amar-def14c
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14C
(Rule
14c−101)
Information
Statement Pursuant to Section 14(c) of the Securities
Exchange
Act of 1934
Check the
appropriate box:
☐ Preliminary
Information Statement
☐
Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d) (2))
☒ Definitive
Information Statement
AMARILLO
BIOSCIENCES, INC.
(Name
of Registrant As Specified in Its Charter)
Payment of Filing
Fee (Check the appropriate box):
☒ No fee
required
☐ Fee
computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
(1) Title of each
class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per unit price
or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total fee
paid:
☐ Fee paid
previously with preliminary materials.
☐ Check box
if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
(1) Amount
Previously Paid:
(2) Form, Schedule
or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
AMARILLO BIOSCIENCES, INC.
4134 Business Park Drive
Amarillo, Texas 79110
(806)376-1741
NOTICE OF ACTION BY WRITTEN CONSENT OF THE HOLDERS OF THE
MAJORITY
VOTING POWER OF THE COMPANY’S COMMON STOCK
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
Dear
Shareholders:
On December 24, 2020, Amarillo Biosciences,
Inc. (the “Company”) entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement” or, the
“Agreement”) with Ainos, Inc., a Cayman Islands
corporation (“Purchaser”) and those certain principal
shareholders of the Company including (i) Stephen T. Chen,
individually and as Trustee of the Stephen T. Chen and Virginia M.
Chen Living Trust, dated April 12, 2018, (ii) Virginia M. Chen,
individually and as Trustee of the Stephen T. Chen and Virginia M.
Chen Living Trust, dated April 12, 2018, and (iii) Hung Lan Lee, a
copy of which is attached hereto as Appendix
A. Pursuant to the
Agreement, upon the closing of the transactions contemplated
thereby (the “Transactions”), the Company will acquire
certain patent assets set forth on Annex A of the Patent Assignment
attached to the Agreement as Exhibit E (the “Patent
Assets”) by issuing 100,000,000 shares of common stock (the
“Shares”) valued at $0.20 per share to Purchaser. The
Patent Assets encompass technologies relating to development and
manufacturing of point-of-care testing rapid test kit products that
include diagnostics for COVID-19 (SARS CoV2 Antigen Rapid Test),
pneumonia, vaginal infection and helicobacter pylori (H. pylori)
bacterial infection. If the Transactions are consummated, the
Shares issued to Purchaser will represent seventy and 39/100ths
percent (70.39%) of the issued and outstanding shares of common
stock of the Company.
The Company is
providing this notice that on January 25, 2021, the holders
of 29,877,183
shares of
issued and outstanding common stock of the Company as of the close
of business on January 22, 2021 (the “Record Date”),
which constitute approximately 71.02% of the voting power of the
Company, approved by written consent the action items set forth
below (collectively, the “Action Items”) in lieu of a
meeting of shareholders. The Company’s board of directors
also approved the Action Items unanimously on December 18, 2020.
The Action Items include:
●
To
approve the Securities Purchase Agreement and the Transactions
including the issuance of the Shares to Purchaser in exchange for
the Patent Assets;
●
To adopt an amended Restated Certificate of
Formation, a copy of which is attached to this Information
Statement as Appendix
B, to, among other matters, (i)
increase the authorized number of common stock of the Company from
100,000,000 shares to 300,000,000 shares and (ii) change the
Company’s name to “Ainos, Inc.”;
and
●
To
elect seven directors designated by the Purchaser under the
Securities Purchase Agreement, as more particularly described in
this Information Statement, to serve as the Company’s
directors whose term will commence if and when the Transactions are
consummated.
Pursuant to Rule 14c-2 promulgated under the Securities Exchange
Act of 1934, as amended, the Action Items will not be effective
until 20 days after the date that a copy of this Information
Statement is mailed to each of our shareholders, unless a later
date is required or permitted by the Securities Purchase
Agreement.
No
action is required by you. The accompanying Information Statement
is furnished only to inform our shareholders who did not execute
the written consent of the Action Items, in accordance with the
requirements of the Securities and Exchange Commission’s
rules and regulations and the Texas Business Organizations Code.
This Information Statement will be mailed on or about March 23,
2021 to all of our shareholders of record as of the close of
business on the Record Date.
By Order of the
Board of Directors,
|
|
/s/ Stephen T.
Chen, Ph.D.
|
Stephen T. Chen,
Ph.D.
Chief Executive
Officer
|
Dated:
March 19, 2021
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND REGULATION 14C PURSUANT
THERETO
March
19, 2021
AMARILLO BIOSCIENCES, INC.
4134 Business Park Drive
Amarillo, Texas 79110
(806)376-1741
This Information Statement is distributed by
Amarillo Biosciences, Inc. (the “Company,”
“we,” “our” and “us”) to inform
our shareholders of actions taken without a meeting by the written
consent of the holders of
29,877,183 shares of issued and
outstanding common stock of the Company (the “Majority
Shareholders”) as of the close of business on January 22,
2021 (the “Record Date”), which constitute
approximately 71.02% of the voting power of the Company (the
“Written Consent”).
NONE OF THE ACTION ITEMS HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE
ACTION ITEMS, NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT
TO SEND US A PROXY
This
Information Statement has been filed with the Securities and
Exchange Commission (the “Commission” or the
“SEC”) and is being furnished by our Board of Directors
(the “Board”) to the holders of record as of the Record
Date of our outstanding common stock, pursuant to Rule 14c-2
promulgated under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Section 6.202(d) of the Texas
Business Organizations Code (the “Code”).
The
cost of preparing, printing and mailing this Information Statement
will be paid by us. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending this Information Statement to the
beneficial owners of our common stock.
This Information Statement informs shareholders
that on December 18, 2020, our Board, and on January 25, 2021, the
Majority Shareholders, adopted and approved (i) the Securities
Purchase Agreement dated December 24, 2020, a copy of which is
attached hereto as Appendix
A, and the transactions
contemplated thereby (the “Transactions”) including the
issuance of 100,000,000 shares of common stock valued at $0.20 per
share in exchange for certain patent assets set forth on Annex A of
the Patent Assignment attached to the Securities Purchase Agreement
as Exhibit E, (ii) the adoption of an amended Restated Certificate
of Formation, a copy of which is attached to this Information
Statement as Appendix
B, to, among other matters, (i)
increase the authorized number of common stock of the Company from
100,000,000 shares to 300,000,000 shares and (ii) change the
Company’s name to “Ainos, Inc.” (the
“Certificate Amendment”), and (iii) the election of
seven directors designated by the Purchaser under the Securities
Purchase Agreement, as more particularly described in this
Information Statement, to serve as the Company’s directors
whose term will commence if and when the Transactions are
consummated (the “Election of Purchaser Designated
Directors”). Under the Company’s existing Restated
Certificate of Formation, approval of each of the Action Items
requires the affirmative vote of holders of fifty-one percent (51%)
of the shares entitled to vote on such Action Item. As of the
Record Date, there were 42,066,172 shares of common stock
outstanding, and the Majority Shareholders beneficially owned
29,877,183 shares of issued and outstanding common stock and
approximately 71.02% of the voting power of the Company.
Accordingly, the Written Consent executed by the Majority
Shareholders pursuant to the Code and the Company’s charter
documents is sufficient to approve the Action Items and no further
shareholder action is required to approve the Action Items. No
payment was made to any person or entity in consideration of
execution of the Written Consent.
Accordingly,
all necessary corporate approvals to effectuate the Action Items
have been obtained. We are not seeking approval from our
remaining shareholders. This Information Statement is
furnished solely for the purpose of informing our shareholders, in
the manner required by the Exchange Act and the Code, of the
approval of the Action Items. Pursuant to Section 14(c) of
the Exchange Act and Rule 14c-2 promulgated pursuant thereto, the
Action Items will not be effective until 20 days after the date
this Information Statement is mailed to each of our shareholders,
unless a later date is required or permitted by the Securities
Purchase Agreement. The Action Items are expected to become
effective on or after April 12, 2021 or such later date as all
conditions and requirements to effectuate each of the Action Items
are satisfied.
The
Action Matters approved by the Majority Shareholders by written
consent are not corporate actions for which shareholders of a Texas
corporation are entitled to a dissenter’s right under Section
21.460 and Section 10.354, et seq. of the Code.
Our
shareholders as of the Record Date are being furnished copies of
this Information Statement. This Information Statement will
be mailed or furnished to our shareholders on or about March 23,
2021.
QUESTIONS AND ANSWERS ABOUT
THIS INFORMATION STATEMENT AND THE TRANSACTIONS
Q. Why did I receive this Information Statement?
A.
The Exchange Act and the Code require us to provide you with
information regarding the Action Items, even though your vote is
neither required nor requested to approve the Action
Items.
Q. Why am I not being asked to vote on the Action
Items?
A.
The Board unanimously adopted, approved and recommended the
approval of the Action Items and determined that the Action Items
are advisable and in the best interests of the Company and our
shareholders. The Action Items have also been approved by the
written consent of the Majority Shareholders. Such approval is
sufficient under the Code and no further approval by our
shareholders is required. Therefore, your vote is not required and
is not being sought. We are not asking you for a proxy and you are
requested not to send us a proxy.
Q. What do I need to do now?
A.
Nothing. This Information Statement is provided to you solely for
your information and does not require or request you to do
anything.
FORWARD-LOOKING STATEMENTS
This Information
Statement contains “forward-looking statements” within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as
“anticipate,” “believe,”
“estimate,” “expect,” “intend,”
“plan,” “predict,” “project,”
“target,” “future,” “seek,”
“likely,” “strategy,” “may,”
“should,” “will,” and similar references to
future periods. Forward-looking statements are neither historical
facts nor assurances of future performance. Instead, they are based
only on our current beliefs, expectations, and assumptions
regarding the future of our business, future plans and strategies,
projections, anticipated events and trends, the economy, and other
future conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks, and
changes in circumstances that are difficult to predict and many of
which are outside of our control. Our actual results may differ
materially from those indicated in the forward-looking statements.
Therefore, you should not rely on any of these forward-looking
statements. Important factors that could cause our actual results
to differ materially from those indicated in the forward-looking
statements include, among others, the following:
●
the risk that one
or more closing conditions to the Transactions may not be satisfied
or waived, on a timely basis or otherwise;
●
the risk that the
Transactions do not close when anticipated, or at all;
●
matters arising in
connection with the parties’ efforts to comply with and
satisfy applicable regulatory approvals and closing conditions
relating to the Transactions;
●
there may be a
material adverse change of the Company, or its business may suffer
as a result of uncertainty surrounding the
Transactions;
●
the Transactions
may involve unexpected costs, liabilities, or delays;
●
the Company’s
limited cash and history of losses;
●
the Company’s
ability to achieve profitability;
●
heated competition
and rapidly advancing technology in the Company’s industry
that may outpace its technology;
●
customer demand for
the products and services the Company develops;
●
the impact of
competitive or alternative products, technologies and
pricing;
●
the Company’s
ability to manufacture any products it develops;
●
general economic
conditions and events and the impact they may have on the Company
and its potential customers, including but not limited to the
impact of COVID-19;
●
the Company’s
ability to obtain adequate financing in the future;
●
the impact of
promulgation and implementation of regulations by the U.S. Food and
Drug Administration (“FDA”) and by foreign governmental
instrumentalities with functions similar to those of the FDA on the
Company’s operations and technology;
●
lawsuits and other
claims by third parties or investigations by various regulatory
agencies governing the Company’s operations;
and
●
our success in
managing the risks involved in the foregoing items.
Any forward-looking
statement made by us in this Information Statement speaks only as
of the date on which such statement is made. New factors emerge
from time to time and it is not possible for management to predict
all such factors, nor can it assess the impact of any such factor
on the business or the extent to which any factor, or combination
of factors, may cause results to differ materially from those
contained in any forward-looking statement. You should also review
the risks and uncertainties listed in our most recent Annual Report
on Form 10-K and other reports we file with the U.S. Securities and
Exchange Commission, including (but not limited to) Item 1A -
“Risk Factors” in the Form 10-K and Management’s
Discussion and Analysis of Financial Condition and Results of
Operations and the risks described therein from time to time. We
undertake no obligation to publicly update any forward-looking
statement, whether written or oral, that may be made from time to
time, whether as a result of new information, future developments
or otherwise. The forward-looking statements contained in this
Information Statement are intended to qualify for the safe harbor
provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended.
The
forward-looking statements are based on management’s current
expectations, estimates and projections. The Company cautions you
that these statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that we cannot
predict. In addition, the Company has based many of these
forward-looking statements on assumptions about future events that
may prove to be inaccurate. Accordingly, actual outcomes and
results may differ materially from what the Company has expressed
or forecast in the forward-looking statements.
You
should rely only on the information the Company has provided in
this Information Statement. The Company has not authorized any
person to provide information other than that provided herein. The
Company has not authorized anyone to provide you with different
information. You should not assume that the information in this
Information Statement is accurate as of any date other than the
date of the front of the document.
THE SECURITIES PURCHASE AGREEMENT AND THE TRANSACTIONS
This section describes the material
provisions of the Securities Purchase Agreement, but does not
purport to describe all of the terms of the Securities Purchase
Agreement. The following summary is qualified in its entirety by
reference to the complete text of the Securities Purchase
Agreement, which is attached as Appendix A
hereto.
The Securities Purchase
Agreement contains representations, warranties and covenants that
the respective parties made to each other as of the date of the
Securities Purchase Agreement or other specific dates. The
assertions embodied in those representations, warranties and
covenants were made for purposes of the contract among the
respective parties and are subject to important qualifications and
limitations agreed to by the parties in connection with negotiating
the Securities Purchase Agreement. The representations, warranties
and covenants in the Securities Purchase Agreement are also
modified in important part by the underlying disclosure schedules,
which we refer to as the “Schedules,” which are not filed publicly
and which are subject to a contractual standard of materiality
different from that generally applicable to shareholders and were
used for the purpose of allocating risk among the parties rather
than establishing matters as facts. We do not believe that the
Schedules contain information that is material to an investment
decision.
The
Securities Purchase Agreement and the Transactions
General Description
On December 24, 2020, the Company entered into a
Securities Purchase Agreement with Ainos, Inc., a Cayman Islands
corporation (“Purchaser” or, “Ainos”) and
those certain principal shareholders of the Company including (i)
Stephen T. Chen, individually and as Trustee of the Stephen T. Chen
and Virginia M. Chen Living Trust, dated April 12, 2018, (ii)
Virginia M. Chen, individually and as Trustee of the Stephen T.
Chen and Virginia M. Chen Living Trust, dated April 12, 2018, and
(iii) Hung Lan Lee (collectively, the “Principal
Shareholders”). The Principal Shareholders collectively
own an aggregate of approximately 11,183,720 shares of the
Company’s common stock (“Common Stock”) or 26.58%
of voting power of the Company as of the Record Date. One of the
Principal Shareholders, Stephen T. Chen, Ph.D. (“Dr.
Chen”) is Chairman of the Board, Chief Executive Officer,
President and Chief Financial Officer of the Company.
Pursuant
to the Agreement, upon the closing of the Transactions (the
“Closing”), the Company will acquire the Patent Assets
set forth on Annex A of the Patent Assignment attached to the
Agreement as Exhibit E and described under “About Ainos and
the Patent Assets” below, by issuing 100,000,000 shares of
Common Stock (the “Shares”) valued at $0.20 per share
to Purchaser. The Patent Assets encompass technologies relating to
development and manufacturing of point-of-care testing rapid test
kit products that include diagnostics for COVID-19 (SARS CoV2
Antigen Rapid Test), pneumonia, vaginal infection and helicobacter
pylori (H. pylori) bacterial infection.
If
the Transactions are consummated, the Shares will represent seventy
and 39/100ths percent (70.39%) of the issued and outstanding shares
of Common Stock at the Closing. The Agreement provides for certain
registration rights to the Purchaser regarding the Shares. Pursuant
to the Agreement, the Company has agreed to seek shareholder
approval on, among other things: (i) the adoption of the Agreement
and approval of the transactions contemplated by the Agreement;
(ii) the amendment of the Company’s charter documents to (A)
increase the number of authorized shares of common stock to
300,000,000 shares and (B) rename the Company to “Ainos,
Inc.” or any other corporate name designated by Purchaser;
and (iii) and the election of directors as designated by the
Purchaser (collectively, the “Company Shareholder
Matters”).
The
Agreement contains customary representations, warranties and
covenants, including covenants obligating the Company to continue
to conduct its business in the ordinary course and to cooperate in
seeking regulatory approvals, as needed.
Closing Conditions and Termination of the Agreement
The
Agreement is subject to customary conditions precedent to closing.
The obligation of each of the Purchaser and the Company to
consummate the Transactions at the Closing is subject to the
fulfillment to such party’s satisfaction, on or prior to the
closing date, of the following conditions, any of which may be
waived by such party, including, among others;
●
The
representations and warranties of the other party shall be true and
correct as of the date when made and as of the Closing date, as
though made on and as of such date, except for such representations
and warranties that expressly speak as of a specific
date;
●
The
other party shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions
required by the Agreement to be performed or satisfied prior to the
Closing;
●
No
statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental entity of competent
jurisdiction that prohibits the consummation of the Transactions
(including if the Purchaser determines that a filing needs to be
made with CFIUS for the transactions contemplated hereby, such
filing has been approved by CFIUS);
●
The
other party has delivered its required closing deliverables
including, among others:
o
As Company deliverables, (i) the Shares;
(ii) a legal opinion of the Company’ counsel containing
certain opinions required by the Agreement; (iii) the resignations
of the Company’s current directors and current
officers;1
o
As
Purchaser deliverables, (i) the Patent Assignment signed by the
Purchaser; and (ii) an appraisal report prepared by Titan
International Valuation Ltd., a third-party appraiser retained by
Purchaser, purporting to value the Patent Assets (the
“Appraisal”).
In
addition, the obligation of the Purchaser to consummate the
Transactions at the Closing is subject to the fulfillment to the
Purchaser’s satisfaction, on or prior to the closing date, of
the following conditions, any of which may be waived by the
Purchaser, including
●
The
Company shall have obtained in a timely fashion any and all
Approvals, permits, approvals, registrations and waivers necessary
for consummation of the purchase and sale of the
Shares;
●
No
Material Adverse Effect (as defined in the Agreement) or change of
control shall have occurred from the date of the Agreement until
the Closing;
●
The
Company shall obtain the shareholder approval of the Company
Shareholder Matters.
The
Agreement contains certain customary termination rights that are
(i) in favor of each of the Company and Purchaser, including by
mutual agreement or for uncured breach by the other party and (ii)
in favor of Purchaser, including if there is a change of the
Board’s recommendation of approving the Transactions or, if
the Closing has not been consummated by the end of day on the forty
fifth (45th) day after the date of the Agreement, subject to
certain limitations.
Covenants of Principal Shareholders
Under
the Agreement, the Principal Shareholders agree to, among other
things, (i) vote all shares of common stock beneficially owned by
the Principal Shareholders in favor of the adoption of the Company
Shareholder Matters, (ii) be responsible jointly and severally with
the Company for the Company’s indemnification obligations
provided in the Agreement and (iii) prior to the Closing, cause
each of their controlled entities to enter into a joinder agreement
to be bound by the terms and conditions of the Agreement as a
Principal Shareholder.
About
Ainos and the Patent Assets
Ainos,
Inc. is a Cayman Islands registered company with offices in Taiwan.
It was established in 2017 with an address at 14F., No. 61, Sec. 4,
New Taipei Blvd., Xinzhuang Dist., New Taipei City 242, Taiwan
(R.O.C.).
Ainos
is a subsidiary of Taiwan Carbon Nano Technology Corporation (TCNT)
Group, a pioneer in the advanced material industry, specializing in
carbon nanotube and graphene. Ainos develops and manufactures
biosensors and diagnostic point-of-care testing
(“POCT”) rapid test kits that include diagnostics for
COVID-19 (SARS CoV2 Antigen Rapid Test), pneumonia, vaginal
infection, and helicobacter pylori (H. pylori) bacterial infection.
Ainos POCT delivers test results rapidly. Powered by a
market-leading volatile organic compound (VOC) AI algorithm and
biosensors manufactured with advanced semiconductor technology,
testing with Ainos POCT only requires volatile organic compounds
from sources including breath. Ainos POCT offers companion mobile
apps, creating new opportunities for telehealth community. The
company is also engaged in the integration of existing
semiconductor technology and carbon diagnostic technology to
establish standardized AI related sensor components-which can be
deployed in the fields of biomedicine, IOT (Internet of Things),
and Big Data. Ainos owns nearly 30 technical inventions patent(s)
with various applications in consumer healthcare and medical device
products.
The
Patent Assets to be assigned to the Company at the Closing include
certain owned patents and licensed patents of Ainos set forth in
the charts below.
Owned Patents
Description
|
Patent Number and Jurisdiction
|
A
GAS SENSOR AND MANUFACTURE METHOD THEREOF
|
Taiwan
Patent No.: I565944
|
MEDICAL
VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA
VIA GAS IDENTIFICATION
|
Taiwan
Patent No.: I565945
|
GAS
DETECTOR
|
Taiwan
Patent No.: D183554
|
Licensed Patents
Description
|
Patent Number and Jurisdiction
|
Licensed Rights
|
MEDICAL
VENTILATOR CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA
VIA GAS IDENTIFICATION
|
Japan
Patent No.: JP 6392811 B2
|
Japan
exclusive from January 1, 2021 to December 31, 2028.
|
GAS
DETECTOR
|
China
Patent No.: CN 304042244 S
|
China
exclusive from January 1, 2021 to December 31, 2028.
|
The
Board’s Reasons for the Approval of the
Transactions
The
Board approved the Securities Purchase Agreement and the
Transactions and recommended that the shareholders of the Company
to approve the Transactions. The Board intends for the Agreement to
be part of a broader strategic transaction to augment the
Company’s business growth whereby Ainos is expected to
contribute additional resources to the Company, including a new
product line of novel POCT rapid test kits and potentially working
capital in the form of a loan, convertible notes, or acquiring
other debt or equity securities of the Company.
According to the Appraisal, the Patent Assets have
an appraised value between $20,168,000 and $22,488,000.
The
Company’s Board believes that the Transactions (including the
issuance of the Shares in exchange for the Patent Assets) are fair
and advisable for the Company and its shareholders. Based on
the Company’s experience in the medical diagnostics and
health care industries, the Board believes that there is a
considerable market potential for biosensors and diagnostic POCT
rapid test kits and the related technologies worldwide, and
acquiring the Patent Assets can allow the Company to tap into this
market, establish a branding platform in healthcare markets, and
pursue opportunities for strategic development and sales channel
alliances. The Patent Assets will complement and expand the
Company’s current patent portfolio. After consummation
of the Transactions, the Board also expects that the Company will
have more opportunity to use the Purchaser’s sales,
marketing, and research development resources and experience to
enhance the Company’s portfolio of medical-related products
and services. With respect to the pricing of the Shares paid
by the Company to acquire the Patent Assets, the Company considered
the pricing of its shares in a recent private offering in May 2020
and the trading price of the Company’s common stock on OTC
which ranged from $0.16 per share to $0.19 per share in the past
five trading days prior to December 18, 2020. In respect to
the fair value of the Patent Assets, the Board evaluated the
Appraisal and determined that the methodology and valuation factors
used therein were sound and the valuation commercially
reasonable.
RISKS RELATING TO THE TRANSACTIONS
The Company’s
ability to achieve business growth and shareholder value by
consummating the Transactions and seeking further cooperation with
Ainos is impacted by a number of risks and uncertainties beyond our
control, including those described below.
We have relied on an appraisal report of the valuation of the
Patent Assets provided by a third-party appraiser retained by
Purchaser and did not conduct a separate appraisal.
We
are not required to obtain a separate appraisal that the
consideration we are paying in connection with the acquisition of
the Patent Assets is fair to us from a financial point of view. The
Board relied on the Appraisal provided by a third-party appraiser
retained by Purchaser, and its due diligence on the Purchaser in
connection with its determination to approve the Transactions.
Based on the Appraisal and the Board’s due diligence, the
Board believes that consummating the Transactions including issuing
the Shares to Purchaser is in the best interests of the Company and
our shareholders and presents an opportunity to increase
shareholder value. Our shareholders will be relying solely on the
Appraisal and the business judgment of our Board regarding the
Patent Assets’ value and the benefits of the
Transactions.
The lack of a separate appraisal commissioned by
the Company may increase the possibility of litigation filed
against the Company and our directors challenging the fairness of
the Transactions. Such
litigation could result in substantial costs and divert our
management’s attention and resources, and could also require
us to make substantial payments to satisfy judgments or to settle
litigation.
The Company intends to focus its business on commercializing,
developing and monetizing the Patent Assets if the Transactions
close, including developing new product lines based on the Patent
Assets. The Company may not be able to successfully monetize the
Patent Assets and any new product line developed based on the
Patent Assets may not be commercially successful, and thus the
Company may fail to realize all of the anticipated benefits of such
acquisition.
There
is no assurance that the Company will be able to successfully
commercialize, develop, license or monetize the Patent Assets that
it intends to acquire from Purchaser. The acquisition of the Patent
Assets could fail to produce anticipated benefits including that we
may fail to generate significant revenue from licensing the Patent
Assets or creating new product lines based on the Patent Assets
that are commercially successful and profitable. The acquisition
could have other adverse effects that the Company does not
currently foresee. We have a history of operating losses and
working capital deficiency and failure to successfully monetize the
Patent Assets may have a further material adverse effect on the
Company’s business, financial condition and results of
operations.
In
addition, the acquisition of the Patent Assets is subject to a
number of risks, including the fact that there is a
significant time lag between acquiring a patent and recognizing
revenue from such patent. During that time lag, material costs are
likely to be incurred that would have a negative effect on the
Company’s results of operations, cash flows and financial
position. Any development of new product lines based on the Patent
Assets is also subject to a number of risks,
including:
●
If
we are not able to obtain, or if there are delays in obtaining,
required regulatory approvals, or the approvals may be for a narrow
indication, we may not be able to commercialize our product
candidates, and our ability to generate revenue may be materially
impaired;
●
Any
product candidate for which we obtain marketing approval may be
subject to post-marketing regulatory requirements and could be
subject to post-marketing restrictions or withdrawal from the
market, and we may be subject to penalties if we fail to comply
with regulatory requirements or if we experience unanticipated
problems with our products, when and if any of them are
approved;
●
Legislation
regulating the medical device and healthcare industries may
increase the difficulty and cost for us to obtain marketing
approval of and commercialize our product candidates and affect the
prices we may obtain;
●
Even
if any of our product candidates receives marketing approval, we
may fail to achieve the degree of market acceptance by physicians,
third-party payers and others in the medical community necessary
for commercial success;
●
If a future product
candidate receives marketing approval and we, or others, later
discover that the product is less effective than previously
believed, the ability to market the product could be
compromised;
●
If we are unable to
establish effective marketing and sales capabilities or enter into
agreements with third parties to market and sell our product
candidates, we may not be able to effectively market and sell our
product candidates, if approved, or generate product
revenues;
●
We face substantial
competition, which may result in others discovering, developing or
commercializing competing products before or more successfully than
we do;
●
Product liability
lawsuits against us could cause us to incur substantial liabilities
and to limit commercialization of any products that we may
develop;
●
If we fail to
comply with environmental, health and safety laws and regulations,
we could become subject to fines or penalties or incur costs that
could harm our business;
●
Macro-economic
conditions may affect our business partners, suppliers and
potential customers in a way adverse to successful
commercialization of our product candidates;
●
While
COVID-19 may create opportunities to commercialize and market our
product candidates, there is no assurance that we can timely launch
our product offerings and such offerings are well recognized and
accepted by the market.
Therefore,
there is no assurance that the monetization of the Patent Assets
acquired will generate enough revenue to recoup the Company’s
investment.
The Company’s
operating history makes it difficult to evaluate its future
business prospects.
The
Company has been involved in the advancement of low-dose
non-injectable interferon as a therapeutic treatment for numerous
indications such as thrombocytopenia, Sjögren’s
syndrome, hepatitis C virus (HCV), and influenza; developing an
innovative, state-of-the-art technology to treat metabolism-related
diseases such as Type 1 and Type 2 diabetes in Asia; and developing
a range of neutraceutical and food supplement products that utilize
our unique liposomal delivery systems. The Company does not have
operating history in developing or commercializing biosensors or
diagnostic point-of-care testing kits. To the extent that following
the Closing the Company uses the Patent Assets to develop or
commercialize biosensors or diagnostic point-of-care testing kits,
the Company’s lack of operating history in this sector makes
it difficult to evaluate its new business model and future
prospects.
Any failure to
maintain or protect the Company’s patent assets or other
intellectual property rights could significantly impair its return
on investment from such assets and harm the Company’s brand,
its business and its operating results.
The
Company’s ability to operate its new line of business and
compete in the intellectual property market largely depends on the
superiority, uniqueness and value of the Company’s acquired
patent assets and other intellectual property. To protect the
Company’s proprietary rights, the Company will rely on a
combination of patent, trademark, copyright and trade secret laws,
confidentiality agreements with its employees and third parties,
and protective contractual provisions. No assurances can be given
that any of the measures the Company undertakes to protect and
maintain its assets will have any measure of success.
