Item 1.01.
|
Entry into a Material Definitive Agreement.
|
Merger Agreement
On
March 16, 2020, Assertio Therapeutics, Inc. a Delaware corporation (“Assertio”), entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Zyla Life Sciences, a Delaware corporation
(“Zyla”), Alligator Zebra Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Assertio
(“Parent”), Alligator Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Assertio Merger
Sub”), and Zebra Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger
Sub”). The Merger Agreement provides that, subject to the terms and conditions set forth therein, Merger Sub will
merge with and into Zyla (the “Merger”), with Zyla surviving the Merger and becoming a wholly-owned
subsidiary of Parent. Prior to the consummation of the Merger, Assertio intends to effect a reorganization merger (the
“Assertio Reorganization”) pursuant to which Assertio Merger Sub will merge with and into Assertio, with
Assertio surviving the merger and becoming a wholly-owned subsidiary of Parent. Parent will become Assertio Holdings, Inc. and will
assume Assertio’s listing on the Nasdaq Stock Market (“Nasdaq”).
The
terms of the Merger Agreement provide that, unless otherwise specified in the Merger Agreement, at the effective time of the
Merger, each issued and outstanding share of common stock, par value $0.001 per share, of Zyla (the “Zyla Common
Stock”) will be canceled and automatically converted into the right to receive as merger consideration (the
“Merger Consideration”) 2.5 shares (the “Exchange Ratio”) of common stock, par value
$0.0001 per share, of Parent (the “Parent Common Stock”). On a pro forma basis, the current holders of
Zyla Common Stock will hold in the aggregate approximately 32% of the issued and outstanding capital stock of Parent
immediately after the Merger.
The terms of the Merger Agreement
also provide that, as of immediately prior to the effective time (“Effective Time”) of the Merger, in each case,
subject to certain adjustments in accordance with the Exchange Ratio and other terms set forth in the Merger Agreement (i) each
Zyla stock option, whether vested or unvested, that is outstanding will be cancelled at the Effective Time in exchange for an option
to purchase shares of Parent Common Stock on the same terms and conditions as were applicable to such Zyla stock option as of immediately
prior to the Effective Time (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration
thereof provided under such option), (ii) each Zyla time-based restricted stock unit, whether vested or unvested, that is outstanding
will be cancelled at the Effective Time in exchange for fully-vested Parent Common Stock, (iii) each Zyla performance-based restricted
stock unit, whether vested or unvested, that is outstanding will be cancelled at the Effective Time in exchange for fully-vested
Parent Common Stock, and (iv) each Zyla warrant to purchase shares of Zyla Common Stock that is issued and outstanding will be
cancelled at the Effective Time in exchange for a warrant to purchase shares of Parent Common Stock on the same terms and conditions
as were applicable to such Zyla warrant as of immediately prior to the Effective Time.
The
Merger and the Merger Agreement have been approved by the board of directors of each of Zyla (the “Zyla
Board”), Assertio (the “Assertio Board”) and Parent (the “Parent Board”).
Completion of the Merger is conditioned upon the adoption and approval of the Merger Agreement by (1) the holders of at
least a majority of the outstanding shares of Zyla Common Stock (the “Zyla Stockholder Approval”) and (2)
by the affirmative vote of the majority of the total votes cast to approve the issuance of the Merger Consideration by the
holders of the outstanding shares of common stock of Assertio (the “Assertio Stockholder Approval”).
Completion of the Merger is also subject to other customary closing conditions including (i) the absence of any
injunction order, judgment or decree by any governmental entity that prohibits or makes the consummation of the transaction
illegal, (ii) the registration on From S-4 to be filed with the Securities and Exchange Commission (the
“SEC”) by Parent in connection with the issuance of Parent Common Stock as Merger Consideration being
declared effective by the SEC, (iii) the approval by Nasdaq of the listing of the Parent Common Stock to be issued as Merger
Consideration on Nasdaq, (iv) the execution by each party of certain intercompany agreements, (v) subject to certain
exceptions, the accuracy of each party’s representations and warranties and (vi) compliance in all material respects by
each party with its obligations under the Merger Agreement.
The Merger Agreement contains customary
representations and warranties of both Assertio and Zyla. Each of Assertio and Zyla has agreed to operate its respective business
in the ordinary course in all material respects and to certain other operating covenants and to not take certain specified actions
prior to date of the consummation of the Merger (the “Closing Date”), as set forth more fully in the Merger
Agreement.
