Item
1.01 Entry into a Material Definitive Agreement.
Agreement
and Plan of Merger
On
February 4, 2022, Second Sight Medical Products, Inc. (the “Company”) entered into the agreement and plan of merger (the
“Merger Agreement”) with Nano Precision Medical, Inc., a California corporation (“NPM”), and, upon and subject
to the execution of a joinder, NPM Acquisition Corp., a California corporation and a wholly-owned subsidiary of the Company (“Merger
Sub”). As of the date of this Current Report on Form 8-K, the Company filed Merger Sub’s formation documents with the Secretary
of State of the State of California, but the latter has not processed the formation documents. Pursuant to the Merger Agreement and subject
to the terms and conditions set forth therein, NPM will merge with and into Merger Sub (the “Merger”), and upon consummation
of the Merger, Merger Sub will cease to exist and NPM will become a wholly-owned subsidiary of the Company. Upon completion of the Merger
and subject to shareholder approval, the Company will change its name as the Company and NPM may agree in the future and change its trading
symbol as NPM requests in writing following consultation with Nasdaq.
Subject to the terms and conditions
of the Merger Agreement, which has been unanimously approved by the board of directors of the Company (the “Board”) and the
board of directors of NPM, if the Merger is completed, the securities of NPM will be converted into the right to receive an aggregate
of approximately 134,349,464 of shares of the Company’s common stock (the “Merger Shares”) representing approximately
77.32% of the total issued and outstanding shares of common stock of the Company on a fully converted basis, including, without limitation,
giving effect to the conversion of all options, warrants, and any and all other convertible securities.
As
a result of the Merger, at the Effective Time (as defined in the Merger Agreement) and without any further action on the part of the
parties to the Merger Agreement or any shareholders of NPM, the following transactions will occur subject to the conditions set forth
in the Merger Agreement:
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(i)
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any
shares of common stock, no par value per share, of NPM (“NPM Capital Stock”)
held as treasury stock prior to the Effective Time shall be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor;
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(ii)
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any
shares of NPM Capital Stock held by the Company or Merger Sub prior to the Effective Time
shall be cancelled and retired and shall cease to exist, and no consideration shall be delivered
in exchange therefor;
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(iii)
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the
following securities of each NPM securityholder will be converted into the right to receive
the Pro Rata Portion (as defined in the Merger Agreement) of the Merger Shares, provided,
however, that no fractional shares of the Company will be issued as a result of the Merger:
(x) the aggregate number of issued and outstanding shares of NPM Capital Stock prior to the
Effective Time; (y) the aggregate number shares of NPM Capital Stock issuable upon the exercise
of all NPM stock options outstanding as of immediately prior to the Effective Time, as if
exercised by means of a net cashless exercise and subject to the assumptions under the Merger
Agreement; and (z) the aggregate number of shares of NPM Capital Stock issuable upon exercise
of NPM warrants outstanding as of immediately prior to the Effective Time that are converted
into the right to acquire securities of the Company in accordance with their terms and subject
to the assumptions under the Merger Agreement, provided that each NPM stock option that is
outstanding shall be cancelled and the Company will assume and/or issue in exchange a Company’s
replacement stock option, under its then effective Equity incentive plan(s) of the Company.
In the event that any such NPM stock option is unable to be so cancelled, the parties of
the Merger Agreement shall negotiate in good faith and use commercially reasonable efforts
to mutually agree as promptly as practicable to such amendments to the Merger Agreement as
are necessary to reflect an assumption, exchange, or similar accommodation, provided that
such assumption, exchange or similar accommodation shall be reasonably satisfactory to each
party of the Merger Agreement;
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(iv)
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it
is anticipated that outstanding NPM warrants will have been “net” exercised prior
to the closing in exchange for shares of NPM Capital Stock in accordance with their terms
and shall no longer be outstanding and shall automatically be cancelled, extinguished, and
retired and shall cease to exist, provided, however, that in the event that any such NPM
warrants are not so exercised, to the extent that by their terms they do not continue to
represent the right to acquire securities of the Company on comparable terms to those of
NPM warrants, then the parties of the Merger Agreement shall negotiate in good faith and
use commercially reasonable efforts to mutually agree as promptly as practicable to such
amendments the Merger Agreement as are necessary to reflect an assumption, exchange or similar
accommodation for such NPM warrants, provided that such assumption, exchange or similar accommodation
shall be reasonably satisfactory to each party of the Merger Agreement; and
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(v)
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each
share of common stock, no par value per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one validly issued,
fully paid, and nonassessable share of NPM Capital Stock.
