Company Officer Support Agreements
On May 8, 2021, concurrently with the execution of the Merger Agreement, AbbVie and Merger Sub entered into support agreements (the “Officer Support Agreements”) with certain officers of the Company, in their capacities as stockholders of the Company, who, collectively and in the aggregate, hold voting power over approximately 3.2% of the outstanding shares of Company common stock, pursuant to which, among other things, each such officer agreed to vote all of his shares of Company common stock (i) in favor of the adoption and approval of the Merger Agreement and approval of the transactions contemplated by the Merger Agreement, (ii) against any takeover proposal from a third party during the term of the Merger Agreement and (iii) against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the Merger.
The Officer Support Agreements will terminate upon the earliest of (i) the Effective Time, (ii) a change in the Board’s recommendation, (iii) a material modification or amendment of the Merger Agreement that reduces the consideration payable thereunder, (iv) the termination of the Merger Agreement in accordance with its terms and (v) the mutual agreement of the parties.
The foregoing description of the Officer Support Agreements and the transactions contemplated thereby is not complete and is qualified in its entirety by reference to the form of Officer Support Agreement, a copy of which is filed as Exhibit 99.2 hereto and the terms of which are incorporated herein by reference.
Amendment to Warrants
On May 8, 2021, the Company entered into an amendment to each of the Common Stock Purchase Warrants (the “Warrants”) governing the terms of the outstanding warrants to purchase Company common stock (the “Warrant Amendments”). Pursuant to the Warrant Amendments, each of the Warrants was amended to provide that upon the occurrence of a Fundamental Transaction (as defined in the Warrant), at the election of the Company, the Warrant will either
| | (i) | remain outstanding and thereafter will be exercisable for the kind and number of shares of stock or other securities or assets of the Company or the successor entity resulting from such Fundamental Transaction to which the applicable warrant holder would have been entitled upon consummation of such Fundamental Transaction if such warrant holder had exercised the Warrant in full immediately prior to the time of such Fundamental Transaction and acquired the applicable number of shares of Company common stock then issuable under the Warrant or |
| | (ii) | be cancelled upon consummation of such Fundamental Transaction in exchange for the right to receive a cash payment equal to (A) the aggregate amount of cash the applicable warrant holder would have been entitled to upon consummation of such Fundamental Transaction if such warrant holder has exercised the Warrant in full immediately prior to the time of such Fundamental Transaction and acquired the applicable number of shares of Company common stock then issuable under the Warrant, less (B) the amount equal to the exercise price of the applicable Warrant multiplied by the number of shares of Company common stock then exercisable under such Warrant. |
At its meeting on May 8, 2021, the Board elected to cause the Warrants to be treated in the Merger as specified in clause (ii).
The foregoing description of the Warrant Amendments is not complete and is qualified in its entirety by reference to
the form of Warrant Amendment, a copy of which is filed as Exhibit 4.1 hereto and the terms of which are incorporated herein by reference.
