Item 1.01.
|
Entry into a Material Definitive Agreement.
|
Agreement and Plan of Merger
On July 6, 2017, Entellus Medical, Inc., a Delaware corporation (Entellus), entered into an Agreement and Plan of
Merger (the Merger Agreement) with Spirox, Inc., a Delaware corporation (Spirox), Stinger Merger Sub, Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Entellus (Merger Sub), and Fortis
Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of Spiroxs equity holders (the Equityholders Representative). Spirox is a privately held medical device company that develops,
manufactures and markets the LATERA Absorbable Nasal Implant which is a minimally invasive option to treat nasal airway obstruction. Closing of the transaction is expected to occur during early third quarter of 2017, upon satisfaction or
waiver of certain customary closing conditions.
The Merger Agreement provides that, upon the terms and subject to the conditions set
forth in the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into Spirox, with Spirox continuing as the surviving entity and an indirect wholly-owned subsidiary of Entellus (the Merger). Subject to
the terms and conditions of the Merger Agreement, Entellus has agreed to pay $25 million in cash and issue approximately 3.4 million shares of Entellus common stock, subject to certain adjustments and as calculated pursuant to the calculation
methodology set forth in the Merger Agreement. At the closing of the Merger, Entellus will deposit $7.5 million of the initial cash merger consideration with an escrow agent to fund payment obligations with respect to the working capital adjustment
and post-closing indemnification obligations of Spiroxs former equity holders. Under the terms of the Merger Agreement, Entellus has agreed to pay additional contingent merger consideration to Spiroxs former equity holders based on
Entelluss net revenue from sales of Spiroxs LATERA device, subsequent versions thereof and any other device that treats nasal valve collapse or nasal lateral wall insufficiency by increasing the mechanical strength of the nasal
lateral wall through the use of a synthetic graft, evaluated annually during the four-year period following the Merger. Entellus has the discretion to pay the contingent consideration in shares of Entellus common stock or cash, subject to compliance
with applicable rules and regulations of the Securities Act of 1933, as amended (the Securities Act), and NASDAQ. A portion of the contingent consideration will be subject to certain rights of set-off for any post-closing indemnification
obligations of Spiroxs equity holders.
All options and warrants to acquire shares of Spirox stock will be terminated in connection
with the Merger and the holders thereof will be entitled to receive the merger consideration that would have been payable to such holders had they exercised their vested options and warrants in full immediately prior to the effective time of the
Merger, less the applicable exercise price of such vested options and warrants.
The completion of the Merger is subject to customary
closing conditions, including, among others, the absence of certain legal impediments to the consummation of the Merger, joinder and release agreements executed by Spiroxs stockholders holding at least 95% of the outstanding shares of Spirox
capital stock, the accuracy of representations and warranties made by Entellus and Spirox, respectively, and compliance by Entellus and Spirox with their respective obligations under the Merger Agreement. The Merger is not subject to any financing
condition. The Merger Agreement contains certain customary termination rights for both Entellus and Spirox. In addition, but subject to customary conditions, either party may terminate the Merger Agreement if the Merger is not consummated on or
before December 31, 2017.
Pursuant to the terms of the Merger Agreement, Entellus has agreed, contingent upon the closing of the
Merger, to increase the size of its board of directors from seven to nine and elect James C. Momtazee and Douglas S. (Duke) Rohlen as directors of Entellus, effective as of the closing of the Merger. Entellus
also has agreed, contingent upon the closing of the Merger, to file a resale shelf registration statement on Form S-3 (or if then ineligible to use such form, then any other available form of
registration statement) to register for resale under the Securities Act, the shares of Entellus common stock issued to Spirox stockholders and warrant holders in connection with the Merger.