Following
the acquisition of Patent Assets, the Company will likely be
required to spend time and resources to maintain the effectiveness
of those assets by paying maintenance fees and making filings with
the patent regulatory agencies in the applicable jurisdictions. The
licensed patents included in the Patent Assets would require the
Company to pay significant fees to the licensor for the license to
use such patents.
Despite
the Company’s efforts to protect its intellectual property
rights, any of the following or similar occurrences may reduce the
value of the Company’s intellectual property:
●
the Company’s
applications for patents, trademarks and copyrights may not be
granted and, if granted, may be challenged or
invalidated;
●
issued trademarks,
copyrights, or patents may not provide the Company with any
competitive advantages when compared to potentially infringing
other properties;
●
the Company’s
efforts to protect its intellectual property rights may not be
effective in preventing misappropriation of the Company’s
technology; or
●
the Company’s
efforts may not prevent the development and design by others of
products or technologies similar to or competitive with, or
superior to those the Company acquires and/or
prosecutes.
If
the Company fails to maintain, defend or prosecute its patent
assets properly, the value of those assets would be reduced or
eliminated, and the Company’s business would be
harmed.
Our financial status raises doubt about our ability to continue as
a going concern. We have a history of operating losses and working
capital deficiency and there is no assurance that we will be able
to achieve profitability or raise additional
financing.
Our
cash and cash equivalents totaled $22,701.61 as of December 31,
2020. We continue to incur significant operating losses, and
management expects that significant on-going operating expenditures
will be necessary to successfully implement our business plan and
develop and market our products. These circumstances raise
substantial doubt about our ability to continue as a going concern.
We have a history of operating losses and working capital
deficiency. Implementation of our business plans and our ability to
continue as a going concern will depend upon our ability to market
our technology and raise additional capital. Under the
Securities Purchase Agreement, Purchaser agrees that following the
Closing, the Company and Purchaser will use their commercially
reasonable efforts to enter into an additional agreement whereby
the Purchaser will provide the Company with up to an additional
$3,000,000 for working capital purposes, in the form of a loan, or
in exchange for additional shares of Common Stock, or other debt or
equity securities. The terms and conditions of the proposed working
capital arrangements under the Agreement have not yet been
determined. There is no guarantee that following the Closing the
Purchaser will provide such financing to the Company on terms
acceptable to the Company or, the Company will be able to achieve
profitability from commercializing the Patent Assets or obtain
financing from other sources.
Our ability to
successfully effect the Transactions and to be successful
thereafter will be dependent upon the efforts of our key personnel,
including the key personnel of Ainos and certain current officers
whom we expect to stay with the post-closing Company in an employee
or consultant capacity. The loss of key personnel could
negatively impact the operations and profitability of our
post-closing business and its financial condition could suffer as a
result.
Our
ability to successfully effect the Transactions and commercialize
the Patent Assets is dependent upon the efforts of our key
personnel, including the directors and officers designated by
Ainos. Although some of our current key personnel may remain with
the post-closing business in senior management or advisory
positions, it is possible that we will lose some key personnel, the
loss of which could negatively impact the operations and
profitability of our post-closing business.
Upon the
Closing of the Transactions, Ainos will become a majority
shareholder of the Company and its interests may conflict with ours
or yours in the future.
Upon
the Closing of the Transactions, Ainos will become a majority
shareholder of the Company. Various conflicts of interest between
Ainos and us could arise. Ownership interests of directors or
officers of Ainos in our common stock, or a person’s service
as either a director or officer of both companies, could create or
appear to create potential conflicts of interest when those
directors and officers are faced with decisions that could have
different implications for Ainos and the Company. These decisions
could, for example, relate to:
●
disagreement over
corporate opportunities;
●
management stock
ownership;
●
employee retention
or recruiting;
●
our dividend
policy; and
●
any services and
other arrangements from which we may benefit as a result of the
Company’s relationship with Ainos.
Potential
conflicts of interest could also arise if we enter into any new
commercial arrangements with Ainos in the future. Our post-closing
directors and officers who have interests in both Ainos and the
Company may also face conflicts of interest with regard to the
allocation of their time between Ainos and the
Company.
Our public
shareholders will experience dilution as a consequence of, among
other transactions, the issuance of Shares as consideration for the
Patent Assets and the potential issuance of Common Stock under the
Securities Purchase Agreement to the extent Purchaser provides
equity financing to the Company following the Closing. Having a
minority share position may reduce the influence that our current
shareholders have on the management of the post-closing
Company.
Pursuant
to the Securities Purchase Agreement, the Company will issue an
aggregate of 100,000,000 shares of Common Stock to the Purchaser in
exchange for the assignment of the Patent Assets. If Purchaser
provides working capital to the Company following the Closing, the
Company may need to issue additional equity securities to the
Purchaser for such capital contribution. It is anticipated that at
the Closing, Purchaser shall acquire seventy and 39/100ths percent
(70.39%) of the issued and outstanding shares of Common
Stock.
The
potential issuance of Common Stock to the Purchaser pursuant to the
Securities Purchase may dilute the equity interests of our existing
shareholders and may adversely affect prevailing market prices for
our Common Stock. Such dilution could, among other things, limit
the ability of the Company’s existing shareholders to
influence the Company’s management through the election of
directors following the closing of the Transactions.
There can be no
assurance that our Common Stock will be approved for listing on
NASDAQ or, if approved, will continue to be so listed following the
closing of the Transactions.
Under
the Securities Purchase Agreement, the Company, the Purchaser and
each Principal Shareholder agree that after the Closing, each shall
use their commercially reasonable efforts to cause the Company to
be qualified for the listing requirements to list the shares of the
Company’s Common Stock on one of the following trading
markets: the NASDAQ Global Select Market, the NASDAQ Global Market,
or the NASDAQ Capital Market and to file an application with the
Commission and the applicable NASDAQ trading market in connection
herewith. If the Company is able to qualify for a listing on a
NASDAQ trading market, it can benefit from more access to capital
and institutional investor research visibility and can increase the
liquidity for its equity securities. Being listed on a NASDAQ
trading market will require substantial financial resources,
planning, and expertise which must be undertaken by the Company. If
following the Closing the Company is not able to achieve
profitability from commercializing the Patent Assets or obtain
adequate financing to grow its business, the likelihood of the
Company qualifying for a listing on a NASDAQ trading market will
remain speculative.
There is no guarantee that the Transactions will be completed.
Failure to complete the Transactions could negatively impact our
stock price and our future business and financial
results.
The
Closing of the Transactions is subject to several material
conditions. We cannot guarantee that these conditions will be
satisfied or waived and that the Transactions will be
completed.
If
the Transactions are not completed, our business, prospects,
financial condition and stock price may be adversely affected. In
addition, we have already incurred significant transaction expenses
in connection with the Transactions, which may have an adverse
effect on our financial position if the Securities Purchase
Agreement is terminated and we are unable to recoup such expenses
from Ainos. Risks arising in connection with the failure of the
Transactions, including the diversion of management’s
attention from conducting our business and pursuing other
opportunities during the pendency of the Closing, may have an
adverse effect on our business, operations, financial results and
stock price. In addition, we could be subject to litigation related
to any failure to consummate the Transactions or any related action
that could be brought to enforce a party’s obligation under
the Agreement.
We have incurred significant transaction costs in connection with
the Transactions and are subject to indemnification obligations
under the Securities Purchase Agreement.
We
have incurred significant costs in connection with the Transactions
including legal, accounting, and related fees. We may also incur
fees and costs related to formulating new business plans
surrounding the commercialization of the Patent Assets. In the
event of any breach of our representations, warranties, covenants
or agreements made by the Company or any Principal Shareholder, we
may become liable for indemnification obligations. We may be unable
to realize efficiencies with the Transactions that would allow us,
over time, to offset the costs and liabilities incurred in
connection with the Transactions.
The market price of our Common Stock may decline as a result of the
Transactions.
The
market price of our Common Stock may decline as a result of the
Transactions if, among other things, we are unable to achieve
growth in earnings or if the aggregate transaction costs related to
the Transactions are greater than expected. The market price also
may decline if we do not achieve the perceived benefits of the
Transactions as rapidly or to the extent anticipated by the
investment community or if the effect of the Transactions on our
financial results is not consistent with the expectations of the
investment community.
The Securities Purchase Agreement provides certain
registration rights to the Shares to be issued to the Purchaser at
the Closing. Resales of the
shares of Common Stock issued to the Purchaser could depress the
market price of the Common Stock of the post-closing
Company.
THE CERTIFICATE AMENDMENT
The Board, on December 18, 2020, and the Majority Shareholders, on
January 25, 2021, adopted certain amendments to the Company’s
Restated Certificate of Formation pursuant to the Securities
Purchase Agreement, which, in the judgment of our Board, will
address the needs of the Company after the closing of the
Transactions. The changes to be effected by the amended Restated
Certificate of Formation primarily include, among others: (i)
increasing the authorized number of Common Stock of the Company
from 100,000,000 shares to 300,000,000 shares, and (ii) changing
the Company’s name to “Ainos, Inc.” (the
“Amendments”). The above summary is qualified in its
entirety by reference to the complete text of the amended Restated
Certificate of Formation, which is attached as Appendix
B hereto.
Reason for the Amendments and How Approval of the Amendments May
Affect Shareholders
Name Change
The Board believes that the new name should more
closely align with the new business the Company expects to develop
post-closing and therefore has proposed the name change. Once the
Company’s name is changed from “Amarillo Biosciences, Inc.” to
“Ainos, Inc.”, the Company’s transfer agent will
change its shareholder records and issue new share Direct
Registration Book-Entry Advice forms, upon request by a
shareholder. The Company does not issue stock certificates and
physical certificates may not be requested.
Increase of Authorized Shares of Common Stock
Prior
to the adoption of the amended Restated Certificate of Formation,
the Company was authorized to issue up to 100,000,000 shares of
Common Stock, par value $0.01 per share, which shares are
non-assessable. Currently, all outstanding shares of our Common
Stock are of the same class and have equal rights and attributes.
The holders of our Common Stock are entitled to one vote per share
on all matters submitted to a vote of the shareholders of the
Company. Our Common Stock does not have cumulative or preemptive
voting rights. Persons who hold a majority of the outstanding
shares of our Common Stock entitled to vote on the election of
directors can elect all of the directors who are eligible for
election. Holders of our Common stock are entitled to share equally
in dividends, if any, as may be declared from time to time by our
Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, subject to the preferential liquidation
rights of any series of preferred stock that we may from time to
time designate, the holders of our Common Stock are entitled to
share ratably in all of our assets remaining after payment of all
liabilities and preferential liquidation rights. Upon the
completion of the increase in the number of authorized shares of
Common Stock, each share of our Common Stock will still possess the
same characteristics as those described in this
paragraph.
There
are certain potential advantages and disadvantages of increasing
the Company’s authorized common stock. Potential advantages
include, but are not limited to:
(i)
The
ability to issue shares of the Company’s Common Stock in
exchange for the Company’s debt.
(ii)
The
ability to raise capital by issuing capital stock under future
financing transactions, if any.
(iii)
To
have shares of Common Stock available to pursue business expansion
opportunities, if any.
Potential
disadvantages include, but are not limited to:
(iv)
Dilution
to the existing shareholders, including a decrease in our net
income per share in future periods.
(v)
Decline
in market price of our stock.
The
Company is currently considering a number of strategic business
opportunities and believes that it may not have sufficient
authorized, but unissued, shares of its Common Stock to facilitate
the issuance of additional shares to pursue future business
growth. The Company believes that the proposed increase in
authorized shares is beneficial to the Company because it provides
the Company with the flexibility it needs to implement new business
initiatives. Specifically, pursuant to the Securities Purchase
Agreement, the Company will issue 100,000,000 shares of Common
Stock to Purchaser in return for certain patent
assets.
Other Changes
In
addition to the name change and increased of authorized shares of
Common Stock discussed above, the amended Restated Certificate of
Formation includes other administrative changes including those to
the Company’s registered office, registered agent and
directors to conform to the Company’s expected organizational
structure upon the Closing.
The
amended Restated Certificate of Formation will become effective
upon its filing with the Secretary of State of the State of Texas,
which we expect to occur upon the Closing.
ELECTION OF PURCHASER DESIGNATED DIRECTORS
The
Company’s Bylaws provide that the Board of Directors shall
consist of not less than one (1) nor more than thirty (30)
directors, as determined by resolution of the Board. The number of
directors may be increased or decreased (provided such decrease
does not shorten the term of any incumbent director) by resolution
of the Board of Directors. The size of the Board is currently set
at nine (9) directors.
Pursuant
to the Securities Purchase Agreement, Purchaser has designated
seven (7) directors to be elected to the Company’s Board and
serve as directors of the Company following the Closing (the
“Purchaser Designated Directors”). Each of the
Purchaser Designated Directors shall serve as a director until his
or her successor shall have been duly chosen and qualified, or
until his or her earlier death, resignation, retirement,
disqualification or removal. Upon being elected, the new Board
shall appoint the persons nominated by Purchaser to serve as
executive officers of the Company.
The
Board nominated, and the Majority Shareholders have elected the
seven (7) Purchaser Designated Directors to the Company’s
Board (“New Board”) by the Written Consent. The five
(5) directors on the current Board will resign effective as of the
date of the Closing. The New Board will commence service as
directors of the Company effective as of the date of the
Closing.
Management
After the Closing
Pursuant
to the Securities Purchase Agreement, all of the Company’s
current directors and executive officers will resign prior to or
upon the Closing. The following persons nominated by Purchaser are
to be the directors and/or executive officers of the Company
following the Closing:
Name
|
|
Age
|
|
Position
|
Chun-Hsien
Tsai
|
|
52
|
|
Director, Chairman,
Chief Executive Officer, Chief Financial Officer
|
Chung-Yi
Tsai
|
|
45
|
|
Director
|
Chung-Jung
Tsai
|
|
50
|
|
Director
|
Ting-Chuan
Lee
|
|
38
|
|
Director
|
Wen-Han
Chang
|
|
58
|
|
Director
|
Yao-Chung
Chiang
|
|
68
|
|
Director
|
Hsiu-Chen
Chiu
|
|
46
|
|
Director
|
Information about the Anticipated Executive Officers and Directors
Upon the Closing
Chun-Hsien
Tsai, age 52, currently serves as the Chairman of the board of
directors Ainos, Inc., the Chairman of the board of directors of
Taiwan Carbon Nano Technology Co., and as the Chief Executive
Officer of Taiwan Enose Bio Corporation. Mr. Tsai has served
in each of these roles since 2012. In his capacity as the Chief
Executive Officer of Taiwan Enose Bio Corporation, Mr. Tsai
oversaw the completion of the world’s first carbon nanotube
reactor. Mr. Tsai also currently serves as a member of the
Taiwan Energy Storage Alliance and a member of the China
Alternative Energy Association.
Chung-Yi
Tsai, age 45, has served as the Executive Business Manager in the
Automotive Business Unit of Maxim Integrated since November 2019,
where he manages the high voltage (off battery) power management
ICs for automotive ADAs & safety, information, telematics &
head unit applications. From October 2013 through November 2019,
Mr. Tsai served as a Senior Product Marketing Manager in the
Battery & Optical Business Unit of Intersil Corporation. In
such role, Mr. Tsai managed computer core power, battery
charger and USB/USB power delivery product lines focused on
computing and consumer markets.
Chun-Jung
Tsai, age 50, currently serves as the Executive Director of Ainos,
Inc. and as the Executive Director of Taiwan Carbon Nano Technology
Co. Mr. Tsai has served in both of these roles since 2012. In
his capacity as the Executive Director of Taiwan Enose Bio
Corporation, Mr. Tsai oversaw the completion of the
world’s first carbon nanotube reactor.
Ting-Chuan
Lee, age 38, has served as a director on the board of directors of
Taiwan Carbon Nano Technology Co. since 2012. From 2012 to 2017,
Mr. Lee served as the Chairman of the board of directors of
Taiwan Carbon Nano Technology Co. Mr. Lee holds a
master’s degree of science from the National Taiwan
University and a bachelor’s of science degree from the
National Cheung Kung University.
Wen-Han
Chang, age 58, currently serves as the Medical Director of the
Department of Emergency Medicine for Mackay Memorial Hospital in
Taiwan, the President of the Taiwan Society of Health Technology
and Intelligence Medicine, and the Executive Director of the Taiwan
Society of Geriatric Emergency & Critical Care Medicine. In
addition, Mr. Chang is an Honorary President of the Taiwan
Society of Engineering Technology and Practical Medicine, a
Director on the board of directors of the Taiwan Society of
Emergency Medicine, a Director on the board of directors of the
Taiwan Society of Emergency Management Medicine, and a Supervisor
of the Emergency and Critical Care Medicine Society. From September
2015 to May 2019, Mr. Change served as a Vice President
General at Mackay Memorial Hospital.
Yao-Chung
Chiang, age 68, is the current Chairman of the board of directors
of the Taiwan High Speed Rail Corporation. Mr. Chiang has
previously served as the Chairman of the board of directors for the
China Steel Chemical Corporation, Kaohsiung Rapid Transit
Corporation, China Steel Corporation and China Airlines.
Mr. Chiang holds a Ph.D. in Mechanical Engineering from the
University of Wisconsin-Madison and a master’s degree in
Mechanical Engineering from the National Cheung Kung
University.
Hsiu-Chen
Chiu, age 46, is currently an Attorney-at-Law at the DaSheng
International Law Firm, with certifications to practice law in both
China and Taiwan, including Taiwan patent and trademark matters.
Ms. Chiu received her Ph.D. from Tsinghua University in China
and her LL.M. from the National Cheng-Chi University in
Taiwan.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
As of the date of
this Information Statement, the directors and executive officers of
the Company are as follows:
Name
|
Age
|
Position
|
Stephen T. Chen,
Ph.D.
|
71
|
Chairman of the
Board, Chief Executive Officer President, Chief Financial Officer,
Chief Operating Officer and Director
|
Bernard
Cohen
|
67
|
Vice President -
Administration
|
Yasushi
Chikagami
|
81
|
Director
|
Daniel
Fisher
|
76
|
Director
|
Nicholas
Moren
|
74
|
Director
|
Beatrice Liu,
Ph.D., CPA
|
55
|
Director
|
Stephen T. Chen, Ph.D. was elected
Chairman of the Board in February 2012 and has been a director of
the Company since February 1996. Effective January 28, 2019, Dr.
Chen assumed the duties, responsibilities, and title of Chief
Financial Officer (CFO) of the Company in addition to his existing
duties and titles of Chairman of the Board, CEO, and President. He
has been President and Chief Executive Officer of STC
International, Inc., a health care investment firm, since May 1992.
Dr. Chen has over thirty years of international business
experience, including an extensive background in pharmaceutical
product acquisition and licensing, development of joint venture
agreements, execution of business strategy, and leadership of
start-up companies in the pharmaceutical, biotechnology and
nutraceutical industries. Dr. Chen has held executive positions in
R&D and business development at several major pharmaceutical
companies, including Burroughs Wellcome (presently
GlaxoSmithKline), Miles Pharmaceuticals (presently Bayer), ICI
America (presently AstraZeneca), and Ciba-Geigy (presently
Novartis). He received a Ph.D. in
Industrial & Physical Pharmacy from Purdue University in
1977.
Bernard Cohen was elected to be a
Vice-President and Chief Financial Officer of the Company on
October 1, 2009. On January 28, 2019, Bernard Cohen, relinquished
the duties and title of Chief Financial Officer (CFO) and assumed
the duties and title of Vice President – Administration. Mr.
Cohen has been Director of Finance and Data Base Manager at the
Harrington Regional Medical Center, Inc. (HRMCI), which is the
management and development entity for the Harrington Regional
Medical Center in Amarillo, Texas. Previously, he held
various executive positions at Colbert’s of Amarillo, a
department store. His positions
included: Chief Executive Officer, Vice President, Chief
Financial Officer, and Controller. He has previously
been a member of the Texas Tech University Health Sciences Center
at Amarillo (TTUHSC) Institutional Review Board (IRB) where he
participated in the review of clinical trial protocols to monitor
the safety and protection of human research and testing
subjects. Neither HRMCI nor TTUHSC has any connection
whatsoever with the Company.
Yasushi Chikagami was elected to the
board of directors in June 2012. Mr. Chikagami holds a B.S. Degree
in Agricultural Engineering from National Taiwan University, and an
M.S. Degree in Engineering from the University of Tokyo. Mr.
Chikagami has principally been engaged in the technology industry
during his business career, continues to serve on several boards,
and is currently serving as Chairman for Arise Corporation
(Taiwan), Good TV Broadcasting Corporation (Taiwan), and ZMOS
Technology, Inc. (US), and is a director of Anxon International,
Inc. (US).
Daniel Fisher was elected to the board
of directors in July 2015. Mr. Fisher is the co-founder, and
President of Nano BioMed, Locust Valley, New York. The base
technologies are licensed from The Albert Einstein College of
Medicine. The licensed technologies are a drug delivery system for
the delivery of nitric oxide. In addition, the company has licensed
a magnetic nano drug targeting technology. Mr. Fisher negotiated
the license from the Einstein College, closed the company’s
first sublicenses, arranged for investment financing, and developed
the business plan. Mr. Fisher, co-founder of BioZone Laboratories,
Inc., served as its President for 22 years. Based near San
Francisco, California, BioZone specializes in research, development
and manufacturing of products utilizing its drug delivery
technologies. He was awarded three patents for his work with
liposomal drug delivery technology. In addition, Mr. Fisher was
president of Equalan Pharma LLC, which marketed GlyDerm
professional skincare products to dermatologists and direct
marketing companies. Prior to forming BioZone in 1989, Mr. Fisher's
experience base included more than twenty years in sales and
marketing management positions for consumer and technical product
companies, including Dun & Bradstreet, General Foods
Corporation and Control Data Corporation. His memberships include
being the founding secretary of the Foundation for Global Skin
Health Strategies. He holds a B.S. in Marketing from San Francisco
State University.
Nicholas Moren was elected to the board
of directors in July 2015. Mr. Moren is currently retired. Prior to
that he was a senior financial executive with several major public
companies, including Loral Space & Communications, Inc.,
Transworld Corporation and Trans World Airlines, Inc. He brings
with him extensive understanding and knowledge of a wide range of
businesses, and substantial financial expertise and insightful
perspectives relating to economic, financial and business
conditions acquired during more than 20 years of serving as a
senior executive. He received a B.A. in Engineering from Brown
University and a M.B.A. from Wharton Graduate Division, University
of Pennsylvania.
Beatrice Liu was elected to the
Amarillo Biosciences, Inc., Board of Directors in July 2019. Ms.
Liu is the senior partner of BDO Taiwan and has over twenty years
of experience in accounting, auditing, and corporate governance.
Ms. Liu has an impressive academic history earning a B.S. –
Taxation degree from National Cheng-Chi University, ROC; an M.A.
– Accounting from University of Illinois at Urbana-Champaign,
USA; and a Ph.D. – Accounting from XIAMEN University, PRC.
Ms. Liu has worked extensively in such areas as assurance service,
internal audit outsourcing, mergers and acquisitions, IPO services,
corporate restructuring, Sarbanes-Oxley Section 404 attestation
services, and many other areas. Her certifications and memberships
include: CPA-ROC; CPA-USA; Member of Audit Standards Committee of
the Auditing Research and Development Foundation, Chairman, and
Auditing and Accounting Committee of the National Federation of
Certified Accountant Associations, ROC. Ms. Liu’s knowledge
and depth of experience enable her to be a valuable asset to
Amarillo Biosciences, Inc.
The Company’s
directors are elected at a meeting of shareholders to hold office
until their successors have been appointed by the Board or duly
elected and qualified by the Company’s shareholders pursuant
to the Company’s charter documents. Officers are elected or
appointed by the Board and serve at the pleasure of the
Board.
EXECUTIVE COMPENSATION
On March 31, 2018,
the Board of Directors voted to restructure the compensation
packages of Dr. Chen and Mr. Cohen, effective as of January 1,
2018.
The following table
sets forth for the three years ended December 31, 2020,
compensation paid by the Company to its Chairman of the Board,
President, Chief Executive Officer, and Chief Financial Officer;
Vice President – Administration, and Secretary.
Summary
Compensation Table
|
|
|
|
|
Name
and Principal Position
|
Year
|
|
|
|
Securities
Underlying Options
|
Stephen T. Chen,
Ph.D.(1)
Chairman of the
Board,
President,
Chief
Executive Officer,
and Chief Financial Officer
|
2020
|
$240,975
|
$-
|
$100,000
|
-
|
|
2019
|
$249,633
|
$-
|
$100,000
|
-
|
|
2018
|
$240,000
|
$-
|
$100,000
|
-
|
|
|
|
|
|
|
Mr. Bernard Cohen,
(2)
Vice
President
|
2020
|
$71,085
|
$-
|
$12,000
|
-
|
|
2019
|
$71,398
|
$-
|
$12,000
|
-
|
|
2018
|
$70,000
|
$12,500
|
$12,000
|
-
|
(1) The Company
hired Dr. Chen under an Employment Contract for the period January
1, 2018 through December 31, 2020 (“Prior Chen
Contract”). On January 1, 2021 an employment agreement for a
3-month term was executed reflecting the same material terms and
conditions of the Prior Chen Contract which includes, (i) a
$240,000 annual salary, (ii) $100,000 in Company shares payable
quarterly based on the average share price of the closing quotes
for the one month preceding issuance (referred to in the table as
“Other Compensation), (iii) certain employee benefits
available to the Company’s employees, and (iv) reimbursement
of expenses made on behalf of the Company. The Company and Dr. Chen
also executed a Settlement Agreement and Mutual General Release
made effective December 24, 2020 covering any employment-related
claims arising under the Prior Chen Contract. The parties expect to
amend the Settlement Agreement and Mutual General Release to
provide that the release of claims will only be in favor of the
Company. The Company and Dr. Chen also entered into an Intellectual
Property Assignment Agreement made effective January 19, 2021
whereby Dr. Chen has assigned all right, title, and interest to
certain patents, trademarks, and other intellectual property
created or developed during Dr. Chen’s employment with the
Company.
(2) The Company
hired Mr. Cohen under an employment contract for the period January
1, 2018 through December 31, 2020 (“Prior Cohen
Contract”). On January 1, 2021 an employment agreement for a
3-month term was executed reflecting the same material terms and
conditions of the Prior Cohen Contract which includes, (i) a
$70,000 annual salary, (ii) $1,000 per month in Company shares paid
monthly based on the average share price of the closing quotes for
the one month preceding issuance (referred to in the table as
“Other Compensation) , (iii) certain employee benefits
available to the Company’s employees, and (iv) reimbursement
of expenses made on behalf of the Company. The Company and Mr.
Cohen also executed a Settlement Agreement and Mutual General
Release made effective December 24, 2020 covering any
employment-related claims arising under the Prior Cohen Contract.
The Company and Mr. Cohen also entered into an Intellectual
Property Assignment Agreement made effective January 19, 2021
whereby Mr. Cohen has assigned all right, title, and interest to
certain patents, trademarks, and other intellectual property
created or developed during Mr. Cohen’s employment with the
Company.
Option
Grants
On September 26,
2018, the Company’s Board of Directors adopted the Amarillo
Biosciences, Inc., 2018 Employee Stock Option Plan (the
“2018-ESOP”). The 2018-ESOP provides for the grant of
qualified incentive stock options to the Company’s
employees.
On September 26,
2018, the Company’s Board of Directors adopted the Amarillo
Biosciences, Inc., 2018 Officers, Directors, Employees, and
Consultants Nonqualified Stock Option Plan (the
“2018-NQSOP”). The 2018-NQSOP provides for the grant of
nonqualified incentive stock options to the Company’s
employees.
Both of these stock
option plans are explained in detail in the “Stock Options
and Warrants” section and in the Financial Statements
footnotes section in note #9 “Stock Option and Stock Plans of
the Company’s Form 10-K filed for the fiscal year ending
December 31, 2019, which is incorporated herein by this reference.
Information regarding options granted to Dr. Chen and Mr. Cohen are
also incorporated herein by reference to the footnotes under the
beneficial ownership table for directors and executive
officers.
Director
Compensation for Last Fiscal Year
Directors receive
$1,000 compensation for attendance at directors’ meetings and
$250 for regularly scheduled teleconference meetings,and are
reimbursed for any out-of-pocket expenses in connection with their
attendance at meetings. There were no regularly scheduled meetings
during 2020.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
As of the Record
Date, there were 42,066,172 shares of the Company’s common
stock issued and outstanding. The following table sets forth as of
the Record Date, the beneficial ownership of each person who owned
more than 5% of such outstanding common stock:
Name
and Address
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class Owned(1)
|
Stephen T Chen
& Virginia M Chen TTEESStephen T & Virginia M Chen
LivingTrust DTD 04/12/201819 Pine Plain RoadWellesley Hills MA
02481
|
12,521,837
|
26.81%
|
Hung Lan LeeFL 20
NO 19 Lane 8SEC 5 RD XIN-YITaipei 110 (R.O.C.)Taiwan
|
4,000,000
|
9.51%
|
ANXON International
Inc.9F -3 NO 32 SEC 1Chenggong RDTaipei City 115 Nangang Dist.00115
Taiwan ROC
|
2,459,153
|
5.85%
|
(1) As of the
Record Date, applicable percentage ownership is based on 42,066,172
shares issued. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission. Shares of
common stock that are currently exercisable or exercisable within
60 days of Record Date, are deemed to be beneficially owned by the
person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership
of any other person.
