Recipient(s). Participant further acknowledges that no Service Recipient (A) makes any representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the Option, including, but not limited to, the grant, vesting, or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends or other distributions, and (B) makes any commitment to and is under any obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to Tax Obligations in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the applicable Service Recipient(s) (or former employer, as applicable) may be required to withhold or account for Withholding Obligations (as defined below) in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares.
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(b) Tax Withholding. Pursuant to such procedures as the Administrator may specify from time to time, the applicable Service Recipient(s) will withhold the amount required to be withheld for the payment of Tax Obligations (the “Withholding Obligations”). The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit or require Participant to satisfy such Withholding Obligations, in whole or in part (without limitation), if permissible by applicable local law, by: (i) paying cash, (ii) having the Company withhold otherwise deliverable Shares having a fair market value equal to the minimum amount that is necessary to meet the withholding requirement for such Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences) (“Net Share Withholding”), (iii) withholding the amount of such Withholding Obligations from Participant’s wages or other cash compensation paid to Participant by the applicable Service Recipient(s), (iv) delivering to the Company Shares that Participant owns and that already have vested with a fair market value equal to the Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences), or (v) selling a sufficient number of such Shares otherwise deliverable to Participant, through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum amount that is necessary to meet the withholding requirement for such Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences) (“Sell to Cover”). If the Withholding Obligations are satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares exercised under the Option, notwithstanding that a number of Shares are held back solely for purposes of paying the Withholding Obligations. To the extent determined appropriate by the Administrator in its discretion, the Administrator will have the right (but not the obligation) to satisfy any Withholding Obligations by Net Share Withholding. If Net Share Withholding is the method by which such Withholding Obligations are satisfied, the Company will not withhold on a fractional Share basis to satisfy any portion of the Withholding Obligations and, unless the Company determines otherwise, no refund will be made to Participant for the value of the portion of a Share, if any, withheld in excess of the Withholding Obligations. If a Sell to Cover is the method by which Withholding Obligations are satisfied, Participant agrees that as part of the Sell to Cover, additional Shares may be sold to satisfy any associated broker or other fees. Only whole Shares will be sold pursuant to a Sell to Cover. Any proceeds from the sale of Shares pursuant to a Sell to Cover that are in excess of the Withholding Obligations and any associated broker or other fees will be paid to Participant in accordance with procedures the Company may specify from time to time.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(d) Section 409A. Under Section 409A, a stock right (such as the Option) that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004), that was granted with a per share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the fair market value of an underlying share on the date of grant (a “discount option”) may be considered “deferred compensation.” A stock right that is a “discount option” may result in (i) income recognition by the recipient of the stock right prior to the exercise of the stock right, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty, and interest tax to the recipient of the stock right. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the fair market value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination. In no event will the Company or any of its Parent or Subsidiaries have any responsibility, liability, or obligation to reimburse, indemnify, or hold harmless Participant (or any other person) in respect of this Option or any other Awards, for any taxes, penalties, or interest that may be imposed on, or other costs incurred by, Participant (or any other person) as a result of Section 409A.
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9. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation, and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of the State of Delaware.
11. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER, WHICH UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAWS IS AT THE WILL OF THE APPLICABLE SERVICE RECIPIENT AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF ANY SERVICE RECIPIENT TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER, SUBJECT TO APPLICABLE LAW, WHICH TERMINATION, UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW, MAY BE AT ANY TIME, WITH OR WITHOUT CAUSE.
12. Nature of Grant. In accepting the Option, Participant acknowledges, understands, and agrees that:
(a) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(b) all decisions with respect to future option or other grants, if any, will be at the sole discretion of the Administrator;
(c) Participant is voluntarily participating in the Plan;
(d) the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;
(e) the Option and Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(f) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted;
(g) if the underlying Shares do not increase in value, the Option will have no value;
(h) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;
(i) for purposes of the Option, Participant’s status as a Service Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if
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any), and unless otherwise expressly provided in this Option Agreement (including by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, (i) Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); and (ii) the period (if any) during which Participant may exercise the Option after such termination of Participant’s engagement as a Service Provider will commence on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s engagement agreement, if any; the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of this Option grant (including whether Participant may still be considered to be providing services while on a leave of absence and consistent with local law); and
(j) unless otherwise provided in the Plan or by the Administrator in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares.
13. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying the Option. Participant is hereby advised to consult with Participant’s own personal tax, legal, and financial advisers regarding Participant’s participation in the Plan before taking any action related to the Plan.
14. Address for Notices. Any notice to be given to the Company under the terms of this Option Agreement will be addressed to the Company at Tenon Medical, Inc., 104 Cooper Court, Los Gatos, CA 95032, or at such other address as the Company may hereafter designate in writing.
15. Successors and Assigns. The Company may assign any of its rights under this Option Agreement to single or multiple assignees, and this Option Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Option Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, successors, and assigns. The rights and obligations of Participant under this Option Agreement may be assigned only with the prior written consent of the Company.
16. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration, qualification, or rule compliance of the Shares upon any securities exchange or under any state, federal, or non-U.S. law, the tax code and related regulations or under the rulings or regulations of the U.S. Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent, or approval of the U.S. Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the exercise of the Options or the purchase by, or issuance of Shares, to Participant (or Participant’s estate) hereunder, such exercise, purchase, or issuance will not occur unless and until such listing, registration, qualification, rule compliance, clearance, consent, or approval will have been completed, effected, or obtained free of any conditions not acceptable to the Company. Subject to the terms of the Option Agreement and the Plan, the Company will not be required to issue any certificate or certificates for (or make any entry on the books of the Company or of a duly authorized transfer agent of the Company of) the Shares hereunder prior to the lapse of such reasonable period of time following the date of exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience.
17. Interpretation. The Administrator will have the power to interpret the Plan and this Option Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator nor any person acting on behalf of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Option Agreement.
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18. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to the Option awarded under the Plan or future options that may be awarded under the Plan by electronic means or require Participant to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the Company.
19. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Option Agreement.
20. Option Agreement Severable. In the event that any provision in this Option Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Option Agreement.
21. Amendment, Suspension or Termination of the Plan. By accepting this Option, Participant expressly warrants that Participant has received an Option under the Plan, and has received, read, and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended, or terminated by the Administrator at any time.
22. Country Addendum. Notwithstanding any provisions in this Option Agreement, this Option shall be subject to any special terms and conditions set forth in an appendix (if any) to this Option Agreement for any country whose laws are applicable to Participant and this Option (as determined by the Administrator in its sole discretion) (the “Country Addendum”). Moreover, if Participant relocates to one of the countries included in the Country Addendum (if any), the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum (if any) constitutes a part of this Option Agreement.
23. Modifications to the Option Agreement. This Option Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that Participant is not accepting this Option Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Option Agreement can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Option Agreement, the Company reserves the right to revise this Option Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A in connection with the Option.
24. No Waiver. Either party’s failure to enforce any provision or provisions of this Option Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Option Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.
25. Tax Consequences. Participant has reviewed with Participant’s own tax advisers the U.S. federal, state, local, and non-U.S. tax consequences of this investment and the transactions contemplated by this Option Agreement. With respect to such matters, Participant relies solely on such advisers and not on any statements or representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Option Agreement.
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EXHIBIT B
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
EXERCISE NOTICE
Tenon Medical, Inc.
104 Cooper Ct
Los Gatos, CA 95032
Attention: Stock Administration
1. Exercise of Option. Effective as of today, ___________, ___, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ___________shares of the Common Stock (the “Shares”) of Tenon Medical, Inc. (the “Company”) under and pursuant to the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated August 8, 2022, including the Notice of Stock Option Grant, and the Terms and Conditions of Stock Option Grant attached as Exhibit A thereto and other exhibits, appendices, and addenda attached thereto (the “Option Agreement”). Unless otherwise defined herein, capitalized terms used in this Exercise Notice will be ascribed the same defined meanings as set forth in the Option Agreement (or the Plan or other written agreement as specified in the Option Agreement).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any Withholding Obligations to be paid in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read, and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to the Option, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 15 of the Plan.
5. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
6. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties to the maximum extent permitted by law.
7. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of the State of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
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8. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. The Plan and the Option Agreement (including this Exercise Notice and any exhibits, appendices, and addenda attached to the Notice of Stock Option Grant of the Option Agreement) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.
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Submitted by: |
Accepted by: |
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PARTICIPANT |
TENON MEDICAL, INC. |
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Steve Van Dick |
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Chief Financial Officer |
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Date Received |
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APPENDIX A
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
COUNTRY ADDENDUM TO STOCK OPTION AGREEMENT
Unless otherwise defined herein, capitalized terms used in this Country Addendum to Stock Option Agreement (the “Country Addendum”) will be ascribed the same defined meanings as set forth in the Option Agreement of which this Country Addendum forms a part (or the Plan or other written agreement as specified in the Option Agreement).
Terms and Conditions
This Country Addendum includes additional terms and conditions that govern this Option granted pursuant to the terms and conditions of the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement to which this Country Addendum is attached (the “Option Agreement”) to the extent the individual to whom the Option was granted (“Participant”) resides and/or works in one of the countries listed below. If Participant is a citizen or resident (or is considered as such for local law purposes) of a country other than the country in which Participant is currently residing and/or working, or if Participant relocates to another country after the Option is granted, the Company, in its discretion, will determine to what extent the terms and conditions contained herein will apply to Participant.
Notifications
This Country Addendum also may include information regarding exchange controls and certain other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, and other Applicable Laws in effect in the respective countries as of August 8, 2022. Such Applicable Laws often are complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Country Addendum as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time Participant vests in or exercises the Option or sells Shares acquired under the Option.
In addition, the information contained in this Country Addendum is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Participant should seek appropriate professional advice as to how the Applicable Laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country other than the one in which Participant currently is residing and/or working, transfers residence and/or employment to another country after this Option is awarded, or is considered a resident of another country for local law purposes, the information in this Country Addendum may not apply to Participant in the same manner.
I. GLOBAL PROVISIONS APPLICABLE TO PARTICIPANTS IN ALL COUNTRIES OTHER THAN THE UNITED STATES
1. Nature of Grant. The following provisions supplement Section 12 of the Option Agreement:
(a) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose;
(b) Participant acknowledges and agrees that no Service Recipient shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise; and
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(c) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against any Service Recipient, waives Participant’s ability, if any, to bring any such claim, and releases each Service Recipient from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim.
2. Data Privacy. Participant hereby acknowledges the collection, use, and transfer, in electronic or other form, of Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Service Recipients for the exclusive purpose of implementing, administering, and managing Participant’s participation in the Plan.
Participant understands that the Company and the Service Recipient may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested, or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data may be transferred to a stock plan service provider, as may be selected by the Company in the future, assisting the Company with the implementation, administration, and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that Participant may request information about sharing, processing, and storage of Data and may exercise their rights with respect to the Data, which may include the right to terminate sharing, processing, and storage, by following instructions in the Company’s Personnel Privacy Notice or by contacting Participant’s local human resources representative. Participant authorizes the Company, any stock plan service provider selected by the Company, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering, and managing the Plan to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering, and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer, and manage Participant’s participation in the Plan.
3. Language. If Participant has received this Option Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
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Exhibit (d)(4)
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
NOTICE OF STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Stock Option Agreement, which includes the Notice of Stock Option Grant (the “Notice of Grant”), the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, the Exercise Notice, attached hereto as Exhibit B, and all other exhibits, appendices, and addenda attached hereto (the “Option Agreement”).
Participant Name:
Address:
The undersigned Participant has been granted an Option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows:
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Date of Grant: |
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Vesting Commencement Date: |
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Total Number of Shares Subject to Option: |
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Total Exercise Price: |
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Type of Option: |
Nonstatutory Stock Option |
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Term/Expiration Date: |
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Vesting Schedule:
Subject to any acceleration provisions contained in the Plan, this Option Agreement or any other written agreement authorized by the Administrator between Participant and the Company (or any Parent or Subsidiary of the Company, as applicable) governing the terms of this Option, this Option will vest and be exercisable, in whole or in part, according to the following vesting schedule:
One third (1/3rd) of the Shares subject to the Option shall vest on the one (1) year anniversary of the Vesting Commencement Date, and thirty-sixth (1/36th) of the Shares subject to the Option shall vest every month thereafter (and if there is no corresponding day, on the last day of the month), subject to the Participant continuing to be engaged with the Company through each such date.
