Item 1.01
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Entry into a Material Definitive Agreement
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Effective October 27, 2017, Windtree Therapeutics, Inc. (the “
Company
”) entered into a Securities Purchase Agreement (the “
SPA
”) with LPH Investments Limited, a company incorporated in the Cayman Islands with limited liability (“
LPH
”). LPH is a wholly-owned subsidiary of Lee’s Pharmaceutical Holdings Limited, a company incorporated in the Cayman Islands with limited liability (“
Lee’s
”). Under the SPA, LPH invested $10,000,000 (the "
Investment
") in the Company and acquired from the Company 46,232,085 shares of the Company's common stock (the “
Shares
”), at a price of $0.2163 per share, which represents a 15% premium over the average of the daily volume-weighted average price per share (VWAP) over the 10-day trading period ending on and including the date of the SPA. Following the transactions described herein, Lee's beneficially owned 73% of the Company's issued and outstanding shares of common stock (the "
Common Stock
"). The Investment includes cancellation of $3,900,000 in outstanding loans that the Company borrowed from Lee’s Pharmaceutical (HK) Ltd., a Hong Kong company organized and existing under the laws of Hong Kong (“
Lee's (HK)
”) under that certain Loan Agreement, effective August 14, 2017, between the Company and Lee's (HK). Pursuant to the SPA, the Company granted LPH the right to appoint up to two individuals to serve on the Company's Board of Directors, and LPH may designate such individuals on or prior to the 30th day following the closing of the transactions contemplated by the SPA (the "
Closing
"). In addition, the SPA also amends the executive employment agreement of each of the Company’s President and Chief Executive Officer (Craig Fraser), Senior Vice President and Chief Financial Officer (John A. Tattory) and Senior Vice President and Chief Medical Officer (Steven G. Simonson, M.D.), such that in lieu of the Annual Bonuses (as defined in each executive's employment agreement) that would have been payable to the executives during the 24 month period following the Closing, the executives are entitled to an award of equity under the Company’s 2011 Long-Term Incentive Plan, as amended, having a value when issued equal to the combined total value of the 2017 and 2018 Target Bonus Amounts (as defined in each executive's employment agreement) and vesting in two equal installments on March 15, 2018 and March 15, 2019. Under the terms of the SPA, the Company also granted to LPH a preemptive right to purchase in future offerings of equity securities up to that number of shares of the Company's equity securities needed to maintain LPH's percentage of beneficial ownership of the Company's outstanding voting stock immediately prior to each such offering, subject to certain limitations and exclusions.
Contemporaneously with the execution of the SPA, the Company and LPH entered into a registration rights agreement pursuant to which the Company has agreed to provide certain registration rights with respect to the Shares under the SPA, which rights are limited to registration of up to 25% of the Shares during the initial 18-month period following the closing of the SPA. The Company issued the Shares to LPH pursuant to Rule 506(b) of Regulation D and Regulation S under, and Section 4(a)(2) of, the Securities Act of 1933.
Contemporaneously with the execution of the SPA, the Company and affiliates of Deerfield Management Company, L.P. (“
Deerfield
”) entered into an Exchange and Termination Agreement (the "
Exchange and Termination Agreement
"). Under the Exchange and Termination Agreement, (i) promissory notes evidencing an aggregate principal amount of $25,000,000 owed to Deerfield under that certain Facility Agreement dated as of February 13, 2013 (the "
Facility Agreement
"), as amended from time to time, and (ii) warrants to purchase up to 500,000 shares of the Company's Common Stock at an exercise price of $39.34 per share held by Deerfield (the “
Deerfield Warrants
”) were cancelled in consideration for (i) a cash payment in the aggregate amount of $2,500,000, (ii) an aggregate of 1,422,250 shares of Common Stock and (iii) the right to receive certain milestone payments ("
Milestone Payments
") based on achievement of specified development and commercial milestones related to the Company's AEROSURF® development program, which, if achieved, could potentially total up to $15,000,000. Contemporaneously with the execution of the Exchange and Termination Agreement, the Company and Deerfield entered into a registration rights agreement pursuant to which the Company has agreed to provide certain registration rights with respect to the shares of Common Stock issued to Deerfield under the Exchange and Termination Agreement. The Company issued the shares of Common Stock to Deerfield pursuant to Rule 506(b) of Regulation D under, and Section 4(a)(2) of, the Securities Act of 1933.
On November 1, 2017 (the "
Closing Date
"), the Company, Lee's and Deerfield consummated the transactions contemplated by the SPA and the Exchange and Termination Agreement. Effective upon the Closing Date, (i) the Facility Agreement, including the outstanding promissory notes thereunder, and (ii) that certain Security Agreement, dated as of February 13, 2013, among Deerfield and the Company were cancelled and terminated.
The foregoing descriptions of the SPA, the Exchange and Termination Agreement, and the registration rights agreements do not purport to be complete and are qualified in their entirety by reference to the agreements themselves. A copy of the SPA, the Exchange and Termination Agreement and the registration rights agreements are attached as Exhibits 10.1, 10.2, 99.1 and 99.2, respectively, to this Current Report on Form 8-K. Such agreements are being filed to provide investors and the Company’s stockholders with information regarding the terms thereof and in accordance with applicable rules and regulations of the SEC. Pursuant to such agreements, each of the parties thereto made customary representations, warranties and covenants and agreed to indemnify each other for certain losses arising out of breaches of such representations, warranties, covenants and other specified matters. The representations, warranties and covenants were made by the parties to and solely for the benefit of each other and any expressly intended third-party beneficiaries in the context of all of the terms and conditions of the agreements and in the context of the specific relationship between the parties. Accordingly, investors and stockholders should not rely on the representations, warranties and covenants. Furthermore, investors and stockholders should not rely on the representations, warranties and covenants as characterizations of the actual state of facts or continuing intentions of the parties, since they were only made as of the date of the agreements. Information concerning the subject matter of such representations, warranties and covenants may change after the date of the agreements, which subsequent information may or may not be fully reflected in the Company’s reports or other filings with the Commission. The foregoing description of the transactions does not purport to be complete and is qualified in its entirety by reference to the agreements filed as exhibits to this report and incorporated herein by reference.