The following table
sets forth the beneficial ownership of the Company’s stock as
of the Record Date by each executive officer and director and by
all executive officers and directors as a group:
Name
and Address of Owner
|
Amount
and Nature of Beneficial Ownership (1)
|
|
Stephen T. Chen,
Ph.D.(2)
31 Service
Drive
Wellesley, MA
02482
|
12,521,837
|
26.81%
|
Bernard Cohen
(3)
2025 S. Lipscomb
St.
Amarillo, TX
79109
|
236,362
|
0.56%
|
Yasushi Chikagami
(4)
9F, No. 29, Ln.
107, Sec. 2
Heping E. Rod.,
Da’an Dist.
Taipei City 106,
Taiwan (ROC)
|
2,647,153
|
6.26%
|
Daniel Fisher
(5)
36 Marlee
Road
Pleasant Hill, CA
94523
|
150,400
|
0.36%
|
Nicholas Moren
(6)
PO Box
6873
Incline Village, NV
89450
|
150,400
|
0.36%
|
Beatrice Liu,
Ph.D., CPA (ROC & U.S.)
10F., No. 72, Sec
2,
Nan Jing E.
Rd.,
Taipei, Taiwan,
R.O.C. 104
|
0
|
0%
|
Total Group (all
directors and executive officers – 6 persons)
|
15,706,152
|
34.35%
|
(1) As of the
Record Date, applicable percentage ownership is based on 42,066,172
shares of common stock issued. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with
respect to securities. Shares of common stock that are currently
exercisable or exercisable within 60 days of Record Date, are
deemed to be beneficially owned by the person holding such
securities for the purpose of computing the percentage of ownership
of such person, but are not treated as outstanding for the purpose
of computing the percentage ownership of any other
person.
(2) Dr. Chen has a
total beneficial ownership of 12,521,837 shares through the
following: (i) 6,400,720 shares under Stephen T Chen & Virginia
M Chen TTEES, Stephen T & Virginia M Chen Living Trust, DTD
04/12/2018; (ii) 638,801 shares owned by STC International, Inc.,
of which Dr. Chen is the majority owner and serves as Chairman,
President and a Board member; (iii) 39,473 shares owned by ACTS
Biosciences, Inc., of which Dr. Chen serves as Chairman and a Board
member; (iv) 783,000 shares owned by Virginia M. Chen IRA, Dr.
Chen’s spouse; (v) 12,413 shares under Stephen T Chen &
Virginia M Chen TTEES, Stephen T & Virginia M Chen Living
Trust, DTD 04/12/2018 held in a Charles Schwab brokerage account;
(vi) 3,363,430 shares reserved for note conversions beneficially
owned by Dr. Chen exercisable within 60 days of December 31, 2020;
and (vii) 1,284,000 vested options. Regarding the options, Dr. Chen
was awarded 500,000 Qualified Incentive Stock Options and 2,585,000
Nonqualified Incentive Stock Options on September 26, 2018, through
the Amarillo Biosciences, Inc., 2018 Employee Stock Option Plan and
the Amarillo Biosciences, Inc., 2018 Officers, Directors,
Employees, and Consultants Nonqualified Stock Option Plan,
respectively. Dr. Chen’s total options granted him
(3,085,000) are reserved for future issue. Since Dr. Chen is an
“insider” or “Affiliate” by virtue of his
holdings and his position in the Company, his option vesting
schedule is determined over a four-year period rather than five
years compared to other grantees. Furthermore, Dr. Chen’s
options vest at a rate of twenty-five per cent (25%) per year
rather than twenty percent per year for qualified options as the
other grantees vest. Dr. Chen has held the options for two years
which entitles him to fifty percent (50%) vesting in the
“Qualified” options and forty percent (40%) vesting in
the “Nonqualified” options. Dr. Chen, therefore, has
beneficial ownership of 1,034,000 “Nonqualified”
options and 250,000 “Qualified” options, the sum
(1,284,000) of which are included in his beneficial total. Dr.
Chen’s beneficial ownership interest is calculated by his
12,521,837 beneficial interest in shares divided by 46,713,602
outstanding shares (42,066,172 issued and outstanding shares at
Record Date in addition to Dr. Chen’s 3,363,420 shares under
convertible notes and 1,284,000 vested stock options).
(3) Mr. Cohen has a
total beneficial ownership of 236,362 shares through the following:
192,362 issued shares under his employment agreement and 44,000
vested stock options. Mr. Cohen’s beneficial ownership
interest is calculated by his 236,362 beneficial interest in shares
divided by 42,110,172 outstanding shares (42,066,172 issued and
outstanding shares at Record Date in addition to 44,000 vested
stock options).
(4) Mr. Chikagami
has a total beneficial ownership of 2,647,153 shares through the
following: 2,459,153 issued shares and 188,000 vested stock
options. Mr. Chikagami’s beneficial ownership interest is
calculated by his 2,647,153 beneficial interest in shares divided
by 42,254,173 outstanding shares (42,066,172 issued and outstanding
shares at Record Date in addition to 188,000 vested stock
options).
(5) Mr. Fisher has
a total beneficial ownership of 150,400 shares through the
following: 150,400 issued shares. Mr. Fisher’s beneficial
ownership interest is calculated by his 150,400 beneficial interest
in shares divided by 42,066,172 issued and outstanding shares at
Record Date.
(6) Mr. Moren has a
total beneficial ownership of 150,400 shares through the following:
150,400 issued shares. Mr. Moren’s beneficial ownership
interest is calculated by his 150,400 beneficial interest in shares
divided by 42,066,172 issued and outstanding shares at Record
Date.
DELINQUENT SECTION 16(a) REPORTS
Section 16(a)
of the Securities Exchange Act of 1934 requires our directors and
executive officers, as well as persons who own more than 10% of a
registered class of our equity securities, to file with the
Commission initial reports of ownership and reports of changes in
beneficial ownership. Directors, executive officers and greater
than 10% shareholders are required to furnish us with copies of all
Section 16(a) forms they file. Based solely upon a review of
the copies of such forms furnished to us we believe that during the
fiscal year ended December 31, 2020 and through the date of
this filing, our directors and officers complied with all
Section 16(a) filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Historically, the
Company has relied upon certain relationships which gave rise to
related transactions. These relationships have helped the Company
with financing, ingredients to potential products, research, and
technology. All future transactions and loans between the Company
and its officers, directors and 5% shareholders will be on terms no
less favorable to the Company than could be obtained from
independent third parties. There can be no assurance, however, that
future transactions or arrangements between the Company and its
affiliates will be advantageous, that conflicts of interest will
not arise with respect thereto or that if conflicts do arise, that
they will be resolved in favor of the Company.
Convertible
Notes Payable – Related Party
The total balance
of the principal for convertible promissory notes as of the Record
Date is $710,736. This amount consisted of the following
convertible promissory notes payable to Dr. Stephen T. Chen,
Chairman, CEO, President, and CFO, and i2China Management Group,
LLC, a consultant, as shown in the table below.
Note
#.
|
|
|
|
Note 1 -
Chen
|
$0.1680
|
0.75%
|
$114,026
|
Note 2 -
Chen
|
$0.1875
|
0.65%
|
$262,500
|
Note 3.19 -
Chen
|
$0.2500
|
1.85%
|
$39,392
|
Note 4.19 -
Chen
|
$0.2500
|
1.61%
|
$12,436
|
Note 5.19 –
i2China
|
$0.2500
|
1.85%
|
$16,000
|
Note 6.20 -
Chen
|
$0.2500
|
1.85%
|
$216,600
|
Note 7.20 -
Chen
|
$0.2500
|
1.60%
|
$1,782
|
Note 8.20 –
i2China
|
$0.2500
|
1.85%
|
$48,000
|
Total Convertible
Notes – Related Party
|
$710,736
|
The notes are unsecured and are due on
demand. All shares issued on conversion are to be restricted
subject to Rule 144 promulgated under the U.S. Securities Act of
1933. The Company may prepay the notes in whole or in part at any
time without penalty. The convertible notes due to Dr. Chen are
related party notes.
Other
Related Party Transactions
Other than the
aforementioned convertible notes activity, there were no related
party transactions that occurred during the period from January 1,
2020 to the Record Date.
INDEPENDENT ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate fees
billed by our independent auditors, PWR CPA, LLP
(“PWR”) (PWR was appointed as our independent auditors
on March 19, 2020) and LBB & Associates Ltd., LLP
(“LBB”) (LBB resigned as our independent auditors on
March 3, 2020), for professional services rendered for the audit of
our annual financial statements, and for the review of quarterly
financial statements for the fiscal years ended December 31, 2019
and December 31, 2020, were:
Aggregate Fees
|
|
|
|
|
|
PWR CPA,
LLP
|
$35,000
|
$20,000
|
LBB &
Associates Ltd., LLP
|
$6,500
|
$20,750
|
Effective
February 6, 2020, LBB & Associates Ltd, LLP
(“LBB”), the previous independent registered public
accounting firm for the Company was suspended by the SEC. As a
result of this suspension, LBB resigned as the independent
registered public accounting firm for the Company. The audit
reports of LBB on the Company’s financial statements for the
years ended December 31, 2018 and December 31, 2017 did not contain
an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting
principles. During the two most recent fiscal years ended December
31, 2018 and through the subsequent interim period preceding
LBB’s resignation, there were no disagreements between the
Company and LBB on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction
of LBB would have caused them to make reference thereto in their
reports on the Company’s financial statements for such
years.
In
respect to PWR’s audit and accounting services, during the
two most recent fiscal years ended December 31, 2019 and through
December 31, 2020, there were no reportable events within the
meaning set forth in Item 304(a)(1)(v) of Regulation
S-K.
Audit fees incurred
by the Company were pre-approved by the Board of
Directors.
Audit Related
Fees:
|
|
|
|
|
|
PWR
CPA, LLP
|
$0
|
$0
|
LBB
& Associates Ltd., LLP $
|
$0
|
$0
|
Tax Fees:
|
|
|
|
|
|
PWR
CPA, LLP
|
$0
|
$0
|
LBB
& Associates Ltd., LLP $
|
$0
|
$0
|
All Other
Fees:
|
|
|
|
|
|
|
|
|
|
|
|
PWR
CPA, LLP
|
$0
|
$0
|
LBB
& Associates Ltd., LLP $
|
$0
|
$0
|
We do not use the
auditors for financial information system design and
implementation. Such services, which include designing or
implementing a system that aggregates source data underlying the
financial statements or that generates information that is
significant to our financial statements, are provided internally or
by other service providers. We do not engage the auditors to
provide compliance outsourcing services.
The Board of
Directors has considered the nature and amount of fees billed by
PWR and believes that the provision of services for activities
unrelated to the audit is compatible with maintaining PWR’s
independence.
Accountant Approval Policy
Before an
accountant is engaged by the Company to perform audit or non-audit
services, the accountant must be approved by the Company’s
Board of Directors.
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
This
Information Statement should be read in conjunction with certain
reports that we previously filed with the Commission. We are
subject to the informational requirements of the Exchange Act and,
in accordance therewith, we file reports, proxy statements and
other information including annual and quarterly reports on Form
10-K and Form 10-Q with the Commission. Reports and other
information that we file can be inspected and copied at the public
reference facilities maintained at the Commission at 100 F Street
NW, Washington, D.C. 20549. Copies of such material can be
obtained upon written request addressed to the Commission, Public
Reference Section, 100 F Street NW, Washington D.C. 20549, at
prescribed rates. The Commission maintains a website on the
Internet (http://www.sec.gov) that contains the filings of issuers
that file electronically with the Commission through the EDGAR
system. Copies of such filings may also be obtained by
writing to Amarillo Biosciences, Inc., 4134 Business Park Drive,
Amarillo, Texas 79110.
DELIVERY OF DOCUMENTS AND HOUSEHOLDING
The
Commission has adopted rules that permit companies and
intermediaries such as brokers, to satisfy the delivery
requirements for Information Statements with respect to two or more
shareholders sharing the same address by delivering a single
Information Statement addressed to those shareholders. This
process, which is commonly referred to as
“householding,” potentially provides extra convenience
for shareholders, is environmentally friendly, and represents cost
savings for companies.
For
this Information Statement, the Company’s transfer agent or
brokers may be householding this Information Statement and the
documents incorporated by reference that we are enclosing with the
Information Statement. A single Information Statement will be
delivered to multiple shareholders sharing an address unless
contrary instructions have been received from the effected
shareholders. Once you have received notice from your broker or the
Company that either of them will be householding communications to
your address, householding will continue until you are notified
otherwise or until you revoke your consent.
If
at any time, you no longer wish to participate in householding and
would prefer to receive separate periodic reports, or if you
currently receive multiple copies of the Information Statement or
other periodic reports at your address and would like to request
householding by the Company, please notify your broker if your
shares are not held directly in your name. If you own your shares
directly rather than through a brokerage account, you should direct
your written request directly to Bernard Cohen, Vice President,
Amarillo Biosciences, Inc., 4134 Business Park Drive, Amarillo,
Texas 79110; Telephone number (806)376-1741.
OTHER MATTERS
Only
one (1) Information Statement is being delivered to multiple
shareholders sharing an address. If you are a shareholder at a
shared address to which a single copy of this Information Statement
was delivered and you desire to obtain a separate copy of the
documents delivered, please contact the person at the address or
telephone number described below.
We
hereby undertake to deliver promptly upon written or oral request a
separate copy of the Information Statement to a shareholder at a
shared address to which a single copy of the documents was
delivered.
As
a matter of regulatory compliance, the Company is sending you this
Information Statement that describes the purpose and effect of the
Action Items. Your consent to the approval of the Action Items is
not required and is not being solicited in connection herewith.
This Information Statement is intended to provide the
Company’s shareholders information required by the rules and
regulations of the Exchange Act and the Texas Business
Organizations Act.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. THE ATTACHED MATERIAL IS FOR INFORMATIONAL PURPOSES
ONLY.
IF YOU HAVE ANY QUESTIONS REGARDING THIS INFORMATION
STATEMENT,
PLEASE CONTACT:
John
Junyong Lee
AMARILLO
BIOSCIENCES, INC.
4134
Business Park Drive
Amarillo,
Texas 79110
(806)376-1741
|
By Order of the
Board of Directors,
|
|
/s/ Stephen T.
Chen, Ph.D.
|
|
|
Stephen T. Chen,
Ph.D.
Chief Executive
Officer
|
Appendix
A
SECURITIES
PURCHASE AGREEMENT
BY
AND AMONG
AMARILLO
BIOSCIENCES, INC.,
AINOS,
INC.
and
THE
MAJOR SHAREHOLDERS NAMED HEREIN
DATED
AS OF DECEMBER 24, 2020
SECURITIES
PURCHASE AGREEMENT
This Securities
Purchase Agreement (this “Agreement”) is dated as
of December 24, 2020, by and between Amarillo
Biosciences, Inc., a Texas corporation (the “Company”), Ainos, Inc., a
Cayman Islands corporation (the “Purchaser”), and each of
the Major Shareholders named herein.
RECITALS
WHEREAS, the Company, the Major
Shareholders, and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by Section 4(a)(2) of the Securities Act
of 1933, as amended (the “Securities Act”), and
Rule 506 of Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission
(the “Commission”) under the
Securities Act;
WHEREAS, the Purchaser desires to
purchase, and the Company desires to sell, upon the terms and
conditions stated in this Agreement, one hundred million
(100,000,000) shares of common stock, par value one cent ($0.01)
per share, of the Company (the “Common Stock”), which
such total amount of shares of Common Stock shall be referred to
herein as the “Shares”; and
WHEREAS, the board of directors of
the Company has unanimously: (i) determined that the sale of
the Shares pursuant to this Agreement is in the best interests of
the Company and the shareholders of the Company, and declared it
advisable, to enter into this Agreement, (ii) approved this
Agreement and the transactions contemplated hereby on the terms and
subject to the conditions of this Agreement, and (iii) adopted a
resolution recommending that the Company Shareholder Matters be
adopted by the shareholders of the Company at the Special Meeting
(the “Company
Recommendation”).
NOW, THEREFORE, IN CONSIDERATION of the
mutual covenants contained in this Agreement, and for other good
and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company, the Major Shareholders, and the
Purchaser hereby agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms shall have the meanings indicated in
this Section 1.1:
“Action” means any
Proceeding, inquiry, or notice of violation pending or, to the
Company’s Knowledge, threatened against the Company, any
Subsidiary or any of their respective properties or any officer,
director or employee of the Company or any Subsidiary acting in his
or her capacity as an officer, director or employee before or by
any federal, state, county, local or foreign court, arbitrator,
governmental or administrative agency, regulatory authority, stock
market, stock exchange or trading facility.
“Acquisition Proposal”
means a written offer or proposal involving the Company or any of
its Subsidiaries with respect to: (a) any merger, reorganization,
consolidation, share exchange, share issuance, recapitalization,
business combination, liquidation, dissolution or other similar
transaction involving any sale, issuance, lease, exchange,
mortgage, pledge, transfer or other disposition of, all or a
material portion of the assets or equity securities or deposits of,
the Company or any of its Subsidiaries, in a single transaction or
series of related transactions; (b) any tender offer or exchange
offer for all or a material portion of the outstanding shares of
capital stock of the Company or any of its Subsidiaries; or (c) any
public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the
foregoing.
“Affiliate” means, with
respect to any Person, any other Person that, directly or
indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such Person, as such
terms are used in and construed under Rule 405 under the Securities
Act.
“Agreement” shall have the
meaning ascribed to such term in the Preamble.
“Appraisal” means an
appraisal report prepared by Titan International Valuation Ltd., a
third-party appraiser retained by Purchaser, purporting to value
Purchaser’s Gas Sensor Patents and Patent License Agreements
as of October 31, 2020.
“Approvals” has the
meaning set forth in Section 3.1(f).
“Board” has the meaning
set forth in Section 2.2(a)(iv).
“Business Combination” the
consummation of a merger, consolidation, statutory share exchange,
or similar transaction that requires adoption by the
Company’s shareholders.
“Business Day” means a
day, other than a Saturday or Sunday, on which banks in the City of
Delaware are open for the general transaction of
business.
“CARES Act” means the
Coronavirus Aid, Relief, and Economic Security Act, as may be
amended or modified.
“CFIUS” means the
Committee on Foreign Investment in the United States.
“Change in Recommendation”
has the meaning set forth in Section 4.18(b).
“Charter Documents” has
the meaning set forth in Section 3.1(b).
“Closing” means the
closing of the purchase and sale of the Shares pursuant to this
Agreement.
“Closing Date” means the
Trading Day when all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all
of the conditions set forth in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied or
waived, as the case may be, or such other date as the parties may
agree.
“CMS” has the meaning set
forth in Section 3.1(hh).
“Code” means the Internal
Revenue Code of 1986, as amended.
“Commission” has the
meaning set forth in the Recitals.
“Common Stock” has the
meaning set forth in the Recitals, and also includes any securities
into which the Common Stock may hereafter be reclassified or
changed.
“Company” has the meaning
set forth in the Preamble.
“Company Business
Combination” has the meaning set forth in Section 4.14(b).
“Company Deliverables” has
the meaning set forth in Section 2.2(a).
“Company Recommendation”
has the meaning set forth in the Recitals.
“Company Registered Intellectual
Property” has the meaning set forth in Section 3.1(s)(i).
“Company Shareholder
Matters” has the meaning set forth in Section 4.18(a).
“Company’s
Knowledge” means, with respect to any statement made
to the knowledge of the Company and the Major Shareholders, that
the statement is based upon the constructive or actual knowledge of
the Major Shareholders and, in the case of the Company, the
executive officers of the Company after reasonable
investigation.
“Contract” shall mean any
contract, subcontract, agreement, indenture, note, bond, loan or
credit agreement, instrument, installment obligation, lease,
sublease, mortgage, use or occupancy agreement, deed of trust,
license, sublicense, commitment, power of attorney, guaranty or
other legally binding commitment, arrangement, understanding or
obligation, whether written or oral, in each case, as amended and
supplemented from time to time and including all schedules, annexes
and exhibits thereto.
“Control” (including the
terms “controlling”, “controlled by” or
“under common control with”) means the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or
otherwise.
“Covered Persons” has the
meaning set forth in Section 3.1(v).
“Damages” has the meaning
set forth in Section
4.23(e).
“Deferral Notice” has the
meaning set forth in Section 4.23(b).
“Delaware Courts” has the
meaning set forth in Section 6.8.
“Disclosure Schedules” has
the meaning set forth in Section 3.1.
“Disqualifications Events”
has the meaning set forth in Section 3.1(v).
“Employee Benefit Plan”
shall mean each “employee benefit plan” (within the
meaning of Section 3(3) of ERISA) and each other retirement,
supplemental retirement, deferred compensation, employment, bonus,
incentive compensation, stock purchase, employee stock ownership,
equity-based, severance, change in control, employee loan, health
welfare, retiree medical or life insurance, educational, employee
assistance, fringe benefit plan or program and all other employee
benefit plans, policies, agreement (including any employment,
consulting and collective bargaining agreements), programs or
arrangements, whether or not subject to ERISA, whether formal or
informal, oral or written, which the Company or any Subsidiary or
any ERISA Affiliate sponsors or maintains or contributes or has any
obligation to contribute for the benefit of the current or former
employees, directors or other individual service providers of the
Company or any Subsidiary or with respect to which the Company or
any Subsidiary has any direct or indirect present or future
liability on behalf of such employees, director or other individual
service providers.
“Environmental Laws” has the meaning set forth in
Section 3.1(l).
“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” shall
mean any trade or business (whether or not incorporated) that,
together with the Company or any Subsidiary is treated as a
“single employer” under Section 414 of the
Code.
“Evaluation Date” has the
meaning set forth in Section 3.1(qq).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated
thereunder.
“FDA” has the meaning set
forth in Section 3.1(hh).
“Financial Statements” has
the meaning set forth in Section 3.1(h)(ii).
“Major Shareholder Shares”
has the meaning set forth in Section 4.18(c).
“Major Shareholders” means
Stephen T. Chen and Virginia M. Chen, individually and as Trustees
of Stephen T. Chen and Virginia M. Chen Living Trust, dated April
12, 2018, and Hung Lan Lee.
“GAAP” means U.S.
generally accepted accounting principles, as applied by the
Company.
“Governmental Entity”
shall mean: (a) any federal, provincial, state, local,
municipal, national or international court, governmental
commission, government or governmental authority, department,
regulatory or administrative agency, board, bureau, agency or
instrumentality, tribunal, arbitrator or arbitral body (public or
private), or similar body; (b) any self-regulatory
organization; or (c) any political subdivision of any of the
foregoing.
“Indemnified Person” has
the meaning set forth in Section 4.7(a).
“Information” has the
meaning set forth in Section 4.14(c).
“Intellectual Property”
shall mean all rights, title and interest in, relating to or
deriving from intellectual property, whether protected, created or
arising under the laws of the United States or any other
jurisdiction, whether registered or unregistered, including: (a)
all patents and patent applications, including provisional patent
applications and similar filings and any and all substitutions,
divisions, continuations, continuations-in-part, divisions,
reissues, renewals, extensions, reexaminations, patents of
addition, supplementary protection certificates, utility models,
inventors’ certificates, or the like and any foreign
equivalents of the foregoing (including certificates of invention
and any applications therefor) (collectively, “Patents”); (b) all
domestic and foreign copyrights, copyright registrations, copyright
applications, including any of the foregoing that protect original
works of authorship fixed in any tangible medium of expression,
including literary works (including all forms and types of computer
software, including all source code, object code, firmware,
development tools, files, records and data, and all documentation
related to any of the foregoing), pictorial and graphic works
(collectively, “Copyrights”);
(c) computer software and firmware, including data files,
source code, object code and software-related specifications and
documentation (collectively “Software”) (d) all
trademarks, service marks, trade names, business marks, service
names, brand names, trade dress rights, logos, corporate names,
trade styles, and other source or business identifiers and general
intangibles of a like nature, together with the goodwill associated
with any of the foregoing, along with all applications,
registrations, renewals and extensions thereof (collectively,
“Trademarks”); (e) all
Internet domain names and social media accounts; (f) trade secrets,
technology, discoveries and improvements, know-how, proprietary
rights, formulae, confidential and proprietary information,
technical information, techniques, inventions (including
conceptions and/or reductions to practice), designs, drawings,
procedures, processes, models, formulations, manuals and systems,
whether or not patentable or copyrightable (collectively
“Trade
Secrets”); (g) proprietary databases and data
compilations and all documentation relating to the foregoing; and,
including in each case any; (h) all other intellectual property
rights, proprietary rights, or confidential information and
materials.
“Insolvent” means, with
respect to any Person, (a) the present fair saleable value of such
Person’s assets is less than the amount required to pay such
Person’s debts as they become due, (b) such Person is unable
to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and
matured or (c) such Person has unreasonably small capital with
which to conduct the business in which it is engaged as such
business is now conducted and is currently proposed to be
conducted.
“Law” shall mean any
federal, state, local, municipal, foreign or other law, statute,
constitution, treaty, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling,
injunction, judgment, order, assessment, writ or other legal
requirement, administrative policy or guidance, or requirement
issued, enacted, imposed, adopted, promulgated, implemented,
entered into or otherwise put into effect by or under the authority
of any Governmental Entity.
“Lien” means any lien,
charge, claim, encumbrance, security interest, right of first
refusal, preemptive right, mortgage, deed of trust, pledge,
conditional sale agreement, restrictions on transfer or other
restriction of any kind.
“Losses” has the meaning
set forth in Section 4.7(a).
“Material Adverse
Effect” means any event,
circumstance, change or occurrence that has had or would reasonably
be expected to have, individually or in the aggregate (a) a
material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (b) a material and
adverse effect on the results of operations, assets, properties,
business, condition (financial or otherwise), liabilities or
prospects of the Company or any Subsidiary, or (c) any adverse
impairment to the Company’s ability to perform in any
material respect on a timely basis its obligations under any
Transaction Document.
“Material Contract” means
any of the following agreements of the Company or any
Subsidiary:
(a) any
employment, severance, termination, consulting, or retirement
agreement with any Person (including current or former directors,
officers, or employees of the company or any
Subsidiary);
(b) regarding
any outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing
indebtedness of the Company or by which the Company is
bound;
(c) any
contract containing covenants that limit in any material respect
the ability of the Company or its Subsidiary or any employee of the
Company or its Subsidiary to compete in any line of business or
with any Person or which involve any material restriction of the
geographical area in which, or method by which or with whom, the
Company or its Subsidiary may carry on its business (other than as
may be required by law or applicable regulatory authorities), and
any contract that could require the disposition of any material
assets or line of business of the Company or its
Subsidiary;
(d) any
joint venture, partnership, strategic alliance, or other similar
contract (including any franchising agreement, but in any event
excluding introducing broker agreements), and any contract relating
to the acquisition or disposition of any material business or
material assets (whether by merger, sale of stock or assets, or
otherwise), which acquisition or disposition is not yet complete or
where such contract contains continuing material obligations or
contains continuing indemnity obligations of the Company or its
Subsidiary;
(e) any
real property lease and any other lease with annual rental payments
aggregating $50,000 or more;
(f) other
than with respect to loans, any contract providing for, or
reasonably likely to result in, the receipt or expenditure of more
than $50,000 on an annual basis, including the payment or receipt
of royalties or other amounts calculated based upon revenues or
income;
(g) any
contract or arrangement under which the Company or its Subsidiary
is licensed or otherwise permitted by a third party to use any
Intellectual Property that is material to its business (except for
any “shrinkwrap” or “click through” license
agreements or other agreements for software that is generally
available to the public and has not been customized for the Company
or its Subsidiary) or under which a third party is licensed or
otherwise permitted to use any Intellectual Property owned by the
Company or its Subsidiary;
(h) any
contract that by its terms limits the payment of dividends or other
distributions by the Company or its Subsidiary;
(i) any
standstill or similar agreement pursuant to which any party has
agreed not to acquire assets or securities of another
person;
(j) any
contract that would reasonably be expected to prevent, materially
delay, or materially impede the Company’s ability to
consummate the transactions contemplated by this Agreement and the
other Transaction Documents;
(k) any
contract providing for indemnification by the Company or its
Subsidiary of any person, except for immaterial contracts entered
into in the ordinary course of business consistent with past
practice;
(l)
any contract that contains a put, call, or similar
right pursuant to which the Company or its Subsidiary could be
required to purchase or sell, as applicable, any equity interests
or assets that have a fair market value or purchase price of more
than $50,000;
(m)
any agreement relating to the provision of data processing, network
communication, or other technical services to or by the Company or
any Subsidiary;
(n) any
agreement that contains any (i) exclusive dealing obligation, (ii)
“clawback” or similar undertaking requiring the
reimbursement or refund of any fees, (iii) “most favored
nation” or similar provision granted by the Company or any
Subsidiary, or (iv) provision that grants any right of first
refusal or right of first offer or similar right or that limits or
purposes to limit the ability of the Company or any Subsidiary to
own, operate, sell, transfer, pledge or otherwise dispose of any
assets or business; and
(o) any
other contract, agreement or understanding material to the Company
or its Subsidiary or their respective operations.
