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Item 1.01.
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Entry into a Material Definitive Agreement.
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Merger Agreement
On May 2, 2019 (the “
Agreement
Date
”), Misonix, a New York corporation (“
Misonix
”), entered into an Agreement and Plan of Merger
(the “
Merger Agreement
”) with Solsys Medical, LLC, a Delaware limited liability company (“
Solsys
”),
New Misonix, Inc., a New York corporation and a direct, wholly owned subsidiary of Misonix (“
ParentCo
”), Motor
Reincorp. Sub One, Inc., a New York corporation and a direct, wholly owned subsidiary of ParentCo (“
Merger Sub One
”),
Surge Sub Two, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of ParentCo (“
Merger Sub
Two
,” and together with Merger Sub One, the “
Merger Subs
”) and, solely in his capacity as the representative
for the equityholders of Solsys, Greg Madden, an individual resident of the State of Massachusetts. The Merger Agreement and the
Mergers (as defined below) have been approved by the board of directors of Misonix and the board of managers of Solsys.
The Merger Agreement provides
that Misonix and Solsys will combine under a new holding company, ParentCo, in a transaction in which the shareholders of Misonix
and unitholders of Solsys will receive stock in ParentCo. After the closing of the transactions contemplated by the Merger Agreement,
the former Misonix shareholders will own approximately 64% of the outstanding ParentCo common stock and the former Solsys unitholders
will own approximately 36% of the outstanding ParentCo common stock. ParentCo will be renamed “Misonix, Inc.” concurrently
with the closing of the transactions contemplated by the Merger Agreement (the “
Transactions
”).
Structure
Pursuant to the terms and subject
to the satisfaction or valid waiver of the conditions set forth in the Merger Agreement, (i) Merger Sub One will merge with and
into Misonix (the “
Misonix Merger
”), with Misonix surviving the Misonix Merger as a wholly owned subsidiary
of ParentCo, and (ii) immediately following the consummation of the Misonix Merger, Merger Sub Two will merge with and into Solsys
(the “
Solsys Merger
,” and together with the Misonix Merger, the “
Mergers
”), with Solsys surviving
the Solsys Merger as a wholly owned subsidiary of ParentCo.
Consideration
Upon the Misonix Merger becoming
effective, each share of Misonix common stock issued and outstanding immediately prior to the Misonix Merger (other than shares
of Misonix common stock owned by Misonix, Solsys or any of their respective subsidiaries) will be converted into the right to receive
one share of ParentCo common stock upon the terms and subject to the conditions set forth in the Merger Agreement. Upon the Solsys
Merger becoming effective, the units of Solsys issued and outstanding immediately prior to the Solsys Merger will, upon the terms
and subject to the conditions set forth in the Merger Agreement, be converted into the right to receive an aggregate of approximately
5.7 million new shares of ParentCo common stock, with the allocation of such shares to holders of Solsys units being made in accordance
with the Solsys operating agreement. We refer to the shares of ParentCo common stock to be issued in the Solsys Merger as the “
Merger
Consideration
”.
Effect on Misonix Stock
Option and Other Stock-Based Awards
Upon the terms and subject to
the conditions set forth in the Merger Agreement, options to purchase Misonix common stock (each, a “
Misonix Stock Option
”),
restricted shares of Misonix common stock (“
Misonix Restricted Stock
”) and rights of any kind to receive shares
of Misonix common stock or benefits measured in whole or in part by the value of shares of Misonix common stock granted by Misonix,
other than Misonix Stock Options (each, other than Misonix Stock Options, a “
Misonix Stock-Based Award
”), in
each case, that is outstanding as of immediately prior to the effective time of the Misonix Merger, will be treated as follows.
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Each Misonix Stock Option will (i) be assumed by ParentCo and become, as of the effective time
of the Misonix Merger, an option to purchase, on the same terms and conditions (including applicable vesting requirements) as applied
to such Misonix Stock Option immediately prior to the effective time of the Misonix Merger, the same number of shares of ParentCo
common stock as the number of shares of Misonix common stock subject to such Misonix Stock Option immediately prior to the effective
time of the Misonix Merger, at an exercise price per share of ParentCo common stock equal to the exercise price for each such share
of Misonix common stock subject to such Misonix Stock Option immediately prior to the effective time of the Misonix Merger and
(ii) cease to represent an option or right to acquire shares of Misonix common stock.
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Each Misonix Stock-Based Award, including shares of Misonix Restricted Stock, will be assumed by
ParentCo and become, as of the effective time of the Misonix Merger, an award, on the same terms and conditions (including applicable
vesting requirements and deferral provisions) as applied to each such Misonix Stock-Based Award immediately prior to the effective
time of the Misonix Merger, with respect to the number of shares of ParentCo common stock that is equal to the number of shares
of Misonix common stock subject to the Misonix Stock-Based Award immediately prior to the effective time of the Misonix Merger.
