Item 1.01
|
Entry into a Material Definitive Agreement.
|
Agreement and Plan of Merger
On September 12, 2017, Inotek Pharmaceuticals Corporation (
Inotek
) entered into an Agreement and Plan of
Merger and Reorganization (the
Merger Agreement
) with Rocket Pharmaceuticals, Ltd., a privately held biopharmaceutical company (
Rocket
) and Rome Merger Sub, a wholly owned subsidiary of Inotek (
Merger
Subsidiary
), pursuant to which the Merger Subsidiary will be merged with and into Rocket (the
Merger
) at the effective time of the Merger, with Rocket continuing after the Merger as the surviving company and a
wholly-owned subsidiary of Inotek.
Subject to the terms and conditions of the Merger Agreement, the percentage of the combined company
that Inotek stockholders will own following the closing of the Merger is subject to an adjustment based on the amount of Inoteks net cash at the closing. On a pro forma basis, based upon the number of shares of Inotek common stock to be issued
in the Merger, following the closing of the Merger current Inotek stockholders will own approximately 19% of the combined company and current Rocket shareholders will own approximately 81% of the combined company if Inotek has a valuation of at
least $47 million, which is based on a projected net cash balance (or cash and cash equivalents minus outstanding liabilities) at the closing of $42 million, plus an additional $5 million of enterprise value. Under the terms of the
Merger Agreement, Rocket has a stipulated valuation of $200 million which is not subject to any adjustments. Ten days prior to the closing, Inoteks estimated net cash at closing will be mutually agreed upon and the final exchange ratio
will be calculated based on the relative values of the parties as described in the Merger Agreement. If Inoteks net cash at closing is within a range of $40.5 million to $43.5 million, no adjustment will be made to the foregoing
split. Based on Inoteks current level of net cash and taking into account Inoteks projected expenses in connection with the proposed transaction, if the Merger were to close today, the stockholders of Inotek would own appropriately 19%
of the combined company and current Rockets shareholders would own approximately 81% of the combined company. There can be no assurances as to Inoteks level of net cash between now and closing.
The Merger Agreement contains a customary
no-shop
provision under which neither Inotek nor
Rocket is permitted to (i) solicit any alternative acquisition proposals, (ii) participate in any negotiations or discussions with any person relating to any alternative acquisition proposal, (iii) approve, endorse or recommend any
alternative acquisition proposal, or (iv) enter into any agreement relating to any alternative acquisition proposal. The Inotek
no-shop
provision is subject to certain exceptions that permit
the board of directors of Inotek to comply with its fiduciary duties, which, under certain circumstances, would enable Inotek to provide information to, and engage in discussions or negotiations with, third parties with respect to alternative
acquisition proposals.
The Merger Agreement provides each of Inotek and Rocket with specified termination rights. If the Merger Agreement
is terminated by Inotek to accept a superior acquisition proposal or under other circumstances specified in the Merger Agreement, Inotek will be required to pay to Rocket or Rocket will be required to pay Inotek, as the case may be, a termination
fee of $2 million (the
Termination Fee
). Further, in connection with the termination of the Merger Agreement if the Rocket shareholders have not approved the Merger Agreement by September 22, 2017, Rocket has agreed to
pay Inotek the Termination Fee, and if Inoteks stockholders do not approve the Merger Agreement Inotek has agreed to reimburse Rocket for its
out-of-pocket
fees
and expenses of up to $500,000.
The Merger Agreement provides that, immediately following the Effective Time, as defined in the Merger
Agreement, the board of directors of the combined company will consist of up to seven individuals, two of whom shall be designated by Inotek (and mutually agreeable to Rocket) and the other five of whom shall be designated by Rocket (until each of
their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal). In connection with the Merger, Inotek will seek to amend its certificate of incorporation to: (i) effect a reverse split of
Inotek common stock at a ratio to be determined by Inotek, which is intended to ensure that the listing requirements of the Nasdaq Global Market are satisfied, (ii) change the name of Inotek to Rocket Pharmaceuticals, Inc. and
(iii) declassify Inoteks Board of Directors, subject to the consummation of the Merger.
Inoteks and Rockets
obligations to consummate the Merger are subject to the satisfaction or waiver of customary closing conditions, including, among others, obtaining the requisite approvals of the stockholders of Inotek and Rocket, including the approval of the
charter amendments by the stockholders of Inotek, and the preparation of a proxy statement.
The board of directors of Inotek has unanimously approved the Merger Agreement and the related
transactions, and has adopted resolutions recommending the requisite stockholder approval for the issuance of the shares of Inotek common stock pursuant to the Merger. Inotek has agreed to hold a stockholders meeting to submit certain matters
to its stockholders for their consideration. In connection with the Merger, Inotek intends to file with the Securities and Exchange Commission (
SEC
) a proxy statement and other relevant materials in connection with the proposed
transactions.
The foregoing description of the Merger and the Merger Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Current Report on Form
8-K
and is incorporated herein by reference.
The Merger Agreement has been included to provide investors and security holders with information regarding its terms. It is not intended to
provide any other factual information about Inotek or Rocket. The Merger Agreement contains representations, warranties and covenants that Inotek and Rocket made to each other as of specific dates. The assertions embodied in those representations,
warranties and covenants were made solely for purposes of the Merger Agreement between Inotek and Rocket and may be subject to important qualifications and limitations agreed to by Inotek and Rocket 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 security holders, or may have been used for the purpose of allocating risk between Inotek and Rocket rather than establishing matters as facts. Moreover, 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 Inoteks public disclosures. For the foregoing reasons, no person should
rely on the representations and warranties as statements of factual information at the time they were made or otherwise.
Voting
Agreements
In connection with the execution of the Merger Agreement, Inotek entered into Voting Agreements with its current
directors and certain officers, which together beneficially own or control an aggregate of approximately 5% of Inotek common stock. The Voting Agreements provide that, among other things, each of the stockholders has agreed to vote or cause to be
voted, all of the shares of Inoteks common stock beneficially owned by such stockholder in favor of the stockholder proposals submitted at the Inotek stockholders meeting held in connection with the Merger. In addition, shareholders of Rocket
owning or controlling approximately 67.2% of Rockets voting securities at the time of signing have entered into similar voting agreements whereby they have agreed to vote, or cause to be voted, all of the shares of Rocket beneficially owned by
such shareholders in favor of the adoption and approval of the Merger Agreement.
The foregoing description of the Voting Agreements does
not purport to be complete and is qualified in its entirety by reference to the form of Inotek Voting Agreement and the form of Rocket Voting Agreement, which are provided as Exhibit B to the Merger Agreement, which is attached as Exhibit 2.1 to
this Current Report on Form
8-K
and incorporated herein by reference.
Lockup Agreements
Concurrently and in connection with the execution of the Merger Agreement, Rockets chief executive officer and chief financial
officer, current directors and certain shareholders of Rocket, who collectively own or control approximately 62.1% of Rockets voting securities at the time of signing, and current directors and certain officers of Inotek, which together
beneficially own or control an aggregate of approximately 5% of Inotek common stock, entered into
lock-up
agreements with Inotek, in substantially the form provided as Exhibit C to the Merger Agreement, which
is attached as Exhibit 2.1 to this Current Report on Form
8-K
and incorporated by reference herein (the
Lockup Agreements
), pursuant to which each stockholder will be subject to a 180 day
lockup on the sale of shares of Inotek common stock received in the Merger.