“Material Permits” has the
meaning set forth in Section 3.1(q).
“OFAC” has the meaning set
forth in Section 3.1(ii).
“Outside Date” means the
forty-fifth (45th) day following the
date of this Agreement; provided that if such day is not a
Business Day, the first (1st) day following such
day that is a Business Day.
“Owned Intellectual
Property” shall mean all Intellectual Property owned
or purported to be owned by the Company or any
Subsidiary.
“Patent Assets” means
those certain rights, title and interest in and to the patents,
patent applications, and patent license agreements as set forth in
Schedule A to
the Patent Assignment.
“Patent Assignment” means
a patent assignment in the form attached hereto as Exhibit E.
“Person” means an
individual, corporation, partnership, limited liability company,
trust, business trust, association, joint stock company, joint
venture, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically
listed herein.
“Personnel” has the
meaning set forth in Section 3.1(s)(vii).
“Press Release” has the
meaning set forth in Section 4.5.
“Principal Trading Market”
means the Trading Market on which the Common Stock is primarily
listed on and quoted for trading. For the avoidance of doubt, the
Common Stock is quoted for trading on the OTC Bulletin Board and the Pink Open Market of
the OTC Markets Group Inc. as of the date of this
Agreement.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
“Public Disclosure” means
all filings, documents, and other filings filed by the Company with
the Commission including all filings made under the Exchange Act
and all registration statements filed under the Securities
Act.
“Purchase Price” is the
fair market value of the Patent Assets as agreed to by the
parties.
“Purchaser” has the
meaning set forth in the Preamble.
“Purchaser Deliverables”
has the meaning set forth in Section 2.2(b).
“Registrable Stock” has
the meaning set forth in Section 4.23(a).
“Registration Statement”
has the meaning set forth in Section 4.23(a).
“Regulation D” has the
meaning set forth in the Recitals.
“Representatives” has the
meaning set forth in Section 4.16(a).
“Required Filings” has the
meaning set forth in Section 4.18(f).
“Rule 144” means
Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
“Securities Act” means the
Securities Act of 1933, as amended.
“Shareholder Approval” has
the meaning set forth in Section 5.1(i).
“Shareholder Litigation”
has the meaning set forth in Section 4.12.
“Shares” has the meaning
set forth in the Recitals.
“Solicitor” has the
meaning set forth in Section 3.1(v).
“Special Meeting” has the
meaning set forth in Section 4.18(a).
“Stock Certificates” has
the meaning set forth in Section 2.2(a)(ii).
“Subsidiary” means any
entity in which the Company, directly or indirectly, owns fifty
percent (50%) or more of the outstanding capital stock or otherwise
has Control over such entity.
“Tax” or
“Taxes”
mean (a) any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise,
employment, payroll, withholding, alternative or add on minimum,
ad valorem, transfer or excise Tax , or any other Tax ,
custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty,
imposed by any Governmental Entity and (b) any liability in
respect of any items described in clause (a) above payable
by reason of contract, assumption, transferee or successor
liability, operation of law, Treasury Regulations
Section 1.1502-6(a) (or any predecessor or successor thereof
or analogous or similar provisions of Law) or
otherwise.
“Tax Return” means any
return, declaration, report or similar statement filed or required
to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated
Tax.
“Trading Day” means a day on which the Common Stock is
listed or quoted and traded on its Principal Trading Market;
provided, that in the event that the Common Stock is not listed or
quoted on a Trading Market, then Trading Day shall mean a Business
Day.
“Trading Market” means whichever of the New York Stock
Exchange, the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ
Global Market, the NASDAQ Capital Market, the OTC Bulletin
Board or any tier of the OTC
Markets Group, Inc. (or any successors to any of the foregoing) on
which the Common Stock is listed or quoted for trading on the date
in question.
“Transaction Documents”
means this Agreement, the schedules and exhibits attached hereto,
the Patent Assignment and any other documents or agreements
executed or delivered in connection with the transactions
contemplated hereunder.
“Transfer Agent” means
American Stock Transfer & Trust Company, LLC, or any successor
transfer agent for the Company.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
(a) Purchase of Shares. Subject to
the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company, the Shares in exchange
for the Purchase Price.
(b) Closing. The Closing of the
purchase and sale of the Shares shall take place on the Closing
Date remotely by facsimile transmission or other electronic means
as the parties may mutually agree.
(c) Delivery of the Shares. On the
Closing Date, the Company shall deliver (or irrevocably instruct
the Transfer Agent to deliver) to the Purchaser (i) one or more
stock certificates reflecting the issuance of, or (ii) in
electronic form via book-entry transfer to the account(s)
maintained by the Purchaser (or its designated custodian), the
Shares.
(d) Purchase Price; Form of
Payment. In consideration for 100,000,000 duly authorized
and issued shares of Common Stock of the Company valued at $0.20
per share, at the Closing and contemporaneously with the
Purchaser’s receipt of the Shares in accordance with
Section 2.1(c), the
Purchaser shall execute and deliver the Patent Assignment to the
Company, which such Patent Assignment is deemed to have an
appraised value between $20,168,000 and $22,488,000 pursuant to the
Appraisal. The Patent Assignment shall not be deemed effective
until the Purchaser (or its designated custodian per its delivery
instructions) confirms receipt of the Shares
2.2 Closing
Deliveries.
(a) On or prior to the
Closing, the Company shall issue, deliver or cause to be delivered
to the Purchaser the following (the “Company
Deliverables”):
(i)
this Agreement,
duly executed by the Company;
(ii)
the Shares, either
by delivery of one or more stock certificates evidencing the Shares
or by book-entry transfer to the account(s) maintained by the
Purchaser (or its designated custodian), registered in the name of
the Purchaser or its nominee (per its instructions) (the
“Stock
Certificates”);
(iii)
a legal opinion of
the Company’s counsel, dated as of the Closing Date and in
the form attached hereto as Exhibit A, executed by
such counsel and addressed to the Purchaser;
(iv)
a certificate of
the Secretary of the Company, in the form attached hereto as
Exhibit B,
dated as of the Closing Date, (a) certifying the resolutions
adopted by the Board of Directors of the Company (the
“Board”) approving the
transactions contemplated by this Agreement and the other
Transaction Documents, including the issuance of the Shares,
(b) certifying the current versions of the certificate of
formation, as amended, and bylaws, as amended, of the Company, and
(c) certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf
of the Company;
(v)
a certificate of
the Chief Executive Officer and Chief Financial Officer of the
Company, in the form attached hereto as Exhibit C, dated as of the
Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1(a) and
5.1(b);
(vi)
a
certificate of good standing for the Company from the Texas
Secretary of State as of a recent date; and
(vii)
the resignations contemplated by
Section
4.17 hereof.
(b) On or prior to the
Closing, the Purchaser shall deliver or cause to be delivered to
the Company the following (the “Purchaser
Deliverables”):
(i)
this Agreement,
duly executed by the Purchaser;
(ii)
the Patent
Assignment duly executed by the Purchaser;
(iii)
a true and correct
copy of the Appraisal;
(iv)
a
certificate of good standing for the Company from the Cayman
Islands General Registry as of a recent date; and
(v)
a list of nominees
of Persons to be nominated, appointed, and/or elected to the Board
of the Company; and
(vi)
a certificate of
the Chief Executive Officer of the Purchaser, in the form attached
hereto as Exhibit
D, dated as of the Closing Date, certifying to the
fulfillment or waiver of the conditions in this
Agreement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and Warranties
Relating to the Company. Except as set forth in the
schedules delivered herewith (the “Disclosure Schedules”),
which Disclosure Schedules shall be deemed part hereof and shall
qualify any representation made herein to the extent of the
disclosure contained in the corresponding section of the Disclosure
Schedules, each of the Company and Major Shareholder hereby jointly
and severally represents and warrants as of the date hereof and as
of the Closing Date (except for the representations and warranties
that expressly speak as of a specific date, which shall be made as
of such date), to the Purchaser that:
(a) Subsidiaries. The Company has
no direct or indirect Subsidiaries other than those listed in
Schedule 3.1(a) of the
Disclosure Schedules. The Company owns, directly or indirectly, all
of the capital stock or comparable equity interests of each
Subsidiary free and clear of any and all Liens, and all the issued
and outstanding shares of capital stock or comparable equity
interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification.
The Company and each Subsidiary is an entity duly incorporated or
otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own or
lease and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its
respective certificate or articles of formation, bylaws or other
organizational or charter documents. The Company and each
Subsidiary is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, would not be expected to have a Material Adverse
Effect. True, correct and complete copies of the certificate of
formation, as amended, and bylaws, as amended (or equivalent
organizational documents) of the Company and each Subsidiary as
currently in effect (collectively referred to herein as
“Charter
Documents”), have been made available to the
Purchaser. The Company and each Subsidiary are not in violation of
any of the provisions of their respective Charter
Documents.
(c) Capitalization.
(i)
The Company’s
authorized and outstanding equity interests is as set forth in
Schedule 3.2(c) of the
Disclosure Schedules.
(ii)
No securities or
ownership interests are reserved for issuance upon the exercise of
outstanding options, warrants, convertible securities, or other
rights to purchase Common Stock. All outstanding shares of Common
Stock have been duly authorized, validly issued, fully paid and are
non-assessable and are not subject to preemptive rights. Each share
of Common Stock has been issued in compliance in all material
respects with (A) applicable Law and (B) the Charter
Documents.
(iii)
Other than as set
forth on Schedule 3.2(c) of the
Disclosure Schedules, there are no subscriptions, options,
warrants, equity or debt securities, partnership interests or
similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition of, any ownership interests
of the Company or obligating the Company to grant, extend,
accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or
agreement. Other than as set forth on Schedule 3.2(c) of the
Disclosure Schedules, there are no stock appreciation, phantom
stock, stock-based performance unit, profit participation,
restricted stock, restricted stock unit or other equity-based
compensation award or similar rights with respect to the
Company.
(iv)
Except as set forth
in Section 4.23 of
this Agreement, there are no registration rights, and there is no
voting trust, proxy, rights plan, anti-takeover plan or other
agreements or understandings to which the Company is a party or by
which the Company is bound with respect to any ownership interests
of the Company.
(v)
Except as provided
for in this Agreement and the other Transaction Documents, as a
result of the consummation of the transactions contemplated
hereunder and thereunder, no shares of capital stock, warrants,
options or other securities of the Company are issuable and no
rights in connection with any shares, warrants, options or other
securities of the Company accelerate or otherwise become triggered
(whether as to vesting, exercisability, convertibility or
otherwise).
(d) Authorization; Enforcement;
Validity. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated hereby and by each of the other Transaction Documents
to which it is a party and otherwise to carry out its obligations
hereunder and thereunder, including, without limitation, to issue
the Shares in accordance with the terms hereof. The Company’s
execution and delivery of each of the Transaction Documents and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action
on the part of the Company, and no further corporate action is
required by the Company, its Board or its shareholders in
connection therewith. Each of the Transaction Documents has been
(or upon delivery will have been) duly executed by the Company and
is, or when delivered in accordance with the terms hereof or
thereof, will constitute the legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its
terms, except (i) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors’ rights and remedies or by other
equitable principles of general application, (ii) as limited
by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions
may be limited by applicable Law. There are no shareholder
agreements, voting agreements, voting trust agreements or similar
agreements with respect to the Company’s capital stock to
which the Company is a party or, between or among any of the
Company’s shareholders.
(e) No Conflicts. The execution,
delivery and performance by the Company of the Transaction
Documents and the consummation by the Company of the transactions
contemplated hereby or thereby do not and will not
(i) conflict with or violate any provisions of the Charter
Documents or otherwise result in a violation of the Charter
Documents, (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would result in a
default) under, result in the creation of any Lien upon any of the
properties or assets of the Company under, or give to others any
rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any Material
Contract, or (iii) conflict with or result in a violation of any
Law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company is subject (including federal and state securities laws and
the rules and regulations thereunder, assuming the correctness of
the representations and warranties made by the Purchaser herein, of
any self-regulatory organization to which the Company or its
securities are subject, including all applicable Trading Markets),
or by which any property or asset of the Company is bound or
affected, except in the case of clauses (ii) and
(iii) such as
would not have or reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(f) Filings, Consents and
Approvals. The Company is in possession of all franchises,
grants, authorizations, licenses, permits, consents, certificates,
approvals and orders from Governmental Entities
(“Approvals”)
necessary to own, lease, and operate the properties it purports to
own, operate or lease and to carry on its business as it is now
being conducted. Neither the Company nor any of its Subsidiaries is
required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any
court or other federal, state, local or other Governmental Entity,
self-regulatory organization (including any Trading Market) or
other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents (including
the issuance of the Shares), other than (i) filings required, if
any, by the Securities Act, the Exchange Act, or by applicable blue
sky state securities laws, and the rules and regulations
thereunder, and appropriate documents received from or filed with
the relevant authorities of other jurisdictions in which the
Company is licensed or qualified to do business (ii) the
filing of a Notice of Exempt Offering of Securities on Form D
with the Commission under Regulation D of the Securities Act,
(iii) the filing of any requisite notices and/or application(s) to
the Principal Trading Market for the issuance and sale of the
Shares for trading or quotation, as the case may be, thereon in the
time and manner required thereby, and (iv) the Shareholder
Approval. The Company is unaware of any facts or circumstances
relating to the Company that might prevent the Company from
obtaining or effecting any of the foregoing.
(g) Issuance of the Shares. The
issuance of the Shares has been duly authorized and the Shares,
when issued and paid for in accordance with the terms of the
Transaction Documents, will be duly and validly issued, fully paid
and non-assessable and free and clear of all Liens, other than
restrictions on transfer imposed by applicable securities Laws, and
shall not be subject to preemptive or similar rights. Assuming the
accuracy of the representations and warranties of the Purchaser in
this Agreement, the Shares will be issued in compliance with all
applicable federal and state securities laws.
(h) Financial
Statements.
(i) The consolidated
financial statements of the Company and each Subsidiary included in
the Public Disclosure comply in all material respects with
applicable accounting requirements and the rules and regulations of
the applicable Governmental Entity with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis
during the periods involved, except as may be otherwise specified
in such financial statements or the notes thereto or as required by
the applicable Governmental Entity and except that unaudited
financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the balance sheet
of the Company and each Subsidiary taken as a whole as of and for
the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited
statements, to normal, year-end audit adjustments, which would not
be material, either individually or in the aggregate.
(ii) The Company has
delivered to the Purchaser the audited consolidated financial
statements of the Company and each Subsidiary as of
December 31, 2018 and for the fiscal year ended
December 31, 2019 and the unaudited consolidated financial
statements of the Company and each Subsidiary (including balance
sheet, income statement and statement of cash flows) as of
September 30, 2020 (collectively, the “Financial Statements”).
The Financial Statements have been prepared based on the books and
records of the Company or its Subsidiaries, as applicable, in
accordance with GAAP applied on a consistent basis throughout the
periods indicated, except that the unaudited Financial Statements
may not contain all footnotes required by GAAP. The Financial
Statements fairly present in all material respects the consolidated
financial condition, position, results of operation, and cash flow
of the Company and its Subsidiaries as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited
Financial Statements to normal year-end audit adjustments, which
would not be material, either individually or in the aggregate.
Except as set forth in the Financial Statements, the Company and
each Subsidiary has no material liabilities or obligations,
contingent or otherwise, other than (A) liabilities incurred in the
ordinary course of business subsequent to December 31, 2019; and
(B) liabilities appropriately reflected or reserved against in
accordance with GAAP in the audited consolidated balance sheet of
the Company and each Subsidiary for the year ended December 31,
2019.
(iii) Except as reported
in the Public Disclosures, the Company and each Subsidiary
maintains a system of internal accounting controls established and
administered in accordance with GAAP and sufficient to provide
reasonable assurance that (A) transactions are executed in
accordance with management’s general or specific
authorizations, and (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP
and to maintain asset accountability.
(i) Tax Matters.
(i) All Tax Returns
required to be filed by or on behalf of the Company or any
Subsidiary have been duly and timely filed with the appropriate
Governmental Entity and all such Tax Returns are true, correct and
complete in all material respects. All Taxes due and payable by or
on behalf of the Company or any Subsidiary (whether or not shown on
any Tax Return) have been fully and timely paid and the Company has
adequately reserved in the Financial Statements in accordance with
GAAP for all Taxes (whether or not shown on any Tax Return) that
have accrued but are not yet due or payable as of the dates
thereof.
(ii) No claim,
assessment, deficiency or proposed adjustment for any Tax has been
asserted or assessed by any Governmental Entity against the Company
or any Subsidiary (or any consolidated, combined or unitary group
of which the Company or any Subsidiary is a member) that has not
been paid or resolved. No Tax audit, proceeding or other
examination of the Company or any Subsidiary (or any consolidated,
combined, or unitary group of which the Company or any Subsidiary
is a member) by any Governmental Entity is presently in progress,
nor has the Company or any Subsidiary been notified of any request
or threat for such an audit, proceeding or other examination.
Neither the Company nor any Subsidiary (or any consolidated,
combined, or unitary group of which the Company or any Subsidiary
is a member) is a party to any litigation or administrative
proceeding relating to Taxes. There are no Liens for Taxes upon any
of the assets of the Company or any Subsidiary (or any
consolidated, combined, or unitary group of which the Company or
any Subsidiary is a member). Neither the Company nor any Subsidiary
(or any consolidated, combined, or unitary group of which the
Company or any Subsidiary is a member) has consented to extend the
time in which any Tax may be assessed or collected by any
Governmental Entity (other than pursuant to extensions of time to
file Tax Returns obtained in the ordinary course of business),
which extension is still in effect. No the Company nor any
Subsidiary has received a claim by any Governmental Entity in any
jurisdiction where it does not file a particular Tax Return or pay
a particular Tax that it is or may be subject to taxation by that
jurisdiction or required to file a Tax Return.
(iii) Neither the Company
nor any Subsidiary has requested, has received or is subject to any
ruling of a Governmental Entity or has entered into any written
agreement with a Governmental Entity with respect to any Taxes, and
neither the Company nor any Subsidiary has entered into any
“closing agreement” as described in Section 7121 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax Law).
(iv) Neither the Company
nor any Subsidiary has entered into or been a party to any
“listed transaction” within the meaning of Section
6707A(c)(2) of the Code.
(v) Neither the Company
nor any Subsidiary has in any year for which the applicable statute
of limitations remains open distributed stock of another person, or
has had its stock distributed by another person, in a transaction
that was purported or intended to be governed in whole or in part
by Section 355 or Section 361 of the Code.
(vi) Neither the Company
nor any Subsidiary is a party to or bound by any Tax allocation,
indemnity or sharing agreement. Neither the Company nor any
Subsidiary (A) has been a member of an affiliated group filing a
consolidated federal income Tax Return, or (B) has any liability
for the Taxes of another Person pursuant to Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or
foreign Law) or as a transferee or a successor or by Contract
(other than pursuant to commercial agreements entered into in the
ordinary course of business and the principal purpose of which is
not related to Taxes) or otherwise.
(vii) The Company and
each Subsidiary has complied with all applicable Laws relating to
the payment and withholding of Taxes (including withholding of
Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471-1474, 3102
and 3402 of the Code or similar provisions under any state or
foreign Laws) and has duly and timely withheld and, in each case,
has paid over to the appropriate Governmental Entity any and all
amounts required to be so withheld and paid over on or prior to the
due date thereof under all applicable Laws.
(viii) No payment under
this Agreement shall be subject to any withholding Taxes under the
Code or any other Applicable Law.
(ix) The Company and
each Subsidiary has collected or withheld and paid (or had
collected or withheld and paid on its behalf) all applicable sales,
use, ad valorem, and value added Taxes.
(x) Neither the Company
nor any Subsidiary has received notice from a taxing authority that
it has a permanent establishment (within the meaning of an
applicable Tax treaty) or otherwise has an office or fixed place of
business in a country or is subject to Tax on its net income other
than the country in which it is organized.
(xi) Neither the Company
nor any Subsidiary will be required to include any item of income
in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date
as a result of: (A) any change in method of accounting for a
taxable period ending on or prior to the Closing Date; (B) any
“closing agreement” as described in Section 7121 (or
any corresponding or similar provision of state, local or foreign
income Tax Law) executed on or prior to the Closing Date; (C) any
intercompany transaction, deferred intercompany gain or excess loss
account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax Law); any (D) installment sale or open
transaction disposition made on or prior to the Closing Date; or
(E) any prepaid amount received on or prior to the Closing
Date.
(xii) Neither the Company
nor any Subsidiary has any deferred payment obligation pursuant to
Section 965 of the Code.
(xiii) The unpaid Taxes of
the Company and each Subsidiary as of the date hereof (A) are
estimated not to exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
the Financial Statements (rather than in any notes thereto) and (B)
are estimated not to exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the
historical practice of the Company and each Subsidiary in filing
its Tax Returns. Since the date of the Financial Statements, the
Company has not incurred any liability for Taxes arising from
extraordinary gains or losses, as that term is used in GAAP,
outside the ordinary course of business and consistent with
historical practice.
(xiv) Neither the Company
nor any Subsidiary has deferred any “applicable employment
taxes” (as defined in Section 2302(d)(1) of the CARES
Act) in respect of calendar year 2020 pursuant to Section 2302 of
the CARES Act, which Taxes would otherwise have been payable by the
Company or any Company Subsidiary in respect of calendar year 2020
but for the application of the CARES Act.
(xv) Schedule 3.1(i)(xv) of the
Disclosure Schedules lists all federal, state, local, and non-U.S.
income Tax Returns filed (and the jurisdictions in which such Tax
Returns have been filed) with respect to the Company and each
Subsidiary for taxable periods ended on or after December 31, 2017,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of
audit.
(xvi) Neither the Company
nor any Subsidiary is currently required or will be required on or
after the Closing Date to make any payments in respect of the
transfer or surrender of any liability to Tax or any Tax loss or
relief by virtue of having been a member of a consolidated,
combined, unitary, group relief or other similar Tax group prior to
the Closing.
(xvii) To the Company’s
Knowledge, there currently are no limitations on the utilization of
the net operating losses, built-in
losses,
capital losses,
tax
credits or other similar items
of the Company or any Subsidiary under
Sections
382, 383 or 384 of the Code
(or
any corresponding or similar provision of state, local or
foreign law).
(xviii) The Company is
classified as a corporation for U.S. federal income tax
purposes.
(xix) For purposes of
this Section 3.1(i), any
reference to the Company or any Subsidiary shall be deemed to
include any Person that merged with or was liquidated into such
Person.
(j) No Undisclosed Liabilities.
There are no debts, liabilities or obligations, whether accrued or
fixed, absolute or contingent, matured or unmatured or determined
or determinable, of the Company or any Subsidiary of a nature
required to be reflected on a balance sheet prepared in accordance
with GAAP, other than any such debts, liabilities or obligations
(i) specifically accrued or reserved against on the Financial
Statements or the notes thereto, (ii) incurred since
December 31, 2019 in the ordinary course of business of the
Company or any Subsidiary, or (iii) that would not, individually or
in the aggregate, reasonably be expected to be material to the
Company or any Subsidiary.
(k) Absence of Certain Changes or
Events. Except as contemplated by this Agreement, since
December 31, 2019, (i) there have been no events, occurrences
or developments that have had or would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse
Effect, (ii) neither the Company nor any Subsidiary has
incurred any material liabilities (contingent or otherwise) other
than (A) trade payables, accrued expenses and other
liabilities incurred in the ordinary course of business consistent
with past practice, and (B) liabilities not required to be
reflected in the Financial Statements pursuant to GAAP or required
to be disclosed in filings made with the Commission,
(iii) neither the Company nor any Subsidiary has altered
materially its method of accounting or the manner in which it keeps
its accounting books and records, (iv) there has not been any
change in the independent auditors of the Company or any
Subsidiary, (v) any purchase, redemption or other acquisition
by the Company of any of the shares of Common Stock or any other
securities of the Company or any options, warrants, calls or rights
to acquire any such Common Stock or other securities, (vi) any
split, combination or reclassification of any of the shares of
Common Stock, (vii) any issuance of shares of Common Stock
(viii) neither the Company nor any Subsidiary has declared or
made any dividend or distribution of cash or other property to its
shareholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its respective capital stock,
(ix) neither the Company nor any Subsidiary has issued any
equity securities to any officer, director or Affiliate, except
Common Stock issued pursuant to existing stock option plans or
equity-based plans disclosed in the Financial Statements,
(x) there has not been any material change or amendment to, or
any waiver of any material right by the Company or any Subsidiary
under, any Material Contract under which the Company or any
Subsidiary is bound or subject, (xi) to the Company’s
Knowledge, there has not been a material increase in the aggregate
dollar amount of the reserves or allowances established on the
Financial Statements with respect thereto, (xii) there has not
occurred any material transfer, assignment, sale or other
disposition of any of the assets shown or reflected in the
Financial Statements or any material cancellation, discharge or
payment of any debts, Liens or entitlements, (xiii) neither
the Company nor any Subsidiary has made any material capital
investment in, or any material loan to, any Person, (xix) the
Company has not adopted, entered into, modified or terminated any
employee benefit plan or any material employment, severance,
retention or other agreement with any current or former employee,
officer, director, independent contractor or consultant,
(xv) the Company has not entered into a material new line of
business or abandoned or discontinued any material existing line of
business, and (xvi) neither the Company nor any Subsidiary has
entered into any Contract or agreement to do any of the foregoing,
or has taken any action or omission to act that would result in any
of the foregoing.
(l) Environmental Matters. Neither
the Company nor any Subsidiary (i) is in violation of any
statute, rule, regulation, decision or order of any governmental
agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively,
“Environmental
Laws”), (ii) owns or operates any real property
contaminated with any substance that is in violation of any
Environmental Laws, (iii) is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, or
(iv) is subject to any claim relating to any Environmental
Laws; in each case, which violation, contamination, liability or
claim has had or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; and, to the
Company’s Knowledge, there is no pending or threatened
investigation that might lead to such a claim. Except as would not
result in a Material Adverse Effect, and, to the Company’s
Knowledge, there are no circumstances or conditions (including the
presence of asbestos, underground storage tanks, lead products,
polychlorinated biphenyls, prior manufacturing operations,
dry-cleaning or automotive services) involving the Company or any
Subsidiary, or any currently or formerly owned or operated property
of the Company or any Subsidiary, that could reasonably be expected
to result in any claim, liability, investigation, cost or
restriction against the Company or any Subsidiary, or result in any
restriction on the ownership, use, or transfer of any property
pursuant to any Environmental Law, or adversely affect the value of
any currently owned property of the Company or any
Subsidiary.
(m) Litigation. There is no Action,
pending or, to the Company’s Knowledge, threatened, which
(i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the issuance
of the Shares pursuant to this Agreement and the other Transaction
Documents or (ii) is reasonably likely to have a Material
Adverse Effect, individually or in the aggregate, if there were an
unfavorable decision. Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal
or state securities laws or a claim of breach of fiduciary duty nor
is any Action, to the Company’s Knowledge, currently
threatened. There is no Action by the Company or any Subsidiary
pending or which the Company or any Subsidiary intends to initiate
(other than collection or similar claims in the ordinary course of
business). There has not been, and to the Company’s Knowledge
there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director
or officer of the Company. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator
or governmental or regulatory body against the Company or any
officers or directors of the Company in their capacities as such,
which individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
(n) Employee
Benefit Plans.
(i) Schedule 3.10(a) of the
Disclosure Schedules sets forth a true, correct and complete list
of each material Employee Benefit Plan, excluding any employment or
consulting agreement or offer letter that either: (i) is terminable
by the Company at will; or (ii) provides for notice and/or
garden leave obligations as required by applicable Law, in each
case, so long as such agreement or offer letter does not provide
for: (A) severance or similar obligations; (B) transaction bonuses
or change in control or similar payments; or (C) Tax gross-ups;
provided that a form of
such employment or consulting agreement or offer letter is listed
and made available to the Purchaser and the individual agreements
or offer letters do not deviate from such form in any material
respect.