Notwithstanding the foregoing vesting schedule, 100% of the then-unvested Options subject to the Option Agreement shall immediately vest and become exercisable if, within the twelve (12) month period following a Change in Control, Participant’s status as a Service Provider is terminated by the Company other than for Cause (as defined below), death or Disability, or by the Participant for Good Reason.
For purposes of this Option Agreement, “Cause” means: (a) an unauthorized use or disclosure by the Participant of the confidential information or trade secrets of the Company or any Parent or Subsidiary of the Company, which use or disclosure causes material harm to the Company or any Parent or Subsidiary of the Company; (b) a material breach by the Participant of any agreement between the Participant and the Company or any Parent or Subsidiary of the Company, and the Participant fails to substantially remedy such condition within thirty (30) days of such breach; (c) a material failure by the Participant to comply with the written policies or rules of the Company or any Parent or Subsidiary of the Company and the Participant fails to remedy such non-compliance within thirty (30) days of such failure to comply; (d) the Participant’s conviction of, or plea of “guilty” or “no contest” to, a felony under the laws of the United States or any State thereof; (e) the Participant’s gross negligence or willful misconduct; (f) a continuing failure by the Participant to perform Participant’s assigned duties after receiving written notification of such failure from the Board and the Participant’s failure to remedy such condition within thirty (30) days after receiving such written
notification; or (g) a failure by the Participant to cooperate in good faith with a governmental or internal investigation of the Company (or any Parent or Subsidiary of the Company) or its directors, officers or employees, if the Company has requested the Participant’s cooperation. For purposes of this Option Agreement, “Good Reason” means Participant’s resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Participant’s express written consent: (a) a reduction in the Participant’s base salary (as in effect immediately prior to such reduction) by more than 10%; (b) a material diminution of the Participant’s authority, duties or responsibilities; or (c) a relocation of the Participant’s principal workplace by more than fifty (50) miles from the Participant’s then-present location. Participant’s resignation will not be deemed to be for Good Reason unless Participant has first provided the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within ninety (90) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date the Company receives such notice, and such condition has not been cured during such period.
Termination Period:
This Option shall be exercisable, to the extent vested, for three (3) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death or Disability. If Participant ceases to be a Service Provider due to Participant’s death or Disability, this Option shall be exercisable, to the extent vested, for twelve (12) months after Participant ceases to be a Service Provider. Notwithstanding the foregoing, in the event that Participant’s status as a Service Provider is terminated by the Company (or any of its Parents or Subsidiaries, as applicable) for Cause, this Option shall terminate immediately upon such termination of Participant’s Service Provider status. Further, and notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above and this Option may be subject to earlier termination as provided in Section 15 of the Plan.
By Participant’s signature and the signature of the representative of the Company below, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement, including the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A, the Exercise Notice, attached hereto as Exhibit B, and all other exhibits, appendices and addenda attached hereto, all of which are made a part of this document. Participant acknowledges receipt of a copy of the Plan. Participant has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and the Option Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan or this Option Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address indicated below.
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PARTICIPANT |
TENON MEDICAL, INC. |
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Steve Van Dick |
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Chief Financial Officer |
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Residence Address: |
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EXHIBIT A
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
TERMS AND CONDITIONS OF STOCK OPTION GRANT
1. Grant of Option.
(a) The Company hereby grants to the individual (“Participant”) named in the Notice of Stock Option Grant of this Option Agreement (the “Notice of Grant”), an option (the “Option”) to purchase the number of Shares set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions in this Option Agreement and the Plan, which is incorporated herein by reference. Subject to Section 20 of the Plan, in the event of a conflict between the terms and conditions of the Plan and this Option Agreement, the terms and conditions of the Plan shall prevail.
(b) For U.S. taxpayers, if designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated as a Nonstatutory Stock Option (“NSO”). Further, if for any reason this Option (or portion thereof) shall not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event shall the Administrator, the Company, or any Parent or Subsidiary of the Company or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.