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The
Merger Agreement also contemplates that the Company, as promptly as practicable following the receipt of the Required Financial Statements
(as defined in the Merger Agreement), will prepare and file with the Securities and Exchange Commission (the “SEC”) a registration
statement on Form S-4 (the “Registration Statement”) in connection with the registration of Merger Shares in which registration
statement a proxy statement soliciting proxies from the Company’s shareholders in favor of the following proposals shall be included:
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(i)
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the
adoption and approval of the transactions contemplated by the Merger Agreement;
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(ii)
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the
adoption and approval of the issuance of the Merger Shares;
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(iii)
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the
adoption and approval of the amendment to the Company’s articles of incorporation and
bylaws (to the extent necessary to effect the Merger Agreement and the entirety of transactions
contemplated therein); and
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(iv)
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the
adoption and approval of any other proposal including (x) the adjournment proposal and (y)
any proposal in connection with amendments of then-existing or approval of new equity incentive
plan(s) including a performance equity plan authorizing the issuance of 35,000,000 shares
of common stock of the Company, as reasonably necessary to consummate the Merger Agreement.
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The
Merger Agreement contains customary representations, warranties, and covenants made by each of the Company and NPM, including, inter
alia, covenants by each party to (i) continue conducting its respective businesses in the ordinary course, consistent with past practice
during the interim period between the execution of the Merger Agreement and consummation of the Merger, (ii) not engage in certain specified
kinds of transactions during that period, and (iii) unless the Merger Agreement is validly terminated, hold a meeting of its shareholders
to vote upon the transactions contemplated therein following the effectiveness of the Registration Statement.
The
consummation of the Merger is subject to certain conditions, including (i) the approval and adoption of the Merger Agreement and the
transactions contemplated therein by NPM shareholders, (ii) the approval of the issuance of the Merger Shares and other aforementioned
proposals by the Company’s shareholders, (iii) the effectiveness of the Registration Statement, (iv) no material adverse effect,
(v) the Company’s receipt of an opinion of a reputable financial adviser of national standing that based upon and subject to the
qualifications and assumptions set forth therein, the issuance of the Merger Shares is fair, from a financial point of view, to the Company’s
shareholders, (vi) execution of certain lock-up agreements by the management and certain shareholders of NPM, and (vii) other customary
conditions.
The
Company and NPM have agreed that, during the period commencing upon the execution of the Merger Agreement and ending at the earlier of
the date of termination of the Merger Agreement and the Effective Time, the Company and NPM will be subject to “non-solicitation”
restrictions and will not, subject to certain exceptions set forth in the Merger Agreement including but not limited to those exceptions
connected to superior proposals, (i) initiate, solicit, seek or knowingly encourage or support any inquiries, proposals or offers relating
to alternative acquisition transactions, (ii) engage in discussions or negotiations regarding, or provide any non-public information
in connection with, alternative business combination transactions with third parties, or (iii) enter any letter of intent, definitive
agreement, or other similar type of arrangement requiring the respective party to abandon, terminate or fail to consummate the Merger.
In
connection with the Merger Agreement, the parties are expected to establish an integration committee composed of senior executive officers
of NPM and the Company, principally responsible for integration matters relating to the Merger and shall be responsible for proposing
recommendations in connection with the integration of the Company and the NPM and their respective businesses, assets, and organizations.