Shares of Misonix common stock issued in connection with the settlement of Misonix Stock-Based Awards which vest on or prior to
the effective time of the Misonix Merger (including vested Misonix Restricted Stock) will be treated in the same manner as shares
of Misonix common stock.
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Governance
Upon the completion of the Mergers,
ParentCo will have a board of directors consisting initially of five directors, three of whom will be designated by Misonix and
two of whom will be designated by Solsys. Solsys has currently designated Michael Koby and Paul LaViolette to serve on the ParentCo
board of directors.
Upon completion of the Mergers,
the officers of Misonix will become the officers of ParentCo. In connection with the execution of the Merger Agreement, ParentCo
entered into employment agreements that will become effective following the completion of the Mergers with Mr. Allan Staley, Mr.
Linwood Staub and Ms. Arti Masturzo, as further discussed below.
Covenants, Representations
and Warranties
The Merger Agreement contains
customary representations, warranties and covenants of Solsys, Misonix, ParentCo and the Merger Subs, including covenants by each
party relating to conduct of their business prior to the closing of the Mergers. Additionally, Solsys has agreed to (i) not solicit,
initiate or take any action to facilitate or encourage or induce the making of, submission or announcement of, any alternative
proposals for an acquisition of Solsys and (ii) use commercially reasonable efforts to consummate the offering of additional units
of Solsys in exchange for at least $4,000,000 in new capital to Solsys (the “
Solsys Capitalization Infusion
”).
Misonix has also agreed to (i) as promptly as practicable following the Agreement Date, file with the U.S. Securities and Exchange
Commission (the “
SEC
”) a joint proxy and consent solicitation statement/prospectus relating to the meeting of
Misonix’s shareholders to approve the terms of the Mergers, including the issuance of shares of ParentCo common stock as
part of the Merger Consideration, and adopt the Merger Agreement (the “
Misonix Shareholder Meeting
”) and a Registration
Statement on Form S-4 (the “
Form S-4
”) relating to the registration of the shares of ParentCo common stock being
issued in connection with the Mergers, and (ii) as promptly as practicable following the effectiveness of the Form S-4, establish
a record date, duly call, give notice of, convene and hold the Misonix Shareholder Meeting and use commercially reasonable efforts
to obtain the Misonix shareholders’ approval of the terms of the Mergers and adoption of the Merger Agreement.
Conditions to Merger
The consummation of the Mergers
is subject to certain conditions, including, among others, (i) receipt of necessary approvals by Misonix shareholders of the adoption
of the Merger Agreement and the terms of the Mergers, as well as the issuance of ParentCo common stock as the Merger Consideration
at the Misonix Shareholder Meeting (the “
Misonix Shareholder Approval
”), (ii) receipt of necessary approvals
of the adoption of the Merger Agreement and the terms of the Solsys Merger by members of Solsys owning more than (A) 55% of the
Solsys Series E Units owned by all the holders of Solsys Series E Units, voting or consenting separately as a single class and
(B) if the transactions contemplated by the Merger Agreement do not qualify as a Qualified Sale (as defined in the current operating
agreement of Solsys), 50% of Solsys’s Common Units, Series A Units, Series B Units, Series C Units and Series D Units, or
an aggregate basis, voting or consenting as a single class (collectively, the “
Solsys Unitholder Approval
”),
(iii) the approval for listing on the NASDAQ Global Market of the shares of ParentCo common stock issuable in connection with the
Mergers, (iv) the absence of certain legal impediments to the completion of the Mergers, (v) subject to certain exceptions, the
accuracy of the representations and warranties made by Misonix, ParentCo, the Merger Subs and Solsys and compliance in all material
respects by Misonix, ParentCo, Merger Subs and Solsys with their respective covenants contained in the Merger Agreement, (vi) each
Employment Agreement (as defined below), Lock-Up Agreement (as defined below) and Non-Compete Agreement (as defined below) being
in full force and effect, (vii) the completion of the Solsys Capitalization Infusion and (viii) other customary conditions.
Termination Rights
The Merger Agreement contains
certain termination rights by either Misonix or Solsys, including if (i) the Mergers are not consummated by the six-month anniversary
of the Agreement Date (the “
Outside Date
”), (ii) any governmental authority of competent jurisdiction has enacted
a law or issued an order permanently prohibiting either of the Mergers, (iii) the Misonix Shareholder Approval is not obtained
or (iv) the Solsys Unitholder Approval is not obtained.
If Solsys is not in material
breach of any its representations, warranties, covenants or agreements set forth in the Merger Agreement, Solsys may terminate
the Merger Agreement if Misonix, ParentCo or either Merger Sub breaches any of its respective representations, warranties, covenants
or agreements set forth in the Merger Agreement and such breach is either not curable prior to the Outside Date or, if curable,
is not cured within the earlier of 15 business days after Solsys has notified Misonix of such breach and two business days prior
to the Outside Date.