(c) For non-U.S. taxpayers, the Option will be designated as an NSO.
2. Vesting Schedule. Except as provided in Section 3, the Option awarded by this Option Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Unless specifically provided otherwise in this Option Agreement or other written agreement authorized by the Administrator between Participant and the Company or any Parent or Subsidiary of the Company, as applicable, Shares subject to this Option that are scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Option Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.
3. Administrator Discretion. The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will be considered as having vested as of the date specified by the Administrator.
4. Exercise of Option.
(a) Right to Exercise. This Option shall be exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery of an exercise notice (the “Exercise Notice”) in the form attached as Exhibit B to the Notice of Grant or in a manner and pursuant to such procedures as the Administrator may determine, which shall state the election to exercise the Option, the number of Shares with respect to which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company. The Exercise Notice shall be completed by Participant and delivered to the Company, accompanied by payment of the aggregate Exercise Price as to all Exercised Shares, together with any applicable Withholding Obligations (as defined below). This Option shall be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price, together with any applicable Withholding Obligations.
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No Shares shall be issued pursuant to the exercise of an Option unless such issuance and such exercise comply with Applicable Laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Participant on the date on which the Option is exercised with respect to such Shares.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of Participant:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan; or
(c) if Participant is a U.S. employee, surrender of other Shares which (i) shall be valued at its fair market value on the date of surrender, and (ii) must be owned free and clear of any liens, claims, encumbrances, or security interests, if accepting such Shares, in the sole discretion of the Administrator, shall not result in any adverse accounting consequences to the Company.
A non-U.S. resident’s methods of exercise may be restricted by the terms and conditions of any appendix to this Agreement for Participant’s country (including the Country Addendum, as defined below). The Company from time to time may engage a stock plan service provider to assist the Company with the implementation, administration, and management of the Plan and Awards granted thereunder. For clarity, the Administrator may establish procedures that require any exercise of this Option, including without limitation the method of payment of the applicable Exercise Price and any applicable Withholding Obligations, to be satisfied through such stock plan service provider.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.
7. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.
8. Tax Obligations.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, Participant’s employer or any Parent or Subsidiary of the Company to which Participant is providing services (together, the “Service Recipients”), the ultimate liability for any tax and/or social insurance liability obligations and requirements in connection with the Option, including, without limitation, (i) all federal, state, and local taxes (including Participant’s Federal Insurance Contributions Act (FICA) obligations) that are required to be withheld by any Service Recipient or other payment of tax-related items related to Participant’s participation in the Plan and legally applicable to Participant, (ii) Participant’s and, to the extent required by any Service Recipient, the Service Recipient’s fringe benefit tax liability, if any, associated with the grant, vesting, or exercise of the Option or sale of Shares, and (iii) any other Service Recipient taxes the responsibility for which Participant has, or has agreed to bear, with respect to the Option (or exercise thereof or issuance of Shares thereunder) (collectively, the “Tax Obligations”), is and remains Participant’s sole responsibility and may exceed the amount actually withheld by the applicable Service Recipient(s). Participant further acknowledges that no Service Recipient (A) makes any representations or undertakings regarding the treatment of any Tax Obligations in connection with any aspect of the Option, including, but not limited to, the grant, vesting, or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends or other distributions, and (B) makes any commitment to and is under any obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate Participant’s liability for Tax Obligations or achieve any particular tax result. Further, if Participant is subject to Tax Obligations in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges that the applicable Service Recipient(s) (or former employer, as applicable) may be required to withhold or account for Withholding Obligations (as defined below) in more than one jurisdiction. If Participant fails to make satisfactory arrangements for the payment of any required Tax Obligations hereunder at the time of the applicable taxable event, Participant acknowledges and agrees that the Company may refuse to issue or deliver the Shares.
