into the right to receive one share of New CytoDyn Series B Convertible Preferred Stock, par value $0.001 per share. In addition, upon consummation of the Holding Company Reorganization:
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each unexercised and unexpired stock option then outstanding under any equity compensation plan of Old CytoDyn,
whether or not then exercisable, ceased to represent a right to acquire Old CytoDyn common stock and was converted automatically into a right to purchase an identical number of shares of New CytoDyn common stock, on the same terms and conditions as
applied to such stock option immediately prior to the effective time of the Holding Company Reorganization; and
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each Old CytoDyn warrant that was not exercised prior to the effective time of the Holding Company Reorganization
ceased to represent a right to acquire Old CytoDyn common stock and was converted automatically into a right to purchase an identical number of shares of New CytoDyn common stock, on the same terms and conditions as applied to such warrant
immediately prior to the effective time of the Holding Company Reorganization.
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Pursuant to Section 251(g) of the
Delaware General Corporation Law and the provisions of the Transaction Agreement, no exchange of stock certificates or other evidence of ownership of securities is required to effect the Holding Company Reorganization. The shares of capital stock of
New CytoDyn shall continue to be represented by the stock certificates and book entry records that previously represented shares of capital stock of Old CytoDyn.
Promptly following the effective time of the Holding Company Reorganization, Old CytoDyn assigned to New CytoDyn all obligations of Old
CytoDyn under Old CytoDyns equity compensation plans and each stock option agreement and any similar agreement entered into pursuant to such equity compensation plans.
Immediately following the effective time of the Holding Company Reorganization, (i) New CytoDyn issued to ProstaGene, for distribution to
its members, 27,000,000 newly issued New CytoDyn common shares (the New Issuance), (ii) ProstaGene sold to New CytoDyn substantially all of ProstaGenes assets identified in the schedules to the Transaction Agreement,
consisting primarily of intellectual property and intellectual property rights, free and clear of all liens, claims, charges, mortgages, pledges, security interests, equities, restrictions or other encumbrances, (iii) ProstaGene assigned to New
CytoDyn, and New CytoDyn assumed from ProstaGene, the liabilities and obligations expressly set forth in the schedules to the Transaction Agreement, and (iv) the Company transferred to Old CytoDyn the acquired assets of ProstaGene, and the
Company assigned to Old CytoDyn all of the assumed liabilities and obligations of ProstaGene, in exchange for additional stock of Old CytoDyn (with (ii) through (iv) above constituting the ProstaGene Asset Acquisition).
The ProstaGene Transaction, including the Holding Company Reorganization and the ProstaGene Asset Acquisition, did not require the approval of
the Old CytoDyn stockholders. The Company relied upon the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, in connection with the issuance of shares of common stock in the ProstaGene Asset Acquisition.
The foregoing is only a brief description of the Transaction Agreement, the ProstaGene Transaction, the Holding Company Reorganization and the
ProstaGene Asset Acquisition and is qualified in its entirety by reference to the Transaction Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on
Form 8-K
and incorporated by
reference herein.
Escrow Agreement
In connection with the ProstaGene Transaction, on November 16, 2018, New CytoDyn and ProstaGene entered into an Escrow Agreement (the
Escrow Agreement) with the Companys transfer agent, pursuant to which 5,400,000 shares of common stock (the Stock Holdback Shares) will be held by the Companys transfer agent as the sole source of recovery for the
Company against any indemnification claims against ProstaGene or Dr. Pestell. The Escrow Agreement provides for release of the Stock Holdback Shares in three equal installments, on each date that is 6, 12 and 18 months following the closing
date of the ProstaGene Transaction, subject to any indemnity claims that may exist.
Stock Restriction Agreement
In connection with the ProstaGene Transaction, on November 16, 2018, New CytoDyn entered into a Stock Restriction Agreement (the
Stock Restriction Agreement) restricting the transfer of 8,342,000 shares of the common stock payable to Dr. Pestell in the ProstaGene Transaction (the Restricted Shares) for a three-year period from the closing date of
the ProstaGene Transaction. In the event Dr. Pestells employment with the Company is terminated other than by the Company without Cause (as defined in the Employment Agreement (as defined below)) or by Dr. Pestell for Good Reason (as
defined in the Employment Agreement), the Company will have an option to
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