(ii) With respect to
each material Employee Benefit Plan, the Company has made available
to the Purchaser a true, correct and complete copy of the following
documents, to the extent applicable: (A) all plan documents,
including any related trust documents, insurance contracts or other
funding arrangements, third party administrative service contracts,
and all amendments to the foregoing; (B) for the most recent two
(2) plan years: (I) the IRS Form 5500 and all schedules thereto;
(II) audited financial statements; and (III) actuarial or other
valuation reports; (C) the most recent IRS determination letter or
opinion letter, as applicable; (D) the most recent summary plan
descriptions, and (E) all correspondence with the Internal Revenue
Service and the Department of Labor under any voluntary compliance
resolution system or delinquent flier programs.
(iii) Each Employee
Benefit Plan has been established, maintained and administered in
all material respects in accordance with its terms and with all
applicable Law. No non-exempt “prohibited transaction”
(within the meaning of Section 406 of ERISA and Section 4975 of the
Code) has occurred or is reasonably expected to occur with respect
to any Employee Benefit Plan.
(iv) Each Employee
Benefit Plan intended to qualify under Section 401(a) of the Code
is qualified and has received a determination letter (or the
prototype plan on which such Employee Benefit Plan is based has
received an opinion letter) from the Internal Revenue Service upon
which it may rely regarding its qualified status under the Code,
and nothing has occurred with respect to the operation of any such
plan that would reasonably be expected to result in the loss of
such qualification or the imposition of any material Tax
penalty.
(v) Neither the Company
nor any of its respective ERISA Affiliates has at any time
sponsored or has ever been obligated to contribute to, or had any
liability in respect of: (A) an “employee pension benefit
plan” (as defined in Section 3(2) of ERISA) subject to Title
IV of ERISA, Section 412 of the Code or Section 302 of ERISA
(including any “multiemployer plan” within the meaning
of Section (3)(37) of ERISA); (B) a “multiple employer
plan” as defined in Section 413(c) of the Code; or (C) a
“multiple employer welfare arrangement” within the
meaning of Section 3(40) of ERISA. No Employee Benefit Plan is a
“multiple employer plan” (within the meaning of
Section 4063 or 4064 of ERISA).
(vi) None of the
Employee Benefit Plans provides for, and the Company and any
Subsidiary do not have liability in respect of, post-retiree
health, welfare or life insurance benefits or coverage for any
participant or any beneficiary of a participant, except as may be
required under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended, or similar state or other applicable
Law.
(vii) With respect to any
Employee Benefit Plan, no actions, suits, claims (other than
non-material routine claims for benefits in the ordinary course),
audits, inquiries, investigations, proceedings or lawsuits are
pending, or, to the Company’s Knowledge, threatened against
any Employee Benefit Plan, the assets of any of the trusts under
such plans or the plan sponsor or administrator, or against any
fiduciary of any Employee Benefit Plan with respect to the
operation thereof that could reasonably be expected to result in
any material liability.
(viii) All contributions,
reserves or premium payments required to be made or accrued for all
prior periods through the date hereof to the Employee Benefit Plans
have been timely made or accrued in all material respects in
accordance with the provisions of each of Employee Benefit Plans,
applicable Law and GAAP.
(ix) Neither the
execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated by the Transaction
Documents will, either alone or in connection with any other
event(s): (A) result in any payment or benefit becoming due to
any current or former employee, contractor or director of the
Company or any Subsidiary or under any Employee Benefit Plan;
(B) increase any amount of compensation or benefits otherwise
payable to any current or former employee, contractor or director
of the Company or any Subsidiary or under any Employee Benefit
Plan; (C) result in the acceleration of the time of payment,
funding or vesting of any benefits to any current or former
employee, contractor or director of the Company or any Subsidiary
or under any Employee Benefit Plan; or (D) limit the right to
merge, amend or terminate any Employee Benefit Plan.
(x) Neither the
execution, delivery or performance of this Agreement nor the
consummation of the transactions contemplated by the Transaction
Documents shall, either alone or in connection with any other
event(s) give rise to any “excess parachute payment” as
defined in Section 280G(b)(1) of the Code, any excise Tax owing
under Section 4999 of the Code or any other amount that would not
be deductible under Section 280G of the Code.
(xi) The Company
maintains no obligations to gross-up or reimburse any individual
for any Tax or related interest or penalties incurred by such
individual, including under Sections 409A or 4999 of the Code or
otherwise.
(xii) Each Employee
Benefit Plan which is a “nonqualified deferred compensation
plan” subject to Section 409A of the Code has been
established, operated and maintained in compliance with Section
409A of the Code in all material respects.
(xiii) Except as set forth
in Schedule 3.1(n)(xiii) of
the Disclosure Schedules, there are no outstanding loans by the
Company or any Subsidiary to any of their respective employees,
directors or other service providers.
(xiv) None of the
Company, any Subsidiary or any employee, director or other service
provider of the Company or any Subsidiary has made any promises or
commitments, whether legally binding or not, to create any
additional Employee Benefit Plan, or to modify or change in any
material way any existing Employee Benefit Plan.
(xv) Any individual who
performs services for the Company or any Company Subsidiary and who
is not treated as an employee for U.S. federal income tax purposes
by the Company or any Subsidiary is not an employee under
applicable Law or for any purpose including, without limitation,
for Tax withholding purposes or Employee Benefit Plan purposes with
only immaterial exceptions. The Company and each Subsidiary has no
liability by reason of an individual who performs or performed
services for the Company or any Subsidiary in any capacity being
improperly excluded from participating in an Employee Benefit Plan.
Each employee of the Company and each Subsidiary has been properly
classified as “exempt” or “non-exempt”
under applicable Law with only immaterial exceptions, and no
individual treated as an independent contractor or consultant by
the Company or any Subsidiary should have been properly classified
as an employee under applicable Law.
(xvi) With respect to
each Employee Benefit Plan that is mandated by a government other
than the United States or subject to the applicable Laws of a
jurisdiction outside of the United States, (A) the fair market
value of the assets of each such plan to the extent funded, the
liability of each insurer for any such funded through insurance or
the book reserve established for any such plan, together with any
accrued contributions, is sufficient to procure or provide for the
accrued benefit obligations, as of the date of this Agreement, with
respect to all current and former participants in such plan
according to the actuarial assumptions and valuations most recently
used to determine employer contributions to such plan, and no
transaction contemplated by this Agreement shall cause such assets
or insurance obligations to be less than such benefit obligations,
and (B) each such plan has been maintained and operated in all
material respects in accordance with the applicable plan document
and all applicable Laws and other requirements, and if intended to
qualify for special tax treatment, satisfies, in all material
respects, the requirements for such treatment.
(o) Labor Matters.
(i) Neither the Company
nor any Subsidiary is a party to any collective bargaining
agreement or other labor Contract applicable to persons employed by
the Company or any Subsidiary. There are no representation
proceedings, demands for recognition or petitions seeking a
representation proceeding presently pending or, to the
Company’s Knowledge, threatened to be brought or filed, with
the National Labor Relations Board or other labor relations
tribunal, nor has any such representation proceeding, petition, or
demand been brought, filed, made, or, to the Company’s
Knowledge, threatened within the last three (3) years. There is no
organizing activity involving the Company or any Subsidiary pending
or, to the Company’s Knowledge, threatened by any labor
organization or group of employees, and nor, to the Company’s
Knowledge, has there been any such activity during the last three
(3) years.
(ii) There are no
pending: (A) strikes, work stoppages, slowdowns, lockouts or
arbitrations (nor have there been any strikes, work stoppages,
slowdowns, lockouts or arbitrations within the last three (3)
years); or (B) grievances or other labor disputes pending or, to
the Company’s Knowledge, threatened against or involving the
Company or any Subsidiary involving any employee of the Company or
any Subsidiary, in each case, that could reasonably be expected to
result in any material liability. Except as set forth on
Schedule 3.1(o)(ii), there
are no charges, grievances or complaints, in each case, related to
alleged unfair labor practices, pending or, to the Company’s
Knowledge, threatened by or on behalf of any employee, former
employee, or labor organization that could reasonably be expected
to result in any material liability.
(iii) To the
Company’s Knowledge, as of the date hereof, none of the
Company’s officers or employees has given notice of any
intent to terminate his or her employment with the Company in
connection with the transactions contemplated by the Transaction
Documents. The Company and each Subsidiary is in compliance in all
material respects and, to the Company’s Knowledge, each of
their employees and consultants are in compliance in all material
respects, with the terms of any employment and consulting
agreements between the Company or any Subsidiary and such
individuals.
(iv) Except as set forth
on Schedule 3.1(o)(iv) of the
Disclosure Schedules, there are no complaints, lawsuits, actions,
investigations, audits, charges or claims against the Company or
any Subsidiary pending or, to the Company’s Knowledge,
threatened that could be brought or filed, by or with any
Governmental Entity based on, arising out of, in connection with or
otherwise relating to the employment or termination of employment
or failure to employ by the Company or any Subsidiary, of any
individual that could reasonably be expected to result in any
material liability. The Company and each Subsidiary is in
compliance in all material respects with all applicable Laws
respecting labor, employment and employment practices, including,
but not limited to, all applicable Laws concerning terms and
conditions of employment, wages and hours, overtime, worker
classification, the provision of meal and rest breaks and accurate
wage statements, immigration, the Worker Adjustment and Retraining
Notification Act, and any similar state or local “mass
layoff” or “plant closing” laws, collective
bargaining, discrimination, civil rights, safety and health,
workers’ compensation and the collection and payment of
withholding and/or social security Taxes and any similar Tax.
Neither the Company nor any Subsidiary is liable for any arrears of
wages or penalties with respect thereto, except in each case as
would not, individually or in the aggregate, reasonably be expected
to be material to the Company. Except as set forth on Schedule 3.1(o)(iv), there
are no pending, or to the Company’s Knowledge, threatened
Proceedings against the Company or any Subsidiary by any employee
in connection with such employee’s employment or termination
of employment by the Company or Subsidiary, as applicable, that
could reasonably be expected to result in any material
liability.
(v) During the last
three (3) years, (A) no allegations of workplace sexual harassment,
discrimination or other similar misconduct have been made,
initiated, filed or, to the Company’s Knowledge, threatened
in writing against the Company or any Subsidiary or any of their
respective current or former directors, officers or senior level
management employees, (B) to the Company’s Knowledge, no
incidents of any workplace sexual harassment, discrimination or
other similar misconduct have occurred, and (C) neither the Company
nor any Subsidiary has entered into any settlement agreement
related to allegations of sexual harassment, discrimination or
other similar misconduct by any of their directors, officers or
employees described in clause (A) hereof or any
independent contractor.
(p) Compliance. Neither the Company
nor any Subsidiary (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any
Subsidiary received written notice of a claim that it is in default
under or that it is in violation of, any Material Contract (whether
or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator Governmental
Entity, or other governmental body having jurisdiction over the
Company, any Subsidiary or their respective properties or assets,
or (iii) is in violation of, or in receipt of written notice
that it is in violation of, any applicable Law, statute, rule,
regulation, policy or guideline or order of any governmental
authority, self-regulatory organization applicable to the Company
or any Subsidiary.
(q) Material Permits. The Company
and each Subsidiary possess all certificates, authorizations,
consents and permits issued by the appropriate federal, state,
local or foreign regulatory authorities necessary to conduct its
respective businesses as currently conducted, except where the
failure to possess such certificates, authorizations, consents or
permits, individually or in the aggregate, has not and would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect (“Material Permits”), and
(i) neither the Company nor any Subsidiary has received any
notice in writing of Proceedings relating to the revocation or
material adverse modification of any such Material Permits, and
(ii) the Company is unaware of any facts or circumstances that
would give rise to the revocation or material adverse modification
of any Material Permits.
(r) Title to Assets; Real Property;
Tangible Property. The Company and each Subsidiary has good
and marketable title to all tangible personal property owned by it
which is material to the business of the Company or Subsidiary, as
applicable, in each case free and clear of all Liens except such
Liens, if any, as may be reflected on the Financial Statements and
such other Liens as do not materially affect the value of such
property or do not interfere with the use made and proposed to be
made of such property by the Company or any Subsidiary. Neither the
Company nor any Subsidiary own any real property. Any real property
and facilities held under lease by the Company and the Bank are
held by them under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and facilities by
the Company or any Subsidiary. No notice of a claim of default by
any party to any real property lease entered into by the Company or
any Subsidiary has been delivered to either the Company or any
Subsidiary or is now pending, and there does not exist any event or
circumstance that with notice or passing of time, or both, would
constitute a default or excuse performance by any party thereto. To
the Company’s Knowledge, none of the owned or leased premises
or real properties of the Company or any Subsidiary are subject to
any Proceedings, or any current or potential interests of third
parties or other restrictions or limitations that would impair or
be inconsistent in any material respect with the current use of
such property by the Company or Subsidiary, as the case may
be.
(s) Intellectual
Property.
(i) Schedule 3.1(s)(i) of the
Disclosure Schedules sets forth a true, correct and complete list,
as of the date of this Agreement, of all of the following Owned
Intellectual Property: (A) registered Patents and pending
applications for Patents; (B) registered Trademarks and pending
applications for registration of Trademarks; (C) registered
Copyrights and pending applications for registration of Copyrights;
(D) Internet domain names actively used by the Company or any
Subsidiary (the Intellectual Property referred to in clauses (A)
through (D), collectively, the “Company Registered Intellectual
Property”); (E) unregistered Trademarks (for
which there are no pending applications) that are material to any
of the businesses of the Company or any Subsidiary; and (F) social
media accounts that are material to any of the businesses of the
Company or any Subsidiary.
(ii) The Company and its
Subsidiaries are the sole and unrestricted legal and beneficial
owners of all Owned Intellectual Property, and no Owned
Intellectual Property will at Closing be subject to any Liens,
adverse claims, any requirement of any past (if outstanding),
present or future royalty payments, or otherwise encumbered or
restricted by any rights of any third party.
(iii) Except as would
not, individually or in the aggregate, reasonably be expected to be
material to the Company or any Subsidiary: (A) no Company
Registered Intellectual Property is involved in any interference,
inter partes, reissue, reexamination, opposition or cancellation
proceeding and (B) all of the Company Registered Intellectual
Property is subsisting and, to the Company’s Knowledge and
excepting any pending applications included therein, valid and
enforceable in all material respects and all necessary
registration, maintenance, renewal, and other relevant filing fees
due through the date of this Agreement have been timely paid and
all necessary documents and certificates in connection therewith
have been timely filed with the relevant Patent, Trademark,
Copyright, domain name registrar, or other authorities in the
United States or foreign jurisdictions, as the case may be, for the
purpose of maintaining such Company Registered Intellectual
Property and those Internet domain names actively used by the
Company or any Subsidiary that are material to any of the
businesses of the Company or any Subsidiary, in full force and
effect.
(iv) Except as set forth
on Schedule 3.1(s)(iv) of the
Disclosure Schedules, neither the Company nor any Subsidiary has
received any written notice of any violation or infringement of any
asserted rights of any other Person, or alleging invalidity of any
Owned Intellectual Property of the Company or any Subsidiary,
challenging the Company’s or any Subsidiary’s ownership
of any Intellectual Property, or otherwise with respect to any
Intellectual Property of any other Person. Neither the Company nor
any Subsidiary is or has been party to any lawsuit, or other
judicial, administrative or arbitral proceeding, relating to its
use of Intellectual Property, including any such lawsuit or
proceeding involving any claim that the Company or any Subsidiary
infringed, misappropriated, diluted or otherwise violated the
Intellectual Property of any third party.
(v) Except as set forth
on Schedule 3.1(s)(v) of the
Disclosure Schedules, to the Company’s Knowledge, no third
party is infringing, in any material respect, any of the Owned
Intellectual Property of the Company or any Subsidiary, and neither
the Company nor any Subsidiary has sent any written communication
to or asserted or threatened any action or claim against any Person
involving or relating to any Owned Intellectual Property. The
conduct of the business of the Company, its Subsidiaries and
Affiliates as currently conducted does not materially infringe,
misappropriate or otherwise violate the Intellectual Property
rights of any Person.
(vi) Except as set forth
on Schedule 3.1(s)(vi) of the
Disclosure Schedules, the Company or its Subsidiary has the right
to use, execute, reproduce, display, perform, modify, enhance,
distribute, prepare derivative works of and sublicense, without
payment to any other Person, all of the Owned Intellectual
Property.
(vii) Except as set forth
on Schedule 3.1(s)(vii) of
the Disclosure Schedules, each of the employees, agents,
consultants, contractors and others who have contributed to or
participated in the discovery, creation or development of any
material Intellectual Property on behalf of the Company or its
Subsidiaries (“Personnel”) (A) has
assigned to the Company or its Subsidiary pursuant to a written and
enforceable agreement all right, title and interest in such
Intellectual Property, which agreement includes a present tense
assignment of Intellectual Property, or (B) is a party to a valid
“work for hire” agreement under which the Company or
its Subsidiary is deemed to be the original author/owner of all
subject matter included in such Intellectual Property. Without
limiting the foregoing, but subject to Schedule 3.1(s)(vii) of
the Disclosure Schedules, the Company or its Subsidiary has secured
from all employees a written and enforceable agreement providing
for the non-disclosure by such Person of confidential information
of the Company and its Subsidiaries.
(viii) Each of the Company
and its Subsidiaries, as applicable, has taken commercially
reasonable steps to maintain the secrecy, confidentiality and value
of all material Trade Secrets included in the Owned Intellectual
Property. Except as set forth on Schedule 3.1(s)(viii) of
the Disclosure Schedules, no Trade Secret or confidential
information of the Company or each Subsidiary has been authorized
to be disclosed, or, to the Company’s Knowledge, has been
disclosed to any of the Company’s or Subsidiary’s past
or present employees or any other Person, in each case, other than
as subject to an agreement restricting the disclosure and use of
such Trade Secret or confidential information.
(ix) All material
Software owned, licensed, used, or otherwise held for use in the
business of the Company or any Subsidiary is in good working order
and condition and is sufficient in all material respects for the
purposes for which it is used in the business of the Company and
each Subsidiary. To the Company’s Knowledge, neither the
Company nor any Subsidiary has experienced any material defects in
design, workmanship or material in connection with the use of such
Software that have not been corrected.
(t) Insurance. The Company and each
Subsidiary are, and following the Closing Date will remain, insured
by insurers of recognized financial responsibility against such
losses and risks and in such amounts as the Company reasonably
believes in good faith to be prudent and customary in the
businesses and locations in which the Company and its Subsidiaries
are engaged. The Company and each Subsidiary has not been refused
any insurance coverage sought or applied for, and the Company and
each Subsidiary do not have any reason to believe that they will
not be able to renew their existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue their business at a cost
that would not have a Material Adverse Effect. All premiums due and
payable under all such policies and bonds have been timely paid,
and the Company and each Subsidiary are in material compliance with
the terms of such policies and bonds. Neither the Company nor any
Subsidiary has received any notice of cancellation of any such
insurance, nor, to the Company’s Knowledge, will it or any
Subsidiary be unable to renew their respective existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would be materially higher than their
existing insurance coverage. The Company (i) maintains
directors’ and officers’ liability insurance and
fiduciary liability insurance with benefits and levels of coverage
as disclosed in Schedule
3.1(t), (ii) has timely paid all premiums on such policies,
and (iii) there has been no lapse in coverage during the term of
such policies.
(u) Transactions With Affiliates and
Employees. Except as set forth in Schedule 3.1(u) of the
Disclosure Schedules:
(i) The Company and its
Subsidiaries are not parties to any Contracts with any Affiliate,
shareholder, employee, member, manager, officer or director of any
the Company or any Subsidiary other than Contracts governing an
individual’s provision of services to the Company or any
Subsidiary and employee benefits and Contracts between the Company
and any Subsidiary.
(ii) Neither the Company
nor any Subsidiary has loaned any amounts that remain outstanding
to any Affiliate, shareholder, employee, member, manager, officer
or director of the Company or any Subsidiary, other than
intercompany loans between the Company or its Subsidiaries, and
neither the Company nor any Subsidiary has borrowed material funds
from any of the foregoing that remains outstanding other than
intercompany loans between the Company and its
Subsidiaries.
(iii) There are no loans,
advances or Indebtedness incurred by the Company or any Subsidiary
from any Affiliate, shareholder, employee, member, manager, officer
or director of the Company or any Subsidiary other than
intercompany loans and advances.
(iv) No Affiliate,
shareholder, employee, member, manager, officer or director of the
Company or a Subsidiary (A) owns any material property right,
tangible or intangible, which is used by the Company or any
Subsidiary in the conduct of its business or (B) owns,
directly or, to the Company’s Knowledge, indirectly, any
Person that is a material customer, supplier, competitor or lessor
of the Company or any Subsidiary.
(v) No “Bad Actor”
Disqualification. The Company has exercised reasonable care,
in accordance with Commission rules and guidance, and has conducted
a factual inquiry including the procurement of relevant information
from each Covered Person (as defined below) or other means, the
nature and scope of which reflect reasonable care under the
relevant facts and circumstances, to determine whether any Covered
Person (as defined below) is subject to any of the “bad
actor” disqualifications described in Rule 506(d)(1)(i)
to (viii) under the Securities Act (“Disqualification
Events”). To the Company’s Knowledge, after
conducting such sufficiently diligent factual inquiries, no Covered
Person is subject to a Disqualification Event, except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3)
under the Securities Act. The Company has complied, to the extent
applicable, with any disclosure obligations under Rule 506(e)
under the Securities Act. “Covered Persons” are
those persons specified in Rule 506(d)(1) under the Securities
Act, including the Company; any predecessor or affiliate of the
Company; any director, executive officer, other officer
participating in the offering, general partner or managing member
of the Company; any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power; any promoter (as defined in
Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of the sale of the Securities; and any
person that has been or will be paid (directly or indirectly)
remuneration for solicitation of purchasers in connection with the
sale of the Securities (a “Solicitor”), any general
partner or managing member of any Solicitor, and any director,
executive officer or other officer participating in the offering of
any Solicitor or general partner or managing member of any
Solicitor.
(w) Certain Fees. No Person will
have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the
Company, any Subsidiary or the Purchaser for any commission, fee or
other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company or any
Subsidiary. The Company shall indemnify, pay, and hold the
Purchaser harmless against, any liability, loss or expense
(including, without limitation, attorneys’ fees and
out-of-pocket expenses) arising in connection with any such right,
interest or claim.
(x) Private Placement. Assuming the
accuracy of the Purchaser’s representations and warranties
set forth in Section 3.3 of this
Agreement and the accuracy of the information disclosed by the
Purchaser to the Company, no registration under the Securities Act
is required for the offer and sale of the Shares by the Company to
the Purchaser under the Transaction Documents.
(y) Registration Rights. Other than
the Purchaser, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities
of the Company.
(z) No Integrated Offering.
Assuming the accuracy of the Purchaser’s representations and
warranties set forth in Section 3.3 of this
Agreement, none of the Company, any Subsidiary nor, to the
Company’s Knowledge, any of its Affiliates or any Person
acting on its behalf has, directly or indirectly, at any time
within the past six (6) months, made any offers or sales of any
Company security or solicited any offers to buy any security under
circumstances that would cause such offers and sales to be
integrated for purposes of Regulation D with the offer and
sale by the Company of the Shares or that otherwise would cause the
exemption from registration under Regulation D to be unavailable in
connection with the offer and sale by the Company of the
Shares.
(aa) Investment Company. Neither the
Company nor any Subsidiary is required to be registered as, and
immediately after receipt of payment for the Shares will not be
required to be registered as, an “investment company,”
an “affiliated person” of, “promoter” for
or “principal underwriter” for, an entity
“controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as
amended.
(bb) Unlawful Payments. Neither the
Company nor any Subsidiary, nor any directors, officers, nor to the
Company’s Knowledge, employees, agents or other Persons
acting at the direction of or on behalf of the Company or any
Subsidiary has, in the course of its actions for, or on behalf of,
the Company or any Subsidiary: (i) directly or indirectly, used any
corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to foreign or domestic political
activity; (ii) made any direct or indirect unlawful payments to any
foreign or domestic governmental officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds; (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any other
unlawful bribe, rebate, payoff, influence payment, kickback or
other material unlawful payment to any foreign or domestic
government official or employee.
(cc) Application of Takeover Protections;
Rights Agreements. The Company does not currently have in
place any stockholder rights plan or similar arrangement relating
to accumulations of beneficial ownership of Common Stock or a
“change in control” of the Company. The Company and its
Board have taken all action necessary to render inapplicable any
control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other
similar anti-takeover provision under the Charter Documents or the
laws of the jurisdiction of its incorporation or otherwise which is
or could become applicable to the Purchaser as a direct consequence
of the transactions contemplated by the Transaction Documents,
including, without limitation, the Company’s issuance of the
Shares and the Purchaser’s ownership of the
Shares.
(dd) Disclosure.
(i) All of the
disclosure furnished by or on behalf of the Company to the
Purchaser regarding the Company and its Subsidiaries, their
respective businesses and the transactions contemplated hereby, is
true and correct in all material respects and does not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not
misleading.
(ii) Any material,
non-public information provided to the Purchaser hereunder will be
disclosed by the Company in the Press Release as contemplated by
Section 4.5
hereof. The Company understands and confirms that the Purchaser
will rely on the foregoing representations in effecting
transactions in securities of the Company. No event or circumstance
has occurred or information exists with respect to the Company or
any Subsidiary or its or their business, properties, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or
disclosed.
(ee) Off Balance Sheet Arrangements.
There is no transaction, arrangement, or other relationship between
the Company (or any Subsidiary) and an unconsolidated or other
affiliated entity that is not reflected on or disclosed in the
Financial Statements.
(ff) Acknowledgment Regarding Purchase of
Shares. The Company acknowledges and agrees that the
Purchaser is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further
acknowledges that the Purchaser is not
acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice
given by the Purchaser or any of their respective representatives
or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Shares.
(gg) Regulation M Compliance. The
Company has not, and to the Company’s Knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares, (ii) sold,
bid for, purchased, or, paid any compensation for soliciting
purchases of, any of the Shares in violation of Regulation M under
the Exchange Act, or (iii) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other
securities of the Company.
(hh) FDA and Other Governmental
Entities. There is no legal or governmental proceeding to
which the Company or any Subsidiary is a party or of which any
property or assets of the Company or any Subsidiary is the subject,
including any proceeding before the United States Food and Drug
Administration (“FDA”), the Centers for
Medicare & Medicaid Services (“CMS”) or any other
comparable federal, state, local or non-U.S. governmental
authority (it being understood that any interaction between the
Company and the FDA, CMS or any such comparable governmental
authority relating to the product development process or the
Company’s laboratory services shall not be deemed proceedings
for purposes of this representation), which, singularly or in the
aggregate, if determined adversely to the Company or any
Subsidiary, would have or would reasonably be expected to have a
Material Adverse Effect; and to the Company’s Knowledge, no
such Proceedings are threatened or contemplated by any Governmental
Entities or threatened by others. The Company and each Subsidiary
is in compliance with all applicable federal, state, local
and non-U.S. laws, regulations, orders and decrees
governing its business as prescribed by the FDA, CMS, or any other
federal, state or non-U.S. governmental authority to the
extent that they may be engaged in the regulation of the
Company’s services, products or product candidates, except
where noncompliance would not, singularly or in the aggregate, be
reasonably likely to have a Material Adverse Effect. All
preclinical studies and clinical trials conducted by or on behalf
of the Company and any subsidiary, including those necessary to
support approval for commercialization of the Company’s or
any Subsidiary’s products or product candidates or to support
coverage and reimbursement of the Company’s testing services
by demonstrating clinical utility, have been conducted by the
Company or any Subsidiary, as applicable, or to the Company’s
Knowledge by third parties, in material compliance with all
applicable federal, state or non-U.S. laws, rules, orders
and regulations.
(ii) OFAC. Neither the Company nor
the Bank nor, to the Company’s Knowledge, any director,
officer, agent, employee, Affiliate or Person acting on behalf of
the Company or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of
the U.S. Treasury Department (“OFAC”); and the Company
will not knowingly, directly or indirectly, use the proceeds of the
sale of the Shares, or lend, contribute or otherwise make available
such proceeds to any Subsidiary, joint venture partner or other
Person or entity, towards any sales or operations in Cuba, Iran,
Syria, Sudan, Myanmar or any other country sanctioned by OFAC or
for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.
(jj) PFIC Status. Neither the
Company nor any of its Subsidiaries is or intends to become a
“passive foreign investment company” within the meaning
of Section 1297 of the U.S. Internal Revenue Code of 1986, as
amended.
(kk) No Additional Agreements.
Except as set forth herein, the Company has no other agreements or
understandings (including, without limitation, side letters) with
any other Person to purchase Shares or other shares of Common Stock
on terms more favorable to such Person than as set forth
herein.
(ll) No General Solicitation or General
Advertising. Neither the Company nor any Person acting on
its behalf has engaged or will engage in any form of general
solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with any offer
or sale of the Shares.
(mm) Shell Company Status. The
Company is not, and has never been, an issuer identified in Rule
144(i)(1).
(nn) Change in Control. The issuance
of the Shares to the Purchaser as contemplated by this Agreement
will not trigger any rights under any “change in
control” provision in any agreements to which the Company or
any of its Subsidiaries is a party, including any employment,
“change in control,” severance or other compensatory
agreements and any benefit plan, which results in payments to the
counterparty or the acceleration of vesting of
benefits.
