Item
1.01 Entry into a Material Definitive Agreement
Agreement
and Plan of Merger and Reorganization
On
October 18, 2022, Advaxis, Inc., a Delaware corporation (the “Company”), Doe Merger Sub, Inc., a Delaware corporation and
a wholly owned subsidiary of the Company (“Merger Sub”), and Ayala Pharmaceuticals, Inc., a Delaware corporation (“Ayala”)
entered into an Agreement and Plan of Merger (the “Merger Agreement”).
The
Merger Agreement provides, among other things, that on the terms and subject to the conditions set forth therein: (i) Merger Sub will
merge with and into Ayala, with Ayala being the surviving entity as a wholly-owned subsidiary of the Company (the “Merger”
and, collectively with the other transactions contemplated by the Merger Agreement, the “Transactions”), (ii) each share
of the common stock, par value $0.01 per share, of Ayala (the “Ayala Common Stock”) issued and outstanding immediately prior
to the Merger shall be automatically converted into the right to receive 0.1874 shares (as such amount may be adjusted as provided in
the Merger Agreement, the “Exchange Ratio”) of the common stock, par value $0.001 per share, of the Company (the “Common
Stock”), (iii) each outstanding option to purchase shares of the Ayala Common Stock (each, an “Ayala Option”) will
be substituted and converted automatically into an option (each, a “Company Replacement Option”) to purchase the number of
shares of Company Common Stock equal to the product obtained by multiplying (a) the number of shares of Ayala Common Stock subject such
Ayala Option immediately prior to the effective time of the Merger, by (b) the Exchange Ratio, with any fractional shares rounded down
to the nearest whole share, with each such Company Replacement Option to have an exercise price per share of Company Common Stock equal
to (x) the per share exercise price for the shares of Ayala Common Stock subject to the corresponding Ayala Option immediately prior
to the effective time of the Merger, divided by (y) the Exchange Ratio, rounded up to the nearest whole cent, and (iv) each restricted
stock unit of Ayala (each, an “Ayala RSU”) outstanding immediately prior to the effective time of the Merger, whether or
not vested or issuable, will be substituted and converted automatically into a restricted stock unit award of the Company with respect
to a number of shares of Company Common Stock equal to the product obtained by multiplying (i) the total number of shares of Ayala Common
Stock subject to such Ayala RSU immediately prior to the effective time of the Merger by (ii) the Exchange Ratio, with any fractional
shares rounded down to the nearest whole share.
Conditions
to Closing
Under
the Merger Agreement, the consummation of the Merger (the “Closing”) is subject to, and will take place within three business
days of, the satisfaction or waiver of certain customary closing conditions, including, without limitation: (i) the registration statement
on Form S-4 (which will include a prospectus of the Company and a proxy statement of Ayala) (the “Registration Statement”),
to be filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) to register the public offering and sale
of the Company’s Common Stock to some or all holders of the Ayala shares in connection with the Merger, must have become effective
and not subject to any stop order or proceeding seeking a stop order; (ii) Ayala must have obtained the approval of its stockholders
of the Merger and the Transactions contemplated by the Merger Agreement (the “Ayala Stockholder Approval”); (iii) receipt of all required state securities or “blue sky”
authorizations for the issuance of such shares of the Company’s Common Stock, except for such authorizations the lack of receipt
of which would not reasonably be expected to have a material adverse impact on any of the parties to the Merger Agreement or their respective
affiliates; (iv) the absence of any law or judgment of a governmental entity of competent jurisdiction that is in effect and restrains,
enjoins, or otherwise prohibits consummation of the Merger; (v) the absence of a material adverse effect on the business, financial condition
or results of operations of, respectively, (a) Ayala and its subsidiaries, taken as a whole or (b) the Company and its subsidiaries, taken
as a whole; (vi) the accuracy of Ayala’s and the Company’s representations and warranties, subject to specified materiality
qualifications; (vii) compliance by Ayala and the Company with its respective covenants in the Merger Agreement in all material respects;
and (viii) delivery of customary closing documents, including a customary officer certificate from Ayala and the Company.
Representations
and Warranties
The
parties to the Merger Agreement have agreed to customary representations and warranties for transactions of this type. In addition, the
parties to the Merger Agreement agreed to be bound by certain customary covenants for transactions of this type, including, among others,
covenants with respect to the conduct of the business and operations Company, Ayala and their respective subsidiaries during the period
between execution of the Merger Agreement and the Closing.
The
representations, warranties, agreements and covenants of the parties set forth in the Merger Agreement will terminate at the Closing.
