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EXHIBIT 2.3
(Patriot Scientific Corporation Letterhead)
December 4, 1996
<<Name1>>
<<Name2>>
<<Street>>
<<City>>, <<State>> <<ZIP>>
<<Salutation>>:
Patriot Scientific Corporation, a Delaware corporation (the "Company") hereby
offers to acquire all of the shares of the Common Stock (the "Shares") of
Metacomp, Inc., a California corporation, owned by you in exchange for 1.1
shares of the Common Stock of the Company for each share of Metacomp, Inc. (the
"Exchange Value") upon the terms and subject to the conditions set forth in this
Exchange Offer and in the Letter of Transmittal (the "Letter of Transmittal",
which, together with this Exchange Offer, constitute the "Offer"). The Offer
constitutes a part of a tender for most but not all of the issued and
outstanding shares of Metacomp. If your Shares are properly tendered, they will
be acquired at the Exchange Value, upon the terms and subject to the conditions
of the Offer.
You will not be obligated to pay brokerage commissions, solicitation fees, or,
subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes
because of the Company's acquisition of your Shares pursuant to the Offer.
The Company's shares are not listed on any exchange or on NASDAQ and are
principally traded over-the-counter. On November 25, 1996, the closing sales
price of Company stock traded over-the-counter was $1.40 per share. The Company
urges you to obtain the current market quotations for its shares prior to
tendering your Shares to the Company.
1. Procedures for Tendering Shares.
For your Shares to be properly tendered pursuant to the Offer, the
certificate for your Shares, together with a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) including required
signature guarantees, and any other documents required by the Letter of
Transmittal, must be received prior to 5:00 p.m., Pacific Standard Time, on
Tuesday, December 17, 1996 (the "Expiration Date") by the Company.
The acceptance of your Shares by the Company for exchange will constitute a
binding agreement between you and the Company upon the terms and subject to
the conditions of the Offer. However, neither the Offer nor the Company's
receipt of your certificate and a Letter of Transmittal will require the
Company to accept the tender of your Shares. The Company will in all events
retain the right to accept or reject such tender and may do so for any
reason, including, without limitation, the receipt of tenders for less than
90% of the issued and outstanding shares of Metacomp.
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Your signature on the Letter of Transmittal must be guaranteed by an
"Eligible Institution." See Instruction 1 of the Letter of Transmittal. If
the certificate representing your Shares is registered in the name of a
person other than the signer of the Letter of Transmittal, or if the shares
to be issued in exchange for your Shares of Metacomp are to be issued to a
person other than the registered holder of such Shares, the certificate
must be endorsed or accompanied by an appropriate stock power, in either
case signed exactly as the name of the registered holder appears on the
certificate, with a signature on the certificate or stock power guaranteed
by an Eligible Institution.
The issuance of shares of the Company in return for your Metacomp Shares
will only occur after the tender of those shares has been accepted by the
Company and the Company has received certificates for those shares, a
properly completed and duly executed Letter of Transmittal and any other
documents required by the Letter of Transmittal. The method of delivery of
all documents, including stock certificates, the Letter of Transmittal, and
any other required documents, is at your election and risk. If delivery is
by mail, registered mail with return receipt requested, properly insured,
is recommended.
All questions as to the form, eligibility, validity (including time of
receipt) and acceptance of the tender of your Shares will be determined by
the Company, in its sole discretion, which determination shall be final and
binding on the parties. The Company reserves the right to reject any tender
it determines not to be in proper form and to waive any defect or
irregularity of the tender of your Shares. Neither the Company nor any
other person is or will be obligated to give notice of any defect or
irregularity in tender, nor will the Company or any such person incur any
liability for failure to give such notice.
2. Withdrawal Rights.
Except as otherwise provided in this Section 2, a tender of Shares made
pursuant to this Offer is irrevocable. A tender of your Shares pursuant to
this Offer may be made at any time prior to the Expiration Date and may
also be withdrawn after 5:00 p.m., Pacific Standard Time on Tuesday,
December 31, 1996, unless previously accepted by the Company.
For a withdrawal to be effective, the Company must receive a timely written
or facsimile transmission Notice of Withdrawal as is set forth in this
letter. All questions as to the form and validity (including time of
receipt) of a Notice of Withdrawal will be determined by the Company, in
its sole discretion, which determination shall be final and binding on all
parties.
3. Exchange of Shares and Issuance of Patriot Shares.
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Upon the terms and subject to the conditions of the Offer, the Company will
accept for exchange Shares properly tendered prior to the Expiration Date
as promptly as practicable following the Expiration Date. For purposes of
the Offer, the Company will be deemed to have accepted for exchange Shares
which are tendered prior to the Expiration Date if and when it gives
written notice to you of its acceptance of such Shares for exchange
pursuant to the Offer.
As soon as possible following its acceptance of the tender of your Shares
for exchange, the Company will issue to you certificates evidencing a
number of shares of its Common Stock equal to the Exchange Value. No
fractional shares will be issued. The Company will round any fractional
share to the nearest whole share.
The Company will pay stock transfer taxes, if any, payable on account of
the transfer to it of your Shares; provided, however, that if the shares to
be issued in exchange for your Shares are to be issued to any person other
than the registered holder of your Shares, or if the tendered certificates
are registered in the name of any person other than the person signing the
Letter of Transmittal, the amount of any stock transfer taxes payable on
account of such tender will be your responsibility or that of such other
person.
