CPMV 8-K
Mosaic ImmunoEngineering Inc. (CPMV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 19, 2020
Patriot Scientific Corporation
(Exact Name of Registrant as Specified in Charter)
| Delaware | 0-22182 | 84-1070278 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
2038 Corte Del Nogal, Suite 141
Carlsbad, CA 92011-1478
(Address of Principal Executive Offices, and Zip Code)
(760) 795-8517
Registrant’s Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| None | None | None |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
JUMPSTART OUR BUSINESS STARTUPS ACT
The Company qualifies as an “emerging growth company” as defined in Section 101 of the Jumpstart our Business Startups Act (the “JOBS Act”) as we do not have more than $1,070,000,000 in annual gross revenue and did not have such amount as of May 31, 2020 our last fiscal year. We are electing to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
We may lose our status as an emerging growth company on the last day of our fiscal year during which (i) our annual gross revenue exceeds $2,000,000,000 or (ii) we issue more than $2,000,000,000 in non-convertible debt in a three-year period. We will lose our status as an emerging growth company if at any time we are deemed to be a large accelerated filer. We will lose our status as an emerging growth company on the last day of our fiscal year following the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement.
As an emerging growth company, we are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) and Section 14A(a) and (b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such sections are provided below:
Section 404(b) of the Sarbanes-Oxley Act requires a public company’s auditor to attest to, and report on, management’s assessment of its internal controls.
Sections 14A(a) and (b) of the Exchange Act, implemented by Section 951 of the Dodd-Frank Act, require companies to hold shareholder advisory votes on executive compensation and golden parachute compensation.
As long as we qualify as an emerging growth company, we will not be required to comply with the requirements of Section 404(b) of the Sarbanes-Oxley Act and Section 14A(a) and (b) of the Exchange Act.
| Item 1.01. | Entry into a Material Definitive Agreement. |
Stock Purchase Agreement
On August 19, 2020, Patriot Scientific Corporation (referred to as “Patriot” or “Parent” in the transaction), entered into a stock purchase agreement (the “Stock Purchase Agreement”) among Parent, PTSC Sub One Inc., a Delaware corporation ( “Buyer” and together with the Parent, the “Buyer Parties”), Mosaic ImmunoEngineering Inc., a Delaware corporation (the “Target” or “Company”), certain stockholders of the Target set for therein (as “Sellers”), and Steven King (as the “Sellers’ Representative” and together with the Target and Sellers, the “Seller Parties”) pursuant to which, Buyer will buy from Sellers 630,000 shares of its Class A common stock (“Class A Stock”), par value $0.0001 per share, and 70,000 shares of its Class B common stock (“Class B Stock”), par value $0.0001 per share, together the Class A Stock and Class B Stock shall collectively be referred to as “Target Common Stock”, representing 100% of the issued and outstanding common stock of the Target as of August 19, 2020. Upon closing, in exchange for the Target Common Stock, the holders of the Class A Stock shall receive 630,000 shares of the Parent’s preferred stock to be designated Series A Convertible Preferred Stock (“Series A Preferred”) and holders of the Class B Stock shall receive 70,000 shares of the Parent’s preferred stock to be designated Series B Convertible Preferred Stock (“Series B Preferred”). Each share of the Series A Preferred; shall (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate. Each share of the Series B Preferred; shall (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. On a fully diluted, as converted basis, the Sellers shall own 90% of the issued and outstanding common stock of the Parent.
The Board of Directors of Parent and the Board of Directors of the Company have each approved execution of the Stock Purchase Agreement.
| 2 |
The Board of Directors of Patriot Scientific Corporation believe that entering into this transaction is in the best interests of its shareholders based on the potential of the Target’s immunotherapy pipeline of products for the potential treatment of cancer and infectious diseases. The Target has secured broad rights through a two-year option agreement granting the Target the exclusive right to license certain technology for the treatment of cancer and infectious diseases, which is supported by numerous publications and university grant funding. In addition, the financial and scientific acumen of Patriot’s new president and chief executive officer, Steven King, who is currently the chief executive officer of the Company has extensive experience in product development, managing publicly traded companies, and raising capital in the public and private markets. Going forward, the newly combined company will focus primarily on research and development of immunotherapies for the treatment of cancer and infectious diseases.
The Stock Purchase Agreement contains customary representations and warranties of Seller Parties and Buyer Parties, which survive the closing through and until the six-month anniversary of the Closing Date.
Additionally, the Stock Purchase Agreement provides for customary pre-closing covenants of the parties, including a covenant to conduct their respective businesses in the usual, regular and ordinary course substantially consistent with past practice and to refrain from taking certain actions without the other parties’ consent.
The foregoing description the Stock Purchase Agreement is qualified in its entirety by reference to the full text of such document, a copy of which is attached hereto as Exhibit 10.13 and is incorporated herein by reference.
The Stock Purchase Agreement has been included with this document to provide you additional information regarding its terms. The Stock Purchase Agreement sets forth the contractual rights of the Buyer Parties and the Seller Parties but is not intended to be a source of factual, business, or operational information about either party. That kind of information can be found elsewhere in this document and in the other filings Patriot makes with the SEC, which are available without charge at the SEC’s web site (www.sec.gov).
| Item 2.01 | Completion of Acquisition or Disposition of Assets |
On August 21, 2020, the Parent completed the purchase from Sellers of 630,000 shares of its Class A Stock and 70,000 shares of its Class B Stock, representing 100% of the issued and outstanding common stock of the Target as of August 21, 2020 (“Target Common Stock”). In exchange for the Target Common Stock, the holders of the Class A Stock received 630,000 shares of the Parent’s preferred stock designated Series A Convertible Preferred Stock (“Series A Preferred”) and holders of the Class B Stock received 70,000 shares of the Parent’s preferred stock designated Series B Convertible Preferred Stock (“Series B Preferred”). Each share of the Series A Preferred; will (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate, as defined in the Series A Certificate of Designations. Each share of the Series B Preferred; will (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. As of closing, on a fully diluted, as converted basis, the Sellers own 90% of the issued and outstanding common stock of the Parent.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The 630,000 shares of the Series A Preferred and 70,000 shares of Series B Preferred that were issued to the Sellers in connection with the transaction were issued with a restrictive legend indicating that the shares had not been registered under the Securities Act of 1933 (the “Securities Act”). For more information, see Item 2.01 - Completion of Acquisition or Disposition of Assets.
The issuance of the Series A Preferred and Series B Preferred in conjunction with the acquisition of the Target Common Stock was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), together with regulations promulgated thereunder by the U.S. Securities and Exchange Commission, based upon the following: (a) there was no public offering or general solicitation with respect to the offering of such shares, (b) each Seller was provided with certain disclosure materials and all other information requested with respect to the Company, (c) each Seller acknowledged that the Series A Preferred and Series B Preferred was being acquired for investment and not with a view to distribution and constitutes “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act, (d) each Seller represented and warranted that he is an “accredited investor” as defined in Rule 501(a) under the Securities Act, and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.
| 3 |
| Item 3.03 | Material Modification to Rights of Security Holders. |
To the extent required by Item 3.03 of Form 8-K, the information contained in Items 2.01, 3.02, and 5.03 of this Current Report on Form 8-K is incorporated herein by reference.
| Item 5.01 | Changes in Control of Registrant. |
The information regarding the Acquisition set forth in Item 2.01 – Completion of Acquisition or Disposition of Assets and the information set forth in Item 5.02 are incorporated herein by reference.
At the closing, the Sellers received 630,000 shares of the Series A Preferred and 70,000 shares of Series B Preferred. Each share of the Series A Preferred; will (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate, as defined in the Series A Certificate of Designations. Each share of the Series B Preferred; will (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. As of closing, on a fully diluted, as converted basis, the Sellers own 90% of the issued and outstanding common stock of the Parent.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
In conjunction with the Stock Purchase Agreement, Mr. Johnson will resign from his role as Interim Executive Officer, Interim Chief Financial Officer, and Secretary of the Parent effective August 28, 2020. There were no disagreements with Mr. Johnson on any matters. Mr. Johnson will continue to serve as a member of the Board of Directors. Upon the resignation of Mr. Johnson, Mr. Steven King will be appointed President and Chief Executive Officer of the Parent, Mr. Paul Lytle will be appointed Executive Vice President, Chief Financial Officer, and Secretary of the Parent, and Nicole Steinmetz, Ph.D, will be appointed Chief Scientific Officer of the Parent.
Also in conjunction with the Stock Purchase Agreement, Mr. Steven King, Mr. Paul Lytle, Dr. Nicole Steinmetz, and Dr. Robert Garnick, were appointed to serve as members of the Board of Directors of Parent. Ms. Gloria Felcyn and Mr. Carlton Johnson will continue to serve as members of the Board of Directors.
At this time, we do not have written employment agreements or other formal compensation agreements with any of our new officers and new and existing directors.
| Item 5.03 | Amendments to Certificate of Incorporation or Bylaws |
Series A and Series B Preferred Stock Certificate of Designations:
In connection with the issuance of the Series A Preferred and Series B Preferred as described in this Current Report, we filed the Series A Certificate of Designation and Series B Certificate of Designation with the Secretary of State of the State of Delaware. The summary of the rights, privileges and preferences of the Series A Preferred and Series B Preferred set forth above in Item 2.01 of the Current Report are qualified in their entirety by reference to the Series A Certificate of Designation and Series B Certificate of Designation, which is attached hereto as Exhibit 3.3.9 and 3.3.10, respectively, and is incorporated herein by reference.
| 4 |
| Item 7.01 | Regulation FD Disclosure. |
On August 24, 2020, the Company issued a press release announcing the transaction. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(a) Financial statements of businesses acquired.
Financial statements as required for the periods specified in Rule 8-04(b) of Regulation S-X, and meeting the requirements of Regulation S-X, are not included in this Report. The Company will provide the required financial statements by amendment of this Current Report within 71 calendar days from the date on which this Current Report on Form 8-K is required to be filed.
(b) Pro forma financial information.
Pro forma financial information, if and as required by Rule 8-05 of Regulation S-X, and meeting the requirements of Regulation S-X, are not included in this Report. If pro forma financial information is required with respect to the transaction described above, the Company will provide such required pro forma financial information by amendment of this Current Report within 71 calendar days from the date on which this Current Report on Form 8-K is required to be filed.
(d) Exhibits
| 5 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Patriot Scientific Corporation | ||
| Date: August 25, 2020 | By: /s/ Carlton Johnson | |
| Carlton Johnson, | ||
|
Interim Chief Executive Officer and interim Chief Financial Officer |
| 6 |
Exhibit 3.3.9
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND LIMITATIONS OF THE
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
PATRIOT SCIENTIFIC CORPORATION
_________________
Patriot Scientific Corporation, a Delaware corporation, (the “Corporation”) DOES HEREBY CERTIFY:
The Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix the powers, designations, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. On August 18, 2020, the Board of Directors duly adopted the following resolution creating a series of preferred stock designated as the Series A Convertible Voting Preferred Stock (the “Series A Preferred Stock”), comprised initially of 630,000 shares and such resolution has not been modified and is in full force and effect on the date hereof: RESOLVED: that, pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Charter, a series of the class of authorized preferred stock, par value $0.00001 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:
1. Series A Designation, Amount and Par Value. The series of Preferred Stock shall be designated as the Corporation’s Series A Convertible Voting Preferred Stock, and the number of shares so designated shall be 630,000. Each share of Series A Preferred Stock shall have a par value of $0.00001 and a stated value equal to $6.50 per share (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Series A Preferred Stock, the “Stated Value”).
2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms have the meanings indicated:
“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1.02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof; (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
| 1 |
“Business Day” means any day other than Saturday, Sunday and any day on which banks are required or authorized by law to be closed in the State of Delaware.
“Change of Control Event” means the occurrence after the Original Issue Date (as defined below), excluding a Liquidation Event, of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 35% of the voting securities of the Corporation, or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation sells or transfers its assets, as an entirety or substantially as an entirety, to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one-year period of more than one-half of the members of the Corporation’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth above in (i) through (iv).
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Corporation, $0.00001 par value per share.
“Eligible Market” means any of (i) the New York Stock Exchange, (ii) the NYSE American, (iii) The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global Select Market (each in clause (iii), a “NASDAQ Stock Market) or (iv) OTC Markets Pink or OTCQB.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Holder” means any holder of Series A Preferred Stock.
“Junior Securities” means (i) the Common Stock, and (ii) all equity or equity equivalent securities issued by the Corporation after the Original Issue Date that do not rank senior to or pari passu with the Series A Preferred Stock.
| 2 |
“Original Issue Date” means the date of the first issuance of any shares of the Series A Preferred Stock, regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates that may be issued to evidence such Series A Preferred Stock.
“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture or other non-corporate business enterprise, limited liability company, joint stock company, trust, organization, business, labor union or government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.
“Series A Preferred Stock” means the Corporation’s Series A Convertible Voting Preferred Stock authorized pursuant to the Series A Preferred Stock Designation.
“Series A Preferred Stock Designation” means this Certificate of Designation for the Corporation’s Series A Convertible Voting Preferred Stock, as adopted by the by the affirmative vote of the Board of Directors on August 18, 2020.
“Trading Day” shall mean, if a security is listed or admitted to trading, or quoted, on an Eligible Market, their successors or another national securities exchange or national securities market, a full day on which the NASDAQ Stock Market or such other national securities exchange or national securities market on which the security is traded is open for business and on which trades may be made thereon.
3. Voting Rights. Holders of the Series A Preferred Stock shall have the following voting rights:
(a) Those voting rights required by applicable law; and
(b) The right to vote together with the holders of the Common Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote. Each share of Series A Preferred Stock will carry a number of votes equal to the number of shares of Common Stock issuable based on the then applicable Conversion Number; provided, however, that so long as shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the prior approval of the Holders of at least a majority of the then issued and outstanding shares of Series A Preferred Stock, voting as a separate class: (a) authorize or increase the authorized number of shares of Series A Preferred Stock or any shares of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series A Preferred Stock, (b) authorize, adopt or approve any amendment to the Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation that would increase or decrease the par value or the Stated Value of the shares of the Series A Preferred Stock, alter or change the powers, preferences or rights of the shares of Series A Preferred Stock or alter or change the powers, preferences or rights of any other capital stock of the Corporation if after such alteration or change such capital stock would be senior to or pari passu with Series A Preferred Stock, (c) amend, alter or repeal the Certificate of Incorporation or the Bylaws of the Corporation or this Certificate of Designation so as to affect adversely the shares of Series A Preferred Stock, or (d) authorize or issue any security convertible into, exchangeable for or evidencing the right to purchase or otherwise receive any shares of any class or classes of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series A Preferred Stock.
| 3 |
4. Dividends.
(a) The Series A Preferred Stock will not be entitled to dividends unless the Corporation pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series A Preferred Stock will be entitled to receive dividends of cash or property in an amount or value equal to the Conversion Number multiplied by the amount paid in respect of one share of Common Stock. Any dividend payable to the Series A Preferred Stock will have the same record and payment date and terms as the dividend payable on the Common Stock.
(b) Notwithstanding any other provision of this Certificate of Designation, the Corporation shall not pay any dividends on, or make any distributions with respect to, in cash or in kind or otherwise, its Common Stock or any other Junior Securities when accrued and unpaid dividends are owed to the Holders.
5. Registration of Series A Preferred Stock. The Corporation shall register shares of the Series A Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “Series A Preferred Stock Register”), in the name of the record Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series A Preferred Stock as the absolute owner thereof for the purpose of any conversion or redemption thereof or any distribution to such Holder, and for all other purposes, absent actual written notice to the contrary from the registered Holder. The shares of Series A Preferred Stock shall be uncertificated.
6. Registration of Transfers. The Corporation shall register the transfer of any shares of Series A Preferred Stock in the Series A Preferred Stock Register, upon receipt of an instrument of transfer acceptable to the Corporation from the Holder of such shares.
7. Liquidation.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a “Liquidation Event”), which shall be deemed to include (i) a Bankruptcy Event, (ii) the acquisition of the Corporation by another Person or affiliated group of Persons by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, issuance of new securities or transfer of issued and outstanding securities) where less than a majority of the voting power of the acquiring or surviving Person or group immediately following such acquisition is held by Persons who were stockholders of the Corporation immediately prior to such acquisition, or (iii) a sale or other disposition of all or substantially all of the assets of the Corporation, as determined by the Board of Directors, the Holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the Stated Value for each share of Series A Preferred Stock then held by them, plus all accrued and unpaid dividends on such Series A Preferred Stock as of the date of such event, or (y) the amount payable per share of Common Stock which such Holder of Series A Preferred Stock would have received if such Holder had converted to Common Stock immediately prior to the Liquidation Event all of the shares of Series A Preferred Stock then held by such Holder together with all accrued but unpaid dividends on such Series A Preferred Stock as of the date of such event (the “Series A Stock Liquidation Preference”). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the Holders of the Series A Preferred Stock shall be insufficient to permit the payment to such Holders of the full Series A Stock Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution (including after giving effect to the terms of Section 20(c)(iii)) shall be distributed ratably among the Holders of the Series A Preferred Stock in proportion to the aggregate Series A Stock Liquidation Preference that would otherwise be payable to each of such Holders.
| 4 |
(b) In the event of a Liquidation Event, following completion of the distributions required by the first sentence of paragraph (a) of this Section 7, if assets or surplus funds remain in the Corporation, the holders of the Junior Securities shall share in all remaining assets of the Corporation, in accordance with the General Corporation Law of Delaware and the Certificate of Incorporation.
(c) The Corporation shall give each Holder written notice of any Liquidation Event no less than 30 days prior to the occurrence thereof. Notwithstanding any provision of this Section 7 to the contrary, at any time during the 30-day period following delivery of such written notice, any Holder shall have the right to issue a Notice of Conversion as set forth in Section 8(a)(i). In such case, the Corporation shall follow the procedures for conversion set forth under Section 8(a)(i).
(d) Notwithstanding any of the foregoing contained in this Section 7, if any Liquidation Event can also be construed as a Fundamental Transaction hereunder as set forth in Section 14, then to the extent that the Holders shall receive greater consideration as a Fundamental Transaction, then the provisions of Section 14 shall apply.
(e) For the avoidance of doubt, in no circumstances shall any event occurring on, or in connection with, the Original Issue Date be construed as a Liquidation Event for purposes of the Series A Preferred Stock and this Certificate of Designation.
8. Conversion.
(a) Optional Conversion.
(i) At any time and from time to time after the earlier of (A) the approval by the stockholders of the Corporation of an amended and restated certificate of incorporation of the Corporation which provides for a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series A Preferred Stock or (B) an event occurring in accordance with the terms set forth in Section 7(c) (either (A) or (B), the “Conversion Period”)all or any portion of the Series A Preferred Stock held by any Holder may be converted into shares of duly authorized, validly issued, fully-paid and non-assessable share of Common Stock (each an “Underlying Share”) at a rate of 5,097.053 shares of Common Stock per share of Series A Preferred Stock to be converted by such Holder, as adjusted pursuant to Section 8(c). The number of Underlying Shares into which each share of Series A Preferred Stock is convertible, as adjusted from time to time in accordance with this Section 8, is referred to herein as the “Conversion Number.” A Holder may convert Series A Preferred Stock into Common Stock pursuant to this paragraph at any time, and from time to time by delivering to the Corporation during the Conversion Period (i) a written notice of the election to convert executed by the Holder (the “Notice of Conversion”), specifying the number of shares of Series A Preferred Stock to be converted, the name in which the shares of the Common Stock deliverable upon conversion shall be registered, and the address of the named person, and (ii) the original certificate(s), if any, evidencing the Series A Preferred Stock being converted. The “Conversion Date,” or the date on which an optional conversion shall be deemed effective, shall be defined as the first Trading Day on which the Corporation has received each of (i) if applicable, the original certificates (if any) representing the shares of the Series A Preferred Stock being converted, duly endorsed, and (ii) the accompanying Conversion Notice.
| 5 |
(b) Mandatory Conversion.
(i) At such time as the Corporation files an amendment (“Amendment”) to its Certificate of Incorporation with the Secretary of State of Delaware effecting either a (i) reverse stock split or (ii) an increase in the Corporation’s authorized Common Stock, so that, in either event, the Corporation has a sufficient number of authorized and unissued shares of Common Stock so as to permit the conversion of all outstanding shares of the Series A Preferred Stock into Common Stock, then upon the filing and acceptance of the Amendment, whether by amendment or restatement, and the effectiveness of any registration statement registering the resale of the Underlying Shares, all the outstanding shares of Series A Preferred Stock will immediately and automatically convert into shares of Common Stock without any notice or action required on the part of the Corporation or the Holder (“Mandatory Conversion”). At the consummation of the Mandatory Conversion, the holders of Series A Preferred Stock will be entitled to receive Common Stock at the then applicable Conversion Number.
(ii) The Corporation agrees that it shall in good faith, promptly, take any and all such corporate action as may, in the opinion of its counsel, be necessary to effect the Amendment and the filing of a registration statement registering the resale of such shares and to expeditiously effect the conversion of all outstanding shares of the Series A Preferred Stock to shares of Common Stock, including, without limitation, use its reasonable best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation to achieve the foregoing.
(c) Adjustments to Conversion Number. Stock Splits and Combinations. If the outstanding shares of Common Stock are split into a greater number of shares, the Conversion Number will be proportionately increased. If the outstanding shares of Common Stock are combined into a smaller number of shares, the Conversion Number then in effect immediately before such combination will be proportionately decreased. These adjustments will be effective at the close of business on the date the split or combination becomes effective.
(i) Dividends and Other Distributions in Shares of Common Stock. If the Corporation declares or makes a dividend or other distribution payable in shares of Common Stock, or any other securities convertible into Common Stock, to holders of Common Stock, then the Conversion Number will be increased, effective at the close of business on the date of issuance of the shares of Common Stock paid as a dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock (the “Measurement Date”), to a number determined by multiplying such Conversion Number by a fraction:
| 6 |
(A) the numerator of which will be sum of (x) the number of shares of Common Stock outstanding immediately prior to the Measurement Date, as calculated on a fully-diluted basis, plus (y) the number of shares of Common Stock issued in payment of such dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock, and
(B) the denominator of which will be the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to the Measurement Date.
(ii) Rules of Calculation; Treasury Stock. The number of shares of Common Stock outstanding will be calculated on the basis of the number of issued and outstanding shares of Common Stock on the applicable date, not including shares held in the treasury of the Corporation. The Corporation shall not pay any dividend on or make any distribution to shares of Common Stock held in treasury.
(iii) Waiver. Notwithstanding the foregoing, the Conversion Number will not be increased if the Corporation receives, prior to the Measurement Date, written notice from the Holders representing at least a majority of the then outstanding shares of Series A Preferred Stock, voting together as a separate class, that no adjustment is to be made as the result of a dividend or other distribution on shares of Common Stock. This waiver will be limited in scope and will not be valid for any dividend or other distribution on shares of Common Stock not specifically provided for in such notice.
9. Mechanics of Conversion.
(a) Delivery of Certificate(s) Upon Conversion(a). Upon conversion of any share of Series A Preferred Stock, the Corporation shall promptly (but in no event later than three Trading Days after the Conversion Date or Mandatory Conversion Date, as applicable (the “Share Delivery Date”) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the Underlying Shares issuable upon such conversion. The Corporation shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Corporation under this Section electronically through the Depositary Trust Company or another established clearing corporation performing similar functions. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become the holder of record of such Underlying Shares as of the Conversion Date. Upon surrender of a certificate representing the shares of Series A Preferred Stock to be converted following one or more partial conversions, the Corporation shall promptly deliver to the Holder a new certificate representing the remaining shares of Series A Preferred Stock. If the shares of Series A Preferred Stock are not certificated, the holder must deliver evidence of ownership satisfactory to the Corporation and its transfer agent. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the certificates representing the shares of Series A Preferred Stock tendered for conversion. The Common Stock issuable upon the Mandatory Conversion shall be issued with a restrictive legend indicating that it was issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to the Corporation.
| 7 |
(b) Transfer Tax Matters. Unless the shares of Common Stock deliverable upon conversion are to be issued in the same name as the name in which the shares of Series A Preferred Stock to be converted are registered, the Holder must also deliver to the transfer agent an instrument of transfer, in form satisfactory to the Corporation, duly executed by the Holder or the Holder’s duly authorized attorney, together with an amount sufficient to pay any transfer or similar tax in connection with the issuance and delivery of such shares of Common Stock in such name (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).
10. Redemption Rights. The Series A Preferred Stock does not have any redemption rights.
11. Reservation of Common Stock. The Corporation shall at all times during the Conversion Period reserve and keep available for issuance upon the conversion of shares of Series A Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series A Preferred Stock (including any shares of Series A Preferred Stock paid by the Corporation as in kind dividends on the Series A Preferred Stock), and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series A Preferred Stock; provided, that the Holders approve any such action that requires a vote of the Holders in accordance with Section 3. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.
12. Charges, Taxes and Expenses. The issuance of certificates for shares of Series A Preferred Stock and for Underlying Shares issued upon conversion of (or otherwise in respect of) the Series A Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Corporation; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Series A Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Series A Preferred Stock or receiving Underlying Shares in respect of the Series A Preferred Stock.
13. Replacement Certificates. If any certificate evidencing Series A Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation or its transfer agent may prescribe.
| 8 |
14. Fundamental Transactions. If, at any time while any shares of Series A Preferred Stock are outstanding, (i) the Corporation effects any merger of the Corporation into, or consolidation of the Corporation with, another Person, (ii) the Corporation effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) a Change in Control Event occurs, (iv) a Liquidation Event occurs under which Section 7(d) is applicable, or (v) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of Series A Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the record holder of such Underlying Shares (the “Alternate Consideration”). The foregoing provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series A Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive mergers, consolidations, sales, reclassifications or share exchanges.
15. No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock, whether voluntary or mandatory. Instead, the Corporation shall pay the cash value of any fractional share to each Holder that would otherwise be entitled to a fractional share.
16. Notice of Corporate Events. If the Corporation (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Corporation or any subsidiary, or (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Liquidation Event, Fundamental Transaction or Change of Control, then the Corporation shall deliver to each Holder a notice which shall specify (1) the record date for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such Liquidation Event, Fundamental Transaction or Change of Control is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon any such Liquidation Event or Fundamental Transaction.
17. Negative Covenants. So long as any shares of Series A Preferred Stock are outstanding, the Corporation will not, and will not permit any of its Subsidiaries to, directly or indirectly, without the prior written consent of the Holders of a majority of the Series A Preferred Stock then outstanding: (i) amend its Certificate of Incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of any Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents pursuant to key employee equity incentive awards; (iii) enter into any agreement with respect to the foregoing; or (iv) pay cash dividends or distributions on any equity securities of the Corporation other than pursuant to the terms of the Corporation’s outstanding Series A Convertible Voting Preferred Stock. For purposes of this Section 17, the following terms shall have the meanings set forth below:
| 9 |
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (Eastern time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:00 p.m. (Eastern time) on any Business Day, (iii) the Business Day following the date of transmittal, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Corporation, to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci, or (ii) if to a Holder, to the address or facsimile number appearing on the Corporation’s Preferred Stock Register or such other address or facsimile number as such Holder may provide to the Corporation in accordance with this Section.
19. Miscellaneous.
(a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(b) No provision of this Certificate of Designation may be amended, except in a written instrument signed by the Corporation and Holders of at least a majority of the shares of Series A Preferred Stock then outstanding.
(c) The Series A Preferred Stock (i) is senior to all other equity interests in the Corporation outstanding as of the Original Issue Date in right of payment, whether with respect to dividends or upon liquidation or dissolution, or otherwise, other than the outstanding Series A Preferred Stock, and (ii) unless otherwise approved in accordance with this Certificate of Designation, will be senior to all other equity or equity equivalent securities issued by the Corporation after the Original Issue Date, other than Series A Preferred Stock issued after the Original Issue Date in accordance with this Series A Preferred Stock Certificate of Designation.
(d) Any of the rights of the Holders of Series A Preferred Stock set forth herein may be waived by the affirmative vote of Holders of a majority of the shares of Series A Preferred Stock then outstanding. No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designation shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
[Signature Page Follows.]
| 10 |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation for the Series A Preferred Stock to be executed by its duly authorized officer on August 19, 2020.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | /s/ Carlton Johnson | |
| Name: Carlton Johnson Title: Interim Chief Executive Officer and Interim Chief Financial Officer | ||
| 11 |
Exhibit 3.3.10
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND LIMITATIONS OF THE
SERIES B CONVERTIBLE VOTING PREFERRED STOCK
OF
PATRIOT SCIENTIFIC CORPORATION
_________________
Patriot Scientific Corporation, a Delaware corporation, (the “Corporation”) DOES HEREBY CERTIFY:
The Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix the powers, designations, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. On August 18, 2020, the Board of Directors duly adopted the following resolution creating a series of preferred stock designated as the Series B Convertible Voting Preferred Stock (the “Series B Preferred Stock”), comprised initially of 70,000 shares and such resolution has not been modified and is in full force and effect on the date hereof: RESOLVED: that, pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Charter, a series of the class of authorized preferred stock, par value $0.00001 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows::
1. Series B Designation, Amount and Par Value. The series of Preferred Stock shall be designated as the Corporation’s Series B Convertible Voting Preferred Stock, and the number of shares so designated shall be 70,000. Each share of Series B Preferred Stock shall have a par value of $0.00001 and a stated value equal to $6.50 per share (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Series B Preferred Stock, the “Stated Value”).
2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms have the meanings indicated:
“Anti-Dilution Threshold” equals ONE MILLION DOLLARS ($1,000,000).
“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1.02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof; (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
| 1 |
“Business Day” means any day other than Saturday, Sunday and any day on which banks are required or authorized by law to be closed in the State of Delaware.
“Change of Control Event” means the occurrence after the Original Issue Date (as defined below), excluding a Liquidation Event, of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 35% of the voting securities of the Corporation, or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation sells or transfers its assets, as an entirety or substantially as an entirety, to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one-year period of more than one-half of the members of the Corporation’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth above in (i) through (iv).
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Corporation, $0.00001 par value per share.
“Eligible Market” means any of (i) the New York Stock Exchange, (ii) the NYSE American, (iii) The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global Select Market (each in clause (iii), a “NASDAQ Stock Market) or (iv) OTC Markets Pink or OTCQB.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Holder” means any holder of Series B Preferred Stock.
“Junior Securities” means (i) the Common Stock, and (ii) all equity or equity equivalent securities issued by the Corporation after the Original Issue Date that do not rank senior to or pari passu with the Series B Preferred Stock.
“Net Working Capital” means the net working capital of the Corporation on the Original Issue Date. On such date of determination, subject to the next sentence in this definition, Net Working Capital shall be calculated as the positive difference (if any) of current assets less current liabilities, all as determined under generally accepted accounting principles as then in effect in the United States). Notwithstanding the foregoing, Net Working Capital shall exclude any restricted cash and any corresponding current liability. The Corporation shall provide the Holders with such back-up materials as the Holders may reasonably request (such as the general ledger entries of the Corporation) to validate the Net Working Capital calculation. The Holders shall have ten (10) calendar days from receipt of such information to object to the Net Working Capital calculation. If the Holders disagree with such calculation, the Holders and the Corporation shall appoint a mutually agreed upon accounting firm to calculate Net Working Capital as of the Original Issue Date. Such calculation by the accounting firm shall then be binding on all parties for purposes of the Series B Preferred Stock.
“Original Issue Date” means the date of the first issuance of any shares of the Series B Preferred Stock, regardless of the number of transfers of any particular shares of Series B Preferred Stock and regardless of the number of certificates that may be issued to evidence such Series B Preferred Stock.
“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture or other non-corporate business enterprise, limited liability company, joint stock company, trust, organization, business, labor union or government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.
| 2 |
“Qualifying Capital Raise” means the receipt by the Corporation of gross proceeds, in immediately available funds, of not less than an amount equal to the Anti-Dilution Threshold through the combination of (a) the Corporation’s issuance and sale of equity and/or hybrid securities (which are convertible into equity) and (b) Net Working Capital. For the avoidance of doubt, the conversion of either the Series B Preferred Stock or the Series A Preferred Stock shall neither be construed as, nor considered in the calculation of, a Qualifying Capital Raise
“Series B Preferred Stock” means the Corporation’s Series B Convertible Voting Preferred Stock authorized pursuant to the Series B Preferred Stock Designation.
“Series B Preferred Stock Designation” means this Certificate of Designation for the Corporation’s Series B Convertible Voting Preferred Stock, as adopted by the by the affirmative vote of the Board of Directors on August 18, 2020.
“Trading Day” shall mean, if a security is listed or admitted to trading, or quoted, on an Eligible Market, their successors or another national securities exchange or national securities market, a full day on which the NASDAQ Stock Market or such other national securities exchange or national securities market on which the security is traded is open for business and on which trades may be made thereon.
“Triggering Event” happens upon the occurrence of a Qualifying Capital Raise has occurred.