Termination
and Termination Fees
The
Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including without
limitation: (i) by mutual written consent of the Company and Ayala; (ii) by either the Company or Ayala, if (a) if a governmental authority
shall have issued a final and non-appealable permanent restraining order, permanent injunction or other similar permanent order which
has the effect of enjoining or otherwise prohibiting consummation of the Transactions, (b) the Closing has not occurred on or before
April 18, 2023, or (c) the Ayala Stockholder Approval has not been obtained at Ayala’s stockholders meeting, in each of (a), (b)
and (c) where the terminating party’s material breach of the Merger Agreement is not the cause of, or has resulted in, the failure
of such condition; (iii) by Ayala if (a) the Company breaches or fails to perform any of its representations, warranties or covenants
contained in the Merger Agreement such that any of Ayala’s conditions to Closing the Transactions would not be satisfied, and such
breach or failure, if curable, is not cured in accordance with the Merger Agreement, (b) the Company has materially breached or failed
to perform its non-solicitation covenant, or entered into a Parent Acquisition Proposal (as defined in the Merger Agreement), (c) the
Ayala’s board of directors authorizes Ayala to enter into a Parent Acquisition Proposal constituting a Parent Superior Proposal
(as such terms are defined in the Merger Agreement); and (iv) by the Company if (a) Ayala breaches or fails to perform any of its representations,
warranties or covenants contained in the Merger Agreement such that any of the Company’s conditions to Closing the Transactions
would not be satisfied, and such breach or failure, if curable, is not cured in accordance with the Merger Agreement, (b) Ayala has materially
breached or failed to perform its non-solicitation covenant, or entered into a Company Acquisition Proposal (as defined in the Merger
Agreement), (c) the Company’s board of directors authorizes the Company to enter into a Company Acquisition Proposal constituting
a Company Superior Proposal (as such terms are defined in the Merger Agreement). Each party is required to pay a termination fee in the
amount of $600,000 to the other party in the event the Merger Agreement is terminated under specified circumstances, as further detailed
in the Merger Agreement.
Closing
of the Merger is expected to occur during the first quarter of 2023.
The
Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended
to provide any other factual information about the Company, Ayala or any of their respective subsidiaries or affiliates. The representations,
warranties and covenants contained in the Merger Agreement were made by the parties thereto only for purposes of the Merger Agreement
and as of specific dates as set forth therein; were made solely for the benefit of the parties to the Merger Agreement; may
be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between
the parties in connection with the execution of the Merger Agreement; may have been made for the purposes of allocating contractual
risk between the parties to the Merger Agreement instead of establishing these matters as facts; and may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition
of the Company, Ayala or Merger Sub or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject
matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information
may or may not be fully reflected in the Company’s public disclosures.
The
foregoing summary of the Merger Agreement does not purport to be complete and is qualified in its entirety be reference to the full copy
of the Merger Agreement, which is attached as Exhibit 2.1 to this Current Report on Form 8-K (the “Form 8-K”) and incorporated
into this Item 1.01 by reference.
Voting
and Support Agreements
Also
on October 18, 2022, in connection with execution of the Merger Agreement, the Company entered into Voting and Support Agreements (the
“Voting Agreements”) with each of (a) Israel Biotech Fund I, L.P., and (b) aMoon Growth Fund Limited Partnership, pursuant
to which each such party agreed, among other things, to vote their respective beneficially owned shares of Ayala Common Stock (i) in
favor of (1) the adoption of the Merger Agreement and the approval of the Merger and the other transactions contemplated by the Merger
Agreement, and (2) any proposal to adjourn or postpone the stockholders meeting of Ayala called to approve such matters to the extent
permitted or required under the Merger Agreement; and (ii) against (1) any Company Acquisition Proposal (as defined in the Merger Agreement),
except as expressly permitted by the Merger Agreement, (2) any merger agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company, in each case except as expressly permitted by the Merger Agreement and (3) any proposal, action or agreement that would
reasonably be expected to (1) materially delay or postpone, prevent or otherwise impair the Merger or the other transactions contemplated
by the Merger Agreement, (2) result in a breach in any respect of any covenant, representation, warranty or any other obligation or agreement
of Ayala under the Merger Agreement, (3) result in a breach in any respect of any covenant, representation, warranty or any other obligation
or agreement of such party under the Voting Agreement, (4) result in any of the conditions set forth in Section 6 of the Merger Agreement
not being fulfilled or (5) except as expressly contemplated by the Merger Agreement, change in any manner the dividend policy or capitalization
of, including the voting rights of any class of capital stock of, Ayala. The Voting Agreements will terminate upon the earliest to occur
of (a) the mutual agreement of the Company and the stockholder party to such Voting Agreement; (b) the Company Stockholders Meeting
(as defined in the Merger Agreement) at which a vote upon the adoption of the Merger Agreement and the approval of the Merger and the
other transactions contemplated by the Merger Agreement is taken; and (c) the date on which the Merger Agreement is terminated in
accordance with its terms. The Voting Agreements provide that, in the event of a Company
Change in Recommendation (as defined in the Merger Agreement), the number of shares of capital stock of Ayala subject to the Voting
Agreements shall only be 30% of the total current outstanding voting power of Ayala, and the number of shares of capital stock of Ayala
of each of Israel Biotech Fund I, L.P. and aMoon Growth Fund Limited Partnership subject to the Voting Agreements shall be reduced
proportionately based on the number of shares of capital stock of Ayala subject thereto.
The
foregoing summary of the Voting Agreements does not purport to be complete and is qualified in its entirety be reference to the full
copy of a form of the Voting Agreements, which are attached as Exhibit 10.1 and 10.2 to this Form 8-K and incorporated into this Item
1.01 by reference.