Post-Closing
Governance
It
is anticipated that at and immediately after the Effective Time, the Board will be comprised of five (5) directors, consisting of Adam
Mendelsohn, Aaron Mendelsohn, Dean Baker, Gregg Williams, and Alexandra Larson. It is further anticipated, following the consummation
of the Merger, Adam Mendelsohn will serve as chief executive officer of the combined company, and Brigid Makes will serve as chief financial
officer. Adam Mendelsohn is the son of Aaron Mendelsohn.
The
Interest of Certain Directors
Three
of the Company’s directors, Gregg Williams, Aaron Mendelsohn, and Dean Baker are also directors of NPM and also have substantial
investments and financial interests in NPM.
SAFE
Agreement to advance $8 Million
On
February 4, 2022, the Company and NPM entered into an agreement (“SAFE”) whereby the Company would provide to NPM pending
closing of the Merger an investment advance of $8 million which effective upon the termination date of the Merger Agreement without completion
of the Merger will result in NPM’s issuing to the Company that number of shares of NPM Capital Stock which following that issuance
will equal not less than 2.133% of the issued and outstanding shares of NPM Capital Stock assuming exercise or conversion of all outstanding
vested and unvested options, warrants, and convertible securities. In the event NPM completes an equity financing at a lower valuation,
the Company may be eligible to receive additional shares of NPM Capital Stock as set forth in the SAFE. If the Merger is completed, the
SAFE will terminate.
Termination
Either
NPM or the Company may terminate the Merger Agreement if, among certain other circumstances, (i) the Merger has not become effective
on or before June 30, 2022 (subject to certain extensions until September 30, 2022), (ii) NPM’s shareholders fail to approve and
adopt the Merger Agreement and the Combination, or the Company’s shareholders fail to approve the issuance of the Merger Shares
and/or the adoption of other proposal necessary for the consummation of the Merger; (iii) to allow such party to enter into a definitive
agreement for an alternative business combination transaction that constitutes a “superior offer.”
The
Merger Agreement provides for the payment of a “termination fee” upon the termination of the Merger Agreement in specified
circumstances. If the Merger Agreement is terminated by NPM by reason that the aggregate amount of cash, cash equivalents, and marketable
securities of the Company and Merger Sub, less amounts of any advances made to NPM, as of immediately prior to the closing of the Merger
is less than $64,000,000, then the Company will be obligated to pay to the NPM the sum of $1 million in cash, within 30 days after the
termination of the Merger Agreement. In the event, this Agreement is terminated by NPM as a result of an adverse change in the recommendation
of the Company’s Board or entering certain competing acquisition arrangements by the Company, the Company will be obligated to
pay a termination fee of $5 million within 30 days after such termination. Analogously, in the event, this Agreement is terminated by
the Company as a result of entering certain competing acquisition arrangements by NPM, the latter will be obligated to pay a termination
fee of $5 million within 30 days after such termination.
The
foregoing description of the Merger Agreement and SAFE does not purport to be complete and is qualified in its entirety by the full
text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated by reference herein, and by the
full text of the SAFE, a copy of which is filed as Exhibit 10.1 hereto, and is incorporated by reference herein. The Merger
Agreement and the SAFE have been attached to provide investors with information regarding its terms. It is not intended to provide
any other factual information about the Company or NPM. In particular, the assertions embodied in the representations and warranties
contained in the Merger Agreement are qualified by information in confidential disclosure schedules provided by each of the Company
and NPM to each other in connection with the execution of the Merger Agreement. These confidential disclosure schedules contain
information that modifies, qualifies, and creates exceptions to the representations and warranties and certain covenants set forth
in the Merger Agreement. Moreover, the representations and warranties in the Merger Agreement were used for the purpose of
allocating risk between the Company and NPM rather than establishing matters as facts and were made only as of the date of the
Merger Agreement (or such other date or dates as may be specified in the Merger Agreement). Accordingly, the representations and
warranties in the Merger Agreement should not be relied on as a characterization of the actual state of facts about the Company or
NPM. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the
Merger Agreement, which subsequent information may or may not be fully reflected in the public disclosures of the
Company.