(oo) Material Contracts. The Company
has made available to the Purchaser or its representatives, prior
to the date hereof, true, correct, and complete copies of each
Material Contract to which the Company or any Subsidiary is a party
or subject (whether written or oral, express or implied) as of the
date of this Agreement. Each Material Contract is a valid and
binding obligation of the Company or its Subsidiary (as applicable)
that is a party thereto and, to the Company’s Knowledge, each
other party to such Material Contract, except for such failures to
be valid and binding as, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Each
such Material Contract is enforceable against the Company or its
Subsidiary (as applicable) that is a party thereto and, to the
Company’s Knowledge, each other party to such Material
Contract in accordance with its terms (subject in each case to
applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors’ rights
generally and general equitable principles, regardless of whether
such enforceability is considered in a Proceeding of law or at
equity), except for such failures to be enforceable as,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor to the Company’s Knowledge, any other party
to a Material Contract, is in material default or material breach
of a Material Contract and there does not exist any event,
condition or omission that would constitute such a default or
breach (whether by lapse of time or notice or both), in each case,
except as, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect.
(pp) Public Disclosure. The Company
has filed all reports, schedules, forms, statements and other
documents required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the
twelve (12) months preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file
such material) on a timely basis or has received a valid extension
of such time of filing and has filed any such Public Disclosure
prior to the expiration of any such extension, except where the
failure to file on a timely basis would not have or reasonably be
expected to result in a Material Adverse Effect and would not have
or reasonably be expected to result in any limitation or
prohibition, or with respect to Rule 144 further delay, on the
Company’s ability to register the Shares for resale on
Form S-1 or the Purchaser’s ability to use Rule 144
to resell any Shares. As of their respective filing dates, or to
the extent corrected by a subsequent amendment, the Public
Disclosure complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of
the Public Disclosure, when filed, contained any untrue statement
of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. Each of the Material Contracts to which the Company
or any Subsidiary is a party or to which the property or assets of
the Company or any of its Subsidiaries are subject has been filed
(or incorporated by reference) as an exhibit to the Public
Disclosure.
(qq) Sarbanes-Oxley; Disclosure Controls;
ICOFR. The Company is in compliance in all material respects
with all of the provisions of the Sarbanes-Oxley Act of 2002 which
are applicable to it. The Company has established disclosure
controls and procedures (as such term is defined in
Rule 13a-15(e) and 15d-15(e) under the Exchange
Act) for the Company and designed such disclosure controls and
procedures to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the
time periods specified in the Commission’s rules and forms.
The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the
Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the Company’s
internal control over financial reporting (as such term is defined
in Rule 13a-15(f) under the Exchange Act) that have
materially affected, or are reasonably likely to materially affect,
the Company’s internal control over financial
reporting.
(rr) Listing and Maintenance
Requirements. The Company’s Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and
the Company has taken no action designed to terminate the
registration of the Common Stock under the Exchange Act, nor has
the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not,
in the twelve (12) months preceding the date hereof, received
written notice from any Trading Market on which the Common Stock is
listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such
Trading Market. The Company is in compliance with all listing and
maintenance requirements of the Principal Trading Market on the
date hereof and the issuance of the Shares will not violate any
such listing or maintenance requirements.
(ss) Solvency. The Company is not as
of the date hereof and, after giving effect to the transactions
contemplated hereby at the Closing, will not be, Insolvent. The
Company is not entering into this Agreement or the transactions
contemplated hereby with the actual intent to hinder, delay or
defraud either present or future creditors.
3.2 Representations and Warranties of the
Major Shareholders. Each Major Shareholder hereby represents
and warrants as of the date hereof and as of the Closing Date to
the Purchaser as follows:
(a) Authority. Such Major
Shareholder has full power, authority and legal capacity to enter
into and to consummate the transactions contemplated by the
applicable Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of
this Agreement and performance by the Major Shareholder of the
transactions contemplated by the Transaction Documents have been
duly authorized by all necessary action on the part of the Major
Shareholder. This Agreement and each Transaction Document has been
duly executed by the Major Shareholder, and when delivered by the
parties hereto in accordance with the terms hereof and thereof,
will constitute the valid and legally binding obligation of the
Major Shareholder, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable
principles of general application.
(b) No Conflicts. The execution,
delivery and performance by the Major Shareholder of this Agreement
and the consummation by the Major Shareholder of the transactions
contemplated hereby will not (i) conflict with, or constitute
a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Major Shareholder
is a party, or (ii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state
securities laws) applicable to the Major Shareholder, except for
such conflicts, defaults, rights or violations which would not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the ability of the Major Shareholder to
perform its obligations hereunder.
(c) Litigation. There is no Action,
pending or, to the Major Shareholder’s Knowledge, threatened,
which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or
the issuance of the Shares pursuant to this Agreement and the other
Transaction Documents or (ii) is reasonably likely to have a
Material Adverse Effect, individually or in the aggregate, if there
were an unfavorable decision. The Major Shareholder is not nor has
been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of
breach of fiduciary duty nor is any Action, to the Major
Shareholder’s Knowledge, currently threatened. There has not
been, and to the Major Shareholder’s Knowledge there is not
pending or contemplated, any investigation by the Commission
involving the Company, the Major Shareholder or any current or
former director or officer of the Company. There are no outstanding
orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Major
Shareholder, which individually or in the aggregate, would
reasonably be expected to have a Material Adverse
Effect.
(d) Other Agreements. Except as
contemplated by or disclosed in the Transaction Documents, such
Major Shareholder is not a party to and has no knowledge of any
agreements, written or oral, relating to the acquisition,
disposition, registration under the Securities Act, or voting of
the securities of the Company.
(e) Prior Legal Matters. Such Major
Shareholder has not been (i) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency
law or the appointment of a receiver, fiscal agent or similar
officer by a court for his business or property; (ii) convicted in
a criminal proceeding or named as a subject of a pending criminal
proceeding (excluding traffic violations and other minor offenses);
(iii) subject to any order, judgment, or decree (not subsequently
reversed, suspended, or vacated) of any court of competent
jurisdiction permanently or temporarily enjoining him from
engaging, or otherwise imposing limits or conditions on his
engagement in any securities, investment advisory, banking,
insurance, or other type of business or acting as an officer or
director of a public company; or (iv) found by a court of competent
jurisdiction in a civil action or by the Commission to have
violated any federal or state securities, commodities or unfair
trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.3 Representations and Warranties of the
Purchaser. The Purchaser hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization; Authority. The
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Cayman Islands with the
requisite corporate power and authority to enter into and to
consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this
Agreement and performance by the Purchaser of the transactions
contemplated by the Transaction Documents have been duly authorized
by all necessary corporate action on the part of the Purchaser.
This Agreement has been duly executed by the Purchaser, and when
delivered by the Purchaser in accordance with the terms hereof and
thereof, will constitute the valid and legally binding obligation
of the Purchaser, enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable
principles of general application.
(b) No Conflicts. Except as
specified in Section
3.3(n), the execution, delivery and performance by the
Purchaser of this Agreement and the consummation by the Purchaser
of the transactions contemplated hereby will not (i) result in
a violation of the organizational documents of the Purchaser,
(ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or
instrument to which the Purchaser is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws) applicable to
the Purchaser, except in the case of clauses (ii) and
(iii) above, for such conflicts, defaults, rights or
violations which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the
ability of the Purchaser to perform its obligations
hereunder.
(c) Investment Intent. The
Purchaser understands that the Shares are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Shares as principal for its own account and not with a view to, or
for distributing or reselling such Shares or any part thereof in
violation of the Securities Act or any applicable state securities
laws, provided,
however, that by making the
representations herein, the Purchaser does not agree to hold any of
the Shares for any minimum period of time and reserves the right at
all times to sell or otherwise dispose of all or any part of such
Shares pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. The
Purchaser does not presently have any agreement, plan or
understanding, directly or indirectly, with any Person to
distribute or effect any distribution of any of the Shares to or
through any Person.
(d) Purchaser Status. At the time
the Purchaser was offered the Shares, it was, and at the date
hereof it is, an “accredited investor” as defined in
Rule 501(a) under the Securities Act.
(e) General Solicitation. The
Purchaser is not purchasing the Shares as a result of any
advertisement, article, notice or other communication regarding the
Shares published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or
any other general advertisement.
(f) Experience of the Purchaser.
The Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment. The Purchaser is
able to bear the economic risk of an investment in the Shares and,
at the present time, is able to afford a complete loss of such
investment.
(g) Access to Information. The
Purchaser acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Shares
and the merits and risks of investing in the Shares;
(ii) access to information about the Company and its
Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor
any other investigation conducted by or on behalf of the Purchaser
or its representatives or counsel shall modify, amend or affect the
Purchaser’s right to rely on the truth, accuracy and
completeness of the Financial Statements and Public Disclosure and
the Company’s representations and warranties contained in the
Transaction Documents. The Purchaser has sought such accounting,
legal and Tax advice as it has considered necessary to make an
informed decision with respect to its acquisition of the
Shares.
(h) Brokers and Finders. No Person
will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the
Company or the Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the
Purchaser.
(i) Independent Investment
Decision. The Purchaser has independently evaluated the
merits of its decision to purchase the Shares pursuant to the
Transaction Documents, and the Purchaser confirms that it has not
relied on the advice of any other Person’s business and/or
legal counsel in making such decision. The Purchaser understands
that nothing in this Agreement or any other materials presented by
or on behalf of the Company to the Purchaser in connection with the
purchase of the Shares constitutes legal, Tax or investment advice.
The Purchaser has consulted such legal, Tax, and investment
advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the
Shares.
(j) Reliance on Exemptions. The
Purchaser understands that the Shares being offered and sold to it
in reliance on specific exemptions from the registration
requirements of U.S. federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and the
Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgements and understandings of the Purchaser
set forth herein in order to determine the availability of such
exemptions and the eligibility of the Purchaser to acquire the
Shares.
(k) No Governmental Review/Not Deposits
and Not Insured. The Purchaser understands that no U.S.
federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of
the Shares or the fairness or suitability of the investment in the
Shares nor have such authorities passed upon or endorsed the merits
of the offering of the Shares.
(l) Residency. The
Purchaser’s office in which its investment decision with
respect to the Shares was made is located at the address
immediately below the Purchaser’s name set forth in
Section 6.3
hereto.
(m) No Outside Discussion of
Offering. As of the date of this Agreement, the Purchaser
has not discussed the offering with any other party or potential
investors (other than the Company, the Major Shareholders, and the
Purchaser’s authorized representatives, advisors and
counsel), except as expressly permitted under the terms of this
Agreement.
(n) Ownership and Transfer of Patent
Assets. The Purchaser has exclusive, valid, good and
marketable title to, or in the case of leased or subleased Patent
Assets, valid and subsisting leasehold interests in, all of the
Patent Assets, and such Patent Assets are free and clear of all
Liens. The Purchaser has the unrestricted right to contribute,
sell, transfer, assign, convey and deliver to the Company all
right, title and interest in and to, or in the case of leased or
subleased Patent Assets, all right, title and interest in and to
the leasehold interest relating to, the Patent Assets without
penalty or other adverse consequences, subject to the consent of
the parties to the license agreements set forth on Schedule A of the Patent
Assignment to transfer such license agreements to the
Company.
3.4 No Other Representations. The
Company and the Purchaser acknowledge and agree that no party to
this Agreement has made or makes any representations or warranties
with respect to the transactions contemplated hereby other than
those specifically set forth in this Article III and the
Transaction Documents.
ARTICLE
IV
COVENANTS;
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) Compliance with Laws.
Notwithstanding any other provision of this Article IV, the Purchaser
covenants that the Shares may be disposed of only pursuant to an
effective registration statement under, and in compliance with the
requirements of, the Securities Act, or pursuant to an available
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, and in compliance
with any applicable state, federal or foreign securities laws. In
connection with any transfer of the Shares other than (i) pursuant
to an effective registration statement, (ii) to the Company, or
(iii) pursuant to Rule 144 (provided that the transferor
provides the Company with reasonable assurances (in the form of a
seller representation letter and, if applicable, a broker
representation letter) that such securities may be sold pursuant to
such rule), the Company may require the transferor thereof to
provide to the Company and the Transfer Agent, at the
transferor’s expense, an opinion of counsel selected by the
transferor and reasonably acceptable to the Company and the
Transfer Agent, the form and substance of which opinion shall be
reasonably satisfactory to the Company and the Transfer Agent, to
the effect that such transfer does not require registration of such
Shares under the Securities Act.
(b) Legends. Book-entry statements
or stock certificates evidencing the Shares shall bear any legend
as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form, until such
time as they are not required under Section 4.1(c) or
applicable Law:
THESE SECURITIES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS
AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY AND ITS TRANSFER AGENT OR (II) UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT (PROVIDED THAT THE TRANSFEROR PROVIDES
THE COMPANY WITH REASONABLE ASSURANCES (IN THE FORM OF A SELLER
REPRESENTATION LETTER AND, IF APPLICABLE, A BROKER REPRESENTATION
LETTER) THAT THE SECURITIES MAY BE SOLD PURSUANT TO SUCH RULE). NO
REPRESENTATION IS MADE BY THE ISSUER AS TO THE AVAILABILITY OF THE
EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES
OF THESE SECURITIES.
The Company
acknowledges and agrees that the Purchaser may from time to time
pledge, and/or grant a security interest in, some or all of the
legended Shares in connection with applicable securities laws,
pursuant to a bona fide margin agreement in compliance with a bona
fide margin loan. Such a pledge would not be subject to approval or
consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion shall be required in
connection with a subsequent transfer or foreclosure following
default by the Purchaser transferee of the pledge. No notice shall
be required of such pledge, but the Purchaser’s transferee
shall promptly notify the Company of any such subsequent transfer
or foreclosure of such legended Shares. Each Purchaser acknowledges
that the Company shall not be responsible for any pledges relating
to, or the grant of any security interest in, any of the Shares or
for any agreement, understanding or arrangement between the
Purchaser and its pledgee or secured party. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Shares may reasonably request in connection with a pledge or
transfer of the Shares, including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act
to appropriately amend the list of selling stockholders thereunder.
Each Purchaser acknowledges and agrees that, except as otherwise
provided in
Section 4.1(c), any Shares subject to
a pledge or security interest as contemplated by this
Section 4.1(b) shall continue to bear
the legend set forth in this
Section 4.1(b) and be subject to the
restrictions on transfer set forth in
Section 4.1(a).
(c) Removal of Legends. The
restrictive legend set forth in Section 4.1(b) above shall be
removed and the Company shall issue a certificate without such
restrictive legend or any other restrictive legend to the holder of
the applicable Shares upon which it is stamped or issue to such
holder by electronic delivery at the applicable balance account at
the Purchaser’s designated custodian, if (i) such Shares are
registered for resale under the Securities Act, (ii) such Shares
are sold or transferred pursuant to Rule 144, or (iii) such Shares
are eligible for sale under Rule 144, without the requirement for
the Company to be in compliance with the current public information
required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as
to such securities and without volume or manner-of-sale
restrictions. Upon Rule 144 becoming available for the resale of
Shares, without the requirement for the Company to be in compliance
with the current public information required under Rule 144(c)(1)
(or Rule 144(i)(2), if applicable) as to the Shares and without
volume or manner-of-sale restrictions, the Company shall instruct
the Transfer Agent to remove the legend from the Shares and shall
cause its counsel to issue any legend removal opinion required by
the Transfer Agent. Any fees (with respect to the Transfer Agent,
Company counsel or otherwise) associated with the issuance of such
opinion or the removal of such legend shall be borne by the
Company. If a legend is no longer required pursuant to the
foregoing, the Company will no later than three (3) Trading Days
following the delivery by the Purchaser to the Transfer Agent (with
notice to the Company) of a legended certificate or instrument
representing such Shares (endorsed or with stock powers attached,
signatures guaranteed, and otherwise in form necessary to affect
the reissuance and/or transfer) and a representation letter to the
extent required by Section
4.1(a), deliver or cause to be delivered to the Purchaser a
certificate or instrument (as the case may be) representing the
Shares that are free from all restrictive legends. The Company may
not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth
in this Section
4.1(c). Certificates for the Shares free from all
restrictive legends may be transmitted by the Transfer Agent to the
Purchaser by crediting the account of the Purchaser’s prime
broker with the Purchaser’s designated custodian as directed
by the Purchaser.
(d) Acknowledgement. Each Purchaser
hereunder acknowledges its primary responsibilities under the
Securities Act and accordingly will not sell or otherwise transfer
the Shares or any interest therein without complying with the
requirements of the Securities Act.
4.2 Acknowledgment of Dilution. The
Company and each Major Shareholder acknowledges that the issuance
of the Shares will result in dilution of the outstanding shares of
Common Stock. The Company and each Major Shareholder further
acknowledges that its obligations under the Transaction Documents,
including without limitation its obligation to issue the Shares
pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim,
delay or reduction, regardless of the effect of any such dilution
or any claim the Company or the Major Shareholders may have against
the Purchaser and regardless of the dilutive effect that such
issuance may have on the ownership of the other shareholders of the
Company.
4.3 Form D and Blue Sky. The
Company agrees to timely file a Form D with respect to the
Shares as required under Regulation D. The Company, on or
before the Closing Date, shall take such action as the Company
shall reasonably determine is necessary in order to obtain an
exemption for or to qualify the Shares for sale to the Purchaser at
the Closing pursuant to this Agreement under applicable securities
or “Blue Sky” laws of the states of the United States
(or to obtain an exemption from such qualification). The Company shall make all filings and reports
relating to the offer and sale of the Shares required under
applicable securities or “Blue Sky” laws of the states
of the United States following the Closing
Date.
4.4 No Integration. The Company
shall not, and shall use its commercially reasonable efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that
will be integrated with the offer or sale of the Shares in a manner
that would require the registration under the Securities Act of the
sale of the Shares to the Purchaser.
4.5 Securities Law Disclosure;
Publicity. On or before 5:30 p.m., New York City time, on
the fourth (4th) Trading Day
immediately following the execution of this Agreement, the Company
will file a Current Report on Form 8-K with the
Commission describing the terms of the Transaction Documents (and
including as exhibits to such Current Report on
Form 8-K the material Transaction Documents). By 12:00
p.m., Amarillo, Texas time, on the Business Day immediately
following execution of this Agreement, the Company shall issue a
press release (the “Press Release”)
reasonably acceptable to the Purchaser disclosing the transactions
contemplated hereby. Notwithstanding the foregoing, neither the
Company nor any Major Shareholder shall publicly disclose the name
of the Purchaser or any Affiliate or investment adviser of the
Purchaser, or include the name of the Purchaser or any Affiliate or
investment adviser of the Purchaser in any Press Release or in any
filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of the Purchaser, except
to the extent such disclosure is required by applicable Law
(including federal securities law), in which case the Company or
such Major Shareholder, as applicable, shall provide the Purchaser
with prior written notice of such disclosure permitted under this
Section 4.5.
4.6 Non-Public Information. Except
with the express written consent of the Purchaser and unless prior
thereto the Purchaser shall have executed a written agreement
regarding the confidentiality and use of such information, the
Company and each Major Shareholder shall not, and shall cause each
Subsidiary and each of their respective officers, directors,
employees and agents, not to, and the Purchaser shall not directly
solicit the Company, each Major Shareholder, each Subsidiary or any
of their respective officers, directors, employees or agents to
provide the Purchaser with any
material, non-public information regarding the Company or
any Subsidiary from and after the
filing of the Press Release.
4.7 Indemnification.
(a) Indemnification of the
Purchaser. In addition to the indemnity provided in
Section 4.23 of
this Agreement, if any, the Company and each of the Major
Shareholders, jointly and severally, shall indemnify and hold the
Purchaser and its directors, officers, shareholders, members,
partners, employees, agents and investment advisers (and any other
Persons with a functionally equivalent role of a Person holding
such titles notwithstanding a lack of such title or any other
title), each Person who controls the Purchaser (within the meaning
of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners, employees, agents and investment advisers (and
any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title) of such controlling person (each, an
“Indemnified
Person”) harmless from any and all damages,
liabilities, obligations, claims, contingencies, costs and
expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys’ fees and costs of
investigation that any such Indemnified Person may suffer or incur
as a result (collectively, “Losses”) of (i)
any breach of any of the
representations, warranties, covenants or agreements made by
the Company or the Major Shareholders in this Agreement or in the
other Transaction Documents, (ii) any Proceeding instituted against
an Indemnified Person in any capacity, or any of them or their
respective Affiliates, by any shareholder of the Company or other
third party who is not an Affiliate of such Indemnified Person,
with respect to any of the transactions contemplated by this
Agreement, or (iii) any Proceeding involving the Company arising
out of or related to any event, fact, change, occurrence,
development or condition prior to the Closing.
(b) Conduct of Indemnification
Proceedings.
Promptly after receipt by any Indemnified Person of any notice of
any demand, claim or circumstances which would or might give rise
to a claim or the commencement of any Proceeding in respect of
which indemnity may be sought pursuant to Section 4.7(a), such
Indemnified Person shall promptly notify the Company and the Major
Shareholders in writing and the Company and the Major Shareholders
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses; provided that the failure of any
Indemnified Person to so notify the Company or any Major
Shareholder shall not relieve the Company or each Major Shareholder
of its obligations hereunder except to the extent that such failure
shall have materially and adversely prejudiced the Company and the
Major Shareholders (as finally determined by a court of competent
jurisdiction, which determination is not subject to appeal or
further review). In any such Proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
Indemnified Person unless: (i) the Company or the Major
Shareholders and the Indemnified Person shall have mutually agreed
to the retention of such counsel; (ii) the Company and the Major
Shareholders shall have failed promptly to assume the defense of
such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Person in such Proceeding; or (iii) in the
reasonable judgment of counsel to such Indemnified Person,
representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests
between them. Without the prior written consent of the Indemnified
Person, neither the Company nor any Major Shareholder shall effect
any settlement of any pending or threatened Proceeding in respect
of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such
Proceeding.
(c) Once a Loss is
agreed to by the Company or finally adjudicated to be payable to an
Indemnified Person pursuant to this Section 4.7, the Company and
the Major Shareholders shall satisfy its indemnification
obligations to such Indemnified Person within fifteen (15) days of
such agreement or final adjudication by wire transfer of
immediately available funds to such Indemnified Person in
accordance with wire transfer instructions to be provided by such
Indemnified Person.
4.8 Use of
Proceeds. The Company
shall use the net proceeds from the sale of the Shares hereunder
and revenues from the Patent Assets pursuant to the Patent
Assignment, for expansive growth in the Covid-19 rapid tests
business, working capital and general corporate purposes related to
such business goals.
4.9 No Change in Control. The
Company shall use reasonable best efforts to obtain all necessary
irrevocable waivers, adopt any required amendments and make all
appropriate determinations so that the issuance of the Shares to
the Purchaser will not trigger a “change in control” or
other similar provision in any of the agreements to which the
Company or any of its Subsidiaries is a party, including without
limitation any employment, “change in control,”
severance or other agreements and any benefit plan, which results
in payments to the counterparty or the acceleration of vesting of
benefits.
4.10 Reasonable Efforts. Each of the
Company, the Major Shareholders, and the Purchaser agrees to use
its commercially reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and
cooperate with the Purchaser in doing, all commercially reasonable
things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner commercially practicable,
the transactions contemplated by this Agreement and the Transaction
Documents, including using commercially reasonable efforts to
accomplish the following: (a) the taking of all reasonable acts
necessary to cause the conditions to the Closings to be satisfied;
(b) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of
all necessary registrations and filings and the taking of all
reasonable steps necessary to obtain an approval or waiver from, or
to avoid an action or Proceeding by, any Governmental Entities; (c)
the obtaining of all necessary consents, approvals or waivers from
third parties; and (d) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement and the
Transaction Documents, including the assignment of the Patent
Assets pursuant to the Patent Assignment.
4.11 Notice of Certain Events. Each
party hereto shall promptly notify the other party hereto of (a)
any event, condition, fact, circumstance, occurrence, transaction
or other item of which such party becomes aware prior to the
Closing that would constitute a violation or breach of the
Transaction Documents (or a breach of any representation or
warranty contained herein or therein) or, if the same were to
continue to exist as of the Closing Date, would constitute the
non-satisfaction of any of the conditions set forth in Sections 5.1 or
5.2 hereof, and (b)
any event, condition, fact, circumstance, occurrence, transaction
or other item of which such party becomes aware that would have
been required to have been disclosed pursuant to the terms of this
Agreement had such event, condition, fact, circumstance,
occurrence, transaction or other item existed as of the date
hereof; provided that
delivery of any notice pursuant to this Section 4.11 shall not
modify the representations, warranties, covenants, agreements or
obligations of the parties (or remedies with respect thereto) or
the conditions to the obligations of the parties under this
Agreement. Notwithstanding the foregoing, neither party shall be
required to take any action that would jeopardize such
party’s attorney-client privilege.
4.12 Shareholder Litigation. The
Company shall promptly inform the Purchaser of any claim, action,
suit, arbitration, mediation, demand, hearing, investigation or
Proceeding (“Shareholder Litigation”)
against the Company, any Subsidiary or any of the past or present
executive officers or directors of the Company or any Subsidiary
that is threatened in writing or initiated by or on behalf of any
shareholder of the Company in connection with or relating to the
transactions contemplated hereby or by the Transaction Documents.
The Company shall consult with the Purchaser and keep the Purchaser
informed of all material filings and developments relating to any
such Shareholder Litigation.
4.13 Conduct of
Business.
(a) From the date
hereof until the earlier of the Closing Date or the termination of
this Agreement in accordance with its terms, except as contemplated
by this Agreement, the Company will, and will cause its
Subsidiaries to: (i) operate their business in the ordinary course
consistent with past practice, preserve intact the current business
organization of the Company; (ii) use commercially reasonable
efforts to retain the services of their employees, consultants and
agents; (iii) preserve the current relationships of the Company and
its Subsidiaries with material customers and other Persons with
whom the Company and its Subsidiaries have and intend to maintain
significant relations; (iv) pay all applicable federal, state,
local and foreign Taxes when due and payable (other than those
Taxes the payment of which the Company challenges in good faith in
appropriate proceedings and which are fully reserved for to the
extent required by GAAP); (v) maintain, renew, keep in full force
and effect and preserve its rights, franchises and licenses and all
permits necessary for the conduct of the business of the Company
and its Subsidiaries as currently conducted; (vi) comply with all
orders, writs, and decrees applicable to it and to the conduct of
its business and operations, maintain all of its operating assets
in their current condition (normal wear and tear excepted); (vii)
refrain from taking or omitting to take any action that would
constitute a breach of Section 3.1(k); and (viii)
refrain from (A) declaring, setting aside or paying any
distributions or dividends on, or making any distributions (whether
in cash, securities, or other property) in respect of, any of its
capital stock, (B) splitting, combining or reclassifying any of its
capital stock or issuing or authorizing the issuance of any other
securities in respect of, in lieu of or in substitution for capital
stock or any of its other securities, or (C) purchasing, redeeming
or otherwise acquiring any capital stock, assets or other
securities or any rights, warrants or options to acquire any such
capital stock, assets or other securities, other than acquisitions
of investment securities in the ordinary course of
business.
