UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current
Report
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 12, 2024
__________________
Psychemedics Corporation
(Exact name of registrant as specified in its
charter)
| Delaware |
001-13738 |
58-1701987 |
(State or other jurisdiction
of incorporation) |
(Commission
File Number) |
(I.R.S. Employer
Identification
No.) |
5220
Spring Valley Road, Suite 230
Dallas, TX
|
75254 |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including
area code (800) 527-7424
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
☒ Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: |
|
Trading Symbol(s) |
|
Name of each exchange on which registered: |
| Common Stock, $0.005 par value per share |
|
PMD |
|
The Nasdaq Stock Market, LLC |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 12, 2024, in connection with the Transaction
(as defined below), Psychemedics Corporation (“Psychemedics” or the “Company”) entered into a stock purchase agreement
(the “Purchase Agreement”) with 3K Limited Partnership, a Delaware limited partnership (“3K”), Peter H. Kamin,
a natural person in his individual capacity (“Mr. Kamin”), the Peter H. Kamin Revocable Trust dated February 2003 (the “2003
Trust”), the Peter H. Kamin Childrens Trust dated March 1997 (the “1997 Trust”), the Peter H. Kamin GST Trust (the “GST”)
and the Peter H. Kamin Family Foundation (the “Foundation”). 3K, Mr. Kamin, the 2003 Trust, the 1997 Trust, the GST and the
Foundation are referred to herein together as the “Investors”.
Pursuant to the Purchase Agreement, the Investors
have agreed to purchase, subject to the terms and conditions thereof, up to 1,595,744 shares (the “Shares”) of the Company’s
common stock, par value $0.005 per share (the “Common Stock”), at a purchase price of $2.35 per share, for an aggregate purchase
price of up to $3,750,000 (the “Stock Sale”). The Company intends to use the proceeds from the Stock Sale to purchase fractional
shares of Common Stock resulting from the proposed Reverse Stock Split (as defined below) and for working capital and general corporate
purposes. Prior to the closing of the Stock Sale (the “Closing Date”), the Company will determine the number of Shares to
be issued (not to exceed 1,595,744 shares) so as to provide the Company with (i) proceeds sufficient to purchase the fractional shares
of Common Stock resulting from the proposed Reverse Stock Split and (ii) an additional $500,000 designated for working capital and general
corporate purposes.
In addition, under the terms of the Purchase
Agreement, in connection with each annual or special meeting of stockholders of the Company occurring after the Closing Date at which
directors of the Company are to be elected, (i) the Company shall include two individuals designated by 3K and satisfying certain eligibility
criteria (each, a “3K Director Nominee”) as nominees for election to the Company’s board of directors (the “Board”)
in its proxy materials and (ii) the Board shall recommend to the stockholders of the Company the election of such 3K Director Nominees
to the Board in the same manner as it recommends the election of the Company’s other director nominees. Additionally, pursuant to
the terms of the Purchase Agreement, from and after the Closing Date, the Company shall not, without 3K’s prior written consent,
increase the size of the Board to more than five directors. In the event the Company’s stockholders are permitted to elect directors
by action by written consent pursuant to the Company’s bylaws and applicable law, the foregoing provisions shall be applied mutatis
mutandis in connection with any such action. The Company has also granted the Investors certain indemnification rights with respect
to the transactions contemplated by the Purchase Agreement.
The consummation of the Stock Sale is subject
to the satisfaction of customary closing conditions, including receiving the requisite approval by the Company’s stockholders of
(i) the terms and conditions of the Purchase Agreement and the proposed Reverse Stock Split (as defined below) and (ii) the filing of
a certificate of amendment to the Company’s amended and restated certificate of incorporation to effect the Reverse Stock Split
(as defined below) on the basis of the final split ratio, which final split ratio will be determined by the Board prior to the closing.
The Shares will be issued and sold without registration
under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2)
of the Securities Act and/or Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws.
The foregoing is only a summary of the material
terms of the Purchase Agreement and does not purport to be a complete description of the rights and obligations of the parties thereunder
and is qualified in its entirety by reference to the Purchase Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report
on Form 8-K (this “Current Report”) and is incorporated by reference herein.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The description set forth in Item 1.01 of this
Current Report is incorporated by reference into this Item 3.02. The Shares to be issued and sold in connection with the Purchase Agreement
have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent
registration under the Securities Act or an applicable exemption from the registration requirements.
On August 12, 2024, the
Board (other than Mr. Kamin and Darius Nevin, each a director of the Company, who were not in attendance and had recused themselves from
the meeting), upon the recommendation of the Transaction Committee of the Board (the “Transaction Committee”) consisting
of independent directors, unanimously approved a transaction whereby the Company would effect a reverse and forward stock split of the
Common Stock, in conjunction with terminating the Company’s public company reporting obligations and delisting the Common Stock
from the Nasdaq Capital Market (the “Transaction”), subject to obtaining the requisite approval of the Company’s stockholders
at the Company’s 2024 Annual Meeting of Stockholders (the “Annual Meeting”), which is currently expected to occur in
the fall of 2024.
Specifically, the participating
members of the Board recommended and approved a transaction whereby the Company would effect a reverse stock split of the Common Stock
at a ratio between 1-for-4,000 and 1-for-6,000 (the “Reverse Stock Split”), followed immediately by a forward stock split
of the Common Stock (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Split”).
Stockholders owning fewer shares of Common Stock than the Reverse Stock Split ratio denominator at the effective time of the Reverse Stock
Split would receive $2.35 in cash, without interest, for each share of Common Stock held by them at the effective time of the Reverse
Stock Split, and thereafter they would no longer be stockholders of the Company. Stockholders owning more shares of Common Stock than
the Reverse Stock Split ratio denominator at the effective time of the Reverse Stock Split (“Continuing Stockholders”) would
not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock
Split, which would immediately follow the Reverse Stock Split, would reconvert whole shares and fractional share interests held by the
Continuing Stockholders back into the same number of shares of the Common Stock held by such Continuing Stockholders immediately before
the effective time of the Reverse Stock Split. As a result of the Forward Stock Split, the total number of shares of Common Stock held
by a Continuing Stockholder would not change as a result of the Reverse Stock Split. The Company estimates that, based on a mid-point
Reverse Stock Split ratio of 1-for-5,000, approximately 1.2 million shares of Common Stock (or approximately 21% of the Common Stock currently
outstanding) would be cashed out in the Transaction and the aggregate cost to the Company of the Transaction would be approximately $2.8
million, plus transaction expenses, which are estimated to be approximately $700,000. The Company expects to fund such costs using the
proceeds from the Stock Sale and cash-on-hand.
The Transaction will
be submitted to a vote of the Company’s stockholders at the Annual Meeting pursuant to the terms of the Purchase Agreement and in
accordance with the Company’s amended and restated certificate of incorporation. The Board has instructed the Company’s management
to prepare and file a preliminary proxy statement with respect to the Transaction. The terms and contemplated timeline of the Transaction,
including the manner of determining the fair value for fractional share interests to be cashed out in the Transaction, will be set forth
in the preliminary proxy statement and a transaction statement on Schedule 13E-3 filed by the Company outlining the Transaction. The Transaction
may be considered a “going private” transaction as defined in Rule 13e-3 promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as it is part of a plan to terminate the registration of the Common Stock under Sections
12(b) and 15(d) of the Exchange Act and suspend the Company’s duty to file periodic reports and other information with the U.S.
Securities and Exchange Commission (the “SEC”) under Section 13(a) thereunder, and to delist the Common Stock from the Nasdaq
Capital Market.
The Board may abandon
the Transaction and terminate the Purchase Agreement at any time prior to the filing and effectiveness of the applicable amendments to
the Company’s amended and restated certificate of incorporation, even after stockholder approval.
On August 12, 2024,
the Company issued a press release announcing the Transaction. The press release is filed as Exhibits 99.1 to this Current Report and
are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| 10.1 |
Stock Purchase Agreement, by and among Psychemedics Corporation, 3K Limited Partnership, Peter H. Kamin, the Peter H. Kamin Revocable Trust dated February 2003, the Peter H. Kamin Childrens Trust dated March 1997, the Peter H. Kamin GST Trust and the Peter H. Kamin Family Foundation, dated August 12, 2024. |
| |
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| 99.1 |
Press Release, dated August 12, 2024. |
| |
|
| 104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Additional Information and Where to Find
It
THIS CURRENT REPORT
IS ONLY A BRIEF DESCRIPTION OF THE TRANSACTION. IT IS NOT A REQUEST FOR OR SOLICITATION OF A PROXY OR AN OFFER TO ACQUIRE OR SELL ANY
SHARES OF COMMON STOCK. THE COMPANY INTENDS TO FILE A PROXY STATEMENT AND OTHER REQUIRED MATERIALS, INCLUDING A SCHEDULE 13E-3, WITH THE
SEC CONCERNING THE TRANSACTION. A COPY OF ALL FINAL PROXY MATERIALS WILL BE SENT TO STOCKHOLDERS PRIOR TO THE 2024 ANNUAL MEETING OF STOCKHOLDERS
AT WHICH THE COMPANY’S STOCKHOLDERS WILL BE ASKED TO VOTE ON THE PROPOSALS DESCRIBED IN THE MATERIALS PROVIDED BY THE COMPANY. THE
COMPANY URGES ALL STOCKHOLDERS TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, AS WELL AS ALL OTHER RELEVANT DOCUMENTS FILED WITH
THE SEC, BECAUSE THOSE DOCUMENTS WILL INCLUDE IMPORTANT INFORMATION. A FREE COPY OF ALL MATERIALS THE COMPANY FILES WITH THE SEC, INCLUDING
THE COMPANY’S SCHEDULE 13E-3 AND PROXY STATEMENT, WILL BE AVAILABLE AT NO COST ON THE SEC’S WEBSITE AT WWW.SEC.GOV. WHEN THOSE
DOCUMENTS BECOME AVAILABLE, THE PROXY STATEMENT AND OTHER DOCUMENTS FILED BY THE COMPANY MAY ALSO BE OBTAINED WITHOUT CHARGE BY DIRECTING
A REQUEST TO PSYCHEMEDICS CORPORATION, 5220 Spring Valley Road, Suite 230, Dallas, Texas 75254,
ATTENTION: SECRETARY.
