| Subsequent events | 10. Subsequent events
Merger Agreement
On November 1, 2017, the Company entered into an Agreement and
Plan of Merger (the “Merger Agreement”) with MAK LLC, a
Delaware limited liability company (“Parent”), MEH
Acquisition Co., a Delaware Corporation and a direct wholly-owned
subsidiary of Parent (“Purchaser”), and for limited
purposes, Mallinckrodt plc, an Irish public limited company and the
ultimate parent entity of Parent and Purchaser
(“Mallinckrodt”).
Pursuant to the terms and subject to the conditions of the Merger
Agreement, Purchaser commenced a tender offer (the
“Offer”) on November 9, 2017 to acquire all of the
outstanding shares of the Company’s common stock (the
“Shares”), at an offer price of (i) $1.52 per Share in
cash (approximately $42 million in the aggregate) (the
“Closing Amount”), plus (ii) one non-transferable
The obligation of Purchaser to purchase Shares tendered in the
Offer is subject to the satisfaction or waiver of a number of
conditions set forth in the Merger Agreement, including
(i) that there shall have been validly tendered and not
validly withdrawn Shares that, considered together with all other
Shares, if any, beneficially owned by Parent and affiliated
entities, represent one more Share than 50% of the total number of
Shares outstanding at the time of the expiration of the Offer
(calculated on a fully-diluted basis in accordance with the Merger
Agreement) (the “Minimum Condition”), and
(ii) those other conditions set forth in Annex I to the Merger
Agreement.
The Offer will initially expire at one minute after 11:59 p.m.
Eastern Time on December 8, 2017. Purchaser may, in its
discretion and without the consent of the Company, extend the Offer
on one or more occasions in accordance with the terms set forth in
the Merger Agreement and the applicable rules and regulations of
the Securities and Exchange Commission (the “SEC”).
Purchaser is not required to extend the Offer beyond the earlier to
occur of the valid termination of the Merger Agreement and the
Outside Date (as defined below) (the “Extension
Deadline”). Purchaser may not terminate the Offer, or permit
the Offer to expire, prior to the Extension Deadline without the
prior written consent of the Company.
As soon as practicable following the Offer Acceptance Time and upon
the terms and subject to the conditions set forth in the Merger
Agreement and in accordance with Section 251(h) of the
Delaware General Corporation Law, Purchaser will merge with and
into the Company, with the Company surviving as a wholly-owned
subsidiary of Parent (the “Merger”), without a meeting
or vote of stockholders of the Company. At the effective time of
the Merger (the “Effective Time”), the Shares not
purchased pursuant to the Offer (other than Shares held by the
Company, Parent, its affiliated entities or by stockholders of the
Company who have perfected their statutory rights of appraisal
under Delaware law) will each be converted into the right to
receive the Offer Price.
In addition, at the Effective Time, each option to purchase Shares
(a “Company Stock Option”) that is then outstanding and
unexercised, whether or not vested and with respect to which the
applicable exercise price per Share is less than the Closing Amount
(each, an “In the Money Company Stock Option”), will be
cancelled and converted into the right of the holder of such In the
Money Company Stock Option to receive, for each Share underlying
such In the Money Company Stock Option, (i) an amount in cash
equal to the excess, if any, of the Closing Amount over the
applicable exercise price for such Share, and (ii) one
CVR.
At the Effective Time, each Company Stock Option other than an In
the Money Company Stock Option that is outstanding and unexercised,
whether or not vested (each, an “Out of the Money Company
Stock Option”), will be cancelled and converted into the
right to receive one or more cash payments, if any, from Parent
with respect to each Share subject to the Out of the Money Company
Stock Option upon each date that a payment would be required to a
holder of a CVR under the terms of the CVR Agreement (each such
date, a “Milestone Payment Date”), equal to
(i) the amount by which the Per Share Value Paid (as defined
in the Merger Agreement) exceeds the exercise price payable per
Share subject to such Out of the Money Company Stock Option, less
(ii) the amount of all payments previously paid with respect
to such Out of the Money Company Stock Option. Notwithstanding the
foregoing, any Out of the Money Options with an exercise price per
Share equal to or greater than $4.10 will be cancelled at the
Effective Time without any consideration payable therefor.
At the Effective Time, each restricted stock unit
(“RSU”), whether vested or unvested, that is
outstanding immediately prior to the Effective Time, shall become
fully vested and shall be cancelled and converted at the Effective
Time into the right of the holder of such RSU to receive, for each
Share underlying such RSU, (i) an amount in cash, equal to the
Closing Amount and (ii) one CVR.
In addition, at the Effective Time, each warrant to purchase Shares
(a “Company Warrant”), that is outstanding and
unexercised immediately prior to the Effective Time shall be
cancelled and converted into the right of the holder of such
Company Warrant to receive, for each Share underlying such Company
Warrant, (i) an amount in cash equal to the excess, if any, of
the Closing Amount over the applicable exercise price for such
Share, and (ii) one (1) CVR. As of the Effective Time,
any Company Warrant with respect to which the applicable exercise
price per Share is greater than the Closing Amount shall be
cancelled without any consideration payable therefor (the
“Cancelled Warrants”).
The Merger Agreement includes representations, warranties and
covenants of the parties customary for a transaction of this
nature. Among other things, until the earlier of the termination of
the Merger Agreement or the Effective Time, the Company has agreed
to operate its business in the ordinary course consistent with past
practice and has agreed to certain other operating covenants, as
set forth more fully in the Merger Agreement. The Merger Agreement
also prohibits the Company’s ability to solicit, initiate,
knowingly facilitate or knowingly encourage any proposals relating
to alternative transactions and restricts the Company’s
ability to furnish information to, or participate in any
discussions or negotiations with, any third party with respect to
any such transaction, subject to certain limited exceptions.
