Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On June 22, 2017, Repligen
Corporation (the
Company
) entered into an Agreement and Plan of Merger and Reorganization (the
Merger Agreement
) with Top Hat, Inc., a California corporation and a wholly owned subsidiary of the Company
(
First Merger Sub
), Swing Time, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (
Second Merger Sub
), Spectrum, Inc., a California corporation (
Spectrum
),
and Roy T. Eddleman as representative of Spectrums securityholders. Pursuant to the Merger Agreement, (i) First Merger Sub will merge with and into Spectrum, with Spectrum as the surviving entity and a direct subsidiary of the
Company, and (ii) thereafter as part of the same overall transaction, Spectrum will merge with and into Second Merger Sub, with Second Merger Sub as the surviving entity and a direct subsidiary of the Company (together, the
Merger
). Spectrum is currently a supplier of hollow fiber filters to the Company for use in its XCell ATF systems.
The aggregate
consideration payable in exchange for all of the outstanding equity securities of Spectrum consists of approximately $120 million in cash and 6,154,000 shares of the Companys common stock (together, the
Merger
Consideration
). The Merger Consideration is subject to adjustment based on (i) cash and working capital adjustment provisions, (ii) the amount of Spectrums transaction expenses and indebtedness that remain unpaid as of the
closing of the Merger (the
Closing
) and (iii) indemnification obligations of holders of equity securities of Spectrum receiving Merger Consideration. Approximately $27 million of the Merger Consideration was placed into
a third party escrow account against which the Company may make claims for indemnification and purchase price adjustments until the fifteen month anniversary of the Closing.
The Merger Agreement contains customary representations, warranties and covenants of the Company, on one hand, and Spectrum, on the other hand, including,
among others, covenants by a party with respect to the operations of the businesses of such party and its subsidiaries during the period between execution of the Merger Agreement and the Closing, and prohibiting each party from engaging in certain
kinds of activities during such period without the consent of the other party. The Merger Agreement also provides that Spectrums securityholders will indemnify the Company following the Closing for breaches of the warranties and covenants
of Spectrum, as well as certain other matters, subject to certain specified limitations, including, among other things, limitations on the period during which the Company may make certain claims for indemnification and limitations on the amounts for
which Spectrums securityholders may be liable.
The Merger is conditioned upon, among other things, the expiration of the applicable waiting period
(and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 laws and other customary closing conditions. The Merger Agreement provides for limited termination rights, including, among others, by the mutual consent of the Company and Spectrum,
upon certain breaches of representations, warranties, covenants or agreements, and in the event the Merger has not been consummated before September 20, 2017, subject to the ability to extend under certain circumstances.
The assertions embodied in the representation, warranties and covenants set forth in the Merger Agreement were made solely for purposes of the Merger
Agreement between the parties and may be subject to important qualifications and limitations agreed to by the parties in connection with negotiating its terms, including being qualified by confidential disclosures exchanged between the parties in
connection with the execution of the Merger Agreement. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to investors or securityholders, or
may have been used for the purpose of allocating risk between the parties to the Merger Agreement rather than establishing matters as facts. 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 the Companys public disclosures. For the foregoing reasons, no person should rely on the warranties as statements of factual information at the time they
were made or otherwise.
Stockholder Agreement
Concurrently with the execution of the Merger Agreement, the Company entered into a Stockholder Agreement (the
Stockholder Agreement
) with
Roy T. Eddleman, the Chief Executive Officer and Chairman of the board of directors of Spectrum. Pursuant to the Stockholder Agreement, following the fifteen month anniversary of the Closing (the
Notice Date
), subject to the
absence of certain disqualifying events, Mr. Eddleman will have the right to elect to join the Companys Board of Directors (the
Board
) and will be nominated by the Board for election by the Companys stockholders
at the following annual or special stockholders meeting. In addition, under the Stockholder Agreement, Mr. Eddleman is subject to certain standstill restrictions, which prohibit Mr. Eddleman from, among other things: (i) engaging in
any solicitation of proxies or consents with respect to securities of the Company; (ii) forming or joining a group (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) with respect to the
common stock of the Company; (iii) acquiring voting securities of the Company resulting in Mr. Eddleman having beneficial ownership of more than 19.9% of the Companys outstanding common stock; (iv) seeking, or encouraging any
person, to submit nominations in furtherance of a contested solicitation for the election or removal of directors; (v) making, encouraging or supporting any offer or proposal with respect to any merger, acquisition,
recapitalization, disposition or other business combination involving the Company; and (vi) making any stockholder proposal, in each case, subject to certain limited exceptions. These standstill restrictions terminate upon the later of
(i) the Notice Date or (ii) Mr. Eddlemans removal or resignation from, or refusal to stand for
re-election
to, the Board.
In addition, pursuant to the Stockholder Agreement and subject to certain customary exclusions, Mr. Eddleman has agreed to a
two-year
lock-up
of his shares of Company common stock, such that no more than 50% of such shares may be transferred or sold in each of the first and second consecutive twelve
month periods following the Closing. Pursuant to the Stockholder Agreement, Mr. Eddleman may also exercise demand registration rights, subject to certain limitations, with respect to his shares of Company common stock.
Financing Commitment Letter
Concurrently with the execution of the Merger Agreement, the Company entered into a Commitment Letter (the
Commitment Letter
) with JPMorgan
Chase Bank, N.A. (
JPM
), pursuant to which, among other things, JPM, subject to customary conditions, committed to provide, directly or through its affiliates or assignees, to the Company a senior secured
364-day
term loan facility of $30 million (the
Bridge Facility
), the proceeds of which may be used for the payment of the Merger Consideration, for which JPM will act the sole administrative
agent, sole lead arranger and sole bookrunner. The definitive agreement for the Bridge Facility will contain, among other terms, affirmative covenants, negative covenants, financial covenants and events of default, in each case to be negotiated by
the parties consistent with the Commitment Letter.
From time to time, JPM or its affiliates have performed, and may in the future perform, various
commercial banking, investment banking and other financial advisory services for the Company, for which the Company pays customary fees and expenses.