Psychemedics and its
directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the Transaction. Information
concerning such participants will be set forth in the proxy statement for Psychemedics’ 2024 Annual Meeting of Stockholders, which
will be filed with the SEC on Schedule 14A. To the extent that holdings of Psychemedics’ securities change since the amounts printed
in Psychemedics’ proxy statement, such changes will be reflected on Statements of Change in Ownership on Form 4 or other filings
filed with the SEC. Additional information regarding the interests of such participants in the solicitation of proxies in connection with
the Transaction will be included in the proxy statement.
Forward Looking
Statements
This Current Report
may contain forward-looking statements that are being made pursuant to the Private Securities Litigation Reform Act of 1995, which provides
a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those
statements are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ
materially from those discussed in the statement. Such forward-looking statements include statements about the perceived benefits and
costs of the Transaction, the number of shares of Common Stock that are expected to be cashed out in the Transaction, the timing and stockholder
approval of the terms of the Purchase Agreement and Stock Split, the timing and closing of the transactions contemplated by the Purchase
Agreement and the Company’s intended use of proceeds from the Purchase Agreement. Such forward-looking statements are subject to
a number of known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially
from those described or implied in such forward-looking statements. Accordingly, actual results may differ materially from such forward-looking
statements. The forward-looking statements relating to the Transaction are based on the Company’s current expectations, assumptions,
estimates and projections about the Company and involve significant risks and uncertainties, including the many variables that may impact
the Company’s projected cost savings, variables and risks related to consummation of the Transaction, SEC regulatory review of the
Company’s filings related to the Transaction, the potential failure to satisfy the conditions to the consummation of the Stock Sale,
including obtaining stockholder approval, and the continuing determination of the Board of Directors and Transaction Committee that the
Transaction is in the best interests of all stockholders. The Company assumes no obligation for updating any such forward-looking statements
to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
PSYCHEMEDICS CORPORATION |
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|
|
| Date: August 12, 2024 |
By: |
/s/ Brian Hullinger |
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Name: |
Brian Hullinger |
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Title: |
President and Chief Executive Officer |
Exhibit 10.1
STOCK PURCHASE
AGREEMENT
This
Stock Purchase Agreement (this “Agreement”), dated as of August 12, 2024 (the “Effective Date”),
is made by and among Psychemedics Corporation, a Delaware corporation (the “Company”), 3K Limited Partnership, a Delaware
limited partnership (“3K”), Peter H. Kamin, a natural person in his individual capacity (“Mr. Kamin”),
the Peter H. Kamin Revocable Trust dated February 2003 (the “2003 Trust”), the Peter H. Kamin Childrens Trust dated
March 1997 (the “1997 Trust”), the Peter H. Kamin GST Trust (the “GST”) and the Peter H. Kamin
Family Foundation (the “Foundation”). Each of 3K, Mr. Kamin, the 2003 Trust, the 1997 Trust, the GST and the Foundation
are referred to herein as an “Investor” and together as the “Investors”.
WHEREAS,
the Investors desire to purchase from the Company, and the Company desires to issue and sell to the Investors, shares of common stock
of the Company, par value $0.005 per share (the “Common Stock”), on the terms and subject to the conditions set forth
in this Agreement; and
WHEREAS,
the Company intends to use the proceeds from the issuance and sale of the shares of Common Stock to the Investors hereunder (the “Financing”)
to (a) purchase fractional shares of Common Stock (the “Cash-Out”) resulting from a reverse stock split of the Common
Stock (the “Stock Split”) to be effectuated by the Company in connection with the delisting of the Common Stock from
The Nasdaq Stock Market, LLC and subsequent deregistration (the “Deregistration”) of the Common Stock under Sections
12(b) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), subject to obtaining the
Requisite Stockholder Approval (as defined below) and the satisfaction or waiver of the other conditions described herein, and (b) for
working capital and other general corporate purposes in its sole discretion.
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained in this Agreement,
and for other good and valuable consideration, the parties hereto hereby agree as follows:
1.
Purchase and Sale of Shares.
(a) Subject
to the terms and conditions of this Agreement, at the Closing (as defined below), the Company shall issue and sell to the applicable
Investors, and the applicable Investors shall purchase from the Company, the number of Shares (as defined below) set forth in the Closing
Certificate (as defined below), at a purchase price per Share of $2.35 (the “Stock Price”). The final allocation
of Shares among the Investors and each Investor’s pro rata portion of the Purchase Price (each expressed on a percentage basis)
shall be provided by 3K to the Company in writing not less than three (3) business days prior to the Closing Date.
(b)
The aggregate number of shares of Common Stock to be issued and sold to the Investors hereunder (the “Shares”)
shall equal the quotient of (x) the Purchase Price (as defined below) divided by (y) the Stock Price (rounded down to the nearest
whole share), provided that in no event shall the aggregate number of Shares exceed 1,595,744 shares. The aggregate purchase price
for the Shares (the “Purchase Price”) shall equal the sum of (i) the amount in United States dollars necessary for
the Company to purchase in the Cash-Out all fractional shares of Common Stock resulting from the application of the Approved Split Ratio
(as defined below), such Purchase Price to be determined by the Company, plus (ii) $500,000, also at the Stock Price, provided,
that in no event shall the Purchase Price exceed $3,750,000.
2.
Closing; Delivery of Shares.
(a) The closing of the purchase and sale of Shares contemplated hereby (the “Closing”, and the date that the
Closing occurs, the “Closing Date”) shall be contingent upon the satisfaction or waiver of the conditions set forth
in Section 3. Subject to Sections 3 and 9, the parties hereto agree that the Closing shall occur on the date of,
and concurrently with, the filing of the Charter Amendment with the Delaware Secretary.
(b) Not
less than (3) business days prior to the date of the Transaction Stockholder Meeting (as defined below), each Investor shall deposit
such Investor’s pro rata portion of the Estimated Purchase Price (as defined below), by wire transfer of United States dollars
in immediately available funds, in an escrow account (the “Escrow Account”) established by the Company for such purpose
at a third-party escrow agent (such escrow agent to be reasonably acceptable to the Investors) (the “Escrow Agent”),
pursuant to an escrow agreement to be entered into on or prior to such date by and among the Company, the Escrow Agent and the Investors
(the “Escrow Agreement”) in form and substance reasonably acceptable to the Company and 3K. If any Investor is unable
to fund its portion of the Purchase Price pursuant to this Section 2, 3K shall fund such amount on such Investor’s behalf
in accordance with this Section 2. On the Closing Date (and following the Closing), (i) the Investors and the Company shall deliver
joint written instructions to the Escrow Agent instructing the Escrow Agent to release the Purchase Price (subject to Section 2(c))
to such account(s) of the Company or the Company’s agent (including any transfer, paying or exchange agent designated by the Company)
as may be designated by the Company and (ii) subject to receiving the Underfunded Amount (if any) pursuant to Section 2(c), the
Company shall deliver or cause to be delivered to the applicable Investor the Shares purchased by such Investor in book entry (or if
requested by the applicable Investor in writing at a reasonable time in advance of the Closing, certificated) form, free and clear of
any liens or other restrictions whatsoever (other than those arising under state or federal securities laws), in the name of such Investor
(or such Investor’s nominee in accordance with such Investor’s delivery instructions) or to a custodian designated by such
Investor, as applicable. If this Agreement is terminated prior to the Closing and any funds have, prior to such termination, been wired
by any Investor to the Escrow Account pursuant to this Section 2(b), then promptly after such termination, the Company shall
instruct the Escrow Agent to promptly return such funds to such Investor by wire transfer of United States dollars in immediately available
funds to the account(s) specified by such Investor.
(c) Not
less than five (5) business days before the date of the Transaction Stockholder Meeting, the Company shall deliver to 3K its good faith
estimate of the Purchase Price (the “Estimated Purchase Price”), together with documentation supporting such calculation.
If the Closing occurs and the Estimated Purchase Price exceeds the Purchase Price (such difference, the “Overfunded Amount”),
the Company and Investors shall promptly deliver to the Escrow Agent a joint written instruction directing the Escrow Agent to promptly
return to each Investor such Investor’s pro rata portion of the Overfunded Amount to the applicable account(s) specified by such
Investor. If the Closing occurs and the Purchase Price exceeds the Estimated Purchase Price (such difference, the “Underfunded
Amount”), each Investor shall, within one (1) business day following the Closing, deposit to such account(s) of the Company
or the Company’s agent (including any transfer, paying or exchange agent designated by the Company) as may be designated by the
Company, by wire transfer of United States dollars in immediately available funds, such Investor’s pro rata portion of the Underfunded
Amount subject to Section 1(b).
3.
Closing Conditions.
(a) The
obligations of the Company and the Investors to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction
or valid waiver on or prior to the Closing Date (unless otherwise specified) of the following conditions:
(i) no
Governmental Body of competent jurisdiction shall have rendered, issued, promulgated, enforced or entered any judgment, order, law, rule
or regulation (whether temporary, preliminary or permanent) which is then in effect and which then makes the consummation of the transactions
contemplated hereby illegal or then restrains or prohibits the consummation of the transactions contemplated hereby;
(ii) the
Transaction Closing Conditions shall have been satisfied; and
(iii) this
Agreement shall not have been terminated in accordance with Section 9.
(b) The
obligations of the Company to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or valid
waiver on the Closing Date of the following conditions:
(i) all representations and warranties of the Investors contained in Section 5 shall be true and correct in all material respects
at and as of the Closing Date (without regard to any materiality qualification contained therein), except to the extent such representations
and warranties are specifically made as of a specific date, in which case such representations and warranties shall be true and correct
in all material respects only as of such date (without regard to any materiality qualification contained therein);
(ii) the
Investors shall have performed, satisfied and complied in all material respects with all covenants and agreements required by this Agreement
to be performed, satisfied or complied with by them at or prior to Closing; and
(iii) the
Investors shall have delivered the items set forth in Section 3(e).