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(b) Tax Withholding. Pursuant to such procedures as the Administrator may specify from time to time, the applicable Service Recipient(s) will withhold the amount required to be withheld for the payment of Tax Obligations (the “Withholding Obligations”). The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit or require Participant to satisfy such Withholding Obligations, in whole or in part (without limitation), if permissible by applicable local law, by: (i) paying cash, (ii) having the Company withhold otherwise deliverable Shares having a fair market value equal to the minimum amount that is necessary to meet the withholding requirement for such Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences) (“Net Share Withholding”), (iii) withholding the amount of such Withholding Obligations from Participant’s wages or other cash compensation paid to Participant by the applicable Service Recipient(s), (iv) delivering to the Company Shares that Participant owns and that already have vested with a fair market value equal to the Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences), or (v) selling a sufficient number of such Shares otherwise deliverable to Participant, through such means as the Company may determine in its sole discretion (whether through a broker or otherwise) equal to the minimum amount that is necessary to meet the withholding requirement for such Withholding Obligations (or such greater amount as Participant may elect if permitted by the Administrator, if such greater amount would not result in adverse financial accounting consequences) (“Sell to Cover”). If the Withholding Obligations are satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares exercised under the Option, notwithstanding that a number of Shares are held back solely for purposes of paying the Withholding Obligations. To the extent determined appropriate by the Administrator in its discretion, the Administrator will have the right (but not the obligation) to satisfy any Withholding Obligations by Net Share Withholding. If Net Share Withholding is the method by which such Withholding Obligations are satisfied, the Company will not withhold on a fractional Share basis to satisfy any portion of the Withholding Obligations and, unless the Company determines otherwise, no refund will be made to Participant for the value of the portion of a Share, if any, withheld in excess of the Withholding Obligations. If a Sell to Cover is the method by which Withholding Obligations are satisfied, Participant agrees that as part of the Sell to Cover, additional Shares may be sold to satisfy any associated broker or other fees. Only whole Shares will be sold pursuant to a Sell to Cover. Any proceeds from the sale of Shares pursuant to a Sell to Cover that are in excess of the Withholding Obligations and any associated broker or other fees will be paid to Participant in accordance with procedures the Company may specify from time to time.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.
(d) Section 409A. Under Section 409A, a stock right (such as the Option) that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004), that was granted with a per share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the fair market value of an underlying share on the date of grant (a “discount option”) may be considered “deferred compensation.” A stock right that is a “discount option” may result in (i) income recognition by the recipient of the stock right prior to the exercise of the stock right, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The “discount option” may also result in additional state income, penalty, and interest tax to the recipient of the stock right. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share exercise price of this Option equals or exceeds the fair market value of a Share on the date of grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share exercise price that was less than the fair market value of a Share on the date of grant, Participant shall be solely responsible for Participant’s costs related to such a determination. In no event will the Company or any of its Parent or Subsidiaries have any responsibility, liability, or obligation to reimburse, indemnify, or hold harmless Participant (or any other person) in respect of this Option or any other Awards, for any taxes, penalties, or interest that may be imposed on, or other costs incurred by, Participant (or any other person) as a result of Section 409A.
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9. Rights as Stockholder. Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares (which may be in book entry form) will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation, and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant. This Option Agreement is governed by the internal substantive laws but not the choice of law rules of the State of Delaware.
11. No Guarantee of Continued Service. PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER, WHICH UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAWS IS AT THE WILL OF THE APPLICABLE SERVICE RECIPIENT AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF ANY SERVICE RECIPIENT TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER, SUBJECT TO APPLICABLE LAW, WHICH TERMINATION, UNLESS PROVIDED OTHERWISE UNDER APPLICABLE LAW, MAY BE AT ANY TIME, WITH OR WITHOUT CAUSE.
12. Nature of Grant. In accepting the Option, Participant acknowledges, understands, and agrees that:
(a) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(b) all decisions with respect to future option or other grants, if any, will be at the sole discretion of the Administrator;
(c) Participant is voluntarily participating in the Plan;
(d) the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;
(e) the Option and Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(f) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted;
(g) if the underlying Shares do not increase in value, the Option will have no value;
(h) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;
(i) for purposes of the Option, Participant’s status as a Service Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent or Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if
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any), and unless otherwise expressly provided in this Option Agreement (including by reference in the Notice of Grant to other arrangements or contracts) or determined by the Administrator, (i) Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any, unless Participant is providing bona fide services during such time); and (ii) the period (if any) during which Participant may exercise the Option after such termination of Participant’s engagement as a Service Provider will commence on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s engagement agreement, if any; the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of this Option grant (including whether Participant may still be considered to be providing services while on a leave of absence and consistent with local law); and
(j) unless otherwise provided in the Plan or by the Administrator in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares.
13. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the Shares underlying the Option. Participant is hereby advised to consult with Participant’s own personal tax, legal, and financial advisers regarding Participant’s participation in the Plan before taking any action related to the Plan.
14. Address for Notices. Any notice to be given to the Company under the terms of this Option Agreement will be addressed to the Company at Tenon Medical, Inc., 104 Cooper Court, Los Gatos, CA 95032, or at such other address as the Company may hereafter designate in writing.
15. Successors and Assigns. The Company may assign any of its rights under this Option Agreement to single or multiple assignees, and this Option Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Option Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, successors, and assigns. The rights and obligations of Participant under this Option Agreement may be assigned only with the prior written consent of the Company.
16. Additional Conditions to Issuance of Stock. If at any time the Company will determine, in its discretion, that the listing, registration, qualification, or rule compliance of the Shares upon any securities exchange or under any state, federal, or non-U.S. law, the tax code and related regulations or under the rulings or regulations of the U.S. Securities and Exchange Commission or any other governmental regulatory body or the clearance, consent, or approval of the U.S. Securities and Exchange Commission or any other governmental regulatory authority is necessary or desirable as a condition to the exercise of the Options or the purchase by, or issuance of Shares, to Participant (or Participant’s estate) hereunder, such exercise, purchase, or issuance will not occur unless and until such listing, registration, qualification, rule compliance, clearance, consent, or approval will have been completed, effected, or obtained free of any conditions not acceptable to the Company. Subject to the terms of the Option Agreement and the Plan, the Company will not be required to issue any certificate or certificates for (or make any entry on the books of the Company or of a duly authorized transfer agent of the Company of) the Shares hereunder prior to the lapse of such reasonable period of time following the date of exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience.
17. Interpretation. The Administrator will have the power to interpret the Plan and this Option Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. Neither the Administrator nor any person acting on behalf of the Administrator will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Option Agreement.
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18. Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to the Option awarded under the Plan or future options that may be awarded under the Plan by electronic means or require Participant to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the Company.
19. Captions. Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Option Agreement.
20. Option Agreement Severable. In the event that any provision in this Option Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Option Agreement.
21. Amendment, Suspension or Termination of the Plan. By accepting this Option, Participant expressly warrants that Participant has received an Option under the Plan, and has received, read, and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended, or terminated by the Administrator at any time.
22. Country Addendum. Notwithstanding any provisions in this Option Agreement, this Option shall be subject to any special terms and conditions set forth in an appendix (if any) to this Option Agreement for any country whose laws are applicable to Participant and this Option (as determined by the Administrator in its sole discretion) (the “Country Addendum”). Moreover, if Participant relocates to one of the countries included in the Country Addendum (if any), the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Country Addendum (if any) constitutes a part of this Option Agreement.
23. Modifications to the Option Agreement. This Option Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that Participant is not accepting this Option Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Option Agreement can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Option Agreement, the Company reserves the right to revise this Option Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A in connection with the Option.
24. No Waiver. Either party’s failure to enforce any provision or provisions of this Option Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party from thereafter enforcing each and every other provision of this Option Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party’s right to assert all other legal remedies available to it under the circumstances.
25. Tax Consequences. Participant has reviewed with Participant’s own tax advisers the U.S. federal, state, local, and non-U.S. tax consequences of this investment and the transactions contemplated by this Option Agreement. With respect to such matters, Participant relies solely on such advisers and not on any statements or representations of the Company or any of its agents, written or oral. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Option Agreement.
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EXHIBIT B
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
EXERCISE NOTICE
Tenon Medical, Inc.
104 Cooper Ct
Los Gatos, CA 95032
Attention: Stock Administration
1. Exercise of Option. Effective as of today, ___________, ___, the undersigned (“Participant”) hereby elects to exercise Participant’s option (the “Option”) to purchase ___________shares of the Common Stock (the “Shares”) of Tenon Medical, Inc. (the “Company”) under and pursuant to the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated August 8, 2022, including the Notice of Stock Option Grant, and the Terms and Conditions of Stock Option Grant attached as Exhibit A thereto and other exhibits, appendices, and addenda attached thereto (the “Option Agreement”). Unless otherwise defined herein, capitalized terms used in this Exercise Notice will be ascribed the same defined meanings as set forth in the Option Agreement (or the Plan or other written agreement as specified in the Option Agreement).