In the event the Offer Acceptance Time occurs on or before
December 31, 2017 and the Company’s cash and cash
equivalents are insufficient to pay and fully discharge the
Indebtedness (as defined in the Merger Agreement) and Transaction
Expenses (as defined in the Merger Agreement) on or prior to
Closing (the “Closing Shortfall”) by more than
$250,000, the aggregate amount payable pursuant to the first
occurring Milestone Payment (as defined below) shall be reduced by
the full amount of the Closing Shortfall. In the event the Offer
Acceptance Time occurs after the December 31, 2017 and the
Indebtedness and Transaction Expenses due and payable as if the
Closing were to occur on December 31, 2017 exceed the
Company’s aggregate balance of cash and cash equivalents as
of December 31, 2017 by more than $250,000 (the
“Measurement Date Shortfall”), the first occurring
Milestone Payment shall be reduced by the full amount of the
Measurement Date Shortfall.
The board of directors of the Company has unanimously adopted
resolutions recommending that the Company’s stockholders
accept the Offer and tender their Shares to Purchaser pursuant to
the Offer.
The Merger Agreement may be terminated under certain circumstances,
including in specified circumstances in connection with superior
proposals, or if the transaction is not consummated by the Outside
Date. Upon the termination of the Merger Agreement, under specified
circumstances, the Company will be required to pay Parent a
termination fee of $1,680,000.
In addition, subject to the terms of the Merger Agreement, either
the Company or Parent may terminate the Merger Agreement, at any
time prior to the Offer Acceptance Time, if the Merger has not been
consummated prior to 5:00 p.m., Eastern Time, on May 1, 2018
(the “Outside Date”).
During the three and nine months ended September 30, 2017, the
Company incurred transaction expenses related to the merger of
$0.4 million, which are included in general and administrative
expenses. The Company will owe $0.8 million payable to our
financial advisor subject to the consummation of the Merger.
Tender and Support Agreement
Concurrently with the execution and delivery of the Merger
Agreement, each director and executive officer of the Company, and
certain stockholders affiliated with such directors and executive
officers (each a “Tendering Stockholder”), entered into
a Tender and Support Agreement (the “Tender Agreement”)
with Parent and Purchaser, pursuant to which each Tendering
Stockholder agreed, among other things, to tender his, her or its
Shares and Company Stock Options that are exercised prior to the
Offer Acceptance Time, if any (collectively, the “Subject
Shares”), pursuant to the Offer and, if necessary, vote his,
her or its Subject Shares against any other acquisition proposal,
including any superior proposal, and against any other proposed
action, agreement or transaction involving the Company that is
intended, or would reasonably be likely, to prevent, materially
impede, materially delay or otherwise materially and adversely
affect or prevent the consummation of the Offer, the Merger or any
other transaction contemplated by the Merger Agreement.
Contingent Value Rights Agreement
At or prior to the Offer Acceptance Time, Parent and Mallinckrodt
will enter into the CVR Agreement with the Rights Agent governing
the terms of the Contingent Consideration. As provided in the
Merger Agreement, each share of Company common stock outstanding
(other than certain excluded shares) and each share underlying an
In the Money Company Stock Option, Company Warrant (other than
Cancelled Warrants) and RSU immediately prior to the Effective
Time, or the Offer Acceptance Time in the case of a share of
Company common stock validly tendered pursuant to the Offer, will
be converted automatically into the right to receive, in addition
to the Closing Amount, one CVR, which represents the right to
receive the Contingent Consideration if the milestones set forth
below are achieved on or before December 31, 2029. The
amounts of each of the payments under the CVR will be determined by
dividing the aggregate milestone payment amounts set forth below,
if achieved (as may be reduced by any payments to certain holders
of Out of the Money Company Options or in the event of a Closing
Shortfall or Measurement Date Shortfall, if any, each such
aggregate milestone payment as may be adjusted, a “Milestone
Payment”), by the number of CVRs outstanding on the Record
Date (as defined in the CVR Agreement).
• IV Milestone
• Oral Milestone
• Product Sales Milestone
The right to the Contingent Consideration as evidenced by the CVR
Agreement is a contractual right only and will not be transferable,
except in the limited circumstances specified in the CVR Agreement.
The CVRs will not be evidenced by a certificate or other instrument
and will not be registered or listed for trading. The CVRs will not
have any voting or dividend rights and will not represent any
equity or ownership interest in Parent, Purchaser, the Company or
any of their affiliates. There can be no assurance that any of the
milestones set forth above will be achieved or that any holders of
CVRs will receive payments with respect thereto.
Amendment to Bylaws
On November 1, 2017, the board of directors of the Company
approved an amendment to the bylaws of the Company (as amended, the
“Bylaws”) to explicitly provide that the Court of
Chancery of the State of Delaware (or, in case such court does not
have jurisdiction, the Federal District Court for the District of
Delaware or other competent state court of the State of Delaware)
will be the sole and exclusive forum for (i) any derivative
action or proceeding brought on behalf of the Company,
(ii) any action asserting a claim of breach of a fiduciary
duty owed by any director, officer or other employee of the Company
to the Company or the Company’s stockholders, (iii) any
action asserting a claim arising pursuant to any provision of the
Delaware General Corporation Law or the certificate of
incorporation or Bylaws, or (iv) any action asserting a claim
against the Company governed by the internal affairs doctrine. This
amendment was effective upon adoption by the board of directors of
the Company. |