(c) The
obligations of the Investors to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction or valid
waiver on the Closing Date of the following conditions:
(i) all
representations and warranties of the Company contained in Section 4 shall be true and correct in all respects at and as of
the Closing Date, except (A) to the extent such representations and warranties are specifically made as of a specific date, in which
case such representations and warranties shall be true and correct only as of such date, and (B) where the failure to be true
and correct (without regard to any materiality or Material Adverse Effect qualification contained therein) has not had a Material
Adverse Effect;
(ii) the
Company shall have performed, satisfied and complied in all material respects with all covenants and agreements required by this Agreement
to be performed, satisfied or complied with by it at or prior to Closing;
(iii) the
Company shall have delivered the items set forth in Section 3(d);
(iv) the
Company shall have received the requisite approval of the Company’s stockholders, at an annual or special meeting of the Company’s
stockholders convened for such purpose (which may include other purposes) (the “Transaction Stockholder Meeting”),
of (A) the terms and conditions of this Agreement, including the issuance of the Shares to the Investors pursuant to this Agreement,
and (B) the Stock Split at a ratio between 1-for-4,000 and 1-for-6,000 (collectively, the “Requisite Stockholder Approval”);
and
(v) the
Company shall have delivered to the Investors a certificate (the “Closing Certificate”) setting forth (A) the
final Stock Split ratio approved by the Company’s board of directors (the “Board”) following the Transaction
Stockholder Meeting (such final approved ratio, the “Approved Split Ratio”), (B) evidence of the Board’s
approval, as recommended by an Independent Committee of the Board, of the filing by the Company with the Secretary of State of the State
of Delaware (the “Delaware Secretary”) of a Certificate of Amendment (the “Charter Amendment”)
to the Company’s Amended and Restated Certificate of Incorporation (the “Charter”) to effect the Stock Split
on the basis of the Approved Split Ratio and (C) the Company’s calculation of the number of Shares and the Purchase Price (the
conditions set forth in Sections 3(c)(iv) and 3(c)(v), together, the “Transaction Closing Conditions”).
(d) The Company shall deliver or cause to be delivered to the Investors the following at the times stated:
(i) on
the date hereof, this Agreement duly executed by the Company;
(ii) not
less than (3) business days prior to the date of the Transaction Stockholder Meeting, the Escrow Agreement duly executed by the Company
and the Escrow Agent;
(iii) on
the Closing Date, a duly executed certificate of the Chief Executive Officer of the Company confirming that the conditions set forth
in Sections 3(c)(i) and 3(c)(ii) have been satisfied;
(iv) on
the Closing Date, a duly executed joint written instructions to the Escrow Agent to release the Purchase Price to the Company;
(v) on
the Closing Date, a duly executed copy of the irrevocable instructions to the Company’s transfer agent (the “Transfer
Agent”) instructing the Transfer Agent to deliver a book entry statement evidencing the Shares to be issued in book entry form,
registered in the name of each applicable Investor; and
(vi) on
the Closing Date, a legal opinion from the Company’s legal counsel with respect to the matters set forth on Schedule 3(d)(vi).
(e) The
Investors shall deliver or cause to be delivered to the Company the following at the times stated:
(i) on
the date hereof, this Agreement duly executed by the Investors;
(ii) not
less than (3) business days prior to the date of the Transaction Stockholder Meeting, the Escrow Agreement duly executed by the Investors;
(iii) on
the Closing Date, duly executed joint written instructions to the Escrow Agent to release the Purchase Price to the Company; and
(iv) on
the Closing Date, a duly executed certificate of an authorized officer or representative of each Investor confirming that the conditions
set forth in Sections 3(b)(i) and 3(b)(ii) have been satisfied.
4.
Company Representations and Warranties. The Company hereby represents and warrants to each Investor as of the Effective
Date as follows:
(a) Organization
and Good Standing. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State
of Delaware. The Company has the corporate power and authority to own, lease and operate its properties and conduct its business as presently
conducted and to enter into, deliver and perform its obligations under this Agreement.
(b) Authorization
of Shares. The Shares have been duly authorized and, when issued and delivered to the applicable Investor against full payment therefor
in accordance with the terms of this Agreement, the Shares will be validly issued, fully paid and non-assessable and will (i) not have
been issued in violation of or subject to any preemptive or similar rights created under the Charter, the Company’s Amended and
Restated Bylaws (the “Bylaws”) or under the laws of the State of Delaware and (ii) not be subject to any liens (other
than liens imposed by applicable securities laws), preemptive rights, rights of first refusal, subscription or other similar rights of
stockholders.
(c) Authorization;
Due Execution; Enforceability. This Agreement has been duly authorized, executed and delivered by the Company and is enforceable
against the Company in accordance with its terms, except as may be limited or otherwise affected by (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws relating to or affecting the rights of creditors generally and (ii) principles of
equity, whether considered at law or equity. The execution, delivery and performance by the Company of this Agreement and each ancillary
document contemplated hereby to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby
have been (or will be when delivered) duly authorized by all necessary corporate action on the part of the Company, and no further approval
or authorization is required on the part of the Company, the Board or its stockholders (except as expressly contemplated by this Agreement).
(d) No
Conflicts. The execution, delivery and performance of this Agreement, including the issuance and sale of the Shares and the consummation
of the transactions contemplated hereby, will not conflict with or result in a material breach or material violation of any of the terms
or provisions of, or constitute a material default under, or result in the creation or imposition of any lien, charge or encumbrance
upon any of the material property or assets of the Company or any of its subsidiaries pursuant to the terms of (i) any indenture, mortgage,
deed of trust, loan agreement, license, lease or any other agreement or instrument to which the Company is a party or by which the Company
is bound or to which any of the material property or assets of the Company is subject, in each case which would reasonably be expected
to have a Material Adverse Effect or materially affect the validity of the Shares or the legal authority or ability of the Company to
perform in all material respects its obligations under the terms of this Agreement; (ii) the organizational documents of the Company;
or (iii) any statute or any judgment, order, rule or regulation of any government, governmental authority or court (each, a “Governmental
Body”) having jurisdiction over the Company or any of its properties that would reasonably be expected to have a Material Adverse
Effect or materially affect the validity of the Shares or the legal authority or ability of the Company to perform in all material respects
its obligations under the terms of this Agreement.
(e) No
Consents. Assuming the accuracy of the representations and warranties of the Investors herein, the Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any Governmental Body, self-regulatory
organization or other person in connection with the execution, delivery and performance by the Company of this Agreement, other than
(i) the filing of the Charter Amendment with the Delaware Secretary, (ii) the filing with the U.S. Securities and Exchange Commission
(the “SEC”) of a proxy statement with respect to the Transaction Stockholder Meeting, (iii) any required filing of
a Notice of Exempt Offering of Securities on Form D with the SEC under Regulation D of the Securities Act of 1933, as amended (the “Securities
Act”), (iv) the filing with the SEC of a registration statement as and when required pursuant to Section 6, (v) any
filings required by applicable state or federal securities laws, (vi) any filings or notices required by The Nasdaq Stock Market
(“Nasdaq”) and (vii) any consent, waiver, authorization or order of, notice to, or filing or registration, the failure
of which to obtain or make would not reasonably be expected to have a Material Adverse Effect.
(f) Capitalization.
As of the Effective Date, the authorized capital stock (the “Capital Stock”) of the Company consists of (i)
50,000,000 shares of Common Stock and (ii) 872,521 shares of preferred stock, par value of $0.005 per share (the “Preferred
Stock”). As of the Effective Date, (A) 5,824,036 shares of Common Stock are issued and outstanding and (B) no shares of
Preferred Stock are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized and validly
issued, are fully paid and are non-assessable and are not subject to preemptive rights. Except as set forth above and disclosed in
the SEC Documents, as of the Effective Date, there are no outstanding options, warrants or other rights to subscribe for, purchase
or acquire from the Company shares of Common Stock or other equity interests in the Company, or securities convertible into or
exchangeable or exercisable for such equity interests. As of the Effective Date, the Company has no subsidiaries, other than as set
forth in Exhibit 21.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and does not
own, directly or indirectly, interests or investments (whether equity or debt) in any person, whether incorporated or
unincorporated. There are no shareholder agreements, voting trusts or other agreements or understandings to which the Company is a
party or by which it is bound relating to the voting of any securities of the Company, other than as set forth in the SEC
Documents.
(g) SEC
Documents; Financial Statements. The Company has made available to the Investors (including via the SEC’s EDGAR system) a true,
correct and complete copy of each form, report, statement, schedule, prospectus, proxy, registration statement and other documents filed
by the Company with the SEC prior to the Effective Date (the “SEC Documents”). None of the SEC Documents filed under
the Exchange Act contained, when filed and as amended to the Effective Date, 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 made therein, in the light of the circumstances
under which they were made, not misleading, and such SEC Documents complied in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder. The Company has timely filed each report, statement, schedule, prospectus,
and registration statement that the Company was required to file with the SEC since its initial registration of the Common Stock with
the SEC, except where the failure to timely file was not material. As of the Effective Date, there are no material outstanding or unresolved
comments in comment letters from the Staff of the SEC with respect to any of the SEC Documents. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of
the SEC with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements
may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and
its consolidated subsidiaries 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, immaterial, year-end audit adjustments.
(h) Absence of Litigation. Except as disclosed in the SEC Documents and for such matters as have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no (i) action, suit, claim or other proceeding,
in each case by or before any Governmental Body pending, or, to the knowledge of the Company, threatened against the Company or (ii)
judgment, decree, injunction, ruling or order of any Governmental Body outstanding against the Company.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Except as disclosed in the SEC Documents, since the date of the latest
audited financial statements included within the SEC Documents filed with the SEC, (i) there has been no event, occurrence or
development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any material liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the SEC, (iii) the Company has not altered its method of
accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of its Capital Stock and (v) the Company has not issued
any equity securities to any officer, director or affiliate, except pursuant to existing Company equity incentive plans.
(j) Compliance with Laws. The Company is in compliance with all applicable laws, except where such non-compliance would not
reasonably be expected to have a Material Adverse Effect. The Company has not received any written communication from any Governmental
Body that alleges the Company is not in compliance with any applicable law, except where such noncompliance would not reasonably be expected
to have a Material Adverse Effect.