3. Voting Rights. Holders of the Series B Preferred Stock shall have the following voting rights:
(a) Those voting rights required by applicable law; and
(b) The right to vote together with the holders of the Common Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote. Each share of Series B Preferred Stock will carry a number of votes equal to the number of shares of Common Stock issuable based on the then applicable Conversion Number; provided, however, that so long as shares of Series B Preferred Stock are outstanding, the Corporation shall not, without the prior approval of the Holders of at least a majority of the then issued and outstanding shares of Series B Preferred Stock, voting as a separate class: (a) authorize or increase the authorized number of shares of Series B Preferred Stock or any shares of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series B Preferred Stock, (b) authorize, adopt or approve any amendment to the Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation that would increase or decrease the par value or the Stated Value of the shares of the Series B Preferred Stock, alter or change the powers, preferences or rights of the shares of Series B Preferred Stock or alter or change the powers, preferences or rights of any other capital stock of the Corporation if after such alteration or change such capital stock would be senior to or pari passu with Series B Preferred Stock, (c) amend, alter or repeal the Certificate of Incorporation or the Bylaws of the Corporation or this Certificate of Designation so as to affect adversely the shares of Series B Preferred Stock, or (d) authorize or issue any security convertible into, exchangeable for or evidencing the right to purchase or otherwise receive any shares of any class or classes of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series B Preferred Stock.
4. Dividends.
(a) The Series B Preferred Stock will not be entitled to dividends unless the Corporation pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series B Preferred Stock will be entitled to receive dividends of cash or property in an amount or value equal to the Conversion Number multiplied by the amount paid in respect of one share of Common Stock. Any dividend payable to the Series B Preferred Stock will have the same record and payment date and terms as the dividend payable on the Common Stock.
(b) Notwithstanding any other provision of this Certificate of Designation, the Corporation shall not pay any dividends on, or make any distributions with respect to, in cash or in kind or otherwise, its Common Stock or any other Junior Securities when accrued and unpaid dividends are owed to the Holders.
| 3 |
5. Registration of Series B Preferred Stock. The Corporation shall register shares of the Series B Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “Series B Preferred Stock Register”), in the name of the record Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series B Preferred Stock as the absolute owner thereof for the purpose of any conversion or redemption thereof or any distribution to such Holder, and for all other purposes, absent actual written notice to the contrary from the registered Holder. The shares of Series B Preferred Stock shall be uncertificated.
6. Registration of Transfers. The Corporation shall register the transfer of any shares of Series B Preferred Stock in the Series B Preferred Stock Register, upon receipt of an instrument of transfer acceptable to the Corporation from the Holder of such shares.
7. Liquidation.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a “Liquidation Event”), which shall be deemed to include (i) a Bankruptcy Event, (ii) the acquisition of the Corporation by another Person or affiliated group of Persons by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, issuance of new securities or transfer of issued and outstanding securities) where less than a majority of the voting power of the acquiring or surviving Person or group immediately following such acquisition is held by Persons who were stockholders of the Corporation immediately prior to such acquisition, or (iii) a sale or other disposition of all or substantially all of the assets of the Corporation, as determined by the Board of Directors, the Holders of Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the Stated Value for each share of Series B Preferred Stock then held by them, plus all accrued and unpaid dividends on such Series B Preferred Stock as of the date of such event, or (y) the amount payable per share of Common Stock which such Holder of Series B Preferred Stock would have received if such Holder had converted to Common Stock immediately prior to the Liquidation Event all of the shares of Series B Preferred Stock then held by such Holder together with all accrued but unpaid dividends on such Series B Preferred Stock as of the date of such event (the “Series B Stock Liquidation Preference”). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the Holders of the Series B Preferred Stock shall be insufficient to permit the payment to such Holders of the full Series B Stock Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution (including after giving effect to the terms of Section 20(c)(iii)) shall be distributed ratably among the Holders of the Series B Preferred Stock in proportion to the aggregate Series B Stock Liquidation Preference that would otherwise be payable to each of such Holders.
(b) In the event of a Liquidation Event, following completion of the distributions required by the first sentence of paragraph (a) of this Section 7, if assets or surplus funds remain in the Corporation, the holders of the Junior Securities shall share in all remaining assets of the Corporation, in accordance with the General Corporation Law of Delaware and the Certificate of Incorporation.
(c) The Corporation shall give each Holder written notice of any Liquidation Event no less than 30 days prior to the occurrence thereof. Notwithstanding any provision of this Section 7 to the contrary, at any time during the 30-day period following delivery of such written notice, any Holder shall have the right to issue a Notice of Conversion as set forth in Section 8(a)(i). In such case, the Corporation shall follow the procedures for conversion set forth under Section 8(a)(i).
(d) Notwithstanding any of the foregoing contained in this Section 7, if any Liquidation Event can also be construed as a Fundamental Transaction hereunder as set forth in Section 14, then to the extent that the Holders shall receive greater consideration as a Fundamental Transaction, then the provisions of Section 14 shall apply.
(e) For the avoidance of doubt, in no circumstances shall any event occurring on, or in connection with, the Original Issue Date be construed as a Liquidation Event for purposes of the Series B Preferred Stock and this Certificate of Designation.
| 4 |
8. Conversion.
(a) Optional Conversion.
(i) At any time and from time to time after the earlier of (A) the approval by the stockholders of the Corporation of an amended and restated certificate of incorporation of the Corporation which provides for a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series B Preferred Stock or (B) an event occurring in accordance with the terms set forth in Section 7(c) (either (A) or (B), the “Conversion Period”), all or any portion of the Series B Preferred Stock held by any Holder may be converted into shares of duly authorized, validly issued, fully-paid and non-assessable share of Common Stock (each an “Underlying Share”) at a rate of 5,734.185 shares of Common Stock per share of Series B Preferred Stock to be converted by such Holder, as adjusted pursuant to Section 8(c). The number of Underlying Shares into which each share of Series B Preferred Stock is convertible, as adjusted from time to time in accordance with this Section 8, is referred to herein as the “Conversion Number.” A Holder may convert Series B Preferred Stock into Common Stock pursuant to this paragraph at any time, and from time to time by delivering to the Corporation during the Conversion Period (i) a written notice of the election to convert executed by the Holder (the “Notice of Conversion”), specifying the number of shares of Series B Preferred Stock to be converted, the name in which the shares of the Common Stock deliverable upon conversion shall be registered, and the address of the named person, and (ii) the original certificate(s), if any, evidencing the Series B Preferred Stock being converted. The “Conversion Date,” or the date on which an optional conversion shall be deemed effective, shall be defined as the first Trading Day on which the Corporation has received each of (i) if applicable, the original certificates (if any) representing the shares of the Series B Preferred Stock being converted, duly endorsed, and (ii) the accompanying Conversion Notice.
Notwithstanding the foregoing, at any time prior to the Conversion Date, upon the occurrence of a Triggering Event, the Conversion Number shall be subject to upward adjustment adjusted upward until the Corporation reaches the Anti-Dilution Threshold through through one or more Qualfying Capital Raises: provided that such adjustment shall terminate and not apply as to any shares of Series B Preferred Stock that previously shall have converted into Common Stock. For example, if Net Working Capital is $400,000, then the to reach the Anti-Dilution Threshold the Corporation shall only need to raise $600,000 in one or more Qualifying Capital Raises. Following any Qualifying Capital Raise, the Conversion Number shall be adjusted to equal 10% of the fully diluted common stock of the Corporation (including for such purposes all other convertible securities outstanding and reserved for issuance except stock options issued and outstanding and reserved for issuance under board approved employee stock option plans reserving for issuance no more than ten percent (10%) of the outstanding common stock of the Corporation then outstanding, after giving effect to any Qualifying Capital Raise, until the Anti-Dilution Threshold is met) and divided that sum by the number of shares of Series B Preferred Stock then outstanding. For example, if the number of fully diluted shares of common stock of the Corporation is 4,100,000,000 upon reaching the Anti-Dilution Threshold, then the Conversion Number shall be 5,857.14286 (4,100,000,000 times 10% divided by the number of shares of Series B Preferred Stock then outstanding)
(b) Mandatory Conversion. The Series B Preferred Stock shall not be subject to mandatory conversion.
(c) Adjustments to Conversion Number. Stock Splits and Combinations. If the outstanding shares of Common Stock are split into a greater number of shares, the Conversion Number will be proportionately increased. If the outstanding shares of Common Stock are combined into a smaller number of shares, the Conversion Number then in effect immediately before such combination will be proportionately decreased. These adjustments will be effective at the close of business on the date the split or combination becomes effective.
(i) Dividends and Other Distributions in Shares of Common Stock. If the Corporation declares or makes a dividend or other distribution payable in shares of Common Stock, or any other securities convertible into Common Stock, to holders of Common Stock, then the Conversion Number will be increased, effective at the close of business on the date of issuance of the shares of Common Stock paid as a dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock (the “Measurement Date”), to a number determined by multiplying such Conversion Number by a fraction:
| 5 |
(A) the numerator of which will be sum of (x) the number of shares of Common Stock outstanding immediately prior to the Measurement Date, as calculated on a fully-diluted basis, plus (y) the number of shares of Common Stock issued in payment of such dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock, and
(B) the denominator of which will be the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to the Measurement Date.
(ii) Rules of Calculation; Treasury Stock. The number of shares of Common Stock outstanding will be calculated on the basis of the number of issued and outstanding shares of Common Stock on the applicable date, not including shares held in the treasury of the Corporation. The Corporation shall not pay any dividend on or make any distribution to shares of Common Stock held in treasury.
(iii) Waiver. Notwithstanding the foregoing, the Conversion Number will not be increased if the Corporation receives, prior to the Measurement Date, written notice from the Holders representing at least a majority of the then outstanding shares of Series B Preferred Stock, voting together as a separate class, that no adjustment is to be made as the result of a dividend or other distribution on shares of Common Stock. This waiver will be limited in scope and will not be valid for any dividend or other distribution on shares of Common Stock not specifically provided for in such notice.
9. Mechanics of Conversion.
(a) Delivery of Certificate(s) Upon Conversion(a). Upon conversion of any share of Series B Preferred Stock, the Corporation shall promptly (but in no event later than three Trading Days after the Conversion Date or Mandatory Conversion Date, as applicable (the “Share Delivery Date”) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the Underlying Shares issuable upon such conversion. The Corporation shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Corporation under this Section electronically through the Depositary Trust Company or another established clearing corporation performing similar functions. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become the holder of record of such Underlying Shares as of the Conversion Date. Upon surrender of a certificate representing the shares of Series B Preferred Stock to be converted following one or more partial conversions, the Corporation shall promptly deliver to the Holder a new certificate representing the remaining shares of Series B Preferred Stock. If the shares of Series B Preferred Stock are not certificated, the holder must deliver evidence of ownership satisfactory to the Corporation and its transfer agent. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the certificates representing the shares of Series B Preferred Stock tendered for conversion. The Common Stock issuable upon the Mandatory Conversion shall be issued with a restrictive legend indicating that it was issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to the Corporation.
(b) Transfer Tax Matters. Unless the shares of Common Stock deliverable upon conversion are to be issued in the same name as the name in which the shares of Series B Preferred Stock to be converted are registered, the Holder must also deliver to the transfer agent an instrument of transfer, in form satisfactory to the Corporation, duly executed by the Holder or the Holder’s duly authorized attorney, together with an amount sufficient to pay any transfer or similar tax in connection with the issuance and delivery of such shares of Common Stock in such name (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).
10. Redemption Rights. The Series B Preferred Stock does not have any redemption rights.
11. Reservation of Common Stock. The Corporation shall at all times during the Conversion Period reserve and keep available for issuance upon the conversion of shares of Series B Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series B Preferred Stock (including any shares of Series B Preferred Stock paid by the Corporation as in kind dividends on the Series B Preferred Stock), and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series B Preferred Stock; provided, that the Holders approve any such action that requires a vote of the Holders in accordance with Section 3. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.
| 6 |
12. Charges, Taxes and Expenses. The issuance of certificates for shares of Series B Preferred Stock and for Underlying Shares issued upon conversion of (or otherwise in respect of) the Series B Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Corporation; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Series B Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Series B Preferred Stock or receiving Underlying Shares in respect of the Series B Preferred Stock.
13. Replacement Certificates. If any certificate evidencing Series B Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation or its transfer agent may prescribe.
14. Fundamental Transactions. If, at any time while any shares of Series B Preferred Stock are outstanding, (i) the Corporation effects any merger of the Corporation into, or consolidation of the Corporation with, another Person, (ii) the Corporation effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) a Change in Control Event occurs, (iv) a Liquidation Event occurs under which Section 7(d) is applicable, or (v) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of Series B Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the record holder of such Underlying Shares (the “Alternate Consideration”). The foregoing provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series B Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive mergers, consolidations, sales, reclassifications or share exchanges.
15. No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred Stock, whether voluntary or mandatory. Instead, the Corporation shall pay the cash value of any fractional share to each Holder that would otherwise be entitled to a fractional share.
16. Notice of Corporate Events. If the Corporation (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Corporation or any subsidiary, or (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Liquidation Event, Fundamental Transaction, or Change of Control, then the Corporation shall deliver to each Holder a notice which shall specify (1) the record date for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such Liquidation Event, Fundamental Transaction, or Change of Control is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon any such Liquidation Event or Fundamental Transaction.
17. Negative Covenants. So long as any shares of Series B Preferred Stock are outstanding, the Corporation will not, and will not permit any of its Subsidiaries to, directly or indirectly, without the prior written consent of the Holders of a majority of the Series B Preferred Stock then outstanding: (i) amend its Certificate of Incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of any Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents pursuant to key employee equity incentive awards; (iii) enter into any agreement with respect to the foregoing; or (iv) pay cash dividends or distributions on any equity securities of the Corporation other than pursuant to the terms of the Corporation’s outstanding Series B Convertible Voting Preferred Stock. For purposes of this Section 17, the following terms shall have the meanings set forth below:
| 7 |
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (Eastern time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:00 p.m. (Eastern time) on any Business Day, (iii) the Business Day following the date of transmittal, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Corporation, to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci, or (ii) if to a Holder, to the address or facsimile number appearing on the Corporation’s Preferred Stock Register or such other address or facsimile number as such Holder may provide to the Corporation in accordance with this Section.
19. Miscellaneous.
(a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(b) No provision of this Certificate of Designation may be amended, except in a written instrument signed by the Corporation and Holders of at least a majority of the shares of Series B Preferred Stock then outstanding.
(c) The Series B Preferred Stock (i) is senior to all other equity interests in the Corporation outstanding as of the Original Issue Date in right of payment, whether with respect to dividends or upon liquidation or dissolution, or otherwise, other than the outstanding Series B Preferred Stock, and (ii) unless otherwise approved in accordance with this Certificate of Designation, will be senior to all other equity or equity equivalent securities issued by the Corporation after the Original Issue Date, other than Series B Preferred Stock issued after the Original Issue Date in accordance with this Series B Preferred Stock Certificate of Designation.
(d) Any of the rights of the Holders of Series B Preferred Stock set forth herein may be waived by the affirmative vote of Holders of a majority of the shares of Series B Preferred Stock then outstanding. No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designation shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
[Signature Page Follows.]
| 8 |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation for the Series B Preferred Stock to be executed by its duly authorized officer on August 19, 2020.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | /s/ Carlton Johnson | |
| Name: Carlton Johnson Title: Interim Chief Executive Officer and Interim Chief Financial Officer | ||
| 9 |
Exhibit 3.3.11
INVESTORS’ RIGHTS AGREEMENT
|
TABLE OF CONTENTS
Page
| 1. Definitions | 1 |
| 2. Registration Rights | 3 |
| 2.1 Demand Registration | 3 |
| 2.2 Company Registration | 4 |
| 2.3 Underwriting Requirements | 4 |
| 2.4 Obligations of the Company | 5 |
| 2.5 Furnish Information | 7 |
| 2.6 Expenses of Registration | 7 |
| 2.7 Delay of Registration | 7 |
| 2.8 Reports Under Exchange Act | 7 |
| 2.9 “Market Stand-off” Agreement | 8 |
| 2.10 Restrictions on Transfer | 8 |
| 2.11 Termination of Registration Rights | 10 |
| 3. Information Rights | 10 |
| 3.1 Delivery of Financial Statements | 10 |
| 3.2 Inspection | 11 |
| 3.3 Termination of Information | 11 |
| 3.4 Confidentiality | 11 |
| 4. Miscellaneous | 11 |
| 4.1 Successors and Assigns | 11 |
| 4.2 Governing Law | 12 |
| 4.3 Counterparts; Facsimile | 12 |
| 4.4 Titles and Subtitles | 12 |
| 4.5 Notices | 12 |
| 4.6 Amendments and Waivers | 13 |
| 4.7 Severability | 13 |
| 4.8 Aggregation of Stock | 13 |
| 4.9 Entire Agreement | 13 |
| 4.10 Dispute Resolution | 13 |
| 4.11 Delays or Omissions | 14 |
| Schedule A - Schedule of Investors |
i |
INVESTORS’ RIGHTS AGREEMENT
THIS INVESTORS’ RIGHTS AGREEMENT is made as of the 19th day of August, 2020, between:
(a) PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (the “Company”), and
(b) the investor listed on Schedule A hereto, referred to in this Agreement as the “Investor”.
Background
1. Upon the consummation of the transactions set forth in that certain Stock Purchase Agreement (the “SPA”), dated as of even date herewith, among the Company, PTSC Sub One, Inc., Mosaic ImmunoEngineering, Inc. (“Mosaic”), certain shareholders of Mosaic set forth therein, (the “Sellers”), and Steve King (as the “Sellers’ Representative”), the Investor, as one of the Sellers, shall receive shares of the Company’s Series B Preferred Stock.
2. As the sole holder of the Series B Preferred Stock the Investor shall receive certain registration rights and information rights, to which the Company has agreed under the SPA. This Agreement is intended to set forth those rights in detail.
NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
1.2 “Common Stock” means shares of the Company’s common stock, $0.00001 par value per share.
1.3 “Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.4 “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.
1.5 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
2 |
1.6 “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; or (ii) a registration relating to an SEC Rule 145 transaction.
1.7 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.8 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.9 “GAAP” means generally accepted accounting principles in the United States.
1.10 “Holder” means any holder of Registrable Securities who is a party to this Agreement.
1.11 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.12 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
1.13 “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act occurring after the date hereof and the listing of such Common Stock on a national securities exchange.
1.18 “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
1.19 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.20 “Preferred Stock” means, collectively, shares of the Company’s Series A Preferred Stock and Series B Preferred Stock.
1.21 “Registrable Securities” means the Common Stock issuable or issued upon conversion of the Series B Preferred Stock.
1.22 “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
1.23 “Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.
1.24 “SEC” means the Securities and Exchange Commission.
1.25 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
3 |
1.26 “SEC Rule 144(k)” means Rule 144(k) promulgated by the SEC under the Securities Act.
1.27 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.
1.28 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.29 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder.
1.30 “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, $0.00001 par value per share.
1.31 “Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock, $0.00001 par value per share.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Demand Registration.
(a) Form S-1 Demand. If at any time after one hundred eighty (180 after the date of this Agreement, the Company receives a request from Holders of seventy-five percent (75.00%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to one-hundred percent (100%) of the Registrable Securities then outstanding, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.
(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company (x) receives a request from Holders of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders or (y) undertakes to file a Form S-3 Registration Statement for the Common Stock issued upon conversion of the Series B Preferred Stock that the Company file a Form S-3 registration with respect to such Common Stock, then the Company shall (i) within ten (10) days after the date such request is given or determination under clause (y) is made, give a Demand Notice to all Holders other than the Initiating Holders (when applicable); and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request under clause (x) is given, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration, subject to the limitations of Sections 2.1(c) and 2.3.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given; and provided that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period.
4 |
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective
2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash, the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6. For the avoidance of doubt, this Section 2.2 shall not apply to any Excluded Registration.
2.3 Underwriting Requirements.
(a) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;
5 |
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company shall be paid for by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
6 |
2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
2.8 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.9 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (x) one hundred eighty (180) days in the case of the IPO or (y) ninety (90) days in the case of any registration other than the IPO, (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.9 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than five percent (5%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.9 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.9 or that are necessary to give further effect thereto.
2.10 Restrictions on Transfer.
a) The Series B Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, in violation of Section 2.9 or Section 2.10(c) of this Agreement. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Series B Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
7 |
(b) Each certificate or instrument representing (i) the Series B Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.10(c)) be stamped or otherwise imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY HAVE THE RIGHTS AND BENEFITS AND ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in Section 2.9 and Section 2.10(c) of this Agreement.
(c) The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.11(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.
2.11 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:
(a) when all of such Holder’s Registrable Securities could be sold without restriction under SEC Rule 144(k); and
(b) the first anniversary of the date of this Agreement.
8 |
3. Information Rights.
3.1 Delivery of Financial Statements. The Company shall deliver to each Holder:
(a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(e)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company and all being prepared in accordance with GAAP;
(b) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP); and
(c) with respect to the financial statements called for in Section 3.1(a) and Section 3.1(b) an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Section 3.1(b)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein.
If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
3.2 Inspection. The Company shall permit the Holders (provided that the Board of Directors has not reasonably determined that such Holder is a competitor of the Company), at such Holder’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Holder; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.3 Termination of Information. The covenants set forth in Section 3.1 and Section 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) if the Company is and remains subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.
9 |
3.4 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.5; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
4. Miscellaneous.
4.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee shall be aggregated together and with those of the transferring Holder; provided further that all transferees shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
4.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
4.3 Counterparts; Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
4.5 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy shall also be sent to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci and if notice is given to Stockholders, a copy shall also be given to Benesch, Friedlander, Coplan & Aronoff LLP, 200 Public Square, Cleveland, OH 44114 Attn: Ira C. Kaplan.
10 |
4.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
4.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
4.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
4.9 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
4.10 Dispute Resolution The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
4.11 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank]
11 |
IN WITNESS WHEREOF, the parties have executed this INVESTORS’ RIGHTS AGREEMENT as of the date first written above.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | /s/ Carlton Johnson | |
| Name: |
Carlton Johnson | |
| Title: | Interim CEO | |
|
INVESTOR: CASE WESTERN RESERVE UNIVERSITY | ||
| By: | /s/ Michael Haag | |
| Name: | Michael Haag | |
| Title: |
Executive Director, Technology Management | |
|
|
||
| By: | /s/ Michael Lee | |
| Name: | Michael Lee | |
| Title: | Treasurer |
12 |
SCHEDULE A
Investors
| First Name | Last Name | |
| Steven | King | |
| Paul | Lytle | |
| Nicole | Steinmetz | |
| Jonathan | Pokorski | |
| Steven |
Fiering |
|
| Robert |
Garnick |
|
13 |
Exhibit 3.3.12
PATRIOT SCIENTIFIC CORPORATION
VOTING AGREEMENT
TABLE OF CONTENTS
Page
| 1. Vote to Increase Authorized Common Stock. | 1 |
| 2. Vote for Reverse Stock Split. | 2 |
| 3. Remedies. | 2 |
| 3.1 Covenants of the Company. | 2 |
| 3.2 Irrevocable Proxy and Power of Attorney. | 2 |
| 3.3 Specific Enforcement. | 3 |
| 3.4 Remedies Cumulative. | 3 |
| 4. Term. | 3 |
| 5. Miscellaneous. | 3 |
| 5.1 Additional Parties. . | 3 |
| 5.2 Transfers. | 3 |
| 5.3 Successors and Assigns. | 4 |
| 5.4 Governing Law. | 4 |
| 5.5 Counterparts. | 4 |
| 5.6 Titles and Subtitles. | 4 |
| 5.7 Notices. | 4 |
| 5.8 Consent Required to Amend, Modify, Terminate or Waive. | 5 |
| 5.9 Delays or Omissions. | 5 |
| 5.10 Severability. | 6 |
| 5.11 Entire Agreement. | 6 |
| 5.12 Share Certificate Legend. | 6 |
| 5.13 Stock Splits, Stock Dividends, Etc. | 6 |
| 5.14 Manner of Voting. | 6 |
| 5.15 Further Assurances. | 6 |
| 5.16 WAIVER OF JURY TRIAL.. | 7 |
| 5.17 Dispute Resolution | 7 |
| 5.18 Aggregation of Stock. . | 7 |
| Schedule A | Investor | |
| Schedule B | Series A Holders | |
| Exhibit A | Adoption Agreement |
VOTING AGREEMENT
THIS VOTING AGREEMENT (this “Agreement”) is made as of the 19th day of August, 2020, between:
(a) PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (the “Company”),
(b) the investor listed on Schedule A hereto, referred to in this Agreement as the “Investor” (together with any subsequent holders of Series B Preferred Stock (as defined below) and transferees who become parties hereto as “Series B Holders” pursuant to Section 7.1(a) or Section 7.2, the “Series B Holders”), and
(c) each holder of the Company’s Series A Preferred Stock, $0.0001 par value per share and any additional series of Series A Preferred Stock of the Company hereafter authorized (together, “Series A Preferred Stock”) listed on Schedule B (together with any subsequent holders of Series A Preferred Stock and transferees who become parties hereto as “Series A Holders” pursuant to Section 7.1(a) or Section 7.2, the “Series A Holders”).
Background
1. Upon the consummation of the transactions set forth in that certain Stock Purchase Agreement (the “SPA”), dated as of even date herewith, among the Company, PTSC Sub One, Inc., Mosaic ImmunoEngineering, Inc. (“Mosaic”), certain shareholders of Mosaic set forth therein, (the “Sellers”), and Steve King (as the “Sellers’ Representative”), the Investor, as one of the Sellers, shall receive shares of the Company’s Series A Series A Preferred Stock, $0.0001 par value per share (the “Series B Preferred Stock”).
2. Each of the Series A Preferred Stock and Series B Preferred Stock convert into shares of the common stock, $0.0001 par value per share, of the Company (the “Common Stock”)
3. In connection with the SPA, the Series A Holders, who as of the date hereof and after giving effect to the transactions contemplated by the SPA shall hold a majority of the voting securities of the Company, and the Investor have agreed to take certain actions in connection with their voting rights.
NOW, THEREFORE, the Company, the Series A Holders, and the Investor agree as follows:
1. Vote to Increase Authorized Common Stock.
1.1 For purposes of this Agreement, the term “Shares” shall mean and include any securities of the Company that the Series A Holders and Series B Holders (collectively, the “Preferred Stock Holders”), as applicable, are entitled to vote, including, without limitation, all shares of Common Stock, Series A Preferred Stock, and Series B Preferred Stock, by whatever name called, now owned or subsequently acquired by a Preferred Stock Holder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, conversion, similar events or otherwise.
| 1 |
1.2 Each Preferred Stock Holder agrees to vote or cause to be voted all Shares owned by such Preferred Stock Holder, or over which such Preferred Stock Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Series A Preferred Stock and Series B Preferred Stock, in each case outstanding at any given time.
2. Vote for Reverse Stock Split. Each Preferred Stock Holder agrees to vote or cause to be voted all Shares owned by such Preferred Stock Holder, or over which such Preferred Stock Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to vote for a reverse stock split of the Common Stock, at such time and in such ratio as may be determined by the board of directors of the Company. Notwithstanding the foregoing, in no case shall the Preferred Stock Holders vote or cause to be voted all Shares in favor of a reverse stock split if the result of such reverse stock split would cause insufficient shares of Common Stock to be available for conversion of all of the shares of Series A Preferred Stock and Series B Preferred Stock, in each case, then outstanding.
3. Remedies.
3.1 Covenants of the Company. The Company agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement. Such actions include, without limitation, the use of the Company’s best efforts to cause the nomination and election of the directors as provided in this Agreement and to call and have a special meeting of the stockholders of the Company to give effect to the purposes of this Agreement, including, without limitation the provisions of Section 1 and Section 2 of this Agreement. The Company shall use its best efforts to call such special meeting to be held within ninety (90) days after the date of this Agreement.
3.2 Irrevocable Proxy and Power of Attorney. Each party to this Agreement hereby constitutes and appoints as the proxies of the Series A Preferred Holders and the Company, as applicable, and hereby grants a power of attorney to the Chief Executive Officer of the Company, and a to a duly authorized representatives of Case Western Reserve University (solely as to Section 1 hereof), with full power of substitution, with respect to the matters set forth herein, including, without limitation, votes to increase authorized shares pursuant to Section 1 and votes regarding any reverse stock split pursuant to Section 2, and hereby authorizes each of them to represent and vote, if and only if the party (i) fails to vote, or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s Shares in favor of the increase of authorized shares or approval of any reverse split of the Company pursuant to and in accordance with the terms and provisions of Section 1 and Section 2, respectively, or to take any action necessary to effect Section 1 and Section 2, respectively. Each of the proxy and power of attorney granted pursuant to this Section 3.2 is given in consideration of the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, each is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 5. Each party hereto hereby revokes any and all previous proxies or powers of attorney with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 5, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth herein.
| 2 |
3.3 Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that the Company and each of the Preferred Stock Holders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.
3.4 Remedies Cumulative. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
4. Term. This Agreement shall be effective as of the date hereof and shall continue in effect until terminated in accordance with Section 5.8. In addition, this Agreement shall terminate as to a particular Preferred Stock Holder when that Preferred Stock Holder no longer owns any Shares.
5. Miscellaneous.
5.1 Additional Parties. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Series A Preferred Stock after the date hereof, as a condition to the issuance of such shares, the Company shall require that any purchaser become a party to this Agreement by executing and delivering (i) the Adoption Agreement attached to this Agreement as Exhibit A, or (ii) a counterpart signature page hereto agreeing to be bound by and subject to the terms of this Agreement as an Investor and Series A Holder hereunder. In either event, each such person shall thereafter be deemed a Series A Holder for all purposes under this Agreement.
5.2 Transfers. Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognition of such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A. Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be a Series A Holder. The Company shall not permit the transfer of the shares of Series A Preferred or of Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Section 5.2. Each certificate, instrument or book entry representing such shares subject to this Agreement if issued on or after the date of this Agreement shall be notated by the Company with the legend set forth in Section 5.12.
| 3 |
5.3 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither the Company nor and Series A Preferred Holder shall be entitled to assign its rights under this Agreement.
5.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
5.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail by scanned pdf counterparts of signature pages, or other such electronic means and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
5.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
5.7 Notices.
(a) All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy shall also be sent to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci and if notice is given to Stockholders, a copy shall also be given to Benesch, Friedlander, Coplan & Aronoff LLP, 200 Public Square, Cleveland, OH 44114 Attn: Ira C. Kaplan.
(b) Each Series A Holder consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at such Investor’s electronic mail address or the facsimile number set forth on Schedule B hereto or such Series A Holder’s signature page hereto, as the case may be, or as subsequently modified by written notice given in accordance with this Section 5.7. Each Series A Holder agrees to promptly notify the Company of any change in its electronic mail address, and that failure to do so shall not affect the foregoing.
| 4 |
5.8 Consent Required to Amend, Modify, Terminate or Waive. This Agreement may be amended, modified or terminated (other than pursuant to Section 5) and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (x) the Company, (y) the Series B Holders holding at least a majority of the outstanding shares of Series B Preferred Stock, and (z) the Investor. Notwithstanding the foregoing:
(a) Schedule B hereto may be amended by the Company from time to time to add information regarding Series A Holders without the consent of the other parties hereto;
(b) any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party; and
Any amendment, modification, termination or waiver effected in accordance with this Section 5.8 and this Agreement shall be binding on each party and all of such party’s successors and permitted assigns. . For purposes of this Section 5.8, the requirement of a written instrument may be satisfied, as to the Series A Holders, in the form of an action by written consent of the Series A Holders circulated by the Company and executed by the Series A Holder parties specified, so long as such action by written consent makes reasonably explicit reference to the terms of this Agreement to such amendment, modification, termination or waiver. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
5.9 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
| 5 |
5.10 Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
5.11 Entire Agreement. This Agreement (including the Exhibits hereto), and and the other Transaction Agreements (as defined in the SPA) constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
5.12 Share Certificate Legend. Each certificate, instrument or book entry representing any Shares issued after the date hereof shall be notated by the Company with a legend reading substantially as follows:
“THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A VOTING AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT VOTING AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER AND OWNERSHIP SET FORTH THEREIN.”
The Company, by its execution of this Agreement, agrees that it will cause the certificates instruments, or book entry evidencing the Shares issued after the date hereof to be notated with the legend required by this Section 5.12, and it shall supply, free of charge, a copy of this Agreement to any holder of such Shares upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates, instruments, or book entry evidencing the Shares to be notated with the legend required by this Section 5.12 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.
5.13 Stock Splits, Stock Dividends, Etc. In the event of any issuance of Shares of the voting securities of the Company hereafter to any of the Series A or Series B Holders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Shares shall become subject to this Agreement and shall be notated with the legend set forth in Section 5.12.
5.14 Manner of Voting. The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law. For the avoidance of doubt, voting of the Shares pursuant to the Agreement need not make explicit reference to the terms of this Agreement.
