Item 1.01. Entry into a Material Definitive Agreement.
ProstaGene Acquisition Agreement
On August 27, 2018,
CytoDyn Inc. (the
Company
) entered into a Transaction Agreement (the
Acquisition
Agreement
) with ProstaGene, LLC, a Delaware limited liability company (
ProstaGene
), and Dr. Richard
Pestell (
Dr.
Pestell
and, together with ProstaGene, the
Sellers
), pursuant to which the Company agreed, on the terms and subject to the conditions stated therein, to purchase from the Sellers
substantially all of the assets and rights, and to assume certain obligations and liabilities, associated with ProstaGenes business (the
ProstaGene Assets
, and such transaction, the
ProstaGene
Acquisition
).
The Company, Point NewCo, Inc., a wholly owned subsidiary of the Company (
NewCo
), Point Merger Sub, Inc., a
wholly owned subsidiary of NewCo (
MergerCo
), ProstaGene, and Dr. Pestell are parties to the Acquisition Agreement. Pursuant to the Acquisition Agreement, in order to achieve certain tax efficiencies relating to the
ProstaGene Acquisition, the Company will reorganize into a holding company by merging MergerCo into the Company (the
Merger
), with the Company surviving as a wholly owned subsidiary of NewCo (the
Surviving
Corporation
). In the Merger, pursuant to Section 251(g) of the Delaware General Corporation Law, all of the outstanding capital stock of the Company (including any convertible debt, warrants, options, or other rights to acquire the
same) will be converted automatically, on a
share-for-share
basis, into equivalent capital stock of NewCo (and rights to acquire the same). NewCo will become the
successor to the Company for all purposes, including under applicable securities laws. Stockholder approval of the Merger is not required.
As
consideration for the ProstaGene Assets, NewCo will issue to Sellers either (collectively, the
Stock Payment Shares
) (i) an aggregate of 27,000,000 shares of NewCo common stock, par value $0.001 per share (the
NewCo
Common Stock
) or (ii) an aggregate of 270,000 shares of NewCo Series C preferred stock, par value $0.001 per share (
NewCo Series C Preferred Stock
), which will automatically convert into an aggregate of 27,000,000
shares of NewCo Common Stock (the
Conversion Shares
) upon the stockholder approval described below. Whether NewCo Common Stock or NewCo Series C Preferred Stock is issued upon closing depends on whether the stockholders of the
Company have previously approved an amendment to the Companys Certificate of Incorporation to increase sufficiently the number of authorized shares of common stock, as specified in the Acquisition Agreement. If no such increase is obtained,
the Company will issue to Sellers shares of NewCo Series C Preferred Stock, which will be redeemable after June 30, 2019 for cash, at a price per share equal to the closing price of the Companys common stock one trading day before the
closing date of the ProstaGene Acquisition.
In connection with the ProstaGene acquisition, Dr. Pestell has agreed to enter into an employment
agreement upon the closing date of the ProstaGene Acquisition (the
Employment Agreement
) appointing Dr. Pestell as Chief Medical Officer. The Employment Agreement provides for a three year term of employment, unless
terminated by either party pursuant to the terms of the Employment Agreement. The Employment Agreement also provides for, among other things, (i) an annual base salary of $400,000, (ii) a target annual bonus equal to 50% of
Dr. Pestells base salary, (iii) an annual supplemental bonus in an amount to be determined at the sole discretion of the board of directors of the Company, and (iv) other customary benefits described in the form of employment
agreement. The Company will also issue Dr. Pestell a stock option award under its equity incentive plan, covering 350,000 shares of Company Common Stock or NewCo Common Stock, as the case may be, vesting in three equal annual installments over
a three-year period from the grant date.
The Sellers have agreed to a noncompetition covenant commencing on the closing date of the ProstaGene
Acquisition and ending on the later of (i) five (5) years from the closing date, and (ii) one (1) year following the termination of Dr. Pestells employment for any reason. Further, Dr. Pestell has agreed to certain
procedures providing the Company a right of first look to license or acquire any intellectual property created by Dr. Pestell as a principal investigator for certain outside academic institutions, as well as certain procedures for
managing potential conflicts of interest in respect of any such outside research activities.
The Acquisition Agreement includes certain indemnification
rights for NewCo and the Surviving Corporation (and certain of their related parties and affiliates) by the Sellers and for ProstaGene (and certain of its related parties and