(k) Finder’s
Fees. The Company has not entered into any agreement or arrangement entitling any agent, broker, investment banker, financial advisor
or other person to any broker’s or finder’s fee or any other commission or similar fee in connection with the transactions
contemplated by this Agreement for which the Investors could become liable.
(l) Investment
Act. The Company is not, and immediately after receipt of payment for the Shares, will not be, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.
(m) Private
Placement. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 5, in connection
with the offer, sale and delivery of the Shares in the manner contemplated by this Agreement, it is not necessary to register the Shares
under the Securities Act. The Shares (i) were not offered by any form of general solicitation or general advertising and (ii) are not
being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act or any state securities
laws.
(n) Use
of Proceeds. The Company shall use the proceeds from the issuance and sale of the Shares to (i) purchase in the Cash-Out fractional
shares of Common Stock resulting from the Stock Split and (ii) pay the costs and expenses related to the transactions contemplated by
this Agreement, as well as the Stock Split and the Deregistration. The Company shall use any proceeds from the issuance and sale of the
Shares remaining after the payment of the expenditures described in the foregoing clauses (i) and (ii) for working capital and other
general corporate purposes in its sole discretion.
(o) Ownership.
Assuming the accuracy of the representations and warranties of the Investors set forth in Section 5(m), the
Board has taken all action necessary to ensure as of the Effective Date that the restrictions applicable to business combinations contained
in Section 203 of the Delaware General Corporation Law, as amended (the “DGCL”), shall be inapplicable to the
execution, delivery and performance of this Agreement and to the consummation of the Financing.
5.
Investors Representations and Warranties. Each Investor, separately and not jointly, represents and warrants to the
Company as of the Effective Date as follows:
(a) Accredited
Investor. At the time such Investor was offered the Shares, it was, and as of the Effective Date, the Investor is, (i) an “accredited
investor” (within the meaning of Rule 501(a) of Regulation D under the Securities Act) and (ii) acquiring the Shares only for its
own account and not for the account of others, and not on behalf of any other account or person or with a view to, or for offer or sale
in connection with, any distribution thereof in violation of the Securities Act. The Investor is not an entity formed for the specific
purpose of acquiring the Shares.
(b) Private
Placement. Such Investor understands that the Shares are being offered in a transaction not involving any public offering within
the meaning of the Securities Act and that the Shares delivered at the Closing will not have been registered under the Securities Act.
The Investor understands that the Shares may not be resold, transferred, pledged or otherwise disposed of by such Investor absent an
effective registration statement under the Securities Act except (i) to the Company or a subsidiary thereof, (ii) to non-U.S. persons
pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act or (iii)
pursuant to another applicable exemption from the registration requirements of the Securities Act, and in each of cases (i) and (iii)
in accordance with any applicable securities laws of the states and other jurisdictions of the United States, and that any certificates
(if any) or any book-entry shares representing the Shares delivered at the Closing shall contain a legend or restrictive notation to
such effect, and as a result, the Investors may not be able to readily offer, resell, transfer, pledge or otherwise dispose of the Shares
and may be required to bear the financial risk of an investment in the Shares for an indefinite period of time. The Investor acknowledges
that the Shares will not be eligible for resale pursuant to Rule 144A promulgated under the Securities Act. The Investor understands
that it has been advised to consult legal counsel prior to making any offer, resale, pledge or transfer of any of the Shares.
(c) Purchase
of Shares. The Investor understands and agrees that it is purchasing the Shares directly from the Company. The Investor further acknowledges
that there have been no representations, warranties, covenants or agreements made to the Investor by the Company, or any of its directors,
officers, employees or other representatives, expressly (other than those representations, warranties, covenants and agreements included
in this Agreement) or by implication.
(d) Access
to Information. The Investor acknowledges and agrees that it has received such information as it deems necessary in order to make
an investment decision with respect to the Shares. Without limiting the generality of the foregoing, the Investor acknowledges that it
has received or had access to the SEC Documents for the purpose of making an investment decision with respect to the Shares. The Investor
represents and agrees that the Investor and the Investor’s advisor(s), if any, have had the full opportunity to ask the Company’s
management questions, receive such answers and obtain such information as the Investor and the Investor’s advisor(s), if any, have
deemed necessary to make an investment decision with respect to the Shares.
(e) Knowledge.
The Investor became aware of this offering of the Shares solely by means of direct contact between the Investor and the Company, and
the Shares were offered to the Investor solely by direct contact between the Investor and the Company. The Investor acknowledges that
the Company represents and warrants that the Shares (i) were not offered by any form of general solicitation or general advertising and
(ii) are not being offered in a manner involving a public offering under, or in a distribution in violation of, the Securities Act, or
any state securities laws.
(f) Experience.
The Investor acknowledges that it is aware that there are substantial risks incident to the purchase and ownership of the Shares, including
those set forth in the SEC Documents. The Investor is able to fend for itself in the transactions contemplated herein and has such knowledge
and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Shares,
and the Investor has sought such accounting, legal and tax advice as the Investor has considered necessary to make an informed investment
decision.
(g) Economic Risks. Alone, or together with any advisor(s), the Investor has adequately analyzed and fully considered the risks
of an investment in the Shares and determined that the Shares are a suitable investment for the Investor and that the Investor is able
at this time and in the foreseeable future to bear the economic risk of a total loss of the Investor’s investment in the Company.
The Investor acknowledges specifically that a possibility of total loss exists.
(h) Independent
Investigation. In making its decision to purchase the Shares, the Investor has relied solely upon independent investigation made
by the Investors and the representations and warranties of the Company set forth herein.
(i) No
Endorsement. The Investor understands and agrees that no Governmental Body has passed upon or endorsed the merits of the offering
or made any findings or determination as to the fairness of this investment or the accuracy or adequacy of the Company’s filings
with the SEC.
(j) Organization
and Good Standing. The Investor has been duly formed and is validly existing in good standing under the laws of its jurisdiction
of organization or formation.
(k) Authorization;
Due Execution; Enforceability. The execution, delivery and performance by such Investor of this Agreement is within the powers of
the Investor, has been duly authorized and will not constitute or result in a breach or default under or conflict with any federal or
state statute, rule or regulation applicable to the Investor, any order, ruling or regulation of any Governmental Body, or any agreement
or other undertaking, to which the Investor is a party or by which the Investor is bound, and will not violate any provisions of the
Investor’s charter documents, including its incorporation, organization or formation papers, bylaws, trust indenture or partnership
or operating agreement, as may be applicable. The signature on this Agreement is genuine, and the signatory has been duly authorized
to execute the same, and this Agreement constitutes a legal, valid and binding obligation of the Investor, enforceable against such Investor
in accordance with its terms.
(l) OFAC.
Such Investor is not (i) a person named on the List of Specially Designated Nationals and Blocked Persons administered by the U.S.
Treasury Department’s Office of Foreign Assets Control (“OFAC”) or in any Executive Order issued by the President
of the United States and administered by OFAC (“OFAC List”), or a person prohibited by any OFAC sanctions program,
(ii) a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (iii) a non-U.S. shell bank or
providing banking services indirectly to a non-U.S. shell bank. The Investor shall provide law enforcement agencies, if requested thereby,
such records as required by applicable law, provided that the Investors are permitted to do so under applicable law. If the Investor
is a financial institution subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.), as amended by the USA PATRIOT Act of 2001,
and its implementing regulations (collectively, the “BSA/PATRIOT Act”), the Investor maintains policies and procedures
reasonably designed to comply with applicable obligations under the BSA/PATRIOT Act. To the extent required, it maintains policies and
procedures reasonably designed for the screening of its investors against the OFAC sanctions programs, including the OFAC List. To the
extent required, the Investor maintains policies and procedures reasonably designed to ensure that the funds held by such Investor and
used to purchase the Shares were legally derived.
(m) Ownership. As
of the Effective Date and for the three (3) years prior thereto, the Investor did not constitute an “interested stockholder”
(as defined in Section 203 of the DGCL) of the Company.
6. Registration
Rights. If, following the Deregistration, the Company registers a class of equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, then, at any time after ninety (90) days after the effective date of such registration, if the Company
receives a request from one or more Investors that the Company file a Form S-1 registration statement (or Form S-3 registration
statement, if the Company is eligible to use a Form S-3 registration statement) with respect to the Shares then outstanding, then
the Company shall file a secondary only Form S-1 registration statement (or Form S-3 registration statement, if the Company is
eligible to use a Form S-3 registration statement) (the “Registration Statement”) under the Securities Act
covering the resale of the shares of Common Stock then beneficially owned by the Investors that the Investors requested to be
registered (the “Registrable Securities”), as specified by notice given by all (and not less than all) the
Investors to the Company, subject to the limitations set forth herein. The Company shall use commercially reasonable efforts to (i)
file the Registration Statement within thirty (30) business days after the Company receives the request from the Investors (the
“Filing Date”), (ii) cause the Registration Statement to become effective within thirty (30) days following the
Filing Date (or, in the event of a full review by the SEC, fifty (50) days following the Filing Date); (iii) cause the Registration
Statement to remain effective until the earlier of (A) the date on which the Investors have disposed of all of the Registrable
Securities, (B) the eighth anniversary of the effectiveness date of the Registration Statement and (C) such time as Rule 144 is
available for the disposition of all Registrable Securities without volume or manner-of-sale restrictions; and (iv) undertake any
additional actions reasonably necessary to maintain the availability of, and to facilitate the disposition by the Investors of the
Registrable Securities pursuant to, the Registration Statement. Each Investor shall cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the Registration Statement, including furnishing to the
Company such information regarding itself, its affiliates, the shares of Common Stock held by them and the intended method of
disposition of the Registrable Securities as shall be reasonably required to effect the registration of the Registrable Securities.