If none of Misonix, ParentCo
or the Merger Subs is in material breach of any their respective representations, warranties, covenants or agreements set forth
in the Merger Agreement, Misonix may terminate the Merger Agreement if Solsys breaches any of its representations, warranties,
covenants or agreements set forth in the Merger Agreement and such breach is either not curable prior to the Outside Date or, if
curable, is not cured within the earlier of 15 business days after Misonix has notified Solsys of such breach and two business
days prior to the Outside Date.
Representations and Warranties
for Benefit of the Parties Only
The Merger Agreement contains
representations and warranties made by Misonix, ParentCo and Merger Subs, on the one hand, and Solsys, on the other hand, to, and
solely for the benefit of, each other. The assertions embodied in the representations and warranties contained in the Merger Agreement
were made only for purposes of the Merger Agreement as of the specific dates therein and are qualified by information in confidential
disclosure schedules provided by Misonix to Solsys and Solsys to Misonix in connection with the signing of the Merger Agreement.
While Misonix does not believe that these disclosure schedules contain information that the securities laws require the parties
to publicly disclose, other than information that has already been so disclosed, they do contain information that modifies, qualifies
and creates exceptions to the representations and warranties set forth in the Merger Agreement for the purposes of allocating contractual
risk between the parties to the Merger Agreement 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. Investors are not third-party
beneficiaries under the Merger Agreement and should not rely on the representations and warranties in the Merger Agreement as characterizations
of the actual state of facts about Misonix or Solsys. Finally, information concerning the subject matter of the representations
and warranties may have changed since the Agreement Date, which subsequent information may or may not be fully reflected in the
companies’ public disclosures.
The foregoing description of
the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.
Support Agreements
As a condition to Misonix’s
willingness to enter into the Merger Agreement, simultaneously with the execution of the Merger Agreement, certain unitholders
of Solsys, holding 100% of the outstanding Solsys Series E Units and approximately 11.5%of the outstanding Solsys Common Units,
Series A Units, Series B Units, Series C Units and Series D Units, taken together as a single class, entered into a support agreement
with Misonix (the “
Solsys Support Agreement
”), pursuant to which such Solsys unitholders agreed to, among other
things and subject to the terms of the Surge Support Agreement, vote or consent to the approval of the Merger Agreement, the consummation
of the Solsys Merger and the other transactions contemplated by the Merger Agreement to which Solsys is a party. Additionally,
two of Solsys’s unitholders, 1315 Capital Solsys, Inc. and SV-Solsys Inc., further agreed to purchase their respective pro
rata portion of new Solsys units in the Solsys Capitalization Infusion and to purchase any Solsys units that are not subscribed
for by other Solsys unitholders up to a total of $2,000,000 each (the “
1315/SV Lock-Up Agreement
”).
As a condition to Solsys’s
willingness to enter into the Merger Agreement, simultaneously with the execution of the Merger Agreement, certain shareholders
of Misonix, holding approximately 18.6%of the issued and outstanding shares of Misonix common stock, entered into a support agreement
with Misonix (the “
Misonix Support Agreement
”), pursuant to which such Misonix shareholders agreed to, among
other things and subject to the terms of the Misonix Support Agreement, vote in favor of the issuances of ParentCo common stock
and approval of the Merger Agreement, the consummation of the Misonix Merger and the other transactions contemplated by the Merger
Agreement to which Misonix is a party.
The foregoing descriptions of
the Solsys Support Agreement, Solsys 1315/SV Support Agreement and the Misonix Support Agreement do not purport to be complete
and are qualified in their entirety by reference to the full text of the Solsys Support Agreement, Solsys 1315/SV Support Agreement
and the Misonix Support Agreement, copies of which are being filed as Exhibit 10.1, Exhibit 10.2, and Exhibit 10.3 hereto, respectively,
and are incorporated by reference herein.
Lock-Up Agreement
As a condition to Misonix’s
willingness to enter into the Merger Agreement, simultaneously with the execution of the Merger Agreement, certain unitholders
of Solsys entered into a lock-up agreement (the “
Lock-Up Agreement
”), pursuant to which such Solsys unitholders
agreed to not, among other things and subject to the terms of the Lock-Up Agreement, for a period of 12 months following the closing
of the Mergers (i) pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares
of ParentCo common stock acquired as Merger Consideration (such shares of ParentCo common stock held by such Solsys unitholders,
collectively, the “
Lock-Up Securities
”), (ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of Lock-Up Securities, whether any such transaction is to be
settled by delivery of shares of Lock-Up Securities, in cash or otherwise, or (iii) publicly disclose the intention to make any
offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up
Securities.
The foregoing description of
the Lock-Up Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the form
of the Lock-Up Agreement, a copy of which is being filed as Exhibit 10.3 hereto and is incorporated by reference herein.
Employment Agreements
Simultaneously with the execution
of the Merger Agreement, ParentCo entered into employment agreements (each an “
Employment Agreement
”) with each
of Allan Staley, Linwood Staub and Dr. Arti Masturzo, all of whom are current employees of Solsys, which will become effective
upon the consummation of the Solsys Merger. Upon the completion of the Mergers, the Employment Agreement with Allan Staley provides
that he will serve as the President of ParentCo.