5.15 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to carry out the intent of the parties hereunder.
| 6 |
5.16 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 5.16 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
5.17 Dispute Resolution The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
5.18 Aggregation of Stock. All Shares held or acquired by a Preferred Stock Holder and/or its affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
| 7 |
IN WITNESS WHEREOF, the parties have executed this VOTING AGREEMENT as of the date first written above.
| PATRIOT SCIENTIFIC CORPORATION | |
| By: | /s/ Carlton Johnson |
| Name: |
Carlton Johnson |
| Title: | Interim President |
|
INVESTOR: CASE WESTERN RESERVE UNIVERSITY | |
| By: | /s/ Michael Haag |
| Name: | Michael Haag |
| Title: | Executive Director, Technology Management |
|
| |
| By: | /s/ Michael Lee |
| Name: | Michael Lee |
| Title: | Treasurer |
| 8 |
IN WITNESS WHEREOF, the Series A Holders have executed this VOTING AGREEMENT as of the date first written above.
| Individuals Sign Below: | |
|
/s/ Steven King Signature
Steven King Name
/s/ Paul Lytle Signature
Paul Lytle Name
/s/ Nicole Steinmetz Signature
Nicole Steinmetz Name
/s/ Jonathan Pokorski Signature
Jonathan Pokorski Name
/s/ Steven Fiering Signature
Steven Fiering Name
s/ Robert Garnick Signature
Robert Garnick Name
|
| 9 |
SCHEDULE A
INVESTOR
Case Western Reserve University
| 10 |
SCHEDULE B
SERIES A HOLDERS
| Steven | King |
| Paul | Lytle |
| Nicole | Franziska Steinmetz |
| Jonathan | Kyle Pokorski |
| Steven | Fiering |
| Robert | Garnick |
| 11 |
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement (“Adoption Agreement”) is executed on _________________, 20__, by the undersigned (the “Holder”) pursuant to the terms of that certain VOTING AGREEMENT dated as of ___, 2020 (the “Agreement”), by and among the Company and certain of its stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.
1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”)[ or options, warrants, or other rights to purchase such Stock (the “Options”)], for one of the following reasons (Check the correct box):
| ☐ | As a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | As a transferee of Shares from a party in such party’s capacity as a “Common Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Common Holder” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | As a new Investor in accordance with Section 7.1(a) of the Agreement, in which case Holder will be an “Investor” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | In accordance with Section 7.1(b) of the Agreement, as a new party who is not a new Investor, in which case Holder will be a “Series A Holder” for all purposes of the Agreement. |
1.2 Agreement. Holder hereby (a) agrees that the Stock [Options], and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.
1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address or facsimile number listed below Holder’s signature hereto.
| HOLDER: _____________________________ | ACCEPTED AND AGREED: |
| By: ___________________________________ | PATRIOT SCIENTIFIC CORPORATION |
| Address: ______________________________ | By: ___________________________ |
| Facsimile: _____________________________ | Title: _________________________ |
| 12 |
Exhibit 10.13
STOCK PURCHASE AGREEMENT
by and among
PATRIOT SCIENTIFIC CORPORATION,
as Parent
PTSC SUB ONE, INC.,
as Buyer
MOSAIC IMMUNOENGINEERING INC.,
as the Company
THE STOCKHOLDERS OF THE COMPANY NAMED HEREIN,
as the Sellers
and
STEVEN KING
as the Sellers’ Representative
Dated as of August 19, 2020
TABLE OF CONTENTS
| Page | ||
| ARTICLE I PURCHASE OF COMPANY STOCK | 2 | |
| 1.1 | Purchase of Company Stock | 2 |
| 1.2 | Purchase Price | 2 |
| ARTICLE II CLOSING | 2 | |
| 2.1 | Closing | 2 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS | 3 | |
| 3.1 | Representations and Warranties of the Company | 3 |
| 3.2 | Representations and Warranties of the Sellers.: | 13 |
| 3.3 | No Other Representations | 14 |
| ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER PARTIES | 14 | |
| 4.1 | Organization and Qualification | 14 |
| 4.2 | Subsidiaries | 14 |
| 4.3 | Authorization | 15 |
| 4.4 | Non-Contravention | 15 |
| 4.5 | No Brokers | 15 |
| 4.6 | Litigation | 15 |
| 4.7 | Investment Intent | 15 |
| 4.8 | SEC Documents; Financial Statements | 16 |
| 4.9 | Absence of Certain Changes or Events | 16 |
| 4.10 | No Undisclosed Material Liabilities | 17 |
| 4.11 | Ownership and Operations of Merger Sub | 17 |
| 4.12 | Inapplicability of Takeover Statutes. | 17 |
| 4.13 | No Other Representations and Warranties | 17 |
| ARTICLE V OTHER AGREEMENTS | 17 | |
| 5.1 | Access and Information | 17 |
| 5.2 | Conduct of Business | 18 |
| 5.3 | Notification of Certain Matters | 23 |
| 5.4 | Further Assurances | 23 |
| 5.5 | Confidentiality | 23 |
| 5.6 | Publicity | 24 |
| 5.7 | No Trading | 25 |
| 5.8 | Litigation Support | 25 |
| ARTICLE VI CONDITIONS TO CLOSING | 25 | |
| i |
| 6.1 | Conditions to Each Party’s Obligations | 25 |
| 6.2 | Conditions to Obligations of the Seller Parties | 26 |
| 6.3 | Conditions to Obligations of Buyer Parties | 27 |
| 6.4 | Frustration of Conditions | 28 |
| ARTICLE VII TERMINATION | 28 | |
| 7.1 | Termination | 28 |
| 7.2 | Effect of Termination | 29 |
| 7.3 | Fees and Expenses | 30 |
| ARTICLE VIII INDEMNIFICATION 30 | ||
| 8.1 | Survival | 30 |
| 8.2 | Indemnification by Company | 30 |
| 8.3 | Indemnification by Buyer Parties | 31 |
| 8.4 | Indemnification Procedures | 31 |
| 8.5 | Limitations on Indemnification | 34 |
| 8.6 | General Indemnification Provisions | 34 |
| 8.7 | Timing of Payment; Right to Set-Off | 35 |
| 8.8 | Exclusive Remedy | 35 |
| ARTICLE IX GENERAL PROVISIONS | 35 | |
| 9.1 | Expenses | 35 |
| 9.2 | Notices | 35 |
| 9.3 | Severability | 36 |
| 9.4 | Assignment | 36 |
| 9.5 | No Third-Party Beneficiaries | 36 |
| 9.6 | Amendment; Waiver | 36 |
| 9.7 | Entire Agreement | 37 |
| 9.8 | Specific Performance | 37 |
| 9.9 | Governing Law; Jurisdiction; Waiver of Jury Trial | 37 |
| 9.10 | Interpretation | 38 |
| 9.11 | Mutual Drafting | 38 |
| 9.12 | Counterparts | 38 |
| 9.13 | Sellers’ Representative | 39 |
| 9.14 | Conflicts and Privilege | 40 |
| 9.15 | Dispute Resolution | 41 |
Exhibits:
| A | Definitions |
| B | Form of Series A Convertible Preferred Certificate of Designation |
| C | Form of Series B Convertible Preferred Certificate of Designation |
| D | Form of Investor Rights Agreement |
| E | Form of Voting Agreement |
| ii |
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this “Agreement”), is entered into as of August 19, 2020, among:
(i) Patriot Scientific Corporation, a Delaware corporation (“Parent”),
(ii) PTSC Sub One, Inc., a Delaware corporation (“Buyer” or “Merger Sub”), and together with Parent, the “Buyer Parties”),
(iii) Mosaic ImmunoEngineering Inc., a Delaware corporation (the “Company”),
(iv) certain stockholders of the Company set forth on Schedule 3.4 hereto (collectively, the “Sellers”, and together with the Company, the “Seller Parties”), and
(v) Steven King, in the capacity of the representative of the Sellers (“Sellers’ Representative”) in accordance with this Agreement.
Each of Parent, Merger Sub, Company, and Seller may be individually referred to herein as a “Party” and collectively referred to herein as the “Parties.”
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the Company have determined that the merger of Merger Sub with and into the Company in the manner contemplated herein (the “Merger”), is desirable and in the best interests of their respective stockholders and, by resolutions duly adopted, have approved and adopted this Agreement;
WHEREAS, the Company, Parent, and Merger Sub intend to effect the Merger in accordance with this Agreement and the General Corporation Law of the State of Delaware (the “DGCL”, where, upon consummation of the Merger, Merger Sub shall cease to exist and the Company shall become a wholly-owned Subsidiary of Parent;
WHEREAS, Sellers own 100% of the issued and outstanding shares of the capital stock of the Company, as of the date hereof;
WHEREAS, prior to the eventual consummation of the Merger, Sellers desire to sell and convey to Buyer, and Buyer desires to purchase from Sellers, all of the issued and outstanding shares of common stock of the Company owned by Sellers on the Closing Date, subject to the terms and conditions set forth herein;
WHEREAS, the Parent Board has approved the issuance of shares of Parent’s Series A Convertible Preferred and the issuance of shares of Parent’s Series B Convertible Preferred as consideration for the Buyer’s purchase of Sellers’ shares of common stock in the Company on the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, certain capitalized terms used herein are defined in Exhibit A below.
| 1 |
NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Article
I
PURCHASE OF COMPANY STOCK
1.1 Purchase of Company Stock. At the Closing, and on the terms and subject to all of the conditions of this Agreement, Sellers will severally and not jointly sell, transfer, assign and convey to Buyer, and Buyer will purchase and accept from Sellers, one hundred percent (100%) of the common stock of the Company owned by Sellers, comprised of 630,000 shares of common stock (“Class A Stock”) and 70,000 shares of Class B Stock (“Class B Stock”), whereas the Class A Stock and the Class B Stock, in aggregate, shall be defined as the “Purchased Shares”), free and clear of any and all Liens, other than Permitted Liens.
1.2 Purchase Price. Upon the terms and subject to the conditions set forth in this Agreement, the per share consideration to be paid by Buyer for the Purchased Shares (the “Share Purchase Price”) shall be one (1) share of Parent Series A Convertible Preferred for each share of Class A Stock and one (1) share of Parent Series B Convertible Preferred for each share of Class B Stock. In the aggregate, 630,000 shares of Parent Series A Convertible Preferred and 70,000 shares of Parent Series B Convertible Preferred Stock shall be issued for the Purchased Shares (the “Purchase Price”). Each share of Parent Series A Convertible Preferred shall (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate. Each share of Parent Series B Convertible Preferred shall (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) include certain anti-dilution protections, and (d) have no dividend rate. The numbers in this Section 1.2 shall be subject to adjustment for any stock issuance, stock split, stock dividend, stock combination or other similar transactions, whether by the Parent or the Company. For the avoidance of doubt, consummation of the transactions contemplated hereunder shall not give rise to any type of conversion event as set forth in either the Parent Series A Convertible Preferred or the Parent Series B Convertible Preferred. Schedule 1.2 sets forth a pro forma capitalization schedule, as of the Closing (as defined below) after giving effect to the transactions contemplated hereunder.
Article
II
CLOSING
2.1 Closing. Subject to the satisfaction or waiver of the conditions set forth in ARTICLE VI, the consummation of the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of Duane Morris LLP, 1540 Avenue of the Americas, New York, NY 10032, on the third (3rd) Business Day after all the Closing conditions to this Agreement have been satisfied or waived (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at such time) at 4:00 pm (New York City time) or at such other date, time or place as Buyer, the Company and the Sellers’ Representative may agree. By mutual agreement of the parties the Closing may take place by conference call and facsimile (or other electronic transmission of signature pages) with exchange of original signatures by overnight mail or guaranteed delivery. The date on which the Closing actually occurs will be referred to as the “Closing Date”. The Parties agree that to the extent permitted by applicable Law and GAAP, the Closing will be deemed effective as of 12:01 a.m. (New York City time) on the Closing Date.
| 2 |
Article
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
3.1 Representations and Warranties of the Company Except as set forth in the disclosure schedules delivered by the Seller Parties to Buyer on the date hereof (the “Company Disclosure Schedules”), the Section numbers of which are numbered to correspond to the Section numbers of this Agreement to which they refer (unless and to the extent the relevance to other representations and warranties is reasonably apparent from the face of the disclosed exception without independent knowledge on the part of the reader regarding the disclosed exception), the Company, hereby represents and warrants to Buyer, unless otherwise specified, as of the date of this Agreement and the Closing Date, as follows:
(a) Organization and Qualification. The Company is a corporation duly organized, validly existing and, as of the Closing Date, in good standing under the laws of the State of Delaware and has full power and authority to own, lease, use and operate the assets owned by it and to conduct its business as and where it is being conducted by it. The Company is duly licensed or qualified to do business, and is in good standing as a foreign entity, in all jurisdictions in which its assets or the operation of its business makes such licensing or qualification necessary, except where the failure to be so licensed or qualified and in good standing individually or in the aggregate with any such other failures, would not be expected to be material to the Company; without limiting the foregoing, the Company is so licensed or qualified and in good standing in each jurisdiction listed on Schedule 3.1(a). Since the Company’s inception, the Company has not been known by or used any corporate, fictitious or other name in the conduct of the Company’s business or in connection with the use or operation of its assets. Schedule 3.1(a) lists all current directors and officers of the Company, showing each such Person’s name and position(s). The Company is not in default in the performance, observance, or fulfillment of any provision of its Governing Documents, true and correct copies of which have been provided to Parent and Buyer.
(b) Authorization and Binding Effect; Corporate Documentation. Each Seller Party has full power and authority to enter into this Agreement and the Ancillary Documents to which it is, or is required to be, a party and to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of each Seller Party, including requisite board of directors and stockholder approval of the Company. Each of this Agreement and each Ancillary Document to which a Seller Party is or is required to be a party has been duly executed and delivered by each such Seller Party and, assuming the due execution and delivery by the other parties hereto or thereto, constitutes a legal, valid and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, except as the enforceability thereof may be limited by the Permitted Exceptions. The copies of the Governing Documents of the Company, as amended to date, copies of which have heretofore been delivered to Buyer, are true, complete and correct copies of the Governing Documents of the Company, as amended through and in effect on the date hereof. The minute books and records of the proceedings of the Company, copies of which have been delivered to Buyer, are true, correct and complete in all material respects.
| 3 |
(c) Capitalization. Prior to giving effect to the transactions contemplated by this Agreement, Sellers are the beneficial and record owner of 700,000 issued and outstanding common stock of the Company, comprised of 630,000 shares of Class A Stock and 70,000 shares of Class B Stock, with each Seller owning the shares of Class A and Class B Stock in the Company set forth on Schedule 3.1(c). The Purchased Shares to be delivered by Sellers to Buyer constitute 100% of the issued and outstanding shares of common stock of the Company, as calculated on a fully diluted basis. All of the issued and outstanding shares of common stock of the Company (i) have been duly and validly issued, (ii) are fully paid and nonassessable and (iii) were not issued in violation of any preemptive rights or rights of first refusal or first offer. The Company has not issued any shares of preferred stock. There are no issued or outstanding options, warrants or other rights to subscribe for or purchase any equity securities of the Company or securities convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire any equity securities of the Company, or preemptive rights or rights of first refusal or first offer with respect to the equity securities of the Company, nor are there any Contracts, commitments, understandings, arrangements or restrictions to which a Seller Party is a party or bound relating to any equity securities of the Company, whether or not outstanding. There are no outstanding or authorized stock appreciation rights, phantom stock rights, subscriptions, options, warrants, puts, calls, claims, commitments or rights of any type relating to the issuance, sale, or repurchase of any equity securities of the Company, nor are there any voting trusts, proxies, shareholder agreements or any other agreements or understandings with respect to the voting of the equity securities of the Company. All of the equity securities of the Company have been granted, offered, sold and issued in material compliance with all applicable foreign, state and federal securities Laws.
(d) Subsidiaries. The Company does not have any Subsidiaries. The Company does not own or have any rights to acquire, directly or indirectly, any capital stock or other equity interests of any Person. The Company is not a participant in any joint venture, partnership or similar arrangement. There are no outstanding contractual obligations of the Company to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person.
(e) Non-Contravention. Except as set forth on Schedule 3.1(e), neither the execution, delivery and performance of this Agreement or any Ancillary Documents by any Seller Party, nor the consummation of the transactions contemplated hereby or thereby, will (a) violate or conflict with, any provision of the Governing Documents of the Company, (b) violate or conflict with any applicable Law or Order to which the Company or any Seller, their respective assets or the Purchased Shares are bound or subject, (c) with or without giving notice or the lapse of time or both, breach or conflict with, constitute or create a default under, or give rise to any right of termination, cancellation or acceleration of any obligation or result in a loss of a material benefit under, or give rise to any obligation of the Company or any Seller to make any payment under, or to the increased, additional, accelerated or guaranteed rights or entitlements of any Person under, any of the terms, conditions or provisions of any Contract, agreement, or other commitment to which a Seller or the Company is a party or by which a Seller or the Company, their respective assets or the Purchased Shares may be bound, (d) result in the imposition of a Lien (other than a Permitted Lien) on any Purchased Shares or any assets of the Company or (e) require any filing with, or Permit, consent or approval of, or the giving of any notice to, any Governmental Authority or other Person.
| 4 |
(f) Financial Statements. (i) Attached to Schedule 3.1(f) as of the date hereof, are true and correct copies of the unaudited balance sheet and income statement for the Company as of and for the period of inception (March 30, 2020) through June 30, 2020, and (ii) attached to Schedule 3.7 as of the Closing Date, the unaudited balance sheet of the Company as of June 30, 2020 and the related unaudited income statement for the period then ended (such financial statements described in clauses (i) and (ii), collectively, the “Financial Statements”). The Financial Statements have been and will be prepared in accordance with the books and records of the Company, are (and will be) true, correct and complete in all material respects, and present fairly and accurately in all material respects the financial condition, results of operations, cash flows and stockholders equity of the Company as of the respective dates thereof and for the periods specified therein, and such presentations are and will be in accordance with Generally Accepted Accounting Principles in all material respects, subject to normal year-end adjustments and the lack of footnotes and other presentation items. The Company maintains accurate books and records reflecting its assets and liabilities and maintains proper and adequate internal accounting controls for a company of its current stage of development that provide reasonable assurance that (i) the Company does not maintain any off-the-book accounts and that the Company’s assets are used only in accordance with management directives, (ii) transactions are executed with management’s authorization, (iii) transactions are recorded as necessary to permit preparation of the financial statements of the Company and to maintain accountability for its assets, (iv) access to its assets is permitted only in accordance with management’s authorization, and (v) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection of accounts, notes and other receivables on a current and timely basis. All of the books and records of the Company are complete and accurate in all material respects and have been maintained in the Ordinary Course of Business consistent with past practice and in accordance with applicable Laws. The signatures of all Persons appearing on all documents comprising such books and records are the true signatures of the Persons purporting to have signed the same, and complete and correct copies of such books and records have been provided to Buyer.
(g) Absence of Liabilities. The Company does not have any Liabilities of a nature required to be disclosed on a balance sheet prepared in accordance with GAAP except (a) Liabilities that are accrued and reflected on the balance sheet of the Company as of the date hereof, as of June 30, 2020, and as of the Closing Date, (b) Liabilities that are listed on Schedule 3.1(g), and (c) obligations to be performed after the date hereof under any Contracts which are disclosed on Schedule 3.1(g)(i).
(h) Absence of Certain Changes. Except as set forth on Schedule 3.1(h), since Company inception of March 1, 2020, (a) the Company has conducted its business only in the Ordinary Course of Business, and (b) there has not been any change in or development with respect to the Company’s business, operations, condition (financial or otherwise), results of operations, assets or Liabilities, except for changes and developments which have not had, and are not likely to have to have, a Material Adverse Effect. Without limiting the foregoing, except as set forth on Schedule 3.1(h), since March 1, 2020, Company has not: (i) suffered any loss, damage, destruction or other casualty in excess of $50,000 in the aggregate, whether or not covered by insurance; (ii) sold, transferred, leased or otherwise disposed of any material assets (other than in the Ordinary Course of Business) or permitted or allowed any of its material assets to be subject to any Lien (other than the Permitted Liens); (iii) instituted, settled or agreed to settle any Action before any Governmental Authority; (iv) entered into or terminated any Contract that would be required to be disclosed on Schedule 3.16 other than in the Ordinary Course of Business; (v) instituted any increase in the compensation payable to any of its employees or under any Benefit Plan other than in the Ordinary Course of Business, or adopted any new Benefit Plans; (vi) made any capital expenditure or commitment therefore for additions to its property, facilities or equipment outside of the Ordinary Course of Business; (vii) made any change in any method of its accounting or accounting practices or any change in its depreciation or amortization policies or rates theretofore adopted or revalued any of its assets; or (viii) agreed or committed, whether in writing or otherwise, to take any action described in this Section 3.1(h).
| 5 |
(i) Title to and Sufficiency of Assets. Except as set forth on Schedule 3.1(i), the Company has good and marketable title to all of its assets, free and clear of all Liens other than Permitted Liens. The assets of the Company constitute all of the assets, rights and properties that are used or held by the Company for use in the operation of the Company’s business and, taken together, are adequate and sufficient for the operation of the Company’s business as it is currently conducted and as it is currently proposed to be conducted. Immediately following the Closing, all of the assets of the Company will be owned, leased or available for use by the Company on terms and conditions substantially identical to those under which, immediately prior to the Closing, the Company owns, leases, uses or holds available for use such assets.
(j) Real Property. The Company does not own any real property. Schedule 3.1(j) contains a complete and accurate list of all premises leased or subleased or otherwise used or occupied by the Company (the “Leased Premises”), and of all leases, lease guarantees, agreements and documents related thereto, including all amendments, terminations and modifications thereof (collectively, the “Leases”), as well as the current annual rent and term under each Lease. Sellers have provided to Buyer a true and complete copy of each of the Leases, and in the case of any oral Lease, a written summary of the material terms of such Lease. The Leases are valid, binding and enforceable in accordance with their terms (subject to the Permitted Exceptions) and are in full force and effect. No event has occurred which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default on the part of the Company under any Lease. To the Knowledge of the Company, no event has occurred which (whether with or without notice, lapse of time or both or the happening or occurrence of any other event) would constitute a default by any other party under any Lease, and the Company has not received written notice or, to the Knowledge of the Company, any other notice of any such condition. The Company has not waived any material rights under any Lease which would be in effect at or after the Closing.
(k) Intellectual Property.
(i) Set forth in Schedule 3.1(k) is an accurate and complete list of
(A) all material foreign and domestic patents, inventions, disclosures, trademarks, service marks, trade names, internet domain names (and any registrations or applications for registration for any of the foregoing trademarks, service marks, trade names and internet domain names) and all material copyright applications and registrations and all other material Intellectual Property rights owned or used by the Company, and
| 6 |
(B) all material agreements to which the Company is a party which concern any of its Intellectual Property;
(ii) Except as set forth in Schedule 3.1(k):
(A) The Company owns, free and clear of any Encumbrances, or has sufficient rights to, its Intellectual Property;
(B) as of the date of this Agreement, no claim of invalidity or ownership with respect to its Intellectual Property has been received by the Company from any third party and, to the Knowledge of the Company, no Intellectual Property is the subject of any pending or threatened Action;
(C) as of the date of this Agreement, no Person has asserted that, with respect to any Intellectual Property, the Company or any licensee is infringing or has infringed any domestic or foreign patent, trademark, service mark, trade name, or copyright or design right, or has misappropriated or improperly used or disclosed any trade secret, confidential information or know-how;
(D) all fees, annuities, royalties, honoraria and other payments which are due from the Company on or before the date of this Agreement for any of its Intellectual Property or under any agreement related to its Intellectual Property have been paid or accrued for;
(E) to the Company’s Knowledge, except as limited by the terms of any license relating thereto, the making, using, selling, manufacturing, marketing, licensing, reproduction, manufacture, composition of matter, or related to any part of the Intellectual Property, does not and will not infringe in any material respect any domestic or foreign patent, trademark, service mark, trade name, copyright, moral right or other intellectual property right of any third party, and does not and will not involve the misappropriation or improper use or disclosure of any trade secrets, confidential information or know-how of any third party;
(F) to the Knowledge of the Company, no unexpired foreign or domestic patents or patent applications exist that are adverse to the material interests of the Company; and
(G) to the Knowledge of the Company, there exists no (A) prior act of the Company or any third party that would void or invalidate any of the Company’s Intellectual Property or (B) conduct or use by the Company or any third party that would void or invalidate any of the Company’s Intellectual Property.
| 7 |
(iii) The Company has taken commercially reasonable steps to safeguard and maintain the secrecy and confidentiality of (i) all of its Intellectual Property, including without limitation material trade secrets and (ii) to the extent required by applicable Law, all of its material patent applications and their related inventions prior to the issuance of a patent registration contained in its Intellectual Property.
(l) Compliance with Laws. The Company is in compliance with, and has complied since its inception, in all material respects with all Laws and Orders applicable to the Company, its assets, employees or business or the Purchased Shares. The Company has not received any written or, to the Knowledge of the Company, oral notice of any actual or alleged violation or non-compliance with applicable Laws.
(m) Permits. The Company owns or possesses all right, title and interest in all material Permits required to own its assets and conduct its business as now being conducted. All material Permits of the Company are listed on Schedule 3.1(m) and are valid and in full force and effect, and the Company is in compliance in all material respects with the terms and conditions of all such Permits. No loss, revocation, cancellation, suspension, termination or expiration of any Permit is pending or, to the Knowledge of the Company, threatened other than expiration or termination in accordance with the terms thereof. The Company has not received any written or, to the Knowledge of the Company, oral notice from any Governmental Authority of any actual or alleged violation or non-compliance regarding any such Permit.
(n) Litigation
Except as described on Schedule 3.1(n), there is no (a) Action of any nature pending or, to the Knowledge of the Company, threatened, nor, to the Knowledge of the Company, is there any reasonable basis for any Action to be made, or (b) Order pending now or rendered by a Governmental Authority since the Company’s inception, in either case of clauses (a) or (b), by or against the Company, any of its current or former directors, officers or equity holders (provided, that any litigation involving the directors, officers or equity holders of the Company must be related to the Company’s business or assets or the Purchased Shares), the Company’s business or assets or the Purchased Shares. Since the Company’s inception, the Company’s current or former officers, senior management or directors have not been charged with, indicted for, arrested for, or convicted of any felony or any crime involving fraud.
(o) Contracts. Schedule 3.1(o) lists each Contract to which the Company is a party or by which it is bound, the breach or absence of which would result in a Material Adverse Effect on the Company (each, a “Material Contract”). Each of the Material Contracts is valid and binding on the Company and in full force and effect and, assuming due execution and delivery by the other parties thereto, is enforceable in accordance with its terms by the Company. The Company is not in breach or default under any Material Contract, nor does any condition exist that, with notice or lapse of time or both, would constitute a breach or default in any respect thereunder by the Company or that would result in material liability to the Company. To the Knowledge of the Company, (a) no other party to any Material Contract is in default thereunder and (b) no condition exists that with notice or lapse of time or both would constitute a default in any material respect by any such other party thereunder. The Company has not received notice of any termination or cancellation of any Material Contract and to the Company’s Knowledge, no other party to a Material Contract has plans to terminate or cancel such Material Contract. The Company has not and, to the Knowledge of the Company, no other party to any Material Contract has, repudiated any material provision of any Material Contract. The Company is not disputing and, to the Knowledge of the Company, no other party to such Material Contract is disputing, any material provision of any Material Contract. None of the parties to any Material Contract is renegotiating any material amounts paid or payable to or by the Company under such Material Contract or any other material term or provision thereof.
| 8 |
(p) Tax Matters. Except as set forth on Schedule 3.1(p): (i) the Company has timely filed all Tax Returns required to have been filed by it; (ii) all such Tax Returns are accurate and complete in all material respects; (iii) the Company has paid all Taxes owed by it which were due and payable (whether or not shown on any Tax Return); (iv) the Company has complied in all material respects with all applicable Laws relating to Tax; (v) the Company is not currently the beneficiary of any extension of time within which to file any Tax Return; (vi) there is no current Action against the Company in writing by a Governmental Authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction; (vii) there are no pending or ongoing audits of the Company’s Tax Returns by a Governmental Authority of which the Company has received notice thereof; (viii) the Company has not requested or received any ruling from, or signed any binding agreement with, any Governmental Authority, with respect to Taxes that would apply to any Tax periods ending after the Closing Date; (ix) there are no Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax; (x) no unpaid Tax deficiency has been asserted in writing against or with respect to the Company by any Governmental Authority which Tax remains unpaid; (xi) the Company has collected or withheld all Taxes currently required to be collected or withheld by it, and all such Taxes have been paid to the appropriate Governmental Authorities or set aside in appropriate accounts for future payment when due; (xii) the Company has not granted or is subject to, any waiver of the period of limitations for the assessment of Tax for any currently open taxable period; (xiii) the Company is not required to include in income any amount for an adjustment pursuant to Section 481 of the Code or the Regulations thereunder with respect to a change in accounting methods made prior to the Closing; (xiv) the Company is not a party to any Tax allocation or sharing agreement (other than an agreement (such as a lease) the principal purpose of which is not the sharing or allocation of Tax); (xv) there is no Contract or Benefit Plan covering any Person that, individually or collectively, could give rise to the payment of any amount that would not be deductible by the Company by reason of Section 280G or Section 162(m) of the Code, and no arrangement exists pursuant to which the Company or Buyer will be required to “gross up” or otherwise compensate any Person because of the imposition of any Tax on a payment to such Person; (xvi) the Company has not been a beneficiary of or participated in any “reportable transaction” within the meaning of Regulations Section 1.6011-4(b)(1) that was, is, or to the Knowledge of the Company will ever be, required to be disclosed under Regulations Section 1.6011-4; (xvii) no Tax Return filed by or on behalf of the Company has contained a disclosure statement under Section 6662 of the Code (or any similar provision of Law), and no Tax Return has been filed by or on behalf of the Company with respect to which the preparer of such Tax Return advised consideration of inclusion of such a disclosure, which disclosure was not made; (xviii) the Company has not taken any action outside of the Ordinary Course of Business that would have the effect of deferring a measure of Tax from a period (or portion thereof) ending on or before the Closing Date to a period (or portion thereof) beginning after the Closing Date; (xix) the Company does not have a “permanent establishment” in any foreign country, as defined in any applicable Tax treaty or convention between the United States of America and such foreign country, or has otherwise taken steps or conducted business operations that have materially exposed, or will materially expose, it to the taxing jurisdiction of a foreign country; (xx) the Company is materially in compliance with the terms and conditions of any applicable Tax exemptions, Tax agreements or Tax orders of any Taxing Authority to which it may be subject or which it may have claimed, and the transactions contemplated by this Agreement will not have any material and adverse effect on such compliance; (xxi) no written power of attorney which is currently in force has been granted by or with respect to the Company with respect to any matter relating to Taxes; and (xxii) no Seller is a “foreign person” for purposes of Section 1445 of the Code.
| 9 |
(q) Environmental Matters. The Company has complied in all respects with all applicable Environmental Laws, and the Company has not received written notice or, to the Knowledge of the Company, other notice of any Actions pending or threatened against the Company or is assets (including the Leased Premises) relating to applicable Environmental Laws, Environmental Permits or Environmental Conditions. The Company has not had any environmental audits, environmental assessments, reports, sampling results, correspondence with Governmental Authorities or other environmental documents relating to the Company’s past or current properties, facilities or operation. There are no Hazardous Materials that are being stored or are otherwise present on, under or about the Leased Premises, or, to the Knowledge of the Company, any real property formerly owned, leased or operated by the Company. The Company has not disposed of, or arranged to dispose of, Hazardous Materials at a disposal facility in a manner or to a location that has resulted or will result in liability to the Company under or relating to Environmental Laws. The Company has not released any Hazardous Materials on, under or about any real property leased or otherwise used by it, which would require investigation or remediation pursuant to any Environmental Law or that which otherwise is in violation of any requirement of any Environmental Law.
(r) Employee Benefit Plans.
(i) Set forth on Schedule 3.1(r)(i) is a true and complete list of each Benefit Plan. With respect to each Benefit Plan: (i) such Benefit Plan has been in all material respects operated, administered and enforced in accordance with its terms and in compliance with, and such Benefit Plan complies with, all applicable Laws, including ERISA and the Code (including Section 409A thereof), in all material respects; (ii) no breach of fiduciary duty has occurred; (iii) no Action is pending, or to the Knowledge of the Company, threatened (other than routine claims for benefits arising in the ordinary course of administration); (iv) no prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code, has occurred, excluding transactions effected pursuant to a statutory or administration exemption; and (v) all contributions and premiums due through the Closing Date have been made as required under ERISA or have been fully accrued on the Financial Statements. All Benefit Plans can be terminated at any time as of or after the Closing Date without resulting in any liability to the Company, Buyer or any of their respective Affiliates for any additional contributions, penalties, premiums, fees, fines, excise taxes or any other charges or liabilities (except for ordinary course termination expenses).
| 10 |
(ii) Each Benefit Plan which is intended to be “qualified” within the meaning of Section 401(a) of the Code (i) has been determined by the IRS to be so qualified (or is based on a prototype plan which has received a favorable opinion letter) during the period from its adoption to the date of this Agreement and (ii) its related trust has been determined to be exempt from taxation under Section 501(a) of the Code or the Company has requested an initial favorable IRS determination of qualification and/or exemption within the period permitted by applicable Law. To the Knowledge of the Company, no fact exists which could adversely affect the qualified status of such Benefit Plans or the exempt status of such trusts.