The Company shall bear all expenses incurred in connection with the performance of its obligations under this Section 6. The
Company’s obligations under this Section 6 shall also apply to any shares in the capital of the Company issued or
issuable with respect to the Registrable Securities as a result of any stock split, stock dividend, recapitalization, exchange or
similar event. For not more than thirty (30) consecutive days or for a total of not more than sixty (60) days in any twelve
(12)-month period, the Company may suspend the use of any Prospectus (as defined below) included in the Registration Statement in
the event the Company determines in good faith that such suspension is necessary to (x) delay the disclosure of material non-public
information concerning the Company or any of its subsidiaries, the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company and its subsidiaries or (y) amend or supplement the affected Registration
Statement or the related Prospectus so that the Registration Statement or Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the
case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed
Delay”); provided, that the Company shall promptly notify the Investors in writing of the commencement of an
Allowed Delay, but shall not (without the prior written consent of the Investors) disclose to the Investors any material non-public
information giving rise to an Allowed Delay, and shall advise the Investors in writing to cease all sales under the Registration
Statement until the end of the Allowed Delay. “Prospectus” means (i) the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference in such prospectus, and (ii) any “free writing
prospectus” as defined in Rule 405 under the Securities Act. The Company shall be obligated to file no more than one (1)
Registration Statement pursuant to this Section 6.
7. Indemnification
of the Investors. Subject to the provisions of this Section 7, the Company will indemnify and hold each
Investor and its directors, officers, trustees, stockholders, members, partners, beneficiaries, employees and agents (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 such Investor (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, trustees, stockholders, agents, members, partners, beneficiaries or employees (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 persons (all of the foregoing, each, an “Investor Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Investor Party may suffer or
incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or agreements made by
the Company in this Agreement that does not result from action taken (or any failure to act where action is required hereunder),
directly or indirectly, by an Investor Party, (b) in connection with any filing made by the Company with the SEC with respect to the
Financing, in each case to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses, as incurred, arising out of or
relating to (x) any untrue or alleged untrue statement of a material fact contained in such filing or arising out of or relating to
any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not
misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information
regarding such Investor furnished in writing to the Company by such Investor expressly for use therein, or (y) 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 therewith or (c) any action instituted against any Investor Party by any stockholder of the Company
who is not an affiliate of any Investor Party challenging the terms of the Financing (unless such action is based upon a breach of
the Investors’ representations, warranties or covenants under this Agreement or any agreements or understandings the Investor
or any other Investor Party may have with any such stockholder or any violations by any Investor or any other Investor Party of
state or federal securities laws or any conduct by any Investor or any other Investor Party which constitutes fraud, gross
negligence, willful misconduct, bad faith or malfeasance). Promptly after receipt by any Investor Party (the “Indemnified
Person”) of notice of any demand, claim or circumstances which could reasonably be expected to give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to
this Section 7, such Indemnified Person shall promptly notify the Company in writing and the Company shall have the
right to 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 for such counsel; provided, however, that the failure of
any Indemnified Person to so notify the Company shall not relieve the Company of its obligations hereunder except to the extent the
Company is actually and materially prejudiced by such failure to notify. 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 and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the
Company 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; provided, however, that (i) the Company shall not be responsible for the fees and expenses of more
than one (1) counsel for all Indemnified Persons and (ii) any such amounts shall be repaid to the Company if it shall ultimately be
determined that the Indemnified Person is not entitled to be indemnified by the Company as contemplated by this Section 7.
Notwithstanding anything herein to the contrary, the Company shall not be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned.
Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or
conditioned, the Company shall not affect 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.
8.
Director Nominations; Board Size.
(a) Designation
Rights. Subject to Section 8(e) and the second sentence of Section 8(c), from and after the Closing Date, in connection
with each annual or special meeting of stockholders of the Company (and any adjournment, postponement, rescheduling or continuation thereof)
occurring after the Closing Date at which directors of the Company are to be elected (each, a “Stockholder Meeting”),
(i) the Company shall include two individuals designated by 3K pursuant to Section 8(c) and satisfying the Eligibility Criteria
(as defined below) (each, a “3K Director Nominee”) as nominees for election to the Board in its proxy statement (or
similar materials) and proxy card in respect of such Stockholder Meeting and (ii) the Board shall recommend to the stockholders of the
Company the election of such 3K Director Nominees to the Board at such Stockholder Meeting in the same manner as it recommends the election
of the Company’s other director nominees. Each 3K Director Nominee elected to the Board shall continue to hold office until the
next Stockholder Meeting (or the then applicable director term under the Company’s Charter and Bylaws) and until his or her successor
is elected and qualified in accordance with the Bylaws or until such individual’s earlier resignation, death or removal. In the
event the stockholders of the Company are permitted to elect directors by action by written consent pursuant to the Bylaws and applicable
law, the provisions of this Section 8 shall be applied mutatis mutandis in connection with any such action.
(b) Replacement
Directors. Subject to Section 8(e), if at any time (other than a period between a Forfeited Annual Meeting (as defined below)
and the next-to-occur Stockholder Meeting that is not a Forfeited Annual Meeting) a 3K Director Nominee (or Replacement 3K Director Nominee,
as defined below) ceases to be a director for any reason (including resignation or removal), 3K shall have the ability to designate an
individual to be a replacement director pursuant to Section 8(c) (a “Replacement 3K Director Nominee”), and
if such individual satisfies the Eligibility Criteria, the Board shall within five (5) business days appoint such Replacement 3K Director
Nominee to fill the applicable vacancy.
(c) Procedure.
Within ten (10) business days following a written request therefor from the Company (which may be by email), 3K shall notify the
Company in writing (which may be by email) of the identity (including name and professional qualifications and affiliations) of each
individual designated by 3K for nomination for election to the Board at the Company’s next-to-occur Stockholder Meeting. If 3K
fails to respond to such written request within ten (10) business days of delivery thereof, (i) 3K shall be deemed to have forfeited
its rights under Section 8(a) in respect of the Company’s next-to-occur Stockholder Meeting (the “Forfeited
Annual Meeting”) and (ii) the Nominating and Corporate Governance Committee of the Board (the “Nominating
Committee”) and the Board may nominate such persons for election to the Board (in lieu of the 3K Director Nominees) at the
next-to-occur Stockholder Meeting as they determine in their sole discretion. Each 3K Director Nominee and each Replacement 3K
Director Nominee must (i) be reasonably acceptable to the Board (such acceptance not to be unreasonably withheld) (the
“Acceptability Requirement”), (ii) qualify as “independent” pursuant to Nasdaq listing standards, if
applicable, and (iii) have the relevant financial and business experience to be a director of the Company (collectively, the
“Eligibility Criteria”). 3K shall cause each proposed 3K Director Nominee and each proposed Replacement 3K
Director Nominee to (i) submit to the Company a fully completed copy of the Company’s standard directors’ and
officers’ questionnaire (as may be modified from time to time) and other reasonable and customary director onboarding
documentation applicable to directors of the Company and (ii) submit to an interview with the Board and/or the Nominating Committee,
in each case, as and when requested by the Company. The Nominating Committee shall make a determination regarding whether such
proposed 3K Director Nominee or Replacement 3K Director Nominee (as applicable) meets the Eligibility Criteria (other than the
Acceptability Requirement) within five (5) business days after the later of (1) such 3K Director Nominee or Replacement 3K Director
Nominee, as applicable, having submitted to the Company any required documentation and (2) representatives of the Board and/or the
Nominating Committee having conducted customary interview(s) of such 3K Director Nominee or Replacement 3K Director Nominee (as
applicable), if such interviews are requested by the Board or the Nominating Committee and, if it determines so, recommend to the
Board whether the 3K Director Nominee or Replacement 3K Director Nominee should satisfy the Acceptability Requirement. If the
Nominating Committee determines such proposed 3K Director Nominee or Replacement 3K Director Nominee (as applicable) meets the
Eligibility Criteria (other than the Acceptability Requirement), the Board shall determine whether such proposed 3K Director Nominee
or Replacement 3K Director Nominee satisfies the Acceptability Requirement no later than five (5) business days after receiving the
determinations of the Nominating Committee. The Company shall use its reasonable best efforts to cause any interview(s) contemplated
by this Section 8(c) to be conducted as promptly as practicable, but in any case, assuming reasonable availability
of the 3K Director Nominee or Replacement 3K Director Nominee (as applicable), within ten (10) business days after the submission of
the fully completed copy of the Company’s standard directors’ and officers’ questionnaire and other reasonable and
customary director onboarding documentation applicable to directors of the Company with respect to such 3K Director Nominee or
Replacement 3K Director Nominee (as applicable). If it is determined that the 3K Director Nominee or Replacement 3K Director Nominee
(as applicable) does not satisfy one or more of the Eligibility Criteria, 3K shall have the right to designate additional person(s)
as the applicable 3K Director Nominee or Replacement 3K Director Nominee in accordance with the procedures described in this Section
8(c), and the parties hereto shall continue to follow the procedures of this Section 8(c), in each case until a
3K Director Nominee or Replacement 3K Director Nominee (as applicable) is determined to meet the Eligibility Criteria.
(d) Board
Size. Subject to Section 8(e), from and after the Closing Date, the Company agrees that the size of the Board shall not, without
3K’s prior written consent, exceed five (5) directors.
(e) Out.
3K irrevocably agrees that, notwithstanding anything to the contrary in this Section 8, if, at any time from and after the Closing
Date, a committee of the Board comprised solely of directors unaffiliated with, and independent from, 3K (an “Independent
Committee”), determines in good faith after consultation with its legal counsel that (i) with respect to any 3K Director Nominee
or Replacement 3K Director Nominee, action by the Board in furtherance of the nomination, appointment or reelection of such 3K Director
Nominee or Replacement 3K Director Nominee to the Board or (ii) compliance with the requirements of Section 8(d), in either such
case would not be in the best interests of the Company and its stockholders in their capacity as such and notifies 3K in writing of such
determination, then (x) in the case of a determination under the foregoing clause (i), the Board will not so recommend (or if so recommended,
will revoke the recommendation of) such 3K Director Nominee or Replacement 3K Director Nominee for election to the Board, if such 3K
Director Nominee or Replacement 3K Director Nominee is then on the Board, he or she need not be, and 3K waives its right to require that
such 3K Director Nominee or Replacement 3K Director Nominee be, recommended for reelection to the Board, and, as applicable, the Board
shall not be required to appoint such Replacement 3K Director Nominee to the Board and (y) in the case of a determination under the foregoing
clause (ii), the Board shall thereafter not be required to comply with the provisions of Section 8(d) (provided, that,
prior to making any determination pursuant to the foregoing clause (ii), the Board shall consult with 3K, it being understood that any
such determination pursuant to the foregoing clause (ii) shall be in the Board’s sole discretion). Subject to the Board’s
rights pursuant to this Section 8(e) not to nominate, recommend or appoint any 3K Director Nominee or Replacement 3K Director
Nominee following the designation thereof by 3K, nothing in this Section 8(e) shall limit 3K’s rights to pursuant to this
Section 8 to designate a 3K Director Nominee or Replacement 3K Director Nominee, as applicable.