(b) Without limiting
the generality of Section 4.13(a), from the
date hereof until the earlier of the Closing Date or the
termination of this Agreement in accordance with its terms, except
as contemplated by this Agreement or otherwise required by law,
rule or regulation, or by policies imposed by any governmental
entity, without the prior written consent of the Purchaser (which
shall not be unreasonably withheld, conditioned or delayed), the
Company shall not, and it shall not permit any Subsidiary
to:
(i) enter into any
significant new line of business or materially change its lending,
investment, underwriting, risk and asset liability management, and
other banking and operating policies, except as required by
applicable Law or policies imposed by any Governmental
Entity;
(ii) acquire or agree to
acquire by merging or consolidating with, or by purchasing a
portion of the equity interests of, or by any other manner, any
business or any corporation, partnership, joint venture,
association or other business organization or division
thereof;
(iii) make any capital
expenditure in excess of $50,000 individually or in the
aggregate;
(iv) sell, lease,
license, sublicense, abandon, divest, transfer, cancel, abandon or
permit to lapse or expire, dedicate to the public, or otherwise
dispose of, or agree to do any of the foregoing, or otherwise
dispose of material assets or properties, other than any sale,
lease or disposition in the ordinary course of business consistent
with past practice;
(v) incur any
indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise become responsible for
the obligations of, any other Person, except in the ordinary course
of business and consistent with past practice, including as to
amounts;
(vi) amend (A) its
certificate of formation or bylaws or similar organizational
documents or (B) any term of any outstanding security issued by the
Company or any Subsidiary;
(vii) other than, in each
case, in the ordinary course of business and consistent with past
practice or required by applicable Law, grant any salary or wage
increase or increase any employee benefit, including incentive or
bonus payments;
(viii) change any material
accounting policies or procedures (including procedures with
respect to reserves, revenue recognition, payments of accounts
payable and collection of accounts receivable) used by it unless
required by the Company’s independent auditors, applicable
Law or GAAP;
(ix) settle any
litigation involving claims against the Company or any of its
Subsidiaries resulting in monetary damages or other payments in
excess of $50,000;
(x) fail to use
reasonable best efforts to maintain or renew any Owned Intellectual
Property that is registered, issued, or the subject of a pending
application;
(xi) except in the
ordinary course of business consistent with past practices (A)
materially modify, amend in a manner that is adverse to the Company
or terminate any Material Contract, or (B) enter into any Contract
that would have been a Material Contract had it been entered into
prior to the date of this Agreement without the prior written
consent of the Purchaser;
(xii) unless required by
applicable Law, (A) make, change or revoke any Tax election, (B)
settle or compromise any Tax claim; (C) change (or request to
change) any method of accounting for Tax purposes; (D) file any Tax
Return other than on a timely basis in the ordinary course, or file
any amended Tax Return; (E) waive or extend any statute of
limitations in respect of a period within which an assessment or
reassessment of Taxes may be issued (other than any extension
pursuant to an extension to file any Tax Return); (F) knowingly
surrender any claim for a refund of Taxes; or (G) enter into any
“closing agreement” as described in Section 7121 of the
Code (or any similar requirement of Law) with any Governmental
Entity;
(xiii) (A) except to the
extent required by applicable Law or by any Employee Benefit Plan
disclosed to the Purchaser, grant or announce any material equity
or equity-based awards or any other incentive awards or the
material increase in the compensation and employee benefits payable
or to be provided by the Company or any Subsidiary to any of the
employees, directors or other individual service providers of the
Company or any Subsidiary, unless the Company provides the
Purchaser with prior notice of and consults in good faith with the
Purchaser on any such grant or announcement; (B) terminate (other
than for cause) any employees of the Company or any Subsidiary,
except in the ordinary course of business consistent with past
practice with respect to employees with an annual base salary not
to exceed $100,000, (C) hire any employees of the Company or
any Subsidiary, except in the ordinary course of business
consistent with past practice, (D) except to the extent required by
applicable Law or by any Employee Benefit Plan disclosed to the
Purchaser, pay or agree to pay any pension, retirement allowance or
termination or severance pay to any employee, director or other
individual service provider of the Company or any Subsidiary,
whether past or present, except in the ordinary course of business
consistent with past practice, or (E) except as required to ensure
that any Employee Benefit Plan is not then out of compliance with
applicable Law, adopt, materially amend, materially increase
benefits under or terminate any Employee Benefit Plan or any
collective bargaining agreement;
(xiv) authorize,
recommend, propose or announce an intention to adopt a plan of
complete or partial liquidation, dissolution or
winding-up;
(xv) enter into any
other transaction with any of its directors or executive officers
outside the ordinary course of business or any transactions;
or
(xvi) authorize, agree or
commit or resolve to do any of the foregoing.
4.14 Access; Furnishing Information;
Confidentiality.
(a) From and after the
date hereof and until the Closing, the Company shall, and shall
cause each of its Subsidiaries to afford the officers, directors,
employees, attorneys, accountants and other authorized
representatives of the Purchaser reasonable access to the
management personnel, offices, properties, books and records of the
Company and each of its Subsidiaries, other than confidential
supervisory information, at such times during regular business
hours as the Purchaser may reasonably request upon one (1) Business
Days’ notice but not more frequently than once per week, and
shall furnish the Purchaser with all financial, business, operating
and other data and information (including, but not limited to, the
Company’s assets, properties, business and operations) that
the Purchaser, through its directors, officers, employees,
consultants or agents, may reasonably request; provided, that nothing in this
Agreement shall require the furnishing of any information prior to
the Closing which would place at risk the ability of the Company or
its attorneys to claim attorney-client privilege or work product
privilege with respect to any third parties; provided, further, that all information obtained
by the Purchaser pursuant to this Section 4.14(a) shall be
subject to the Purchaser’s confidentiality obligations set
forth in Section 4.14(c) of this
Agreement.
(b) In order to enable
the Purchaser to sell the Shares under Rule 144 (once Rule 144
becomes available for the resale of securities of the Company),
until the earlier of (i) the date that the Shares cease to be
Registrable Stock (and for no less than 12 months from the
Closing), (ii) the date that is 24 months from the Closing or (iii)
the consummation of a Company Business Combination pursuant to
which the Company is no longer a reporting company under the
Exchange Act, the Company shall use its commercially reasonable
efforts to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act. If the Company at any time is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the
Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell
the Shares under Rule 144.
(c) Each party to this
Agreement will hold, and will use commercially reasonable efforts
to cause its respective subsidiaries and their directors, officers,
employees, agents, consultants and advisors to hold, in strict
confidence, unless disclosure to a Governmental Entity is necessary
or appropriate in connection with any necessary regulatory
approval, or request for information or similar process, or unless
compelled to disclose by judicial or administrative process or,
based on the advice of its counsel, by other requirement of law or
the applicable requirements of any Governmental Entity (in which
case, the party permitted to disclose such information shall, to
the extent legally permissible and reasonably practicable, provide
the other party with prior written notice of such permitted
disclosure), all nonpublic records, books, contracts, instruments,
computer data and other data and information (collectively,
“Information”) concerning
the other party hereto furnished to it by such other party or its
representatives pursuant to this Agreement (except to the extent
that such information can be shown to have been (i) previously
known by such party on a nonconfidential basis, (ii) in the public
domain through no fault of such party, or (iii) later lawfully
acquired from other sources by the party to which it was
furnished), and neither party hereto shall release or disclose such
Information to any other person, except its Affiliates, partners,
auditors, attorneys, financial advisors, other consultants and
advisors with the express understanding that such parties will
maintain the confidentiality of the Information and, to the extent
permitted above, to auditors and bank and securities regulatory
authorities; provided,
however, that (1) the
Purchaser is permitted to disclose Information to auditors and bank
and securities regulatory authorities without prior written notice
to the Company in connection with any audit or examination that
does not explicitly reference the Company or this Agreement, and
(2) the Purchaser may identify the Company and the number and value
of the Purchaser’s security holdings in the Company in
accordance with applicable investment reporting and disclosure
regulations or internal policies without prior notice to or consent
from the Company.
4.15 No Additional Issuances. From
the date hereof until the Closing Date (or the date of any
termination of this Agreement in accordance with its terms), except
for the Shares being issued pursuant to this Agreement, the Company
shall not issue or agree to issue any additional shares of Common
Stock, common stock equivalents or other securities.
4.16 No Solicitation.
(a) During the period
from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms and the
Closing, the Company and each Major Shareholder shall not, and
shall cause each Subsidiary not to, and shall direct its respective
employees, agents, officers, directors, representatives and
advisors (collectively, “Representatives”) not to,
directly or indirectly: (i) solicit, initiate, participate in,
enter into or continue discussions, negotiations or transactions
with, or encourage or respond to any inquiries or proposals by, or
provide any information to or otherwise cooperate in any way with,
any Person (other than the Purchaser and its agents,
representatives, advisors) concerning any merger, acquisition,
consolidation, sale of ownership interests and/or assets of the
Company, recapitalization or similar transaction (each, a
“Company Business
Combination”); (ii) enter into any agreement
regarding, continue or otherwise participate in any discussions or
negotiations regarding, or cooperate in any way that would
otherwise reasonably be expected to lead to a Company Business
Combination; or (iii) commence, continue or renew any due
diligence investigation regarding a Company Business Combination.
In addition, the Company and each Major Shareholder shall, and
shall cause its Subsidiaries to, and shall cause their respective
Representatives to, immediately cease any and all existing
discussions or negotiations with any Person with respect to any
Company Business Combination.
(b) Each party shall
promptly (and in no event later than twenty-four (24) hours after
becoming aware of such inquiry, proposal, offer or submission)
notify the other parties if it or, any of its Representatives
receives any inquiry, proposal, offer or submission with respect to
a Company Business Combination, as applicable (including the
identity of the Person making such inquiry or submitting such
proposal, offer or submission), after the execution and delivery of
this Agreement. If either party or its Representatives receive an
inquiry, proposal, offer or submission with respect to a Company
Business Combination, as applicable, such party shall provide the
other parties with a copy of such inquiry, proposal, offer or
submission.
4.17 Resignations of Directors and
Officers; Purchaser’s Director Nominees.
(a) The Company shall,
at the Closing, deliver or cause to be delivered to the Purchaser
the resignation of (a) the directors of the Company, and (b) such
officers of the Company as previously requested by the Purchaser,
with each such resignation to be effective concurrently with the
Closing.
(b) Within three (3)
days following the date of this Agreement, the Board shall hold a
special meeting of the Board in order to (i) expand the number of
directors on the Board from five (5) directors to (7) directors,
and (ii) prepare a list of new directors of the Board, including
replacement directors each of the existing directors of the Board,
each of whom shall be designated by the Purchaser. The parties
agree that the Company shall cause the notice of Special Meeting of
Shareholders to set forth, and submit for stockholder approval at
the Special Meeting, an expanded board of directors comprising the
individuals designated by the Purchaser in accordance with this
Section
4.17(b).
4.18 Special Meeting; Company
Recommendation; Major Shareholders’
Support.
(a) Within ten (10)
days following of the date of this Agreement, the Company shall
establish a record date (which date shall be mutually agreed with
the Purchaser) and duly call and give notice of a special meeting
of the shareholders of the Company (the “Special Meeting”) in
connection with a vote on the following matters: (i) the adoption
of this Agreement and approval of the transactions contemplated by
the Transaction Documents; (ii) the issuance of Shares; (iii) the
amendment and restatement of the Charter Documents, to among other
things, (A) increase the number of authorized shares of Common
Stock to three hundred million (300,000,000) shares, which shall be
the total amount of capital stock of the Company, (B) rename the
Company to “Ainos, Inc.” or any other corporate name
designated by the Purchaser; and (C) decrease the number of
authorized shares of Preferred Stock to zero (0); (iv) the
expansion of the number of directors on the Board and the election
of directors, as designated by the parties in accordance with
Section 4.17;
and (v) any other proposals the parties deem necessary or desirable
to consummate the transactions contemplated by the Transaction
Documents (collectively, the “Company Shareholder
Matters”). The Company and each Major Shareholder
shall use its best efforts to obtain the approval of the Company
Shareholder Matters at the Special Meeting.
(b) The Company shall
include the Company Recommendation in the notice to the
shareholders for the Special Meeting. The board of directors of the
Company shall not (and no committee or subgroup thereof shall)
change, withdraw, withhold, qualify or modify, or publicly propose
to change, withdraw, withhold, qualify or modify, the Company
Recommendation (a “Change in
Recommendation”); provided, that the board of directors
of the Company may make a Change in Recommendation if it determines
in good faith, after consultation with its outside legal counsel,
that a failure to make a Change in Recommendation would reasonably
be expected to constitute a breach by the Company’s board of
directors of its fiduciary obligations to the Company’s
shareholders under applicable Law. The Company agrees that its
obligation to establish a record date for, duly call, give notice
of, convene and hold the Special Meeting for the purpose of seeking
approval of the Company Shareholder Matters shall not be affected
by any Change in Recommendation, and the Company agrees to
establish a record date for, duly call, give notice of, convene and
hold the Special Meeting and submit for the approval of the Company
Shareholder Matters regardless of whether or not there shall have
occurred any Change in Recommendation.
(c) From the date
hereof until any termination of this Agreement in accordance with
its terms, at the Special Meeting (or any meeting of the
stockholders of the Company however called) (or any action by
written consent in lieu of a meeting) or any adjournment thereof,
each Major Shareholder shall vote all shares of Common Stock
beneficially owned by the Major Shareholder (the
“Major Shareholder
Shares”) (or cause them to be voted), or execute
written consents in respect thereof, (i) in favor of the adoption
of the Company Shareholder Matters and the approval of the
transactions contemplated by this Agreement, (ii) against any
action or agreement that would result in a breach of any
representation, warranty, covenant, agreement or other obligation
of the Company in this Agreement, (iii) against any Acquisition
Proposal, and (iv) against any agreement, amendment of the Charter
Documents or other action that is intended or could reasonably be
expected to prevent, impede, interfere with, delay, postpone or
discourage the consummation of the sales of the Shares or the other
transactions contemplated by this Agreement. Any such vote shall be
cast (or consent shall be given) by each Major Shareholder in
accordance with such procedures relating thereto so as to ensure
that it is duly counted, including for purposes of determining that
a quorum is present and for purposes of recording the results of
such vote (or consent).
(d) From the date
hereof until any termination of this Agreement in accordance with
its terms, each Major Shareholder shall not, and shall cause its
Affiliates not to, (i) sell, transfer (including by operation of
law), give, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, gift, pledge,
encumbrance, assignment or other disposition of, any Major
Shareholder Shares, (ii) deposit any Major Shareholder Shares into
a voting trust or grant any proxies or enter into a voting
agreement, power of attorney or voting trust with respect to any
Major Shareholder Shares, or (iii) take any action that would make
any representation or warranty of the Major Shareholder set forth
in this Agreement untrue or incorrect in any material respect or
have the effect of preventing, disabling or materially delaying the
Major Shareholder from performing any of its obligations under this
Agreement.
(e) During the time
period commencing after the Closing and continuing until the
relisting of the Company’s Common Stock as contemplated
pursuant to Section 4.19, the Major
Shareholders shall not,
and shall cause its Affiliates not to, sell, transfer (including by
operation of law), give, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement
or understanding with respect to the sale, transfer, gift, pledge,
encumbrance, assignment or other disposition of, any Major
Shareholder Shares, at a per share price less than twenty four
cents ($0.24) per share of Common Stock.
(f) The Company shall
make all required filings with respect to the transactions
contemplated hereby including the Special Meeting or any written
consent of the Company’s shareholders approving the Company
Shareholder Matters under the Securities Act, the Exchange Act, and
all other applicable federal and state securities Laws and
“blue sky” Laws, including, without limitation, any
proxy statement or information statement required to be prepared in
connection therewith (the “Required Filings”). As
promptly as practicable after the execution of this Agreement, the
Company shall prepare and file with the Commission (i) a proxy
statement on Schedule 14A to the extent it will solicit proxies for
the Special Meeting or (ii) to the extent that it will not solicit
proxies for the Special Meeting or will obtain its shareholder
approval of the Company Shareholder Matters by written consent, an
information statement on Schedule 14C. Each party shall use its
reasonable best efforts to ensure that the information supplied or
to be supplied by such party specifically for inclusion or
incorporation in the Required Filings, at the time any such
Required Filing is filed with the Commission, does not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make
the statements therein not misleading.
(g) Prior to Closing,
each Major Shareholder shall cause any and all Persons Controlled
by such Major Shareholder to execute and deliver to the Purchaser a
joinder agreement (in a form reasonably acceptable to the
Purchaser) whereby such Person agrees to be bound to the terms and
conditions of this Agreement as a Major Shareholder.
4.19 NASDAQ Trading Market
Relisting. After the Closing Date, the Company, the
Purchaser and each Major Shareholder shall each use their
commercially reasonable efforts to cause the Company to be
qualified for the listing requirements to list the shares of the
Company’s Common Stock on one of the following Trading
Markets: the NASDAQ Global Select
Market, the NASDAQ Global Market, or the NASDAQ Capital Market and
to file an application with the Commission and the
applicable NASDAQ Trading Market in connection herewith.
4.20 Additional Working Capital.
Following the Closing Date and at any time and from time to time
prior to the Trading Market relisting of the Company pursuant to
Section 4.19,
to the extent that the Company experiences immediate working
capital needs, the parties will use their commercially reasonable
efforts to enter into an additional agreement whereby the Purchaser
will provide the Company with up to an additional three million
U.S. dollars ($3,000,000) for working capital purposes, in the form
of a loan, or in exchange for additional shares of Common Stock, or
other debt or equity securities.
4.21 Voting Agreement. Within twelve
(12) months following the date of this Agreement, the Company shall
cause each of the principal shareholders of the Company holding ten
percent (10%) or more of the issued and outstanding capital stock
of the Company, to enter into a voting agreement in which the
Purchaser shall have the authority and power to exercise the voting
rights of such shareholders at subsequent shareholders meetings of
the Company.
4.22 Restrictions on Post-Closing Stock
Splits and Company Sales Below FMV. During the time period
commencing after the Closing and continuing until the relisting of
the Company’s Common Stock as contemplated pursuant to
Section 4.19,
the Company shall not (a) split, combine, or reclassify any of its
capital stock, or (b) issue or agree to issue any additional shares
of Common Stock, common stock equivalents or other securities at a
per-share-price (determined on an as converted basis) less than
eighty percent (80%) of the six (6)-month Trading Day
per-share-price average for such security.
4.23 Registration
Rights.
(a) Registration
of Shares. Following the Closing Date, the Company shall, as
promptly as reasonably practicable, (i) file with the Commission
(A) a resale shelf registration statement under the Securities Act
on Form S-3 (or any successor short form registration involving a
similar amount of disclosure) or if then ineligible to use any such
form, then any other available form of registration statement, or
(B) pursuant to Rule 424(b) under the Securities Act, a prospectus
supplement that shall be deemed to be part of an existing shelf
registration statement in accordance with Rule 430B under the
Securities Act, in each case for a public offering of the Shares
received by the Purchaser (the “Registrable Stock”) to be
made on a continuous basis pursuant to Rule 415 under the
Securities Act (the “Registration Statement”)
and, in the case of clause (A) above, use commercially reasonable
efforts to cause the Registration Statement to become effective
within 180 days after the Closing Date, (ii) use commercially
reasonable efforts to cause the Registration Statement to remain
effective until the earlier of (1) the date when all Registrable
Stock covered by the Registration Statement has been sold or (2)
the date when all Registrable Stock covered by the Registration
Statement first becomes eligible for sale pursuant to Rule 144
under the Securities Act without volume limitation or other
restrictions on transfer thereunder, and (iii) use its reasonable
best efforts to prepare and file with the Commission any required
amendments to the Registration Statement and the prospectus
(including any prospectus supplement) used in connection therewith
(“Shelf
Prospectus”). Notwithstanding the foregoing, the
Company shall have no obligation to register or to maintain the
effectiveness of the Registration Statement after all Registrable
Stock covered by the Registration Statement first becomes eligible
for sale pursuant to Rule 144 under the Securities Act without
volume limitation or other restrictions on transfer thereunder. In
the event that the filing deadline contemplated by this
Section 4.23(a)
shall occur during a trading “blackout” period under
the Company’s securities trading policies, then the Company
shall not be required to file the Registration Statement
contemplated by this Section 4.23(a) until such
“blackout” period is no longer applicable. In addition,
the Company may postpone for a reasonable period of time, not to
exceed 60 days, the filing of a Registration Statement contemplated
by this Section
4.23(a) if the Company, in its reasonable good faith
judgment (after consultation with its legal advisors), has
determined that the offer and sale or other disposition of
Registrable Stock pursuant to the Registration Statement would
require public disclosure by the Company of material nonpublic
information that the Company is not otherwise obligated to
disclose, provided, however, that the Company shall file such
Registration Statement as soon as reasonably practicable following
the lapsing or expiration of the circumstances that led the Company
to delay such filing.
(b) Suspension
of Registration. (i) Upon the issuance by the Commission of
a stop order suspending the effectiveness of the Registration
Statement or the initiation of any legal proceeding with respect to
the Registration Statement under Section 8(d) or 8(e) of the
Securities Act, or (ii) if the Registration Statement or Shelf
Prospectus shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading (including,
in any such case, as a result of the non-availability of financial
statements), (iii) the Company, in its reasonable good faith
judgment, has determined that the offer and sale or other
disposition of Registrable Stock would require public disclosure by
the Company of material nonpublic information that is not included
in the Registration Statement and that immediate disclosure of such
information would be materially detrimental to the Company, or (iv)
upon the occurrence or existence of any other development, event,
fact, situation or circumstance relating to the Company that, in
the judgment of a majority of the board of directors of the
Company, makes it appropriate to suspend the availability of the
Registration Statement and/or Shelf Prospectus, (A)(1) in the case
of clause (ii) above, and subject to clauses (iii) and (iv) above,
the Company shall as promptly as reasonably practicable prepare and
file a post-effective amendment to such Registration Statement or a
supplement to the related Shelf Prospectus, as applicable, so that
such Registration Statement or Shelf Prospectus, as applicable,
does not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and subject to
clause (iii) above, in the case of a post-effective amendment to
the Registration Statement, use commercially reasonable efforts to
cause it to become effective as promptly as reasonably practicable,
and (2) in the case of clause (i) above, use commercially
reasonable efforts to cause such stop order to be lifted, and (B)
the Company shall give notice to the Purchaser that the
availability of such Registration Statement or Shelf Prospectus is
suspended (a “Deferral Notice”) and,
upon receipt of any Deferral Notice, the Purchaser agrees that it
shall not sell any Registrable Stock pursuant to the Registration
Statement or Shelf Prospectus until the Purchaser is notified by
the Company of the effectiveness of the post-effective amendment to
the Registration Statement provided for in clause (A) above, or
until it is notified in writing by the Company that the Shelf
Prospectus may be used. In connection with any development, event,
fact, situation or circumstance covered by clause (iii) above, the
Company shall be entitled to exercise its rights pursuant to this
Section 4.23(b) to
suspend the availability of the Registration Statement and Shelf
Prospectus for no more than an aggregate of 60 days in the
aggregate in any one year period.
(c) Registration
Expenses. In connection with the performance of its
obligations under this Section 4.23(b), the Company
shall pay all registration fees under the Securities Act, all
printing expenses and all fees and disbursements of the
Company’s legal counsel, the Company’s independent
registered public accounting firm and any other persons retained by
the Company, and any other expenses incurred by the Company. The
Purchaser shall pay any discounts, commissions and transfer taxes,
if any, attributable to the sale of Registrable Stock and any other
expenses (including the fees and expenses of other advisors and
agents, if any) incurred by it; provided, however, that the Company
shall pay the reasonable and documented out-of-pocket legal fees
and expenses of the Purchaser under this Section
4.23(b).
(d) Purchaser’s
Obligations. The Purchaser (i) shall furnish to the Company
such information as is required to be included under the Securities
Act in the Registration Statement (or any amendment or supplement
thereto) or any Shelf Prospectus, (ii) shall comply with the
prospectus delivery requirements under the Securities Act in
connection with the sale or other distribution of Registrable Stock
pursuant to the Registration Statement, and (iii) shall report to
the Company all sales or other distributions of Registrable Stock
pursuant to the Registration Statement.
(e) Indemnification
and Contribution by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify,
defend and hold harmless the Purchaser, the officers, directors,
agents, partners, members, managers, stockholders, affiliates and
employees of the Purchaser, each person who controls the Purchaser
(within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, partners,
members, managers, stockholders, agents and employees of each such
controlling person, to the fullest extent permitted by applicable
law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable costs
of preparation and investigation and reasonable attorneys’
fees) and expenses (collectively, “Damages”), as incurred,
that arise out of or are based upon (i) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Shelf Prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
to state a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Shelf Prospectus
or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, or (ii)
any violation or alleged violation by the Company of the Securities
Act, the Exchange Act or any state securities law or any rule or
regulation thereunder, in connection with the performance of its
obligations under this Section 4.23, except to the
extent, but only to the extent, that such untrue statements,
alleged untrue statements, omissions or alleged omissions are based
solely upon information regarding the Purchaser furnished in
writing to the Company by the Purchaser expressly for use therein,
or to the extent that such information relates to the Purchaser or
the Purchaser’s proposed method of distribution of
Registrable Stock and was reviewed and approved in writing by the
Purchaser expressly for use in the Registration Statement, such
Shelf Prospectus or such form of Shelf Prospectus or in any
amendment or supplement thereto or, (B) to the extent that any such
Damages arise out of the Purchaser’s (or any other
indemnified person’s) failure to send or give a copy of the
Shelf Prospectus or supplement (as then amended or supplemented),
if required, pursuant to Rule 172 under the Securities Act (or any
successor rule) to the persons asserting an untrue statement or
alleged untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the
sale of Registrable Stock to such person if such statement or
omission was corrected in such Shelf Prospectus or supplement. The
Company shall notify the Purchaser promptly of the institution,
threat or assertion of any proceeding arising from or in connection
with the transactions contemplated by this Section 4.23 of which the
Company is aware. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of an
indemnified party and shall survive the transfer of the Registrable
Stock by the Purchaser. If the indemnification provided for in this
Section 4.23(e)
from the Company is unavailable to an indemnified party hereunder
in respect of any Damages, the Company, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Damages, in
such proportion as is appropriate to reflect the relative fault of
the Company and indemnified party in connection with the actions
which resulted in such Damages, as well as any other relevant
equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The
obligations of the Company and the Purchaser under this
Section 4.23(e)
shall survive the completion of any offering or sale of Registrable
Stock pursuant to any Registration Statement. Each Major
Shareholder shall be jointly and severally responsible with the
Company for the indemnification and contribution obligations
provided in this Section
4.23.
ARTICLE
V
CONDITIONS
PRECEDENT TO CLOSING
5.1 Conditions Precedent to the
Obligations of the Purchaser to Purchase Shares. The
obligation of the Purchaser to acquire the Shares at the Closing is
subject to the fulfillment to the Purchaser’s satisfaction,
on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the
Purchaser:
(a) Representations and Warranties.
The representations and warranties of the Company contained herein
shall be true and correct as of the date when made and as of the
Closing Date, as though made on and as of such date, except for
such representations and warranties that expressly speak as of a
specific date.
(b) Performance. The Company shall
have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with
by it at or prior to the Closing.
(c) No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or Governmental Entity of competent jurisdiction, nor shall
there have been any regulatory communication, that prohibits the
consummation of any of the transactions contemplated by the
Transaction Documents or restricts the Purchaser or any of the
Purchaser’s Affiliates from owning or voting any of the
Shares in accordance with the terms hereof (including if the
Purchaser determines that a filing needs to be made with CFIUS for
the transactions contemplated hereby, such filing has been approved
by CFIUS).
(d) Consents. The Company shall
have obtained in a timely fashion any and all consents, permits,
approvals, registrations and waivers necessary for consummation of
the purchase and sale of the Shares, all of which shall be and
remain so long as necessary in full force and effect.
(e) Company Deliverables. The
Company shall have delivered the Company Deliverables in accordance
with Section 2.2(a).
(f) Termination. This Agreement
shall not have been terminated as to the Purchaser in accordance
with Section 6.15
herein.
(g) Material Adverse
Effect. No Material Adverse
Effect shall have occurred since the date of this
Agreement.
(h) No Change in
Control. The Company shall not
have agreed to enter into or entered into (i) any agreement or
transaction in order to raise capital, or (ii) any transaction that
resulted in, or would result in if consummated, a “change in
control” of the Company, in each case, other than in
connection with the transactions contemplated by the Transaction
Documents.
(i) Shareholder
Approval. At the Special
Meeting (including any adjournments thereof) or an action by
written consent of the majority of the Company’s
shareholders, the Company Shareholder Matters shall have been duly
adopted by the shareholders of the Company in accordance with the
Charter Documents, applicable Law, and applicable Trading Market
rules and regulations (the “Shareholder
Approval”).
5.2 Conditions Precedent to the
Obligations of the Company to sell the Shares. The
Company’s obligation to sell and issue the Shares to the
Purchaser at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the
following conditions, any of which may be waived by the
Company:
(a) Representations and Warranties.
The representations and warranties made by the Purchaser in
Section 3.3
hereof shall be true and correct as of the date when made, and as
of the Closing Date as though made on and as of such date, except
for representations and warranties that expressly speak as of a
specific date.
(b) Performance. The Purchaser
shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing Date.
(c) No Injunction. No statute,
rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction, nor
shall there have been any regulatory communication, that prohibits
the consummation of any of the transactions contemplated by the
Transaction Documents (including if the Purchaser determines that a
filing needs to be made with CFIUS for the transactions
contemplated hereby, such filing has been approved by
CFIUS).
(d) Purchaser Deliverables. The
Purchaser shall have delivered its Purchaser Deliverables in
accordance with Section 2.2(b).
(e) Termination. This Agreement
shall not have been terminated as to the Purchaser in accordance
with Section 6.15
herein.
ARTICLE
VI
MISCELLANEOUS
6.1 Fees and Expenses. Other than
as set forth in the Transaction Documents, the parties hereto shall
be responsible for the payment of all expenses incurred by them in
connection with the preparation and negotiation of the Transaction
Documents and the consummation of the transactions contemplated
hereby. The Company shall pay all Transfer Agent fees, stamp Taxes
and other Taxes and duties levied in connection with the sale and
issuance of the Shares to the Purchaser.
6.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior
agreements, understandings, discussions and representations, oral
or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further
consideration, the Company and the Purchaser will execute and
deliver to the other such further documents as may be reasonably
requested in order to give practical effect to the intention of the
parties under the Transaction Documents.
