Item 1.01 Entry into a Material Definitive
Agreement.
Agreement and Plan of Merger
On
September 29, 2021, Acceleron Pharma Inc., a Delaware corporation (“Acceleron” or the “Company”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”) with Merck Sharp & Dohme Corp., a New Jersey
corporation (“Parent”), and Parent’s wholly owned subsidiary, Astros Merger Sub, Inc., a Delaware corporation (“Purchaser”).
Pursuant to the Merger Agreement, and upon the
terms and subject to the conditions thereof, Purchaser will commence a tender offer (the “Offer”) to purchase all of the issued
and outstanding shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), of the
Company in exchange for $180.00 per Share, net to the seller in cash, without interest and less applicable tax withholdings (the “Offer
Price”). If certain conditions are satisfied and the Offer closes, Parent would acquire any remaining shares by a merger of Purchaser
with and into the Company (the “Merger”).
Following the consummation of the Offer and subject
to the terms and conditions of the Merger Agreement, Purchaser will merge with and into the Company, with the Company being the surviving
corporation. The Merger Agreement contemplates that the Merger will be effected pursuant to Section 251(h) of the General Corporation
Law of the State of Delaware (the “DGCL”), which permits completion of the Merger without a shareholder vote promptly following
consummation of the Offer. At the effective time of the Merger (the “Effective Time”), each Share issued and outstanding immediately
prior to the Effective Time (other than (i) Shares held in the treasury of the Company or owned by the Company or any direct or indirect
wholly owned subsidiary of the Company and each Share owned by Parent, Purchaser or any direct or indirect wholly owned subsidiary of
Parent or Purchaser immediately prior to the Effective Time or (ii) Shares outstanding immediately prior to the Effective Time and
held by stockholders who are entitled to demand, and properly demand, appraisal for such Shares in accordance with Section 262 of
the DGCL) will be converted into the right to receive the Offer Price, without interest (the “Merger Consideration”).
The obligation of Parent and Purchaser to consummate
the Offer is subject to the condition that there be validly tendered in the Offer and “received” by the “depositary”
(as defined in Section 251(h) of the DGCL), and not validly withdrawn prior to the expiration of the Offer, a number of Shares
that, together with the number of Shares, if any, then owned beneficially by Parent and Purchaser (together with their wholly owned subsidiaries)
would represent at least a majority of the Shares outstanding as of the consummation of the Offer (the “Minimum Tender Condition”),
among others. The Minimum Tender Condition may not be waived by Purchaser without the prior written consent of the Company. The obligation
of Purchaser to consummate the Offer is also subject to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, receipt of approvals under certain antitrust laws in ex-U.S. jurisdictions and other customary conditions. Consummation of
the Offer is not subject to a financing condition.
The Merger Agreement provides that at the Effective
Time all options to purchase Shares granted under a Company equity plan, agreement or arrangement (each such option, a “Company
Stock Option”), that are outstanding immediately prior to the Effective Time and that have an exercise price per Share that is less
than the Offer Price, will be cancelled and the holder of each such Company Stock Option will be entitled to receive (without interest),
in consideration for the cancellation of such Company Stock Option, an amount in cash (less applicable withholding of taxes required
by applicable law) equal to the product of (i) the total number of Shares subject to such Company Stock Option immediately prior
to the Effective Time multiplied by (ii) the excess of the Offer Price over the applicable exercise price per Share under such Company
Stock Option.
The Merger Agreement also provides that as of
the Effective Time all outstanding restricted stock units (“RSUs”) and performance stock units (“PSUs”) that are
outstanding immediately prior to the Effective Time will be cancelled and the holder of each RSU and PSU will be entitled, in exchange
therefor, to receive (without interest) an amount in cash (less applicable withholding of taxes required by applicable law) equal to the
product of (i) the total number of Shares subject to (or deliverable under) such RSUs and PSUs immediately prior to the Effective
Time (with any performance conditions deemed achieved at maximum levels with respect to the PSUs) multiplied by (ii) the Offer Price.
The Merger Agreement includes customary representations,
warranties and covenants of the Company, Parent and Purchaser. The Company has agreed to use commercially reasonable efforts to carry
on its business in the ordinary course until the Effective Time. The Company has also agreed not to solicit or initiate discussions with
third parties regarding other proposals for a strategic transaction involving the Company. Parent and Purchaser have agreed to use reasonable
best efforts to take actions that may be required in order to obtain antitrust approval of the proposed transaction, subject to certain
limitations.