Amended and Restated Severance Plan
On May 8, 2021, the Board approved, upon the recommendation of the Compensation Committee of the Board, the Soliton, Inc. Employee Severance Plan (the “Amended and Restated Severance Plan”). The Amended and Restated Severance Plan amends and restates the Soliton, Inc. Executive Severance Plan, effective March 1, 2021 (the “Prior Severance Plan”). The Prior Severance Plan was amended to:
| | • | | provide that all employees of the Company will be eligible to participate in, and receive severance benefits under, the Amended and Restated Severance Plan, subject to otherwise meeting the requirements to receive such severance as set forth therein, except for those employees party to an employment agreement or similar agreement with the Company that provides severance benefits greater than those set forth in the Amended and Restated Severance Plan; |
| | • | | revise the definition of “good reason” to resign from employment to include a material, adverse change in the employee’s authority, duties or responsibilities (other than temporarily while the employee is physically or mentally incapacitated or as required by applicable law); |
| | • | | require that the Board provide 15 days’ notice to participants of any amendment to or termination of the Amended and Restated Severance Plan; |
| | • | | provide that the Amended and Restated Severance Plan will be binding upon any successor to the Company; |
| | • | | provide that the Amended and Restated Severance Plan cannot be amended or terminated in a manner that adversely affects the rights of any participant thereunder whose employment was terminated for any or no reason prior to the date of such amendment or termination; |
| | • | | provide that the Amended and Restated Severance Plan cannot be amended or terminated in a manner that adversely affects the rights of any participant thereunder in connection with such participant’s termination of employment occurring in connection with, or within 12 months following, a “change of control” of the Company (as defined therein), without such participant’s consent; and |
| | • | | provide that any release of claims that a participant is required to enter into to receive severance under the Amended and Restated Severance Plan may not include a non-competition and/or non-solicitation covenant that extends more than six months from the participant’s termination from employment, and any such non-competition and/or non-solicitation covenant must be limited to the tattoo removal and cellulite treatment markets. |
The foregoing description of the Amended and Restated Severance Plan is not complete and is qualified in its entirety by reference to the text of the Amended and Restated Severance Plan, a copy of which is filed as Exhibit 10.3 hereto and the terms of which are incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Amendment to Brad Hauser Employment Agreement
In connection with the execution of the Merger Agreement, on May 8, 2021, the Company entered into an amendment (the “Employment Agreement Amendment”) to that certain Employment Agreement, dated October 30, 2020, between the Company and its Chief Executive Officer, Brad Hauser (the “Employment Agreement”). The Employment Agreement Amendment provides that, if Mr. Hauser becomes entitled to payments and/or benefits under the Employment Agreement or otherwise (collectively, the “Total Payments”) that would result in Mr. Hauser being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), Mr. Hauser will be entitled to receive a gross-up payment in an amount such that, after payment by Mr. Hauser of all applicable taxes on the gross-up payment (including any excise tax and any associated interest charges or penalties that could be imposed under Section 4999 of the Code), Mr. Hauser will retain an amount of the gross-up payment equal to the excise tax and any associated interest charges or penalties imposed by Section 4999 upon the Total Payments, such that the net amount retained by Mr. Hauser shall be equal to the net amount of the Total Payments as if the excise tax imposed by Section 4999 was not applicable to the Total Payments, provided that the amount of the gross-up payment to Mr. Hauser will not exceed $250,000.
Non-Competition and Non-Solicitation Agreement with Mr. Hauser
On May 8, 2021, in connection with the execution of the Merger Agreement, the Company entered into a non-competition and non-solicitation agreement with Mr. Hauser (the “Non-Competition Agreement”). The Non-Competition Agreement provides that, subject to certain exceptions set forth therein, during Mr. Hauser’s employment with the Company and until 18 months following the Closing, Mr. Hauser will be prohibited from, directly or indirectly, including on behalf of any person, firm or other entity, (i) actively soliciting for employment any employee of the Company or any of its parents, subsidiaries, divisions or affiliates, or anyone who was an employee of the Company or one of its parents, subsidiaries, divisions or affiliates within the six-month period prior to the Closing, or inducing any such employee to terminate his or her employment with the Company or any of its parents, subsidiaries, divisions or affiliates, (ii) performing services for any other business, within the United States or any foreign jurisdiction in which the Company or any of its subsidiaries is then conducting clinical trials, providing services or products or marketing its services or products (or is engaged in active discussions to provide such services), that is engaged in the development, manufacture, marketing, distribution or sale of, or research directed to the development, manufacture, marketing, distribution or sale of, medical or aesthetic solutions or devices in the tattoo-removal or reduction of cellulite markets (a “Competing Business”), (iii) serving as an officer or director (or similar position) of a Competing Business, or (iv) requesting any person, firm or other entity that is a customer of the Company or any of its parents, subsidiaries, divisions or affiliates during Mr. Hauser’s employment with the Company or during the 18-month period following the Closing to curtail or cancel such customer’s business with the Company or any of its affiliates.