6.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of (a) the date of transmission,
if such notice or communication is delivered via facsimile or
e-mail (provided the sender receives a machine-generated
confirmation of successful facsimile transmission or e-mail
notification or confirmation of receipt of an e-mail transmission)
at the facsimile number or e-mail address specified in this
Section 6.3
prior to 5:00 p.m., Amarillo, Texas time, on a Trading Day,
(b) the next Trading Day after the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number specified in this Section 6.3 on a day that
is not a Trading Day or later than 5:00 p.m., Amarillo, Texas time,
on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier
service with next day delivery specified, or (d) upon actual
receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as
follows:
If to
the Company:
Amarillo
Biosciences, Inc.
Amarillo, Texas
79110
Attention: Stephen
T. Chen, Chief Executive Officer
Telephone:
(626)407-2570
Facsimile:
(806)376-9301
Email: stcacts@amarbio.com;
stcacts49@gmail.com
With a
copy to:
Amarillo
Biosciences, Inc.
Attention: John
Junyong Lee, Esq.
468 North Camden
Drive, 2nd
Floor
Beverly Hills,
California 90210
Telephone:
(213)300-5220
Facsimile:
(213)607-3105
Email: junylee@gmail.com
If to
the Purchaser:
Ainos,
Inc.
P.O. Box 31119
Grand Pavilion, Hibiscus Way, 802 West Bay Road
Grand Cayman,
KY1-1205 Cayman Islands
Attention: Tsai
Chun Hsien, President
Telephone:
+886-37-581999
Facsimile:
+886-37-583335
Email:
et@tcnt.tw
With a
copy to:
Squire Patton Boggs
(US) LLP
555 South Flower
Street, 31st Floor
Los Angeles,
California 90071
Attention: James L.
Hsu, Esq.
Telephone: +1 (213)
689-5170
Facsimile: +1 (213)
623-4581
Email:
james.hsu@squirepb.com
Da Sheng
International Law Firm
9F.-1., No.22,
Aigou E. Rd., Zhongzheng District, Taipei 100, Taiwan
(R.O.C)
Attention: Jenny
Chiu, Esq.
Telephone:
+886-920053805
Facsimile:
+886-2-23923866
Email:
chiujenny1@gmail.com
or such other
address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 Amendments; Waivers; No Additional
Consideration. No amendment or waiver of any provision of
this Agreement will be effective with respect to any party unless
made in writing and signed by an officer or a duly authorized
representative of such party. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair
the exercise of any such right.
6.5 Construction. The headings
herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party. This Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.6 Successors and Assigns. The
provisions of this Agreement shall inure to the benefit of and be
binding upon the parties and their successors and permitted
assigns. This Agreement, or any rights or obligations hereunder,
may not be assigned by the Company without the prior written
consent of the Purchaser. The Purchaser may assign its rights
hereunder in whole or in part to any (a) Affiliate of the
Purchaser, or (b) Person to whom the Purchaser assigns or transfers
the Shares in compliance with the Transaction Documents and
applicable Law, provided
that such transferee shall agree in writing to be bound, with
respect to the transferred Shares, by the terms and conditions of
this Agreement that apply to the Purchaser.
6.7 No Third-Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, other than Indemnified Persons.
6.8 Governing Law. This Agreement
will be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts made and to be
performed entirely within such State. Each party agrees that all
Proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective Affiliates, employees or agents) may be commenced on
an exclusive basis in the courts of the State of Delaware and the
United States District Courts located in the city of Wilmington
(the “Delaware
Courts”). Each party hereto hereby irrevocably submits
to the non-exclusive jurisdiction of the Delaware Courts for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such Delaware Courts,
or that such Proceeding has been commenced in an improper or
inconvenient forum. Each party hereto hereby irrevocably waives
personal service of process and consents to process being served in
any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
6.9 Survival. The representations,
warranties, agreements, and covenants contained herein shall
survive the Closing and the delivery of the Shares as follows: (a)
the representations and warranties of the Company and each Major
Shareholder set forth in Sections 3.1(a),
3.1(b),
3.1(c),
3.1(d),
3.1(e),
3.1(f),
3.1(g),
3.1(i),
3.1(s),
3.1(w),
3.1(cc),
3.1(ff),
3.1(hh),
3.1(kk),
3.1(gg),
3.1(rr) and
3.2 shall survive
indefinitely, (b) the representations and warranties of the Company
set forth in Sections 3.1(j),
3.1(m),
3.1(ss) shall
survive for the applicable statute of limitations, and (c) all
other representations and warranties of the Company set forth in
Section 3.1
shall survive for a period of twenty-four (24) months following the
Closing and the delivery of the Shares. The representations and
warranties of the Purchaser set forth in Section 3.3 shall not
survive the Closing.
6.10 Execution. This Agreement may
be executed in two (2) or more counterparts, all of which when
taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party, it being understood that
the parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission, or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile signature page were an original
thereof.
6.11 Severability. If any provision
of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and
provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision
in this Agreement.
6.12 Replacement of Shares. If any
certificate or instrument evidencing any of the Shares is
mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company and the Transfer Agent of
such loss, theft or destruction and the execution by the holder
thereof of a customary lost certificate affidavit of that fact and
an agreement to indemnify and hold harmless the Company and the
Transfer Agent for any losses in connection therewith or, if
required by the Transfer Agent, a bond in such form and amount as
is required by the Transfer Agent. The applicants for a new
certificate or instrument under such circumstances shall also pay
any reasonable third party costs associated with the issuance of
such replacement such Shares. If a replacement certificate or
instrument evidencing any of the Shares is requested due to a
mutilation thereof, the Company may require delivery of such
mutilated certificate or instrument as a condition precedent to any
issuance of a replacement.
6.13 Remedies. In addition to being
entitled to exercise all rights provided herein or granted by law,
including recovery of damages, the Purchaser and the Company may be
entitled to specific performance under the Transaction Documents.
The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to
waive in any action for specific performance of any such obligation
(other than in connection with any action for a temporary
restraining order) the defense that a remedy at law would be
adequate.
6.14 Payment Set Aside. To the
extent that the Company makes a payment or payments to the
Purchaser pursuant to any Transaction Document or the Purchaser
enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
6.15 Termination.
(a) This Agreement may
be terminated and the sale and purchase of the Shares abandoned at
any time prior to the Closing:
(i) by the written
consent of the Company and the Purchaser;
(ii) by the Purchaser
upon written notice to the Company, if the Closing has not been
consummated on or prior to 11:59 p.m., Eastern Time, on the Outside
Date; provided,
however, that the right to
terminate this Agreement under this Section 6.15(a)(ii) shall
not be available to the Purchaser if its failure to comply with its
obligations under this Agreement has been the cause of or resulted
in the failure of the Closing to occur on or before such
time;
(iii) by the Purchaser or
the Company, upon written notice to the other party, in the event
that any Governmental Entity shall have issued any order, decree or
injunction or taken any other action restraining, enjoining or
prohibiting any of the transactions contemplated by this Agreement
and such order, decree, injunction or other action shall have
become final and nonappealable;
(iv) by the Purchaser,
upon written notice to the Company, if (A) there has been a breach
of any representation, warranty, covenant or agreement made by the
Company or any Major Shareholder in this Agreement, or any such
representation or warranty shall have become untrue after the date
of this Agreement, in each case such that a closing condition in
Section 5.1(a)
or Section 5.1(b) would not
be satisfied or (B) there has been a Material Adverse Effect since
the date of the Agreement and such event, circumstance, change or
occurrence shall be incapable of being cured within fifteen (15)
days after such event, circumstance, change or
occurrence;
(v) by the Company,
upon written notice to the Purchaser, if there has been a breach of
any representation, warranty, covenant or agreement made by the
Purchaser in this Agreement, or any such representation or warranty
shall have become untrue after the date of this Agreement, in each
case such that a closing condition in Section 5.1(a) or
Section 5.1(b)
would not be satisfied with respect to the Purchaser;
(vi) by the Purchaser,
if the Company directly or indirectly effects, causes to be
effected, or enters into any definitive agreement to effect any
transaction with a third-party with respect to an Acquisition
Proposal or that would reasonably be expected to result in a
“change in control” of the Company;
(vii) by the Purchaser
if, prior to the Special Meeting (including any adjournments
thereof), the Company’s Board shall have made a Change in
Recommendation; or
(viii) by the Purchaser or
the Company if, at the Special Meeting (including any adjournments
thereof), the Company Shareholder Matters are not duly adopted by
the shareholders of the Company by the requisite vote under
applicable Law and the Charter Documents.
(b) Nothing in this
Section 6.15
shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement
or the other Transaction Documents or to impair the right of any
party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction
Documents. Upon a termination in accordance with this Section 6.15, the Company
and the Purchaser shall not have any further obligation or
liability (including arising from such termination) to the
other.
6.16 Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction
Documents, whenever the Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does
not timely perform its related obligations within the periods
therein provided, then the Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in
part without prejudice to its future actions and
rights.
6.17 Adjustments in Common Stock Numbers
and Prices. In the event of any stock split, subdivision,
dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the
holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event
occurring after the date hereof and prior to the Closing, each
reference in any Transaction Document to a number of shares or a
price per share shall be deemed to be amended to appropriately
account for such event.
[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto
have caused this Securities Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first
indicated above.
|
AMARILLO
BIOSCIENCES, INC.
By: /s/ Stephen T.
Chen__________________
Name: Stephen T.
Chen
Title: President
Chief Executive Officer, and Chief Financial Officer
AINOS,
INC.
By: /s/ Tsai Chun Hsien
__________________
Name: Tsai Chun
Hsien
Title:
President
MAJOR SHAREHOLDERS:
/s/ Stephen T.
Chen
Stephen T. Chen,
individually and as Trustee of
Stephen T. Chen and
Virginia M. Chen Living Trust, dated April 12, 2018
/s/ Virginia M.
Chen
Virginia M. Chen,
individually and as Trustee of
Stephen T. Chen and
Virginia M. Chen Living Trust, dated April 12, 2018
/s/ Hung Lan Lee, by Shih-Hsein Kuo as
attorney-in-fact
Hung Lan
Lee
|
[Signature Page to
Securities Purchase Agreement]
EXHIBITS
A:
Form of
Company’s Legal Opinion
B:
Form of
Company’s Secretary’s Certificate
C:
Form of
Company’s Officer’s Certificate
D:
Form of
Purchaser’s Officer’s Certificate
E:
Form of Patent
Assignment
EXHIBIT A
Form of
Company’s Legal Opinion
1.
The Company has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Texas.
2.
The Company has the
corporate power and authority to execute and deliver and to perform
its obligations under the Transaction Documents, including, without
limitation, to issue the Shares.
3.
Each of the
Transaction Documents has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution
and delivery by the Purchaser, each of the Transaction Documents
constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its
terms.
4.
The execution and
delivery by the Company of each of the Transaction Documents and
the performance by the Company of its obligations under such
agreements, including its issuance and sale of the Shares, do not
and will not: (a) result in any violation of the Restated
Certificate of Formation or Bylaws of the Company, (b) require any
consent, approval, license or exemption by, order or authorization
of, or filing, recording or registration by the Company with any
federal or state governmental authority which has not been received
or made, (c) violate any court order, judgment or decree, if any,
(d) violate or conflict with, or result in any contravention of,
any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which
the Company is subject or by which any property or asset of the
Company is bound or affected, or (e) result in a breach of, or
constitute a default under, any Material Contract.
5.
As of the date
hereof, the authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, par value $0.01 per share, and
10,000,000 shares of Preferred Stock, par value $0.01 per share.
Immediately upon the Closing (after giving effect to the sale and
issuance of the Shares at the Closing in accordance with the
Securities Purchase Agreement), the authorized capital stock of the
Company consists of (i) 300,000,000 shares of Common Stock, par
value $0.01, [141,116,351] of which are issued and outstanding as
of the Closing and [5,109,617] of which are reserved for issuance
pursuant to warrants, convertible notes or options and (ii) [no
shares of Preferred Stock shall be authorized].
6.
The Shares being
delivered to the Purchaser pursuant to the Securities Purchase
Agreement have been duly and validly authorized and, when issued,
delivered and paid for as contemplated in the Securities Purchase
Agreement, will be duly and validly issued, fully paid and
non-assessable, and free of any preemptive right or similar rights
contained in the Company’s Restated Certificate of Formation
or Bylaws.
7.
As of the date
hereof, the holders of shares of Common Stock are not entitled to
preemptive rights arising solely by operation of (i) the Governing
Documents or (ii) the Texas Corporations Laws.
8.
No consent,
approval, authorization or order of, or filing with, any
governmental agency or body or any court is required in connection
with the execution, delivery or performance of the Transaction
Documents by the Company, or in connection with the issuance or
sale of the Shares by the Company to the Purchaser, except (i) the
filing with the Commission of one or more Registration Statements
in accordance with the requirements of this Agreement, (ii) filings
required by applicable state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the Commission under
Regulation D of the Securities Act of 1933, as amended, (iv) the
filing of any requisite notices and/or application(s) to the Nasdaq
Capital Market for the issuance and sale of the Shares and the
listing of the Shares for trading thereon in the time and manner
required thereby, (v) the Required Filings required in accordance
with Section 4.18
of the Purchase Agreement, (vi) the Stockholder Approval, and (vii)
those that have been made or obtained prior to the date
hereof.
9.
It is not necessary
in connection with the offer and sale of the Shares to the
Purchaser under the Securities Purchase Agreement to register the
Shares under the Securities Act of 1933, as amended, assuming the
accuracy of the representations and warranties of the Purchaser in
the Securities Purchase Agreement.
10.
To our actual
knowledge, there is no litigation or any governmental proceeding
involving the Company, pending or threatened, that challenges the
validity or enforceability of the Securities Purchase Agreement, or
seeks to enjoin the performance of the Securities Purchase
Agreement by the Company.
EXHIBIT B
Form of Company's
Secretary’s Certificate
The undersigned
hereby certifies that [he][she] is the duly elected, qualified and
acting Corporate Secretary of Amarillo Biosciences, Inc., a Texas
corporation (the “Company”), and that as
such [he][she] is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in
connection with the Securities Purchase Agreement, dated as of
December 24, 2020, by and between the Company and Ainos, Inc.,
a Cayman Islands corporation (the “Securities Purchase
Agreement”), and further certifies in [his][her]
official capacity, in the name and on behalf of the Company, the
items set forth below. Capitalized terms used but not otherwise
defined herein shall have the meaning set forth in the Securities
Purchase Agreement.
1.
Attached hereto as
Exhibit A is a
true, correct and complete copy of the resolutions duly adopted by
the Board at a meeting held on December [_], 2020, which
represent all of the resolutions approving the transactions
contemplated by the Securities Purchase Agreement and the issuance
of the Shares. Such resolutions have not in any way been amended,
modified, revoked or rescinded, have been in full force and effect
since their adoption to and including the date hereof and are now
in full force and effect.
2.
Attached hereto as
Exhibit B is a
true, correct and complete copy of the Restated Certificate of
Formation the Company, together with all amendments thereto
currently in effect, and no action has been taken to further amend,
modify or repeal such Restated Certificate of Formation, the same
being in full force and effect in the attached form as of the date
hereof.
3.
Attached hereto as
Exhibit C is a
true, correct and complete copy of the Bylaws of the Company,
together with all amendments thereto currently in effect, and no
action has been taken to further amend, modify or repeal such
Bylaws, the same being in full force and effect in the attached
form as of the date hereof.
4.
Each person listed
below has been duly elected or appointed to the position(s)
indicated opposite his name and is duly authorized to sign the
Securities Purchase Agreement and each of the Transaction Documents
on behalf of the Company, and the signature appearing opposite such
person’s name below is such person’s genuine
signature.
Name
|
Position
|
Signature
|
|
|
|
|
|
Stephen T.
Chen
|
President, CEO, and
CFO
|
_________________________
|
|
John Junyong
Lee
|
Secretary
|
_________________________
|
|
|
|
|
IN WITNESS WHEREOF,
the undersigned has hereunto set her hand as of this [__] day of
[______], 2021.
|
______________________________
John Junyong
Lee
Secretary
|
I, Stephen T. Chen,
the President and Chief Executive Officer of the Company, hereby
certify that John Junyong Lee is the duly elected, qualified and
acting Secretary of the Company and that the signature set forth
above is his true signature.
|
______________________________
Stephen T.
Chen
President and Chief
Executive Officer
|
EXHIBIT C
Form of
Company’s Officer’s Certificate
The undersigned,
the President, Chief Executive Officer and Chief Financial Officer
of Amarillo Biosciences, Inc., a Texas corporation (the
“Company”), pursuant to
Section 2.2(a)(vi) of the Securities Purchase Agreement, dated
as of December 24, 2020, by and between the Company and Ainos,
Inc., a Cayman Islands corporation (the “Securities Purchase
Agreement”), hereby represents, warrants and certifies
as follows (capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Securities Purchase
Agreement):
1. The
representations and warranties of the Company contained in the
Securities Purchase Agreement are true and correct as of the date
when made and as of the Closing Date, as though made on and as of
such date, except for such representations and warranties that
expressly speak as of a specific date.
2. The
Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
IN WITNESS WHEREOF, the undersigned have
executed this certificate this [__] day of [_____],
2021.
|
______________________________
Stephen T.
Chen
President and Chief
Executive Officer
|
EXHIBIT
D
Form of
Purchaser’s Officer’s Certificate
The undersigned,
the President and Chief Executive Officer of Ainos, Inc., a Cayman
Islands corporation (the “Purchaser”), pursuant to
Section 2.2(b)(vi) of the Securities Purchase Agreement, dated
as of December 24, 2020, by and between the Company and
Purchaser (the “Securities Purchase
Agreement”), hereby represents, warrants and certifies
as follows (capitalized terms used but not otherwise defined herein
shall have the meaning set forth in the Securities Purchase
Agreement):
1. The
representations and warranties of the Purchaser contained in the
Securities Purchase Agreement are true and correct as of the date
when made and as of the Closing Date, as though made on and as of
such date, except for such representations and warranties that
expressly speak as of a specific date.
2. The
Company has performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied
with by it at or prior to the Closing.
IN WITNESS WHEREOF, the undersigned have
executed this certificate this [__] day of [_______],
2021.
|
______________________________
Name: Tsai Chun
Hsien
President and Chief
Executive Officer
|
EXHIBIT E
Form of Patent
Assignment
This Patent
Assignment (this “Patent Assignment”) is
made and effective as of [______], 2021 (the “Effective Date”) by
Ainos, Inc., a Cayman Islands corporation having a principal place
of business at 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road, Grand Cayman, KY1-1205 Cayman Islands (“Assignor”). Capitalized
terms used and not otherwise defined herein that are defined in the
Purchase Agreement (as defined below) shall have the meanings given
to such terms in the Purchase Agreement.
RECITALS
WHEREAS, Assignor is the sole owner of
all rights, title and interest in and to the patents, patent
applications, and patent license agreement set forth in
Schedule A
attached hereto (collectively, the “Patent
Assets”);
WHEREAS, Assignor and Amarillo
Biosciences, Inc., a Texas corporation having a principal place of
business at 4134 Business Park Drive, Amarillo, Texas 79110
(“Assignee”), have entered
into that certain Securities Purchase Agreement, dated as of
December 24, 2020, by and among Assignee, Assignor, and each of the
Major Shareholders named therein (the “Securities Purchase
Agreement”); and
WHEREAS, it is a condition to closing
the transactions contemplated by the Securities Purchase Agreement
that Assignor execute and deliver this Patent Assignment to
Assignee in connection with the sale, transfer and conveyance by
Assignor to Assignee of Assignor’s right, title and interest
to the Patent Assets pursuant to Sections 2.1(d) and
2.2(b)(iii) the Securities Purchase Agreement.
NOW, THEREFORE, IN CONSIDERATION of the
good and valuable consideration that Assignor receives under the
Securities Purchase Agreement, the receipt and sufficiency of which
consideration Assignor hereby acknowledges:
1. Assignor
hereby sells, assigns, transfers and conveys to Assignee, the
entire worldwide right, title and interest of Assignor (a) in, to
and under the Patent Assets (including without limitation, rights
to damages and payments for past, present and future infringements
or misappropriations), and all continuations, divisionals,
substitutions, reexaminations, post-opposition foreign counterpart
patents and applications, reissues and extensions thereof, if any,
existing on the Effective Date; and (b) in, to and under all rights
to apply in any or all countries of the world for patents,
certificates of inventions or other governmental grants on the
Patent Assets, including the right to apply for patents pursuant to
the International Convention for the Protection of Industrial
Property or pursuant to any other convention, treaty, agreement or
understanding.
2. Assignor
hereby authorizes and requests the applicable governmental
agencies, whose duty it is to issue patents and applications as
aforesaid, to record Assignee as the owner of the Patent Assets, to
the same extent as held by Assignor, and to issue all Letters
Patent for such Patent Assets in the name of Assignee, as assignee
of the entire right, title and interest in, to and under the Patent
Assets.
3. Assignor
hereby covenants and agrees to cooperate as commercially reasonable
(and at Assignee’s expense) with Assignee to enable Assignee
to exercise all the right, title and interest conveyed herein. Such
cooperation by Assignor shall include executing any petitions,
oaths, specifications, declarations or other papers, and any other
assistance reasonably necessary for perfecting in Assignee the
right, title and interest herein conveyed.
4. Assignor
hereby covenants and agrees that if Assignor after the Effective
Date receives any business revenues in connection with the Patent
Assets, Assignor will promptly so advise Assignee, will segregate
and hold such business revenues in trust for the benefit of
Assignee and will promptly deliver such funds to an account or
accounts designated by Assignee.
5. Assignor
hereby represents and warrants that Assignor has not entered and
will not enter into any assignment, contract or understanding that
would result in the assignment of less than the entire right, title
and interest to the Patent Assets assigned hereby.
6. The
terms and covenants of this Patent Assignment shall inure to the
benefit of Assignee, its successors, assigns and other legal
representatives, and shall be binding upon Assignor, its
successors, assigns, and legal representatives.
7. This
Patent Assignment shall be governed by the internal law of Taiwan,
R.O.C., without regard to conflict of law principles that would
result in the application of any law other than the law of Taiwan,
R.O.C.
[REMAINDER OF PAGE INTENTIONALLY LEFT
BLANK]
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, Assignor has caused
this Patent Assignment to be executed on its behalf by its duly
authorized officer as of the Effective Date.
|
ASSIGNOR:
AINOS,
INC.
|
|
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Title:
|
|
|
SCHEDULE A
PATENT ASSETS
Owned Patents
A GAS SENSOR AND
MANUFACTURE METHOD THEREOF
|
Taiwan Patent No.: I565944
|
MEDICAL VENTILATOR
CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS
IDENTIFICATION
|
Taiwan Patent No.: I565945
|
GAS
DETECTOR
|
Taiwan Patent No.: D183554
|
Licensed Patents
MEDICAL VENTILATOR
CAPABLE OF ANALYZING INFECTION AND BACTERIA OF PNEUMONIA VIA GAS
IDENTIFICATION
|
Japan Patent No.: JP 6392811
B2
|
GAS
DETECTOR
|
China Patent No.: CN 304042244
S
|
Appendix
B
AMARILLO BIOSCIENCES, INC. RESTATED CERTIFICATE OF
FORMATION
ARTICLE I
AMARILLO
BIOSCIENCES, INC. (the “Corporation”), pursuant to the
provisions of the Texas Business Organizations Code (the
“Code”), hereby adopts a Restated Certificate of
Formation which accurately states the text of the Certificate of
Formation and all amendments thereto that are in effect to date and
as further amended by such Restated Certificate of Formation as
hereinafter set forth and which contains no other change in any
provision thereof except for information permitted to be omitted by
the Code. This document becomes effective when filed by the
Secretary of State. The Corporation is a Texas for-profit
corporation formed June 26, 1984, file number
71028800.
ARTICLE II
The
Certificate of Formation of the Corporation is amended by this
Restated Certificate of Formation as follows:
Article
One is amended to change the name of the Corporation from AMARILLO
BIOSCIENCES, INC. to AINOS, INC.
Article
Three is amended to (a) to change reference of the Texas Business
Corporate Act to the Texas Business Organizations Code under
Article Three, Subsection (1), and to delete Subsections (2)
through and including (6).
Article
Four is amended to grant the Corporation authority to issue Three
Hundred Million (300,000,000) shares of common stock, one cent
($0.01) par value.
Article
Six is amended to be deleted in its entirety.
Article
Seven is amended to delete the Corporation’s registered
office at 4134 Business Park Drive, Amarillo, Texas 79110 and
delete Bernard Cohen as registered agent and to substitute
therefor, as the registered office of the Corporation and
as the registered
agent.
Article
Eight is amended to show only the names and addresses of the
current Board of Directors of the Corporation.
ARTICLE III
The
amendments made by this Restated Certificate of Formation have been
effected in conformity with the provisions of the Code and such
Restated Certificate of Formation
and the
amendments made by thereto were duly adopted by the shareholders of
the Corporation on
the____________day of
_____________, 2021.
The
number of shares of the Corporation outstanding at the time of such
adoption was ___________________and the number
entitled to vote thereon was____________________. The number of
shares voted for such amendments as__________________and the number
of shares voted against such amendments
was__________________.
ARTICLE V
The
amendments effect no change in the amount of stated capital of the
Corporation.
ARTICLE VI
The
Certificate of Formation and all amendments and supplements thereto
are hereby superseded by the following Restated Certificate of
Formation which accurately copies the entire text thereof and as
amended as above set forth:
ARTICLE ONE
The
name of the Corporation is AINOS, INC.
ARTICLE TWO
The
period of duration of the Corporation is perpetual.
ARTICLE THREE
The
purpose or purposes for which the Corporation is organized are to
transact all lawful business of every kind and character for which
a corporation may be incorporated under the Texas Business
Organizations Code.
ARTICLE FOUR
The
Corporation shall have authority to issue Three Hundred Million
(300,000,000) share of common stock, one cent ($0.01) par
value.
No
holder of shares of any class of the Corporation shall have the
preemptive right to subscribe for or acquire additional shares of
the Corporation of the same or any other class, whether such shares
shall be hereby or hereafter authorized; and no holder of shares of
any class of the Corporation shall have any right to acquire any
shares which may be held in the Treasury of the Corporation. All
such additional or Treasury shares may be sold for such
consideration, at such time, and to such person or persons as the
Board of Directors may from time to time determine.
The
Corporation may purchase, directly or indirectly, its own shares to
the extent of the aggregate of unrestricted capital surplus
available therefore and unrestricted reduction surplus available
therefore.
The
right to cumulate votes in the election of directors is expressly
prohibited.
ARTICLE FIVE
The
Corporation shall have the authority to issue Ten Million
(10,000,000) shares of preferred stock, one cent ($0.01) par value.
The Board of Directors of the Corporation shall have authority to
establish series of the unissued preferred stock of the Corporation
by affixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the
shares of any series so established to the same extent that such
designations, preferences, limitatiohns and relative rights could
be stated if fully set forth in this Restated Certificate of
Formation.
ARTICLE SIX
Deleted.
ARTICLE SEVEN
The address of the
Corporation’s registered office is__________________and the
name of its registered agent is____________________.
ARTICLE EIGHT
The
names and addresses of the Directors of the Corporation
are:
CHUN-HSIEN
TSAI
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
TING-CHUAN
LEE
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
CHUNG-YI
TSAI
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
CHUNG-JUNG
TSAI
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
HSIU-CHEN
CHIU
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
YAO-CHUNG
CHIANG
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
WEN-HAN
CHANG
Ainos,
Inc.
P.O.
Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road
Grand
Cayman, KY1-1205 Cayman Islands
ARTICLE NINE
With
respect to a matter for which the affirmative vote of the holders
of a specificed portion of the shares entitled to vote is required
by the Texas Business Organizations Code (the “Code”),
the affirmative vote of the holders of fifty-one percent (51%) of
the shares entitled to vote on that matter is required for
shareholder action on that matter. With respect to a matter for
which the affirmative vote of the holders of a specified portion of
the shares of a class or series is required by the Code, the
affirmative vote of the holders of fifty-one percent (51%) of the
shares of that class or series is required for action of the
holders of that class or series on that matter.
ARTICLE TEN
Except
as otherwise provided by the Code, the shareholders of the
Corporation are authorized to take any action required or
authorized to be taken under the Code or the governing documents of
this Corporation at an annual or special meeting of the
shareholders of the Corporation, without holding a meeting,
providing notice, or taking a vote if shareholders of the
Corporation having at least the minimum number of votes that would
be necessary to take the action that is the subject of the consent
at a meeting, in which each owner or member entitled to vote on the
action is present and votes, sign consent or consents stating the
action taken.
Execution
The
undersigned affirms that the person designated as registered agent
in the Restated Certificate of Formation has consented to the
appointment. The undersigned signs this document subject to the
penalties imposed by law for the submission of a materially false
or fraudulent instrument and certifies under penalty of perjury
that the undersigned is authorized under the provisions of law
governing the entity to execute the filing instrument.
Date: __________________________________
|
AMARILLO
BIOSCIENCES, INC.
[Renamed AINOS,
INC.]
|
______________________________________
John
Junyong Lee Secretary