(iii) No Benefit Plan is a “defined benefit plan” (as defined in Section 414(j) of the Code), a “multiemployer plan” (as defined in Section 3(37) of ERISA) or a “multiple employer plan” (as described in Section 413(c) of the Code) or is otherwise subject to Title IV of ERISA or Section 412 of the Code, and the Company has not incurred any Liability or otherwise has any outstanding Liability under Title IV of ERISA and, to the Knowledge of the Company, no condition presently exists that is expected to cause such Liability to be incurred. The Company does not currently maintain or contribute to, or has ever maintained or contributed to or in any way directly or indirectly had any Liability (whether contingent or otherwise) with respect to any “multiemployer plan,” within the meaning of Section 3(37) or 4001(a)(3) of ERISA. The Company is not or has not in the past been a member of a “controlled group” for purposes of Section 414(b), (c), (m) or (o) of the Code, nor does the Company have any Liability with respect to any collectively-bargained for plans, whether or not subject to the provisions of ERISA. The Company does not currently maintain or has ever maintained, or is required currently or has ever been required to contribute to or otherwise participate in, a multiple employer welfare arrangement or voluntary employees’ beneficiary association as defined in Section 501(c)(9) of the Code.
(iv) With respect to each Benefit Plan which is a “welfare plan” (as described in Section 3(1) of ERISA): (i) no such plan provides medical or death benefits with respect to any current or former employee of the Company beyond their termination of employment (other than coverage mandated by Law, which is paid solely by such employees); and (ii) there are no reserves, assets, surplus or prepaid premiums under any such plan. Except to the extent required by Section 4980B of the Code or similar state Law, the Company does not provide health or welfare benefits to any former or retired employee or is obligated to provide such benefits to any active employee following such employee’s retirement or other termination of employment or service.
(v) Each Benefit Plan that is subject to Section 409A of the Code (each, a “Section 409A Plan”) as of the Closing Date is indicated as such on Schedule 3.1(r)(v) Each Section 409A Plan has been administered in all material respects in compliance, and is in documentary compliance, with the applicable provisions of Section 409A of the Code, the regulations thereunder and other official guidance issued thereunder. The Company has no obligation to any employee or other service provider with respect to any Section 409A Plan that may be subject to any Tax under Section 409A of the Code.
(s) Employees and Labor Matters.
(i) Schedule 3.1(s)(i) sets forth a complete and accurate list of all employees of the Company as of the date of this Agreement and the Closing Date showing for each as of that date (i) the employee’s name, employer, job title or description, location, salary level (including any bonus, commission, deferred compensation or other remuneration payable (other than any such arrangements under which payments are at the discretion of the Company)), (ii) any bonus, commission or other remuneration other than salary paid during the Company’s fiscal year ending December 31, 2020 and (iii) any wages, salary, bonus, commission or other compensation due and owing to each employee for the fiscal year ending December 31, 2020. Except as set forth on Schedule 3.1(s)(i), no employee is a party to a written employment agreement or contract with the Company and each is employed “at will”. The Company has paid in full to all employees all wages, salaries, commission, bonuses and other compensation due, including overtime compensation, and there are no severance payments which are or could become payable by the Company to any employees under the terms of any written or, to the Knowledge of the Company, oral agreement, or commitment or any Law, custom, trade or practice.
| 11 |
(ii) Schedule 3.1(s)(ii) contains a list of all independent contractors (including consultants) currently engaged by the Company, along with the position, date of retention and rate of remuneration, most recent increase (or decrease) in remuneration and amount thereof, for each such Person.
(iii) The Company is not a party to any collective bargaining agreement or other Contract with any group of employees or any labor organization or other Representative of any of employees of the Company.
(iv) Except as set forth in Schedule 3.1(s)(iv), to the Knowledge of The Company, it is in material compliance with applicable Laws and its own policies respecting employment and employment practices, terms and conditions of employment, wages and hours, equal opportunity, equal pay, civil rights, labor relations, immigration, occupational health and safety, and payroll and wage taxes.
(t) Insurance. The Company has maintained since inception and now maintains insurance in amounts sufficient for its business, operations and assets and in such amounts and covering such risks as are usually carried by companies at the same stage of development, engaged in similar businesses and owning similar properties in the same general areas in which the Company operates. Insurance policies meeting the criteria in the preceding sentence are in full force and effect, and all premiums due theron have been paid (collectively, the “Company Insurance Policies”). As of the Closing, each of the Company Insurance Policies will be in full force and effect. None of the Company Insurance Policies will lapse or terminate as a result of the transactions contemplated by this Agreement. The Company is in material compliance with the provisions of the Company Insurance Policies.
(u) Bank Accounts. Schedule 3.1(u) lists the names and locations of all banks and other financial institutions with which the Company maintains an account (or at which an account is maintained to which the Company has access as to which deposits are made on behalf of the Company) (each, a “Bank Account”), in each case listing the type of Bank Account and the names of all Persons authorized to draw thereupon or have access thereto and lists the locations of all safe deposit boxes used by the Company. All cash in such Bank Accounts is held on demand deposit and is not subject to any restriction or limitation as to withdrawal.
| 12 |
(v) No Brokers. No Seller or the Company, nor any of their respective Representatives on their behalf, has employed any broker, finder or investment banker or incurred any liability for any brokerage fees, commissions, finders’ fees or similar fees in connection with the transactions contemplated by this Agreement.
(w) No Untrue Statements. No statement by the Company contained in this Agreement, any Schedule to this Agreement, any other document or certificate delivered pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statements therein contained not misleading.
(x) Affiliated Transactions. Neither the Company nor any officer or director of the Company has any direct or indirect interest in any customer, supplier or competitor of the Company or in any Person from whom or to whom the Company leases real or personal property.
(y) Board Recommendation. The Board of Directors of the Company, at a meeting duly called and held, by the unanimous vote of all directors (a) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interest of the Company and its stockholders, and (b) approved this Agreement in accordance with the provisions of the DGCL and its Governing Documents.
3.2 Representations and Warranties of the Sellers. Each Seller, severally, and not jointly, hereby represents and warrants to Buyer, unless otherwise specified, as of the date of this Agreement and the Closing Date, as follows:
(a) Authorization and Binding Effect. Such Seller has full power and authority to enter into this Agreement and the Ancillary Documents to which it is, or is required to be, a party and to consummate the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of such Seller. Each of this Agreement and each Ancillary Document to which such Seller is or is required to be a party has been duly executed and delivered by each such Seller and, assuming the due execution and delivery by the other parties hereto or thereto, constitutes a legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms, except as the enforceability thereof may be limited by the Permitted Exceptions.
(b) Title to the Purchased Shares. Such Seller owns good, valid and marketable title to the Purchased Shares, free and clear of any and all Liens (other than those imposed by applicable securities Laws), and upon delivery of the Purchased Shares owned by such Seller to Buyer on the Closing Date in accordance with this Agreement, and upon Buyer’s payment of the Purchase Price for such Purchased Shares payable at the Closing in accordance with Section 1.2, the entire legal and beneficial interest in the Purchased Shares and good, valid and marketable title to the Purchased Shares, free and clear of all Liens (other than those imposed by applicable securities Laws or those incurred by Buyer), will pass to Buyer.
(c) Investment Intent. Such Seller is acquiring the Parent Series A and Series B Convertible Preferred, as applicable, for such Seller’s own account and not with a view to distribution within the meaning of Section 2(11) of the Securities Act and the rules and regulations issued pursuant thereto. Such Seller is an “accredited investor” within the meaning of Rule 501 of the Securities Act. Such Seller understands that neither the Parent Series A and Series B Convertible Preferred have been registered under the Securities Act and cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.
| 13 |
3.3 No Other Representations. Except for the representations and warranties set forth in this ARTICLE III, as modified by the Company Disclosure Schedules, the other Ancillary Documents and any certificate delivered pursuant hereto or thereto, the Seller Parties have not made nor make any representation or warranty, express or implied, written or oral, with respect to the Company, Sellers or the transactions contemplated by this Agreement and the other Ancillary Documents.
Article
IV
REPRESENTATIONS AND WARRANTIES OF BUYER parties
Except as set forth in (i) Annual Report on Form 10-K for the fiscal year ended May 31, 2019, Quarterly Report on Form 10-Q for the period ended February 29, 2020, (the “Covered Parent SEC Disclosure”) or (ii) the disclosure schedules delivered by the Buyer Parties to the Seller Parties on the date hereof (the “Buyer Parties Disclosure Schedules”), the Section numbers of which are numbered to correspond to the Section numbers of this Agreement to which they refer (unless and to the extent the relevance to other representations and warranties is reasonably apparent from the face of the disclosed exception without independent knowledge on the part of the reader regarding the disclosed exception) each of the Buyer Parties represents and warrants to the Seller Parties, as of the date of this Agreement and the Closing Date, as follows:
4.1 Organization and Qualification. Each of the Buyer Parties is duly formed, validly existing and in good standing under the Laws of their jurisdiction of incorporation and has all of the requisite corporate power, authority and all necessary government approvals or licenses to own, lease, operate its properties and to carry on its business as now being conducted. Each of the Buyer Parties is duly qualified or licensed to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification or license is required, except where the failure to be so qualified or be so licensed would not have or reasonably be expected to have a Buyer Party Material Adverse Effect.
4.2 Subsidiaries. Except as disclosed in Schedule 4.2, each Subsidiary of Parent is duly organized, validly existing and, as applicable, in good standing under the Laws of its jurisdiction of formation, and has all of the requisite corporate, partnership, limited liability company or other organizational power and authority and all necessary government approvals and licenses to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to have such approvals or licenses would not, individually or in the aggregate, constitute a Buyer Party Material Adverse Effect. Each Subsidiary of Parent is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership, operation or leasing of its properties or the management of properties for others makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed or in good standing would not, individually or in the aggregate, constitute a Buyer Party Material Adverse Effect. All outstanding equity interests in each Subsidiary of Parent have been duly authorized and are validly issued, fully paid and nonassessable, and are not subject to any preemptive rights, purchase options, call options, rights of first refusal, subscriptions or any similar rights and are owned by Parent and are so owned free and clear of all Liens, except as would not, individually or in the aggregate, constitute a Buyer Party Material Adverse Effect.
| 14 |
4.3 Authorization. Each of Parent and Buyer has full corporate power and authority to enter into this Agreement and the Ancillary Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents to which Buyer is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer. This Agreement and each Ancillary Document to which a Buyer Party is a party constitutes a legal, valid and binding obligation of each, enforceable against such Buyer Party in accordance with its terms, except as the enforceability thereof may be limited by the Permitted Exceptions.
4.4 Non-Contravention. Neither the execution and delivery of this Agreement or any Ancillary Document by a Buyer Party, nor the consummation of the transactions contemplated hereby or thereby, will violate or conflict with or (with or without notice or the passage of time or both) constitute a breach or default under (a) any provision of the Governing Documents of either Parent or Buyer, (b) any Law or Order to which the Buyer Parties or any of their business or assets are bound or subject or (c) any Contract or Permit to which any of the Buyer Parties is a party or by which the Buyer Parties or any of their properties may be bound or affected, other than, in the cases of clauses (a) through (c), such violations and conflicts which would not reasonably be expected to have a Buyer Party Material Adverse Effect.
4.5 No Brokers. Neither the Buyer Parties, nor any Representative of Buyer Parties on their behalf, has employed any broker, finder or investment banker or incurred any liability for any brokerage fees, commissions, finders’ fees or similar fees in connection with the transactions contemplated by this Agreement.
4.6 Litigation. There is no Action pending or, to the Knowledge of the Buyer Parties, threatened, nor any Order of any Governmental Authority is outstanding, against or involving Parent, Buyer, or any of their respective officers, directors, stockholders, properties, assets or businesses, whether at law or in equity, before or by any Governmental Authority, which would reasonably be expected to have a Buyer Party Material Adverse Effect.
4.7 Investment Intent. Buyer is acquiring the Purchased Shares for its own account and not with a view to distribution within the meaning of Section 2(11) of the Securities Act, and the rules and regulations issued pursuant thereto. Buyer is an “accredited investor” within the meaning of Rule 501 under the Securities Act. Buyer understands that the Purchased Shares have not been registered under the Securities Act and cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available.
| 15 |
4.8 SEC Documents; Financial Statements. Parent has made available to the Seller Parties (by public filing with the SEC or otherwise) a true and complete copy of each report, schedule, registration statement, other statement (including proxy statements) and information filed by Parent with the SEC since January 1, 2017 (the “Parent SEC Documents”), which are all the documents (other than preliminary material) that Parent was required to file with the SEC since such date pursuant to the federal securities Laws and the SEC rules and regulations thereunder. As of their respective dates, the Parent SEC Documents complied in all material respects with the requirements of the Securities Act, the Sarbanes-Oxley Act of 2002 and the Exchange Act, as applicable, and the rules and regulations of the SEC thereunder applicable to such Parent SEC Documents, in each case, as in effect at such time, and none of the Parent SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent such statements have been modified or superseded by later Parent SEC Documents filed and publicly available prior to the date of this Agreement. No Subsidiary of Parent is required (by contract or applicable Law) to make periodic filings with the SEC. The consolidated financial statements of Parent (including the notes thereto) included or incorporated by reference in the Parent SEC Documents (including the audited consolidated balance sheet of Parent as at May 31, 2019 (the “Parent Balance Sheet”) and the unaudited consolidated statements of income for the three and nine months ended January 31, 2020) complied as to form in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present, in accordance with applicable requirements of GAAP and the applicable rules and regulations of the SEC (subject, in the case of the unaudited statements, to normal, recurring adjustments, none of which are material and the absence of footnotes), in each case, as in effect at such time, the assets, Liabilities and the consolidated financial position of Parent and its Subsidiaries, taken as a whole, as of their respective dates and the consolidated results of operations and cash flows of Parent and its Subsidiaries taken as a whole, for the periods presented therein. As of the Closing Date, Schedule 1.2 containing the pro forma capitalization table following Closing is true and correct. Since the enactment of the Sarbanes-Oxley Act of 2002, Parent has been and is in compliance in all material respects with the applicable provisions thereof and the rules and regulations promulgated thereunder.
4.9 Absence of Certain Changes or Events. Except as disclosed in Schedule 4.9 or in any Parent SEC Document filed since the date of the Parent Balance Sheet, each of Parent and the Parent Subsidiaries have conducted their business only in the ordinary course and there has not been: (i) a Buyer Party Material Adverse Effect; (ii) any declaration, setting aside for payment or payment of any dividend or other distribution; (iii) any amendment of any material term of any outstanding security of Parent; (iv) any repurchase, redemption or other acquisition by Parent or any Parent Subsidiary of any outstanding shares, stock or other securities of, or other ownership interests in, Parent or any Parent Subsidiary; or (v) any change in any method or practice of financial accounting by Parent or any consolidated Parent Subsidiary other than any change after the date of this Agreement permitted by ARTICLE V.
| 16 |
4.10 No Undisclosed Material Liabilities. Except as disclosed in the Parent SEC Documents filed prior to the date hereof, there are no Liabilities of Parent or any of the Parent Subsidiaries, whether accrued, contingent, absolute or determined other than: (i) Liabilities reflected on the financial statements (including the notes thereto), or (ii) Liabilities incurred in the ordinary course of business consistent with past practice since the date of the Balance Sheet as would not, individually or in the aggregate, constitute a Buyer Party Material Adverse Effect.
4.11 Ownership and Operations of Merger Sub. Parent is the record owner of all of the outstanding capital stock of Buyer. Buyer was formed solely for the purpose of engaging in the transactions contemplated hereunder, has engaged in no other business activities and has conducted its operations only as contemplated hereby.
4.12 Inapplicability of Takeover Statutes. Parent has taken all appropriate and necessary actions to exempt Buyer’s purchase of the Purchased Shares using the capital stock of Parent as consideration, this Agreement, and the other transactions contemplated thereby from the restrictions of any applicable provision of a Takeover Statute. No other “control share acquisition”, “fair price”, “moratorium” or other antitakeover Laws apply to Buyer’s purchase of the Purchased Shares, this Agreement or the other transactions contemplated hereby.
4.13 No Other Representations and Warranties. Except for the representations and warranties set forth in this ARTICLE IV, as modified by the Buyer Parties Disclosure Schedules, the other Ancillary Documents and any certificate delivered pursuant hereto or thereto, neither Parent, Buyer, nor any of their respective Representatives has made nor make any representation or warranty, express or implied, written or oral, with respect to the transactions contemplated by this Agreement and the other Ancillary Documents, and each of Buyer and Parent hereby disclaims any other representations and warranties, whether made orally or in writing, by or on behalf of Buyer or Parent by any Person. The Buyer Parties acknowledge and agree that each has conducted to its satisfaction its own independent investigation of the condition, operations and Liabilities of the Company and, in making its determination to proceed with the transactions contemplated by this Agreement and the other Ancillary Documents, the Buyer Parties have relied solely on the results of their own independent investigation and the express representations and warranties set forth in ARTICLE III, as modified by the Company Disclosure Schedules, the Ancillary Documents and any certificate delivered pursuant hereto or thereto.
Article
V
OTHER AGREEMENTS
5.1 Access and Information. During the Interim Period, Sellers and the Company shall give, and shall direct their Representatives to give, Buyer and its Representatives, at reasonable times during normal business hours and upon reasonable intervals and notice, access to all offices and other facilities and to all employees, properties, Contracts, agreements, commitments, books and records, financial and operating data and other information, of or pertaining to the Company, as Buyer or its Representatives may reasonably request regarding the Company and its respective businesses, assets, Liabilities, financial condition, prospects, operations, management, employees and other aspects (including unaudited quarterly financial statements, including a quarterly balance sheet and income statement, a copy of each material report, schedule and other document filed with or received by a Governmental Authority pursuant to the requirements of applicable securities Laws, and independent public accountants’ work papers (subject to the consent or any other conditions required by such accountants, if any)) and instruct each of the Company’s Representatives to reasonably cooperate with Buyer and its Representatives in their investigation; provided, however, that Buyer and its Representatives shall conduct any such activities in such a manner as not to unreasonably interfere with the business or operations of the Company. Buyer shall, and shall cause its Representatives to, abide by the terms of any reasonable confidentiality agreement with respect to such access and any information furnished to it or its Representatives.
| 17 |
5.2 Conduct of Business
(a) During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement in accordance with Section 7.1 or the Closing (the “Interim Period”), each of (x) the Company on the one hand, and (y) Parent on the other, shall, and shall cause each of their respective Subsidiaries, except as expressly contemplated by this Agreement, as required by applicable Laws, as set forth on Schedule 6.2, or to the extent consented to by the Parties in writing: (i) to conduct its respective business, in all material respects, in the Ordinary Course of Business, (ii) to not take any action except in the Ordinary Course of Business and in compliance in all material respects with all applicable Laws, (iii) to comply with all Laws applicable to their respective businesses, assets, directors, officers, employees, independent contractors, consultants, equity holders, agents, Representatives and Covered Persons, and (iv) to take all commercially reasonable measures necessary or appropriate to preserve intact, in all material respects, their respective business organizations, business, operations, material assets, material rights, franchises, goodwill and relations with its customers, vendors, regulators, employees and other persons with which it has significant business or other relationships, to keep available the services of their respective managers, directors, officers, employees and consultants, and to preserve the possession, control and condition of their respective material assets, all as consistent with past practice.
(b) Without limiting the generality of Section 5.2(a) and except as contemplated by the terms of this Agreement, as required by applicable Laws or as set forth on Schedule 5.2, during the Interim Period, each Party shall not:
(i) amend, waive or otherwise change, in any respect, its Governing Documents;
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of, subject to any Lien, or propose to issue, grant, sell, pledge or dispose of or subject to any Lien, any of its equity securities, voting interests or any options, warrants, commitments, subscriptions or rights of any kind to acquire or sell any of its equity securities, voting interests or other securities, including any securities convertible into or exchangeable for any of its shares or other equity securities or securities of any class and any other equity-based awards, or engage in any hedging transaction with a third Person with respect to such securities, or enter into any agreement, understanding or arrangement with respect to the sale or voting of its capital stock or other securities;
| 18 |
(iii) adjust, split, combine, recapitalize or reclassify any of its shares, securities, voting interests, or other equity interests or issue any other securities in respect thereof or pay or set aside any dividend or other distribution (whether in cash, equity or property or any combination thereof) in respect of its equity interests, or directly or indirectly redeem, purchase or otherwise acquire or offer to acquire any of its securities;
(iv) declare, set aside or pay any dividend or distribution payable in cash, securities or property in respect of capital stock;
(v) incur, create, assume, prepay or otherwise become liable for any Indebtedness (directly, contingently or otherwise) in excess of $10,000 (individually or in the aggregate);
(vi) make a loan or advance to or investment in any Person (including, without limitation, any Affiliate, or any of their respective employees, shareholders, officers, directors, and/or any third party), or guarantee or endorse any Indebtedness, Liability or obligation of any Person, in any amount;
(vii) (A) increase the wages, salaries, benefits or compensation of its employees, consultants or independent contractors other than in the Ordinary Course of Business, consistent with past practice, and in any event not in the aggregate by more than five percent (5%), (B) make or commit to make any bonus payment (whether in cash, property or securities) to any employee, independent contractor or consultant outside of the ordinary course of business, (C) increase other benefits of employees generally, or enter into, establish, materially amend or terminate any Benefit Plan with, for or in respect of any current consultant, officer, manager director or employee, in each case other than as required by applicable Law, pursuant to the terms of any Benefit Plans or in the ordinary course of business consistent with past practice or (D) grant any new awards or benefits to any director, officer, employee, independent contractor or consultant;
(viii) (A) hire or engage the services of any officer, employee, independent contractor or consultant, except any such person already engaged or any new officer, employee, independent contractor or consultant reasonably necessary to continue to operate the businesses of each of the Company and Parent in the Ordinary Course of Business, (B) enter into any employment, severance or other Contract with any officer, employee, independent contractor or consultant; (C) grant or provide any severance or termination payments or benefits to any director, officer, employee, independent contractor or consultant, or (D) discretionarily accelerate the vesting or payment of any equity or equity-based award held by any director, officer, employee, independent contractor or consultant;
(ix) make any material changes in work force;
(x) make or rescind any material election relating to Taxes, settle any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, file any amended Tax Return or claim for refund, or make any material change in its accounting or Tax policies or procedures, in each case except as required by applicable Law;
| 19 |
(xi) transfer or exclusively license to any Person any Intellectual Property owned by or licensed to any Party, or materially amend or modify, permit to lapse or fail to preserve Intellectual Property that is material to the business of a Party, or disclose to any Person who has not entered into a confidentiality agreement any Trade Secrets;
(xii) (A) enter into, amend in any material respect or terminate any Contract which is material to a Parent or the Company, other than in the Ordinary Course of Business; or (B) waive or assign any material right under, any material Contract or enter into any Contract that would be a material Contract outside of the Ordinary Course of Business;
(xiii) cancel, release or assign any Indebtedness to any Person, or any claims held by any such Person, except pursuant to contracts or agreements in force at the date of this Agreement;
(xiv) introduce any material new products or services, any material marketing campaigns or any material new sales compensation or incentive programs or arrangements, other than in the Ordinary Course of Business;
(xv) fail to maintain its books, accounts and records in all material respects in the ordinary course of business consistent with past practice;
(xvi) establish any Subsidiary or alter its business as currently operated, establish any new line of business or enter into any business other than the business as currently operated;
(xvii) fail to use commercially reasonable efforts to keep in force insurance policies or replacement or revised policies providing insurance coverage with respect to its assets, operations and activities in such amount and scope of coverage as are currently in effect;
(xviii) revalue any of its material assets or make any change in accounting methods, principles or practices, except to the extent required to comply with GAAP (for the avoidance of doubt, this shall not include any “discontinued operations” or assets “held for sale” of or by the Company);
(xix) waive, release, assign, settle or compromise any claim, action or proceeding (including any suit, action, claim, proceeding or investigation relating to this Agreement or the transactions contemplated hereby), other than waivers, releases, assignments, settlements or compromises that involve only the payment of monetary damages (and not the imposition of equitable relief on, or the admission of wrongdoing by, any of the respective Parties or any of their respective Affiliates) not in excess of $50,000 (individually or in the aggregate), or otherwise pay, discharge or satisfy any Actions, Liabilities or obligations, unless such amount has been reserved in such Party’s financial statements;
(xx) close or materially reduce its activities, or effect any material change, at any of its facilities;
| 20 |
(xxi) (A) acquire or enter into any agreement to acquire, including by merger, consolidation, acquisition of stock or assets, or any other form of business combination, any corporation, partnership, limited liability company, other business organization or any division thereof, or any material amount of assets outside the Ordinary Course of Business consistent with past practice or (B) adopt or implement any equityholder rights plans;
(xxii) make capital expenditures in excess of $10,000 individually for any project (or set of related projects), or $25,000 in the aggregate;
(xxiii) (A) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization or (B) liquidate, dissolve, merge or consolidate with or into any other Person, restructure, recapitalize or otherwise reorganize or make other changes in the capital structure of either Parent or the Company;
(xxiv) voluntarily incur any Liability or obligation (whether absolute, accrued, contingent or otherwise) in excess of $10,000 individually or $25,000 in the aggregate other than pursuant to the terms of a material Contract or Benefit Plan;
(xxv) sell, lease, license, transfer, exchange or swap, mortgage pledge, encumber (including securitizations), or otherwise dispose of any of its properties, assets or rights or any portion thereof (for the avoidance of doubt, this limitation shall not apply to any “discontinued operations” or assets “held for sale” of or by the Company provided that the proceeds of such disposal or sale remain in the Company);
(xxvi) except as otherwise set forth herein, enter into any agreement, understanding or arrangement with respect to the voting of equity securities of a Party;
(xxvii) take any action that would reasonably be expected to significantly delay or impair the obtaining of any Consents or approvals of any Governmental Authority to be obtained in connection with this Agreement;
(xxviii) enter into, amend, waive or terminate (other than terminations in accordance with their terms) any transaction with any Affiliate (other than compensation and benefits and advancement of expenses, in each case, provided in the Ordinary Course of Business consistent with past practice) except as otherwise set forth herein;
(xxix) take any action which would reasonably prevent or conflict with the consummation of the transactions contemplated by this Agreement; or
(xxx) authorize, agree or otherwise commit to do or take any of the foregoing actions.
(c) During the Interim Period, notwithstanding any of the foregoing to the contrary, the Parties agree to work together, at the sole expense of the Company and subject to the sole direction of the Company and Seller Parties, to take all necessary action to ensure that, as soon as reasonably practicable, but no later than the Closing Date, each of the following actions occur:
| 21 |
(i) Take such corporate action as necessary to initiate a corporate name of Parent change to a name mutually agreed upon prior to the date hereof between Parent and the Seller Parties;
(ii) Commence the process with the Financial Industry Regulatory Authority and OTC Markets LLC to change the ticker symbol of Parent in conformity with such agreed upon name change;
(iii) Take such other actions as reasonably necessary, in consultation with OTC Markets LLC, for Parent to commence being quoted on the OTC QB quotation system; and
(iv) To raise such additional capital on behalf of the Parent for additional working capital and capital expenditures, as the Parties may reasonably determine. For the avoidance of doubt, any capital raised by the Parent during the Interim Period shall not impact the number of shares of Parent Series A Convertible Preferred issued and the conversion ratio set forth set forth in Section 1.2.
5.3 Notification of Certain Matters. During the Interim Period, each of the Parties shall give prompt notice to the other Parties if such Party or its Affiliates: (a) fails to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it or its Affiliates hereunder in any material respect; (b) receives any notice or other communication in writing from any third party (including any Governmental Authority) alleging (i) that the Consent of such third party is or may be required in connection with the transactions contemplated by this Agreement or (ii) any non-compliance with any Law by such party or its Affiliates; (c) receives any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; (d) discovers any fact or circumstance that, or becomes aware of the occurrence or non-occurrence of any event the occurrence or non-occurrence of which, would reasonably be expected to cause or result in any of the conditions to set forth in ARTICLE VI not being satisfied or the satisfaction of those conditions being materially delayed; or (e) becomes aware of the commencement or threat, in writing, of any Action against such party or any of its Affiliates, or any of their respective properties or assets, or, to the Knowledge of such party, any officer, director, partner, member or manager, in his, her or its capacity as such, of such party or of its Affiliates with respect to the consummation of the transactions contemplated by this Agreement. No such notice shall constitute an acknowledgement or admission by the Party providing the notice regarding whether or not any of the conditions to the Closing have been satisfied or in determining whether or not any of the representations, warranties or covenants contained in this Agreement have been breached; provided, however, that if a Party has the right to, but does not elect to, terminate this Agreement or begin procedures to terminate this Agreement (including by providing the written notice required by Section 7.1(d) or 7.1(e), as applicable) within five (5) Business Days of its receipt of such notice, then such party shall be deemed to have irrevocably waived any right to terminate this Agreement with respect to such matter.
5.4 Further Assurances. In the event that at any time after the Closing any further action is reasonably necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as the other Parties reasonably may request, at the sole cost and expense of the requesting Party (unless otherwise specified herein or unless such requesting Party is entitled to indemnification therefor under ARTICLE VIII in which case, the costs and expense will be borne by the Parties as set forth in ARTICLE VIII).
| 22 |
5.5 Confidentiality. Each of the Seller Parties and Buyer Parties will, and will cause their respective Representatives to: (a) treat and hold in strict confidence any Confidential Information, and will not use for any purpose, nor directly or indirectly disclose, distribute, publish, disseminate or otherwise make available to any third party any of the Confidential Information without the other Party’s prior written consent; (b) in the event that a Party becomes legally compelled to disclose any Confidential Information, to provide the other Parties with prompt written notice of such requirement so that such other Party may seek a protective order or other remedy or waive compliance with this Section 5.5; (c) in the event that such protective order or other remedy is not obtained, or such other Party waives compliance with this Section 5.5, to furnish only that portion of such Confidential Information which is legally required to be provided as advised in writing by outside counsel and to exercise their commercially reasonable efforts to obtain assurances that confidential treatment will be accorded such Confidential Information; and (d) to promptly furnish to such other Party any and all copies (in whatever form or medium) of all such Confidential Information and to destroy any and all additional copies of such Confidential Information and any analyses, compilations, studies or other documents prepared, in whole or in part, on the basis thereof; provided, however, that Confidential Information shall not include any information which, at the time of disclosure by a Party or its Representatives, is generally available publicly and was not disclosed in breach of this Agreement by a Party or its Representatives. Notwithstanding anything else herein, each Party shall be permitted to disclose the transactions contemplated in this Agreement and the Ancillary Documents to (i) any Person for whom consent, notice, waiver or approval is required in connection with such transactions, solely for the purpose of satisfying such consent, notice, waiver or approval requirement, (ii) their Representatives, (iii) their stockholders, limited partners and other holders of securities, (iv) the courts, the Independent Expert or an arbitrator pursuant to Sections 1.5, 8.4 and 9.9, (v) any Tax Governmental Authority in connection with any tax audit, examinations or other similar tax Action involving any tax return or tax matter, and (vi) any Governmental Authority to the extent necessary or advisable in compliance with Law.
5.6 Publicity.
(a) No Party hereto shall, and each shall cause their respective Representatives not to, disclose, make or issue, any statement or announcement concerning this Agreement or the Ancillary Documents or the transactions contemplated hereby or thereby (including the terms, conditions, status or other facts with respect thereto) to any third parties (other than its Representatives who need to know such information in connection with carrying out or facilitating the transactions contemplated hereby) without the prior written consent of the other parties (such consent not to be unreasonably withheld, delayed or conditioned), except (i) in the case of the Company or the Sellers, as required by applicable Law after conferring with Buyer concerning the timing and content of such required disclosure, and (ii) in the case of Buyer, as may be required of Buyer or its Affiliates by applicable Law or securities listing or trading requirements.
| 23 |
(b) Notwithstanding the foregoing in Section 5.6(a), Buyer and its Affiliates shall have the right to issue a press release announcing the execution of this Agreement (the “Signing Press Release”); provided that the contents of such Signing Press Release shall be subject to the reasonable approval of the Company. Promptly after the issuance of the Signing Press Release, Buyer and its Affiliates shall have the right to file a current report on Form 8-K (the “Signing Filing”) with the Signing Press Release and a description of this Agreement as required by Federal Securities Laws, which the Sellers’ Representative may review and comment upon prior to filing (and Buyer shall consider such comments in good faith). After the Closing (but in any event within four (4) Business Days thereafter), Buyer and its Affiliates shall have the right to issue a press release announcing the consummation of the transactions contemplated by this Agreement (the “Closing Press Release”); provided that the contents of such Closing Press Release shall be mutually agreeable to the Parties. Promptly after the issuance of the Closing Press Release, Buyer and its Affiliates shall have the right to draft and file a current report on Form 8-K (the “Closing Filing”) with the Closing Press Release and a description of the Closing as required by Federal Securities Laws for which the Sellers’ Representative shall be required to provide substantive input in the drafting thereof.
5.7 No Trading. The Company and the Sellers acknowledge and agree that each is aware, and that the Company’s Affiliates are aware (and to the Knowledge of the Seller Parties each of their respective Representatives is aware or, upon receipt of any material nonpublic information of Buyer, will be advised) of the restrictions imposed by U.S. federal securities laws and the rules and regulations of the SEC and Nasdaq promulgated thereunder or otherwise (the “Federal Securities Laws”) and other applicable foreign and domestic Laws on a Person possessing material nonpublic information about a publicly traded company. The Company and such Seller hereby agree that, while such Party is in possession of such material nonpublic information, it shall not purchase or sell any securities of Parent), communicate such information to any third party, take any other action with respect to Parent or Buyer in violation of such Laws, or cause or encourage any third party to do any of the foregoing.
