PAVmed Inc.
Extract: Charter Amendment (Plain English Desc) from a DEF 14A on 06/11/2020   Download
SEC Document
SEC Filing

 

THE AUTHORIZED CAPITAL PROPOSAL

 

On March 12, 2020, the Board unanimously adopted and declared the advisability of an amendment to the Company’s Certificate of Incorporation to increase the total number of shares of common stock the Company is authorized to issue by 50,000,000 shares, from 100,000,000 shares to 150,000,000 shares. The Board further directed that this amendment be considered at the next annual meeting of stockholders. Accordingly, at the Annual Meeting, stockholders will vote on a proposal to approve this amendment.

 

The form of the certificate of amendment is attached as Annex A to this proxy statement. If approved by the stockholders, the amendment to the Company’s Certificate of Incorporation will become effective upon the filing of the certificate of amendment with the Delaware Secretary of State, which will occur as soon as reasonably practicable after the Annual Meeting.

 

Description of the Amendment to the Certificate of Incorporation

 

If the amendment to the Company’s Certificate of Incorporation is approved, the Board will be authorized to issue the additional shares of common stock, in its discretion, without further approval of the stockholders, and the Board does not intend to seek stockholder approval prior to any issuance of the shares of common stock, unless stockholder approval is required by applicable law or securities exchange rules.

 

The additional shares of common stock for which authorization is sought would be identical to the shares of common stock the Company is presently authorized to issue. Holders of the common stock do not have preemptive rights to subscribe to additional securities which may be issued by the Company. The holders of the common stock are entitled to one vote for each share held of record on all matters to be voted on by stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares of the common stock voted in an election of directors can elect all of the Company’s directors. The holders of the common stock are entitled to receive dividends when, as, and if declared by the Board out of funds legally available therefor. The Company has never paid dividends on its shares of common stock. In the event of the Company’s liquidation, dissolution or winding up, the holders of the common stock are entitled to share ratably in all assets remaining available for distribution after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the common stock. There is no redemption or sinking fund provision applicable to the common stock.

 

The Company’s Certificate of Incorporation also authorizes the Company to issue 20,000,000 shares of preferred stock, of which 1,179,872 shares of Series B Preferred Stock were issued and outstanding as of the June 3, 2020.

 

Reasons for the Amendment to the Certificate of Incorporation

 

As of June 3, 2020, 47,462,759 shares of the common stock were issued and outstanding. In addition, as of such date:

 

  6,473,529 shares of common stock were subject to outstanding options issued to officer, directors, employees and consultants,
     
  17,196,857 shares of common stock were subject to outstanding warrants,
     
  53,000 shares of common stock and 53,000 Series Z Warrants were subject to outstanding unit purchase options issued to the selling agent in the Company’s initial public offering and its designees,
     
  1,179,872 shares were subject to outstanding convertible preferred stock,

 

 15 

 

 

  27,087,355 shares were reserved for issuance under the Senior Secured Convertible Note issued in December 2018, the November 2019 Convertible Notes and the April 2020 Convertible Note,
     
  328,406 shares of common stock were reserved for issuance but not subject to outstanding awards under the Company’s long-term incentive equity plan (2,328,406 shares of common stock will be so reserved if the 2014 Plan Proposal is approved), and
     
  12,962 shares of common stock were reserved for issuance under the ESPP (512,962 shares of common stock will be so reserved if the ESPP Proposal is approved).

 

The Board believes approval of the amendment is in the best interests of the Company and its stockholders. In addition, under the November SPA and the April SPA, as described in “The Alto Transaction Proposals,” the Company agreed to hold a stockholder meeting, by no later than July 31, 2020, to approve resolutions authorizing, among other things, the increase in authorized shares of contemplated by this proposal.

 

The authorization of additional shares of common stock will enable the Company to meet its obligations under its outstanding options, warrants and convertible securities, and its equity compensation plans, while retaining flexibility to respond to future business needs and opportunities. For example, the additional shares may be used for additional equity awards to the Company’s employees, for financing the Company’s business, for acquiring other businesses, or for forming strategic partnerships and alliances. The Company explores opportunities for strategic transactions that could result in the issuance of common stock, including equity capital raises, as they arise or as the Company’s needs require. Although the Company frequently reviews various transactions, the Company has no current agreement or commitment to issue additional shares of its common stock, except for issuances of common stock upon the exercise of its outstanding options and warrants and the conversion of its outstanding convertible preferred stock and notes.

 

The issuance of additional shares of common stock for which authorization is sought may have a dilutive effect on earnings per share and on the equity and voting power of existing security holders of the Company’s capital stock. It may also adversely affect the market price of the common stock. However, if the issuance of additional shares of common stock allows the Company to pursue its business plan and grow its business, the market price of the common stock may increase.

 

While not intended as an anti-takeover provision, the additional shares of common stock for which authorization is sought could also be used by management to oppose a hostile takeover attempt or to delay or prevent changes in control or management of the Company. For example, without further stockholder approval, the Board could strategically sell shares of common stock to purchasers who would oppose a takeover or favor the current Board. Although the amendment to the Company’s Certificate of Incorporation has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is the Board currently aware of any such attempts directed at the Company), approval of the proposal could facilitate future efforts by management to deter or prevent changes in control of the Company, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices. The Board is not aware of any attempt, or contemplated attempt, to acquire control of the Company, and the amendment is not being presented with the intent that it be utilized as a type of anti-takeover device or to secure management’s positions within the Company.