(f) Termination.
The terms of this Section 8, including the rights of 3K conferred herein, shall terminate and be of no further force or
effect at such time as (i) the Investors own of record or beneficially (as determined under Rule 13d-3 promulgated under the
Exchange Act) in the aggregate less than ten percent (10%) of the then-outstanding Common Stock or (ii) any Investor commits a
material breach of this Agreement as finally determined by a court of competent jurisdiction (except to the extent such breach is
capable of being cured and the Investor has cured such breach within twenty (20) days after receipt of written notice of such breach
from the Company). 3K shall (x) promptly notify the Company at such time as the Investors own of record and/or beneficially in the
aggregate less than ten percent (10%) of the then-outstanding Common Stock and (y) within three (3) business days following any
request by the Company, provide to the Company a written statement of the number of shares of Common Stock owned of record and/or
beneficially by the Investors as of the date of such statement. In the event of any termination pursuant to this Section 8(f),
if requested by the Company following the effective time of such termination, 3K shall cause each 3K Director Nominee or Replacement
3K Director Nominee then serving on the Board to tender his or her resignation from the Board within three (3) business days
following the receipt of such request from the Company to 3K.
9. Termination.
This Agreement shall terminate and be void and of no further force and effect upon the earlier to occur of (a) the mutual written
agreement of each of the parties hereto to terminate this Agreement (taking into account the matters set forth on Schedule 9,
as applicable) or (b) the delivery of written notice by the Company to the Investors to terminate this Agreement (provided, that
the Company may only exercise its termination right pursuant to this clause (b) prior to the Closing). Upon any such termination, all
rights and obligations hereunder of the parties hereto shall terminate without any further liability in respect thereof on the part of
either party hereto or any of their respective affiliates or any of such party’s or affiliates’ respective directors, officers,
employees or other representatives. Sections 13 and 14 will survive any termination of this Agreement and continue indefinitely.
10. Non-Reliance;
No Other Representations and Warranties. Except as expressly set forth in this Agreement, no party makes any representation
or warranty to any other party of any nature, express or implied. Each Investor acknowledges and agrees that, in connection with its
entry into this Agreement, it is not relying on any representations or warranties (including the accuracy or completeness thereof) other
than the representations and warranties contained herein.
11. Disclosure;
Investors Information for Transaction Filings.
(a) Disclosure.
The Company shall (a) by the Disclosure Time (as defined below), issue a press release disclosing the material terms of the transactions
contemplated hereby (the “Press Release”), and (b) file, within the time required by the Exchange Act, a Current Report
on Form 8-K, including this Agreement as an exhibit thereto, with the SEC. Upon the issuance of the Press Release, to the Company’s
knowledge, the Investors shall not be in possession of any material, non-public information received from the Company or any of its officers,
directors or employees or agents. Prior to the issuance of the Press Release and subject to the terms of this Agreement, no party hereto
shall issue any press release or make any public announcement regarding this Agreement or the matters contemplated hereby (or the Stock
Split or the Deregistration) without the prior written consent of the other parties hereto, except as required by law or applicable stock
exchange listing rules. Following the issuance of the Press Release, no party hereto shall make any public announcement or statement
that is inconsistent with or contrary to the terms of the Press Release or this Agreement, except as required by law or applicable stock
exchange listing rules or with the prior written consent of the other parties hereto.
(b) Investors
Information for Transaction Filings. The Investors shall, upon request by the Company, promptly supply the Company in writing, for
inclusion in any filings or other submissions to be made by the Company with the SEC in connection with the Transaction Stockholder Meeting
(including the proxy statement in respect of such meeting) (the “Transaction Filings”), all information concerning
the Investors as may requested by the Company to be included in the Transaction Filings. The Investors shall promptly correct any such
information provided by the Investors if and to the extent the Investors shall have obtained knowledge that such information shall have
become false or misleading in any material respect.
(c) Transaction
Stockholder Meeting. Within fifteen (15) business days after the Effective Date, the Company shall file with the SEC a preliminary
proxy statement with respect to the Transaction Stockholder Meeting for the purpose of obtaining the Requisite Stockholder Approval.
The Company shall use its reasonable best efforts, and shall take all action necessary in accordance with applicable law and the Charter
and Bylaws, as applicable, to duly call, give notice of and convene the Transaction Stockholder Meeting as soon as practicable after
the date the SEC has informed the Company that it has no further comments to the preliminary proxy statement (the “Proxy Statement
Clearance Date”), such that the Transaction Stockholder Meeting is held on the earliest practicable date after the Proxy Statement
Clearance Date, and to cause the Stock Split to be consummated as promptly as practicable after receipt of the Requisite Stockholder
Approval. The Company shall, through the Board, recommend to the Company stockholders that they vote in favor of the proposals to obtain
the Requisite Stockholder Approval, and the Company shall use commercially reasonable efforts to solicit sufficient proxies from the
Company stockholders in favor of the Requisite Stockholder Approval matters (which shall include engaging a proxy solicitor selected
by the Company). Notwithstanding anything to the contrary contained in this Agreement, the Company may in its sole discretion, after
consultation with 3K, adjourn or postpone the Transaction Stockholders Meeting only: (a) to ensure that any supplement or amendment to
the proxy statement that is required by applicable law is timely provided to the Company’s stockholders; (b) if as of the time
for which the Transaction Stockholders Meeting is originally scheduled there are insufficient shares of Common Stock represented (either
in person or by proxy) to constitute a quorum necessary to conduct the business to be conducted at the Transaction Stockholders’
Meeting; or (c) if additional time is required to solicit proxies in order to obtain the Requisite Stockholder Approval; provided
that (i) no single adjournment shall be for more than 30 days unless otherwise required by applicable law, and (ii) all such adjournments
together shall not cause the date of the Transaction Stockholders Meeting to be held later than sixty (60) business days following the
Proxy Statement Clearance Date.
12.
Reimbursement. The Company shall reimburse the Investors for their reasonable and documented out-of-pocket legal expenses
incurred in connection with this Agreement; provided, however, that such reimbursement shall not exceed $75,000 in the
aggregate.
13. Governing
Law; Jurisdiction. This Agreement, and all matters, claims or causes of action (whether in contract, tort or statute) that
may be based upon, arise out of or in connection with or relate to this Agreement or the negotiation, execution, enforceability or
performance of this Agreement (including any matter claim or cause of action based upon, arising out of or in connection with or
related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this
Agreement), shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without reference
to the conflict of laws principles thereof that would result in the application of the law of another jurisdiction. Each party
hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising
hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising
hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the
Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of
Chancery declines to accept jurisdiction over a particular matter, any federal court within the State of Delaware). Each party
hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally
and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to
this Agreement in any court other than the aforesaid courts. Each party hereto hereby irrevocably waives, and agrees not to assert
in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in
aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable legal
requirements, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of
such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such
courts. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
14.
Miscellaneous.
(a) Amendments
and Waivers. This Agreement may not be amended or modified except by an instrument in writing signed by each party hereto. No provision
of this Agreement may be waived except by an instrument in writing signed by the party against whom enforcement of such waiver is sought.
(b) Assignment. Neither this Agreement nor any rights that may accrue to the Investors hereunder (other than the Shares acquired
hereunder, if any, subject to applicable securities laws) may be transferred or assigned by the Investors without the prior written consent
of the Company. Any purported transfer or assignment in violation of this Section 14(b) shall be null and void ab initio.
(c) Entire Agreement. This Agreement and the Escrow Agreement, together with the exhibits and schedules hereto and thereto,
constitute the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written
and oral, among the parties hereto, with respect to the subject matter hereof.
(d) Notices.
All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given
(i) when delivered in person, (ii) when delivered by facsimile or email, with affirmative confirmation of receipt, (iii) one (1)
business day after being sent, if sent by reputable, internationally recognized overnight courier service, or (iv) three (3)
business days after being mailed, if sent by registered or certified mail, prepaid and return receipt requested, in each case to the
applicable party at the following addresses (or at such other address for a party as shall be specified by like notice):
| If to the
Company, to: |
with copies
(which shall not constitute notice) to: |
Psychemedics Corporation
5220 Spring Valley Road
Dallas, TX 75254
Attn: Brian Hullinger, President and
Chief Executive Officer
Email: BrianH@psychemedics.com
Telephone No.: (800) 628-8073 |
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Matthew J. Gardella; Matthew W.
Tikonoff
Email: MGardella@mintz.com; MWTikonoff@mintz.com
Telephone No.: (617) 542-6000 |
| If to the Investors,
to: |
with copies (which shall
not constitute notice) to: |
3K Limited Partnership
c/o Peter Kamin
c/o David E. Danovich
Sullivan & Worcester LLP
1251 Avenue of Americas
New York, NY 10020
Attn: David E. Danovich
Email: ddanovich@sullivanlaw.com
Telephone No.: (212) 660-3060 |
Sullivan & Worcester LLP
1251 Avenue of Americas
New York, NY 10020
Attn: Joseph E. Segilia; Angela Gomes
Email: jsegilia@sullivanlaw.com; agomes@sullivanlaw.com
Telephone No.: (212) 660-3027; (617)
338-2957 |
(e) Additional
Documents. At the Closing, the parties hereto shall execute and deliver such additional documents and take such additional actions
as the parties hereto may reasonably deem practical and necessary in order to consummate the purchase and sale of the Shares as contemplated
by this Agreement.