5.8 Litigation Support. Following the Closing, in the event that and for so long as any Party is actively contesting or defending against any third party or Governmental Authority Action in connection with any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction that existed on or prior to the Closing Date , each of the other Parties will (i) reasonably cooperate with the contesting or defending party and its counsel in the contest or defense, (ii) make available its personnel at reasonable times during normal business hours and upon reasonable notice and (iii) provide (A) such testimony and (B) access to its non-privileged books and records as may be reasonably requested in connection with the contest or defense, at the sole cost and expense of the contesting or defending party (unless such contesting or defending party is entitled to indemnification therefor under ARTICLE VIII in which case, the costs and expense will be borne by the parties as set forth in ARTICLE VIII).
Article
VI
CONDITIONS TO CLOSING
| 24 |
6.1 Conditions to Each Party’s Obligations. The obligations of each party to consummate the transactions described herein shall be subject to the satisfaction or written waiver (where permissible) by the Sellers and Buyer of the following conditions:
(a) Requisite Regulatory Approvals. All Consents and filings required to be obtained from or made with any Governmental Authority in order to consummate the transactions contemplated by this Agreement shall have been obtained or made.
(b) No Law or Order. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) or Order that is then in effect and which has the effect of making the transactions or agreements contemplated by this Agreement illegal or which otherwise prevents or prohibits consummation of the transactions contemplated by this Agreement.
(c) Parent Series A Convertible Preferred Certificate of Designations. The Company and the Parent shall have agreed upon the form of the Parent Series A Convertible Preferred Certificate of Designations, pursuant to which Parent shall issue Parent Series A Convertible Preferred as consideration for Buyer’s purchase of the Company’s Class A Stock. The Parent Series A Convertible Preferred Certificate of Designations shall be attached hereto as Exhibit B and filed with the Delaware Secretary of State prior to the Closing Date.
(d) Parent Series B Convertible Preferred Certificate of Designations. The Company and the Parent shall have agreed upon the form of the Parent Series B Convertible Preferred Certificate of Designations, pursuant to which Parent shall issue Parent Series B Convertible Preferred as consideration for Buyer’s purchase of the Company’s Class B Stock. The Parent Series B Convertible Preferred Certificate of Designations shall be attached hereto as Exhibit C and filed with the Delaware Secretary of State prior to the Closing Date.
6.2 Conditions to Obligations of the Seller Parties. In addition to the conditions specified in Section 6.1, the obligations of the Seller Parties to consummate the transactions contemplated by this Agreement are subject to the satisfaction or written waiver (by the Company) of the following conditions:
(a) Representations and Warranties. All of the representations and warranties of the Buyer Parties set forth in this Agreement and in any certificate delivered by Buyer pursuant hereto, shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on, or with respect to, the Buyer Parties.
(b) Agreements and Covenants. Buyer Parties shall have performed in all material respects all of the Buyer Parties’ obligations and complied in all material respects with all of the Buyer Parties’ agreements and covenants under this Agreement to be performed or complied with by it on or prior to the Closing Date.
| 25 |
(c) Closing Deliveries by Buyer Parties. At or prior to the Closing, Buyer Parties’ will deliver or cause to be delivered to Seller Parties the following, each in form and substance reasonably acceptable to the Seller Parties:
(i) a certificate, dated the Closing Date, signed by an executive officer of the Parent in such capacity, certifying as to the satisfaction of the conditions specified in Sections 6.2(a) and 6.2(b);
(ii) a certificate from its secretary or other executive officer of Parent certifying as to, and attaching, (A) copies of Buyer’s Organizational Documents as in effect as of the Closing Date, (B) the resolutions of Parent’s board of directors authorizing the execution, delivery and performance of this Agreement and each of the Ancillary Documents to which it is a party or by which it is bound, and the consummation of the transactions contemplated hereby and thereby, and (C) the incumbency of officers authorized to execute this Agreement or any Ancillary Document to which a Buyer Party is or is required to be a party or otherwise bound;
(iii) resignations effective no later than 14 days following the Closing of the officers of Parent and Merger Sub in their capacities as officers, as requested by Seller;
(iv) a good standing certificate for the Parent certified as of a date no later than thirty (30) days prior to the Closing Date from the proper state official in its jurisdiction of organization and each other jurisdiction set forth on Schedule 3.1;
(v) a duly executed Investor Rights Agreement, a form of which is attached hereto as Exhibit D; and
(vi) a duly executed Voting Agreement, a form of which is attached hereto as Exhibit E.
6.3 Conditions to Obligations of Buyer Parties. In addition to the conditions specified in Section 6.1, the obligations of the Buyer Parties to consummate the transactions contemplated by this Agreement are subject to the satisfaction or written waiver (by Parent) of the following conditions:
(a) Representations and Warranties. All of the representations and warranties of the Seller Parties set forth in this Agreement and in any certificate delivered by the Sellers or the Company shall be true and correct on and as of the date of this Agreement and on and as of the Closing Date as if made on the Closing Date, except for (i) those representations and warranties that address matters only as of a particular date (which representations and warranties shall have been accurate as of such date), and (ii) any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or Material Adverse Effect), individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on, or with respect to, the Company or any Seller.
(b) June 30, 2020 Financial Statements. Parent shall have received the financial statements described in section 3.7 above and had the opportunity to discuss same with the Sellers’ Representative and the Company internal accounting staff and consultants.
| 26 |
(c) Closing Form 8-K. The Company along with their legal and accounting representatives shall have prepared the closing form 8-K and provided the final draft to the Parent for review and approval. The Sellers’ Representative acknowledges that this requirement is founded on the need for the Parent management to get comfort relative to the new business of the Company including the formal plan of operation and the source of financing for those operations on a going forward basis as disclosed to the general public through the SEC website. The Parent shall have a reasonable period of time not exceeding five Business Days to review the form of 8-K, ask questions, and provide its approval which shall not be unreasonably withheld.
(d) Agreements and Covenants. The Company and each Seller shall have performed in all material respects all of their respective obligations and complied in all material respects with all of their respective agreements and covenants under this Agreement to be performed or complied with by any of them on or prior to the Closing Date.
(e) No Material Adverse Effect. No Material Adverse Effect shall have occurred with respect to the Company since the date of this Agreement.
(f) Closing Deliveries by Seller Parties. At or prior to the Closing, the Seller Parties will deliver or cause to be delivered to the Buyer Parties the following, each in form and substance reasonably acceptable to the Buyer Parties:
(i) a certificate, dated the Closing Date, signed by an executive officer of the Company in such capacity, certifying as to the satisfaction of the conditions specified in Sections 6.3(a) and 6.3(d) solely by the Company;
(ii) a certificate from the Company’s secretary or other executive officer certifying as to, and attaching, (A) copies of the Company’s Organizational Documents as in effect as of the Closing Date, (B) the resolutions of Company’s stockholders and the Company’s board of directors authorizing the execution, delivery and performance of this Agreement and each of the Ancillary Documents to which it is a party or by which it is bound, and the consummation of the transactions contemplated hereby and thereby, and (C) the incumbency of officers authorized to execute this Agreement or any Ancillary Document to which the Company is or is required to be a party or otherwise bound;
(iii) Stock powers duly executed in blank and in a form reasonably acceptable to Buyer necessary to transfer the Purchased Shares to Buyer on the books and records of the Company;
(iv) the required notices, consents, Permits, waivers authorizations, orders and other approvals listed in Schedule 6.3(d)(iv), and all such notices, consents, Permits, waivers, authorizations, orders and other approvals will be in full force and effect and not be subject to the satisfaction of any condition that has not been satisfied or waived; and
(v) a good standing certificate for the Company certified as of a date no later than thirty (30) days prior to the Closing Date from the proper state official in its jurisdiction of organization and each other jurisdiction set forth on Schedule 3.1.
| 27 |
6.4 Frustration of Conditions. Notwithstanding anything contained herein to the contrary, no Party may rely on the failure of any condition set forth in this ARTICLE VI to be satisfied if such failure was caused by the failure of such Party or its Affiliates (or with respect to any Seller or any Company) failure to comply with or perform any of its covenants or obligations set forth in this Agreement.
Article
VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing as follows:
(a) by mutual written consent of Buyer and the Sellers’ Representative;
(b) by written notice by Buyer or the Sellers’ Representative if any of the conditions to the Closing set forth in ARTICLE VI have not been satisfied or waived by September 30, 2020 (the “Outside Date”); provided, however, the right to terminate this Agreement under this Section 7.1(b) shall not be available to a party if the breach or violation by such party or its Affiliates of any representation, warranty, covenant or obligation under this Agreement was the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date;
(c) by written notice by either Buyer or the Sellers’ Representative if a Governmental Authority of competent jurisdiction shall have issued an Order or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order or other action has become final and non-appealable; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(c) shall not be available to a party if the failure by such party or its Affiliates to comply with any provision of this Agreement has been a substantial cause of, or substantially resulted in, such action by such Governmental Authority;
(d) by written notice by Sellers’ Representative, if (i) there has been a material breach by any of the Buyer Parties of any of their respective representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of any of Buyer Party shall have become materially untrue or materially inaccurate in any case which would result in a failure of a condition set forth in Section 6.2 to be satisfied (treating the Closing Date for such purposes as the date of this Agreement or, if later, the date of such breach), and (ii) the breach is incapable of being cured or is not cured within the earlier of (A) twenty (20) days after written notice of such breach or is provided by the Sellers’ Representative or (B) the Outside Date; provided that the Sellers’ Representative shall not have the right to terminate this Agreement pursuant to this Section 7.1(d) if at such time any Seller or the Company is in material breach of this Agreement; or
(e) by written notice by Buyer, if (i) there has been a material breach by any Seller or the Company of any of their respective representations, warranties, covenants or agreements contained in this Agreement, or if any representation or warranty of such parties shall have become untrue or inaccurate, in any case which would result in a failure of a condition set forth in Section 6.3(a) to be satisfied (treating the Closing Date for such purposes as the date of this Agreement or, if later, the date of such breach), and (ii) the breach is incapable of being cured or is not cured within the earlier of (A) twenty (20) days after written notice of such breach or inaccuracy is provided by Buyer or (B) the Outside Date; provided that Buyer shall not have the right to terminate this Agreement pursuant to this Section 7.1(e) if at such time Buyer is in material breach of this Agreement;
| 28 |
(f) by written notice by Buyer if there shall have been a Material Adverse Effect on the Company following the date of this Agreement; or
(g) by written notice of Sellers’ Representative if there shall have been a Material Adverse Effect on the Parent following the date of this Agreement.
7.2 Effect of Termination. This Agreement may only be terminated in the circumstances described in Section 7.1 and pursuant to a written notice delivered by the applicable party to the other applicable parties, which sets forth the basis for such termination, including the provision of Section 7.1 under which such termination is made. In the event of the valid termination of this Agreement pursuant to Section 7.1, this Agreement shall forthwith become void, and there shall be no Liability on the part of any party or any of their respective Representatives, and all rights and obligations of each party shall cease, except: (i) Sections 5.5 (Confidentiality), 5.6 (Publicity), 5.7 (No Trading), 7.3 (Fees and Expenses), ARTICLE IX and this Section 7.2 shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from Liability for any willful breach of any representation, warranty, covenant or obligation under this Agreement or any Fraud claim against such party, in either case, prior to termination of this Agreement. Without limiting the foregoing, and except as provided in Section 7.3 and this Section 7.2, and subject to the right to seek injunctions, specific performance or other equitable relief in accordance with Section 9.8, the Parties’ sole right prior to the Closing with respect to any breach of any representation, warranty, covenant or other agreement contained in this Agreement by another party or with respect to the transactions contemplated by this Agreement shall be the right, if applicable, to terminate this Agreement pursuant to Section 7.1.
7.3 Fees and Expenses. In the case of a termination in accordance with Section 7.1, or if the Closing does not occur for any other reason, all Expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. As used in this Agreement, “Expenses” shall include all out-of-pocket expenses (including all fees and expenses of counsel, accountants, investment bankers, financial advisors, financing sources, experts and consultants to a party hereto or any of its Affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution or performance of this Agreement or any Ancillary Document related hereto and all other matters related to the consummation of this Agreement.
Article
VIII
INDEMNIFICATION
8.1 Survival. All representations and warranties of the Company, the Seller Parties, and the Buyer Parties contained in this Agreement and any Ancillary Agreement (including all schedules and exhibits hereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement) shall survive the Closing through and until 11:59 p.m. Pacific time on the six-month anniversary of the Closing Date. For purposes of this Agreement, the “Survival Date” with respect to any representation or warranty shall mean the date when such representation or warranty shall survive in accordance with this Section 8.1. If written notice of a claim for breach of any representation or warranty has been given on or before the applicable Survival Date for such representation or warranty, then the relevant representations and warranties shall survive as to such claim, until the claim has been finally resolved. All pre-Closing covenants, obligations and agreements of the parties contained in this Agreement (including all schedules and exhibits hereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement) shall expire and be of no further force or effect as of the Closing. All other covenants, obligations and agreements that are to be performed after the Closing shall survive the Closing and continue until fully performed in accordance with their terms or, if no such term is expressly contemplated, the date which is the expiration of all applicable statute of limitations related to the underlying subject matter of such covenants, obligations and agreements. For avoidance of doubt, the Parties agree that for matters, disputes, and claims governed by Delaware law under this Agreement and the Ancillary Documents such documents shall not give effect to Section 8106(c) of the Delaware code.
| 29 |
8.2 Indemnification by Company. Except as otherwise limited by this ARTICLE VIII, the Company shall indemnify, defend and hold harmless Parent, Buyer and their Representatives and any assignee or successor thereof (collectively, the “Buyer Indemnified Parties”) from and against, and pay or reimburse the Buyer Indemnified Parties for, any and all losses, Actions, Orders, liabilities, damages (including consequential damages), Taxes, interest, penalties, Liens, amounts paid in settlement, costs and expenses (including reasonable expenses of investigation and court costs and reasonable attorneys’ fees and expenses) (any of the foregoing, a “Loss”) suffered or incurred by, or imposed upon, any Buyer Indemnified Party arising in whole or in part out of or resulting directly or indirectly from: (a) any inaccuracy in or breach of any representation or warranty made by a Seller Party in this Agreement (including all schedules and exhibits hereto) or any of the certificates and instruments to be executed or delivered by the Company in connection with or pursuant to this Agreement; (b) any non-fulfillment or breach of any unwaived covenant, obligation or agreement made by or on behalf of a Seller Party contained in this Agreement (including all schedules and exhibits hereto) or any of the certificates and instruments to be executed or delivered by the Company in connection with or pursuant to this Agreement; or (c) any Action by Person(s) who were holders of equity securities of the Company, including stock options, warrants, convertible debt or other convertible securities or other rights to acquire equity securities of the Company, prior to the Closing arising out of the sale, purchase, termination, cancellation, expiration, redemption or conversion of any such securities.
8.3 Indemnification by Buyer Parties. Except as otherwise limited by this ARTICLE VIII, Buyer Parties shall indemnify, defend and hold harmless each Seller and its Representatives and any assignee or successor thereof (collectively, the “Seller Indemnified Parties”) from and against, and pay or reimburse the Seller Indemnified Parties for, any and all Losses, suffered or incurred by, or imposed upon, any Seller Indemnified Party arising in whole or in part out of or resulting directly or indirectly from: (a) any inaccuracy in or breach of any representation or warranty made by Buyer or Parent in this Agreement (including all schedules and exhibits hereto) or any of the certificates and instruments to be executed or delivered by Buyer or Parent hereto in connection with or pursuant to this Agreement; or (b) any non-fulfillment or breach of any unwaived covenant, obligation or agreement made by or on behalf of Buyer or Parent, contained in this Agreement (including all schedules and exhibits hereto) or any of the certificates and instruments to be executed or delivered by Buyer or Parent hereto in connection with or pursuant to this Agreement.
| 30 |
8.4 Indemnification Procedures.
(a) For the purposes of this Agreement, (i) the term “Indemnitee” shall refer to the Person or Persons indemnified, or entitled, or claiming to be entitled, to be indemnified, pursuant to the provisions of Section 8.2 or 8.3, as the case may be, and (ii) the term “Indemnitor” shall refer to the Person having the actual or alleged obligation to indemnify pursuant to such provisions. Notwithstanding anything to the contrary contained in this Agreement, the Sellers’ Representative will have the sole and exclusive right to act on behalf of the Seller Indemnified Parties with respect to any indemnification claims made pursuant to this ARTICLE VIII, including bringing and settling any claims hereunder and receiving any notices on behalf of the Seller Indemnified Parties.
(b) In the case of any claim for indemnification under this Agreement arising from a claim of a third party (including any Governmental Authority), an Indemnitee must give prompt written notice and, subject to the following sentence, in no case later than thirty (30) days after the Indemnitee’s receipt of notice of such claim, to the Indemnitor of any claim of which such Indemnitee has knowledge and as to which it may request indemnification hereunder. The failure to give such notice will not, however, relieve an Indemnitor of its indemnification obligations except to the extent that the Indemnitor is actually harmed thereby. The Indemnitor will have the right to defend and to direct the defense against any such claim in its name and at its expense, and with counsel selected by the Indemnitor unless: (i) the Indemnitor fails to acknowledge fully its obligations to the Indemnitee within fifteen (15) days after receiving notice of such third party claim or contests, in whole or in part, its indemnification obligations therefor; (ii) if the Indemnitor is Buyer, the applicable third party claimant is a Governmental Authority or a then-current material customer of Buyer, the Company or any of their respective Affiliates; (iii) if the Indemnitor is Buyer, an adverse judgment with respect to the claim will establish a precedent materially adverse to the continuing business interests of Buyer, the Company or their respective Affiliates; (iv) outside counsel to the Indemnitee has informed Indemnitee that there is a conflict of interest between the Indemnitee and the Indemnitor in the conduct of such defense; (v) the applicable third party alleges claims of fraud, willful misconduct or intentional misrepresentation; or (vi) such claim is criminal in nature, could reasonably be expected to lead to criminal proceedings, or seeks an injunction or other equitable relief against the Indemnitee. If the Indemnitor elects, and is entitled, to compromise or defend such claim, it will within fifteen (15) days (or sooner, if the nature of the claim so requires) notify the Indemnitee of its intent to do so, and the Indemnitee will, at the request and expense of the Indemnitor, cooperate in the defense of such claim. If the Indemnitor elects not to, or is not entitled under this Section 8.4(b) to, compromise or defend such claim, fails to notify the Indemnitee of its election as herein provided or refuses to acknowledge or contests its obligation to indemnify under this Agreement, the Indemnitee may pay, compromise or defend such claim. Notwithstanding anything to the contrary contained herein, the Indemnitor will have no indemnification obligations with respect to any such claim which has been or will be settled by the Indemnitee without the prior written consent of the Indemnitor (which consent will not be unreasonably withheld, delayed or conditioned); provided, however, that notwithstanding the foregoing, the Indemnitee will not be required to refrain from paying any claim which has matured by a court judgment or decree, unless an appeal is duly taken therefrom and exercise thereof has been stayed, nor will it be required to refrain from paying any claim where the delay in paying such claim would result in the foreclosure of a Lien upon any of the property or assets then held by the Indemnitee or where any delay in payment would cause the Indemnitee material economic loss. The Indemnitor’s right to direct the defense will include the right to compromise or enter into an agreement settling any claim by a third party; provided that no such compromise or settlement will obligate the Indemnitee to agree to any settlement that that requires the taking or restriction of any action (including the payment of money and competition restrictions) by the Indemnitee (other than the delivery of a release for such claim and customary confidentiality obligations), except with the prior written consent of the Indemnitee (such consent to be withheld, conditioned or delayed only for a good faith reason). Notwithstanding the Indemnitor’s right to compromise or settle in accordance with the immediately preceding sentence, the Indemnitor may not settle or compromise any claim over the objection of the Indemnitee; provided, however, that consent by the Indemnitee to settlement or compromise will not be unreasonably withheld, delayed or conditioned and the Indemnitor shall not be responsible for any additional Losses above the compromise or settlement amount to the extent the Indemnitee withholds its consent. The Indemnitee will have the right to participate in the defense of any claim with a counsel selected by it subject to the Indemnitor’s right to direct the defense. The fees and disbursements of such counsel will be at the expense of the Indemnitee; provided, however, that, in the case of any claim which seeks injunctive or other equitable relief against the Indemnitee, the fees and disbursements of such counsel will be at the expense of the Indemnitor.
| 31 |
(c) In order to be valid, any indemnification claim that does not arise from a third-party claim must be asserted in good faith by a written notice to the Indemnitor setting forth: (i) that Indemnitee has directly or indirectly incurred, paid, sustained, reserved or accrued, or reasonably anticipates that it may directly or indirectly incur, pay, sustain, reserve or accrue, Losses, (ii) with reasonable specificity the amount claimed and (iii) the underlying facts, in reasonable detail, supporting such claim to the extent then known by the Indemnitee, including the basis for such anticipated liability and the nature of the breach to which such Losses are related (including the clause of ARTICLE VIII giving rise to the indemnity obligation). The Indemnitor will have a period of thirty (30) days after receipt of such notice within which to accept or dispute such claim by providing written notice to the Indemnitee. If the Indemnitor does not respond within thirty (30) days, the Indemnitor will be deemed to have accepted responsibility for the Losses set forth in such notice and will have no further right to contest the validity of such notice. If the Indemnitor responds in such thirty (30) day period and rejects such claim in whole or in part, the Indemnitee will be free to pursue such remedies as may be available to it under this Agreement (subject to Section 9.15), any other Ancillary Document or applicable Law.
8.5 Limitations on Indemnification. No Indemnitor shall be liable for an indemnification claim made under Section 8.2 or 8.3, as the case may be: (w) for which a claim for indemnification is not asserted hereunder on or before the applicable Survival Date; (x) to the extent Losses, in the aggregate, incurred by the Buyer Indemnified Parties or by the Seller Indemnified Parties, as applicable, exceed an amount equal to One Hundred Thousand Dollars ($100,000) (the “Indemnification Cap”); and (y) unless and until the actual Losses of the Buyer Indemnified Parties, collectively, or the Seller Indemnified Parties, collectively, as applicable, exceed an aggregate amount equal to Fifty Thousand Dollars ($50,000) (the “Basket”), in which case the applicable Indemnitor(s) shall be obligated to the Indemnitee(s) for the amount of all Losses of the Indemnitee(s) in excess of the Basket; provided, however, that the Basket and the Indemnification Cap shall not apply to (i) indemnification claims to the extent amounts are actually paid under insurance maintained by the Indemnitor (or any of its Affiliates) and (ii) indemnification claims based in whole or in part upon Fraud. Losses shall not include any exemplary or punitive damages, except in each case to the extent actually awarded to a third-party who is not a party to this Agreement or an Affiliate of a party to this Agreement. Indemnitee shall take commercially reasonable efforts to mitigate any of its Losses promptly upon becoming aware of any event that would reasonably be expected to, or does, give rise to Losses that are indemnifiable hereunder, in each case, to the same extent as it would if such Losses were not subject to indemnification hereunder. Any Losses for which an Indemnitee is entitled to indemnification under this ARTICLE VIII shall be determined without duplication of recovery by reason of the state of facts giving rise to such Losses constituting a breach of more than one representation, warranty, covenant, agreement or otherwise. In addition, notwithstanding anything to the contrary in this Agreement, the Sellers shall not be liable for (i) any Taxes of the Company incurred after the Closing or (ii) any Taxes resulting from an election made under Code Section 338 or under any comparable provisions of any other state, local or foreign laws with respect to the purchase of the Purchased Shares pursuant to this Agreement.
| 32 |
8.6 General Indemnification Provisions. The amount of any Losses suffered or incurred by any Indemnitee shall be reduced by the amount of any insurance proceeds or other cash receipts paid to the Indemnitee or any Affiliate thereof as a reimbursement with respect to such Losses (and no right of subrogation shall accrue to any insurer hereunder, except to the extent that such waiver of subrogation would prejudice any applicable insurance coverage), including any indemnification received by the Indemnitee or such Affiliate from an unrelated party with respect to such Losses, net of the costs of collection and any related anticipated future increases in insurance premiums resulting from such Loss or insurance payment. Notwithstanding anything in this Agreement to the contrary, for purposes of application of the indemnification provisions of this ARTICLE VIII, the amount of any Loss arising from the breach of any representation, warranty, covenant, obligation or agreement contained in this Agreement shall be the entire amount of any Loss actually incurred by the respective Indemnitee as a result of such breach and not just that portion of the Loss that exceeds the relevant level of materiality, if any. The Buyer Indemnified Parties will not make any claim against the Sellers in respect of any representation, warranty, covenant or any other obligation of the Company to Buyer hereunder or under any Ancillary Document to which the Company is a party, and may solely seek action against the Company.
8.7 Timing of Payment; Right to Set-Off. Any indemnification obligation of an Indemnitor under this ARTICLE VIII will be paid within three (3) Business Days after the determination of such obligation in accordance with Section 8.4.
8.8 Exclusive Remedy. Except with respect to Actions arising out of or relating to Fraud, each of the parties hereto expressly acknowledges and agrees that the indemnification provisions set forth in this ARTICLE VIII shall be the sole and exclusive remedy of the Parties with respect to any breaches of the representations, warranties, covenants, or agreements set forth in this Agreement or any of the certificates and instruments to be executed or delivered in connection with or pursuant to this Agreement. Nothing in this Section 8.8 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled or to seek any remedy on account of any party’s Fraud.
| 33 |
Article
IX
GENERAL PROVISIONS
9.1 Expenses. Subject to the provisions of Section 7.3, Parent will bear all expenses incurred in connection with this Agreement upon the Closing and only if the Closing occurs.
9.2 Notices. Any notice, request, instruction or other document to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given, (i) when received if given in person or by courier or a courier service, (ii) on the date of transmission if sent by facsimile or email (with affirmative confirmation of receipt, not to be withheld) or (iii) three (3) Business Days after being deposited in the U.S. mail, certified or registered mail, postage prepaid:
If to the Sellers’ Representative, any
Seller or,
prior to the Closing, the Company, to:
Steven King
Mosaic ImmunoEngineering Inc.
1537 South Novato Blvd #5,
Novato CA 94947
Email: [email protected]
with copies (which will not constitute notice) to:
Duane Morris LLP
1540 Broadway
New York, New York 10036
Attention: Dean Colucci
Telephone No.: (973) 424-2020
Email: [email protected]
If to Buyer to:
PTSC Sub One Inc.
P.O. Box 3208
Cummings, GA 30028
Attention: Carlton Johnson
Telephone No.: (760) 795-8517
If to Parent to:
Patriot Scientific Corporation
P.O. Box 3208
Cummings, GA 30028
Attention: Carlton Johnson
Telephone No.: (760) 795-8517
| 34 |
with copies (which will not constitute notice) to:
Law Office of Otto E. Sorensen
Attention: Otto E. Sorensen
501 West Broadway, Suite 1310
San Diego, CA 92101
Telephone No.: (619) 889-7077
or to such other individual or address as a party hereto may designate for itself by notice given as herein provided.
9.3 Severability. In case any one or more of the provisions contained in this Agreement should be held invalid, illegal or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions will not in any way be affected or impaired. Any illegal or unenforceable term will be deemed to be void and of no force and effect only to the minimum extent necessary to bring such term within the provisions of applicable Law and such term, as so modified, and the balance of this Agreement will then be fully enforceable. The parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.
9.4 Assignment. This Agreement may not be assigned by any party without the prior written consent of the other parties hereto, and any attempted assignment in violation of this Section 9.4 will be null and void ab initio.
9.5 No Third-Party Beneficiaries. Except for the indemnification rights of the Buyer Indemnified Parties and the Seller Indemnified Parties set forth herein, this Agreement is for the sole benefit of the parties hereto and their successors and permitted assigns and nothing herein expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such successors and permitted assigns, any legal or equitable rights hereunder.
9.6 Amendment; Waiver. This Agreement may not be amended or modified except by an instrument in writing signed by each of the parties hereto. Notwithstanding anything to the contrary contained herein: (a) the failure of any party at any time to require performance by the other of any provision of this Agreement will not affect such party’s right thereafter to enforce the same; (b) no waiver by any party of any default by any other party will be valid unless in writing and acknowledged by an authorized representative of the non-defaulting party, and no such waiver will be taken or held to be a waiver by such party of any other preceding or subsequent default; and (c) no extension of time granted by any party for the performance of any obligation or act by any other party will be deemed to be an extension of time for the performance of any other obligation or act hereunder.
9.7 Entire Agreement. This Agreement (including the Exhibits and Schedules hereto, which are hereby incorporated herein by reference and deemed part of this Agreement), together with the Ancillary Documents constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, with respect to the subject matter hereof.
| 35 |
9.8 Specific Performance. Each party acknowledges that the rights of each party to consummate the transactions contemplated hereby are unique, recognizes and affirms that in the event of a breach of this Agreement by any party, money damages may be inadequate and the non-breaching Parties may have not adequate remedy at law, and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by an applicable party in accordance with their specific terms or were otherwise breached. Accordingly, each of Parent, Buyer, the Company and the Sellers’ Representative shall be entitled to seek an injunction or restraining order to prevent breaches of this Agreement and to seek to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.
9.9 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware (without giving effect to its choice of law principles). Subject to the provisions and limitations set forth in Sections 8.8 and 9.15, for purposes of any Action arising out of or in connection with this Agreement, the Ancillary Documents or any transaction contemplated hereby or thereby, each of the parties hereto (a) irrevocably submits to the exclusive jurisdiction and venue of any state or federal court located within County of Orange, State of California, (b) agrees that service of any process, summons, notice or document by U.S. registered mail to such party’s respective address set forth in Section 9.2 shall be effective service of process for any Action with respect to any matters to which it has submitted to jurisdiction in this Section 9.9, and (c) waives and covenants not to assert or plead, by way of motion, as a defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of such court, that the Action is brought in an inconvenient forum, that the venue of the Action is improper or that this Agreement or the Ancillary Document, as applicable, or the subject matter hereof or thereof may not be enforced in or by such court, and hereby agrees not to challenge such jurisdiction or venue by reason of any offsets or counterclaims in any such Action. THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY IN CONNECTION WITH SUCH AGREEMENTS. FOR THE AVOIDANCE OF DOUBT, IT IS THE INTENT OF THE PARTIES THAT ALL DISPUTES (AS DEFINED BELOW) SHALL BE RESOLVED PURSUANT TO THE PROVISIONS OF SECTION 9.16.
9.10 Interpretation. The table of contents and the headings and subheadings of this Agreement are for reference and convenience purposes only and in no way modify, interpret or construe the meaning of specific provisions of the Agreement. In this Agreement, unless the context otherwise requires: (i) whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; (iii) any accounting term used and not otherwise defined in this Agreement or any Ancillary Document has the meaning assigned to such term in accordance with GAAP; (iv) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (v) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement; (vi) the word “if” and other words of similar import when used herein shall be deemed in each case to be followed by the phrase “and only if”; (vii) the term “or” means “and/or”; (viii) reference to any status includes any rules and regulations promulgated thereunder; (ix) any agreement, instrument, insurance policy, Law or Order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, insurance policy, Law or Order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein; and (x) except as otherwise indicated, all references in this Agreement to the words “Section,” “Schedule” and “Exhibit” are intended to refer to Sections, Schedules and Exhibits to this Agreement.
| 36 |
9.11 Mutual Drafting. The Parties acknowledge and agree that: (a) this Agreement and the Ancillary Documents are the result of negotiations between the parties and will not be deemed or construed as having been drafted by any one party, (b) each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement (including any, Exhibits and Schedules attached hereto) and the Ancillary Documents and have contributed to their revision, (c) the rule of construction to the effect that any ambiguities are resolved against the drafting party will not be employed in the interpretation of this Agreement or the Ancillary Documents and (d) neither the drafting history nor the negotiating history of this Agreement or the Ancillary Documents may be used or referred to in connection with the construction or interpretation thereof.
9.12 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. A photocopy, faxed, scanned and/or emailed copy of this Agreement or any Ancillary Document or any signature page to this Agreement or any Ancillary Document, shall have the same validity and enforceability as an originally signed copy.
