|
Item 1.01
|
Entry into a Material Agreement
|
On September 7, 2016, Cogentix Medical, Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with Accelmed Growth Partners, L.P. (“Accelmed”). Under the terms of the Purchase Agreement, Accelmed has agreed to purchase 16,129,033 shares of the Company’s common stock at $1.55 per share, for an aggregate purchase price of $25 million. The sale of the Company’s shares of common stock pursuant to the Purchase Agreement is expected to close in the fourth quarter of 2016, subject to the approval of the Company’s stockholders in accordance with applicable NASDAQ requirements and the satisfaction of the other closing conditions. The Company has agreed to use commercially reasonable efforts to seek the approval by its stockholders by November 18, 2016 of the Purchase Agreement and the Note Exchange Agreement (as defined below) at a meeting of the Company’s stockholders, subject to certain conditions.
The Purchase Agreement includes customary covenants, including a covenant requiring the Company not to solicit, or enter into discussions with third parties relating to, alternative business combination transactions during the period between the execution of the Purchase Agreement and the Closing (as defined in the Purchase Agreement), subject to fulfillment of certain fiduciary requirements of the Company’s Board of Directors (the “Board”). The Purchase Agreement also contains certain termination rights. Upon termination of the Purchase Agreement by Accelmed upon specified conditions, a termination fee of up to $1.0 million (inclusive of any fees and expenses) may be payable by the Company to Accelmed.
As a condition to the closing of the Purchase Agreement, the Company will convert into shares of its common stock all of the outstanding principal amount and accrued interest on the Company’s promissory notes held by Lewis C. Pell, one of the Company’s Class I directors, pursuant to the terms of a note exchange agreement between the Company and Mr. Pell, dated as of September 7, 2016 (the “Note Exchange Agreement”). Mr. Pell currently holds promissory notes with approximately $28.5 million of outstanding principal and $1.0 million of accrued interest, for a total of approximately $29.5 million. Under the terms of the Note Exchange Agreement, the entire outstanding principal amount and all accrued interest on the notes held by Mr. Pell will be converted into shares of the Company’s common stock, at a price per share of $1.67. Subject to the approval of the Note Exchange Agreement by the Company’s stockholders, the conversion will occur immediately prior to the closing of the Purchase Agreement. The Note Exchange Agreement also provides that, simultaneously with the conversion of the notes and accrued interest held by Mr. Pell, all outstanding warrants to purchase the Company’s common stock held by Mr. Pell will be cancelled.
The Company has agreed to amend its bylaws within 10 business days of entering into the Purchase Agreement to reduce the required quorum for all stockholder meetings to one-third of all issued and outstanding shares of voting stock of the Company. In connection with the Purchase Agreement, Accelmed and Mr. Pell have entered into a voting agreement (the “Voting Agreement”). Pursuant to the terms of the Voting Agreement, each of Mr. Pell and Accelmed have agreed to vote their shares of the Company’s common stock for the other party’s nominees to the Board. Following the transactions contemplated by the Purchase Agreement, Mr. Pell and Accelmed will own or control a majority of the outstanding common stock of the Company. The Voting Agreement is intended, in part, to qualify the Company as a “Controlled Company” under Nasdaq Rule 5615(c)(2), and the parties to the Voting Agreement have agreed to take such further actions (consistent with the terms thereof and of the Purchase Agreement) as may be reasonably necessary to satisfy such qualification. Additionally, under the terms of the Purchase Agreement, the Company has agreed that one of the directors nominated to the Board by Accelmed shall serve as Chairman of the Board until Accelmed or its affiliates no longer own 50% of the shares purchased pursuant to the Purchase Agreement or unless otherwise agreed by Accelmed.
In connection with the Purchase Agreement, the Company has agreed to enter into a registration rights agreement (the “Registration Rights Agreement”) prior to Closing, pursuant to which the Company will agree to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the shares issued pursuant to the terms of the Purchase Agreement and the Note Exchange Agreement to Accelmed and Mr. Pell (together, and including any successors and assigns to the Registration Rights Agreement, the “Holders”), upon the written demand by Accelmed. Pursuant to the terms of the Registration Rights Agreement, the Company would maintain the effectiveness of the registration statement until the earlier of (A) three years after the registration statement is declared effective by the SEC, (B) the date upon which the securities held by the Holders cease to be Registerable Securities (as that term is defined in the Registration Rights Agreement), or (C) the date upon which the Holders have completed the distribution described in the registration statement.
The Board established a Special Committee of the Board, comprised of Cheryl Pegus, James D’Orta and Kenneth Samet, each of whom is an independent director, to review these transactions and provide a recommendation to the full Board. The Special Committee engaged Duff & Phelps, LLC to serve as its independent financial advisor. The Special Committee recommended to the full Board that it approve these transactions, and the Board has unanimously approved the transactions.
The Purchase Agreement, the Note Exchange Agreement and the Voting Agreement (together, the “Agreements”) contain customary representations and warranties by the Company. The foregoing description of the Agreements is a summary of the material terms of those Agreements, and is qualified in its entirety by the terms of the Agreements, which are filed herewith as Exhibit 10.1, Exhibit 10.2 and Exhibit 99.2, respectively, each of which is incorporated herein by reference.