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any Withholding Obligations to be paid in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read, and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to the Option, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement. No adjustment shall be made for a dividend or other right for which the record date is prior to the date of issuance except as provided in Section 15 of the Plan.
5. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
6. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall be final and binding on all parties to the maximum extent permitted by law.
7. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of the State of Delaware. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
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8. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. The Plan and the Option Agreement (including this Exercise Notice and any exhibits, appendices, and addenda attached to the Notice of Stock Option Grant of the Option Agreement) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to Participant’s interest except by means of a writing signed by the Company and Participant.
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TENON MEDICAL, INC. |
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Steve Van Dick |
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Chief Financial Officer |
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Date Received |
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APPENDIX A
TENON MEDICAL, INC.
2022 EQUITY INCENTIVE PLAN
COUNTRY ADDENDUM TO STOCK OPTION AGREEMENT
Unless otherwise defined herein, capitalized terms used in this Country Addendum to Stock Option Agreement (the “Country Addendum”) will be ascribed the same defined meanings as set forth in the Option Agreement of which this Country Addendum forms a part (or the Plan or other written agreement as specified in the Option Agreement).
Terms and Conditions
This Country Addendum includes additional terms and conditions that govern this Option granted pursuant to the terms and conditions of the Tenon Medical, Inc. 2022 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement to which this Country Addendum is attached (the “Option Agreement”) to the extent the individual to whom the Option was granted (“Participant”) resides and/or works in one of the countries listed below. If Participant is a citizen or resident (or is considered as such for local law purposes) of a country other than the country in which Participant is currently residing and/or working, or if Participant relocates to another country after the Option is granted, the Company, in its discretion, will determine to what extent the terms and conditions contained herein will apply to Participant.
Notifications
This Country Addendum also may include information regarding exchange controls and certain other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, and other Applicable Laws in effect in the respective countries as of August 8, 2022. Such Applicable Laws often are complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information in this Country Addendum as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time Participant vests in or exercises the Option or sells Shares acquired under the Option.
In addition, the information contained in this Country Addendum is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Participant should seek appropriate professional advice as to how the Applicable Laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country other than the one in which Participant currently is residing and/or working, transfers residence and/or employment to another country after this Option is awarded, or is considered a resident of another country for local law purposes, the information in this Country Addendum may not apply to Participant in the same manner.
I. GLOBAL PROVISIONS APPLICABLE TO PARTICIPANTS IN ALL COUNTRIES OTHER THAN THE UNITED STATES
1. Nature of Grant. The following provisions supplement Section 12 of the Option Agreement:
(a) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose;
(b) Participant acknowledges and agrees that no Service Recipient shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise; and
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(c) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the termination of Participant’s status as a Service Provider (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s employment or service agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against any Service Recipient, waives Participant’s ability, if any, to bring any such claim, and releases each Service Recipient from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim.
2. Data Privacy. Participant hereby acknowledges the collection, use, and transfer, in electronic or other form, of Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Service Recipients for the exclusive purpose of implementing, administering, and managing Participant’s participation in the Plan.
Participant understands that the Company and the Service Recipient may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company, details of all Options or any other entitlement to Shares awarded, canceled, exercised, vested, unvested, or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data may be transferred to a stock plan service provider, as may be selected by the Company in the future, assisting the Company with the implementation, administration, and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country of operation (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that Participant may request information about sharing, processing, and storage of Data and may exercise their rights with respect to the Data, which may include the right to terminate sharing, processing, and storage, by following instructions in the Company’s Personnel Privacy Notice or by contacting Participant’s local human resources representative. Participant authorizes the Company, any stock plan service provider selected by the Company, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering, and managing the Plan to receive, possess, use, retain, and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering, and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer, and manage Participant’s participation in the Plan.
3. Language. If Participant has received this Option Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
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