| Item 1.01 | Entry into a Material Definitive Agreement. |
On December 7, 2020, MannKind Corporation, a Delaware corporation (the “Company”), QrumPharma, Inc., a Delaware corporation (the “Acquired Company”), the stockholders of the Acquired Company named therein (the “Sellers”) and SHR Services LLC, a Pennsylvania limited liability company, solely in its capacity as the Securityholders’ Representative (the “Securityholders’ Representative”), entered into a Stock Purchase Agreement (the “Purchase Agreement”). Pursuant to the terms and conditions of the Purchase Agreement, the Company purchased all of the outstanding capital stock of the Acquired Company, subject to the conditions set forth therein (the “Transaction”).
Pursuant to the terms of the Purchase Agreement and as consideration to the holders of capital stock, options and convertible securities of the Acquired Company, the Company paid upfront approximately $3.5 million in cash (the “Cash Consideration”) and issued 3,067,179 shares of the Company’s common stock (the “Stock Consideration”), subject to adjustment for cash on hand, unpaid indebtedness, unpaid transaction expenses, net working capital, and other liabilities of the Acquired Company. 306,717 shares of the Stock Consideration (the “Escrow Shares”) and $350,000 of the Cash Consideration (the “Escrow Cash”) will be held in an escrow fund for purposes of satisfying any post-closing indemnification claims under the Purchase Agreement, and $250,000 of the Cash Consideration will be held in an escrow fund for purposes of post-closing purchase price adjustments.
The Sellers are also entitled to contingent payments equal to (i) 1.5% of the total annual and global adjusted net sales of specified products that exceed $50.0 million is such calendar year plus (ii) 1.0% of the total annual and global adjusted net sales of a specified clofazimine product that exceed $200.0 million is such calendar year (the “Contingent Payments”).
The Purchase Agreement contains customary representations and warranties and covenants of each of the parties. The Purchase Agreement also includes indemnification provisions whereby the Sellers will indemnify the Company for losses arising out of, among other things, inaccuracies in, or breaches of, the representations, warranties and covenants of the Acquired Company. The Company and the other indemnified parties will be able to make claims against the Escrow Shares and the Escrow Cash for a period of eighteen months following the consummation of the Transaction and thereafter against any Contingent Payments.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, a copy of which is attached as Exhibit 2.1 to this Current Report on Form 8-K.
MidCap Credit Facility Amendment
On December 7, 2020, the Company and MannKind LLC, the Company’s wholly owned subsidiary, entered into an Amendment No. 4 to Credit and Security Agreement (the “MidCap Amendment”) with MidCap Financial Trust, as agent, and the lenders party thereto, pursuant to which the parties amended the Credit and Security Agreement, dated August 6, 2019, to consent to the Transaction.
The foregoing description of the MidCap Amendment does not purport to be complete and is qualified in its entirety by reference to the MidCap Amendment, a copy of which is attached as Exhibit 4.1 to this Current Report on Form 8-K.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
The information contained in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01.