9.13 Sellers’ Representative.
(a) By the execution and delivery of this Agreement, each Seller hereby irrevocably constitutes and appoints Steven King (in such capacity, the “Sellers’ Representative”) as the true and lawful agent and attorney-in-fact of such Seller with full powers of substitution to act in the name, place and stead of thereof with respect to the performance on behalf of such Seller under the terms and provisions of this Agreement and the Ancillary Documents, as the same may be from time to time amended, and to do or refrain from doing all such further acts and things, and to execute all such documents on behalf of such Seller, if any, as the Sellers’ Representative will deem necessary or appropriate in connection with any of the transactions contemplated under this Agreement or any of the Ancillary Documents, including: (i) agree upon or compromise any matter related to the calculation of any adjustments to the Purchase Price; (ii) direct the distribution of the Purchase Price among Sellers; (iii) act for Sellers with respect to all indemnification matters referred to in this Agreement, including the right to compromise on behalf of Sellers any indemnification claim made by or against Sellers, if any; (iv) act for Sellers with respect to all post-Closing matters; (v) terminate, amend or waive any provision of this Agreement; provided, that any such action, if material to the rights and obligations of Sellers in the reasonable judgment of the Sellers’ Representative, will be taken in the same manner with respect to all Sellers unless otherwise agreed by each Seller who is subject to any disparate treatment of a potentially adverse nature; (vi) employ and obtain the advice of legal counsel, accountants and other professional advisors as the Sellers’ Representative, in his or her sole discretion, deems necessary or advisable in the performance of his or her duties as the Sellers’ Representative and to rely on their advice and counsel; (vii) incur and pay expenses, including fees of brokers, attorneys and accountants incurred pursuant to the transactions contemplated hereby, and any other fees and expenses allocable or in any way relating to such transaction or any indemnification claim, whether incurred prior or subsequent to Closing; (viii) receive all or any portion of the Purchase Price and to distribute the same to Sellers according to this Agreement; (ix) sign any releases or other documents with respect to and dispute or remedy arising under this Agreement or the Ancillary Documents; and (x) do or refrain from doing any further act or deed on behalf of Sellers which the Sellers’ Representative deems necessary or appropriate in his or her sole discretion relating to the subject matter of this Agreement as fully and completely as any Seller could do if personally present and acting. The Sellers’ Representative hereby accepts his or her appointment and authorization as the Sellers’ Representative under this Agreement.
| 37 |
(b) The appointment of the Sellers’ Representative will be deemed coupled with an interest and will be irrevocable, and any other Person, including Buyer, the Company and any other Buyer Indemnified Parties may conclusively and absolutely rely, without inquiry, upon any actions of the Sellers’ Representative as the acts of Sellers hereunder or any Ancillary Document to which it they are a party. Each Buyer Indemnified Party shall be entitled to rely conclusively on the instructions and decisions of the Sellers’ Representative as to (i) the settlement of any claims for indemnification by a Buyer Indemnified Party pursuant to ARTICLE VIII hereof, (ii) any payment instructions provided by the Sellers’ Representative or (iii) any other actions required or permitted to be taken by the Sellers’ Representative hereunder, and no Seller Indemnified Party shall have any cause of action against any Buyer Indemnified Party for any action taken by a Buyer Indemnified Party in reliance upon the instructions or decisions of the Sellers’ Representative. No Buyer Indemnified Party shall have any liability to Sellers for any allocation or distribution among Sellers by the Sellers’ Representative of payments made to or at the direction of the Sellers’ Representative.
(c) The Sellers’ Representative will act for Sellers on all of the matters set forth in this Agreement in the manner the Sellers’ Representative believes to be in the best interest of Sellers, but the Sellers’ Representative will not be responsible to Sellers for any loss or damage that any Seller may suffer by reason of the performance by the Sellers’ Representative of such Sellers’ Representative’s duties under this Agreement, other than loss or damage arising from fraud, gross negligence or willful misconduct in the performance of the Sellers’ Representative’s duties under this Agreement. Sellers do hereby severally and not jointly agree to indemnify and hold the Sellers’ Representative harmless from and against any and all Losses reasonably incurred or suffered as a result of the performance of the Sellers’ Representative’s duties under this Agreement, except for any such liability arising out of the fraud, gross negligence or willful misconduct of the Sellers’ Representative. The Sellers’ Representative will be entitled to the payment from the Sellers of all his or her expenses incurred as the Sellers’ Representative. No bond shall be required of the Sellers’ Representative.
| 38 |
(d) If the Sellers’ Representative shall die, become disabled, resign or otherwise be unable to fulfill his or her responsibilities as agent of Sellers, then Sellers shall, within ten (10) days after such death or disability, appoint a successor agent and, promptly thereafter (but in any event within two (2) Business Days after such appointment), shall notify Buyer in writing of the identity of such successor. Any such successor shall be appointed by the written consent of Sellers, and any successor so appointed shall become the “Sellers’ Representative” for purposes of this Agreement. A vacancy in the position of Sellers’ Representative may be filled by the vote of Sellers holding a majority in interest of the Escrow Accounts.
(e) All notices or other communications required to be made or delivered by Buyer to a Seller pursuant to this Agreement shall be made to the Sellers’ Representative for the benefit of such Seller, and any notices so made shall discharge in full all notice requirements of Buyer to such Seller with respect thereto. All notices or other communications required to be made or delivered by a Seller shall be made by the Sellers’ Representative (except for a notice under Section 9.13(d) of the replacement of the Sellers’ Representative).
(f) After the Closing, Buyer shall afford the Sellers’ Representative and its Representatives reasonable access (electronically to the greatest extent possible) during business hours and with prior notice to the Buyer, during the period from the date of receipt of a written notice for indemnity until all claims related to such notice are resolved to the books, records and working papers of Buyer and its Affiliates related to such indemnity claim, each of their respective personnel and any other information of Buyer or its Affiliates that the Sellers’ Representative reasonably requests relating to the such indemnity claims, and Buyer and its Affiliates shall cooperate with the Sellers’ Representative and its Representatives in connection therewith.
9.14 Conflicts and Privilege. It is acknowledged by each of the parties hereto that the Sellers’ Representative has retained Duane Morris LLP (“DM”) to act as its counsel in connection with the transactions contemplated hereby. Buyer hereby agrees that in the event of a dispute under this Agreement, the Ancillary Documents and the documents and instruments contemplated hereby and thereby related to the transactions contemplated hereby or thereby that arises after the Closing between Buyer Indemnified Parties, on the one hand, and the Sellers’ Representative and Sellers, on the other hand, DM may represent the Sellers’ Representative and/or Sellers in such dispute even though the interests of the Sellers’ Representative and/or Sellers may be directly adverse to the Buyer Indemnified Parties, and even though DM may have represented the Company in a matter substantially related to such dispute; provided, however, this sentence shall not apply if and to the extent (a) DM is then representing the Buyer Indemnified Parties and (b) such representation of such member of the Buyer Indemnified Parties would require DM to either refrain from representing the Sellers’ Representative and/or Sellers or obtain the informed consent of the Sellers’ Representative and/or Sellers and the applicable member of the Buyer Indemnified Parties under applicable Laws or applicable ethical standards governing attorney conduct. Buyer further agrees that, as to all communications among DM, the Company, the Sellers’ Representative and/or any Seller that relate in any way to the transactions contemplated hereby or a similar transaction prior to the Closing (the “Protected Communications”), the attorney-client privilege and the expectation of client confidence with respect to the Protected Communications (the “Associated Rights”) belong to the Sellers’ Representative and Sellers and may be controlled by the Sellers’ Representative and Sellers and shall not pass to or be claimed by Buyer, the Company (after Closing) or any of their Subsidiaries; provided, however, the parties hereto expressly agree that the Protected Communications and Associated Rights shall not include any communications at or prior to the Closing among DM, the Company, the Sellers’ Representative and/or any Seller: (i) relating to (A) the pre-Closing operation by the Company of its business other than the negotiation of the transactions contemplated hereby or a similar transaction prior to the Closing or (B) Fraud (whether related to the negotiation of the transactions contemplated hereby or a similar transaction prior to the Closing or otherwise); or (ii) with respect to which the attorney-client privilege could not validly be asserted by the Company prior to the Closing. Notwithstanding the foregoing, (x) in the event that a dispute arises between Buyer Indemnified Parties, on the one hand, and a third party other than the Sellers’ Representative or a Seller, on the other hand, Buyer Indemnified Parties may assert the attorney-client privilege to prevent disclosure of confidential communications to such third party; provided, however, that Buyer Indemnified Parties may not waive such privilege without the prior written consent of the Sellers’ Representative and (y) if Buyer is legally required by order of a Governmental Authority to access or obtain a copy of all or a portion of the Protected Communications, Buyer shall be entitled to access or obtain a copy of and disclose the Protected Communications to the extent necessary to comply with any such order.
| 39 |
9.15 Dispute Resolution. Any and all Actions, complaints, disputes, controversies and claims (other than applications for a temporary restraining order, preliminary injunction, permanent injunction or other equitable relief or application for enforcement of a resolution under this Section 9.15) arising out of, related to, or in connection with this Agreement or the transactions contemplated hereby (a “Dispute”) shall be governed by this Section 9.15. A party must, in the first instance, provide written notice of any Disputes to the other parties subject to such Dispute, which notice must provide a reasonably detailed description of the matters subject to the Dispute. The parties involved in such Dispute shall seek to resolve the Dispute on an amicable basis within ten (10) Business Days of the notice of such Dispute being received by such other parties subject to such Dispute; the “Resolution Period”); provided, that if any Dispute would reasonably be expected to have become moot or otherwise irrelevant if not decided within sixty (60) days after the occurrence of such Dispute, then there shall be no Resolution Period with respect to such Dispute. Any Dispute that is not resolved during the Resolution Period may immediately be referred to and finally resolved by arbitration pursuant to the then-existing Expedited Procedures of the Commercial Arbitration Rules (the “AAA Procedures”) of the American Arbitration Association (the “AAA”). Any party involved in such Dispute may submit the Dispute to the AAA to commence the proceedings after the Resolution Period. To the extent that the AAA Procedures and this Agreement are in conflict, the terms of this Agreement shall control. The arbitration shall be conducted by one arbitrator nominated by the AAA promptly (but in any event within five (5) Business
| 40 |
Days) after the submission of the Dispute to the AAA and reasonably acceptable to each party subject to the Dispute, which arbitrator shall be a commercial lawyer with substantial experience arbitrating disputes under acquisition agreements. The arbitrator shall accept his or her appointment and begin the arbitration process promptly (but in any event within five (5) Business Days) after his or her nomination and acceptance by the parties subject to the Dispute. The proceedings shall be streamlined and efficient. The arbitrator shall decide the Dispute in accordance with the substantive law of the State of Delaware. Time is of the essence. Each party shall submit a proposal for resolution of the Dispute to the arbitrator within twenty (20) days after confirmation of the appointment of the arbitrator. The arbitrator shall have the power to order any party to do, or to refrain from doing, anything consistent with this Agreement, the Ancillary Documents and applicable Law, including to perform its contractual obligation(s); provided, that the arbitrator shall be limited to ordering pursuant to the foregoing power (and, for the avoidance of doubt, shall order) the relevant party (or parties, as applicable) to comply with only one or the other of the proposals. The arbitrator’s award shall be in writing and shall include a reasonable explanation of the arbitrator’s reason(s) for selecting one or the other proposal. The seat of arbitration shall be in county of Orange, California, and the language of the arbitration shall be English.
[Remainder of Page Intentionally Left Blank; Signatures Appear on Following Page]
| 41 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Buyer: | |
| PTSC SUB ONE, INC. | |
| By: /s/ Carlton Johnson | |
| Name: Carlton Johnson | |
| Title: Interim Chief Executive Officer and Interim Chief Financial Officer |
[Signature page of Stock Purchase Agreement]
| 42 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Parent: | |
| PATRIOT SCIENTIFIC CORPORATION | |
| By: /s/ Carlton Johnson | |
| Name: Carlton Johnson | |
| Title: Interim Chief Executive Officer and Interim Chief Financial Officer |
[Signature page of Stock Purchase Agreement]
| 43 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| The Company: | |
| MOSAIC IMMUNOENGINEERING INC. | |
| By: /s/ Steven King | |
| Name: Steven King | |
| Title: President and Chief Executive Officer |
[Signature page of Stock Purchase Agreement]
| 44 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers’ Representative: | |
| By: /s/ Steven King | |
| Name: Steven King | |
[Signature page of Stock Purchase Agreement]
| 45 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| By: /s/ Steven King | |
| Name: Steven King | |
[Signature page of Stock Purchase Agreement]
| 46 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| PAUL LYTLE | |
| /s/ Paul Lytle | |
| Paul Lytle |
[Signature page of Stock Purchase Agreement]
| 47 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| NICOLE STEINMETZ, PH.D. | |
| /s/ Nicole Steinmetz | |
| Nicole Steinmetz, Ph.D. |
[Signature page of Stock Purchase Agreement]
| 48 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| JONATHAN POKORSKI, PH.D. | |
| /s/ Jonathan Pokorski | |
| Jonathan Pokorski, Ph.D. |
[Signature page of Stock Purchase Agreement]
| 49 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| STEVEN FIERING, PH.D. | |
| /s/ Steven Fiering | |
| Steven Fiering, Ph.D. |
[Signature page of Stock Purchase Agreement]
| 50 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| ROBERT GARNICK, PH.D. | |
| /s/ Robert Garnick | |
| Robert Garnick, Ph.D. |
[Signature page of Stock Purchase Agreement]
| 51 |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first written above.
| Sellers: | |
| CASE WESTERN RESERVE UNIVERSITY | |
| /s/ Michael Haag | |
| Michael Haag, Executive Director Technology Management | |
| /s/ Michael l Lee | |
| Michael Lee, Treasurer |
[Signature page of Stock Purchase Agreement]
| 52 |
Exhibit A
Definitions
Certain Defined Terms. As used in the Agreement, the following terms shall have the following meanings:
“Action” means any notice of noncompliance or violation, or any claim, demand, charge, action, suit, litigation, audit, settlement, complaint, stipulation, assessment or arbitration, or any request (including any request for information), inquiry, hearing, proceeding or investigation, by or before any Governmental Authority.
“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations under the Exchange Act.
“Ancillary Documents” means each agreement, instrument or document attached hereto as an Exhibit, and the other agreements, certificates and instruments to be executed or delivered by any of the parties hereto in connection with or pursuant to this Agreement.
“Benefit Plan” means any deferred compensation, executive compensation, incentive compensation, equity purchase or other equity-based compensation plan, employment or consulting, severance or termination pay, holiday, vacation or other bonus plan or practice, hospitalization or other medical, life or other insurance, supplemental unemployment benefits, profit sharing, pension, or retirement plan, program, agreement, commitment or arrangement, and each other employee benefit plan, program, agreement or arrangement, including each “employee benefit plan” as such term is defined under Section 3(3) of ERISA, maintained or contributed to or required to be contributed to by the Company for the benefit of any employee or terminated employee of the Company, or with respect to which the Company has any liability, whether direct or indirect, actual or contingent, whether formal or informal, and whether legally binding or not.
“Business Day” means any day that is not a Saturday, Sunday or any other day on which banks are required or authorized by Law to be closed in New York or California.
“Buyer Common Stock” means the common stock of the Buyer, $0.00001 par value.
“Code” means the Internal Revenue Code of 1986 and any successor statute thereto, as amended. Reference to a specific section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.
“Confidential Information” means any information concerning the business and affairs of a Party that is not generally available to the public, including know-how, trade secrets, customer lists, details of customer or consultant contracts, pricing policies, operational methods and marketing plans or strategies, and any information disclosed to the Party by third parties to the extent that the Party has an obligation of confidentiality in connection therewith.
“Contract” means any contract, agreement, binding arrangement, commitment or understanding, bond, note, indenture, mortgage, debt instrument, license (or any other contract, agreement or binding arrangement concerning Intellectual Property), franchise, lease or other instrument or obligation of any kind, written or oral (including any amendments or other modifications thereto).
“Disclosure Schedules” means the disclosure schedules to this Agreement dated as of the date hereof and forming a part of this Agreement, including the Company Disclosure Schedules and the Buyer Disclosure Schedules.
| A-1 |
“Environmental Condition” means any contamination or damage to the environment caused by or relating to the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaching, pumping, pouring, emptying, discharging, injection, escaping, disposal, dumping or threatened release of Hazardous Materials by any Person. With respect to claims by employees or other third parties, Environmental Condition also includes the exposure of Persons to amounts of Hazardous Materials.
“Environmental Laws” means all Laws relating to pollution or protection of the environment, natural resources and health, safety and fire prevention, including those relating to emissions, discharges, releases or threatened releases of Hazardous Material into the environment (including ambient air, surface water, groundwater or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Material.
“Environmental Permits” means all permits, approvals, agreements, identification numbers, licenses and other authorizations required under any applicable Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974 and any successor statute thereto, as amended. Reference to a specific section of ERISA shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fraud” means common law fraud, including the element of scienter, or an intentional misrepresentation with respect to the representations and warranties contained in this Agreement or an Ancillary Agreement. For avoidance of doubt, “Fraud” shall not include any type of constructive or equitable fraud.
“GAAP” means United States generally accepted accounting principles applied on a consistent basis.
“Governing Documents” means, with respect to any entity, its certificate of incorporation, certificate of formation or similar charter document and its bylaws, operating agreement or similar governing document.
“Governmental Authority” means any federal, state, local, foreign or other governmental, quasi-governmental or administrative body, instrumentality, department or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body. The term “Governmental Authority” includes any Person acting on behalf of a Governmental Authority.
“Hazardous Material” means (a) all substances, materials, chemicals, compounds, pollutants or wastes regulated by, under or pursuant to any Environmental Laws, including the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq., the Clean Water Act, 33 U.S.C. §§1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, Title III of Public Law 99-499, the Safe Drinking Water Act, and any and all foreign (whether national, provincial or local), state or local counterparts thereto or other similar foreign (whether national, provincial or local), state or local laws and orders, including any and all rules and regulations promulgated thereunder, or any common law theory based on nuisance, negligence, product liability, trespass, ultrahazardous activity or strict liability; and (b) asbestos, petroleum, any fraction or product of crude oil or petroleum, radioactive materials and polychlorinated biphenyls.
| A-2 |
“Indebtedness” means, without duplication, (a) the outstanding principal of, and accrued and unpaid interest on, all bank or other third party indebtedness for borrowed money of the a Person, including indebtedness under any bank credit agreement and any other related agreements and all obligations evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, (b) all obligations of a Person for the reimbursement of any obligor on any line or letter of credit, banker’s acceptance, guarantee or similar credit transaction, in each case, that has been drawn or claimed against, (c) all obligations of a Person issued or assumed for deferred purchase price payments (other than trade payables in the Ordinary Course of Business), (d) all obligations of a Person under leases required to be capitalized in accordance with GAAP, (e) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by a Person, whether periodically or upon the happening of a contingency, (f) all obligations of a Person secured by a Lien (other than a Permitted Lien) on any asset of such Person or any Affiliate, whether or not such obligation is assumed by such Person, (g) any premiums, prepayment fees or other penalties, fees, costs or expenses associated with payment of any Indebtedness and (h) all obligation described in clauses (a) through (g) above of any other Person which is directly or indirectly guaranteed by such Person or which such Person has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which it has otherwise assured a creditor against loss; provided, however, notwithstanding the foregoing, Indebtedness shall not include any item included in the calculation of (i) Net Working Capital and (ii) Transaction Expenses.
“Independent Expert” means a Person independent with respect to the Parties (i.e., no prior material business relationship with any party for the prior two (2) years) or otherwise does not promptly accept its engagement, another mutually acceptable independent (i.e., no prior material business relationship with any party for the prior two (2) years) accounting firm recognized nationally (which appointment will be made no later than ten (10) days after the Dispute Resolution Notice Date); provided, that if the Independent Expert does not accept its appointment or if Buyer and the Sellers’ Representative cannot agree on the Independent Expert, in either case within twenty (20) days after the Dispute Resolution Notice Date, either Buyer or the Sellers’ Representative may require, by written notice to the other, that the Independent Expert be selected by the Orange County Office of the American Arbitration Association in accordance with the procedures of the American Arbitration Association. The Parties agree that the Independent Expert will be deemed to be independent even though a party or its Affiliates may, in the future, designate the Independent Expert to resolve disputes of the types described in Section 1.5.
“Intellectual Property” means rights in all of the following as they exist in any jurisdiction throughout the world: (a) Patents; (b) Trademarks; (c) Copyrights; (d) Trade Secrets; (e) all domain name and domain name registrations, web sites and web pages and related rights, registrations, items and documentation related thereto; (f) Software; and (g) rights of publicity and privacy, and moral rights.
“IRS” means the U.S. Internal Revenue Service or any successor entity.
“Knowledge” means: (i) with respect to the Seller Parties, the actual present knowledge of a particular matter by any Seller or any executive officer or director of the Company, and the knowledge that any such Person would reasonably be expected to have if diligently performing their duties on behalf of the Company; (ii) with respect to any Seller shall mean the actual present knowledge of a particular matter by such Seller; and (iii) with respect to Buyer Parties, the actual present knowledge of a particular matter by any of the directors or executive officers of Parent, without independent inquiry.
“Law” means any federal, state, local, municipal, foreign or other law, statute, legislation, principle of common law, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, directive, requirement, writ, injunction, settlement, Permit or Order that is or has been issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Authority.
“Legacy Business” means the Parent’s licensing of patented microprocessor technologies as described in Item 1. Description of Business contained in the Parent’s annual report on Form 10-K for fiscal year ended May 31, 2019, as filed with the SEC, and all related, copyrights, trademarks, and trade names currently in use in connection with the Legacy Business.
“Liabilities” means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, absolute or contingent, mature or unmatured or determined or determinable, including those arising under any Law, Action, Order or Contract.
| A-3 |
“Lien” means any interest (including any security interest), pledge, mortgage, lien, encumbrance, charge, claim or other right of third parties, including any spousal interests (community or otherwise), whether created by law or in equity, including any such restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.
“Material Adverse Effect” means, with respect to any Party, any event, fact, condition, change, circumstance, occurrence or effect, which, either individually or in the aggregate with all other events, facts, conditions, changes, circumstances, occurrences or effects, (a) has had, or would reasonably be expected to have, a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise), operations or results of operations of such Party or (b) does or would reasonably be expected to materially impair or delay the ability of such Party to perform their respective obligations under this Agreement and the Ancillary Documents or to consummate the transactions contemplated hereby and thereby; provided, however, that with respect to the Company or Parent, a Material Adverse Effect will not include any adverse effect or change resulting from any change, circumstance or effect relating to (A) the economy in general, (B) securities markets, regulatory or political conditions in the United States (including terrorism or the escalation of any war, whether declared or undeclared or other hostilities), (C) changes in applicable Laws or GAAP or the application or interpretation thereof, (D) the industries in which the Company or Parent primarily operate and not specifically relating to the Company or Parent, (E) a natural disaster or the worsening thereof, and (F) the public announcement, pendency or completion of the transactions contemplated hereby (provided, that in the cases of clauses (A) through (E), the Company or Parent is not disproportionately affected by such event as compared to other similar companies and businesses in similar industries and geographic regions as the Company or Parent).
“Order” means any order, writ, rule, judgment, injunction, decree, stipulation, determination or award that is or has been made, entered, rendered or otherwise put into effect by, with or under the authority of any Governmental Authority.
“OFAC” means the Office of Foreign Assets Control of the U.S. Treasury Department.
“Ordinary Course of Business” means, with respect to a Person, an action taken by such Person if (a) such action is recurring in nature, is consistent with the past practices of the Person and is taken in the ordinary course of the normal day-to-day operations of the Person; (b) such action is not required to be authorized by the equity holders of such Person, the board of directors (or equivalent) of such Person or any committee of the board of directors (or equivalent) of such Person and does not require any other special authorization of any nature; and (c) such action is taken in accordance with sound and prudent business practice. Unless the context or language herein requires otherwise, each reference to Ordinary Course of Business will be deemed to be a reference to Ordinary Course of Business of the Company.
“Parent Series A Convertible Preferred” means that certain convertible preferred stock to be issued by the Parent in exchange for the Class A Stock having the rights, interests, and obligations set forth in the Form of Series A Convertible Preferred Certificate of Designations attached hereto as Exhibit B.
“Parent Series B Convertible Preferred” means that certain convertible preferred stock to be issued by the Parent in exchange for the Class B Stock having the rights, interests, and obligations set forth in the Form of Series B Convertible Preferred Certificate of Designations attached hereto as Exhibit B.
“Patents” means all patents, patent applications and the inventions, designs and improvements described and claimed therein, patentable inventions, and other patent rights (including any divisionals, continuations, continuations-in-part, substitutions, or reissues thereof, whether or not patents are issued on any such applications and whether or not any such applications are amended, modified, withdrawn, or refiled).
“Permit” means any federal, state, local, foreign or other third-party permit, grant, easement, consent, approval, authorization, exemption, license, franchise, concession, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration or qualification that is or has been issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or other Person.
“Permitted Exceptions” means bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).
| A-4 |
“Permitted Liens” means any (a) statutory Liens of landlords, carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by Law in the Ordinary Course of Business for sums not yet due and payable; (b) Liens for current taxes not yet due and payable or Taxes being contested in good faith by any appropriate proceeding for which adequate reserves have been established; (c) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by applicable Law; (d) Liens with respect to any Indebtedness, only to the extent such liens described in this clause (d) are released in connection with and prior to the Closing; and (e) licenses entered into in the Ordinary Course of Business.
“Person” shall include any individual, trust, firm, corporation, limited liability company, partnership, Governmental Authority or other entity or association, whether acting in an individual, fiduciary or any other capacity.
“Personal Property” means all of the machinery, equipment, tools, vehicles, furniture, leasehold improvements, office equipment, plant, spare parts, and other tangible personal property which are owned, used or leased by the Company and used or useful, or intended for use, in the conduct or operations of the Company’s business.
“Representative” means, as to any Person, such Person’s Affiliates and its and their managers, directors, officers, employees, agents and advisors (including financial advisors, counsel and accountants).
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Software” means all computer software, including all source code, object code, and documentation related thereto and all software modules, assemblers, applets, compilers, flow charts or diagrams, tools and databases.
“Subsidiary” means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons will be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons will be allocated a majority of partnership, association or other business entity gains or losses or is or will control the managing director, managing member, general partner or other managing Person of such partnership, association or other business entity.
“Tax” means any federal, state, local or foreign income, gross receipts, license, payroll, parking, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, natural resources, customs duties, capital stock, franchise, profits, withholding, social security (or similar), payroll, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated tax, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, including such item for which Liability arises from the application of Treasury Regulation 1.1502-6, as a transferee or successor-in-interest, by contract or otherwise, and any Liability assumed or arising as a result of being, having been, or ceasing to be a member of any Affiliated Group (as defined in Section 1504(a) of the Code) (or being included or required to be included in any Tax Return relating thereto) or as a result of any Tax indemnity, Tax sharing, Tax allocation or similar Contract.
“Tax Return” means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with a Taxing Authority in connection with any Tax, or, where none is required to be filed with a Taxing Authority, the statement or other document issued by a Taxing Authority in connection with any Tax.
| A-5 |
“Taxing Authority” means any Governmental Authority responsible for the imposition or collection of any Tax.
“Trademarks” means all trademarks, service marks, trade dress, trade names, brand names, Internet domain names, designs, logos, or corporate/company names (including, in each case, the goodwill associated therewith), whether registered or unregistered, and all registrations and applications for registration and renewal thereof.
“Trade Secrets” means any trade secrets, confidential business information, concepts, ideas, designs, research or development information, processes, procedures, techniques, technical information, specifications, operating and maintenance manuals, engineering drawings, methods, know-how, data, mask works, discoveries, inventions, modifications, extensions, improvements, and other proprietary rights (whether or not patentable or subject to copyright, trademark, or trade secret protection).
| A-6 |
Other Defined Terms. The following capitalized terms, as used in the Agreement, have the respective meanings given to them in the Section as set forth below adjacent to such terms:
| Term | Section | Term | Section | |
| AAA | 9.16 | Indemnitee | 8.4(a) | |
| AAA Procedures | 9.16 | Indemnitor | 8.4(a) | |
| Agreement | Preamble | Interim Period | 5.2(a) | |
| Bank Account | 3.22 | Leased Premises | 3.11 | |
| Basket | 8.5 | Leases | 3.11 | |
| Buyer | Preamble | Legacy Purchase Price | 6.1(d) | |
| Buyer Parties Disclosure Schedules | ARTICLE IV | Loss | 9.2 | |
| Buyer Indemnified Parties | 8.2 | Merger | Recitals | |
| Closing Date | 2.1 | Noncompliance Period | 2.5 | |
| Closing Press Release | 5.6(b) | DM | 9.15 | |
| Company | Preamble | Outside Date | 7.1(b) | |
| Company Disclosure Schedules | ARTICLE III | Parent | Preamble | |
| Covered Parent SEC Disclosure | ARTICLE IV | Parent Balance Sheet | 4.8 | |
| DGCL | Recitals | Parent SEC Documents | 4.8 | |
| Dispute | 9.16 | Parent Series A and B Convertible Preferred | Recitals | |
| Expenses | 8.3 | Parent Stockholder Approval | 4.11 | |
| Federal Securities Laws | 5.7 | Party, Parties | Preamble | |
| Financial Statements | 3.7 | Protected Communications | 9.15 | |
| Indemnification Cap | 8.5 | Purchase Price | 1.2 | |
| Purchased Shares | 1.1 | |||
| Related Person | 4.23 | |||
| Resolution Period | 9.16 | |||
| Section 409A Plan | 3.19(e) | |||
| Seller Indemnified Parties | 8.3 | |||
| Seller Parties | Preamble | |||
| Sellers’ Representative | 9.14 | |||
| Sellers | Preamble | |||
| Signing Press Release | 5.6(b) | |||
| Survival Date | 8.1 | |||
| A-7 |
Exhibit B
Form of Series A Convertible Preferred Certificate of Designations
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND LIMITATIONS OF THE
SERIES A CONVERTIBLE VOTING PREFERRED STOCK
OF
PATRIOT SCIENTIFIC CORPORATION
_________________
Patriot Scientific Corporation, a Delaware corporation, (the “Corporation”) DOES HEREBY CERTIFY:
The Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix the powers, designations, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. On August 18, 2020, the Board of Directors duly adopted the following resolution creating a series of preferred stock designated as the Series A Convertible Voting Preferred Stock (the “Series A Preferred Stock”), comprised initially of 630,000 shares and such resolution has not been modified and is in full force and effect on the date hereof: RESOLVED: that, pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Charter, a series of the class of authorized preferred stock, par value $0.00001 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows:
1. Series A Designation, Amount and Par Value. The series of Preferred Stock shall be designated as the Corporation’s Series A Convertible Voting Preferred Stock, and the number of shares so designated shall be 630,000. Each share of Series A Preferred Stock shall have a par value of $0.00001 and a stated value equal to $6.50 per share (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Series A Preferred Stock, the “Stated Value”).
2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms have the meanings indicated:
“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1.02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof; (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
| B-1 |
“Business Day” means any day other than Saturday, Sunday and any day on which banks are required or authorized by law to be closed in the State of Delaware.
“Change of Control Event” means the occurrence after the Original Issue Date (as defined below), excluding a Liquidation Event, of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 35% of the voting securities of the Corporation, or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation sells or transfers its assets, as an entirety or substantially as an entirety, to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one-year period of more than one-half of the members of the Corporation’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth above in (i) through (iv).
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Corporation, $0.00001 par value per share.
“Eligible Market” means any of (i) the New York Stock Exchange, (ii) the NYSE American, (iii) The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global Select Market (each in clause (iii), a “NASDAQ Stock Market) or (iv) OTC Markets Pink or OTCQB.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Holder” means any holder of Series A Preferred Stock.
“Junior Securities” means (i) the Common Stock, and (ii) all equity or equity equivalent securities issued by the Corporation after the Original Issue Date that do not rank senior to or pari passu with the Series A Preferred Stock.
| B-2 |
“Original Issue Date” means the date of the first issuance of any shares of the Series A Preferred Stock, regardless of the number of transfers of any particular shares of Series A Preferred Stock and regardless of the number of certificates that may be issued to evidence such Series A Preferred Stock.
“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture or other non-corporate business enterprise, limited liability company, joint stock company, trust, organization, business, labor union or government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.
“Series A Preferred Stock” means the Corporation’s Series A Convertible Voting Preferred Stock authorized pursuant to the Series A Preferred Stock Designation.
“Series A Preferred Stock Designation” means this Certificate of Designation for the Corporation’s Series A Convertible Voting Preferred Stock, as adopted by the by the affirmative vote of the Board of Directors on August 18, 2020.
“Trading Day” shall mean, if a security is listed or admitted to trading, or quoted, on an Eligible Market, their successors or another national securities exchange or national securities market, a full day on which the NASDAQ Stock Market or such other national securities exchange or national securities market on which the security is traded is open for business and on which trades may be made thereon.
3. Voting Rights. Holders of the Series A Preferred Stock shall have the following voting rights:
(a) Those voting rights required by applicable law; and
(b) The right to vote together with the holders of the Common Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote. Each share of Series A Preferred Stock will carry a number of votes equal to the number of shares of Common Stock issuable based on the then applicable Conversion Number; provided, however, that so long as shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the prior approval of the Holders of at least a majority of the then issued and outstanding shares of Series A Preferred Stock, voting as a separate class: (a) authorize or increase the authorized number of shares of Series A Preferred Stock or any shares of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series A Preferred Stock, (b) authorize, adopt or approve any amendment to the Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation that would increase or decrease the par value or the Stated Value of the shares of the Series A Preferred Stock, alter or change the powers, preferences or rights of the shares of Series A Preferred Stock or alter or change the powers, preferences or rights of any other capital stock of the Corporation if after such alteration or change such capital stock would be senior to or pari passu with Series A Preferred Stock, (c) amend, alter or repeal the Certificate of Incorporation or the Bylaws of the Corporation or this Certificate of Designation so as to affect adversely the shares of Series A Preferred Stock, or (d) authorize or issue any security convertible into, exchangeable for or evidencing the right to purchase or otherwise receive any shares of any class or classes of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series A Preferred Stock.
| B-3 |
4. Dividends.
(a) The Series A Preferred Stock will not be entitled to dividends unless the Corporation pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series A Preferred Stock will be entitled to receive dividends of cash or property in an amount or value equal to the Conversion Number multiplied by the amount paid in respect of one share of Common Stock. Any dividend payable to the Series A Preferred Stock will have the same record and payment date and terms as the dividend payable on the Common Stock.