(f) Additional Information. The Company may request from the Investors such additional information as the Company may deem necessary
to evaluate the eligibility of the Investors to acquire the Shares, and the Investors shall provide such information to the Company upon
such request to the extent readily available and to the extent consistent with the Investors’ internal policies and procedures,
and provided that the Company agrees to keep any such information provided by the Investors confidential.
(g) Affirmation. Each
Investor acknowledges that the Company will rely on the acknowledgments, understandings, agreements, representations and warranties of
the Investor contained in this Agreement. Prior to the Closing, the Investors shall promptly notify the Company if any of the acknowledgments,
understandings, agreements, representations and warranties set forth herein are no longer accurate in any material respect. Each Investor
agrees that the purchase by such Investor of Shares from the Company will constitute a reaffirmation of the acknowledgments, understandings,
agreements, representations and warranties herein (as modified by any such notice) by the Investor as of the time of such purchase.
(h) Disclosure.
The Company is entitled to rely upon this Agreement and is irrevocably authorized to produce this Agreement or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
(i) Survival.
All the agreements, representations and warranties made by each party hereto in this Agreement shall survive the Closing.
(j) Successors
and Assigns; No Third-Party Beneficiaries. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto
and their heirs, executors, administrators, successors, legal representatives, and permitted assigns, and the agreements, representations,
warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, such heirs, executors,
administrators, successors, legal representatives and permitted assigns. This Agreement is solely for the benefit of the parties hereto
and is not enforceable by any other persons, except with respect to the indemnification obligations set forth in Section 7.
(k) Severability.
If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired thereby and shall continue in full force and effect.
(l) Counterparts.
This Agreement may be executed in one or more counterparts (including by facsimile or electronic mail or in .pdf) and by different
parties in separate counterparts, with the same effect as if all parties hereto had signed the same document. All counterparts so executed
and delivered shall be construed together and shall constitute one and the same agreement.
(m) 3K
as Representative for Investors. With respect to any provision of this Agreement that requires the consent or approval of, or notice
to, any or all Investors, the consent or approval of, or notice to, solely 3K shall constitute compliance with such requirement with
respect to such Investor(s).
(n) Headings;
Interpretation; Certain Definitions. The headings set forth in this Agreement are for convenience of reference only and shall
not be used in interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) whenever required by the
context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative
meaning “include”) means including without limiting the generality of any description preceding or succeeding such term
and shall be deemed in each case to be followed by the words “without limitation”; and (iii) the words
“herein”, “hereto” and “hereby” and other words of similar import in this Agreement shall be
deemed in each case to refer to this Agreement as a whole and not to any particular portion of this Agreement. As used in this
Agreement, the term: (v) “Disclosure Time” shall mean, (i) if this Agreement is signed on a day that is not a
trading day or after 9:00 a.m. (New York City time) and before midnight (New York City time) on any trading day, no later than 9:30
a.m. (New York City time) on the trading day immediately following the Effective Date, and (ii) if this Agreement is signed between
midnight (New York City time) and 9:00 a.m. (New York City time) on any trading day, no later than 9:30 a.m. (New York City time) on
the Effective Date, (w) “business day” shall mean any day other than a Saturday, Sunday or a legal holiday on
which commercial banking institutions in New York, New York are authorized to close for business (excluding as a result of
“stay at home”, “shelter-in-place”, “non-essential employee” or any other similar orders or
restrictions or the closure of any physical branch locations at the direction of any Governmental Body so long as the electronic
funds transfer systems, including for wire transfers, of commercially banking institutions in New York, New York are generally open
for use by customers on such day); (x) “person” shall refer to any individual, corporation, partnership, trust,
limited liability company or other entity or association, including any Governmental Body, whether acting in an individual,
fiduciary or any other capacity; (y) “affiliate” shall mean, with respect to any specified person, any other
person or group of persons acting together that, directly or indirectly, through one or more intermediaries controls, is controlled
by or is under common control with such specified person (where the term “control” (and any correlative terms) means the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise); and (z) “Material Adverse Effect” shall
mean a material adverse effect upon the business, assets or financial condition of the Company, except any such adverse effect
related to or resulting from (a) general business or economic conditions affecting the industry in which the Company operates, (b)
national or international political or social or conditions or hostilities, (c) financial, banking, or securities markets
(including any disruption thereof and any decline in the price of any security or any market index), (d) changes in law or Generally
Accepted Accounting Principles (GAAP) (or interpretations thereof), (e) natural disasters or other force majeure events,
(f) the taking of any action contemplated or required by this Agreement or the announcement or pendency of this Agreement or
the transactions contemplated hereby or the Stock Split or the Deregistration, including the impact thereof on relationships,
contractual or otherwise, (g) any existing event, occurrence or circumstance with respect to which the Investors or any of their
affiliates has knowledge as of the Effective Date, (h) changes in the trading price or trading volume of the Common Stock (it being
understood that, in the case of this clause (h), the facts or occurrences giving rise or contributing to such change may be taken
into account in determining whether a Material Adverse Effect has occurred), (i) any failure by the Company to meet any estimates,
projections, budgets, forecasts or expectations of revenue, earnings or other financial performance or results of operations for any
period (it being understood that, in the case of this clause (i), the facts or occurrences giving rise or contributing to such
failure may be taken into account in determining whether a Material Adverse Effect has occurred), (j) any stockholder litigation or
other claims arising from or relating to this Agreement or the Stock Split or the Deregistration or (k) any delay in the holding of
the Transaction Stockholder Meeting or the consummation of the Stock Split (except, in the case of clauses (a)-(e), to the extent
such condition would have a materially disproportionate impact on the Company as compared to other industry
participants).
(o)
Equitable Relief. The parties hereto agree that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other remedy to which such party is entitled at law, in equity,
in contract, in tort or otherwise.
[Signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories
as of the Effective Date.
| |
COMPANY: |
| |
|
| |
PSYCHEMEDICS CORPORATION |
|
|
|
| |
|
|
| |
By: |
/s/
Brian Hullinger |
|
| |
|
Name: Brian
Hullinger |
| |
|
Title:
President and Chief Executive Officer |
| INVESTORS: |
|
|
| |
|
|
|
| 3K LIMITED PARTNERSHIP |
|
|
| |
|
|
|
| By: |
/s/ Peter H. Kamin |
|
|
| |
Name: Peter H. Kamin |
|
|
| |
Title: General Partner |
|
|
| PETER H. KAMIN |
| |
| /s/ Peter H. Kamin |
| PETER H. KAMIN REVOCABLE TRUST DATED FEBRUARY 2003 |
| |
|
|
|
| By: |
/s/ Peter H. Kamin |
|
|
| |
Name: Peter H. Kamin |
|
|
| |
Title: Trustee |
|
|
| PETER H. KAMIN CHILDRENS TRUST DATED
MARCH 1997 |
| |
|
|
|
| By: |
/s/ Peter H. Kamin |
|
|
| |
Name: Peter H. Kamin |
|
|
| |
Title: Trustee |
|
|
| PETER H. KAMIN GST TRUST DATED MARCH
1997 |
| |
|
|
|
| By: |
/s/ Peter H. Kamin |
|
|
| |
Name: Peter H. Kamin |
|
|
| |
Title: Trustee |
|
|
| PETER H. KAMIN FAMILY FOUNDATION |
| |
|
|
|
| By: |
/s/ Peter H. Kamin |
|
|
| |
Name: Peter H. Kamin |
|
|
| |
Title: Trustee |
|
|
[Signature Page to Stock Purchase Agreement]
Schedule
3(d)(vi)
Form of Legal
Opinion
| 1. | The
Company is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company is duly qualified to transact business and is
in good standing in the State of [*]. |
| 2. | The
Company has the requisite corporate power and authority to execute, deliver and perform all
of its obligations under the Stock Purchase Agreement and the Escrow Agreement, including,
without limitation, the issuance of the Shares in accordance with the terms thereof. The
execution and delivery of the Stock Purchase Agreement and the Escrow Agreement by the Company
and the consummation by it of the transactions contemplated therein (including, without limitation,
the issuance and sale of the Shares) have been duly authorized by the Board and no further
consent or authorization of the Company, its Board or its stockholders is required therefor,
except for receipt of the Requisite Stockholder Approval (as defined in the Stock Purchase
Agreement) and any further authorizations by the Board that have been obtained. The Stock
Agreement and the Escrow Agreement have been duly executed and delivered by the Company.
The Stock Purchase Agreement and the Escrow Agreement constitute valid and binding agreements
or obligations of the Company, enforceable against the Company in accordance with their respective
terms. |
| 3. | The
execution, delivery and performance of the Stock Purchase Agreement and the Escrow Agreement
by the Company and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the issuance of the Shares, and the compliance by the Company
with the terms thereof (a) do not result in a violation of (i) the Company’s Charter
or Bylaws, (ii) the Delaware General Corporation Law or (iii) any federal law of the United
States or any rule or regulation thereunder, and (b) do not result in the creation of any
lien, security interest or other encumbrance upon any of the Company’s material properties. |
| 4. | The
Shares have been duly authorized and, when issued pursuant to the terms of the Stock Purchase
Agreement, will be validly issued, fully paid and nonassessable. |
| 5. | Assuming
the accuracy of the representations of the Investors contained in the Stock Purchase Agreement,
the offer and sale of the Shares in accordance with the Stock Purchase Agreement and the
issuance and delivery of the Shares in accordance with the Stock Purchase Agreement constitute
transactions exempt from the registration requirements of the Securities Act of 1933, as
amended, subject to the timely filing of a Form D pursuant to Securities and Exchange Commission
Regulation D (“Regulation D”). |
| 6. | No
authorization, approval, consent, filing or other order of any Delaware court or federal
governmental body is required to be obtained under the Delaware General Corporation Law or
the federal law of the United States, respectively, by the Company to enter into and perform
its obligations under the Stock Purchase Agreement or the Escrow Agreement, or for the issuance and sale of the Shares in accordance
with the Stock Purchase Agreement, except (a) the filing of a Form D under Regulation D, (b) the filing of a Form 8-K pursuant to the
Securities Exchange Act of 1934, as amended, (c) any action necessary in order to qualify the Shares under applicable securities or “Blue
Sky” laws of the states of the United States and (d) those that have been obtained or made. |
For
the avoidance of doubt, the foregoing opinions are not being given with respect to the Stock Split or the Deregistration.
