Item 1.01. Entry into a Material Definitive Agreement.
On May 24, 2022, CEN Biotech, Inc., an Ontario, Canada corporation (the “Company”) entered into a Patent Purchase and Assignment Agreement (the “Agreement”) with Emergence Global Enterprises Inc., a corporation incorporated pursuant to the laws of British Columbia, Canada (the “Buyer”). Pursuant to the Agreement, the Company agreed to sell its entire right, title and interest in Registered U.S. Patent No. 8,723,425, Light Emitting Diode Driver Circuit, issued May 13, 2014, in and to the inventions therein set forth and any reissue, reexamination, renewal, divisional, or continuation thereof (the “Patent”) to the Buyer, in exchange for the amount of seven million, four hundred and forty thousand Dollars (CAD $7,440,000), which was agreed to be paid through the issuance of 62,000,000 Common Shares of the Buyer (the “Shares”) at a deemed issue price of $0.12 per share (the “Payment”) constituting 44.17% of the Buyer’s issued and outstanding capital stock. Pursuant to the Agreement, the Payment will fully satisfy all payment obligations under the Agreement to the Company. Pursuant to the Agreement, the Company agreed to be fully responsible for, and the Buyer shall not be liable to the Company or any other person or entity for any dispute regarding, allocation of the Payment made under the Agreement. Pursuant to the Agreement, the Company agreed to pay any maintenance fees, annuities, and the like due or payable on the Patent until the closing date of the Agreement.
The closing of the Agreement subject to certain customary closing conditions, including, but not limited to, the Buyer having received approvals of the Canadian Securities Exchange for the Agreement and the transactions contemplated thereby and such approvals must be valid and in effect as of the closing date of the Agreement. Additionally the closing of the Agreement is subject to the approval of the shareholders of the Buyer. Additionally, between the date of entry into the Agreement, and the closing date of the Agreement, there must be no material adverse effect, as such term is defined in the Agreement, occurring with regards to the Buyer. Additionally, between the date of entry into the Agreement, and the closing date of the Agreement, the Buyer and the Company agreed to conduct their business and operations of the Buyer in the ordinary course of business and in compliance with all applicable laws. Additionally, between the date of entry into the Agreement, and the closing date of the Agreement, the Buyer agreed, without the written consent of the Company, including but not limited to, not to issue any dividends, amend its organizational documents, incur any indebtedness, recognize any labor union, or enter into any material transaction other than in the ordinary course of business. Additionally, between the date of entry into the Agreement, and the closing date of the Agreement, the Company agreed not to amend its organizational documents and not to effect any merger, consolidation, share exchange or business combination that would transfer the Patent to any other person.
The Agreement can be terminated at any time prior to closing by mutual written consent of the parties. The Company may terminate the Agreement if the Buyer breaches any of the closing conditions applicable to it under the Agreement. The Buyer may terminate the Agreement if the Company breaches any of the closing conditions applicable to it under the Agreement.
Pursuant to the Agreement, the Company agreed to indemnify the Buyer against any and all out-of-pocket loss, cost, payments, demand, penalty, forfeiture, expense, liability, judgment, deficiency or damage, and diminution in value or claim (including actual costs of investigation and attorneys’ fees and other costs and expenses) (all of the foregoing collectively, “Losses”) incurred or sustained by the Buyer as a result of or in connection with (i) any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties, covenants and agreements of the Company contained in the Agreement and (ii) the ownership, and operation of the Patent prior to the transfer of the Patent on the closing date of the Agreement. Additionally, pursuant to the Agreement, the Buyer agreed to indemnify the Company against any and all Losses incurred or sustained by the Company as a result of or in connection with (i) any breach, inaccuracy or nonfulfillment or the alleged breach, inaccuracy or nonfulfillment of any of the representations, warranties, covenants and agreements of the Buyer contained in the Agreement and (ii) the ownership, and operation of the Patent following the transfer of the Patent on the closing date of the Agreement. Pursuant to the Agreement, neither the Buyer nor the Company, shall be obligated to indemnify the other party for any Losses in excess of $7,440,000.
Bahige (Bill) Chaaban and Joe Byrne are a Director and Chief Executive Officer of the Buyer, respectively, and each previously held positions with the Company. Bahige (Bill) Chaaban resigned from his positions as Chief Executive Officer, President, Chairman of the Board of Directors Company effective at the close of business on April 14, 2022. Joseph Byrne resigned from his position as a Director of the Company effective at the close of business on April 14, 2022. At December 31, 2020, the Company had an outstanding loan agreement with the Buyer and advanced funds of $17,901. At the time the loan was made, Joseph Byrne, the CEO of the Buyer was not an officer or director of the Company. He was at that time a 5% shareholder and former CEO of the Company. He was then appointed as the President and a director of the Company on April 19, 2021, and has since resigned from all positions with the Company. Additionally, our former CEO, Bill Chaaban was appointed as the President of the Buyer on April 12, 2021. As of May 6, 2021, the loan to the Buyer was repaid in full, through the issuance to the Company of shares of the Buyer common stock, and is no longer outstanding. The Company and the Buyer entered into a Loan Repayment Agreement dated as of May 6, 2021, pursuant to which the Buyer agreed to repay to the Company $17,901, representing the total amount then outstanding under the loan agreement, by issuing 21,830 shares of the Buyer’s common stock. Such shares were issued to the Company on May 6, 2021.
The Agreement also contains customary representations by the Company and the Buyer which are typically contained in such agreements. There can be no assurance that the Agreement will close as planned, or at all.
To evidence the assignment of the Patent, the Company agreed to enter into a Patent Assignment Agreement (the “PAA”) for the Patent, with the Buyer at the closing of the Agreement. Pursuant to the PAA, the Company will agree to assign the Patent to the Buyer, and also to provide evidence to the Buyer of the filing of a request for recordation with the U.S. Patent Office of the PAA.
The foregoing descriptions of Agreement and the PAA, do not purport to be complete and are qualified in their entirety by the full text of the Forms of the Agreement and the PAA which are filed herewith as Exhibits 10.1 and 10.2, respectively, and are incorporated by reference herein.
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