(b) Notwithstanding any other provision of this Certificate of Designation, the Corporation shall not pay any dividends on, or make any distributions with respect to, in cash or in kind or otherwise, its Common Stock or any other Junior Securities when accrued and unpaid dividends are owed to the Holders.
5. Registration of Series A Preferred Stock. The Corporation shall register shares of the Series A Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “Series A Preferred Stock Register”), in the name of the record Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series A Preferred Stock as the absolute owner thereof for the purpose of any conversion or redemption thereof or any distribution to such Holder, and for all other purposes, absent actual written notice to the contrary from the registered Holder. The shares of Series A Preferred Stock shall be uncertificated.
6. Registration of Transfers. The Corporation shall register the transfer of any shares of Series A Preferred Stock in the Series A Preferred Stock Register, upon receipt of an instrument of transfer acceptable to the Corporation from the Holder of such shares.
7. Liquidation.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a “Liquidation Event”), which shall be deemed to include (i) a Bankruptcy Event, (ii) the acquisition of the Corporation by another Person or affiliated group of Persons by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, issuance of new securities or transfer of issued and outstanding securities) where less than a majority of the voting power of the acquiring or surviving Person or group immediately following such acquisition is held by Persons who were stockholders of the Corporation immediately prior to such acquisition, or (iii) a sale or other disposition of all or substantially all of the assets of the Corporation, as determined by the Board of Directors, the Holders of Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the Stated Value for each share of Series A Preferred Stock then held by them, plus all accrued and unpaid dividends on such Series A Preferred Stock as of the date of such event, or (y) the amount payable per share of Common Stock which such Holder of Series A Preferred Stock would have received if such Holder had converted to Common Stock immediately prior to the Liquidation Event all of the shares of Series A Preferred Stock then held by such Holder together with all accrued but unpaid dividends on such Series A Preferred Stock as of the date of such event (the “Series A Stock Liquidation Preference”). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the Holders of the Series A Preferred Stock shall be insufficient to permit the payment to such Holders of the full Series A Stock Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution (including after giving effect to the terms of Section 20(c)(iii)) shall be distributed ratably among the Holders of the Series A Preferred Stock in proportion to the aggregate Series A Stock Liquidation Preference that would otherwise be payable to each of such Holders.
| B-4 |
(b) In the event of a Liquidation Event, following completion of the distributions required by the first sentence of paragraph (a) of this Section 7, if assets or surplus funds remain in the Corporation, the holders of the Junior Securities shall share in all remaining assets of the Corporation, in accordance with the General Corporation Law of Delaware and the Certificate of Incorporation.
(c) The Corporation shall give each Holder written notice of any Liquidation Event no less than 30 days prior to the occurrence thereof. Notwithstanding any provision of this Section 7 to the contrary, at any time during the 30-day period following delivery of such written notice, any Holder shall have the right to issue a Notice of Conversion as set forth in Section 8(a)(i). In such case, the Corporation shall follow the procedures for conversion set forth under Section 8(a)(i).
(d) Notwithstanding any of the foregoing contained in this Section 7, if any Liquidation Event can also be construed as a Fundamental Transaction hereunder as set forth in Section 14, then to the extent that the Holders shall receive greater consideration as a Fundamental Transaction, then the provisions of Section 14 shall apply.
(e) For the avoidance of doubt, in no circumstances shall any event occurring on, or in connection with, the Original Issue Date be construed as a Liquidation Event for purposes of the Series A Preferred Stock and this Certificate of Designation.
8. Conversion.
(a) Optional Conversion.
(i) At any time and from time to time after the earlier of (A) the approval by the stockholders of the Corporation of an amended and restated certificate of incorporation of the Corporation which provides for a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series A Preferred Stock or (B) an event occurring in accordance with the terms set forth in Section 7(c) (either (A) or (B), the “Conversion Period”)all or any portion of the Series A Preferred Stock held by any Holder may be converted into shares of duly authorized, validly issued, fully-paid and non-assessable share of Common Stock (each an “Underlying Share”) at a rate of 5,097.053 shares of Common Stock per share of Series A Preferred Stock to be converted by such Holder, as adjusted pursuant to Section 8(c). The number of Underlying Shares into which each share of Series A Preferred Stock is convertible, as adjusted from time to time in accordance with this Section 8, is referred to herein as the “Conversion Number.” A Holder may convert Series A Preferred Stock into Common Stock pursuant to this paragraph at any time, and from time to time by delivering to the Corporation during the Conversion Period (i) a written notice of the election to convert executed by the Holder (the “Notice of Conversion”), specifying the number of shares of Series A Preferred Stock to be converted, the name in which the shares of the Common Stock deliverable upon conversion shall be registered, and the address of the named person, and (ii) the original certificate(s), if any, evidencing the Series A Preferred Stock being converted. The “Conversion Date,” or the date on which an optional conversion shall be deemed effective, shall be defined as the first Trading Day on which the Corporation has received each of (i) if applicable, the original certificates (if any) representing the shares of the Series A Preferred Stock being converted, duly endorsed, and (ii) the accompanying Conversion Notice.
| B-5 |
(b) Mandatory Conversion.
(i) At such time as the Corporation files an amendment (“Amendment”) to its Certificate of Incorporation with the Secretary of State of Delaware effecting either a (i) reverse stock split or (ii) an increase in the Corporation’s authorized Common Stock, so that, in either event, the Corporation has a sufficient number of authorized and unissued shares of Common Stock so as to permit the conversion of all outstanding shares of the Series A Preferred Stock into Common Stock, then upon the filing and acceptance of the Amendment, whether by amendment or restatement, and the effectiveness of any registration statement registering the resale of the Underlying Shares, all the outstanding shares of Series A Preferred Stock will immediately and automatically convert into shares of Common Stock without any notice or action required on the part of the Corporation or the Holder (“Mandatory Conversion”). At the consummation of the Mandatory Conversion, the holders of Series A Preferred Stock will be entitled to receive Common Stock at the then applicable Conversion Number.
(ii) The Corporation agrees that it shall in good faith, promptly, take any and all such corporate action as may, in the opinion of its counsel, be necessary to effect the Amendment and the filing of a registration statement registering the resale of such shares and to expeditiously effect the conversion of all outstanding shares of the Series A Preferred Stock to shares of Common Stock, including, without limitation, use its reasonable best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation to achieve the foregoing.
(c) Adjustments to Conversion Number. Stock Splits and Combinations. If the outstanding shares of Common Stock are split into a greater number of shares, the Conversion Number will be proportionately increased. If the outstanding shares of Common Stock are combined into a smaller number of shares, the Conversion Number then in effect immediately before such combination will be proportionately decreased. These adjustments will be effective at the close of business on the date the split or combination becomes effective.
(i) Dividends and Other Distributions in Shares of Common Stock. If the Corporation declares or makes a dividend or other distribution payable in shares of Common Stock, or any other securities convertible into Common Stock, to holders of Common Stock, then the Conversion Number will be increased, effective at the close of business on the date of issuance of the shares of Common Stock paid as a dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock (the “Measurement Date”), to a number determined by multiplying such Conversion Number by a fraction:
| B-6 |
(A) the numerator of which will be sum of (x) the number of shares of Common Stock outstanding immediately prior to the Measurement Date, as calculated on a fully-diluted basis, plus (y) the number of shares of Common Stock issued in payment of such dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock, and
(B) the denominator of which will be the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to the Measurement Date.
(ii) Rules of Calculation; Treasury Stock. The number of shares of Common Stock outstanding will be calculated on the basis of the number of issued and outstanding shares of Common Stock on the applicable date, not including shares held in the treasury of the Corporation. The Corporation shall not pay any dividend on or make any distribution to shares of Common Stock held in treasury.
(iii) Waiver. Notwithstanding the foregoing, the Conversion Number will not be increased if the Corporation receives, prior to the Measurement Date, written notice from the Holders representing at least a majority of the then outstanding shares of Series A Preferred Stock, voting together as a separate class, that no adjustment is to be made as the result of a dividend or other distribution on shares of Common Stock. This waiver will be limited in scope and will not be valid for any dividend or other distribution on shares of Common Stock not specifically provided for in such notice.
9. Mechanics of Conversion.
(a) Delivery of Certificate(s) Upon Conversion(a). Upon conversion of any share of Series A Preferred Stock, the Corporation shall promptly (but in no event later than three Trading Days after the Conversion Date or Mandatory Conversion Date, as applicable (the “Share Delivery Date”) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the Underlying Shares issuable upon such conversion. The Corporation shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Corporation under this Section electronically through the Depositary Trust Company or another established clearing corporation performing similar functions. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become the holder of record of such Underlying Shares as of the Conversion Date. Upon surrender of a certificate representing the shares of Series A Preferred Stock to be converted following one or more partial conversions, the Corporation shall promptly deliver to the Holder a new certificate representing the remaining shares of Series A Preferred Stock. If the shares of Series A Preferred Stock are not certificated, the holder must deliver evidence of ownership satisfactory to the Corporation and its transfer agent. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the certificates representing the shares of Series A Preferred Stock tendered for conversion. The Common Stock issuable upon the Mandatory Conversion shall be issued with a restrictive legend indicating that it was issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to the Corporation.
| B-7 |
(b) Transfer Tax Matters. Unless the shares of Common Stock deliverable upon conversion are to be issued in the same name as the name in which the shares of Series A Preferred Stock to be converted are registered, the Holder must also deliver to the transfer agent an instrument of transfer, in form satisfactory to the Corporation, duly executed by the Holder or the Holder’s duly authorized attorney, together with an amount sufficient to pay any transfer or similar tax in connection with the issuance and delivery of such shares of Common Stock in such name (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).
10. Redemption Rights. The Series A Preferred Stock does not have any redemption rights.
11. Reservation of Common Stock. The Corporation shall at all times during the Conversion Period reserve and keep available for issuance upon the conversion of shares of Series A Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series A Preferred Stock (including any shares of Series A Preferred Stock paid by the Corporation as in kind dividends on the Series A Preferred Stock), and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series A Preferred Stock; provided, that the Holders approve any such action that requires a vote of the Holders in accordance with Section 3. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.
12. Charges, Taxes and Expenses. The issuance of certificates for shares of Series A Preferred Stock and for Underlying Shares issued upon conversion of (or otherwise in respect of) the Series A Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Corporation; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Series A Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Series A Preferred Stock or receiving Underlying Shares in respect of the Series A Preferred Stock.
13. Replacement Certificates. If any certificate evidencing Series A Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation or its transfer agent may prescribe.
| B-8 |
14. Fundamental Transactions. If, at any time while any shares of Series A Preferred Stock are outstanding, (i) the Corporation effects any merger of the Corporation into, or consolidation of the Corporation with, another Person, (ii) the Corporation effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) a Change in Control Event occurs, (iv) a Liquidation Event occurs under which Section 7(d) is applicable, or (v) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of Series A Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the record holder of such Underlying Shares (the “Alternate Consideration”). The foregoing provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series A Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive mergers, consolidations, sales, reclassifications or share exchanges.
15. No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series A Preferred Stock, whether voluntary or mandatory. Instead, the Corporation shall pay the cash value of any fractional share to each Holder that would otherwise be entitled to a fractional share.
16. Notice of Corporate Events. If the Corporation (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Corporation or any subsidiary, or (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Liquidation Event, Fundamental Transaction or Change of Control, then the Corporation shall deliver to each Holder a notice which shall specify (1) the record date for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such Liquidation Event, Fundamental Transaction or Change of Control is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon any such Liquidation Event or Fundamental Transaction.
17. Negative Covenants. So long as any shares of Series A Preferred Stock are outstanding, the Corporation will not, and will not permit any of its Subsidiaries to, directly or indirectly, without the prior written consent of the Holders of a majority of the Series A Preferred Stock then outstanding: (i) amend its Certificate of Incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of any Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents pursuant to key employee equity incentive awards; (iii) enter into any agreement with respect to the foregoing; or (iv) pay cash dividends or distributions on any equity securities of the Corporation other than pursuant to the terms of the Corporation’s outstanding Series A Convertible Voting Preferred Stock. For purposes of this Section 17, the following terms shall have the meanings set forth below:
| B-9 |
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (Eastern time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:00 p.m. (Eastern time) on any Business Day, (iii) the Business Day following the date of transmittal, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Corporation, to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci, or (ii) if to a Holder, to the address or facsimile number appearing on the Corporation’s Preferred Stock Register or such other address or facsimile number as such Holder may provide to the Corporation in accordance with this Section.
19. Miscellaneous.
(a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(b) No provision of this Certificate of Designation may be amended, except in a written instrument signed by the Corporation and Holders of at least a majority of the shares of Series A Preferred Stock then outstanding.
(c) The Series A Preferred Stock (i) is senior to all other equity interests in the Corporation outstanding as of the Original Issue Date in right of payment, whether with respect to dividends or upon liquidation or dissolution, or otherwise, other than the outstanding Series A Preferred Stock, and (ii) unless otherwise approved in accordance with this Certificate of Designation, will be senior to all other equity or equity equivalent securities issued by the Corporation after the Original Issue Date, other than Series A Preferred Stock issued after the Original Issue Date in accordance with this Series A Preferred Stock Certificate of Designation.
(d) Any of the rights of the Holders of Series A Preferred Stock set forth herein may be waived by the affirmative vote of Holders of a majority of the shares of Series A Preferred Stock then outstanding. No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designation shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
[Signature Page Follows.]
| B-10 |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation for the Series A Preferred Stock to be executed by its duly authorized officer on August 19, 2020.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | ||
| Name: Carlton Johnson Title: Interim Chief Executive Officer and Interim Chief Financial Officer | ||
| B-11 |
Exhibit C
Form of Series B Convertible Preferred Certificate of Designations
CERTIFICATE OF DESIGNATION
OF RIGHTS, PREFERENCES AND LIMITATIONS OF THE
SERIES B CONVERTIBLE VOTING PREFERRED STOCK
OF
PATRIOT SCIENTIFIC CORPORATION
_________________
Patriot Scientific Corporation, a Delaware corporation, (the “Corporation”) DOES HEREBY CERTIFY:
The Amended and Restated Certificate of Incorporation of the Corporation (the “Charter”) confers upon the Board of Directors of the Corporation (the “Board of Directors”) the authority to provide for the issuance of shares of preferred stock in series and to establish the number of shares to be included in each such series and to fix the powers, designations, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. On August 18, 2020, the Board of Directors duly adopted the following resolution creating a series of preferred stock designated as the Series B Convertible Voting Preferred Stock (the “Series B Preferred Stock”), comprised initially of 70,000 shares and such resolution has not been modified and is in full force and effect on the date hereof: RESOLVED: that, pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Charter, a series of the class of authorized preferred stock, par value $0.00001 per share, of the Corporation is hereby created and that the designation and number of shares thereof and the powers, preferences and rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows::
1. Series B Designation, Amount and Par Value. The series of Preferred Stock shall be designated as the Corporation’s Series B Convertible Voting Preferred Stock, and the number of shares so designated shall be 70,000. Each share of Series B Preferred Stock shall have a par value of $0.00001 and a stated value equal to $6.50 per share (as adjusted for any stock split, stock dividend, stock combination or other similar transactions with respect to the Series B Preferred Stock, the “Stated Value”).
2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms have the meanings indicated:
“Anti-Dilution Threshold” equals ONE MILLION DOLLARS ($1,000,000).
“Bankruptcy Event” means any of the following events: (a) the Corporation or any Significant Subsidiary (as such term is defined in Rule 1.02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary thereof; (b) there is commenced against the Corporation or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Corporation or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Corporation or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors; (f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (g) the Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
| C-1 |
“Business Day” means any day other than Saturday, Sunday and any day on which banks are required or authorized by law to be closed in the State of Delaware.
“Change of Control Event” means the occurrence after the Original Issue Date (as defined below), excluding a Liquidation Event, of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 35% of the voting securities of the Corporation, or (ii) the Corporation merges into or consolidates with any other Person, or any Person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation sells or transfers its assets, as an entirety or substantially as an entirety, to another Person and the stockholders of the Corporation immediately prior to such transaction own less than 65% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a one-year period of more than one-half of the members of the Corporation’s board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth above in (i) through (iv).
“Commission” means the Securities and Exchange Commission.
“Common Stock” means the common stock of the Corporation, $0.00001 par value per share.
“Eligible Market” means any of (i) the New York Stock Exchange, (ii) the NYSE American, (iii) The NASDAQ Global Market, The NASDAQ Capital Market or The NASDAQ Global Select Market (each in clause (iii), a “NASDAQ Stock Market) or (iv) OTC Markets Pink or OTCQB.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Holder” means any holder of Series B Preferred Stock.
“Junior Securities” means (i) the Common Stock, and (ii) all equity or equity equivalent securities issued by the Corporation after the Original Issue Date that do not rank senior to or pari passu with the Series B Preferred Stock.
“Net Working Capital” means the net working capital of the Corporation on the Original Issue Date. On such date of determination, subject to the next sentence in this definition, Net Working Capital shall be calculated as the positive difference (if any) of current assets less current liabilities, all as determined under generally accepted accounting principles as then in effect in the United States). Notwithstanding the foregoing, Net Working Capital shall exclude any restricted cash and any corresponding current liability. The Corporation shall provide the Holders with such back-up materials as the Holders may reasonably request (such as the general ledger entries of the Corporation) to validate the Net Working Capital calculation. The Holders shall have ten (10) calendar days from receipt of such information to object to the Net Working Capital calculation. If the Holders disagree with such calculation, the Holders and the Corporation shall appoint a mutually agreed upon accounting firm to calculate Net Working Capital as of the Original Issue Date. Such calculation by the accounting firm shall then be binding on all parties for purposes of the Series B Preferred Stock.
“Original Issue Date” means the date of the first issuance of any shares of the Series B Preferred Stock, regardless of the number of transfers of any particular shares of Series B Preferred Stock and regardless of the number of certificates that may be issued to evidence such Series B Preferred Stock.
“Person” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture or other non-corporate business enterprise, limited liability company, joint stock company, trust, organization, business, labor union or government (or an agency or subdivision thereof) or any court or other federal, state, local or other governmental authority or other entity of any kind.
| C-2 |
“Qualifying Capital Raise” means the receipt by the Corporation of gross proceeds, in immediately available funds, of not less than an amount equal to the Anti-Dilution Threshold through the combination of (a) the Corporation’s issuance and sale of equity and/or hybrid securities (which are convertible into equity) and (b) Net Working Capital. For the avoidance of doubt, the conversion of either the Series B Preferred Stock or the Series A Preferred Stock shall neither be construed as, nor considered in the calculation of, a Qualifying Capital Raise
“Series B Preferred Stock” means the Corporation’s Series B Convertible Voting Preferred Stock authorized pursuant to the Series B Preferred Stock Designation.
“Series B Preferred Stock Designation” means this Certificate of Designation for the Corporation’s Series B Convertible Voting Preferred Stock, as adopted by the by the affirmative vote of the Board of Directors on August 18, 2020.
“Trading Day” shall mean, if a security is listed or admitted to trading, or quoted, on an Eligible Market, their successors or another national securities exchange or national securities market, a full day on which the NASDAQ Stock Market or such other national securities exchange or national securities market on which the security is traded is open for business and on which trades may be made thereon.
“Triggering Event” happens upon the occurrence of a Qualifying Capital Raise has occurred.
3. Voting Rights. Holders of the Series B Preferred Stock shall have the following voting rights:
(a) Those voting rights required by applicable law; and
(b) The right to vote together with the holders of the Common Stock, as a single class, upon all matters submitted to holders of Common Stock for a vote. Each share of Series B Preferred Stock will carry a number of votes equal to the number of shares of Common Stock issuable based on the then applicable Conversion Number; provided, however, that so long as shares of Series B Preferred Stock are outstanding, the Corporation shall not, without the prior approval of the Holders of at least a majority of the then issued and outstanding shares of Series B Preferred Stock, voting as a separate class: (a) authorize or increase the authorized number of shares of Series B Preferred Stock or any shares of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series B Preferred Stock, (b) authorize, adopt or approve any amendment to the Certificate of Incorporation or Bylaws of the Corporation or this Certificate of Designation that would increase or decrease the par value or the Stated Value of the shares of the Series B Preferred Stock, alter or change the powers, preferences or rights of the shares of Series B Preferred Stock or alter or change the powers, preferences or rights of any other capital stock of the Corporation if after such alteration or change such capital stock would be senior to or pari passu with Series B Preferred Stock, (c) amend, alter or repeal the Certificate of Incorporation or the Bylaws of the Corporation or this Certificate of Designation so as to affect adversely the shares of Series B Preferred Stock, or (d) authorize or issue any security convertible into, exchangeable for or evidencing the right to purchase or otherwise receive any shares of any class or classes of capital stock of the Corporation having any right, preference or priority ranking senior to or pari passu with Series B Preferred Stock.
4. Dividends.
(a) The Series B Preferred Stock will not be entitled to dividends unless the Corporation pays cash dividends or dividends in other property to holders of outstanding shares of Common Stock, in which event, each outstanding share of the Series B Preferred Stock will be entitled to receive dividends of cash or property in an amount or value equal to the Conversion Number multiplied by the amount paid in respect of one share of Common Stock. Any dividend payable to the Series B Preferred Stock will have the same record and payment date and terms as the dividend payable on the Common Stock.
(b) Notwithstanding any other provision of this Certificate of Designation, the Corporation shall not pay any dividends on, or make any distributions with respect to, in cash or in kind or otherwise, its Common Stock or any other Junior Securities when accrued and unpaid dividends are owed to the Holders.
| C-3 |
5. Registration of Series B Preferred Stock. The Corporation shall register shares of the Series B Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “Series B Preferred Stock Register”), in the name of the record Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series B Preferred Stock as the absolute owner thereof for the purpose of any conversion or redemption thereof or any distribution to such Holder, and for all other purposes, absent actual written notice to the contrary from the registered Holder. The shares of Series B Preferred Stock shall be uncertificated.
6. Registration of Transfers. The Corporation shall register the transfer of any shares of Series B Preferred Stock in the Series B Preferred Stock Register, upon receipt of an instrument of transfer acceptable to the Corporation from the Holder of such shares.
7. Liquidation.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (a “Liquidation Event”), which shall be deemed to include (i) a Bankruptcy Event, (ii) the acquisition of the Corporation by another Person or affiliated group of Persons by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, issuance of new securities or transfer of issued and outstanding securities) where less than a majority of the voting power of the acquiring or surviving Person or group immediately following such acquisition is held by Persons who were stockholders of the Corporation immediately prior to such acquisition, or (iii) a sale or other disposition of all or substantially all of the assets of the Corporation, as determined by the Board of Directors, the Holders of Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Junior Securities by reason of their ownership thereof, an amount per share in cash equal to the greater of (x) the Stated Value for each share of Series B Preferred Stock then held by them, plus all accrued and unpaid dividends on such Series B Preferred Stock as of the date of such event, or (y) the amount payable per share of Common Stock which such Holder of Series B Preferred Stock would have received if such Holder had converted to Common Stock immediately prior to the Liquidation Event all of the shares of Series B Preferred Stock then held by such Holder together with all accrued but unpaid dividends on such Series B Preferred Stock as of the date of such event (the “Series B Stock Liquidation Preference”). If, upon the occurrence of a Liquidation Event, the funds thus distributed among the Holders of the Series B Preferred Stock shall be insufficient to permit the payment to such Holders of the full Series B Stock Liquidation Preference, then the entire assets and funds of the Corporation legally available for distribution (including after giving effect to the terms of Section 20(c)(iii)) shall be distributed ratably among the Holders of the Series B Preferred Stock in proportion to the aggregate Series B Stock Liquidation Preference that would otherwise be payable to each of such Holders.
(b) In the event of a Liquidation Event, following completion of the distributions required by the first sentence of paragraph (a) of this Section 7, if assets or surplus funds remain in the Corporation, the holders of the Junior Securities shall share in all remaining assets of the Corporation, in accordance with the General Corporation Law of Delaware and the Certificate of Incorporation.
(c) The Corporation shall give each Holder written notice of any Liquidation Event no less than 30 days prior to the occurrence thereof. Notwithstanding any provision of this Section 7 to the contrary, at any time during the 30-day period following delivery of such written notice, any Holder shall have the right to issue a Notice of Conversion as set forth in Section 8(a)(i). In such case, the Corporation shall follow the procedures for conversion set forth under Section 8(a)(i).
(d) Notwithstanding any of the foregoing contained in this Section 7, if any Liquidation Event can also be construed as a Fundamental Transaction hereunder as set forth in Section 14, then to the extent that the Holders shall receive greater consideration as a Fundamental Transaction, then the provisions of Section 14 shall apply.
(e) For the avoidance of doubt, in no circumstances shall any event occurring on, or in connection with, the Original Issue Date be construed as a Liquidation Event for purposes of the Series B Preferred Stock and this Certificate of Designation.
| C-4 |
8. Conversion.
(a) Optional Conversion.
(i) At any time and from time to time after the earlier of (A) the approval by the stockholders of the Corporation of an amended and restated certificate of incorporation of the Corporation which provides for a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series B Preferred Stock or (B) an event occurring in accordance with the terms set forth in Section 7(c) (either (A) or (B), the “Conversion Period”), all or any portion of the Series B Preferred Stock held by any Holder may be converted into shares of duly authorized, validly issued, fully-paid and non-assessable share of Common Stock (each an “Underlying Share”) at a rate of 5,734.185 shares of Common Stock per share of Series B Preferred Stock to be converted by such Holder, as adjusted pursuant to Section 8(c). The number of Underlying Shares into which each share of Series B Preferred Stock is convertible, as adjusted from time to time in accordance with this Section 8, is referred to herein as the “Conversion Number.” A Holder may convert Series B Preferred Stock into Common Stock pursuant to this paragraph at any time, and from time to time by delivering to the Corporation during the Conversion Period (i) a written notice of the election to convert executed by the Holder (the “Notice of Conversion”), specifying the number of shares of Series B Preferred Stock to be converted, the name in which the shares of the Common Stock deliverable upon conversion shall be registered, and the address of the named person, and (ii) the original certificate(s), if any, evidencing the Series B Preferred Stock being converted. The “Conversion Date,” or the date on which an optional conversion shall be deemed effective, shall be defined as the first Trading Day on which the Corporation has received each of (i) if applicable, the original certificates (if any) representing the shares of the Series B Preferred Stock being converted, duly endorsed, and (ii) the accompanying Conversion Notice.
Notwithstanding the foregoing, at any time prior to the Conversion Date, upon the occurrence of a Triggering Event, the Conversion Number shall be subject to upward adjustment adjusted upward until the Corporation reaches the Anti-Dilution Threshold through through one or more Qualfying Capital Raises: provided that such adjustment shall terminate and not apply as to any shares of Series B Preferred Stock that previously shall have converted into Common Stock. For example, if Net Working Capital is $400,000, then the to reach the Anti-Dilution Threshold the Corporation shall only need to raise $600,000 in one or more Qualifying Capital Raises. Following any Qualifying Capital Raise, the Conversion Number shall be adjusted to equal 10% of the fully diluted common stock of the Corporation (including for such purposes all other convertible securities outstanding and reserved for issuance except stock options issued and outstanding and reserved for issuance under board approved employee stock option plans reserving for issuance no more than ten percent (10%) of the outstanding common stock of the Corporation then outstanding, after giving effect to any Qualifying Capital Raise, until the Anti-Dilution Threshold is met) and divided that sum by the number of shares of Series B Preferred Stock then outstanding. For example, if the number of fully diluted shares of common stock of the Corporation is 4,100,000,000 upon reaching the Anti-Dilution Threshold, then the Conversion Number shall be 5,857.14286 (4,100,000,000 times 10% divided by the number of shares of Series B Preferred Stock then outstanding)
(b) Mandatory Conversion. The Series B Preferred Stock shall not be subject to mandatory conversion.
(c) Adjustments to Conversion Number. Stock Splits and Combinations. If the outstanding shares of Common Stock are split into a greater number of shares, the Conversion Number will be proportionately increased. If the outstanding shares of Common Stock are combined into a smaller number of shares, the Conversion Number then in effect immediately before such combination will be proportionately decreased. These adjustments will be effective at the close of business on the date the split or combination becomes effective.
(i) Dividends and Other Distributions in Shares of Common Stock. If the Corporation declares or makes a dividend or other distribution payable in shares of Common Stock, or any other securities convertible into Common Stock, to holders of Common Stock, then the Conversion Number will be increased, effective at the close of business on the date of issuance of the shares of Common Stock paid as a dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock (the “Measurement Date”), to a number determined by multiplying such Conversion Number by a fraction:
| C-5 |
(A) the numerator of which will be sum of (x) the number of shares of Common Stock outstanding immediately prior to the Measurement Date, as calculated on a fully-diluted basis, plus (y) the number of shares of Common Stock issued in payment of such dividend or distribution as calculated on as converted basis taking into account any securities issued which are convertible into Common Stock, and
(B) the denominator of which will be the number of shares of Common Stock outstanding, on a fully diluted basis, immediately prior to the Measurement Date.
(ii) Rules of Calculation; Treasury Stock. The number of shares of Common Stock outstanding will be calculated on the basis of the number of issued and outstanding shares of Common Stock on the applicable date, not including shares held in the treasury of the Corporation. The Corporation shall not pay any dividend on or make any distribution to shares of Common Stock held in treasury.
(iii) Waiver. Notwithstanding the foregoing, the Conversion Number will not be increased if the Corporation receives, prior to the Measurement Date, written notice from the Holders representing at least a majority of the then outstanding shares of Series B Preferred Stock, voting together as a separate class, that no adjustment is to be made as the result of a dividend or other distribution on shares of Common Stock. This waiver will be limited in scope and will not be valid for any dividend or other distribution on shares of Common Stock not specifically provided for in such notice.
9. Mechanics of Conversion.
(a) Delivery of Certificate(s) Upon Conversion(a). Upon conversion of any share of Series B Preferred Stock, the Corporation shall promptly (but in no event later than three Trading Days after the Conversion Date or Mandatory Conversion Date, as applicable (the “Share Delivery Date”) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate a certificate or certificates for the Underlying Shares issuable upon such conversion. The Corporation shall, upon request of the Holder, deliver any certificate or certificates required to be delivered by the Corporation under this Section electronically through the Depositary Trust Company or another established clearing corporation performing similar functions. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become the holder of record of such Underlying Shares as of the Conversion Date. Upon surrender of a certificate representing the shares of Series B Preferred Stock to be converted following one or more partial conversions, the Corporation shall promptly deliver to the Holder a new certificate representing the remaining shares of Series B Preferred Stock. If the shares of Series B Preferred Stock are not certificated, the holder must deliver evidence of ownership satisfactory to the Corporation and its transfer agent. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after the Conversion Date, the Holder shall be entitled to elect by written notice to the Corporation at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Corporation shall immediately return the certificates representing the shares of Series B Preferred Stock tendered for conversion. The Common Stock issuable upon the Mandatory Conversion shall be issued with a restrictive legend indicating that it was issued in a transaction which is exempt from registration under the Securities Act of 1933, as amended (“Securities Act”), and that it cannot be transferred unless it is so registered, or an exemption from registration is available, in the opinion of counsel to the Corporation.
(b) Transfer Tax Matters. Unless the shares of Common Stock deliverable upon conversion are to be issued in the same name as the name in which the shares of Series B Preferred Stock to be converted are registered, the Holder must also deliver to the transfer agent an instrument of transfer, in form satisfactory to the Corporation, duly executed by the Holder or the Holder’s duly authorized attorney, together with an amount sufficient to pay any transfer or similar tax in connection with the issuance and delivery of such shares of Common Stock in such name (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).
10. Redemption Rights. The Series B Preferred Stock does not have any redemption rights.
11. Reservation of Common Stock. The Corporation shall at all times during the Conversion Period reserve and keep available for issuance upon the conversion of shares of Series B Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Series B Preferred Stock (including any shares of Series B Preferred Stock paid by the Corporation as in kind dividends on the Series B Preferred Stock), and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Series B Preferred Stock; provided, that the Holders approve any such action that requires a vote of the Holders in accordance with Section 3. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable.
| C-6 |
12. Charges, Taxes and Expenses. The issuance of certificates for shares of Series B Preferred Stock and for Underlying Shares issued upon conversion of (or otherwise in respect of) the Series B Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Corporation; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Series B Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Series B Preferred Stock or receiving Underlying Shares in respect of the Series B Preferred Stock.
13. Replacement Certificates. If any certificate evidencing Series B Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Corporation shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Corporation of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation or its transfer agent may prescribe.
14. Fundamental Transactions. If, at any time while any shares of Series B Preferred Stock are outstanding, (i) the Corporation effects any merger of the Corporation into, or consolidation of the Corporation with, another Person, (ii) the Corporation effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) a Change in Control Event occurs, (iv) a Liquidation Event occurs under which Section 7(d) is applicable, or (v) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental Transaction”), then, upon any subsequent conversion of Series B Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the record holder of such Underlying Shares (the “Alternate Consideration”). The foregoing provisions shall apply regardless of whether or not there would have been a sufficient number of shares of Common Stock authorized and available for issuance upon conversion of the shares of Series B Preferred Stock outstanding as of the date of such transaction, and shall similarly apply to successive mergers, consolidations, sales, reclassifications or share exchanges.
15. No Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series B Preferred Stock, whether voluntary or mandatory. Instead, the Corporation shall pay the cash value of any fractional share to each Holder that would otherwise be entitled to a fractional share.