The Merger Agreement includes a remedy of specific
performance for the Company, Parent and Purchaser. The Merger Agreement also includes customary termination provisions for both the Company
and Parent and provides that, in connection with the termination of the Merger Agreement under specified circumstances, including termination
by the Company in order to accept and enter into a definitive agreement with respect to a Superior Proposal (as defined in the Merger
Agreement), the Company will be required to pay a termination fee of $345,000,000 by wire transfer of immediately available funds. The
Merger Agreement also provides that if the Offer or Merger are not consummated due to the failure of certain antitrust conditions to be
satisfied, then Parent will be required to pay the Company a reverse termination fee of $650,000,000 or $750,000,000, depending on the
time of termination. The termination fees, if paid, constitute the sole and exclusive remedy of the party receiving the fee in respect
of the Merger Agreement.
The Company’s Board of Directors unanimously
(i) determined that the Merger Agreement and the transactions contemplated thereby are fair to, and in the best interests of,
the Company and its stockholders, (ii) declared it advisable to enter into the Merger Agreement, (iii) approved the
execution and delivery of the Merger Agreement and the performance of the Company’s obligations thereunder, (iv) resolved
that the Merger be effected pursuant to Section 251(h) of the DGCL and (v) resolved to recommend that the
Company’s stockholders accept the Offer and tender their Shares pursuant to the Offer.
The foregoing summary of the principal terms of
the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full copy of the Merger Agreement
filed as Exhibit 2.1 hereto and incorporated herein by reference. The summary and the copy of the Merger Agreement are intended to
provide information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about
the Company in its public reports filed with the U.S. Securities and Exchange Commission (“SEC”). The assertions embodied
in the representations and warranties included in the Merger Agreement were made solely for purposes of the contract among the Company,
Purchaser and Parent and are subject to important qualifications and limitations agreed to by the Company, Purchaser and Parent in connection
with the negotiated terms, including being qualified by confidential disclosures made by each contracting party to the other for the purposes
of allocating contractual risk between them that differ from those applicable to investors. Moreover, some of those representations and
warranties may not be accurate or complete as of any specified date, may be subject to a contractual standard of materiality different
from those generally applicable to the Company’s SEC filings or may have been used for purposes of allocating risk among the Company,
Purchaser and Parent rather than establishing matters as facts. Investors should not rely on the representations and warranties or any
description of them as characterizations of the actual state of facts of the Company, Parent, Purchaser or any of their respective subsidiaries
or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of
the Merger Agreement, and this subsequent information may or may not be fully reflected in public disclosures by the Company or Parent.
Item 5.02 Compensatory Arrangements of Certain
Officers
In connection with approving the
Company’s entry into the Merger Agreement, but prior to the execution of the Merger Agreement, the Company’s Board of
Directors also approved amendments to the employment agreements between the Company and the following executive officers of the
Company: Mr. Habib J. Dable, the Company’s Chief Executive Officer, Mr. Kevin F. McLaughlin, the Company’s
Chief Financial Officer, Dr. Jay T. Backstrom, the Company’s Executive Vice President, Research and Development,
Mr. Sujay R. Kango, the Company’s Chief Commercial Officer, and Mr. Adam M. Veness, the Company’s General
Counsel. The amendments provide that if the executive’s employment is terminated other than for cause or if the executive
resigns for good reason, in either case, within one year following the date of a change of control (as the terms cause, good reason
and change of control are defined in the applicable employment agreement), in lieu of the cash severance benefits payable upon such
a termination under the current employment agreements, the executive will be entitled to receive: (i) a lump sum payment equal
to 150% (two times for Mr. Dable) of the sum of the executive’s base salary and target bonus amount for the year in which
such termination occurs; and (ii) up to 18 months of Company paid COBRA premiums (24 months for Mr. Dable). The amendments
also provide for the reimbursement for excise taxes under Section 4999 of the Internal Revenue Code (the “Code”) so
that on a net after-tax basis the executives would be in the same position as if no such excise tax had applied to the executive,
subject to an aggregate cap.
The compensation and benefits as described above
are contingent on, and subject to, documentation of the foregoing arrangements.