4. Certain Conditions of the Offer.
Notwithstanding any other provision of this Exchange Offer, the Company
will not be required to accept for exchange any Shares tendered, and may
terminate or amend the Offer or may postpone the acceptance of the Shares,
if at any time following the date of this Exchange Offer and at or before
the time of acceptance for exchange of the Shares, any of the following
events shall have occurred (or shall have been determined by the Company to
have occurred) which, in the Company's sole judgment in any such case, and
regardless of the circumstances giving rise thereto, makes it inadvisable
to proceed with the Offer or with the acceptance of the Shares for
exchange, including, without limitation, the following:
(a) The Company shall have received tenders of Shares constituting an
aggregate of less than 90% of the issued and outstanding shares of
Metacomp;
(b) Metacomp shall have received notice from any unsecured creditor of
Metacomp that it objects to the closing of Metacomp's bankruptcy
proceeding before the United States District Court for the Southern
District of California.
(c) There shall be any claim, action or proceeding threatened, pending or
instituted which challenges the making of this Offer or the
acquisition of Shares pursuant to this Offer, or otherwise relates in
any manner to the Offer.
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(d) The failure to satisfy any of the conditions to the closing of the
exchange set forth in that certain letter of intent, dated October
30, 1996, by and among the Company, Metacomp, and certain of the
shareholders of Metacomp.
(e) Any change shall occur or be threatened in the business, condition
(financial or otherwise) income, operations or prospects of Metacomp.
(f) The Company shall have received audited financial statements of
Metacomp for each of the years ended July 31, 1995 and July 31, 1996.
The foregoing conditions are non-exclusive, are for the benefit of the
Company, and may be asserted by the Company regardless of the circumstances
giving rise to them (including any action or failure to act on the part of
the Company) or may be waived by the Company in whole or in part. The
Company's failure at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right, and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to
time.
Any determination by the Company concerning any of the events described in
this Section 4 and any related judgment by the Company regarding the
inadvisability of proceeding with the exchange and the acquisition of
tendered Shares shall be final and binding on all parties.
5. Price Range of Shares.
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the NASD OTC Bulletin Board system maintained by the National
Association of Securities Dealers, Inc. Prices reported represent prices
between dealers, do not include markups or commissions and do not
necessarily represent actual transactions. The market for the Company's
Shares has been sporadic and at times very limited.
The following table sets forth the high and low bid quotations for the
Common Stock for the fiscal years ended May 31, 1996 and 1995 and the
period ended November 25, 1996.
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BID QUOTATIONS
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HIGH LOW
Period Ended November 25, 1996
First Quarter $3.38 $1.75
Second Quarter Thru November 25 $2.25 $1.16
Fiscal Year Ended May 31, 1996
First Quarter $0.35 $0.12
Second Quarter $0.76 $0.22
Third Quarter $3.53 $0.47
Fourth Quarter $3.97 $2.00
Fiscal Year Ended May 31, 1995
First Quarter $0.72 $0.12
Second Quarter $0.44 $0.12
Third Quarter $0.44 $0.09
Fourth Quarter $0.31 $0.09
The Company has approximately 137 shareholders of record as of August 9,
1996. At August 9, 1996 there were 29,811,975 shares of Common Stock issued
and outstanding. The Company has never paid a cash dividend on its Common
Stock and does not expect to pay one in the foreseeable future.
6. Representations of Shareholders.
By execution of the Letter of Transmittal, you acknowledge that the
following representations are true:
(a) You have received a copy of the Company's report on Form 10-K for the
year ended May 31, 1996 and a copy of its report on Form 10-Q for the
quarter ended August 31, 1996.
(b) You understand that (i) the Patriot Common Stock to be issued to you
will not have been registered under any federal or state securities
laws and may not be resold unless so registered or in a transaction
exempt from registration and (ii) the certificates evidencing the
Patriot shares to be issued will bear a legend reflecting this
limitation on transferability.
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(c) You, together with your advisors, have such knowledge and experience
in financial or business matters that you are capable of evaluating
the merits and risks of this Exchange Offer, the Patriot Common
Stock, and the transactions related thereto.
(d) You understand and have fully considered for purposes for this
investment the risks of this investment and that (i) this investment
is suitable only for an investor who is able to bear the economic
consequences of losing his or her entire investment, (ii) the Patriot
Common Stock is a speculative investment which involves a high degree
of risk of loss, and (iii) you are able to bear the economic risk of
this investment.
(e) You and your representatives and advisors have been given the
opportunity to ask questions of, and have received satisfactory
answers from, the Company concerning the terms of the Exchange Offer
and the business prospects of the Company.
(f) You and your representatives and advisors have been given the
opportunity to ask questions of, and have received satisfactory
answer from, representatives of Metacomp concerning the financial
condition and business prospects of Metacomp.
7. Covenants of the Company. Within six months following the issuance of
Patriot shares in exchange for your Shares of Metacomp, the Company will
use its best efforts to prepare, file, and diligently pursue to
effectiveness a registration statement on Form S-3 (or, if Form S-3 is not
available, Form SB-2) with the Securities and Exchange Commission for the
registration of the shares of Patriot Common Stock to be issued to you
pursuant to the Offer. The cost of such registration will be borne by the
Company; however, the Company will not be responsible for any separate
expenses incurred by you in connection with this offering or for any
commissions or discounts paid to any underwriter or broker. As a condition
to the filing of such registration statement, the Company may require that
former shareholders of Metacomp who receive 10,000 or more shares of
Patriot Common Stock and on whose behalf the registration statement is
filed enter into lock-up agreements specifying that, for a period of two
years following
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the closing of the Exchange Offer, each such shareholder would be eligible
to sell not more than five percent (5%) of his shares of Patriot Common
Stock during any calendar month.
Very truly yours,
Patriot Scientific Corporation
By: /s/ MICHAEL A. CARENZO
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Michael A. Carenzo, President
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