Schedule 9
The Company and the Investors hereby
agree that if, between the date of this Agreement and the Closing, (a) there arises any suit, action, or proceeding challenging or seeking
to restrain, limit or prohibit any transactions contemplated by this Agreement or (b) one or more stockholders of the Company shall have
exercised appraisal rights pursuant to Section 262 of the Delaware General Corporation Law in connection with the transactions contemplated
by this Agreement, then, in each case, the Company and 3K will discuss with each other whether consummating the transactions contemplated
by this Agreement continues to be in the best interests of the Company’s stockholders, as determined by the Board of Directors;
it being understood that no party to the Agreement shall be obligated to consent to a termination of this Agreement in connection with
such discussion.
EXHIBIT 99.1
Psychemedics Corporation’s Board of Directors Approves Plan to Terminate Registration of Its Common Stock
DALLAS, Aug. 12, 2024 (GLOBE NEWSWIRE) -- Psychemedics Corporation (Nasdaq:PMD) (“Psychemedics” or the “Company”) today announced that a Transaction Committee (the “Transaction Committee”) of the Board of Directors of the Company (the “Board”) comprised of independent directors has recommended, and the Board has approved, a plan to cease the registration of the Company’s common stock under the federal securities laws following the completion of a proposed reverse stock split and to delist its shares of common stock from trading on the Nasdaq Capital Market. It is expected that this plan would be effectuated in the fall of 2024, assuming the approval of Psychemedics’ stockholders at the Company’s 2024 Annual Meeting of Stockholders, among other things, as described below.
Psychemedics is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus the Company’s resources on enhancing long-term stockholder value. The Company anticipates savings exceeding $900,000 on an annual basis as a result of the proposed deregistration and delisting transaction.
The proposed reverse stock split will be at a ratio between 1-for-4,000 and 1-for-6,000, in which holders of shares of the Company’s outstanding common stock in an amount less than the reverse stock split ratio denominator would be cashed out at a price of $2.35 per share for their fractional shares. Such price represents a premium above the common stock’s closing price on August 9, 2024 and is supported by a fairness opinion delivered by Mirus Capital Advisors Inc., whom the Transaction Committee engaged for such purpose. Stockholders owning more shares of the Company’s common stock than the reverse stock split ratio denominator prior to the reverse stock split would remain stockholders in Psychemedics, which would no longer be encumbered by the expenses and distraction of a public reporting company. The number of shares they would own following the proposed transaction would be unchanged, as immediately after the reverse stock split a forward split would be applied to the continuing stockholders, negating any effects to them. Psychemedics intends to fund the purchase of fractional shares resulting from the reverse stock split using proceeds from the issuance and sale of shares of the Company’s common stock pursuant to the Purchase Agreement (as defined below), and cash-on-hand.
In connection with the proposed reverse stock split, on August 12, 2024, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with certain investors (collectively, the “Investors”). Pursuant to the Purchase Agreement, the Investors have agreed to purchase, at the closing of the transactions contemplated by the Purchase Agreement and subject to the terms and conditions thereof, up to 1,595,744 shares of the Company’s common stock at a purchase price of $2.35 per share, for an aggregate purchase price of up to $3,750,000. The Company intends to use the proceeds from the issuance and sale of the common stock under the Purchase Agreement to purchase fractional shares of common stock resulting from the proposed reverse stock split and for working capital and general corporate purposes.
The participating members of the Board determined unanimously that the proposed transaction is in the best interests of the Company and its stockholders. Psychemedics currently realizes none of the traditional benefits of public company status, yet incurs all of the significant annual expenses and indirect costs associated with being a public company. Without its public company status, Psychemedics would have an ongoing cost structure befitting its current and foreseeable scale of operations and its management would be able to have an increased focus on core operations. The purpose of the reverse stock split is to (i) help Psychemedics stay below 300 record holders of its common stock, which is the level at which the U.S. Securities and Exchange Commission (the “SEC”) public reporting obligations are required, (ii) offer liquidity to smaller stockholders at $2.35 per share without a brokerage commission and (iii) provide all stockholders the opportunity to vote on this matter. Among the factors considered the Board were:
- the significant ongoing costs and management time and effort involved in the Company remaining a public company, including the preparation and filing of periodic and other reports with the SEC and compliance with Sarbanes-Oxley Act and other applicable requirements;
- the limited trading volume and liquidity of the Company’s common stock;
- that the business and operations of the Company are expected to continue substantially as presently conducted, except without the burden of public company costs;
- enabling the Company’s stockholders with the smallest holdings to liquidate their holdings in the Company’s common stock and receive a premium over current market prices without incurring brokerage commissions;
- the determination of Mirus Capital Advisors Inc., independent financial advisor to the Transaction Committee, that the consideration for the fractional shares is fair from a financial point of view to the common stockholders of the Company, excluding affiliated stockholders, including independent director, Peter Kamin, and entities affiliated with him; and
- as a result of the deregistration and delisting, the ability of the Company’s management and employees to focus their time, effort and resources on the Company’s long-term growth and increasing long-term stockholder value.
Subject to filing of the Company’s proxy statement relating to the proposed stock splits and the Purchase Agreement and stockholder approval thereof, it is anticipated that the proposed transaction would become effective shortly after the 2024 Annual Meeting of Stockholders (the “Annual Meeting”), which is expected to be held in the fall of 2024.
Subject to receiving such stockholder approval, as soon as practicable after the Annual Meeting, the Company expects to terminate the registration of its common stock with the SEC and delist its common stock from the Nasdaq Capital Market. As a result, at such time, (i) the Company would cease to file annual, quarterly, current and other reports and documents with the SEC, except as otherwise required by the SEC, and stockholders would cease to receive annual reports and proxy statements, and (ii) the Company’s common stock would no longer be listed on the Nasdaq Capital Market.
The Board may abandon the proposed reverse stock split and terminate the Purchase Agreement at any time prior to the completion of the proposed transaction.
Additional Information and Where to Find It
THIS PRESS RELEASE IS ONLY A BRIEF DESCRIPTION OF THE PROPOSED TRANSACTION. IT IS NOT A REQUEST FOR OR SOLICITATION OF A PROXY OR AN OFFER TO ACQUIRE OR SELL ANY SHARES OF COMMON STOCK. THE COMPANY INTENDS TO FILE A PROXY STATEMENT AND OTHER REQUIRED MATERIALS, INCLUDING A SCHEDULE 13E-3, WITH THE SEC CONCERNING THE PROPOSED STOCK SPLITS. A COPY OF ALL FINAL PROXY MATERIALS WILL BE SENT TO STOCKHOLDERS PRIOR TO THE 2024 ANNUAL MEETING OF STOCKHOLDERS AT WHICH THE COMPANY’S STOCKHOLDERS WILL BE ASKED TO VOTE ON THE PROPOSALS DESCRIBED IN THE MATERIALS PROVIDED BY THE COMPANY. THE COMPANY URGES ALL STOCKHOLDERS TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, AS WELL AS ALL OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THOSE DOCUMENTS WILL INCLUDE IMPORTANT INFORMATION. A FREE COPY OF ALL MATERIALS THE COMPANY FILES WITH THE SEC, INCLUDING THE COMPANY’S SCHEDULE 13E-3 AND PROXY STATEMENT, WILL BE AVAILABLE AT NO COST ON THE SEC’S WEBSITE AT WWW.SEC.GOV. WHEN THOSE DOCUMENTS BECOME AVAILABLE, THE PROXY STATEMENT AND OTHER DOCUMENTS FILED BY THE COMPANY MAY ALSO BE OBTAINED WITHOUT CHARGE BY DIRECTING A REQUEST TO PSYCHEMEDICS CORPORATION, 5220 SPRING VALLEY ROAD, SUITE 230, DALLAS, TEXAS 75254, ATTENTION: SECRETARY.
Participants in the Solicitation
Psychemedics and its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information concerning such participants will be set forth in the proxy statement for the Annual Meeting, which will be filed with the SEC on Schedule 14A (the “Proxy Statement”). To the extent that holdings of Psychemedics’ securities change since the amounts printed in the Proxy Statement, such changes will be reflected on Statements of Change in Ownership on Form 4 or other filings filed with the SEC. Additional information regarding the interests of such participants in the solicitation of proxies in connection with the proposed transaction will be included in the Proxy Statement.
About Psychemedics
Psychemedics Corporation is a leading global provider of innovative hair testing for drugs of abuse. With a commitment to accuracy and reliability, the company offers cutting-edge drug testing solutions. Psychemedics Corporation is dedicated to providing valuable insights and maintaining the highest standards in substance abuse testing.
Forward-Looking Statements
This press release may contain forward-looking statements that are being made pursuant to the Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. Such forward-looking statements include statements about the perceived benefits and costs of the proposed transaction, the number of shares of the Company’s common stock that are expected to be cashed out in the proposed transaction, the timing and stockholder approval of the proposed transaction, the timing and closing of the transactions contemplated by the Purchase Agreement and the Company’s intended use of proceeds from the Purchase Agreement. Such forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those described or implied in such forward-looking statements. Accordingly, actual results may differ materially from such forward-looking statements. The forward-looking statements relating to the transaction discussed above are based on the Company’s current expectations, assumptions, estimates and projections about the Company and involve significant risks and uncertainties, including the many variables that may impact the Company’s projected cost savings, variables and risks related to consummation of the proposed transaction, SEC regulatory review of the Company’s filings related to the proposed transaction, the potential failure to satisfy the conditions to the consummation of the proposed transaction, including obtaining stockholder approval, and the continuing determination of the Board and Transaction Committee that the proposed transaction is in the best interests of all stockholders. The Company assumes no obligation for updating any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
Investor Relations:
Email: InvestorRelations@psychemedics.com
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