16. Notice of Corporate Events. If the Corporation (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including, without limitation, any granting of rights or warrants to subscribe for or purchase any capital stock of the Corporation or any subsidiary, or (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Liquidation Event, Fundamental Transaction, or Change of Control, then the Corporation shall deliver to each Holder a notice which shall specify (1) the record date for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such Liquidation Event, Fundamental Transaction, or Change of Control is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon any such Liquidation Event or Fundamental Transaction.
17. Negative Covenants. So long as any shares of Series B Preferred Stock are outstanding, the Corporation will not, and will not permit any of its Subsidiaries to, directly or indirectly, without the prior written consent of the Holders of a majority of the Series B Preferred Stock then outstanding: (i) amend its Certificate of Incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of any Holder; (ii) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents pursuant to key employee equity incentive awards; (iii) enter into any agreement with respect to the foregoing; or (iv) pay cash dividends or distributions on any equity securities of the Corporation other than pursuant to the terms of the Corporation’s outstanding Series B Convertible Voting Preferred Stock. For purposes of this Section 17, the following terms shall have the meanings set forth below:
| C-7 |
“Common Stock Equivalents” means any securities of the Corporation or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:00 p.m. (Eastern time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:00 p.m. (Eastern time) on any Business Day, (iii) the Business Day following the date of transmittal, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Corporation, to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci, or (ii) if to a Holder, to the address or facsimile number appearing on the Corporation’s Preferred Stock Register or such other address or facsimile number as such Holder may provide to the Corporation in accordance with this Section.
19. Miscellaneous.
(a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.
(b) No provision of this Certificate of Designation may be amended, except in a written instrument signed by the Corporation and Holders of at least a majority of the shares of Series B Preferred Stock then outstanding.
(c) The Series B Preferred Stock (i) is senior to all other equity interests in the Corporation outstanding as of the Original Issue Date in right of payment, whether with respect to dividends or upon liquidation or dissolution, or otherwise, other than the outstanding Series B Preferred Stock, and (ii) unless otherwise approved in accordance with this Certificate of Designation, will be senior to all other equity or equity equivalent securities issued by the Corporation after the Original Issue Date, other than Series B Preferred Stock issued after the Original Issue Date in accordance with this Series B Preferred Stock Certificate of Designation.
(d) Any of the rights of the Holders of Series B Preferred Stock set forth herein may be waived by the affirmative vote of Holders of a majority of the shares of Series B Preferred Stock then outstanding. No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designation shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
[Signature Page Follows.]
| C-8 |
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation for the Series B Preferred Stock to be executed by its duly authorized officer on August 19, 2020.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | ||
| Name: Carlton Johnson Title: Interim Chief Executive Officer and Interim Chief Financial Officer | ||
| C-9 |
Exhibit D
Form of Investor Rights agreement
TABLE OF CONTENTS
Page
| 1. Definitions | 1 |
| 2. Registration Rights | 3 |
| 2.1 Demand Registration | 3 |
| 2.2 Company Registration | 4 |
| 2.3 Underwriting Requirements | 4 |
| 2.4 Obligations of the Company | 5 |
| 2.5 Furnish Information | 7 |
| 2.6 Expenses of Registration | 7 |
| 2.7 Delay of Registration | 7 |
| 2.8 Reports Under Exchange Act | 7 |
| 2.9 “Market Stand-off” Agreement | 8 |
| 2.10 Restrictions on Transfer | 8 |
| 2.11 Termination of Registration Rights | 10 |
| 3. Information Rights | 10 |
| 3.1 Delivery of Financial Statements | 10 |
| 3.2 Inspection | 11 |
| 3.3 Termination of Information | 11 |
| 3.4 Confidentiality | 11 |
| 4. Miscellaneous | 11 |
| 4.1 Successors and Assigns | 11 |
| 4.2 Governing Law | 12 |
| 4.3 Counterparts; Facsimile | 12 |
| 4.4 Titles and Subtitles | 12 |
| 4.5 Notices | 12 |
| 4.6 Amendments and Waivers | 13 |
| 4.7 Severability | 13 |
| 4.8 Aggregation of Stock | 13 |
| 4.9 Entire Agreement | 13 |
| 4.10 Dispute Resolution | 13 |
| 4.11 Delays or Omissions | 14 |
| Schedule A - Schedule of Investors |
D-1 |
INVESTORS’ RIGHTS AGREEMENT
THIS INVESTORS’ RIGHTS AGREEMENT is made as of the 19th day of August, 2020, between:
(a) PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (the “Company”), and
(b) the investor listed on Schedule A hereto, referred to in this Agreement as the “Investor”.
Background
1. Upon the consummation of the transactions set forth in that certain Stock Purchase Agreement (the “SPA”), dated as of even date herewith, among the Company, PTSC Sub One, Inc., Mosaic ImmunoEngineering, Inc. (“Mosaic”), certain shareholders of Mosaic set forth therein, (the “Sellers”), and Steve King (as the “Sellers’ Representative”), the Investor, as one of the Sellers, shall receive shares of the Company’s Series B Preferred Stock.
2. As the sole holder of the Series B Preferred Stock the Investor shall receive certain registration rights and information rights, to which the Company has agreed under the SPA. This Agreement is intended to set forth those rights in detail.
NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
1.2 “Common Stock” means shares of the Company’s common stock, $0.00001 par value per share.
1.3 “Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.4 “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.
1.5 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
D-2 |
1.6 “Excluded Registration” means (i) a registration relating to the sale or grant of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, equity incentive or similar plan; or (ii) a registration relating to an SEC Rule 145 transaction.
1.7 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.8 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.9 “GAAP” means generally accepted accounting principles in the United States.
1.10 “Holder” means any holder of Registrable Securities who is a party to this Agreement.
1.11 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.12 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
1.13 “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act occurring after the date hereof and the listing of such Common Stock on a national securities exchange.
1.18 “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
1.19 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.20 “Preferred Stock” means, collectively, shares of the Company’s Series A Preferred Stock and Series B Preferred Stock.
1.21 “Registrable Securities” means the Common Stock issuable or issued upon conversion of the Series B Preferred Stock.
1.22 “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
1.23 “Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12(b) hereof.
1.24 “SEC” means the Securities and Exchange Commission.
1.25 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
D-3 |
1.26 “SEC Rule 144(k)” means Rule 144(k) promulgated by the SEC under the Securities Act.
1.27 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.
1.28 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.29 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder.
1.30 “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, $0.00001 par value per share.
1.31 “Series B Preferred Stock” means shares of the Company’s Series B Preferred Stock, $0.00001 par value per share.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Demand Registration.
(a) Form S-1 Demand. If at any time after one hundred eighty (180 after the date of this Agreement, the Company receives a request from Holders of seventy-five percent (75.00%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement with respect to one-hundred percent (100%) of the Registrable Securities then outstanding, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 2.1(c) and Section 2.3.
(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company (x) receives a request from Holders of the Registrable Securities then outstanding that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holders or (y) undertakes to file a Form S-3 Registration Statement for the Common Stock issued upon conversion of the Series B Preferred Stock that the Company file a Form S-3 registration with respect to such Common Stock, then the Company shall (i) within ten (10) days after the date such request is given or determination under clause (y) is made, give a Demand Notice to all Holders other than the Initiating Holders (when applicable); and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request under clause (x) is given, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration, subject to the limitations of Sections 2.1(c) and 2.3.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given; and provided that the Company shall not register any securities for its own account or that of any other stockholder during such ninety (90) day period.
D-4 |
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 2.1(a) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective
2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash, the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.3, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6. For the avoidance of doubt, this Section 2.2 shall not apply to any Excluded Registration.
2.3 Underwriting Requirements.
(a) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below twenty percent (20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of Common Stock (or other securities) of the Company, from selling any securities included in such registration;
D-5 |
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly make available for inspection by the selling Holders, any managing underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company shall be paid for by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
D-6 |
2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
2.8 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144;
(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.9 “Market Stand-off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed (x) one hundred eighty (180) days in the case of the IPO or (y) ninety (90) days in the case of any registration other than the IPO, (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.9 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than five percent (5%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.9 and shall have the right, power, and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.9 or that are necessary to give further effect thereto.
2.10 Restrictions on Transfer.
a) The Series B Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, in violation of Section 2.9 or Section 2.10(c) of this Agreement. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Series B Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
D-7 |
(b) Each certificate or instrument representing (i) the Series B Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.10(c)) be stamped or otherwise imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY HAVE THE RIGHTS AND BENEFITS AND ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in Section 2.9 and Section 2.10(c) of this Agreement.
(c) The holder of each certificate representing Restricted Securities, by acceptance thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (x) in any transaction in compliance with SEC Rule 144 or (y) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of this Section 2.12. Each certificate or instrument evidencing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.11(b), except that such certificate shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.
2.11 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of:
(a) when all of such Holder’s Registrable Securities could be sold without restriction under SEC Rule 144(k); and
(b) the first anniversary of the date of this Agreement.
D-8 |
3. Information Rights.
3.1 Delivery of Financial Statements. The Company shall deliver to each Holder:
(a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, (i) a balance sheet as of the end of such year, (ii) statements of income and of cash flows for such year, and a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Section 3.1(e)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants of nationally recognized standing selected by the Company and all being prepared in accordance with GAAP;
(b) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP); and
(c) with respect to the financial statements called for in Section 3.1(a) and Section 3.1(b) an instrument executed by the chief financial officer and chief executive officer of the Company certifying that such financial statements were prepared in accordance with GAAP consistently applied with prior practice for earlier periods (except as otherwise set forth in Section 3.1(b)) and fairly present the financial condition of the Company and its results of operation for the periods specified therein.
If, for any period, the Company has any subsidiary whose accounts are consolidated with those of the Company, then in respect of such period the financial statements delivered pursuant to the foregoing sections shall be the consolidated and consolidating financial statements of the Company and all such consolidated subsidiaries.
Notwithstanding anything else in this Section 3.1 to the contrary, the Company may cease providing the information set forth in this Section 3.1 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3.1 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
3.2 Inspection. The Company shall permit the Holders (provided that the Board of Directors has not reasonably determined that such Holder is a competitor of the Company), at such Holder’s expense, to visit and inspect the Company’s properties; examine its books of account and records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Holder; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.3 Termination of Information. The covenants set forth in Section 3.1 and Section 3.2 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, or (ii) if the Company is and remains subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, whichever event occurs first.
D-9 |
3.4 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.4 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.5; (iii) to any existing or prospective Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
4. Miscellaneous.
4.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities; provided, however, that (x) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee shall be aggregated together and with those of the transferring Holder; provided further that all transferees shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
4.2 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
4.3 Counterparts; Facsimile. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may also be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
4.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
4.5 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy shall also be sent to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci and if notice is given to Stockholders, a copy shall also be given to Benesch, Friedlander, Coplan & Aronoff LLP, 200 Public Square, Cleveland, OH 44114 Attn: Ira C. Kaplan.
D-10 |
4.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of of the Registrable Securities then outstanding; provided that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
4.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
4.8 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
4.9 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
4.10 Dispute Resolution The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
4.11 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank]
D-11 |
IN WITNESS WHEREOF, the parties have executed this INVESTORS’ RIGHTS AGREEMENT as of the date first written above.
| PATRIOT SCIENTIFIC CORPORATION | ||
| By: | ||
| Name: |
Carlton Johnson | |
| Title: | Interim CEO | |
|
INVESTOR: CASE WESTERN RESERVE UNIVERSITY | ||
| By: | ||
| Name: | Michael Haag | |
| Title: |
Executive Director, Technology Management | |
|
|
||
| By: | ||
| Name: | Michael Lee | |
| Title: | Treasurer |
D-12 |
SCHEDULE A
Investors
| First Name | Last Name | |
| Steven | King | |
| Paul | Lytle | |
| Nicole | Steinmetz | |
| Jonathan | Pokorski | |
| Steven |
Fiering |
|
| Robert |
Garnick |
|
D-13 |
Exhibit E
Form of Voting Agreement
PATRIOT SCIENTIFIC CORPORATION
VOTING AGREEMENT
| E-1 |
TABLE OF CONTENTS
Page
| 1. Vote to Increase Authorized Common Stock. | 1 |
| 2. Vote for Reverse Stock Split. | 2 |
| 3. Remedies. | 2 |
| 3.1 Covenants of the Company. | 2 |
| 3.2 Irrevocable Proxy and Power of Attorney. | 2 |
| 3.3 Specific Enforcement. | 3 |
| 3.4 Remedies Cumulative. | 3 |
| 4. Term. | 3 |
| 5. Miscellaneous. | 3 |
| 5.1 Additional Parties. . | 3 |
| 5.2 Transfers. | 3 |
| 5.3 Successors and Assigns. | 4 |
| 5.4 Governing Law. | 4 |
| 5.5 Counterparts. | 4 |
| 5.6 Titles and Subtitles. | 4 |
| 5.7 Notices. | 4 |
| 5.8 Consent Required to Amend, Modify, Terminate or Waive. | 5 |
| 5.9 Delays or Omissions. | 5 |
| 5.10 Severability. | 6 |
| 5.11 Entire Agreement. | 6 |
| 5.12 Share Certificate Legend. | 6 |
| 5.13 Stock Splits, Stock Dividends, Etc. | 6 |
| 5.14 Manner of Voting. | 6 |
| 5.15 Further Assurances. | 6 |
| 5.16 WAIVER OF JURY TRIAL.. | 7 |
| 5.17 Dispute Resolution | 7 |
| 5.18 Aggregation of Stock. . | 7 |
| Schedule A | Investor | |
| Schedule B | Series A Holders | |
| Exhibit A | Adoption Agreement |
| E-2 |
VOTING AGREEMENT
THIS VOTING AGREEMENT (this “Agreement”) is made as of the 19th day of August, 2020, between:
(a) PATRIOT SCIENTIFIC CORPORATION, a Delaware corporation (the “Company”),
(b) the investor listed on Schedule A hereto, referred to in this Agreement as the “Investor” (together with any subsequent holders of Series B Preferred Stock (as defined below) and transferees who become parties hereto as “Series B Holders” pursuant to Section 7.1(a) or Section 7.2, the “Series B Holders”), and
(c) each holder of the Company’s Series A Preferred Stock, $0.0001 par value per share and any additional series of Series A Preferred Stock of the Company hereafter authorized (together, “Series A Preferred Stock”) listed on Schedule B (together with any subsequent holders of Series A Preferred Stock and transferees who become parties hereto as “Series A Holders” pursuant to Section 7.1(a) or Section 7.2, the “Series A Holders”).
Background
1. Upon the consummation of the transactions set forth in that certain Stock Purchase Agreement (the “SPA”), dated as of even date herewith, among the Company, PTSC Sub One, Inc., Mosaic ImmunoEngineering, Inc. (“Mosaic”), certain shareholders of Mosaic set forth therein, (the “Sellers”), and Steve King (as the “Sellers’ Representative”), the Investor, as one of the Sellers, shall receive shares of the Company’s Series A Series A Preferred Stock, $0.0001 par value per share (the “Series B Preferred Stock”).
2. Each of the Series A Preferred Stock and Series B Preferred Stock convert into shares of the common stock, $0.0001 par value per share, of the Company (the “Common Stock”)
3. In connection with the SPA, the Series A Holders, who as of the date hereof and after giving effect to the transactions contemplated by the SPA shall hold a majority of the voting securities of the Company, and the Investor have agreed to take certain actions in connection with their voting rights.
NOW, THEREFORE, the Company, the Series A Holders, and the Investor agree as follows:
1. Vote to Increase Authorized Common Stock.
1.1 For purposes of this Agreement, the term “Shares” shall mean and include any securities of the Company that the Series A Holders and Series B Holders (collectively, the “Preferred Stock Holders”), as applicable, are entitled to vote, including, without limitation, all shares of Common Stock, Series A Preferred Stock, and Series B Preferred Stock, by whatever name called, now owned or subsequently acquired by a Preferred Stock Holder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, conversion, similar events or otherwise.
| E-3 |
1.2 Each Preferred Stock Holder agrees to vote or cause to be voted all Shares owned by such Preferred Stock Holder, or over which such Preferred Stock Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Series A Preferred Stock and Series B Preferred Stock, in each case outstanding at any given time.
2. Vote for Reverse Stock Split. Each Preferred Stock Holder agrees to vote or cause to be voted all Shares owned by such Preferred Stock Holder, or over which such Preferred Stock Holder has voting control, from time to time and at all times, in whatever manner as shall be necessary to vote for a reverse stock split of the Common Stock, at such time and in such ratio as may be determined by the board of directors of the Company. Notwithstanding the foregoing, in no case shall the Preferred Stock Holders vote or cause to be voted all Shares in favor of a reverse stock split if the result of such reverse stock split would cause insufficient shares of Common Stock to be available for conversion of all of the shares of Series A Preferred Stock and Series B Preferred Stock, in each case, then outstanding.
3. Remedies.
3.1 Covenants of the Company. The Company agrees to use its best efforts, within the requirements of applicable law, to ensure that the rights granted under this Agreement are effective and that the parties enjoy the benefits of this Agreement. Such actions include, without limitation, the use of the Company’s best efforts to cause the nomination and election of the directors as provided in this Agreement and to call and have a special meeting of the stockholders of the Company to give effect to the purposes of this Agreement, including, without limitation the provisions of Section 1 and Section 2 of this Agreement. The Company shall use its best efforts to call such special meeting to be held within ninety (90) days after the date of this Agreement.
3.2 Irrevocable Proxy and Power of Attorney. Each party to this Agreement hereby constitutes and appoints as the proxies of the Series A Preferred Holders and the Company, as applicable, and hereby grants a power of attorney to the Chief Executive Officer of the Company, and a to a duly authorized representatives of Case Western Reserve University (solely as to Section 1 hereof), with full power of substitution, with respect to the matters set forth herein, including, without limitation, votes to increase authorized shares pursuant to Section 1 and votes regarding any reverse stock split pursuant to Section 2, and hereby authorizes each of them to represent and vote, if and only if the party (i) fails to vote, or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s Shares in favor of the increase of authorized shares or approval of any reverse split of the Company pursuant to and in accordance with the terms and provisions of Section 1 and Section 2, respectively, or to take any action necessary to effect Section 1 and Section 2, respectively. Each of the proxy and power of attorney granted pursuant to this Section 3.2 is given in consideration of the agreements and covenants of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, each is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to Section 5. Each party hereto hereby revokes any and all previous proxies or powers of attorney with respect to the Shares and shall not hereafter, unless and until this Agreement terminates or expires pursuant to Section 5, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than this Agreement), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth herein.
| E-4 |
3.3 Specific Enforcement. Each party acknowledges and agrees that each party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by the parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that the Company and each of the Preferred Stock Holders shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.
3.4 Remedies Cumulative. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
4. Term. This Agreement shall be effective as of the date hereof and shall continue in effect until terminated in accordance with Section 5.8. In addition, this Agreement shall terminate as to a particular Preferred Stock Holder when that Preferred Stock Holder no longer owns any Shares.
5. Miscellaneous.
5.1 Additional Parties. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Series A Preferred Stock after the date hereof, as a condition to the issuance of such shares, the Company shall require that any purchaser become a party to this Agreement by executing and delivering (i) the Adoption Agreement attached to this Agreement as Exhibit A, or (ii) a counterpart signature page hereto agreeing to be bound by and subject to the terms of this Agreement as an Investor and Series A Holder hereunder. In either event, each such person shall thereafter be deemed a Series A Holder for all purposes under this Agreement.
5.2 Transfers. Each transferee or assignee of any Shares subject to this Agreement shall continue to be subject to the terms hereof, and, as a condition precedent to the Company’s recognition of such transfer, each transferee or assignee shall agree in writing to be subject to each of the terms of this Agreement by executing and delivering an Adoption Agreement substantially in the form attached hereto as Exhibit A. Upon the execution and delivery of an Adoption Agreement by any transferee, such transferee shall be deemed to be a party hereto as if such transferee were the transferor and such transferee’s signature appeared on the signature pages of this Agreement and shall be deemed to be a Series A Holder. The Company shall not permit the transfer of the shares of Series A Preferred or of Shares subject to this Agreement on its books or issue a new certificate representing any such Shares unless and until such transferee shall have complied with the terms of this Section 5.2. Each certificate, instrument or book entry representing such shares subject to this Agreement if issued on or after the date of this Agreement shall be notated by the Company with the legend set forth in Section 5.12.
| E-5 |
5.3 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither the Company nor and Series A Preferred Holder shall be entitled to assign its rights under this Agreement.
5.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law.
5.5 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail by scanned pdf counterparts of signature pages, or other such electronic means and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
5.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
5.7 Notices.
(a) All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.5. If notice is given to the Company, a copy shall also be sent to Duane Morris LLP, One Riverfront Plaza, 1037 Raymond Blvd., Suite 1800, Newark, NJ 07102 Attn: Dean M. Colucci and if notice is given to Stockholders, a copy shall also be given to Benesch, Friedlander, Coplan & Aronoff LLP, 200 Public Square, Cleveland, OH 44114 Attn: Ira C. Kaplan.
(b) Each Series A Holder consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at such Investor’s electronic mail address or the facsimile number set forth on Schedule B hereto or such Series A Holder’s signature page hereto, as the case may be, or as subsequently modified by written notice given in accordance with this Section 5.7. Each Series A Holder agrees to promptly notify the Company of any change in its electronic mail address, and that failure to do so shall not affect the foregoing.
| E-6 |
5.8 Consent Required to Amend, Modify, Terminate or Waive. This Agreement may be amended, modified or terminated (other than pursuant to Section 5) and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (x) the Company, (y) the Series B Holders holding at least a majority of the outstanding shares of Series B Preferred Stock, and (z) the Investor. Notwithstanding the foregoing:
(a) Schedule B hereto may be amended by the Company from time to time to add information regarding Series A Holders without the consent of the other parties hereto;
(b) any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party; and
Any amendment, modification, termination or waiver effected in accordance with this Section 5.8 and this Agreement shall be binding on each party and all of such party’s successors and permitted assigns. . For purposes of this Section 5.8, the requirement of a written instrument may be satisfied, as to the Series A Holders, in the form of an action by written consent of the Series A Holders circulated by the Company and executed by the Series A Holder parties specified, so long as such action by written consent makes reasonably explicit reference to the terms of this Agreement to such amendment, modification, termination or waiver. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision. No waivers of or exceptions to any term, condition or provision of this Agreement, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
5.9 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
| E-7 |
5.10 Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
5.11 Entire Agreement. This Agreement (including the Exhibits hereto), and and the other Transaction Agreements (as defined in the SPA) constitute the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
5.12 Share Certificate Legend. Each certificate, instrument or book entry representing any Shares issued after the date hereof shall be notated by the Company with a legend reading substantially as follows:
“THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A VOTING AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THAT VOTING AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER AND OWNERSHIP SET FORTH THEREIN.”
The Company, by its execution of this Agreement, agrees that it will cause the certificates instruments, or book entry evidencing the Shares issued after the date hereof to be notated with the legend required by this Section 5.12, and it shall supply, free of charge, a copy of this Agreement to any holder of such Shares upon written request from such holder to the Company at its principal office. The parties to this Agreement do hereby agree that the failure to cause the certificates, instruments, or book entry evidencing the Shares to be notated with the legend required by this Section 5.12 herein and/or the failure of the Company to supply, free of charge, a copy of this Agreement as provided hereunder shall not affect the validity or enforcement of this Agreement.
5.13 Stock Splits, Stock Dividends, Etc. In the event of any issuance of Shares of the voting securities of the Company hereafter to any of the Series A or Series B Holders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization, or the like), such Shares shall become subject to this Agreement and shall be notated with the legend set forth in Section 5.12.
5.14 Manner of Voting. The voting of Shares pursuant to this Agreement may be effected in person, by proxy, by written consent or in any other manner permitted by applicable law. For the avoidance of doubt, voting of the Shares pursuant to the Agreement need not make explicit reference to the terms of this Agreement.
5.15 Further Assurances. At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to carry out the intent of the parties hereunder.
| E-8 |
5.16 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION 5.16 HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
5.17 Dispute Resolution The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
5.18 Aggregation of Stock. All Shares held or acquired by a Preferred Stock Holder and/or its affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
| E-9 |
IN WITNESS WHEREOF, the parties have executed this VOTING AGREEMENT as of the date first written above.
| PATRIOT SCIENTIFIC CORPORATION | |
| By: | |
| Name: |
Carlton Johnson |
| Title: | Interim President |
|
INVESTOR: CASE WESTERN RESERVE UNIVERSITY | |
| By: | |
| Name: | Michael Haag |
| Title: | Executive Director, Technology Management |
|
| |
| By: | |
| Name: | Michael Lee |
| Title: | Treasurer |
| E-10 |
IN WITNESS WHEREOF, the Series A Holders have executed this VOTING AGREEMENT as of the date first written above.
| Individuals Sign Below: | |
|
Signature
Steven King Name
Signature
Paul Lytle Name
Signature
Nicole Steinmetz Name
Signature
Jonathan Pokorski Name
Signature
Steven Fiering Name
Signature
Robert Garnick Name
|
| E-11 |
SCHEDULE A
INVESTOR
Case Western Reserve University
| E-12 |
SCHEDULE B
SERIES A HOLDERS
| Steven | King |
| Paul | Lytle |
| Nicole | Franziska Steinmetz |
| Jonathan | Kyle Pokorski |
| Steven | Fiering |
| Robert | Garnick |
| E-13 |
EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement (“Adoption Agreement”) is executed on _________________, 20__, by the undersigned (the “Holder”) pursuant to the terms of that certain VOTING AGREEMENT dated as of ___, 2020 (the “Agreement”), by and among the Company and certain of its stockholders, as such Agreement may be amended or amended and restated hereafter. Capitalized terms used but not defined in this Adoption Agreement shall have the respective meanings ascribed to such terms in the Agreement. By the execution of this Adoption Agreement, the Holder agrees as follows.
1.1 Acknowledgement. Holder acknowledges that Holder is acquiring certain shares of the capital stock of the Company (the “Stock”)[ or options, warrants, or other rights to purchase such Stock (the “Options”)], for one of the following reasons (Check the correct box):
| ☐ | As a transferee of Shares from a party in such party’s capacity as an “Investor” bound by the Agreement, and after such transfer, Holder shall be considered an “Investor” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | As a transferee of Shares from a party in such party’s capacity as a “Common Holder” bound by the Agreement, and after such transfer, Holder shall be considered a “Common Holder” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | As a new Investor in accordance with Section 7.1(a) of the Agreement, in which case Holder will be an “Investor” and a “Series A Holder” for all purposes of the Agreement. |
| ☐ | In accordance with Section 7.1(b) of the Agreement, as a new party who is not a new Investor, in which case Holder will be a “Series A Holder” for all purposes of the Agreement. |
1.2 Agreement. Holder hereby (a) agrees that the Stock [Options], and any other shares of capital stock or securities required by the Agreement to be bound thereby, shall be bound by and subject to the terms of the Agreement and (b) adopts the Agreement with the same force and effect as if Holder were originally a party thereto.
1.3 Notice. Any notice required or permitted by the Agreement shall be given to Holder at the address or facsimile number listed below Holder’s signature hereto.
| HOLDER: _____________________________ | ACCEPTED AND AGREED: |
| By: ___________________________________ | PATRIOT SCIENTIFIC CORPORATION |
| Address: ______________________________ | By: ___________________________ |
| Facsimile: _____________________________ | Title: _________________________ |
| E-14 |
Exhibit 99.1
Patriot Scientific Corporation and Mosaic ImmunoEngineering Inc. Enter into Definitive Merger Agreement
Carlsbad and Novato, Calif., August 24, 2020 – Patriot Scientific Corporation (the “Company” or “Patriot”) (OTC PINK: PTSC) and Mosaic ImmunoEngineering Inc., (“Mosaic”) announced today that they have entered into a definitive agreement under which a wholly-owned subsidiary of Patriot will merge with Mosaic through the issuance of convertible preferred stock. The merged company will focus on advancing its immunotherapy pipeline of products including intra-tumoral immunotherapy of cancer and its modular vaccine platform.
“Patriot was able to create substantial shareholder value for many years through licensing of our broad microprocessor intellectual property patents. However, we recently began to evaluate new opportunities to create stockholder value with the expiration of our patents and unsuccessful court appeals. As part of this process, we evaluated a number of opportunities and we believe that the technology platform at Mosaic has the opportunity to create tremendous shareholder value.” said Carlton Johnson, interim president and interim chief financial officer of Patriot. “Mosaic has a broad technology platform with potential in cancer and infectious diseases. We believe this union represents a great opportunity for the stockholders of both companies.”
As part of the merger, Mr. Johnson will remain onboard in his executive duties through August 28th to ensure a smooth management transition.
“We appreciate the thorough approach that the board of directors at Patriot took in considering strategic alternatives and we feel that this union has the potential to create significant value for stockholders of both companies moving forward.” stated Steven King, president and CEO of Mosaic. “Our technology platforms have broad potential to treat and prevent diseases that span oncology and infectious diseases. The underlying research supporting our product pipeline and technology platforms has been extensive over the past 10 years with funding of over $20 million. We look forward to providing more details regarding our development plans in these areas over the coming weeks.”
About the Transaction
The merger is structured as a stock-for-stock transaction whereby all of Mosaic’s outstanding shares of Class A and Class B common stock will be exchanged for Patriot’s Series A and Series B Preferred Stock. A subsidiary of Patriot will buy from the stockholders of Mosaic 630,000 shares of its Class A common stock and 70,000 shares of its Class B common stock, representing 100% of the issued and outstanding common stock of Mosaic, in exchange for 630,000 shares of the Patriot’s Series A Convertible Preferred Stock (“Series Preferred”) and 70,000 shares of Patriot’s Series B Convertible Preferred Stock (“Series B preferred), respectively. Each share of the Series A Preferred; shall (a) convert into 5,097.053 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, and (c) have no dividend rate. Each share of the Series B Preferred; shall (a) convert into 5,734.185 shares of common stock of the Parent, (b) possess full voting rights, on an as-converted basis, as the common stock of the Parent, (c) have no dividend rate, and (d) shall possess certain anti-dilution protections as defined in the Series B Certificate of Designations. On a fully diluted, as converted basis, it is anticipated that Patriot’s equityholders immediately prior to the merger will own 10% of the combined company and Mosaic’s equityholders immediately prior to the merger will own 90% of the combined company.
Law Office of Otto E. Sorensen is serving as legal counsel to Patriot and Duane Morris LLP is serving as legal counsel to Mosaic IE.
No Offer or Solicitation
This communication will not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor will there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities in connection with the proposed merger shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
1 |
A more complete description of the terms of and conditions of the transaction can be found in Patriots’ Form 8-K to be filed with the SEC on August 25, 2020, and in the Stock Purchase Agreement, which will be filed as an exhibit to that Form 8-K.
About Patriot Scientific Corporation
Patriot Scientific Corporation is publicly traded company with a long history focused on licensing its patented microprocessor technologies through broad and open licensing and by litigating against those who may have infringed on its patents. The company has licensed its technology to over 100 companies through its joint-venture Phoenix Digital Solutions. On November 4, 2019, the Supreme Court of the United States denied its application to review a lower court’s decision that was adverse to its patented microprocessor technologies and its patents were no longer enforceable, and therefore, company had begun planning for its future by exploring alternatives and a new line of business.
About Mosaic ImmunoEngineering Inc.
Mosaic ImmunoEngineering Inc. is a private biotechnology company focused on bridging immunology and engineering to develop novel immunotherapies to treat and prevent cancer and infectious diseases. Mosaic is developing virus-like nanoparticle-based (“VLP”) technologies for the treatment and prevention of cancer and infectious diseases in humans and for veterinary use. The technology has broad potential for the treatment of many different types of cancer and the lead product candidates supported by numerous publications and grant funding. In addition, the technology also has direct application as part of a vaccine platform which has already generated promising data in both cancer and infectious diseases, including COVID-19 through research that is being funded by the National Science Foundation. For additional information about Mosaic, please visit MosaicIE.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. For example, we are using forward-looking statements when we discuss Patriot’s future operations and its ability to successfully initiate and complete clinical trials and achieve regulatory milestones and related timing; the nature, strategy and focus of Patriot’s business; and the development and commercial potential and potential benefits of any of Patriot’s product candidates. Patriot may not actually achieve the plans, carry out the intentions or meet the expectations or projections disclosed in the forward-looking statements and you should not place undue reliance on these forward-looking statements. Because such statements deal with future events and are based on Patriot’s current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Patriot that could differ materially from those described in or implied by the statements in this press release, including: the uncertainties associated with advancing Mosaic’s multiple products into clinical trials, the clinical development and regulatory approval of Mosaic’s product candidates, including potential delays in the commencement, enrollment and completion of clinical trials; the potential that earlier preclinical studies of Mosaic’s product candidates may not be predictive of future results; risks related to business interruptions, including the outbreak of COVID-19 coronavirus, which could seriously harm Patriot’s financial condition and increase its costs and expenses; and the requirement for additional capital to continue to advance these product candidates, which may not be available on favorable terms or at all. The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the those risks discussed in Patriot’s filings with the Securities and Exchange Commission. Except as otherwise required by law, Patriot disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether, as a result of new information, future events or circumstances or otherwise.
CONTACT:
Steven King, President and CEO
Mosaic ImmunoEngineering Inc.
[email protected]
2 |