Each of Entellus and Spirox has made customary representations, warranties and other covenants in the Merger Agreement. The assertions
embodied in the representations, warranties and covenants were made solely for purposes of the Merger Agreement and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating such agreement. The
representations, warranties and covenants in the Merger Agreement are also modified in important part by the disclosure schedules and annexes attached thereto, which are not filed publicly and which may be subject to contractual standards of
materiality or material adverse effect applicable to the contracting parties that differ from what may be viewed as material to investors. The representations and warranties in the Merger Agreement and the items listed in the disclosure schedules
were used for the purpose of allocating risk among the parties rather than establishing matters as facts, and, moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in Entelluss current public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of
the Merger Agreement, and not to provide investors with any other factual information regarding Entellus or its business, or Spirox or its business. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the
representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates.
The foregoing description of the Merger Agreement does not purport to be complete and is subject to, qualified in its entirety by reference
to, the full text of the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Joinder and Release Agreements
Concurrently with entering into the Merger Agreement, Entellus entered into joinder and release agreements with certain stockholders of Spirox,
pursuant to which such stockholders agreed to join and become parties to the Merger Agreement, including certain indemnification provisions contained therein, and to a general release and waiver of claims against Entellus, Spirox, Merger Sub or any
of their respective affiliates.
Under the terms of the Merger Agreement, Spirox has agreed to obtain, prior to the closing of the Merger,
joinder and release agreements with stockholders representing at least 95% of Spiroxs then outstanding common stock and preferred stock, considered in aggregate on an as-converted basis.
The foregoing description of the joinder and release agreements does not purport to be complete and is qualified in its entirety by reference
to the full text of the form of joinder and release agreement, which is filed as Exhibit 10.1 hereto and incorporated herein by reference.
Resignation and Release Agreements
Concurrently with entering into the Merger Agreement, Entellus entered into resignation and release agreements with certain officers and
directors of Spirox pursuant to which such individuals agreed to resign, conditioned upon and effective as of the consummation of the Merger, and to a general release and waiver of claims against Entellus, Spirox, Merger Sub or any of their
respective affiliates.
The foregoing description of the resignation and release agreements does not purport to be
complete and is qualified in its entirety by reference to the full text of the form of resignation and release agreement, which is filed as Exhibit 10.2 hereto and incorporated herein by reference.
Lock-Up Agreements
The terms of the Merger Agreement require each stockholder or warrant holder of Spirox that is to receive shares of Entellus common stock in
connection with the Merger to enter into a lock-up agreement providing, among other things and subject to customary exceptions, that such stockholder or warrant holder shall not offer, sell, contract to sell, pledge, assign, grant any option, right
or warrant to purchase, lend, make any short sale, enter into any swap or other arrangement that transfers to another any of the economic consequences of ownership or otherwise dispose of their shares of Entellus common stock received in connection
with the Merger. The lock-up shall apply for a period of (i) three months from the date of closing of the Merger in the case of 25% of the Entellus common stock received in connection with the Merger, (ii) six months from the date of
closing of the Merger in the case of an additional 25% of the Entellus common stock received in connection with the Merger and (iii) 12 months in the case of the remaining shares of Entellus common stock received in connection with the Merger.
The foregoing description of the lock-up agreements does not purport to be complete and is qualified in its entirety by reference to the
full text of the form of lock-up agreement, which is filed as Exhibit 10.3 hereto and incorporated herein by reference.
Non-Competition and Non-Solicitation Agreements
Concurrently with entering into the Merger Agreement, Entellus entered into non-competition and non-solicitation agreements with certain key
employees, in their capacities as key equity holders, of Spirox, pursuant to which such key employees agreed to customary non-competition and non-solicitation provisions applicable for a term of three years.
Concurrently with entering into the Merger Agreement, Entellus also entered into non-solicitation agreements with certain other stockholders
of Spirox, pursuant to which such stockholders agreed to customary non-solicitation provisions applicable for a term of three years.
The
foregoing description of the non-competition and non-solicitation agreements with certain key employees of Spirox and the non-solicitation agreements with certain other stockholders of Spirox does not purport to be complete and is qualified in its
entirety by reference to the full text of the form of non-competition and non-solicitation agreement and form of non-solicitation agreement, which are filed as Exhibits 10.4 and 10.5 hereto and incorporated herein by reference.