Each of Assertio and Zyla has also agreed
to customary “no-shop” restrictions on its ability to solicit alternative acquisition proposals from third parties
and to provide non-public information to, and engage in discussions or negotiations with, third parties regarding alternative acquisition
proposals. Notwithstanding the “no-shop” restrictions, prior to obtaining the Zyla Stockholder Approval, Zyla may under
certain circumstances provide non-public information to, and participate in discussions or negotiations with, third parties with
respect to any unsolicited alternative acquisition proposal that the Zyla Board has determined constitutes or would be reasonably
likely to lead to a Superior Proposal. A “Superior Proposal” is an unsolicited bona fide written offer that is fully
financed or has fully committed financing that the Zyla Board determines in good faith (after consultation with its outside legal
counsel and its financial advisor), taking into account all legal, financial, regulatory and other aspects of the proposal, is
(1) more favorable to the stockholders of Zyla from a financial point of view than the Merger and the other transactions contemplated
by the Merger Agreement (including any adjustment to the terms and conditions proposed by Assertio in response to such a Superior
Proposal in accordance with the terms of the Merger Agreement) and (2) reasonably likely of being completed on the terms proposed
on a timely basis.
Prior to obtaining the Zyla Stockholder
Approval, the Zyla Board may, among other things, change its recommendation that the stockholders of Zyla adopt the Merger Agreement
(a “Change in Recommendation”) in response to a Superior Proposal or an Intervening Event (as defined in the
Merger Agreement), subject to complying with notice and other specified conditions, including giving Assertio the opportunity to
propose revisions to the terms of the Merger Agreement during a period following such notice.
The Merger
Agreement contains certain customary termination rights for Assertio and Zyla, including, among others, the right of (1)
either party to terminate the Merger Agreement if (a) the Merger is not completed by September 12, 2020, unless otherwise
extended pursuant to the terms of the Merger Agreement and (b) either the Zyla Stockholder Approval or the Assertio
Stockholder Approval is not obtained, (2) Assertio to terminate the Merger Agreement as a result of a Change in
Recommendation and (3) Zyla to terminate the Merger Agreement as a result of the Assertio Board changing its recommendation
with respect to the Merger Agreement.
Upon termination of the Merger Agreement
under certain specified circumstances, Zyla will be obligated to pay Assertio a termination fee of $3,400,000. The Merger Agreement
also provides that Assertio or Zyla will be obligated to pay the transaction expenses of the other party, up to a maximum amount
of $1,750,000, upon termination of the Merger Agreement under certain specified circumstances.
Upon consummation
of the Merger and the Assertio Reorganization, the Parent Board will consist of nine directors, of which six of the directors
will be appointed by the Assertio Board and three of the directors will be appointed by the Zyla Board. The initial Parent
Board shall include the President and Chief Executive Officer of Assertio as of immediately prior to the Effective Time, the
President and Chief Executive Officer of Zyla as of immediately prior to the Effective Time, and the Chairman of the Zyla
Board as of immediately prior to the Effective Time, who will become the lead independent director of the Parent Board. The
President and Chief Executive Officer of Zyla as of immediately prior to the Effective Time will become the President and
Chief Executive Officer of Parent, while the President and Chief Executive Officer of Assertio as of immediately prior to
the Effective Time will become the Non-Executive Chairman of the Parent Board. The Senior Vice President and Chief Financial
Officer of Assertio as of immediately prior to the Effective Time will become the Senior Vice President and Chief Financial
Officer of Parent.
The foregoing summary of the Merger Agreement
and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by,
the full text of the Merger Agreement attached hereto as Exhibit 2.1 and incorporated herein by reference.
Voting and Support Agreement
Concurrently with
the execution of the Merger Agreement, Parent entered into voting and support agreements (the “Voting
Agreements”) with certain stockholders of Zyla (each, a “Supporting Stockholder” and,
collectively, the “Supporting Stockholders”) pursuant to which each Supporting Stockholder has agreed,
among other things and subject to the terms and conditions set forth therein, to vote or cause to be voted its shares of Zyla
Common Stock in favor of the adoption of the Merger Agreement and the transactions contemplated thereby, including the
Merger. The shares of Zyla Common Stock covered by the Voting Agreements represent, in the aggregate, a majority of
the total Zyla Common Stock that is issued and outstanding, provided that if the Zyla Board makes a Change in Recommendation
in response to a Superior Proposal or an Intervening Event (as defined in the Merger Agreement), then the shares covered by
the Voting Agreements will only represent 35% of the total Zyla Common Stock that is issued and outstanding.
The foregoing description of the Voting
Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Voting Agreements,
forms of which are attached hereto as Exhibit 10.1 and Exhibit 10.2 and are incorporated herein by reference.
The Merger
Agreement and the Voting Agreements have been attached as exhibits hereto to provide investors with information regarding
their respective terms. They are not intended to provide any other factual information about Assertio, Zyla, Parent or Merger
Sub, their respective businesses, or the actual conduct of their respective businesses during the period prior to the
consummation of the Merger. The representations, warranties and covenants contained in the Merger Agreement and the Voting
Agreements were made only for purposes of such agreements as of the specific dates therein, were made solely for the benefit
of the respective contracting parties to those agreements, may be subject to limitations agreed upon by the contracting
parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk among the
respective parties thereto instead of establishing these matters as facts, and may be subject to standards of materiality
applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and
warranties may not describe the actual state of affairs as of the date they were made or at any other time and investors
should not rely on them as statements of fact.